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Kyrgyzstan, Business, Corruption and the U.S. Manas Airbase

Politics / GeoPolitics Apr 16, 2010 - 03:09 AM GMT

By: OilPrice_Com

Politics Best Financial Markets Analysis ArticleKyrgyzstan’s mass anti-government protests last week were essentially the culmination of more than a decade of disillusionment and dissatisfaction that accumulated in the nation’s political, economic and social spheres from the period of Akayev to his successor Kurmanbek Bakiyev, with virtually every Kyrgyz concerned about rising prices and falling standards of living, both issues of little concern and dimly understood in Washington.


The diplomatic logjam over the fate of deposed President Kurbanbek Bakiyev has apparently ended, as on 15 April Russia’s Itar-Tass news agency reported that Bakiyev, along with his younger brother Dzhanysh, former head of the country’s feared National Security Service (NSS) and the presidential guard and former Defense Minister Bakytbek Kalyev had fled the country. Kazakh Foreign Ministry Spokesman Kazakhstan Askar Abdyrakhmanov subsequently confirmed that their military aircraft arrived in Taras, Kazakhstan. The Organization for Security and Cooperation in Europe (OSCE) office in Bishkek issued a statement that Bakiyev left “as a result of joint efforts by President Nursultan Nazarbayev of Kazakhstan, (U.S. President) Barack Obama and the Russian Federation (President) Dmitrii Medvedev, as well as the active mediation of the OSCE, the UN and the EU.” According to interim government member Almambek Shykmamotov, Bakiyev was allowed to leave the country after signing a formal resignation statement.

While Kyrgyzstan’s political impasse has been resolved by Bakiyev’s sudden departure, expect to see furious behind the scenes politicking in Bishkek, particularly between Russia and the U.S. as both attempt to strengthen their influence with interim Prime Minister Roza Otumbayev’s administration at the expense of the other.

Two issues are likely to dominate Kyrgyzstan’s political scene in upcoming weeks – negotiating as much foreign aid as possible and recovering as much of the money looted by the Bakiyev kleptocracy as possible.


The scale of the fiscal depredations of Bakiyev’s inner circle is quite startling for a country of only 5 million people. According to Natsional’nyi bank Kyguzstana Acting Chairman Zair Chokoev, during the period 7-8 April, when the unrest peaked, the country’s largest commercial bank, AziiaUniversalBanke (AUB), controlled by Bakiyev’s son Maksim, sent $200 million out of the country.

Such thievery has had an immediate impact on the country’s finances; provisional Finance Minister Temir Sariyev said that as the result of such depredations, the country’s budget deficit will amount to over $20 million in April alone.

Again outpacing Washington, on 14 April Russian Finance Minister Aleksei Kudrin announced that Russia was Kyrgyzstan an immediate grant of $20 million and a soft loan of $30 million, commenting, “I think it is possible to provide humanitarian aid - a grant of $ 20 million for the priority of payments for social support…now, collection of customs and tax payments to ensure the ongoing costs of government in Kyrgyzstan is weak.”


In contrast, Washington has yet to announce any relief aid. Instead, expect the U.S. in the upcoming days to focus obsessively on continued access to the Manas Transit Center airbase, 20 miles from the capital. While the base’s lease expires on 7 July, Otunbayeva has already stated that it will be “automatically” extended, though next year the issue is likely to arise again unless Washington institutes some major course corrections in its previous policies towards Kyrgyzstan. Washington has a major uphill struggle ahead, largely of its own making.

Senior leaders in the interim government that took power last week are accusing the United States of allowing Bakiyev family members to enrich themselves with inflated contracts supplying jet fuel to Manas Transit Center. According to provisional government senior members, companies controlled by the president’s 32-year-old son, Maksim, who last October was appointed by his father to head the country’s newly created Central Agency on Development, Investment, and Innovation, skimmed as much as $8 million a month from daily jet fuel sales to the base of up to a quarter million gallons, utilizing a monopoly and favorable taxes. More than any other single factor, Washington’s policies towards the Manas Transit Center have been responsible for alienating Kyrgyz opinion against the U.S. Accordingly, a brief overview of U.S. policies towards the airbase are in order.


The Manas airbase was established on 4 December 2001 under the joint Kyrgyz-U.S. Status of Forces Agreement (SOFA) under the administration of then President Askar Akayev. The Pentagon was granted the right to use the airbase for the bargain rent of $2 million annually, but almost immediately Washington established contracts for fueling and landing rights with companies controlled by Akayev’s family, which found the Pentagon paying far higher than prevailing international rates for the base. The Pentagon selected Manas above Kyrgyzstan’s other 52 airports because its 14,000-foot runway, originally built for Soviet bombers, could be utilized by USAF C-5 Galaxy cargo planes and 747s to support Operation Enduring Freedom operations in Afghanistan.


By early 2005 Akayev’s increasingly authoritarian turn and increasing corruption alienated many of his supporters. Another less well-known factor in undercutting his authority were the activities of a number of U.S.-based non-governmental organizations, most notably Freedom House, which published many opposition papers.

Washington’s disenchantment with Akayev began in 2003 when he decided to allow Russia to establish a full-fledged military base in Kant near Bishkek, its first outside the Russian Federation since the 1991 collapse of the USSR. Though less than a quarter of the size of Manas, Akayev’s decision landed him on America’s “watch list” and increased aid flowed to the Kyrgyz opposition via American NGOs. In 2004 Washington in assisting the democratic process directed $12 million, an amount six times the ‘formal” rent for Manas, into Kyrgyzstan in the form of scholarships and donations, while the State Department even funded TV station equipment in the restive southern provincial town of Osh. Goerge Soros through his various foundations also helped fund the opposition, while Freedom House operated a printing press in Bishkek.

In April, having fled the unrest, Akayev signed his resignation in Moscow and entered a gilded retirement. In Bishkek Freedom House project director Mike Stone said simply, “Mission accomplished.” Kurmanbek Bakiyev now strode to center stage amid high expectations.

In essence, shortly after the 2005 Tulip Revolution, Washington turned its back on Kyrgyzstan and developments there. The Pentagon had Manas, and Kyrgyzstan had no oil and gas reserves that evoked such Western interest in Kazakhstan and Turkmenistan. Washington simply rewrote its cozy contracts with the Baikyev administration for Manas, delivered intermittent harangues on democracy and human rights, and essentially ignored the country.

Manas would eventually prove an ace in Bakiyev’s hand. The base’s importance increased dramatically after the tragic May 2005 events in Andijan, Uzbekistan, when Tashkent, infuriated with Washington’s ambivalent response, on 29 July unilaterally terminated its SOFA agreement allowing the Pentagon to utilize Uzbekistan’s Karshi-Khanabad (K2) airbase, a mere 60 miles north of the Afghan border. Under the agreement’s terms, the Pentagon had 180 days to evacuate the facility, which it did.

Manas quickly proved to be a useful, if more distant and expensive, alternate base for Afghan operations. Despite being its 400 miles and 90-minutes flying time to Afghanistan, Manas dwarfed the six to eight hours flight time from other potential launching areas, such as ships or U.S. bases in Saudi Arabia and the Gulf.

Washington’s arrogance and befuddle response to events in Andjian reverberated throughout the region. Even before Uzbekistan abrogated its SOFA agreement with Washington, at a Shanghai Cooperation Organization (SCO) summit on 5 July 2005 the presidents of Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan signed a joint declaration requesting the U.S.-led anti-terrorist coalition forces to set a date for leaving Central Asia. In Kyrgyzstan, then Acting Minister of Foreign Affairs Roza Otunbayeva held a news conference to rehash the SCO declaration’s arguments for setting a deadline on the U.S.-led military presence. According to a 6 July 2005 Itar-Tass report, she reiterated the contention that Afghanistan had essentially been stabilized and that consequently active military operations were no longer necessary, implying that Manas had lost its reason for being. Citing the 2001 U.S.-Kyrgyzstan SOFA agreement, Otunbayeva stated, “We intend to act in line with this and discuss the matter. We want to know how long the base is going to stay.”


The corruption involved in the Manas lease arrangement which helped precipitate last week’s events had a long genesis, as beginning in early 2002 Akayev’s son Aydar was the recipient of annual $2 million lease payments, plus additional fees of $7,000 per takeoff and landing. In all, Akayev’s family law received $87 million and $32 million for his two airport service companies during Akayev’s tenure as president as shortly after Manas began operations, the Pentagon signed contracts with Manas International Services Ltd. and Aalam Services Ltd., the only two aviation fuel suppliers in Kyrgyzstan, both controlled by Akayev’s relatives. Compalints over American arrogance over the facility would outlast the Akayev regime.


Other simmering complaints included a 26 September 2006 aircraft collision involving a KC-135 and the presidential Tu-154 airliner, for which the Americans declined to take responsibility, and the repeated USAF practice of dumping of tons of surplus fuel over Kyrgyz farms adjoining the base. Claims by nearby farmers for compensation were denied.

Things came to a head on 6 December 2006, when 20-year old US soldier Zachary Hatfield shot twice and killed 42-year-old Kyrgyz Aleksandr Ivanov, an ethnic Russian Kyrgyz, at the airbase’s entry gate. Ivanov worked for Aerocraft Petrol Management, which provides fuel services for Kyrgyz and international civilian aircraft. Hatfield maintained that he fired in self defense after Ivanov approached him with a knife. Despite promises to make Hatfield available to the Kyrgyz judicial system, the Pentagon whisked him out of the country.


The year 2009 began with the Bakiyev regime cozying up to Moscow, receiving in early February $2.15 in loan guarantees, the bulk of which would be used to finish the Kambarata-1 hydroelectric cascade. Bishkek’s rumor mill buzzed with gossip that part of the price of the loan was that the Bakiyev administration would shutter Manas.

The Pentagon was certainly alarmed, despite a calm exterior. In January 2009, as negotiations were taking place in Moscow, during a trip through Central Asia, Head of U.S. Central Command General David Petraeus said in relation to Manas that “$63 million of funds (we) are giving (is) for leasing the airport, paying contracts and salaries to the local personnel.” However, Kyrgyz Foreign Minister Kadyrbek Sarbayev corrected the general’s spin for the local audience, telling journalists, said that “Kyrgyzstan gets $150 million from the USA every year, but most of these funds are not for deploying the Manas air base,” stressed that this was the “total sum” of U.S. payments and that in fact the air base rental totaled only $17.5 million per year
On 3 February 2009 Kyrgyz President Kurmanbek Bakiyev announced in Moscow that “the Kyrgyz government has taken a decision to terminate the rent of the base,” signing a bill into law to that effect on 20 February.

As the result of a full-press U.S. diplomatic offensive however, the terms of which remain to be seen by Otunbayeva, on 7 July Bakiyev grandly announced that the lease for Manas had been extended for a year.


On 10 April the United States Embassy issued a statement stopping short of endorsing Otunbayeva’s government, commenting, “We remain a committed partner to the development of Kyrgyzstan for the benefit of the Kyrgyz people and intend to continue to support the economic and democratic development of the country.”

On the issue of Manas, while during an interview with RFE/RL on 8 April Otunbaeva said the interim government initially had "some questions" about the base, adding, "we will honor the agreements and commitments we have signed," a member of the Social Democratic Party of Kyrgyzstan told the author, strictly off the record, that the Otunabayeva administration had reached an agreement with Putin about a U.S. withdrawal from the Manas Transit Center, but no date was given. While the threat of the base’s immediate closure has receded for the moment, the next year will prove critical should Washington wish to retain it.

Moscow has currently won the PR war for Kyrgyz “hearts and minds.” While the Kremlin was quick to support the triumphant forces of change and assist the interim government with financial assistance, Washington backed Kyrgyzstan’s now-deposed dictator. The U.S. has already failed to make a significant humanitarian gesture by not opening up the Manas Transit Center’s medical facilities to those injured in last week’s unrest in Bishkek, a mere 20 miles away but putting the base instead into lockdown.

Kyrgyzstan’s provisional government faces a number of daunting tasks, the most immediate being to impose order in the capital. High on the political agenda is to reach agreement on the division of power resources with the southern clans, Bakiyev's former stronghold. Another with immense foreign implications is to legitimize its victory by creating transitional power structures that are recognized by the international community while preparing a new constitution and organizing new elections for six months’ time while finding foreign assistance to ameliorate the country’s dire fiscal situation.

On the issues of securing the capital and dividing power the global community can do little, but its impact on the last issues could be immense. Whoever provides the most significant assistance in resolving these problems can expect to see a commensurate growth in its influence. If current events are anything to go by, then Russia already has the inside track.

Washington should immediately recognize Otumbayeva’s government. Secondly, it should use its considerable clout with international lending institutions such as the International Monetary Fund and World Bank to assist Bishkek in getting easier access to international lending.

Third, despite the potential embarrassment, the Pentagon should come clean about its Manas contracts and negotiate a fair rent for Manas. This may be inevitable anyway, as Congress is preparing its own probe of the Manas contracts. On 13 April a House of Representatives panel conducting a preliminary investigation into U.S. contracting in Afghanistan began focus on what its chairman called the "unexplained relationships" between the families of two Kyrgyzstan presidents and fuel supplies to Manas. Washington should also use its influence to help the provisional government locate and repatriate as much of Bakiyev’s stolen funds as possible, whatever the embarrassment to U.S. officials over the ‘deals” arranged with the Bakiyev regime.

The United States on 12 April welcomed as "very good news" statements from the Kyrgyz interim government that it will abide by existing agreements covering Manas. Two days later the U.S. Assistant Secretary of State for South and Central Asian affairs Robert Blake met with Otunbayeva in Bishkek, telling journalists that he came to “express support for the steps the provisional government has taken to restore democracy” and to offer American aid.

The Kyrgyz people have grown weary of American “expressions” of support for democracy and human rights; if Washington truly wants to stabilize its presence in Kyrgyzstan, it can begin by understanding that Central Asia is not an American satrapy to be purchased at bargain basement prices and ignored, but that other countries have legitimate interests there as well, including security, and that an integral part of the security is “quality of life” issues, which previous U.S. arrangements with corrupt regimes have signally failed to address. The operating motto of the new provisional government may well prove to be “Show us the money – and help us find what was stolen.” It is an adage that Washington, having apparently up to now learned little since 2005, ignores at its peril.


Parts 1 & 2 can be found at:

Part 1:

Part 2:

This article was written by Dr. John CK Daly for who offer detailed analysis on Crude Oil, Geopolitics, Gold and most other commodities. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit:

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