Book Review: Challenging myths about Central Asia
Book Review: Challenging myths about Central Asia
“Dictators Without Borders: Power and Money in Central Asia” sheds light on the close link between secret financial transactions and political machinations in the Central Asian republics that became independent in the 1990s.
Central Asia made headlines worldwide when the Panama Papers were leaked to the press. The secretive world of tax havens became public knowledge. Politicians, celebrities, oligarchs — no one was spared. It became clear that Central Asian elites and businesses, far from operating in isolation, are embedded in a highly globalized system of shell companies and offshore intermediaries.
Alexander Cooley and John Heathershaw take us behind the scenes through an obscure network of bankers, lawyers and lobbyists in Frankfurt, London, New York and other financial capitals. They challenge the myth that Central Asia is remote and isolated from global influences. In fact, Central Asians are more knowledgeable about global popular culture than we are about them.
Another myth the authors refute is that Central Asia’s lack of economic liberalization has caused its economic and governance problems. Although the old Soviet-Russian ruble was immediately replaced by new currencies in Kazakhstan, Kyrgyzstan and Tajikistan, privatization policies instigated by Western experts were not governed by the rule of law, but “by the principles of neo-patrimonial relations, where ruling elites provided assets to relatives and allies in return for their absolute loyalty and a cut of the spoils,” write Cooley and Heathershaw.
These states, which have embraced economic liberalization while retaining authoritarian rule, are referred to as “hybrid regimes.” They are defined by the quasi absence of a boundary between politics and economics, and between the public and private sectors.
“Crony capitalism” has connected Central Asia to the hidden and complex global system of tax havens and shell companies, which provide the world’s mega rich with the means to dodge their taxes and protect their unlawful fortunes.
In “Tax Havens: How Globalization Really Works,” authors Christian Chavagneux, Richard Murphy and Ronen Palan explain that in financial circles, “those who know do not talk and those who talk do not know. In tax matters, those who know talk, sometimes, but those who do not know talk a lot. The world of tax havens is opaque, confusing and secretive. It is a world that is saturated with stories and anecdotes. Yet the veritable flood of information can sometimes hide a dearth of solid data.”
The post-Soviet-state-building coincided with the rapid expansion of globalization. But Eastern Europe and Central Asia took different paths. For East European countries, joining the EU dominated their political agenda.
Central Asian states were originally interested in joining European institutions, but in time they became closer to China and Russia, and joined the Eurasian Economic Union and the Shanghai Cooperation Organization. Under Russian President Vladimir Putin, Central Asia became a stratregic priority.
Following the 9/11 attacks, Central Asian rulers became new allies in the global “War on Terror.” Uzbekistan, Kyrgyzstan and Tajikistan provided logistical military bases for Operation Enduring Freedom, and all the Central Asian states provided transit rights for resupply and refueling. In return, the EU and US turned a blind eye to their increasingly authoritarian practices.
The Central Asian states skillfully juggled the new opportunities, institutions and legal tools provided by globalization to pursue their private economic agendas on a more global scale. Their use of shell companies played a key role in covering up their personal transactions and corrupt deals.
Corruption and environmental abuse watchdog Global Witness, in a report on Turkmenistan’s intermediary energy trading companies, says: “These companies have often come out of nowhere, parlaying tiny amounts of start-up capital into billion-dollar deals. Their ultimate beneficial ownership has been hidden behind complex networks of trusts, holding companies and nominee directors and there is almost no public information about where their profits go.”
Since many Central Asian shell companies are registered abroad, legal jurisdiction and contestation have shifted to foreign courts. In 2011, the Financial Times reported that about half of all active cases in the English Commercial Court were linked to Russia and the former Soviet states.
But this legal globalization has not advanced global governance or standards of accountability. Central Asian states have used and abused legal proceedings for their own purposes, mixing without qualms their personal business with state obligations.
Central Asian elites and oligarchs have also acquired passports and citizenship by taking part in a growing number of investor-residency programs. Countries such as Portugal, Cyprus and Malta provide passports to investors, which gives them free movement and residency rights in the EU’s Schengen area.
The UK, another popular destination, offers the Tier 1 Investor Residency program, which according to the Home Office is for people with a high net worth who want to make a substantial financial investment in the country.
The memory of the road that saw all the treasures, ideas, inventions, products and skills of the peoples of Eurasia remains alive. Former US Secretary of State Hillary Clinton announced in 2011 the concept of a New Silk Road (NSR), a web of economic and transit connections that will bind together a region too long torn apart by conflict and division. The NSR strategy continues to be a centerpiece of US policy in Central Asia and Afghanistan.
Two years later, in September 2013, Chinese Premier Xi Jinping declared that his country would promote a Silk Road Economic Belt. A few months later, he said the land-based belt includes building transportation networks (high-speed rail, airports and roads), energy infrastructure (power generation and energy pipelines) and a 21st-century Maritime Silk Road Belt. These two belts are known as One Belt, One Road (OBOR). This project, worth $1 trillion, is far more ambitious than the NSR.
Today’s Central Asian autocrats defend their authoritarianism and protect their activities as global individuals. They benefit from the complicity of Western institutions, companies, banks, regulators and politicians, and from the indifference of the rest of the world.
What We Are Reading Today: The spin doctor’s diary
In 1997, Tony Blair led the Labour party to a landslide victory in the UK general election.
After 18 years of Conservative rule, everything about New Labour seemed vibrant and youthful. Its dynamic media operation was led by chief “spin doctor” Alastair Campbell.
Lance Prince, a BBC political correspondent, joined the team a year later as the prime minister’s deputy spokesman, later heading the communications operation at Labour headquarters in the 2001 election.
Throughout it all, he kept a diary.
“The Spin Doctor’s Diary” delves into the minutiae of policy, but one consistent thread shines through: How utterly obsessed Blair and his Cabinet were with how they were perceived. Policy making was driven by how it would read in the newspapers rather than if it would work. This meant the press office constantly spun situations to make them look better than they were.
In other words, they covered up, distorted, misled and occasionally outright lied. It was style versus substance and style mostly won.