A Perfect Storm: Eurasia Feels the Effects of Mounting Crises

On August 24 the Russian ruble slipped to a seven-month low of 71.04 to the dollar, part of a perfect storm that has hit the country—sanctions over actions in Ukraine,  and the decline of crude oil prices to roughly 40 dollars per barrel. Russia’s over-reliance on oil exports for hard currency and the fact that 84 percent of the country’s oil exports were to Europe make its economy particularly susceptible to this storm.

Cutting Off Your Nose…

Such a hit to the economy can potentially raise the risk of civic unrest. Yes, Putin’s popularity is still high at the moment, but the question is whether that popularity will continue over a long period of economic malaise. Despite the fact that U.S. and European sanctions were narrowly focused on elites close to Putin, in an action that resembled the proverbial “cutting off your nose to spite your face,” in 2014 Russia retaliated with its own sanctions on imports of European and American goods, particularly food stuffs. Prior to these retaliatory sanctions, Russia had imported 43 billion dollars-worth of food products from Europe and the U.S.  

The sanctions decreased such imports in 2014, but bans had not completely blocked the path for the European and American goods. Many continued to pass through Belarus and other Former Soviet states into the market. Recently, as a show of commitment to upholding the sanctions, the Russian government burned contraband goods in accordance with presidential decree, sparking anger inside and outside the country.

The biggest threat to Putin’s power, however, may not be from civil unrest, but rather from among the elite itself. Putin’s own rise to power may provide some insight here. The 1998 Russian financial crisis had hit the country’s economy hard, causing it to contract 5.3%, the collapse of the ruble and the country’s default on treasury bills. Boris Yeltsin’s inability to manage the crisis, and his general weakness led some in the elite to recognize the need to replace him. Putin, who had been promoted from Yeltsin’s head of Security Council to prime minister in August 1999, was appointed president until official elections could be held.

Russia could see a similar situation occur with Putin if economic hardships continue for an extended period of time.

We All Fall Down

Russia is not the only former Soviet state being hit by the current crisis, and Putin’s certainly isn’t the only authoritarian government put at risk by it. Regardless of the independence gained after the fall of the Soviet Union, the Eurasian states are still highly connected and dependent on Russia for exporting raw materials and as an outlet for excess labor. The labor stop-gap is very important for many of the countries whose own economies—due to inefficiencies in the systems—are not able manage their unemployment rate.

In Kyrgyzstan and Tajikistan remittances make up 32 and 42 percent of GDP respectively. And the decline in the Russian economy—particularly the labor market—puts extreme pressure on these countries as their citizens are returning home without jobs. One article notes that the drop in remittances to Central Asia could be estimated at somewhere around 15 percent.

 We may be seeing the effects of the downturn manifest in the sphere of politics. Armenia, being one of the countries that are more vulnerable to risk, due to its state of war with Azerbaijan, strained relationship with Turkey and its relative lack of natural resources, has already seen civic unrest in the country over the government’s decision to raise energy prices.

It’s the Exchange Rate, Stupid

Resource rich countries like Azerbaijan and Kazakhstan have fared slightly better, but are beginning to see the limits of what their oil wealth can do. Unable to continue to support its currency’s managed float, Kazakhstan freely floated the tenge on August 20, which resulted in a 26.2 percent depreciation against the dollar to 255.26.

Azerbaijan, though not resorting to freely floating its currency, determined that it was unable to maintain the manat’s previous exchange rate and devalued the currency in February. Pressure in the society has grown since then with concerns over rising prices. And this concern was significantly increased with the fall of the Kazakhstan tenge, which prompted some Azerbaijanis to exchange their manats for dollars in expectation of a similar fate to the country’s currency. The situation also prompted Azerbaijan’s Trend news agency to question whether the depreciation of the tenge would affect Azerbaijan’s economy, and others to speculate about how long the Azerbaijan government would be able to maintain even the current exchange rate.

Each of these suggests a rising uncertainty in the region about the future of the countries’ economies and potentially the political status quo.

Better Late Than Never?

Perhaps it’s a little too late to repeat the international community’s mantra of “diversify, diversify, diversify.” Even though Russia claimed that sanctions enabled the country to focus on developing its internal production, it will take time for the governments of the region to make any significant changes, particularly since endemic corruption and an appearance of political, economic and legislative instability serve to deter foreign investors and discourage local small and medium business.

Recent crackdowns on political opposition further suggest an unstable environment

As these countries, lose foreign investment and their ability to export natural resources for high prices, they find themselves at greater risk. The long-term forecast for low oil prices could produce a number of negative effects over the coming years—economic and political instability being some of the most significant.

There might be a chance to start anew with the expansion of other sectors of the countries’ economies. After all, the lower exchange rates make goods more affordable on the international market and suggest less risk of suffering Dutch disease. However, this won’t be a quick fix.

Economies that were highly centered on oil and gas revenues (Kazakhstan, Azerbaijan, Turkmenistan and Russia) cannot quickly redevelop Soviet industries that have languished for years. And reinvigorating these old industries or developing new ones will take significant investment—investment that is currently not coming from external sources and might not find sufficient cash infusion from governmental “rainy day funds.”  

The countries in the region without significant petroleum resources are not in much better situations, since many of them relied upon remittances from resource rich countries.

Most likely, what we will see is a rough few years with increased conflicts between the populace and the government—even if only on the small scale—and infighting among elites, who seek to gain access to a shrinking pool of government resources.

There is still hope, however, that the Former Soviet States will use this chance to take a hard look at the systems currently in place, and despite the fact that changes may have negative repercussions on the regimes in power, will make the hard choices that will ensure sustainability in the long-term.

Risk, Fragility and Post-Soviet Fifth Columns

On April 22, Intiqam Aliyev, Azerbaijani human rights defender, was sentenced to seven and a half years for tax evasion, abuse of authority, illegal entrepreneurship and appropriation. On May 6, another well known-activist, Faraj Karimov, was given a six-year sentence on drug-related charges. Critics have claimed the sentences were politically motivated, particularly since they come at the time of a general crackdown on opponents of the Azerbaijani government.

Human rights groups, international institutions and governments have warned that such a crackdown would bolster radicalism, or that the actions could result in protests and instability. In her testimony to the House Foreign Affairs Committee in February 2015, Audrey Altstadt, professor of history at the University of Massachusetts, Amherst, noted, “Critics oppose the regime, not the state. But the regime identifies itself with the state and claims that a threat to its own power is a threat to statehood. Under these conditions, endemic corruption, lack of democratic governance, and repression of critical voices undermine the stability of society and therefore put the country at risk.” She later states that the clamp-down on civil society is a “risky and counter-productive strategy for the regime itself.”

Altstadt makes a strong case, but to understand why the Azerbaijani government made these decisions, we need to look at Altstadt’s statement in two parts: 1) “critics oppose the regime, not the state” and 2) the Azerbaijan government’s decisions to crackdown on civil society are “risky and counter-productive.”

State and Regime

Despite Altstadt’s distinction between opposition to the regime and opposition to the state, the situation might not be so clear-cut in Azerbaijan. The president and the parliament are elected, but since the early ‘90s the elections have never passed international standards for being free and fair. Freedom House’s Freedom in the World Index currently lists the country as “Not Free,” receiving low scores on both political rights and civil liberties.

At the center of the system lies a combination of clan and patronage politics, which results in a highly centralized and personalized system and in effect closes the distance between the regime and the state.

This type of system makes it difficult to distinguish where the government ends and the state begins.

Civil Society as a Threat to the State

The Azerbaijan government has woven a narrative similar to that of Russia that the United States is drawing on democracy development programs to create a fifth column in the country. The narrative has the underlying logic that given the state and government are inseparable and opposition groups and parties are “radical” and “anti-Azerbaijani,” any change of regime—democratic or otherwise—would undermine the state. Thus liberal groups and organizations, particularly those receiving funding from the U.S. for democracy development programs have been attacked for their role in undermining the sovereignty of the state.

To fully grasp the narrative, we need to look at its history, which is intimately connected to the threat deriving from the color revolutions in Eurasia and the events of the Arab Spring. 
With the fall of the Soviet Union, U.S. and European funding for democracy development programs began to be provided to civil society organizations, founded on the theory that transition to market economics required a concomitant transition to democratic governance. From the beginning, many post-Soviet authoritarian governments had an uneasy relationship with the programs, even going so far as creating GONGOs (Government Organized Non-Governmental Organizations) in order to control the sphere of civil society and maintain low levels of opposition. As many of the fledgling governments became more established, they gave less room for civil society and democracy development programs. Kyrgyzstan’s Askar Akayev is a good example. The Kyrgyzstan government began its movement away from democracy in 1996, when the new constitution codified a strong president and weak parliament. And by 1999 Kyrgyzstan was designated by Freedom House as “Not Free.”

In 2002 and 2003, Azerbaijan was still designated as “Partly Free.” However, in December 2003, the country’s president Heydar Aliyev died. The election of his son, Ilham Aliyev, was followed by violent protests, giving evidence of discontent and a potential weakness in the regime. These events and the Rose and Orange revolutions (in Georgia and Ukraine respectively) demonstrated the susceptibility of the post-Soviet authoritarian regimes to instability, leading the Azerbaijan government to tighten its grip on power. The 2006 Tulip revolution in Kyrgyzstan hammered home this concern about unrest.

The situation was not helped when Azerbaijan’s leadership witnessed the Arab Spring in the Middle East in 2011, the 2012 post-election protests in Russia, the ouster of Viktor Yanukovych in Ukraine (and the subsequent descent into conflict over Crimea and Donbas) and the 2013 controversy over Ilham Aliyev’s election to a third term. 

The crisis in Ukraine and the increasingly aggressive activities of Russia (with the rationale of resistance to the encroachment of the U.S. and Europe) resulted in the leadership of a number of post-Soviet countries growing more concerned about being caught in the middle of a geopolitical struggle that seemed to be occurring in the civil society of post-Soviet space. 

In the lead up to the 2013 presidential elections, small protests began to pop up in Ismayilli, Quba and Nardaran causing unease in the Azerbaijani government.

By 2014, the head of the Azerbaijan President’s Cabinet accused the U.S. government of “forming a radical group of protesters.” Just recently, the Azerbaijan newspaper, a publication of the Azerbaijani parliament, published a piece claiming that the United States had created a fifth column in the country.

Crackdowns and Increased Risk
Is Azerbaijan’s government putting itself at risk because of its decision to crack down on groups critical of the regime?
In his book Principles of International Politics, Bruce Bueno de Mesquita points out that on average democratic leaders stay in office for less than four years, while their authoritarian counterparts for roughly nine, suggesting a general increased longevity of authoritarian rulers.

Jack Goldstone et al. have pointed out that “…the risk of instability is lowest in full autocracies and full democracies, other things being equal. By contrast, hybrid regimes—partial autocracies and partial democracies—are substantially more vulnerable to crisis than their more ‘coherent’ counterparts.”

In 2003, Azerbaijan’s Partly Free designation set it squarely among the hybrid regimes, i.e. at higher risk. The options, then, were to move either toward democracy or authoritarianism. Given both Bueno de Mesquita’s point about longevity of leaders in the two systems and the need for stability, the more rational choice in the short-term was to tighten the government’s grasp.

Fragility
But the decision for the short term does not consider the fact that other risks can arise from strengthening the authoritarian elements of government. A highly centralized and personalized authoritarianism can produce fragility in the system in the longer-term. Nassim Nicholas Taleb, in his book Antifragile notes that nonlinear systems—in which most of the volatility can be attributed to one or a small number of events—are highly fragile.



Taleb and Gregory F. Treverton later explained, “The first marker of a fragile state is a concentrated decision-making system. On its face, centralization seems to make governments more efficient and thus more stable. But that stability is an illusion.”

Since the centralized system is able to hold volatility in check for such a long time, it does not have the benefit of self-correction that comes with handling small shocks often—as would be done in a more open system. Without that self-correction, the fragility in the system does not enable the state to handle slightly larger shocks, and the harm from these shocks may be increased exponentially—resulting in a non-linear system. Taleb and Treverton note that Lebanon, because it has constant small incidences of unrest, is better prepared to handle larger protests without sinking into chaos as Syria has.

Similarly, Azerbaijan’s ability to stave off opposition through heavy-handed policies may leave the country vulnerable to slightly larger unrest down the road.

The government may be able to hold volatility in check for now, and may decrease short-term uncertainty by removing opponents from the political field, but with the decline in oil prices, the fall in the value of the manat and the potential for shocks throughout the Azerbaijan economy (which has a low level of diversification)—some coming from Russia’s economic woes—the Azerbaijani government may need to keep Taleb’s and Altstadt’s thoughts in mind, even if the best bet in the short-term seems to be strengthening authoritarian elements of the government.

At the same time, recommendations from international Institutions need to keep in mind the interpretation, logic and the political calculus of the Azerbaijan government. To claim the separation between regime and state is to assume the depersonalization of the state, which is not necessarily the case. With the present form of government in place, the logic of “attacks on the regime are attacks on the state” hold. However, it is specifically this personalized authoritarian state that creates the interconnection, and thus the subsequent risk—not some external power or fifth column.

Airing the Dirty Laundry of Morocco's Sex Industry: Hiding from the Gaze of the Colonizer in the Postcolony

In an effort to protect its image, the Moroccan government banned the movie Much Loved (Zin Li Fik), which depicts the lives of sex workers in the country. But just days after the the premiere of the movie at the Cannes film festival the government released data from a 2011 report that acknowledged the presence of 19,333 sex workers, primarily in the cities of Marakech and Casablanca.

In the days following the release of the film, social media and Moroccan online news outlets buzzed with discussion of the topic. One op-ed piece in the Moroccan Times criticised the film not only for its depiction of this side of society and of sexuality, but for the filmaker's choice to do so on the international stage, rather than within the country itself.

The refrain of "don't air the nation's dirty laundry to an international audience" is common in postcolonial countries, and it takes the form of desiring not to acknowledge marginal behaviors and economic sectors (as in this case) or to bring internal political issues to international bodies (as some authors in Azebaijan have said about groups that requested European countries boycott the European games because of the county's human rights abuses).

These types of situations suggest the continuing of focus on the gaze of the colonizer and the desire to maintain uniformity of national identity and a strict adherence to normative representation of the body politic. The question, however, is whether the discussion would have ever arisen if the topic had not been brought to the international public sphere. The answer may reside in the openness of the society itself.

In a closed political environment, where the government has tight controls on what is being published or broadcast, controversial topics may never reach the fore of discussion and may find themselves swept into a corner. Morocco, a country with a rating of "Partly Free" in the Freedom in the World Index, has begun having discourse on the topic with both supporters and detractors of the filmaker weighing, and could utilize this chance to address the problem.

As public discussions move to the Internet, the relations of social media and governments become more significant for a society's ability to address its issues. Facebook's and Twitter's challenges with authoritarian governments that wish to suppress opposition, such as Turkey and Russia, and the increased ability of governments to block such websites, mean societies might have a decrease ability to mitigate risk of unrest through the self-correction of dealing with smaller issues.

It remains to be seen what direction such trends will take, but hot-button topics like Much Loved's depiction of the Moroccan sex industry will provide insight into how the trend is developing.

Succession Concerns in Algeria

Roughly a year ago, Algeria had suffered pockets of protest surrounding the election of Abdullaziz Bouteflika to his fourth term as the president of the North African country. The protests, and the ailing health of the 78 year-old leader brought on discussion among political observers about the country’s ability to remain stable in the coming years. The decline in onshore petroleum reserves and in oil prices recently have aggravated the problem, leading some analysts to look into not only the potential for instability, but also the succession problem that looms over the political landscape.

Abdullaziz Bouteflika rose to power in 1999 at the end of the country’s civil war that began with the annulled election of Islamists to government in 1992.  Since then, Bouteflika has drawn upon income from oil and gas production to provide social services to the country and invest into infrastructure projects. At the same time, the security forces have come down hard on attempts to protest. 

In the capital city Algiers, a strong police presence is maintained to ensure stability, but outside the city remains a threat from groups associated with ISIS. In September 2014, militants kidnapped and beheaded French tourist Herve Gourdel to punish France for its actions against the Islamic State. In March 2015, 100 Turkish workers were evacuated from a roadway project east of Algiers due to a threat from militants associated with the Islamic state. In February, the US State Department issued a travel warning for its citizens about the Kabylie regions and the eastern wilayas, and the Saharan Desert regions of the south and southeast.

Such areas of insecurity make the concerns about Mr. Bouteflika’s health more significant. The lack of plans for succession could put the country in a position where a power vacuum is created, which could lead to violent clashes within the society. Some observers have noted that leaders of the Algerian government since the 1960s have been less elected by the public than selected by the security forces, which could decrease the succession issue. Moreover, the government is seeking to compensate for the loss of onshore reserves by seeking offshore wells to support the country’s economy.

Nonetheless, this situation is one that should be watched. Since the country has a long border with Libya and analysts have registered concern about the possibility of Libya’s becoming the next failed state, even a small loss of stability in Algeria could provide the opportunity militants need to expand their reach. 

The best way to ensure stability in the long term is to prepare now for the event of succession, in particular one that would ensure that the voice of the broader public can be heard.