2009-05-12 09:59:02 - Central Asia Defence and Security Report Q2 2009 - a new market research report on companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/Central-Asia-D ..

There are at least four key issues in play for this region: the global financial crisis, water, oil and Russia.

Even though none of the countries in Central Asia –Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – has any significant exposure to the global capital market, the fallout will still impact their economies. The access to FDI and the slowing of remittances

from expatriate workers back into Central Asia will have an economic impact. (In Kyrgystan and Tajikistan, remittance flows from workers abroad accounts for 20-25% of nominal GDP).

While the focus in the West has been on oil, the long-term strategic asset in this region is more likely to be water. Both Turkmenistan and Uzbekistan are major producers of cotton, a crop that demands large and reliable supplies of water. Tajikistan has little by way of mineral or oil resources, but it does hold 40- 60% of the water supply in Central Asia. Tajikistan wants to use this resource (including the ability to generate hydro-electric power) as its leverage to gain economic benefits. This strategy has clear risks.

Attempting to maximise the value of its water resources may bring it into conflict with its oil rich neighbours.

Russia is the dominant economic and military power in the region. While all five countries are moving towards being less dependant on ties with Russia, each is aware of the need not to antagonise the bear in the process. By invading South Ossetia, Russia made very plain its willingness to take whatever action it deems necessary to protect (or assert) its interests.

Central Asian countries are linked economically and strategically, but are also diverse and far from united. Politically, none is democratic and most are governed by long-term authoritarian regimes that pay no more than lip service to political and human rights reform. The area was strategically unimportant for many years. In recent times it has become important as a junction between the Russian, Chinese and US spheres of influence. It also sits alongside the “war on terror” hotspots of the Middle East. In addition, it has become a major route for the transhipment of heroin and comes under the influence of major drug operators.

2009 considerations, however, are more likely to be dominated by economic matters.