Central Asia and South Caucasus

Viscount Waverley Excerpts

Tuesday 30th November 2010 Grand Committee

Asked by

[Viscount Waverley]

To ask Her Majesty’s Government what are their current priorities as they take forward their relationship with the individual countries of central Asia and south Caucasus.

[Viscount Waverley]

My Lords, long before the advent of oil as a prize, mystery and a heightened realisation of its impending post-independence importance first drew me to Asia and the south Caucasus. I now count with pleasure many friends from the region. I declare at this stage that I am the chairman of five central Asian APPGs, serve on the advisory council at Asia House of the Asia and South Caucasus Association, am vice-chair of the British-Azerbaijan interaction group and am associated with a global organisation that is active in infrastructure construction projects.

Central Asia and the south Caucasus have a mystical resonance in the British imagination, whether through the writings of the orientalists or the biographers of the Great Game. The colonial withdrawal and Soviet takeover of the region led to a steady decline in what was once a glorious tradition of scholarship and trade, as access to the region became restricted. The dissolution of the Soviet Union and liberalisation in China and Mongolia removed barriers to access to central and inner Asia, but the UK business and academic community is only now turning concerted effort to a region that we all once knew well, although there are already substantial British successes.

Thus, starting anew, I intend to draw attention to and elevate the profile of a region that has been substantially neglected in UK foreign policy in recent years but which has become greatly relevant both on the global political stage and to regional stability. The prospective importance of this area, politically, economically and strategically, can scarcely be over- estimated. We must work hard to secure interests such as counterterrorism, energy security, democratisation and the rule of law. No longer landlocked thanks to a new innovative pipeline grid, a new golden triangle of trans-Caspian oil and gas resources is emerging between Kazakhstan, Turkmenistan and Azerbaijan that could transform the regional economic potential for central Asia and the south Caucasus.

These countries are characterised by predominantly moderate and secular Governments who have proved to be reliable partners and rational actors on key issues. They remain favourably inclined towards the UK and recognise that we have a social, economic and political culture which they wish to partner. Indeed, these nations look to us as trusted brokers. We have the opportunity to act now to help secure their futures, as well as our national interests, amid the powerful spheres of influence exerted by adjacent nations.

The task is incumbent on us to listen intelligently to, to welcome and to benefit from these new voices at the table of nations. The need for a balanced foreign policy that accommodates a geopolitical approach cannot be overlooked. Afghanistan is part of the central Asian nexus and has natural affinities with that area to counterbalance external influences. Regional countries understand the culture of the ethnic groups in Afghanistan, and the essential economic development of Afghanistan will filter down from the north. I envisage the region becoming the rock around which an enduring peace can be built. The region possesses abundant agricultural, mineral and energy resources, including great potential for renewable energy, including hydropower and solar. It contains all the necessary ingredients for industrial growth, and has a widely educated workforce.

The scientific potential is also enormous. Kazakhstan’s Baikonur Cosmodrome, which is shared with Russia, remains the world’s first and largest space launch facility, and services global commercial satellites and shuttles to the International Space Station. It bears witness to considerable technological sophistication. However, industry, such as the Soviet cotton monoculture, requires vision and assistance in the continued transition from a command economy to market mechanisms that create jobs, exports and opportunities for UK partnerships.

Although this year saw a period of economic stagnation, it is predicted that these countries will experience strong economic expansion in 2011, with real GDP growth of 5 to 9 per cent for a combined regional population of 77 million and a total GDP of $400 billion. Economic engines, such as Azerbaijan, which was third in global GDP growth last year, and Kazakhstan and Turkmenistan, which have new Caspian oil and gas field production in the years ahead, position the region for solid growth, development and diversification. This will be fuelled by relatively high global commodity prices and stronger domestic demand.

The hydrocarbons sector is the backbone of the largest economies, but structural challenges undermine the full development of the natural resources sector. The lack of local technical skills and limited financial capacity to develop the energy sector make the search for foreign investors a priority, while corruption remains a disincentive to foreign investors. Regional interests should not fall into the trap of a single-commodity economy, however. There are real opportunities in the form of energy co-operation beyond hydrocarbons, and the potential for sustainable partnerships for western interests is immense.

Events of global relevance are also now coming from the region. Importantly, this year, Kazakhstan has been chairman of the OSCE. The priorities of Afghanistan and Nagorno-Karabakh, together with advancing dialogue on European security through the Corfu process, and the political, military and economic dimensions, go together with a theme of promoting interethnic and religious tolerance. I wish that country well in living up to the high expectations that it is anticipated will come from the upcoming summit in Astana.

Uzbekistan's presidency of the Shanghai Cooperation Organisation, comprising most of central Asia with China and Russia, has achieved considerable results in developing international contacts and the legal framework, as well as in implementing initiatives to strengthen security and stability and to combat terrorism, extremism and separatism. Importantly, President Karimov's speech to the Oliy Majlis on 12 November on the concept of the deepening of democratic reforms and the formation of civil society in Uzbekistan was a welcome milestone and should stimulate progress in the region. However, despite periods of continuing unrest in Tajikistan and Kyrgyzstan, the Kyrgyz Government recently held their first parliamentary elections, and both countries show signs of increased stability. The militant Fergana Valley tri-state region is, however, a concern.

The countries of the southern Caucasus, anchored by Baku and its management of key pipelines, serve as a gateway to central Asia and are evolving into a dynamic Eurasian artery of economic growth and development. Azerbaijan and Georgia, as well as Armenia, sit in a region that has vast potential. Transport corridors will not only link central Asian and south Caucasus countries with wider regional continental trade and transport networks, but will strengthen the sovereignty of the regional states and facilitate the opening of their political and economic systems.

Azerbaijan's strategic location and stability are vital to the West. The United Kingdom is the largest foreign direct investor in Azerbaijan's economy, and bilateral trade has doubled in the past year alone. Besides long-term energy co-operation, over the past few years bilateral ties have broadened into new areas such as finance, infrastructure projects, education and culture. For all these reasons and more, I believe it is essential for the UK to take a leading role in Europe to push forward relationships on political, economic and strategic fronts and to seek to balance the interests of Russia, the US and China in the multivector policies of the central Asian and south Caucasus states.

What ideas do we have for regional policy? The fragile nascent political systems should be encouraged to progress towards the growth of democratic and anti-authoritarian regimes. However, we will be more successful if we take a long-term view of reform. Our own democracy is an evolutionary process, and we should be seen as a partner, not a preacher. However, given the United Kingdom's professionalism and experience, I think we should mould a regional policy around strengthening the sovereignty of those states and facilitating the development of their political and economic systems. The democratisation of state power and governance, ensuring freedom of choice and the development of electoral legislation, reforming the judicial and legal systems and developing civil society are all areas in which we could usefully engage in the spirit of partnership and co-operation. This would strengthen the parallel-to-trade objectives in advocating the benefits of good governance, transparency and accountability, freedom of the press and human rights standards. In conclusion, engagement is essential. The central Asian and south Caucasus states have now completed their transition stage from independence. Twenty years on it is now a new game and a positive one in a region that should be one of our priority strategic areas. I thank the Minister and all those who are contributing today. In addition, through the Minister if he will allow me, I pay a special tribute to all the excellent London-based officials, together with his ambassadors in post.