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Foreign Policy and Civil Society Program

May 2012

Summary: Central Asia may be a collateral victim of the European financial crisis. The internal European political crisis, further spurred by the financial crisis, has impaired Europe’s rise to power on the Central Asian scene. Austerity policies will drastically reduce the funding strategies of the individual European member states. However, the impact of the European crisis is making itself most clearly felt in Central Asia on the political level. The crisis has reinforced local elites’ skepticism toward the European model, reducing Europe’s legitimacy to promote rule of law and good governance, therefore decreasing its soft power.

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The Impact of the European Debt Crisis on the Partnership with Central Asia

by Sébastien Peyrouse

The 2008 global economic and financial downturn, followed by the European debt crisis and the risk of an internal political crisis, have an impact on European foreign policy both directly and indirectly. This is especially true in the Mediterranean region, Eastern Europe (Ukraine, Belarus, Moldova), and the South Caucasus. European governments are facing growing skepticism from their citizens, who are not inclined to commit public funds to coun- tries deemed too far removed from their daily lives. In this environment, the Mediterranean and the Eastern Partnerships risk becoming weaker as Europe loses legitimacy in terms of its global role in world affairs. The EU membership prospects of the Balkan countries and the associative agree- ments discussed with Ukraine and Turkey may slow or lose some of their meaning. Central Asia may also be a collateral victim of the European crises at the crucial time when Europe and the United States must put forward new security mechanisms for regional stability in preparation for the 2014 drawdown in Afghanistan.

Central Asia sees Europe as a complex actor. Central Asian governments, accustomed to the centralization and personalization of power, are baffled by the administrative layers of the Euro-

pean Union and its multiple faces — the Commission, the Council, and the Parliament — as well as by its unique situation with its influence challenged by its very members. Historically, the Central Asian societies, influenced by decades of Soviet domination, have seen Europe more through the national cultures of its member states than through the European political construct. The Soviet regime always tried to avoid building solid relations with European institutions, favoring direct relations with member states.

Although the EU has gained visibility in the region thanks to the “Strategy for a New Partnership with Central Asia” launched in 2007 and an increase in political contacts at the highest levels, Europe’s representation in the region remains through its member states. Germany, France, Netherlands, Italy, and Great Britain all dominate in both cultural and economic terms. Some countries that one would not expect to be on the honors list for their visibility have also cemented their presence in the region. Finland, for example, has done so thanks in part to its 2009 “Wider Europe Initiative.” Other Central European countries such as Poland, the Czech Republic, and Romania, have followed suit by

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transforming their once-common belonging to the socialist world into new economic assets.

The internal European political crisis, further spurred by the financial crisis, has impaired Europe’s rise to power on the Central Asian scene — a stage full of external actors. EU development funding dedicated to Central Asia — about €750 million between 2007 and 2013, based on mid-terms cycles from 3 to 7 years — has not been directly hit by the crisis in the current cycle. However, since the current review of the strategy is neither proposing major developments nor making the region a priority for the EU, this funding will probably not be increased for the next cycle, or could even be reduced. In any case, the amount in question — about €20 million per country per year — is so small that it has only a very minor impact on Central Asian countries. Much more problematic are the funding strategies of the individual European member states; austerity policies will drastically reduce these.

Trade and investment between Europe and Central Asia is mostly driven by private actors, and, besides those dealing in energy-related sectors, they have also been weakened. While major oil and gas companies (Eni, Wintershall, BASF), firms linked to strategic resources like uranium (Areva), and major international groups in the defense industrial sector (EADS, Thalès) will pursue becoming established in the region, the presence of mid-size European companies specializing in areas of innovation such as green energies, high-tech, or biotechnologies, or in the develop- ment sector is liable to wane. European aid for the modern- ization of Central Asian economies, which are overly specialized in raw material exports and in the entrenched rent-seeking culture of the ruling elites, risks being heavily affected.

However, the impact of the European crisis is making itself most clearly felt in Central Asia on the political level. The crisis has reinforced local elites’ skepticism toward the Euro- pean model, reducing Europe’s legitimacy to promote rule of law and good governance, therefore decreasing its soft power. Europe also appears to be an ambiguous and contra- dictory actor for the Central Asian elites, who feel that the value-oriented narrative is conditional, since priority is given to energy (in particular as concerns Turkmenistan and its possible association with the “Southern Corridor”) and security (German and British agreements with Uzbeki-

stan and Kazakhstan for resupply efforts and reverse transit from Afghanistan). Unless the EU has confidence in itself, the legitimacy to promote its own conception of develop- ment and human security will be limited in a region marked by authoritarian regimes and failing governance, and in which Russia and China do not promote any political reform policies.

The crisis also exacerbates the lack of solidarity between EU member states and the dissociation of their foreign poli- cies. Member states will continue to favor their own way in Central Asia and be less dependent on EU structures. Germany, the leading European actor in terms of visibility, economic presence, and security involvement in Central Asia, might for instance see its policies in the region diverge from those of France, Italy, or Great Britain, as was already the case in discussions concerning whether to adopt a value-oriented or an energy- and security-oriented strategy.

The crisis also exacerbates the lack of solidarity between EU member states and the dissociation of their foreign policies.

The image Europe conveys to the Central Asian societies is therefore partly one of confusion, of a lack of well-hierar- chized priorities, and of an entity in which the contradic- tion between institutions and between member states is becoming increasingly apparent. As a growing share of the young Central Asian elites look toward China, other parts of Asia (South Korea, Malaysia, Singapore), and the United Arab Emirates, the undermining of Europe — as well as of the United States — in promoting its model of develop- ment presents a challenge to the legitimacy of the West in the region. European actors will have to explain how their model can be more competitive than others, but nonethe- less more sustainable in the long term, or else they might lose the support of a growing contingent of younger Central

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Asians, whose view of the world has greatly diversified in recent years.

At the same time, Turkish economic dynamism, as compared with the Greek collapse, and the image of Erdoğan’s Turkey as a self-confident power in a fully trans- forming Middle East has suddenly reinvigorated Ankara’s soft power in Central Asia. The prospects for economic growth in Turkey is raising hopes in the Central Asian societies and reopening the debate on the possibility of exporting the “Turkish model.” This new Turkey also chal- lenges Europe. The refusal of EU membership to Ankara is increasingly baffling to the Central Asians, particularly since European actors have not managed to agree on a unified position concerning the status of Turkey.

Finally, the United States cannot be indifferent about the economic and potential political weakening of Europe. Washington is disturbed to see its main international partner in a difficult position, even though transatlantic policies toward Central Asia are not unified. Central Asian ruling circles have not failed to note the absence of any convergence of EU strategy and the U.S.-led New Silk Roads narrative. While Russia and China both elaborated a “grand narrative” some time ago on what they deem the challenges facing the Central Asian states — albeit with a large gap between narrative and capacity for action, especially in the case of the Shanghai Cooperation Organization — Europe has refused to put forward any overall design for the region. The United States built a Central Asian strategy defined by Afghanistan, and now centered on the management of troop withdrawal and preparation for the post-2014 period, but European engagement in Central Asia is not directly linked to the Afghan question. The transatlantic partnership could be strengthened in the region, and U.S. and European policies better coordinated with one another.

Europe’s influence in Central Asia is not solely dependent on its financial capacities. Even with limited budgets, it can impose itself as an important external actor on the Central Asian scene. This is conditional on giving itself the means to do so, including better defined goals, an improved hier- archy of its priority (perhaps values, development, security, and energy?), aid that is better monitored, and increasing cooperation between member states, private actors, other external actors, and international donors. A large share of the Central Asian public still considers Europe to be an

aspirational model in terms of culture, the well-being it offers its citizens, and its social-oriented model of market economy. However, Europe will be put to the test of its own legitimacy in coming years, during which time another generation of Central Asian elites will arise, one that does not necessarily look to Europe for inspiration.

About the Author

Sébastien Peyrouse is a Senior Research Fellow with the Central Asia- Caucasus Institute & Silk Road Studies Program at Johns Hopkins University’s School of Advanced International Studies, Washington, DC, a Europe-Central Asia Monitoring researcher, and FRIDE asso- ciate. He thanks Jos Boonstra for his comments on an earlier version of the text.

About GMF

The German Marshall Fund of the United States (GMF) is a non- partisan American public policy and grantmaking institution dedi- cated to promoting better understanding and cooperation between North America and Europe on transatlantic and global issues. GMF does this by supporting individuals and institutions working in the transatlantic sphere, by convening leaders and members of the policy and business communities, by contributing research and analysis on transatlantic topics, and by providing exchange opportunities to foster renewed commitment to the transatlantic relationship. In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 through a gift from Germany as a permanent memo- rial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Wash- ington, DC, GMF has seven offices in Europe: Berlin, Paris, Brussels, Belgrade, Ankara, Bucharest, and Warsaw. GMF also has smaller representations in Bratislava, Turin, and Stockholm.

About the On Wider Europe Series

This series is designed to focus in on key intellectual and policy debates regarding Western policy toward Wider Europe that other- wise might receive insufficient attention. The views presented in these papers are the personal views of the authors and not those of the institutions they represent or The German Marshall Fund of the United States.