The Foreign Service Journal, December 2016

THE FOREIGN SERVICE JOURNAL | DECEMBER 2016 35 experience to run the country. The country has suffered from low oil, gas and commodity prices that put downward pressure on the tenge , increased the cost of living and provoked sporadic protests. Astana has pursued longer-term economic competitiveness by joining the World Trade Organization and engaging in dialogue with the international business community. Uzbekistan can potentially punch well above its weight in the region, given its significant territory, population, energy andmin- eral reserves, and developed heavy and light industry. However, Tashkent’s state-run economic planning model has spurred a large underground economy andmultiple foreign exchange rates. Uzbekistan denies any problemwith the availability of foreign exchange, but that is the number-one concern for Uzbek and foreign companies. Rather than deregulating its market to attract broad-based domestic and foreign investment, Tashkent has pursued an industrial policy based on high-tech industries. This has produced some limited success in export-orientedmanufacturing. Still, with a loosening of economic decision-making and a reduction of the state’s role in the economy, Uzbekistan’s low costs and abundant labor could drive development. Late 2016 elections present an opportunity for both political and economic reforms that can unlock Uzbekistan’s potential. Kyrgyzstan, Tajikistan and Turkmenistan have limited near- term opportunities for broad-based economic development. Kyrgyzstan’s small market, lack of export-oriented production and limited, large-scale agricultural potential constrain its growth. Its mining sector, originally thought to present major opportuni- ties for foreign investment, remains moribund. Tajikistan remains largely dependent on remittances from Russia. Given radical Islamist activity in the region, this presents near- and long-term challenges to U.S., Russian and European security. Turkmenistan remains largely closed to the outside world, striving for economic self-sufficiency. This undermines development of its huge gas reserves, which will remain largely unexplored absent an increase in global gas prices and a more competitive exploration and pro- duction environment. Secretary of State John Kerry’s February 2016 marathon tour and August U.S.-Central Asia (C5 Plus One) engagement with the region’s foreign ministers are precisely the right kind of steps to engage the political, economic and human dimensions of our bilateral relationships in Central Asia. Given our cross- cutting political, economic, security, intelligence and human rights interests in this region, the United States should simulta- neously build all these pillars without waiting for resolution of one or another dimension. The Baltics: The West’s Eastern Edge At independence, the Baltic states emerged with relatively strong institutions, a constructive nationalist ethos and smaller, more reformable economies. In 2011, Estonia became the first post-Soviet state to adopt the euro and has the E.U.’s lowest debt- to-GDP ratio. Latvia faced a severe economic shock following the 2008 global economic crisis, but began reforms to bolster the judiciary, reduce corruption and return to growth by 2010. Lithuania is investing in its own energy independence with the construction of the region’s largest liquefied natural gas termi- nal, which will reduce Russian gas supply leverage. But the real picture in the Baltics is not in the country-by-coun- try comparison, but in the aggregate: as a bloc, they represent the eastern edge of E.U., NATO and the rule of law. Given their large Russian populations and, in some places, a land border with Russia marked with sticks and poles, the Baltics look for continued sup- port fromBrussels andWashington. The recent Brexit decision did not go over well in Baltic capitals, which desperately need a united Europe and look nervously east. Fortunately, their E.U. and NATO memberships provide a solid economic and security foundation that international investors appreciate. The Ties That Blind: A Eurasian Economic (Dis)Union? Many Eurasian capitals were wary when Russia began advocat- ing a Eurasian Economic Union in 2014. The proposal was viewed as a potential bridge for greater Moscow dominance in the region, with some arguing that the EAEU could be a back-door method of reconstituting the former Soviet Union. A closer look, however, quickly disproves this notion. First, with few exceptions, Eurasian leaders do not see Moscow as the “shining city on the hill” for future political and economic development. Second, Eurasian elites are unlikely to want to cede authority to a Russian-dominated institution. Finally, “policy creep” is a major concern: a customs union with synchronized standards can lead to eventual calls for monetary union and a resultant loss of economic sovereignty. Those Eurasian nations with sufficient political and economic wherewithal will play the long game on the EAEU; others, such as Uzbekistan and Ukraine, have rejected it out of hand. From a U.S. policy perspective, we should recognize that absent viable alternatives, some Eurasian nations will feel the need to cooper- ate at a minimal level with the EAEU. For example, Moscow holds the cards on work permits for millions of Central Asian migrants doing menial labor in Russia who send survival remit- tances back home. While Russia, and increasingly China, will