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Intelligence Report

Office of Transnational Issues

Long-Term Scenarios for the Central Asian, Caucasus, and Caspian Regionessimistic Future

A Research Paper

Intelligence Report

Office of Transnational Issues

Long-Term Scenarios for the Central Asian, Caucasus, and Caspian Regionessimistic Future

A Research Paper

This report was prepared by analysts in Ihe Office of Transnational Issues, with contributions Irom analysis in the Office of Russian and European Analysis. Com-ments and queries arc welcome and may be directed to

Long-Term Scenarios for the Central Asian, Caucasus, and Caspian Regionessimistic Future

Key Findingsdecade after tbe dissolution of the former Soviet Union, significant uncer-

adamras of uinty over the future of the Caucasus, Central Asian, and CaspianThe Caspian states' anticipated energy wealth and central position

m Europe, Asia, the Middle East, and South Asia have drawn for-

eign attention to that area's potential geostrategic imponance. In theand Central Asia, latent ethnic tensions and economic and political instability have attracted interest from China. Turkey, Russia. Iran, and others, which either fear the spillover of ethnic tensions across their borders or view tbe region's instability as ripe for remolding:

Significant foreign meddling paired with domestic instability has the potential to push the region comprising the Caucasus, Central Asia, and the Caspian states toward vastly different extremes during the nextears, from significant wealth and stability to virtual anarchy anddisaster.

The manner in which the region develops will shape the future threats or opportunities it presents to rhe United States. This path also willthe degree of pressure, either positive or negative, the United States will face to become involved io the region economically, politically, and rnihtortiyJ

To assess the range of potential futures we envision for the region, theAssessments Groupear consulting with overutside experts, analysts, and policymakers to arriveet of plausible outcomesur experts first identified key certainties and uncertaintiesthe fiiturc and then, through iterative discussions, arrived at what they thought were rhe three most important drivers in rJeternuning the region's future:

inclination of neighboringChina. Iran, andassert their foreign policies aggressively and thus to intervene in the region. The degree to which these key countries choose to become involved in internal developments in the region is highly dependent on several variables including their domestic political and economicand energy needs.

effectiveness of the governments in the Caspian, Caucasus, andAsian region. Although we are confident that democracy is not likely to flourish there over the nextears, our experts believe the degree to


which each country will develop enduringautocade oror cohesive national identitiesajor unknown.

priced for commodity exports. With the region's heavy reliancenot only oil and gas but also otherproductsnvagaries could severely affect agrowth

The consensu* of our outside experts for tbe most probable scenarioineffectiveigh degree of foreign imcrvcDtioo. and high carunodityscenario labeled Cold War-Like Great Garnc.cenario would resultegion mat is atenter of ongoing, low-level regional conflict and atcene where each great power plays itself off against another,ider global conflict Foreignby high global demand forrife in this scenario as outside players jockey for economic and political control:

none of ihc experts couldtable, cooperative,region where outside neighbors fostered economicpoutical stability and where Caspian governments effectivelyenergyn the Cold War-Luce Oreat Gamein most countries is weak or nonexisient andfaikd to build workable political and ecooorrJc insriwdons.

Similar themes tended to emerge in most of our other scenarios. In general, the scenarios posited relatively pessimistic outcomes for the region and for tbe United States:

Expectations of higher levels of foreign-government meddling, polidcal instability, and economic backwardness were among the most prominent factors that our experts thought would cither boost pressure for US involvement or create havens for narcotics and arms trafficking and terrorism.

None of the scenarios errvisxtted strong, stable democracies, aad many anticipated ssaioos domestic instability. The factors that worked most

aga nst political itabUity whmMac intervention and the absence of economic and political growth and reform.

scenarios anticipated that foreign intervention in the region would be disruptive, either because local govranments would invite foreignor political support or because foreign neighbors could become embroiled In mtcrnecine ethnic or territorial disputes. NeighboringinRussia, China, Iran, andwatch the region closely.


Id only oneTightropeIran gain significant influence in the region and only after an improvement in Iranian-USa development our experts thought was essential forcenario to materialize. Id most scenarios, Russia meddled in local politics orissues but was more of an irritantajor threat.

The scenarios suggested that long-term cooperation among states in the region was unlikely, especially given the strategic cultures there andarnmostties among ethnic groups.

The project found that the United States will remain an important player in the region from the perspective of national governments:

Because ofthe United States' roleorld leader, governments will continue to seek its support in developing their countries.

Local elites, however, might misjudge US actions and mislabel them toolitical agenda.

US reaction to the policies of Turkey, Iran, and especially Russia and China will be instrumental in detemuhing the region's global significance.

These countries, especially Russia, would react negatively to increased US influence in the region, even if Caspian and Caucasus governments invited this involvement. Cordial relations between rhe United Slates and Russia, China, Turkey, or Iran could mitigate these negative reactions and could lead to less manipulation and less big-power maneuvering in the region. F

Senior Advisory Board

Weumber of outside experts to provide analysis and guidance for our workshops, seminars, and scenario building (seeor a

completeheir expertise helped shape the substance of our findings and the course of ourroup ofsix outside experts servedenior advisory board to provide guidance and suggestions on all events and analysis:

' Enders Wunbush, Assistant Director, Hicks and Associates, SAJC

Richard Armitage, President, Armitage and Associates.

Rozanne Ridgway. Chair. Baltic-American Enterprise Fund.

Thomas Crumm, Chief, Scenario Development and Application Croup, General Motors.

Fred Starr, Chair, Central Asian Institute, Johns Hopkins University.

Geoffrey Kemp, Director, Regional Strategic Programs, Nixon Center for Peace and Freedom. I


Scope Note Q

part of the DI's Strategic Perspectives Series,

of Transnational

Issues (OTI) and the Office of Russian and European Affairs (OKEA) spent approximately one year exploring the strategic significance of the southern tier of the formerhis Intelligence Report is based on the results of that project and two specially convened workshops that brought together intelligence analysts and outside experts from several disciplines to develop future scenarios. I

the workshops' deliberations nor this report are intended to predict the fiiture course of events in tbe Caspian region. Nevertheless, theperspectives serve as tools to enhance our urtderstanding of themilitary, and economic dynamics at work in the region and to gain insights into the potential policy decisions facing the key regional states and the United Statcs-P

The first paper on this topic in the Strategic Perspective Series was OREA

Ine intend toaper on gas projections for the Caspian region


Lonr;-TerrQ Scenarios for the Central Asian. Caucasus, and Caspian Regionessimistic Future

IrataMitv ofthe Caspian Stales aod ta* Caucasus

Ten years after the disscijaon of the former Soviet Union, uncertainty over the future of countries in the Caspian. Caucasus, and Central Asian region remains high Domestic economic and poliiical systems are unsiable as government leaders andinterest groups fight to carvenare of their countries' political and ewrnorrric resources. At the same time, foreignboth littoral and nonlii-toraljockeying for pobbcal and economic influence, especially in tbe Caspian nations but also in bordering slates where Caspian oil and gas pipelines may eventually ran.otal of upillion berrels of proved reserves and possible recoverable od

is eric crfthc few regions in rhe world ihvajor new player in the globalhe cormrg decade. Caspian gas resource! areiespresaivc with pro-ed reserres atn cubic mesers (tcmX on par wirh tbe United Stares atern. Europend South and Central America corribined at aroundern I

In most of Central Asia including Uzbekistan.and Kazakhstan, poll Deal cocxhnons have been relatively stable rn recentituaooo some attribute to repressive regimes. Ruling ditea have swiftly silenced independent politicalparticularly in tobekjstan andthrough propaganda, imprisonment, and exile. Wilh the partial exceptions of Kyrgyzstan and Kazakhstan, civil and political pluralism are extremely weak,and societies are highly corrupt, andconditions are poor. While Kyrgytstan and Kazakhstan arc relatively more reform minded than ether Central Asian states, they all share many nits of the former Soviet era: highly persrjrialized and pater-nalistic rule; nomraxJature networks;statist economic systems. According io oneipeiU with whom we consulted, the absencecreuc governanceigoificani procUem lhal could lead io wideapcead social unrest or ihe dewtopcsrni of forces irhmical lo US i


Domestic i

Although economic conditions have improved in Ihe Caucasus over the past couple of years, governments remain weak and the legacy of protracted ethniccontinues to stall economic reform. In recent

lerm growlh. Tbe region islinks toarge share ofareas Already old transportand the lack of reform also haveand. desprte todaysinvestors ate timid and badly neededforeign direct irrvesrjnraM is limited.

Unstable domestic economic and political conditions make the Caspian. Caucasus, and Central Asian region ripe for foreignwinch there ia plenty^-further cornpucating the region's furore. Each of the countries that borders the Caspian states, including China, Iran, Turkey, and Russia, isthat another will gain primary irutucncc; wilh (he vacuum toft by reduced Russian influenceestige, the other three sec rjppctrumues fortheir own interests. At the same time, some govemtnents in the region are pressuring the West, especially the United Stares, to ally with them:

Russia sees tbe Caspian and Caucasus nations as being wiilim Its sphere of influence and is suspicious of other foreign involvement, including lhal of the




Figure 2

Caspian Oil Reserves7




1 1



Stales. Moscow attempts to maintain aof control over thesehas military bases in Georgia and Armenia, and several pipelines for Caspian gas and oil already run throughcurrently it has lets control than it would like. Several factors limit Moscow's Influenceeak Russian economy, Caspian and Caucasus government resistance to Russianand the involvement of other foreign players.

Iranajor presence in tbe Caspian region and sees itselfatural conduit tor the region's oil exports. Up to now, many Caspian and Caucasus states have stayed at arm's length from Iran because of poor relations between Tehran and Washington, which they view as an important and beneficial

player in the region. Because of current USon Iran, Tehran sees the Westirect threat and bas Died to convince local governments of this. For example.


Ee muuans said that States is backing in the region will allow tbe West to terrorize the entire southern Caucasus. Tbe Iranians warned Georgian officials that all trade, commercial relations, and social and economic assistance from the United States, Western Europe, Turkey, and Azerbaijan would jeopardize Georgia's interests and security.

Table 1

Uncertainties nnd Certainties Regarding the Region's Future'




upon will iddoid ticjil j

ibit lo larcicn influence especially fromthina. Iioji. andwhich view Cat region utram cried in ilcvelotsng Oil i

Howwillchiia. Iran,

and Turkey assert (heir foreign polled? ll ii clear lhal these- Mure wiH havei die region, bur the ejient to whichs benign oriflieoliilh any prreiiion.

i ii relations he eirjlnl or

IS rarprancment with Ine noald nicm-iih relation! hip? in ihe rejyeei lhat have developed abnormally because ol CS

rHi.-eli la isolate tan.

Chinallarger role, al Will ibr govern ic Iviii Id KaiskhitmL Berjutf has already ail manured to till same of ihe vacuum lefi by Monow in border

employees, ll alio ha

nentt and help. Beijing's interest in dieill peeeabCy be iconr brcuuic Otitic ivailibiliry of oil roppbea lo feed China's

countries in Ihe region dmtep coalitions wilh isch. olhar?

cckipcnilnney factor ihai could enable Ibrae countries to feed off for eitn feitcrfercaec, accnnlmj lo our epem.

prices loe rommodily esporli bra major influence In the region for ban- or low? Cmpan. Cmcwu. nndof rem end is likely to remain so la Asian eonrrries ate heaviy denaadeas onii'ufvni iif of th? former Soviel Unico, rrory eoie-notlirira, irclwlmt oil, ;nin thecspon reveaoe. The level of global coo>-

rcodily prices an importantol coustrisi' sbitlty to generate ccoountic of vtlopennn and win effect the wiltiagoeis of outside plsyeis to Intervene in thrrecioa.

" Inotrnrizl frtuies for the CMpiaii, Cjuciuis. snd Central Ai'in icgitm. ve worked with our ouuidc eapens id drawlstcf factors BUS worelsn very certain to ehorsis urlre ihe texion'a rnturci lei ofthat wcilI be key onecrtalntiei or wild eardi.


Oiinu's demand ftx oil probably wilt be growing failcr than thai of any other counlry in Ihe next (wo decade* because of its rapid industrialization, and China sees the Caspian regionotential source of supply As such, Beijing is seeking to provide an alternative route for the region's exports. Beijing also increasinglyey provider of consumer goods to the Centra! Asian slates. Chinese relations withlike China, opposes Westernnd bas reason to fear Russiangrowing. Under Russia's curreniconditions, our experts did not think that it could fend off the growth of Chinese influence, although this could change if Russia's economy recovers,

Turkey is pressing for the construction of awould carry Azerbaijani oil from Bakuand then across Turkey to thevia Ccytian. Turkey favors this route in orderUV potenual number of Black Sea tankersalready-crowded Bosporus. Azerbaijan hasaccessaritime export route, soanker, it must cross at leastborder, possibly two. For theV vti .im pipeline to work, Turkey will have torelations with Georgia, which has beensince ihe dissolution of the former

Eihnic and religious issuesource of potential foreign interference and conflict.western province of Xinjiang is inhabited by some Kazakh and Kyrgyzincreasedties in the region that could cause futurewith Russia, which sees Kazakhstan and Kyrgyzstan as being within its sfihere of influence. Turkey has close cultural bes to Centralof the Central Asian languages eacept Tank are oforigin, foralso has stepped uptic activity in the region. Turkish links to Azerbaijan in particular could generate future friction with Iran, which is nervous about its own Azeri minority. Saudi Arabia Is the strongest backer of an Islamic cultural and politicul resurgence in the region and provides large sums of money covertlyslamic community leaders throughout ihe region. [

Anticipating Potential Futures: Eight Possible Scenaitoj

The manner in which foreign involvement andpolitical and economic dynamics interact to shape developments in tbe Caucasus. Central Asian, and Caspian region during the next IS years will be adeterminant of the challenges and risks the region will present to the United States. Anticipating the region's future is challenging, however, because we can onlyew factors that are relativelyto characterize it In addition, because fewhave had to restructure domestic political and economic structures simultaneously, and even fewer have had to do it with siimificant interference by out-side *ers. we have limited paMaafadtrtc" to drjv. on.'

To gain an undetstanding of these uncertainties, weeries of focused workshops, senunars, and research projects over tbe past year in which more thanutside experts, analysts, and policymakers from throughout the US Government provided input to help flesh out potential scenarios that might describe tbe region's future. We did not plan for any of the exercises to predict the exact course of future events in thespecificubject of dispute among someandto enhance our understanding of the types of governments and societies that could develop in tbe Caspian and Caucasus areas5 and to examine the potential effects of external actors and oil wealth. The following analytic approach guided this process:

We designed the workshops, seminars, and research projects as cumulative endeavors, forming theof each one according to the findings of the previous events.

Our experts, including DI analysts, drewist of factors they thought would be crucial in deicmiining the region's future. From this list, they chose what they considered to be the three most importantthe level of commodity prices, tbe degree

Table 2

Scenario Snapshot

for US


foe Rt-^lon

'Hp i

Kefla]Li foe *Liou)icyuh; outbids

Intervention.overnments and the West arc not at odds politicly, ted Ibc United Suica ha* lifted sanction on Iruajor cnjttit row feeecrgy andpflncncc in. the report

mil- ^vtrnnjCft^ impose aciblliry.

Coixunodiiy price* arc tow, ami fovmmuni* diver-itfy tli-tar economiei. Outtidc power* arctfcM too mods tavorvtSKst in tbe region would aiire them in alliance* witfi autocr<il& vbo are, cr cater to, crime lord**

fcr tee


rjt functional world.

33niic iMrrrits are itrccg owugh to altow teelTcc

tlvc governmcnta lo muddle along and teCGmc

modestly iniegrrod into toe iotrttiationttSocieties have rainy safety valve* fee ine poor, which Lnnr*jca stabilityhe sheer term. Governatcotu generally coot* ho* to stability is tcottcni over tbe Icm fentt.


region under thisiiui.ir locoa

temporary Afcjiamstoa. Thmreat oeaJ of

Cfimful aaivuy.afld Che rejignrntu-jt haven

onduit mute for the pcoUfcneien ofco* ofdcatrvctjoa Tbe Uwt4 Sure* free* rigmricant pressure* tocgjonal po6cc-sun do rcctaeo ifce rtrat neh pomum activities to US frronryV icg^ii

of Power

Frxcs It* Muscle*


US inierrau

the wodd b

niy inttnau

outside intervention

:cj thef one vital to

of ictervearjeaof other pow-ttinthlssndocberrcgkrace' the ihreac to US VZH-


develops among rrfjiocil energy Turkey, Iran..andi Ihe rtgtaTa ceonoouc aod polttlcaJ jifairs.

Sataiity Krtr>onaJ inaUiMlity JTiviua iMtrtxuUMA] focnj on (he region. An outride power MXttaQta to impotc lULility oj js^jmcuilluence. Interna-tiooai oil conaptntca leave Ihe regxm bocauieombirjiion of lowxitbptc of

imrmi] tnfnktTriieiiirrwiiil rohriJLin.

We varied each of these drivers in turn from high to low to create eight different permuouions.

Our experts turned these permutations into full-fledged scenarios by describing the logical political and economic developments that would occur Innder each scenario.

Scenarios Lean Toward Pessimistic Future."

Although our experts derived eight vastly different scenarios, there were some general trends thatmany of them, including the two scenarios that our experts thought were mostWar-Like Great Game and Forced Stability. These general trendsegion that is relatively unstable and that has the potential to cause major headaches for US policymakers!

Nonethe scenarios envisioned strong, stable democracies Id all countries, and lew expectedpolitical staliilrry. The trinjority of theCold War-Like Great Game and Forcedthat the future for theand Caucasus states looks quite bleak, wiihstagnation, political instability, and foreign interference more likely than not

In both Cold War-Like Great Game and Fcrcod Stability, governments were largely autocratic,conditions were poor, corruption wasand, in the latter scenario, the regions became bastions of lenorism. gun running, smuggling, and drug dealing. Our experts tbought that in Forced Subitity terrorists might use the regionocale to develop noncemventionai weapons.


in ihe scenarios thai posited effectivesuchightrope Utopia and Balance of Power Prosperity, governments had major weaknesses. In the farmer, many governments weresuccessful at implcrruairing market reforms but made only lirnrted progress creariDg moreregimes. In the latter scenario, border disputes and nationalism tarnished an otherwise optimistic outlook.-

Most scenarios dkl not envision beneficialfor tbe United States. We assumed certainwould benefit US interests including large-scale successful clevetoprrjerit of Caspian energy resources, increased globalization, and government competency. US interests would be disadvantaged by increased external meddling that would weakenregimes and raise the possibility of more active US engagement:

In twoightrope Utopia and China Fleaes Its Muscles, US interests were threatened the most In each scenario, the influence of China and Iran increased significantly to the extent that each of these countries became rhe predominant player in tbe region. In the scenario in which China gained (be most influence, US interests were threatened because Beijing's presence sparked intense rivalry among foreign powers seeking to limit, or reduce. Chinese influence. In the scenario in which Iran gained predcrmnance, Tehran became the major conduit for Caspian oil. Although Iran was able to do thisesult ofthe lifting of US sanctions, the resultouble-edged sword for rhe United States as Tehran's influence over global oil markets andprimary consumer ofsignificantly.

In Cold War-Like Great Game, US interests were not disturbed as much as in cither scenarios, but tbe region didagnet for non-US foreign interventionelatively large scale. Russia'sto dominate ihe region grew, pulling in other powers including Turkey, Iran, and perhaps the United States. In Forced Stability, the regionource for ihe proliferation of arms and drugs while ethnic conflicts increased tensions among regional governments.

The Most Probable Scenario; Bad for the Region and the United States

The experts saw as the most likely scenario the one we named Cold Wtr-like Great Game bt which local governments pair up with outsideUnited Slates, TUrkey, Russia, Iran, andclient/ patron relationships. In this scenario, local govern-menu or an ally such as Turkey seek US diplomatic and eventually military assistance to ensure liabilityocal leader. This scenario underscores several prevailing themes:

The lack of democracy in ihe region, continuedand growing inequalities result inand ethnic conflicts.

Because most regional leaders will have failed to build Institutions neededime of crisis, local governments are forced to invite outside powers to help stabilize their own regimes.

To head off any one state from having preeminent influence in Out region, outside powers compete to keep others out ofthe region and to maintain access to energy sources. Regional governments call on the United States totabilizing role

Any movement by the United States or lis allies to srabdize the region is seen by neighboring bigdetrimental to their national Interests.

Energy resources are the catalyst for unrest in this scenario. Demand for oil worldwide is unusually high, and the Persian Guff cannot meet all new demands forCaspian region becomesand there is competition among neighboring states for influence there. I

In what we and our experts agreed was one of the worst scenarios for both the region and the Unitedwere sorely ineffective, economic conditions were poor, andintervention wasluggish world economy in which the supply of oil greatly exceeds demand significantly reduced foreign interest in the region.


inlerfercnce will generate conflict-all of the scenarios involved some degree ofby outsideChina, Iran, andonly China was deemed strong enough tohance ofole, dominant hegemonicajor change from previous periods in history, according to our projectwould be ihe effective use of "softinvestment and security guarantees instead of militarygain influence in the region. Our experts believe thai there is currendy little likdilwod that any of die outside powers will resortilitaryto gain initial control over the Caspian region:

pace and did not Illicit strong reactions from other foreign powers until its position was relatively secure. Once this occurred. Russia and otherbegan to Intervene. Under some specific cir-

t possible

thai China could drag the United Stalesit-far-tat. Cold War-style game in the region. Even if China did not achieve the predominance outlined in China Flexes Its Muscles, our experts thought lhat its influence In the region would increase, in part because ofrobable increased demand for Caspian oil.

In China Flexes Its Muscles. China was able and willing tooothold in ihe region because oil prices werereduced other countries'because it was seeking toap-live source of cheap oil lo fuel its rapid economic growth. China's involvement greweasured

If the United Slates retains its imageorld leader, our experts thought countries in the region would seek US support in developing their countries and helping to ensure their sovereignty under our two most probable scenarios. They also wouldmisjudge US intentions and mislabel US


to fit their mindset. The experts thought it was possible that tbe US lead in the NATO actions to halt Serbian hegemony against Kosovarwould reinforce this mindset, at least in the near term.

* In Cold War-Like Great Game in which domestic unrest was high and government effectiveness weak, our experts thought local leaders would invitepowers to help manage instability.In the region would expect the United States, in particular, totabilizing role. Anyby the United States or its allies, however, to boost influence in the region would be seen by neighboring big powers, especiallyhallenge to its national interests.!

Iran gained noteworthy influence in the region in only oneTightropeassumed that US relations with Iran had Improved. Our experts did not think that Iran would be able to

gain significant leverage in the region withoutlis relationship with the United States. This is attributable in pan to the fact that our experts thought local governments would continue to look to the United States as the most promising partner in the region and would shy away from establishing close relations with Iran unless US-Iranian relations were cordial.'

None of tbe scenariosenign Russia, although ia most cases Moscow served as merely an Irritant ratherajor threatest case scenario, Russia only interfered in the Caucasus and Kazakhstan, and local governmerus were strong enough K> overcome Russian interference. It also did not challenge these states militarily but used covert means to destabilize local govenurtenis or fomentunrest. Other neighboring countries and the United

Stales played positive roles by helping withencouraging international investment, and underscc*ing local govemroents' sovereignty:

Given Moscow's weakened condition and the improbability that it will completely reboundover the next several years, our experts thought Russia would play the role of spoiler and continue to attempt to manipulate political events from behind the scenes, especially in Georgia and Azerbaijan. The experts believed ibat Moscow would not willingly give up its military presence in the region and that the extent to which it modernized its military equipment would be an indicator of how important Russia believes the region is to its strategic security.

No scenarios saw Central Asia and the Caucasus demonstrate enough regional cooperation to lead our experts to believe that these areas could develop independently of foreign Interference. Our experts thoughtajor wilddeveloping working alliances with each other-could improve prospects for the region. Such alliances would counter attempts by neighboring cotmtries, especially Russia, to sow instability and unrest.however, was unlikely, according to our experts, and occurred weakly in only one scenario:

In ourightrope Utopia. Intraregional cooperation was greater than it is now. in part because there was limited external involvement in the region and governments were managing their economies and political systems relatively well. Even In this situation, bcrwever, the countries had no senseohesive regional security alliance. Our experts thought that, while this scenario illustrated one of the less likely outccnies for the region, the effect such an outcome would have on regional cooperation was quite realistic. Although countries in the Caspian areaistoric sense ofto outside encroachment that may embolden them to forge alliances, past attempts at suchas Centrasbategional militaryimproved trade ties largely have been ^effectual, in part because the sense ofIn those countries extends to suspicions of each other.

In Cold War-Like Great Game, goveniments in the Caucasus and Central Asia were weak andencouraging foreign governments to meddle in the region's affairs to sow discord amongcountries. In Forced Stability, lawlessness,and economic regression were rampant in individual states, precluding efforts by governments to seek regional cooperation. Instability, ethnicand ineffective governments also led to increased ethnic conflicts that fueled regional tensions. P

Implications for US Pollcy| |

The two scenarios that our experts deemed to bewell as severalwill be significani pressure for tbe Unitedintervene either politically or militarily in theCaucasus, and Central Asian region in theboth of our most probable scenarios, thisfrom poor local governance, whichmeddling by other foreign actors, especiallyTurkey, Iran, and China. Although thecould choose not to become involved inour experts thought this would belong as Iran, China, and perhapshave the potential to challenge key USinvolved in the region.

The United Slates would benefit most from countries that are well governed, but most of our experts

lhat this was unlikely. Good governance would reduce ihe extent of outside interference in the region'! affairs while promoting economic stability and growth and reducing die proliferation of nonslatc actors. Unstable regions typified by weak, ineffective govcrrtrrjcMs, meanwhile, would work against US business and strategic interests. With corruption and lawlessness Ihc norm, US businessinfa would find it difficult to conduct business and could choose to develop energy interests in other areas, especially if. IS years out, sanctions have been lifted on Iran or Iraq. This will leave the envelopment of Caspianopen lo other countries.p-

A highly icterventicinist and aggressive Russia otof which is highlywould signal the presenceussia or China increasing tensions with the United Stales in other spheres or regions. If China were toegemonic

sphere of influence In ihe region, for example, it probably would not challenge US interests directly but mightendency for Beijing to be less willing to cooperate on diplomatic or economic issues. I

Tbe pressure from local governments to induce the United Stales and the West to ally with the region runs counter to the goals of neighboring stales. The policy actions of Turkey. Iran. China, and Russia in thethe US reactions todetermine the region's globalegree of trust among these bigger powers may lead to less manipulation of the local governments. Conversely, foreign manipulation may increase in the Caspian as distrust and tension grow between the United States and these players, especially Russia and China.

Rrvrrtt Ptflnt

Appendix A

Developing the Axes for the Scenarios

participants in Ihe future scenarios workshop ideatin rd three fa ctors that tookverwhelming importance in determining the future of the Caspian, Caucasus, arid Central Asian region:

Commodity prices: The values for this axis range from the extremesapidly growing andglobal economy with high commodity pricesluggish global economy with weak commodity prices,

Role of outside powers: At one extreme along this axiseavy inclination by outside powers to become the dominant influence in the region or by the state, in at least one case, to act almost as afor on outside power's policy interests- The other extreme value is that there is little outside interest in the area,ack of asiisiance programs and very liKle trade.

Effectiveness of governments'. Extreme values range from governments that successfully transition to market economies and representational rule to those that arc weakened by corruption, autocratic rule, and lack of Institution building.|

We have arranged the eight scenarios from the mostWar-Like Greatthe scenario we believe is the leastState. Rankings are subjective and based on iterative discussions with our experts. I

In the graphics preceding each scenario, we have attempted to roughly measure the effect lhat variations of our three drivers would have on US interests. To do this, wc have assumed subjective values for each of tbe key drivers on the basts of information contained in each scenario US taierestx are assumed to benefit from large-scale successful dcvrlopuxsu of the region's energy resources; increased globalization, which expands rruutru for US goods: andcocQpeiency. which increases the well-being of the region's people. US interests are ouarlvaniaeed by increased external meddling, which weakensresumes and iui*es the possibility of more active US engagement-!-

Figure 8

Cold War-Like Great Game Scenario

Commoduy Prices HighIntervention

Ineffective Governance

fecti .cress

on US Interests



War-like Great Game

Mean values tor Variables Across Scenarios

Ol lUgi Can. WITO is>M


Tbe Persian Gulf cannot meet increasing global demand for energy because sanctions remain on Iran and Iraq.esult, oil and gas in tbe Caspian region is very precious. None ofthe Caspian countries reduces its dependence on revenue from the export of oil or other primary commodities, such as agricultural goods, and government revenues for nonoD producers fluctuate quite significantlyesult of weatherand variations in global demand. Concerns about stability within the region in addition to external interference lead local governments to runnel large chunks of their oil revenues Into military spending.


Outside powers do not work well together. They vie tor influence in the region and are mistrustful of each other's actions in tbe Caspian area and worldwide. Because local governments are ineffective each ofthe countries pairs with an outside power. The alliances they form are more like those of colonial powers or of the puppet stales that were seen during the CoM War:

Kazakhstan is tornhina that is in the ascendancyussia thatecond-rate power but because of demographics has great influence in its country.

ost of reasons, including countering the growing Chinese influence in Kazaklurtan, the United States pairs with Uzbekistan

First Turkey, then the Umled States and Israel, will be the ixifltsential players in Azerbaijan

Tbe United States and the EU will be tbe mostplayers in Georgia, where Russia at let opts to destabilize local ethnic groups in order to scare tbe West into decarnping and leaving the region to Russia.

In general. Russia continues to be obstreperous. It modernizes and resupplies military bases andRussian action around the globe causes concern among local governments nnd their neighbors. For example, it is instigating tensions in the Turkish Straits, fomenting unrest in the Baltic states, orits anti-NATO policies in the Balkans.

for closer economic relations between Iran andAsia. This also results in the rr^veloprneni ofthe historically more competitive ties between Iran and Russiaiminished relationship between the two.

Indiarowing role in the region under thisbut isecond-tier power compared to the other players there. Fifteen years out. there is anof transport routes with Pakistan and increased soft diplomacy between the two, India looks torowing role in tbe region to counter China's rote there and lo gain access to the region's energy. I

The EU develops the Eurasian corridor, whichGeorgia's sigruficance, Israel also becomes an important player by helping to ensure regionalTbe United States is most likely to be part-rieredwiih Georgia. Uzbekistan, or Azerbaijan.

reaction to any Russian moves to undermine the region's sovereignty. Turkey reacts by doing all in its power, up to direct military intervention, to ensure the sovereignty of tbe local governrrafntsr placing military advisersouatry. making diplomatic approaches to Russia, the UN. or the West; and snrmptmg to bring the West in as an ally against Russia. Turkey also attempts to get an agreement from the United States to share US intelligence on Russian regionalwith local leaders.I

Chinese involvement in the region it largely confined to Central Asia and possibly just Kazakhstan andIt is possible that,ore nationalistattemptsesubilize tbe Uighurs in Xinjiang, then China would become more involved in thein order lo counter Turkey. For Use I'm led States to get involved to countering Chinese moves ia the region. China would have to be less benign globally.1 are up over Taiwan between China and tbe United States resultseaction between the two in Central Asia, where the situation it irruninently less vohhlc

If Iisnlayer in this scenario, it is because iiswith the United States has become moreA normalized Iranian-US relationship allows


Local governments have divergent economicTbe limited gains Kazakhstan and Azerbaijan made in tberadually dctenoratr. as private investors find local condiUorts and governmenttoo volatile to make long-term investmentthere. Most of Kazakhstan's energy goes toward Asian markets either through an easlcmor through Iran, with some going to the west. Ibis heavy export toward China makes the West anddetermined to ensure that some oil Sows west via Azerbaijan and Georgia. Usui raising the strairpc sahence of both countries. Uzbekistaneconomy using its skilled labor supply to build faclones such as auto plants. Iturope pushes forwardurasian economic corridor.

The govemmeois are largely autocratic and corrupt, and many factions exist within each state. There is no regional cooperation, which increases the ability of neighboring states to manipulate the local powers. Breakdown of order is in progress and is systemic in most of the countries in the region. Political and social institutions continue to disintegrate. Oil money goes


into the pockets of government leaders and local oil executives. The governments are unable to control security of their exports. There is sporadicof energy exports that require external help to overcome. I

In tho scenario, ideologyajor role. There is competition among outside powers for support of their respective ideologies. Islamic activists, Pan-Turkists, democrats, and regionalistsew examples of the possible compering ideotoejcsl groups. Nauorialism is also strong. I

Weak local governments and strong ideologies result In the inability of local governments to control their borders. Weak governments with growing nationalism prompt minority ethnic groups lo want out of the country in which they reside, leading to local conflicts and border disputes. Furthermore, outside powers manipulate local minority concerns. I

Figure 9

Forced Stability Scenario

Commodiry Price* Low

' Inirr.Tiit! en

Iwffcctive Gcncrasnce

Government EQcctivencsi |

Decree of Outwee Inicr-entico


World energy supply exceeds demand, and the region is estranged from the world trading community. World trade growth slows, and there are only limited foreign capital inflows. International oil companies leave the region becauseombination of low energy pacesollapse of internal irifrasfnicoire and social cohesion. Mismanagement of oil revenues and low prices exacerbate economic problems, leading to state collapse.


Russia and China are most engaged in the region,by Iran, Turkey, and India. The China, Russia, and Iran engagement is driven by gcostiategicand not ccorKKnics. The Turkish engagement is driven by cultural ties. India becomes engaged in tbe regionounterreater Chinese influence

there but is unlikely toajor player. If China becomes more involved in the region, then Russia still has not recovered sufficiently to be able to exertthere. Russia is likely toower in the Caucasus, but it has less influence in Central Asia where China is attempting to fill the vacuum.

This scenario assumes the same economicas the Failed State scenario. All key Caspian states are almost certain to face economic regressions, with growth and economic performances in all sectors declining precipitantly. Foreign investors have no interest in putting money Into the region, and domesticlittle thereas well.are barely able to manage their economies, and the public operatesurvival of the fittest basis.

Economic data are virtually rronexistent, andbuuracssanen, creditors, and aid providers have no focal pot rus through which Id deal. Local banks of "eoueprctieut s" gain control over agriculture,and other economic facilities and extort money from the public in return for the use of these resources and products. There is increased regional urbanizationack of infrastructure investments in the region. Trafficking in guns aod drugsand the areaentral training ground for tcrrorisls-1

Individual Country Developments Local regimes are narrowly based, authoritarian, and unstable. There is no attempt by regional entities to form regional coalitions and no successionInternal instability feeds on itself, producing at envtrcfirnent in which no state has the political or eco-nomic resources for adequate infrastructure.

Intrarcgjooal conflict is high as are Inirder conflicts based on ethnicity. There is low regional security and high military earxttdrtare for which localturn to neighboring stares for help. Borders are porous with illegal trafficking of all goods. Thiswouldroliferation nightmare with the regionajor transit route. Instability, ethnicand ineffective govemmeois would cause many noostate actors to emerge, moat of whom would be criminal elements or terrrxist groups. It is unlikely that many iniernariorial businessmen or corporations would exist because lawlessness and corruption are rampant.

Figure 10

Passive SlabUily Scenario

Pilot Low


Enecriw! Govcirjocc

| Degree of Ootlld* Intervention


Low prices for basic commodities sod oil force local stales to try and diversify their econornies or increase production of low-level manufactured goods. Growth falls below expectations tor oil producers because they do not gamer significant foreign investment. In addition to lower oil prices hindering foreign investor interest, investment in the ncooD sector also is limited because governments implement few measures to make mvestments sttractive. Govcrrnrjcnts do not allow utility service providers to charge market prices for ibeir products, for ejamplc. and thereumber of price controls and other market distortions that make doing business In the region uncertain andLocal governments lack both the domestic

funds and tbe foreign investmeni to build needed infrastructure.


Limited economic prospects and low energy prices leave this area as one of Utile concern to the great powers. Russia is largely precccupied with its own domestic raises. It remains engaged in Armenia,and Kazakhstan but not In other countries in the region. China Is preoccupied toward the east. It hasood relationship with Kazakhstan,

which it relies on to help it with Uighur separatists. Turkey maintains its close relationship withand is its largest trading partner. Iran andmaintain their economic relationship. India has developed relationships elsewhere and is notwith the region. The United States, Europe, and Japan spend little time on this part of the world, although the United States provides some aid.!-


Stability, which comes from indifference rather than prosperity, reigns. There arc varying degrees ofrule throughout the region, hut none of the countries is so autocratic that the govenvrnent ceases to be effective in muting the people's needs. The regimes, foe the most part, arc corrupt and have no succession mechanisms, but leaders have been in place for yean and are largely related lo previous leaders. Some of the new states evolve into gangster states based on drug trafficking and intimidation.and Georgia are the most notable execpoons and are rhe most democratic. Turkmenistan remains much as it is now, with President Saparmurat Niyazov or his hand picked successor remaining in power. Azerbaijan, Kazakhstan, and Uzbekistan are highly corrupt and autocratic.

There are few civil liberties In most of Use region, although govcminenit have implemented enough reforms to keep the people hopeful of change. For example, governments have revamped education and health care, and there are local government-run projects to employ young men luteal goverrumnis attempt to limit urban migration by developingtor young males to remain in rural areas. Sorne programs work: meet do not Tbe tuverxmeors also encourage outmigrauon to alleviate tbe strain ofgrowth. Statist regimes are abac to block most ideological challenges by keeping rhe porsilatson sal isfiedwitb these meager social sops and quality of life improvements. Any limited attempts to develop new ideologies result in regimes coming down firmly onhou in power, criminal elements, are by far the wealthiest The populace becomes adept at and comforUiblc with gaining higher livingthrough black market activities. There iscross-border trade in illegal goods.

Indiridual Country Developments

Kazakhstan, whkh started to encourage foreign investment early, performs slightly better than its neighbors. It makes some improvements to its legal and banking systems to encourage more foreign investment Economic growth is limited, however, because Kazakhstan does not have the money to make significant Infrastructure improvements. Privatization slows because of limited domestic capital and limited interest by foreign investors. There still is sorneinvestor interest in consumer goods industries, transport, and other nonoQ sectors, but the extent of this mvestment is inhibited by brownouts, poorfacilities, and other infrastructureWhat Utile investment there is in infrastructure, other than oil, is heavily concentrated inand electricity. Traditional sources of growth including gas aod oil fall in part because Kazakhstan has limited success coming to agreement on the use of oil export routes (all of which are controlled byThis aggravates tbe problem of cash shortages and aging equipmenl:

already weak road networkfurther because the government lacks the funds to maintainhis increases the cost of distributing and exporting agricultural and bask cortsumer products.

areas remain unconnected toareas, and the government does nothing to ensure that domestic consumers pay for the use of etectricity, making private mvestment in the sector unattractivcJ

Turkmenistan has an even tougher lime exporting hydrocarbons than other countries because it still relies heavily on the Russian pipeline grid for access to export markets. Turkmenistan does not signifi-cantly develop its oil resources, and efforts tothe agriculturalincreasing the production of food and reducing the production ofunsuccessful. Nevertheless, Turkmenremain heavily oepersocnt on cotton exports and food imports. |


Figure 11

China Hexes Its Muscles* Scenario

rices low


Effective Co-eroimtc

Ooiemn-^al EtTiulivriWM

EHeci on US Interest! a:

* NcjaOve

Flexes lis Muscles

Meaa Values for Variables Across Scenarios

'Rusiia or Iran cmld also be tlie main character In this scenario. Wi chose China as the main actor because we surmised thai there would not be the visceral reaction to Russia's reasserting in hegemony in the region thai there would bekra new hegemonic power. We also beheved fr unlikely that Russia would have rtcovtrtd saffklesuty IS years out so be able to regain power in the region. Iran is also unlikely to have the economic might to assets itself in the region- Local leaders hare sufficient concern about Iran 'i influence that we deemed is less plausible that Tehran could infiltrate sufficiently into load politics to mate its preetninent role in theait accompli.

VJi* Cu. wvsh

Because oil exporters* earnings are limited, these countries attempt to bolster revenue with indirect taxes on trade and businesses, significantlyprivate investment in the region and slowingdevelopmentersification. Local governments rely on international organizations to help them shore up their economies. Thesedo make some headway improving theirsectors and economic institutions and draw on loans from the World Bank and bilateral lenders to

make piecemeal improvements to nonoil iitfrastruc-tures. All governments remain highly dependent on primary commodities such as cotton, metals, minerals, and oil, however, and maintain production levels roughly equal to those of tbe. Governments are unable to commit to many medium to longer term economic development projects because their heavy dependence on the production and export ofand weather-dependent commodities makesrevenues unpredictable from year to year.

US Bureau of (beecerkt ceosBt data iruBcwt that KaoUuun's total population9 milltoo.

Kazakhstan, for access to long-term energy markets. Beijing is thinking strategically about energy and seeks to secure new supplies. The ChineseIs characterizedlow absorption through Chinese migration, aid to Kazakhstan,etwork of Chinese trading communities. Chinese migration into Centrallow and trade related, winch helps the populace accept the increased Chinese



A catalyst for drawing outside powers intowould be Chinese expansion ofwith Central Asia as one of severalwhich China is attempting to gain

China's actions are the catalyst forarge scale. Under this scenario. China is interested in the eastern portion of the region, cspe-

Foreign ecoooouc interest in (be region is limited, except from China, whicb is seeking toaptive source of cheap oil to fuel its rapid economic growth iMernaOooal energy mvestment Bows out of tbe region In search of more profitable mvestment opportunities. Russia tries to coccaexbalaace Chinese lnfluerice in part by strong-arming lurkmeriisian, Kazakhstan, and Azerbaijan into deals to share oilin return for access to pipelines, decreasing thr oil revenues that flow into these governments' coffers,

At first the UrBted Sau ind ihr tesi erf rhe West remain isolated from the great-power maneuvenrjjs ia the region Aa regional politics play our, however, rhe West, led by rhe Unitedrrerupes to item the growing global power of China. The West does this by forging alliances with some of the countries in die region Local regimes, in turn, attempt to find pairings with big powers-

Chirsalose relsncoshrp wirhlargely because Aitana is not interested in work' ingeakened Russia. The possibility of unrest on ihe border between Kaiakhstan and Chinaayor factor in the growing Kazakhstan China rela-uonsfiip China is rhe dceninsni power in Kyrgyzstan as wellnfluence wanes farther west, aa does us interest in developing that influence |

Otherat we thought might become involved in Ihe region in this scenario wouldumber of meant to gain rhear own or counter another country's influence.

United Stareslose relationship with Uzbekistanounter lo an incipient China-Kazakhstan alliance. The United States stops short of basing troops in the regionay to counter Chinese influence in ihe Caspian region. The dynamics between ihe United Stales and China become crucial.

Tu.-kroeruc.ani gr.ificanr. relationship with Iran.

Azerbaijan 's principal links ate fust to Turkey, then to Israel, and finally to the Uniteduropeigger player ia the regionthrough Georgia aod Azerbaijan

Am-ema rccnaina deprndent cn Rossis Peering disruption of oil pipelines, the West increaseson Armeniaake concessions un Nagorno-Karabakh.

concerned about Chinese influence in Kazakhstan, also courts Uzbetosraa.

UUs scenario Russiaecond-order power in the region. It plays the role of spoiler, largely in the Caucasus but also in northern Kaxtkhttan.

Regional Development of WMD il Unlikely

One of the low probability/high impact scenario* thai our experu examined was the decision of one or mont of die governments in the region to develop weapons of mass destructionur experts agreed thai thecf WMD capabu'inei -at highly unlikely. espectaOy because Central Aston leaders are genuinelylan to make theuclear-weapons -free zone. Despite the Unprovability, the Importance of this Issue led us to push our experts to imagine even highly unlikely scenarios In which countries might develop such capabilities. Our experts devaed two scenarios:

They agreed that Armenia would be moil likely to pursue the development of nuclear weapons.mighti course if it believed that its country was on the verge cf losing la sovereignty. This might happen if Russia walked away from ft. perhaps loloser relationship withTurkey would have to developore nationalistic and chauvinistic stale, and the West would hare lo completely turn its back on Armenia. Oar experts believe that tone members ofthediaspora commit lirj- woMd be willing to supplytechnology and funds forroject

Another even lets hkeb/ scenario was thatmight choose touclear weapon. This would happen, according to our experts. If the United Stairs downgraded regional nonproliferationigh priority The Uzbekistan's would nottrategic reason for developingeapon but aiight be moo voted by prestige. It is potable that if dm UtbekuianU gota war wilh fa/Milan tkey might want to use chemical weapons. Our experts could noteason for Uzbekistan, or any Other country in the region, to develop biological weapons. [

Russia attempts to prevent China from dominating Kazakhstan, and this hostility will probably be reflected in Russian policies elsewhere in Central Asia to weakenas support tot Xinjiang separatism

TurtanerUsurit ana Russia are bed but links are much weaker than those of other states to outside power*.


eriod of good, if autocratic,Is some corruption, but it is tempered byof local institutions that help thewith education systems and work program!.ire porous, and meet security funding is spentpolice. Although there is urban migration,regimes attempt to stem this throughprograms in the rural areas. There isli-Chinese nationalism in some countries such


Figure 13

Living for Ihr Moment

tadfteilie GJf ru.ii'

Gavenunsn' cJrrit-'tnfii

Drgrog of CulM* lotwveaicn

IIj| foranes!

Mm VWbm forViriabtis

Prices Commodity prices arc nigh because of wrong growth gtobellyp


Local governments' inability to manage economic and political ctetliuont (caret hnBv deor.euic aad fotrlEn investors away. Ouuida players aie primarilyitrvl enmnog tbe ceeuinoed Ho- of reerp so mtmvnil am tea Rsuaa itmags on Ce decLse one? nwP BvBBasuc ttrtm China ocawaptsits teie in flu rarrjy lectors but Coo thts itowty *ed is focused oa the Eon. The Haltedurope, and Japan ire interested in the energy lectors tut are nee faOosing through on infrastructure pn'JecU beesute of the lack of economic and political minima In the region. Iran

anempts loigger player and viesoute and customer fee energy exports.country wanes to case on China cr Russia; tbey (Ibteily etr.phanre econcinic avenues and parrot the US foeisr on multiple pipelines)


This scenario centers ca corrupt local gc/veramcetK nothing ecu accompli sheday oft'. Stuism is common in the region. Georgia. Kazakhstan, and Uzbekistan rpcradscaDy develop projects intended to keep onrcsi ai bay, sueb as focusing In the short term CO the educational system, building anew eni-ersity. ee nuking rnoves toward developing work ptoaroms.mgrarn? arc large aad superficial mi are used

as present-day Potemkin villages to show the(bat they are benefiting from the oil wealth.dynamics and inequalities could eventually increase instability and migtatiooJ

Militaryfor internalhip.h. Armies aie fairly conventional. Itnlikely that these states are inclined to bold thinking or creative military innovation The militaries are used primarily for internal control and tor putting down cross-border unrest or local irredeotisrn. Pear of being drawn into these messy, largely ethnic, clashes keeps the bigger powers from becoming too involved in the region.

Individual Country Developments Individual incomes are most unequally distributed in this scenario, and governments offer few incentives to encourage tbe development of privaie businesses. Governments, attempting to reduce public unhappi-oess brought on by low incomes, subsidize the use of oil, gas, electricity, and agricultural goods, which

leads to overuse, inefficiencies, and waste. They also discourage high inflows of foreign investment:

Kazakhstan and Azerbaijan, in particular, attempt to increase privatization, they have Utile success because investors do Dot trust government leaders and are not convinced that their properties will not be expropriated or taxed away in the future.

which is one of (he leastcountries, fares well under this scenariowith its ndghoors.ontinues to relygoods and services for economic supportfails to make (he needed economic reformsopen trading, privatization of keyother more open reforms associated with

Figure 14

Balance of Power Prosperity Scenario

i Cwntnod.lv Price, iiljn

' Intervention

< EtlcctM Oovemance

CovrnWKB Flfceoveeeai

EfTect on US InantcsU

A POUllve

Balance of Power Prosperity

mmm Mean Values Ice Variables Across Scenarios


This seessumes that Ihe Caspian regionarge percentage of rhe world's otllose tecood to the Persian Cnilf-cecause sanenc-tt remain on Iran and Iraq. There also is enough oil in rhe region for eastern and western markets. Oil prices are high because of strong global growth and high demand from China. Pnces for other basicas cotton andthroughout the period bul on average remain high enough to enable nononcrgy producers to run small trade surpluses. I


Pipelines to China have rxcorne operational, andoil is fWing east Thu makes the West anddciemu ned to ensure that oil flows west via Arerhaiyan and Georgia and rirses the .tratepc salience of both countries. Strong interest in the region from outside powers leads Western countrtea to pool their resources ioarshall Plan -style aid package in an attempt to increase influence there The aid would be equally concentrated on oil and noncril producers and sectors. Europe establishes the Eurasian economic corridor, which raises the importance of


Georgia. With tbe aid. US companies becomein investing In tbe

With ibe growth of Western influence, other external players try tooothold in rhe region. Local regimes have varying relations with externalquasi-coIonics to client states tomanipulators that play two or more suitors off


iajor outside power but isominant player except in the Caucasus. China gains more influence and becomes the dominant player in Kazakhstan:

Russia manipulates the Russian population of north Kazakhstan toore pro-Chinese As tana. The Kazakhstanis' ability to manage this situation is questionable. Kazakhstan heavily depends on China for internal stability, arms, and troop training.

lose relationship withlargely because Astana is not interested in workingeakened Russia.hepower in KyrgyTStan as well. China has less influence farther west and less interest in developing that influence.

attempts tooothold in Turkmenistan.

Individual Country Developments Azerbaijan persuades the United States to Liltf the Freedom Support Act2 so tbecan import free or subsidized wheat from tbe United Stales. The government significantly improves tbe cbrnatr for private investment by settingodJ-mcatary backing system early on in the scenario that eventually leads to the creation andumber of private banks Foreign banks are allowed to set up branches in the country and toloans to private businesses. The government manages its fiscal accounts well because of the inflow of oil revenue and foreign

Kazakhstan boosts foreign direct investment beyond the3 billion it had7 (and maintains it on an annual basis) by continuing with rapid privati-ration and improvement tn the investment climate for foreign and domestic businesses. The reforms include:

* Tbe government slgniftcanily improves its official banking sector try instituting mimmum reserve rerrairemencs, reducing inurest rates on Loans from rhe correalercent, and improving oversight and regulation. AH of these factors boost the availability of investment capital available to domesticWestern experts directly assist theand private investors in modernizing the country's financial sector and regulating slock

The region is relatively stable. Regional governrnems range from autocratic to democratic. Across the board there is improvement in the development ofinstitutions. Each of the governmentsroven, constitutional succession mechanism, but some governments' mechanisms work more smoothly than others. Kazakhstan, Kyrgy/stnn, and Georgia become the most democratic. Uzbekistan and Turk-memstan remain mosl autocratic. Nonetheless, most regional governments move forward in developing political institutions that make their populace feel hopeful and optimistic about their future. Income is distributed relatively fairly within states, with theo the poor through formal philanthropic i. taxes, and informal networks.

* The government reaches agreement wiih Russiaownership of Caspian offshore reserves.makes moderate improvements to itsand cotturiunications infrastructurefrom the World Bank and bilateral donorsMost Kazakhstan! energy goes to thegoes to the

Turkmenses Marshall Plan-style sad to improve existing gas prprJinea and build new ones, giving rhe country better access to hard currency marketsrelying on tbe Russian pipeline grid as it does now. Tbe government comes close to making tbe country self-sufficient in food production by the end of the

decade by in veiling in dairy and sugar processing p'.anisui pine in and other food processing ecjuiprnent-p

Uzbekistan is able to take advantage ol" it* largeresource base, skilled work force, and forage aid io improve production and export of gold, agricultural goods, aad other metals. The tutrainability of growth is questionable, however, because rhe governrnent remains committedo-iiow approach to eco-norruc reform:

Despite improvements the government maker with outside assistance, it maintains controls cm prices and wages and heavily subsidizes public goods (such as electricity andiscouragingtrong small business sector.]

Figure 15

A TlRhtrope Utopia Scenario

Prices High

Ncoi merverili cci

Effective Governance

| Degree of Cnstskde buervenUoo


* Ni-RBtive

A Tightrope Uiopis

Mean Vnioes fee Variables

Across Scenarios



In this scenario, economic issues drive international strategics and albances. Global growth is relatively high, boosting energy and other commodity prices. Iran and Iraq are no longer under sanctions, but global energy demand exceeds supply because of high demand for oil from China!


The Caspian region is politically stable, so mostgovernments leave development of energy resources to the private sector and do not become embroiled in regional political Issues. Competition for regional influence among tbe external forcesactor but is not carried out to any extreme. Regional ndghbors generally are benign because demesne

governments arc stable and all outside players are profWng from oil and gas export sales:

Russia's imperial ambitions have receded, androleum sector is coc**eraring profitably in devel-oping and marketing Caspian energy. Russiato meddle in Caucasus politics and in northern Kazakhstan but when push comes to shove will effectively be countered by other forces.

Iranian-US relations have improved, and Iran is reintegrated into the world economy andajor customer and transit route for Caspian energy.


The effects of internal development! in each of the countries are mixed:

Over time, most of the local governments develop proven succession mechanisms and effective domestic institutions that populaces consider largely legitimate.

Intjaregtonal cooperation increases from its current level, but there is no senseohesive regional security alliance. Most cooperation revolves around trade issues!

Individual Country Developments Several governments in the region embrace market informs because of the success these reforms have had in promoting growth in other developing regions:

most countries, domestic businesses become more active in the near to medium term and more important drivers of growth. Local governments are interested in diversifying their economics, and many government leaders break down bureaucratic and institutional barriers to development.

Asian and Caucasus governments andimprove their upstream and downstream oil sectors or become more efficient producers (and exportersuch lesser extent) of rmdrange goods such as textiles, chemicals, processed foods, and,maller scale, automobiles. Tourismslowly as the region develops itsand private entrepreneurs set up small businesses that cater to tourists.

Kazakhstan boosts foreign direct investment beyond the roughly SIillion it had7 (and maintains it on an annual basis) by continuing with rapidand improvement in the investment climate for foreign and domestic businesses. The reforms include:

The government significantly improves its official tanking sector by instituting minimum reserve requirements, reducing interest rates on loans, and improving oversight and regulation. All of theseboost the availability of investment capital to domestic businesses.

- Kazakhstan privatizes its pension system, udpension managers begin to invest funds in tbe country's growing stock markets.

The government reaches agreement with Russia on the ownership of Caspian offshore reserves. The country makes moderate improvements to itsand communications infrastructure with loansorld Bank and tiil.iteral creditors.


Figure 16

Failed Stale Scenario

Cc-mrnc-diry Price* Lew


Ineffective Governance

Govemmenl EfTcclivrcris

Degree of Outside Intervenrlcri

oo US Interests

Failed Sate

' Negative

Values tor Variables Across Scenarios


In this scenario world energy supply exceeds demand, and there is little pressure to develop Caspian energy. Energy and commodity prices remain low, the latter because of several years of good weather cencations and improved cultivation techniques for agricultural goods. Mismanagement of oil revenues and lowprices exacerbate economic problems, leading to state colla


There are significant limits on the way outside powers can effect the actions of tbe local countries, except through tbe use of force, which they are not willing to commit because the stakes are not high enough. As long as conflict remains within the region and oil

revenues arc low, there ia little gain for outside powers to become embroiled in these areas.'


AD Caspian states race ecoorjrruc regression, and growth and economic performances in all sectors decline precipitantly. Foreign investors have noin putting money into the region, and domesticlittle thereas wellarc barely able to maintain their economics, and tbe public coenitesurvival of the fiuest basis. Economic data arc poor, and investors, businessmen, creditors, and aid providers have no focal points through which to deal.esult, even tbe IMF is

unwilling to commit funds to the region until theimproves. Local banks of "entrepreneurs" gain control over agriculture, infrastructure, and otherfacilities and extort money from the public in return for the use of these resources and products.

There is do institution building, development ofor addressing of social concerns. Countries are largely weak authoritarian regimes perhaps with multiple regime turnover. Corruption runs high. Regimes reel from one internal or even regional crisis to another. There is no time for long-term planning o: economic development. I

Populations seek something not offered by the local governments, such as religion or nonstateighly charged and contentious factor. The

poverty also results in the growth of differingsuch as Islamic fundamentalism. There are severe uiequalities among each state's populations and among the stales themselves^

Borders are porous with illegal trafficking of any goods possible. This scenarioroliferation night-mare, with the regionajor global transit route for weapons of mass destruction (VVMD) nndThereroliferation of trafficking in guns and drugs, and the areaentral training ground for terrorists. It is possible that terrorists could use tbe region as fl place to develop WMD. Nonstate actors havefreedom of action, under this scenario. Organized crime and drug traffickers infiltrate state institutions. Stales become havens for criminals, weapons proliferators, and terrorists. [


roject Participants

It aim! Aiirizaenior associate at the Center for Strategic andStudiese is an expert in Turkish politics and foreign policy as well as relations between Turkey and the wider Turkic world. AJiriza directs the Turkish program at CSIS and is codirector of the CSIS Caspian Sea Oil Study Group. He servedumber for yearsurkish Cypriot cliplornat, with postings at the UN and in Washington. He also hasenior associate at the Carnegie Endowment for International Peace. AJiriza. in international relations from the London School ofand Political Scienceh.D. in international relations from theof Oxford.

Audrey Altstadt is an associate professor of history ai the University of Massachusetts, Amherst. She is the author of The Azerbaijani Turks: Power and Identity Under Russian Rule and numerous articles on Azerbaijan and Central Asia. She is past president of the Association for the Advancement of Central Asian Research. She conducted research on the history andof Azerbaijan duringonths in Baku as an exchange fellow with the International Research and Exchanges Board during. Altstadt. in Russian language and area studies from the University of Illinois and.h-D. in history from the University of Chicago.

Richard Armitage is president of Armitage Associates, an miernaiional business and public policy turn Prom2 tormitage served as Ambassador directing US assistance to the Newly Independent States. In previous public service he was deputy assistant secretary of defense for East Asia and Pacific affairs1ssistant defense for international security affairs3ndmediator for water in the Middle East9rrrutage served in the US Navy in Vietnam after graduating from the US Naval Academy

Richard Autyeader in the geography of economic development at Lancaster University, England. Auty isenior research fellow at the World Institute for Development of Economics Research at the United Nations University in Helsinki.7 heisiting scholar at Harvard University's Institute for International Development and under thesedid field work in Turkmenistan and Kazakhstan. Heorthcoming book titled Sustainable Development in Mineral Economies. He published several papers7 on oil wealth and its effect on Kazakhstan and

Tbrknnerustan. Auty. in geography ftoir, ihc University of Reading,. in geography from ihe University of Toronto,h.D. in economic geography from University College in London.

Lowell Bczanlsonsultant specializing in Central Asian issueseporter for the Energy Intelligence Group. He has done monitoring and advising work for tbe Open Media Research Institute and the Middle East Technical University. He has published various articles on Central Asian and Trancaucasian politics and development and is currently studyinggas transport issues. Bezanis. in Middle Eastern affairs from Vassar College and. in Near Eastern history from UCLA.

Thomas Crumm manages the Scenario Development and Application Group for General Motors as part of the Corporate Strategy and Knowledge Development Staff, maintaining corporate tiescademia, government, and futurists. Heormer memberM Corporate Strategic Planning Group, specializing in manufacturing. He has also worked extensively in GM operations. Crumm. from General Motors Institute and has studied at the Wharton School and at Harvard and Northwestern Universities.

John Daly is director of publications at the Central Asia Institute al Johns Hopkins University. Among other positions, he has workeduestin the history department at Koc University in Istanbul, Turkey, and associate professor of Russian naval history at Kansas Slate University. Daly. in history from Northwestern Universityh-D. in history from the University of London.

Nicholas Ebcrstadtisiting scholar at the Americanisiting fellow at Harvard Utu'versity's Center for Population and Developmental Studies. His expertise is in the fields of foreign and defense policy studies as they relate to social and economic trends. Ebesrstadt has written numerous articles and bookside range of topics mcluding poverty and demography in the former Soviet Union. Heember of the Council on Foreign Relations. Ebersiadth-D. from Harvard University andc. from the London School of Economics.

William Fierman is director of the Inner Asian and Uralic National Resource Center at Indiana University. He has taught at tbe University of Tennessee and has workedonsultant of the US Board of International Broadcasting and as an analyst for the US Information Agency. His research has focused on language issues as integral parts of Central Asian cultural identity. Fierman. in Slavic and East Asian languages and

Htexatures from the Um vereity of Indiana and.h.D. in politi-caJ science from Harvard University. He has also performed research at Tashkent State University.

Graham Fullerenior political scientist at RAND Corporation, where ha primary work is on the Middle East Central Asia, and former Soviet nationality affairs. He servedears in the Foreign Service, mostly in the Middle East He also was the National Intelligence Officer for Near East and South Asia, where he was responsible for long-range forecasting. Fuller has rniblished many studies and articles on geopolitics in the Islamic world. Heegular contributor to The New York Times, The Washington Post, and other rniblkations. He also appears on ABC's Nightline, CNN, and The McNeil-LehrerNews Hour. Fuller. aod, in Russian and Middle Eastern studies from Harvard University.

Sumit Ganguly is professor of political science at Hunter College. City University of New York. He specializes in South Asian comparativecihnopolitics. regional security, and nuclear nortrux>liferation. Ganguly has performed extensive research on etJraic and border conflicts in India and South Asia. He has written on the Kashmir crisis, Indian and Pakistani nuclear programs, prospects for regional cooperation,ariety of otber issues. Ganguly. in English and political science from Berea College,. in political science from Miami University,h.D. in political sdence from the University of Illinois.

Sherman Garncttenior associate at the Carnegie Endowment for International Peace specializing in the foreign and security policies ofand the former states of the Soviet Union. He alsoewproject on Russian-Chinese relations to assess the changing dyrramics of that relationship. Garnctl previously served as deputy assistant secretary of defense for Russia, Ukraine, and Eurasia andariety of other DoD positions. GamertJi in political philosophy from Michigan State University,. in Russian and East European suidics fromh.D. in Russian Uterarure from the University of Michigan.

Barry Gilmore is dean of senior seminar and the chair of Caucasus Area Studies at the State Derjartment Foreign Service Instimte. He was the first US ambassador to the Republic of Armenia3isForeign Service assignments have included deputy commandant for mternational affairs of the US Army War College; director of the Office of Central European Affairs; and postings to Ankara, Budapest Moscow, and Munich. Gilmore. from the University of Pittsburgh andgraduate study at Indiana University.

William Helkie is chief of ihc US International Transactions Section of the Federal Reserve. He has served in numerous capacities at (he Federal Reserve tacluomg as chief of the Quantitative Studies Section. He served as an economic consultant to the Ministry of Finance and the Central Bank of the Government of Nepal andisiting scholar at the Economic Research Institute, Economic Planning Agency, Government of Japan. He has taught various macroecortoraics and international finance courses.holds an engineering degree from West Pointh.D. in economics from Purdue University.

Paul Ilenzc hasesident consultant at RAND's Washington officeorking on projects related to Turkey, Russia, the Caucasus, and Centralraduate of the Harvard Soviet Programeyear career in government and government-related organizations. He served in the US Embassy in Ankara.70 he served with Zbigniew Brzezinski on the National Security Council, where he chaired the Nationalities Workingigh-level task force that focused on non-Russian regions of the USSR- Heilson fellow at the Smithsonian1d recent years he has made frequent visits to the Caucasus and Central Asia.

Stephen Jones is associate professor of Russian and Eurasian studies at Mount Holyoke College. He is an expert on Georgian issues, havingto Ihe country on numerous occasions and written extensively on its history and on modern issues. HeA. in comparative government from the University of Essex as well as. in Soviet politicsh.D. from the London School of Economics-Roger Kangasonsultant specializing in regional security andcooperation in Central Asia. Until recently be was deputy director of the Central Asia Institute at Johns Hopkins University. He hasesearch analyst on Central Asian affairs for the Open Media Research Institute and has taught political science at rhe University of Mississippi. Kangasraduate of the Georgetown Uriiversity School of Foreignandh.D. in political science from Indiana University.

Geoffrey Kemp is director of regional strategic programs at the Nixonfor Peace and Freedom. His current areas of interest focus on theof energy in tbe Caspian Basin and Persian Gulf and US relations in the Middle East, particularly with Iran. He was formerly director of the Middle East Arms Control Project at the Carnegie Endowment for International Peace, was Special Assistant to the President for National Security Affairs under Reagan, and served on the National Security Council staff and in the


DoD. Kempi. and. from the University of Oxfordh.D. in political science from MIT.

Nancy Lubin is president of JNA Associates,esearch andfirm focusing on assessments and projects in the NIS, especially Central Asia. She is also director of the Council on Foreign Relations' Project on the Ferghana Valley. She has taught at Carnegie-Mellon University,ellow at the US Instimte of Peace and the Woodrow Wilson Center for International Scholars,roject director at the Congressional Office of Technology Assessment She. from Harvard University, has studied at the Universities of Moscow and Leningrad, andh.D. from the University of Oxford. She also has conducted doctoral research at Tash-kent State University.

Paul Mnrer, an expert on transition economies, is professor of mternational business at Indiana Umvcxsity's Kelley School of Business. Marer has received numerous distinctions including servingember of the board of trustees to the National Council for Soviet and East European Research andember of the executive corrirmttee for the Association forEconomic Studies. He has received several honors from theof Indiana Marer has written extensively on transition economies. He holds an undergraduate degree from Florida Southern Collegeoctorate in economics from the University of Pennsylvania.

Daniel Matu-SMwski has been president of the International Research and Exchanges Boardhere he has been responsible forombination of field research and professional trainingin Central and Eastern Europe, Russia, Eurasia, Mongolia, and China.92 he was executive director of the International Foundation for tbe Survival and Development of Humanity in Moscow. He is the author of several studies on Soviet nationality issues and mternational relations. Matusxewskih.D. in Russian and Turkic history from the University of Washington andulbright scholar in Russia and Turkey.

Rajan Mexvon is the Monroe Rath bone Professor of International Relations at Lehigh University and is an adjunct professor at the Harriman Institute, Columbia University. He is on tbe executive committee of ColumbiaCaspian project Menon has written extensively on the former Soviet Union and isook to be published next year entitled Improving the Neo-Realist Paradigm: The Case of Conflict and Conflict Resolution in Central Asia. Menon holds an MA. in mternational relations from Lehigh Universityh.D. in political science from the University of Illinois.


Jeyhun MoUazade is president of the US Azerbaijan Business Council. Thisesearch organization that serves to foster greater interest and knowledge of the Caucasus and Central Asia. He is also editor in chief of Caspian Crossroads, an analytical magazine on economics and geopolitics of the region. Mollazade formerly served as Deputy Chief of Mission io the Azerbaijani Embassy in Washington. Heoctorate in Middle East issues.

Richard Morningstar is the Special Adviser to the President and Secretary of State for Caspian Basin Energy Diplomacy, responsible for coordinating executive branch policy and programs relating to oil and gas development. Previously, he was Special Adviser on Assistance to the Newly independent Stales of the former Soviet Union. He bas served as Senior Vice President for Policy and Investment Development at the Overseas Private Investment Corporation and chairman of Costar Corporation. Morning starraduate of Harvard University andaw degree from Stanford Unrversity Law School.

Ross Munroreelance writer and journalist spedalizing in US-Asia relations. He was director of the Asia program at the Foreign Policy Research institute0reviously, he was TIME magazines bureau chief in Hong Kong. Bangkok, and New Delhi. He has reportedariety of issues in Asia and the Pacific, focusing on US foreign policy,toward Chirm, in recent years and has recently coauihoted The Coming Conflict With China.

James Norausky. vice president of supply and transportation for Amoco Eurasia Petroleum Company. Is responsible for planning and securingtransportation for Amoco's current and proposed oil and gas projects in Azerbaijan, Kazakhstan, and Russia. Norausky has been wiih Amoco forears. He holds an undergraduate degree in civil engmeering from the University of Missouri-Rolla and. in businessfrom the Illinois Institute of Technology.

Barry Naughton is an associate professor and former associate dean at the Graduate School of International Relations and Pacific Studies at theof California at San Diego. His primary focus is economic reform in China, on which he has recently co-edited Reform of China's State-Owned Enterprises. He has servedonsultant and researcher with the World Bank andeviewer for numerous professional journals. Naughton. in Chinese language and literature from the University of Washington in Seattle,. in international relatioos fromhD. in economics.

David Nbsman is Persian Gulf coordinalor for Radio Free Europe/Radio Libertyommentator for RFE/RL's Azerbaijan service. He is aof the board of directors of the Azerbaijan Cultural Center of New York; the board of trustees of the US-Azerbaijan Council and the Caucasianfor Peace. Democracy, and Development; and the editorial board of Caspian Crossroads. Nissmanh-D. from Columbia University's Department of Near and Middle Eastern Languages and Cultures, and he has performed research in Cairo and Istanbul.

Michael Ochsrofessional staff adviser to the US Commission on Security and Cooperation in Europeis primary work is ondevelopment and natiorialrty issues in the former Soviet Union. Heand developed the CSCE election monitoring project and represented the OSCE's Office of Democratic tostirmkms and Human Rightsoint operation with the UN to monitor5 parliamentary elections inOchs holds ain modern European history from City College of New York andh-D. in Russian history from Harvard University.

Rozanne Ridgway is the chair of the Baltic-American Enterpriseareer foreign service officer, she has servedariety of posts in the State Department, mduding Ambassador to the German Democratic Republic. Ambassador to Finland, and Assistant Secretary of State for European and Canadian Affairs. Sheast president of the Atlantic Council of the United States. She has received numerous federal and State apartment awards and serves on several corporate boards. RidgwayA. from Hamhne University.

Gil Knzman is the Musgrave Professor of Sociology at Princetonand serves on the university's program committees on East Asianand Russian studies. Rozman. in Chinese and Russian studies from Carlollegeh.D. in sociology from Princeton. He has attended Princeton's Critical language Program in Chinese and Russian Studies, as well as other intensive language programs in Chinese, Russian, and Japanese. Rozman specializes in comparative studies of East Asian states.

Matthew Sagers is director of the Energy Services at PlanEcon,firm spedalizing in the economies of tbe former Soviet Union and Eastern Europe. As head of the Energy Service, he is the editor of PlanEcon Energy Report, as well as PlanEcon's Energy Outlook. Sagers has ledmajor studies including on the electric power industry in the region, refined petroleum product consumption, and the status of foreignin the upstream oil sector and the natural gas sector. This effort

includes advising major mternational energy corporations and the World Bank. He was recently selected to serve on an advisory panel to Kazakh Oil and KJrzTransOil on Kazakhstan's pipeline options. Sagcrs previously served as chief of the Soviet Branch of the US Census Bureau's Center for Mternational Research. He holds an unclergraduatc degree from Weber State Umvcrsityoctorate in geography from Ohio State University.

Elizabeth Sollietrategic analyst for Texaco IiKorporated. SoDiepolitical develorjraents in tbe Caspian and surrounding regions and comrnurucates implications for ihe oil and gas industry to Texaco'sCouncil and Caspian Group. Sheember of Texaco's Caspian Strategy Team Before receiving this position, Sollie was an associate at LPI Consulting where she spent two months in the Kazakhstan! officer^Utical and economic conditions of the various oil-producing countries in the former Soviet Union. Sollie spent two years in Kazakhstannem-ber of the US Peace Corps. She holds an undergraduate degree from Claxe-mont McKenna College and. from The George Washington Universiiy.

Frederick Starr, chairman of the Central Asia Institute at the Paul H. Nitze School of Advanced International Swdies, Johns Hopldns University,eading authority on Russian and Central Asian affairs. His recentare Making Eurasia Stable, The Role of Uzbekistan in Central Asian Security, Being Rich Will Not Be Enough, and Power Failure: American Policy in the Caspian. He is currently planning toew university in Tajikistan. He was founding director of the Keonan Institute for Advanced Russian Studies at the Woodxow Wilson Center in Washington andof Oberlin College and tbe Aspen Institute He is the recipient of foux honorary degreesellow of the American Academy of Arts andHe was educated at Yale, Cambridge, and Princeton Universities.

M- Nazif Sbahranl is professor of anthropology at Indiana Universiiy. He also has taught at UCLA. Most recently, heeUowsbip at the Woodrow Wilson Center and did field work in Uzbekistan, Pakistan, Afghanistan, and eastern Turkey. Snahrani has written extensively onAsia. He. in anthropology from the University of Hawaii as well as an MA.h.D. from the University of Washington, Seattle.

John Tcdstrom is associate director of the Center for International Security and Defense Policy at RAND Corporation. Heounder of RAND's pub-lication series in international security economics. He has served as the senior economist in the mternational Policy Department at RAND andenior research analyst for Radio Free Europe/Radio Uberty. He has written extensively on economic issues for the new states in the post-Soviet period.



Tedstroni. in economics and management from. in economics and Soviet affairs from Indiana University,h.D. in economics and Russian area studies from the University of Birmingham in England.

Enders Wirabusb is assistant director of the Strategic Assessment CenterIC, where he supervises research on the changing strategic dynamics of Eurasia. He currently serves as president of the America-GeorgiaDevelopment Council, which he founded at the request of President Eduard Shevardnadze. Wimbush has been director of Radio Liberty in Munich, Germany, and of tbe Society for Central Asian Studies, which he founded. He has written numerous books and articles on the Caspian region and has directed several strategic assessments of the new Eurasianfor the US Government and private clients. He. in history and politics from the University of Massachusetts and. inrelations from the University of Chicago, where he also conducted Ph.D. work.


Original document.

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