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Update No: 295 - (26/07/05)
Shanghai Cooperation Organization (SCO) takes new course at
"Qara Qitay qaptasa, sary orys akengdey bolar" (If black Chinese come,
white Russian will seem as your own father) Orystan joldasyng bolsa, ay-baltang
dayar bolsyn" (If you have a Russian friend, have your axe always ready)
Kazak sayings from this large under populated country about its two giant
neighbours, synthesising the experience of many generations.
Chinese President Hu, Kyrgyz Acting President Bakiyev and Russian President
Putin attended a session of the Shanghai Cooperation Organization on July 5th,
hosted by President Nursultan Nazerbayev of Kazakstan. It may prove to be the
most important meeting of the SCO ever, coming as it did after the 'colour
revolutions' in Ukraine, Georgia and Kyrgyzstan and the eruption of violence in
Uzbekistan in May.
As the six SCO members (China, Russia, Kazakstan, Kyrgyzstan, Uzbekistan, and
Tajikistan), plus four countries with observer status, Iran, Pakistan, India and
Mongolia, gathered in Kazakstan's capital, Astana, the summit adopted a measure
of anti-Western rhetoric. The SCO states regard the US as partly responsible for
the new turn of events, with the Soros Foundation and other Western NGO's
actively promoting change. They not only suggested that the US-led coalition
forces in Afghanistan should announce a timetable for withdrawal, they also
issued a declaration demanding, among other things, a limit to outside
interference in a country's internal affairs.
The regional alliance is led by China and Russia, who called for the US to set a
deadline for its departure from the region. Many see this as a move by the
Shanghai Cooperation Organization to bolster the regional clout of China -
hungry for Central Asian resources - and remove US influence from Russia's own
It is clear that the major two countries within SCO with full-membership are
China and Russia. What makes these two regional rivals stick to each other
There seem to be several reasons. Putin is trying to find allies in the changing
world, who could create a counter-balance to the Western influence in world
politics. Playing the Chinese card is essential for the Kremlin's foreign
policy-makers in terms of extending Russia's significance on the global
political scene. If one takes into account that both China and Russia are voting
members of the UN's Security Council, then it is clear which countries comprise
the SCO's core.
As President Nazarbayev stated in his opening speech on July 5th, one may now
say that the organization represents half of humankind. This was a clear attempt
to stress the importance of the organization, its role on the world arena. But
the question is: What has really brought all those countries together except the
fact that they border giant China (all of them have joint borders with China,
except Uzbekistan, and Iran, with observer status)?
By 1999-2000 all the border issues between four former Soviet republics and
China have been basically resolved. Why does the Shanghai Cooperation
Organization not only continue to function, but also try seemingly to expand and
even challenge the rest of the world?
During the Kazak President's opening speech in Astana, he mentioned several
times the "joint efforts of SCO member-states against international
terrorism." That issue seems to be of more importance than economic
cooperation for several member-states of the organization.
After September 11th, 2001, Putin's Russia and Chinese leaders immediately
jumped onto the US boat called "fight against international
terrorism." To be precise, the Kremlin and Beijing started strong
propaganda on portraying national liberation movements on their territories as
part and parcel of so-called international terrorist activities.
Russia's "Chechen" headache is very similar in some ways to China's
"Uyghur" problem. The 10 million Turkic-speaking indigenous population
of Muslim Uyghurs in Eastern Turkistan, called by the Chinese Xin Jiang (that
means New Frontier in Chinese), has been looking for its independence for many
decades. In a short period of time from 1948 and 1951 Eastern Turkistan even
existed as an independent state. The history of the Chechen resistance to the
Russian Empire's expansion is also very well-known. Putin, whom US President
George W. Bush often calls "my friend Vladimir", does his best to
"prove" that Chechen resistance is nothing but a cell of al-Qaeda in
the North Caucasus, ignoring the historic fact that the Chechen nation has been
fighting for its independence for centuries, long before either the phenomenon
of international terrorism or al-Qaeda even existed. That seems to be one very
important reason for marrying the Russian Bear to the Chinese Dragon currently.
Interestingly, "terrorism" turns out to be a very important word in
the vocabulary of other Presidents representing the Shanghai Cooperation
Organization. Uzbek President Islam Karimov denounced the participants in a
peaceful demonstration in Andijan in May as "terrorists", trying to
justify his decision to open fire against the protesters, among whom there were
women and children. The number of those who lost their lives in the Andijan
massacre is still not clear. Some witnesses, such as Galima Bukharbayeva of the
Institute of War and Peace, say that hundreds, if not thousands, were shot dead
in front of their eyes.
The Uzbek leader called all the demonstrators "terrorists", meanwhile
many of the protesters invited Putin to intervene in the matter. The question
is: If all the demonstrators had been so-called Islamic terrorists and
militants, is it likely that they would have called the Russian President to
interfere? The answer is very clear and simple: never. Among hundreds of Uzbek
refugees who fled Uzbekistan to neighbouring Kyrgyzstan right after the Andijan
tragedy, the majority were women, children and elderly people. After finding
himself under harsh criticism, expressed by Western democracies, for his
decision to resort to force, the Uzbek leader demonstrated his gratitude towards
Russia and China, the leaders of which openly expressed support for his actions
Kazak President Nursultan Nazarbayev indirectly supported his Uzbek colleague's
deeds in Andijan during his press conference in Astana on July 1, as well. He
defined the Andijan riot as a "terrorist action" and said that the
Uzbek government had no choice but to shoot the demonstrators.
Why did the Kazak President make that statement? Usually Nursultan Nazarbayev is
very cautious when speaking about terrorism and terrorists. It looks like the
Kazak President made it clear to anyone who might plan to organize
demonstrations similar to the so-called "colour revolutions in Georgia,
Ukraine and Kyrgyzstan" that such attempts would end similarly to what
happened in Andijan. A Presidential election in Kazakstan is scheduled for
December this year.
The attendees naturally signed up to a joint declaration and a "Concept of
SCO Cooperation against Terrorism, Separatism, and Extremism." They
reiterated the decision of the Tashkent summit last year to strength the SCO,
and to move towards greater multilateral cooperation between member states and
growing interaction with other international organizations, said the
The Achilles' Heel of anti-terrorism - US domination
But the SCO leaders are clearly nervous of the new post-9:11 military
presence of the US in the region that all this has entailed. The SCO
declaration, as well as a bilateral Russo-Chinese declaration on "World
Order in the 21st Century" adopted on July 2, did not mention the United
States directly. However, these documents are understood to target perceived US
domination in international affairs. Both declarations reiterated the principles
of mutual respect of sovereignty and territorial integrity, mutual
non-aggression and non-interference.
Moreover, the SCO urged the US-led coalition forces in Afghanistan to declare a
timetable for withdrawal from Afghanistan as well as from the Uzbek and Kyrgyz
bases in the region that were set up to support operations in Afghanistan.
According to the declaration, now that the active military phase of the
Afghanistan campaign is over, the coalition should set a deadline for
withdrawing their troops from SCO states.
However, the SCO states would not allow a security vacuum to emerge following
the anticipated coalition withdrawal from the region. The SCO leaders would
rather fill the vacuum themselves: they pledged to boost security cooperation.
Chinese President Hu Jintao said after the summit meeting in Astana: "We
have to make every effort to step up security cooperation or else all our talks
about stability will be pointless."
Beijing has been repeatedly emphasizing a security angle, noting that the SCO
plays an important role in safeguarding regional security and promoting member
states' common development. Hu Jintao outlined this view in a written interview
with the Kazakstan News Agency, on the eve of the SCO summit (Xinhuanet, July
For some SCO leaders, security cooperation could be vital. For instance,
Uzbekistan's President Islam Karimov faced bloody riots in Andijan in May and
has been cornered by Western criticism since then. Not surprisingly, when facing
a possible regime change, Karimov came to value Russian and Chinese backing on
the Andijan crackdown. He told a press conference in Astana on July 5 that the
international community should feel the presence of the SCO on the international
Russian media and analysts appear to agree that the SCO has been leaning towards
anti-Western thinking, and possibly a course of action. The SCO countries proved
vulnerable to "colour revolutions," hence the SCO now re-thinks its
concept of operation, Kommersant commented. Now the SCO aims to counter "colour
revolutions" through collective action (Kommersant, July 5).
In the wake of "colour revolutions" in the former Soviet Union and the
US invasions of Afghanistan and Iraq, the SCO seeks to curb U.S. influence in
Central Asia, said Vyacheslav Nikonov, president of the Politika Foundation, a
Moscow-based think tank. The SCO states are "coming to share an interest in
restricting American influence in Asia," he said (RIA-Novosti, June 29).
However, Russian officials have tended to deny obvious conclusions, claiming
that the SCO does not intend to sustain repressive post-Soviet regimes. The SCO
is not an "anti-orange" block, Russian Foreign Minister Sergei Lavrov
claimed in June 2005.
In the meantime, the SCO officials approved observer status for Iran, Pakistan,
India and Mongolia. The leaders believe the decision to grant observer status to
these countries "will expand the capacity of the organization to develop
multilateral and mutually beneficial cooperation," according to the
Pakistan sent its premier, Shaukat Aziz, to the meeting. It is likely to become
a full member, which would bring one unflinching US ally to the table. The
Pakistani Prime Minister thanked the SCO for granting Pakistan observer status
and said the region was full of possibilities to ensure stability and progress.
Iranian First Vice President Mohammad Reza Aref said that Iran could become a
bridge between the SCO and Persian Gulf states. Indian Foreign Minister Natwar
Singh also thanked the SCO for granting his country observer status and said
India would cooperate with the organization.
The Russian media commented that the SCO enlargement was a potentially divisive
issue, particularly between the two largest members: Russia and China. Russia
sought to bring India into the SCO, while China suggested Pakistan for the SCO
enlargement. Subsequently, both India and Pakistan were accepted as observers (Izvestiya,
Although touted as an exercise of the "multi-polar world" concept and
"multilateralism," the SCO's decision to admit Iran inevitably becomes
an affront to Washington. It remains to be seen whether the SCO could limit its
perceived drift towards anti-Westernism.
Iran is a country that has been trying to expand its influence in Central Asian
region since the collapse of the Soviet Union. But surely it is a bit strange to
see Iran in one club with Russia and China - its major rivals in the
"struggle for Central Asia".
The most important resolution adopted at the Astana summit, as we have seen, was
the request to the U.S. leadership to outline the schedule of dismantling US
military bases in Kyrgyzstan and Uzbekistan. That was a clear challenge to US
foreign policy and its military presence in the Central Asian region. It is also
an explicit answer to the question why Iran is an observer within SCO. The
Washington-Tehran stand-off has been lasting for more than a quarter of a
century now. It is clear that for Iran it is more convenient to be at odds with
US in the company of Russia and China, rather than to do that alone.
US officially rejected the request for US troops to abandon the Central Asian
region in the near future. But that request of the SCO seems to be just a
beginning. One thing is very clear. The "Great Game" for the Central
Asian region goes on and the US stance and position in that old game is
challenged by the autocratic regimes of Russia and China. Meanwhile dictators of
Central Asia, whom Bush administration often calls strategic partners in US-led
fight against international terrorism, seem to look for other allies, especially
when the Western part of the world imposes pressure upon them demanding more
openness, transparency, freedoms and democratisation for Central Asian nations.
It looks like the Bush administration should reconsider its position on
international terrorism, religious extremism and strategic partnership.
George W. Bush in his inauguration speech earlier this year stressed that US
policy on the liberation of nations suffering under dictatorship will continue.
In what form and how would such a policy of White House continue functioning?
What is more important for the Bush administration: Expansion of democracy over
the world or strategic partnership with dictatorships? That seems to be a
question the current U.S. leadership has to find a coherent answer to.
It would appear to be that while the push for democracy is the strategic goal,
temporary alliances with dictatorships are tactically necessary along the way.
The Central Asian regimes have figured that out for themselves and do not like
it. Who wants to be a mere passing expedient of US grand strategy? Hence the new
mood of the SCO at Astana.
EBRD president in Kazakstan for foreign investors council
The President of the European Bank for Reconstruction and Development, Jean
Lemierre, visited Kazakstan to co-chair with Kazak President Nursultan
Nazarbayev, the 13th plenary session of the foreign investors' council (FIC),
which met in Karaganda on June 17th, Kazinform reported. The council is a
consultative and advisory body established in 1998 to enhance the investment
climate and create a favourable framework for investments in Kazakstan and to
promote the integration of Kazakstan into the global economy.
The EBRD's operations in Kazakstan are focused on diversifying its economy out
of the oil sector by building earning assets in the private sector and the
development of the small- and medium-sized enterprise (SME) sector. There are
well-established and effective relationships between the EBRD and the government
for financing in the transport and municipal areas. The EBRD has also seen a
significant increase in the use of its trade facilitation and grain receipts
Kazakstan takes a closer step to full WTO accession
During a recent visit to Japan, Kazak Prime Minister, Daniyal Akhmetov,
announced the official completion of bilateral negotiations for Kazakstan's
entry to the World Trade Organisation (WTO), Kazinform reported. A special group
on Kazakstan's accession to the WTO included 37 states.
The government of Kazakstan held bilateral negotiations with 15 states on
commodity turnover and service rendering in various spheres of economics of
which Japan is one of those 15 states during the preparation groundwork for its
accession to the WTO. For the past two years the government of Kazakstan
fulfilled a great work along with Japan's MFA. During the talks conducted in
Geneva and Tokyo, conditions made by the Japanese party to Kazakstan were
AVIATION & SPACE
Kazakstan and Russia eye better space cooperation
Kazakstan and Russia discussed the realisation of joint space projects at the
scientific conference "On prospects of scientific and innovation space
activities" in Almaty on June 17-18, Kazinform reported.
Strong cooperation will lead to Kazakstan approaching, jointly with Russia, the
world market of spacecrafts-launching, and the creation of a new technical base
to design and construct elements of space shuttles, participants said.
It will also allow Kazakstan to take part in joint commercial satellite launches
from Baikonur space centre. It is a reliable source of income since the launch
service cost to date is fluctuating around US$7.95m per launch.
The Russians are to generate the first Kazakstan communication satellite KazSat,
but the Kazakstan-Russian team will undertake the development on the ground of
the powerful complex of telecommunication services.
In the course of the conference it was proposed to initiate a joint Kazakstan-Russian
enterprise in Astana on principle of equality and organisation of a special
design-engineering bureau to develop cosmic equipment. Realisation of the space
programme would have political, economic and social effect. Kazakstan will
create a national communication and broadcast system on the ground for its own
satellite, and a basis for integration with the world community in the sphere of
Kazakstan, Russia create joint investment bank
At the Eurasian Economic Community summit held on June 23 in Moscow, Russia and
Kazakstan announced the creation of a joint investment bank, Interfax News
According to the two heads of state, Russia and Kazakstan will establish a joint
investment bank with a chartered capital of US$1.5bn. The bank, to be
headquartered in Almaty with an office in St. Petersburg, will be managed by a
Russian representative, the report said. "This issue had been discussed in
detail for many years," stated Russian President, Vladimir Putin. He added
that the point was to activate work of EurAsEC's financial structure but not
much was done in attending to this issue. So on the initiative of Kazak
President, Nursultan Nazarbayev, both former Soviet republics have agreed to
establish the joint investment bank.
The Russian-Kazak investment bank that is being created will work only in
accordance with market principles, Putin said following a summit of the
Collective Security Treaty Organisation. "Complete de-politicisation will
be the main feature of this bank. Its work will be based solely on market
rules," Putin said. "We will create an effective mechanism for
integration, including within EurAsEC," the Kremlin leader said. Kazakstan
will contribute 500m Euro to the bank's initial capital and Russia will
contribute over one billion Euro, Putin said.
The EurAsEC summit was opened by Nazarbayev, who chairs the EurAsEC Interstate
Council. While addressing the participants at the summit, he reminded that the
summit's agenda included issues for pushing the integration process. There were
about 10 issues on the agenda. The consideration of three major issues was
continued at an expanded meeting. The first issue, according to Nazarbayev, was
actively continuing the work on setting up a free trade zone without restricting
exceptions. The second was a decision to set up an interstate bank. And the last
was to promote agreements and the unification of all countries' tariffs by
bringing them closer.
In effect, the members (Belarus, Kazakstan, Kyrgyzstan, Russia and Tajikistan
with Armenia, Moldova and Ukraine holding observer status) discussed the
expansion of cooperation among member states in the realms of trade, economy, as
well as credit and finance. Participants recognised the economic growth of all
EurAsEC member states since EurAsEC's creation. Kazakstan's growth stands at
10.3 percent while Russia's 6.2 percent. Meanwhile, Kazak Prime Minister,
Daniyal Akhmetov, met Russian Communications Minister, Leonid Reiman. After the
talks, Reiman announced that Russia and Kazakstan agreed to create the
interstate task group on working out joint measures in the system of
telecommunication market. At the meeting both sides also touched upon the
questions of further cooperation in development of e-government systems.
"It is worth noting that Russia and Kazakstan remain traditional partners
in this sphere," Reiman was quoted as saying. The parties also talked about
the development of traditional latched and mobile communications.
S&P rates Kazakstan Temir Zholy kzAA
Standard & Poor's Ratings Services assigned a kzAA- Kazakstan national scale
rating to rail company Kazakstan Temir Zholy (KTZ), while leaving the BB+ global
scale rating with a stable outlook on the company unaffected, an S&P
statement read last week, New Europe reported.
The ratings on KTZ reflect the poor and aged state of its operating assets,
ongoing regulatory risk, the high level of expected capital expenditure, and the
requirement for additional borrowing in the medium term, the group said. A
further risk is the increasing contribution to KTZ's cash flows of oil traffic,
much of which is expected to transfer to new pipelines These risks are offset at
this rating level by KTZ's position as monopoly railroad infrastructure operator
and dominant freight carrier; a strong intermodal competitive position; good
medium-term rail traffic growth prospects and KTZ's strategic importance to and
support from the government of Kazakstan.
S&P rates postal operator Kazpost BB+
Standard & Poor's Ratings Services announced recently that it assigned its
BB+ long-term foreign and local currency global issuer credit ratings to 100 per
cent state-owned postal company Kazpost (JSC), New Europe reported.
The ratings on Kazpost reflect its status as a 100 per cent state-owned entity,
and the strong support it received from the Republic of Kazakstan, the ratings
agency said. S&P credit analyst, Felix Ejgel, noted that the support
provided to Kazpost came in the form of guarantees and capital injections, in
recognition of the important public service role that Kazpost provides in rural
Ejgel said, "These elements are mitigated by the company's weak financial
profile due to the low profitability of core services, and strong competition
faced by the company in Kazak cities."
Fitch rates Kazak Turan Alem Bank
Fitch Ratings on June 10th assigned Kazakstan's Bank, Turan Alem (BTA), ratings
of long-term foreign currency BB, short-term B, support 3 and individual C/D.
The international ratings agency said in a report that the outlook on the
long-term rating is stable.
BTA's rating reflects what Fitch viewed as moderate probability of support from
the Kazak authorities, if required. This view of Fitch is based on the perceived
relatively strong tendency of the Kazak authorities` to support BTA, as well as
the ability to provide support, as reflected in Kazakstan long-term foreign
currency BBB- (BBB minus) rating with a stable outlook.
At the same time, Fitch assigned long-term foreign currency BB ratings to Turan
Alem Finance BV's notes, guaranteed by BTA. The individual rating reflected the
risks inherent in the bank's rapid loan growth and ongoing expansion into other
CIS countries, significant loan concentrations, moderate capitalisation and
certain weaknesses in the bank's operating environment.
However, it also considered the bank's substantial franchise, reasonable
performance and liquidity, relatively diversified funding base and fairly low
market risk appetite. Upward pressure on the long-term foreign currency rating
of Kazakstan and downward pressure on the individual rating could result from a
reduction in capital ratios or deterioration in asset quality, with the latter
being in respect to either domestic lending or exposures in other CIS countries.
Spotlight on energy ties between China, Kazakstan
Chinese President Hu Jintao told reporters in Kazakstan recently that he is
satisfied with the current level of cooperation between Kazakstan and China. Hu
recalled that in the past several years, trade and economic cooperation between
the two countries has been developing rapidly and trade turnover growth has
maintained vigorous dynamism. Bilateral trade reached 4.5bn Euro in 2004, and
this year trade turnover is expected to surpass the level of five billion Euro.
China and Kazakstan attach great significance to practical cooperation in all
areas, Hu was quoted as saying. In this context, he recalled the establishment
of a Chinese-Kazak cooperation committee at the level of deputy prime ministers,
a structure that is composed of 10 sub-committees embracing the trade-economic,
energy, transportation, scientific and technological, humanities, and other
spheres of cooperation.
"The committee is responsible for regulating bilateral cooperation and
plays an important role in making interaction between our countries more
active," Hu said.
Both countries support each other in the most important issues concerning state
sovereignty and territorial integrity, successfully cooperate within the
framework of multilateral forums, including the UN, the Shanghai Cooperation
organisation and the conference on interaction and confidence-building measures
in Asia, and have contributed to regional stability and general development.
Hu is confident that relations between both countries would develop
successfully. Both countries are developing in the energy sector. He said,
"Cooperation in the energy sector is an important component of
neighbourliness and partnership between China and Kazakstan.
"It is of strategic importance for general development. We are satisfied to
note that our cooperation in the energy sector has brought about positive
"We are willing to continue to intensify cooperation with the Kazak side in
this sector on the mutually-beneficial basis." Hu told Interfax that about
the construction of an oil pipeline between Kazakstan and China that will be
effective by the end of the year.
Besides the pipeline construction, other joint projects implemented by both
countries are an international centre for border cooperation in Khorgos and
several facilities to promote scientific and technological cooperation,
including a Chinese-Kazak technopark. Speaking to reporters before leaving for
Kazakstan, Hu said he planned to have a detailed exchange of opinions with
President Nursultan Nazarbayev on bilateral relations, regional and
international issues of mutual importance.
The Chinese leader said, "The agenda also includes the signing of a number
of agreements between our countries in the areas of trade-economic, energy,
transportation, financial, and border cooperation. I am convinced that our joint
efforts during the visit will help us in reaching important results and will add
a new impetus to comprehensive promotion of Chinese-Kazak relations in order to
bring more real advantages to our peoples." In the past several years,
Chinese leaders have met Nazarbayev and have become good friends. This high
level of bilateral relations was possible due to close contacts that are
supported between the leaders of both countries.