Once-flourishing Uzbek-German trade is nosediving. German businessmen are coming forward with horror stories about doing business in Uzbekistan, a country where powerful, voracious families often seize profitable businesses or simply fail to pay for services rendered. But Berlin – eyeing a retreat from Afghanistan through Uzbekistan – is in no position to protest.
"The German private sector, statistics show, is losing faith in Uzbekistan," Germany's international broadcaster Deutsche Welle (DW) reported on February 28. “German companies have filed complaints of stolen shares, missing payments and frozen profits.”
Bilateral trade fell 30 percent between 2010 and 2011, from 759 million euros to 518 million euros, the broadcaster said. Germany's Economics Ministry predicts a further 20 percent decrease in 2012.
More than twenty German construction companies, for example, built the Palace of Forums in the capital, Tashkent, in 2009. They are still owed some 60 million euros. "In total, experts estimate that up to 500 million euros are being withheld from German companies by Uzbek partners," DW concluded.
The Swiss-registered Zeromax conglomerate, widely believed to have been linked to the president's daughter Gulnara Karimova, was behind the Palace of Forums and other major construction projects. The company went bust in 2010, leaving behind huge debts. It’s unclear if Karimova suffered, or divested just in time.
Sgt. 1st Class Peter Mayes, 101st Sustainment Brigade, 101st Airborne Division (AA) Public Affairs
A rail line at Hairatan on the Uzbekistan-Afghanistan border.
Just as the U.S. announces that it is accelerating its withdrawal from Afghanistan, its exit routes through Pakistan have reopened, taking a yet-unknown amount of business away from Central Asia.
The U.S. is reportedly now planning on removing more than half of the 66,000 U.S. troops in Afghanistan over the next year. That means that the "retrograde" routes out of Afghanistan that U.S. military planners have been establishing will soon be operating in full gear. Repeated delays had kept the bulk of cargo in and out of Afghanistan passing through Central Asia, a longer route that cost the Pentagon about $100 million a month more than it would be spending to use the shorter route through Pakistan. But with impeccable timing, the Pakistan border has just reopened for U.S. military business, reports the AP:
The United States began its withdrawal from Afghanistan in earnest, officials said Monday, sending the first of what will be tens of thousands of containers home through a once-blocked land route through Pakistan.
The shipment of 50 containers over the weekend came as a new U.S. commander took control of U.S. and NATO forces in Afghanistan to guide the coalition through the end stages of a war that has so far lasted more than 11 years.
The containers were in the first convoys to cross into Pakistan as part of the Afghan pullout, said Marcus Spade, a spokesman for U.S. forces in Afghanistan....
Although Pakistan reopened its border with Afghanistan of U.S. and NATO military back in July, traffic there is still moving so slowly that the coalition forces haven't even moved all of the goods that had backed up there -- meaning the Northern Distribution Network through Central Asia remains the key means of supplying foreign forces in Afghanistan. That's according to Air Force Col. Robert Brisson, chief of operations for U.S. Transportation Command, in a recent interview with Military Times.
U.S. military officials have spent the past five months wrangling with the Pakistanis over a formal legal agreement and also working to clear out the roughly 7,000 shipping containers that were stalled in transit when the Pakistanis abruptly closed the border crossings in November 2011.
Coalition forces are only able to get between 10 and 50 cargo trucks per day across the border, compared to around 100 before the border was closed, Col. Brisson said.
“We haven’t booked any new cargo into the ports of Karachi and Qasim to move northbound, nor have we started moving new cargo heading southbound out of Afghanistan,” Brisson said.
New cargo may begin moving in late December or January, he said.
The U.S. and Pakistan are still working out the terms of the new agreement to ship goods through that country, and apparently the biggest sticking point is the question of transit fees.
The U.S. spent about $1.3 billion in Central Asia on supplies for its troops in Afghanistan over the most recent fiscal year, including $820 million in Turkmenistan alone. The $1.3 billion represents a sevenfold increase from the previous year, according to figures provided to The Bug Pit by the Defense Logistics Agency, the Pentagon agency in charge of supplying forces. The totals for fiscal year 2012, broken down by country, were:
Kazakhstan: $137.3 million
Kyrgyzstan: $218.1 million
Tajikistan: $11.7 million
Turkmenistan: $820.5 million
Uzbekistan: $105.9 million
DLA was unable to provide any detailed numbers about what was bought in each country, but that eye-popping $820 million in Turkmenistan was certainly almost entirely fuel. In general, the money went to "bottled water, sodas, juices, pasta, bakery items, lumber, plywood, cement, concertina wire, generators, rebar, fuel drums, corrugated steel, galvanized steel coils, and feeder cable. We also support the region by purchasing fuel and paying associated transportation costs," the DLA said in a statement.
The agency has made efforts to boost its Central Asia buying:
"DLA has conducted market research extensively in Kazakhstan, Uzbekistan, and Kyrgyzstan for a wide range of products... DLA has consistently increased procurement in the region since FY08. DLA increased local procurement in the five Central Asian States by over 700% when compared to FY11 figures. In January 2012, DLA placed a liaison officer in the U.S. Embassy in Uzbekistan and one in the U.S. Embassy in Kazakhstan to help foster increased local procurement efforts."
The goal for the upcoming fiscal year is slightly more than this year, $1.31 billion.
Senior Airman Brett Clashman, 376th Air Expeditionary Wing
General William Fraser, commander of U.S. Transportation Command, visits the Manas air base in Kyrgyzstan while on a tour around Central Asia, October 2012
The U.S.'s top military logistics officer, just returned from a trip around Central Asia, has enthusiastically endorsed the notion that American military supply routes in the region can be transformed into a civilian "New Silk Road" after the U.S. pulls its forces out of Afghanistan.
In an interview with American Forces Press Service, General William Fraser added a senior military voice to the apparently re-emergent argument that the Northern Distribution Network (NDN) will act as the foundation for a transformation of trade in Central Asia:
Recognizing that U.S. shipments will diminish over time, leaders in nations supporting the NDN see the routes established to support the war effort in Afghanistan as a path to economic progress, Fraser noted. “I think the NDN is opening up opportunities for the future that these countries can capitalize on,” he said.
Nations are working together in unprecedented ways as a result of NDN agreements and exploring ways to streamline their import and export procedures to encourage cross-border commerce.
“We are already seeing some of that,” Fraser said. “As they look forward to the future, these countries know that the military is not going to be doing things at the same level that we have been for a long time. So they are looking for ways to capitalize on what has happened as a result of the Northern Distribution Network.”
Ambassador Dennise Mathieu, Fraser’s foreign policy advisor who accompanied him on the trip, said these efforts fit into the State Department’s vision of a “New Silk Road” that offers new potential in one of the least economically integrated areas of the world.
Scheme of the routes the U.S. military will use to ship its equipment out of Afghanistan.
The U.S. military will need to ship about 2,200 containers and vehicles out of Afghanistan every month for two years to get all of its equipment out of Afghanistan, with about 500 of those passing through Central Asia, according to U.S. Central Command. Of that, 400 are slated to go by rail through Uzbekistan, Kazakhstan and Russia and another 100 by truck through Tajikistan, Kyrgyzstan, Kazakhstan and the Caucasus.
Briefing slides presented this fall lay out the requirements that CENTCOM has developed for its retrograde transit:
Rolling Stock (RS) – 1,200 Pieces per Month
Non-Rolling Stock (NRS) – 1,000 Pieces per Month
Perhaps the most interesting part of the slide is the map pictured here, depicting all the various routes that cargo can take out of Afghanistan. The "Russian route" via rail also includes Uzbekistan and Kazakhstan, and the KKT truck route, interestingly, doesn't go through Russia but takes the somewhat longer route to the Caspian Sea port of Aktau, across the sea to Baku, and then through the Caucasus and Turkey en route to Europe.
It's also interesting that the multimodal facilities that the U.S. and NATO have set up in Eurasia -- like Baku, Ulyanovsk (Russia) and Constanta (Romania) -- appear to be low priorities, with pretty large volumes instead going through Dubai and Jordan. Those Middle Eastern hubs are set to get as much traffic as Central Asia, in spite of the fact that things will have to be flown some distance there. As the slides say, the goal is: "Redundancy, Flexibility, No Single Point of Failure!"
Before the "New Silk Road" was ever official U.S. policy, there was talk among Washington wonks and U.S. policymakers of transforming the military Northern Distribution Network -- the system of supply routes the Pentagon uses to get its equipment to Afghanistan -- into a civilian, commercial trade network. But when the U.S. State Department rolled out its New Silk Road Initiative last year, there was never any connection made between that idea and the NDN.
That looks like it's changing, however. In a speech last week, Assistant Secretary of State for South and Central Asia Robert Blake, made that connection explicit:
[W]e should not overlook the economic potential of the NDN. The existing infrastructure and transit routes used to transport military cargo can and should be used by the private sector to continue trade across the region, where there is ample opportunity for growth. The economic potential of a more open and integrated region – full of untapped human and natural resources – is virtually unlimited.
And at an event last week at the Open Society Foundations Washington office, Blake's deputy Lynne Tracy made the same point, calling the NDN a "proof of principle" for the New Silk Road.
As the United States has grown more dependent on the countries of Central Asia for transit routes into and out of Afghanistan, policymakers in Washington have talked up the military’s Northern Distribution Network as the beginning of a “New Silk Road.” The idea is to help the region’s stagnant economies by promoting regional trade and, hopefully in the process, bring stability to Afghanistan.
Secretary of State Hillary Clinton trumpeted the idea at a town hall meeting in Dushanbe in October 2011, saying she hoped the New Silk Road would increase “economic opportunity here in Tajikistan so that so many of your people do not have to leave home to find work, that there can be a flourishing economy right here.”
But a new study says these hopes are overly optimistic. The Northern Distribution Network (NDN), a logistics supply chain that has, since 2009, become the primary overland supply route for the war in Afghanistan, has not helped ease trade or cut corruption throughout the region. Instead, the study, released by the Open Society Foundations on October 19, finds it may be having the opposite effect in Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. [Editor’s Note: EurasiaNet operates under OSF’s auspices.]
The report, by Graham Lee (a former EurasiaNet contributor), asks four key questions: Is the NDN incentivizing regional cooperation and border reforms? Is the NDN helping to fight corruption in Central Asia? Has the NDN made transshipment through Central Asia more efficient? Are ordinary Central Asian citizens benefitting from NDN trade?
Russia's transit hub at Ulyanovsk is ready to go and is only awaiting NATO, said President Vladimir Putin's special representative for Afghanistan, Zamir Kabulov. The facility, which would help NATO move equipment in and out of Afghanistan, has been under discussion since the beginning of this year, and was finally approved by the Kremlin in June. Now it's ready for use, Kabulov said, according to Interfax:
"The Ulyanovsk transit-transshipment point is in principle already ready to handle cargo and transfers," Kabulov said... "We gave the NATO people permission, and now it depends on whether they want to use it."
Kabulov added that the transit through Russia would be more expensive for NATO than through Pakistan, but it would be more reliable: "Everything gets there [via Russia], but there [through Pakistan] it doesn't, as experience shows."
It remains unclear what role Ulyanovsk would play in U.S./NATO plans for Afghanistan transit. Its main virtue is that it is multimodal, meaning that goods can easily be transferred from airplane to truck or train (or vice versa). But the U.S. and NATO already have a backup to Pakistan -- the Northern Distribution Network, set up to ship everything by land via Uzbekistan, Kazakhstan and Russia. So is Ulyanovsk a backup plan in case things go south on the Central Asian portion of the NDN?
The question of what motivates Uzbekistan's president, Islam Karimov, is key to U.S. policy in Central Asia, which relies heavily on Uzbekistan as a staging ground for military equipment being shipped to Afghanistan. What does Karimov want in return for his cooperation for this Northern Distribution Network? The most plausible explanation is that he is looking for some sort of geopolitical support against Russia, and the military equipment that the U.S. is in the process of giving Uzbekistan is meant as an explicit symbol of that support.
This is in marked contrast to Uzbekistan's neighbors Tajikistan and Kyrgyzstan, who by all accounts are just out for money, and see military cooperation with foreign countries as a cash cow. Karimov, for all his faults, is generally believed to be relatively uncorrupt (his daughters, of course, are a different story...)
But might Karimov be more motivated by money than we usually think? A reader passes on a very interesting report, which I missed when it was first released (yes, in 2006). The report discusses the fate of the Karshi-Khanabad air base that the U.S. operated in the early years of the war in Afghanistan. And the experience of K2 is probably our best look into what Karimov wants, and doesn't want, out of his military ties with the U.S.