Uzbek border row introduces new element of tension in Central Asia

1/27/03

Claiming its Central Asian neighbors are engaging in "economic aggression," Uzbekistan has virtually sealed its borders, causing massive disruption to regional trade. Many regional analysts dispute the chief assertion behind an information campaign conducted by state-controlled mass media in Uzbekistan – that Tashkent's action is driven by a desire to protect consumers from shoddily manufactured imports. Instead, the chief impetus for border closings, some observers contend, is Tashkent's own inability to grapple with economic reforms, especially the introduction of currency convertibility.

Uzbek officials began closing border crossings along the frontiers with Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan in late December. In one instance, Uzbek border guards blew up a bridge spanning a border crossing near the Kyrgyz town of Kara Su, Uzbek television reported January 21. So far, most of Uzbek officials' ire on the border trade issue has been focused on Kazakhstan and Kyrgyzstan. The imposition of border restrictions followed an unsuccessful effort by Uzbek officials to get their Kazakhstani and Kyrgyzstani counterparts to crack down on illegal trade.

Border markets in both Kazakhstan and Kyrgyzstan are flourishing, especially since July when Uzbekistan introduced punitive duties on imports. Those duties, which initially were as high as 90 percent on some goods, threw the Uzbek economy into chaos, eventually forcing the government to first modify them, and ultimately repeal them altogether. Nevertheless, many Uzbeks persisted in obtaining durable goods and foodstuffs at border markets in neighboring states, often at significantly lower cost. In addition, consumers and shuttle traders often managed to avoid paying customs duties when bringing their purchases back into Uzbekistan.

Tashkent's effort to stop such shuttle consumerism through tightened border-crossing restrictions has been accompanied by an intensive media campaign. In recent weeks, state television and newspapers have carried reports on a daily basis about the dangers posed by the flood of "low-quality goods" entering Uzbekistan. A headline in the January 18 edition of Pravda Vostoka, for example, read "Defending Consumers' Rights."

The official Uzbek position, as outlined in a Pravda Vostoka editorial in the same January 18 edition, states that the lives of "simple people" in Uzbekistan are threatened by unscrupulous Kazakh and Kyrgyz traders pushing "low-quality" goods manufactured in China, in particular alcohol and tobacco products. "These goods of Chinese manufacturers are for the most part substandard, and in some cases, simply a health hazard," the editorial cautioned.

Articles and television reports have also detailed the substantial loss in revenue that shuttle consumerism is causing for the Uzbek government. A January 25 article in the newspaper Narodnoye Slova estimated that in 2002 authorities uncovered about 2,800 cases of smuggling involving goods valuing an estimated 1.5 billion Uzbek som.

One Kazakhstani report gauged that roughly 50,000 Uzbeks visit the Kazakhstani border city of Shymkent every day, spending roughly the equivalent of $4 million. Uzbek officials, meanwhile, deny the borders are closed. Those being prevented from crossing the frontier are "those people who are intending to import and export goods in breach of the law," Sodiqjon Musayev, a department head to the Uzbek Committee for the Protection of State Borders, told Uzbek television on January 20.

While the media campaign has generally attempted to cast the government as the protector of the country's consumers, some articles have hinted at the deeper economic motivating factors behind the border closings. A January 21 Pravda Vostoka article, for example, declared: "The durability and stability of the economies of many leading states in large part depends on their ability to safeguard their internal market from foreign intervention."

Some economic observers say Uzbek authorities are intent on a crackdown because shuttle consumerism allows Uzbeks to circumvent the strictures of state-controlled economy, thus exposing the system's dysfunction.

Other analysts suggest the border restrictions, and the accompanying media campaign, constitute an attempt by the government to mask its own reluctance to forge ahead with needed economic reforms, including currency convertibility.

President Islam Karimov's administration has repeatedly pledged to make the som fully convertible, the most recent promise coming last November [For additional information see the EurasiaNet Business and Economics archive]. Each pledge, however, has lacked follow-up. The practice of shuttle consumerism allows Uzbeks to circumvent the strictures of state-controlled Uzbek economy, thus exposing the system's dysfunction.

Some analysts point out that that the disastrous import duties experiment was designed to accompany steps to close the gap between the official and black market currency rates for the som. At the last moment, however, the government reportedly recoiled from the currency convertibility measures.

Some commentators suggest that an influential segment of the Uzbek political and economic establishment benefits greatly from the existing, state-controlled exchange framework, and, thus, steadfastly opposes any move to eliminate the currency black market.

"The [state] structures engaged in exports and the service sectors get the most out of the black market, likewise major enterprises take loans to import production technology and military hardware" according to a report broadcast January 3 by Orbita, a regional Uzbek television station.

"The full convertibility of the national currency means that the government [and state structures] will have to buy goods for higher prices," the Orbita report added. "This might become an unacceptable burden to the state budget, especially as there has been a substantial decline in budget receipts as a result of the closure of markets in Uzbekistan [exacerbated by the import duty fiasco]."

Rather than grapple with the economic problem, Uzbek officials reportedly demanded that Kazakhstani and Kyrgyzstani officials take steps to close border markets and shut down currency trading operations that allowed Uzbeks to freely change their money into Kazakh tenge, Kyrgyz som or US dollars.

Some Kazakhstani authorities have expressed understanding for Tashkent's dilemma. Deputy Kazakhstani Prime Minister Karim Masimov, who leads Astana's negotiating team on regulating the trade issue, has said there is a need "to put the whole [trade] process in order," the Interfax-Kazakhstan At the same time, other Kazakhstani officials scoff at Uzbekistan's posture. "What is their [Uzbek leaders'] business with our exchange offices?" Deputy Interior Minister Ivan Otto said.

The border trade row means Uzbekistan is feuding with all of its neighbors in formerly Soviet Central Asia. Uzbek-Turkmen tension has been high since a failed assassination attempt against Turkmen leader Saparmurat Niyazov, who has accused Tashkent of aiding those who plotted to kill him. [For background see the EurasiaNet Human Rights archive]. Likewise, Uzbek-Tajik relations have been strained for years, stemming mainly from Tashkent's perception that Islamic radicals use Tajikistan as a safe haven. [For additional information see the Eurasia Insight archive].

Posted January 27, 2003 © Eurasianet