What did those who were “Present at the Transition” Miss? The Creation of Powerful Presidential Families in Central Asia

Abstract

A striking feature of Havrylyshyn's book present at the transition is the space and emphasis that he gives to elites. He contrasts the new rich in Central European Big Bang countries, who formed a capitalist class that supported further reforms and consolidation of the new economic system, with the new rich in countries with gradual reforms or where an early Big Bang was aborted and old communist-era elites were able to short-circuit the reform process. This paper argues that, although Havrylyshyn's focus on the oligarchs of Russia and Ukraine may be justified by their status as the two largest Soviet successor states, they were not typical of the non-Baltic former Soviet republics. In the Central Asian countries and Azerbaijan, extreme wealth has become concentrated in the presidential families and their associates. This pattern has had specific and pernicious consequences.

Introduction

The sudden end of central planning in 1989 in Central and Eastern Europe and in 1991 in the Soviet Union and the ensuing transition to market-based economies was largely unexpected. Piecemeal reforms had taken place, but the total collapse of central planning mechanisms was unanticipated. Policymakers unfamiliar with market economies and in many countries with few domestic advisers to fill the knowledge gap turned to foreign economists, especially those in institutions such as the IMF and World Bank whose technical advice came with financial assistance. Oleh Havrylyshyn was exceptional in playing the three roles of independent academic adviser, senior member of a transition-economy government, and IMF official.

Despite debates over speed and sequencing, external economic advice to policymakers in transition economies was generally consistent, captured in the “Washington Consensus” and favouring rapid reform. Sequencing was determined by practical considerations; liberalization of prices and privatization of small enterprises were quicker than privatization or restructuring of large enterprise, or than creating a tax, financial or legal system suitable for a market-based economy. In Present at the Transition, Havrylyshyn argued that the advice was sound. Countries pursuing a “Big Bang” strategy reaped economic and political benefits; they became more prosperous and democratic after communism than countries adopting gradual or partial reform.

The key elements of transition were price liberalization and privatization or restructuring of state enterprises. For a successful transition, as Havrylyshyn (2020) repeatedly emphasized, in both cases the “how” was at least as important as the “how much”. Liberalized prices must be competitively determined. Changes in ownership structure must result in owners who respond to prices to minimize costs and maximize profits. The outcome is a matter of degree; all market-based economies have areas of monopoly power and state-regulated prices, and all capitalist economies have inefficient state-owned or private enterprises, but even a cursory comparison between high-income and poor economies shows that the degree matters.

A striking feature of Havrylyshyn’s book is the space and emphasis that he gives to elites. As extremes, he contrasts the new rich in Central European Big Bang countries (such as the Czech Republic and Poland), who formed a new capitalist class that supported further reforms and consolidation of the new economic system, with the new rich in countries with gradual reforms or where an early Big Bang was aborted. In the latter, communist-era elites were able to short-circuit the reform process to their own economic benefit. Oligarchs in Russia and Ukraine were also directly involved in politics, in Russia sometimes losing out and in Ukraine even rising to the presidency. Although we know the starting point for the transition from central planning, the destination on the spectrum from more to less well-functioning market-based economies is less clear. Havrylyshyn’s emphasized elites because of their key role in determining the country-specific variety of capitalism that will ensue.

Havrylyshyn focused on the oligarchs in the two largest Soviet successor states, Russia and Ukraine. However, they were not typical of the non-Baltic former Soviet republics (FSU), despite the generalization that the old guard’s “success was considerable in the FSU, culminating in the creation of an enormously wealthy group of oligarchs” (Havrylyshyn 2020, 279). In the Central Asian countries and Azerbaijan, power and wealth became concentrated in presidential families and their associates, and this has consequences for the type of market-based economies created in these countries.

This paper considers the five Central Asian republics as a natural experiment of countries with similar cultural, geographical, and historical background in a region that experienced no interstate wars and only one violent post-independence political transition (Tajikistan 1992-7). Transition strategies covered the full spectrum from rapid reform (Kyrgyzstan) to minimal change (Turkmenistan). By the turn of the century, economic output performance varied but showed little relation to transition strategies.

In contrast to the variety of economic transition strategies, all five political systems gave overwhelming power to the president. In four countries, former Soviet First Secretaries cemented their power as presidents. Until 1997, Tajikistan suffered through a civil war during which the old guard lost power and a regional warlord became president; once the war was over, he strengthened presidential powers.

Twenty-first century economic performance was dominated by the 1999–2014 global resource boom, which enabled presidents to deliver economic improvements as well as strengthening their own image and security services. Protests occurred, but were localized and quelled, or pre-empted, with varying degrees of violence. Only in Kyrgyzstan were protesters able to bring about change in leadership, although by the early 2020s presidential powers had been restored and the super-presidential regime resembled that of the other four countries.

This paper argues that the nature of the regimes in Central Asia differs fundamentally from those of Russia and Ukraine. A model for Central Asian countries was established by Azerbaijan, a country with similarities to Central Asia. Wealth and power are clearly concentrated in the hands of the president and are shared primarily with his family and close associates. Although economic transition strategies in Central Asia varied greatly, the power of presidents and their family have led to similar characteristics of the economic systems.

The Azerbaijan Model

The phenomenon of hereditary rule in post-Soviet states began in Azerbaijan, a former Soviet republic often linked with the five Central Asian republics. The six were the poorest republics and shared commonalities of language and religion. However, Azerbaijan’s early independence history was distinct in that politics were dominated by an interstate war that the country lost.

The final years of the Soviet Union saw conflicts between Azeris and Armenians that resulted in substantial ethnic cleansing as people relocated to their titular republic. The conflict highlighted the dwindling authority of the government in Moscow, which was unable to resolve the problem. Among Azeris, the central government’s main display of force, in Baku in January 1990, triggered deep opposition to the Union. In 1992, the Popular Front of Azerbaijan (PFA) government was perhaps the most democratic in the FSU. However, the PFA did not govern well and was unprepared for war with Armenia.

The no longer popular PFA was overthrown in a coup in 1993, and Haidar Aliev assumed power. He ended the war in 1994 by signing a ceasefire, acknowledging the de facto independence of the disputed territory of Nagorno Karabagh and Armenian occupation of seven Azerbaijani provinces. In 1995, Aliev signed the “Deal of the Century” with BP to update Azerbaijan’s oil facilities and exploit new oilfields. Aliev’s strategy was successful as oil production increased just as oil prices began their rise from under $20 a barrel in 1998 to over $140 in 2008.

The oil bonanza allowed Aliev to cement his position by distributing some of the gains to the people, and by strengthening internal security and upgrading the military. When he died in 2003, he was succeeded by his son Ilham Aliyev who continued to wield absolute power. The oil-fuelled growth enabled continuing military upgrading until in 2020 Azerbaijan defeated Armenia and regained the seven lost provinces. Ilham Aliev retains absolute power; he, his wife (who is the country’s first Vice President), their three children, and other family members are extremely wealthy.¹ The model of successful family rule resonated in Central Asia.

Central Asia

The conventional story of Central Asian transition in the 1990s is of extremes, with Kyrgyzstan the poster boy for rapid reform and Turkmenistan the least-reformed Soviet successor state. The two biggest economies were identified as reformist (Kazakhstan) and gradualist (Uzbekistan). In the 1990s, Uzbekistan had the shallowest transitional recession and was the first Soviet successor state to regain its pre-independence GDP, while there was little to choose between the GDP-performances of Kazakhstan, Kyrgyzstan, and Turkmenistan. War-torn Tajikistan had a de facto market-driven economy without good institutions or policies and predictably experienced dramatic decline in incomes and increase in poverty during the 1990s.²

Economic growth in Kazakhstan and Turkmenistan, rich in oil and gas, was rapid during the resource boom. Uzbekistan enjoyed less dramatic economic growth driven by mineral exports and self-sufficiency in gas, while resource-poor Kyrgyzstan and Tajikistan had moderate economic growth. The last three countries all benefited from remittances from migrant workers employed in Russia and, to a lesser extent, in Kazakhstan. None of this had much to do with choice of transition strategies. In all cases, an elite became rich, although details varied from country to country.

All five Central Asian countries created super-presidential regimes, in which elections were sham and parliaments rubber stamps. The presidents have maintained power and changes of president following death (Turkmenistan in 2006, Uzbekistan in 2016) or resignation (Kazakhstan in 2019, Turkmenistan in 2022) have been stage-managed. The only exception has been Kyrgyzstan, where the first president chose to abdicate in 2005 in the face of public demonstrations and the second president went into exile in 2010 in the face of public demonstrations; a new constitution in 2011 gave more power to parliament, but a decade later a populist president rewrote the constitution, returning powers to the president.

In the twenty-first century, presidents have strengthened their personal power and the wealth of their relatives. The first hereditary succession occurred in Turkmenistan in 2022, and the next is likely to be in Tajikistan. In Kazakhstan and Uzbekistan, an obstacle to hereditary succession has been the president’s lack of a son, and in Kyrgyzstan it is the exceptional turnover of presidents. Enrichment by presidential families has been a common feature of all five countries.

Turkmenistan

The power of the president is exemplified by Turkmenistan, where the president became synonymous with the state. The economic structure was easy to control. Turkmenistan had been the second Soviet republic in cotton production in the 1970s, when the economy was given a further boost by construction of modern natural gas facilities. The transition strategy was straightforward; revenues from cotton and gas exports were paid into accounts controlled by the president, who saw no need for economic reform.

President Niyazov provided free water, gas, electricity, and other benefits to the people, maintained extensive security services, spent lavishly on palaces and a personality cult, and still had substantial bank deposits in Frankfurt. Apart from cotton and gas exports and relations with preferred foreign construction companies and other suppliers, the economy was closed. Public accounts and government policies were non-transparent, and Turkmenistan ranked near the bottom of international measures of good governance, corruption, or media freedom. Apart from the president, a small group of close friends and colleagues appeared to be the main beneficiaries, but the elite was unstable under Nyazov (Mayne 2021). The president brooked no opposition, while foreign reports largely trivialized his eccentricities. The system was sustainable because, although cotton revenues declined due to poor maintenance of infrastructure and gas output was flat, gas revenues rose considerably during the energy boom.³

President Niyazov does not appear to have shown much concern over his succession (Clement 2022, 4). After President Niyazov died in December 2006, Gurbanguly Berdimuhamedov emerged as president through a non-transparent process.⁴ Like his predecessor, Berdimuhamedov ruled absolutely and idiosyncratically, enjoying absolute power and great wealth. Corruption became worse as higher access fees were required for meeting the new president and bribes amounted to 20–25% of construction projects. The beneficiaries of the regime became increasingly centred on Berdimuhamedov’s sisters, brothers-in-law, and their children.⁵

Only after the global energy price boom ended in 2014 was sustainability brought into question. GDP peaked in 2014 at just under USD 48 billion (Table 1), a level not achieved since then. The first expenditures to go were the social benefits; subsidies on water, gas, and electricity were phased out on 1 January 2019. By 2021, six times as many manat were required to buy dollars on the black market than at the official exchange rate.

Table 1 Central Asian Countries; Economic and Social Indicators. Sources: UNDP Human development report (HDI), World Bank world development indicators (WDI)

In February 2022, President Berdimuhamedov announced that he was standing down as president and advised holding an election to determine his successor as soon as possible. On March 12, his 40-year-old son, Serdar Berdimuhamedov won the election. Serdar had been groomed for the succession having been educated in Russia (2008–2011) and Geneva (2011–2013) and having held three military ranks and ten civilian jobs, the last of which was deputy prime minister (Clement 2022, 7).⁶

Tajikistan

Tajikistan had the least peaceful transition from central planning. A bitter civil war was associated with 60-100 thousand deaths and destruction of infrastructure. The victor in the civil war, President Rahmon, only gained full control of the country around the turn of the century. Tajikistan has a much lower GDP than Turkmenistan (Table 1) and has been less hermetically sealed. Lack of opportunities has encouraged over a million Tajiks, mainly young males, to travel to Russia for work and Tajikistan has become one of the world’s most remittance-dependent economies. However, despite differing history and resource base, Tajikistan resembles Turkmenistan in the simple economic structure and accumulation of presidential power.

The two main economic prizes after the civil war were the recently built aluminium and hydroelectricity facilities and the cotton gins, although as in Turkmenistan cotton output suffered from poor infrastructure maintenance and grasping policies. Struggles for control of the aluminium smelter were highlighted in 2004 when two senior officials absconded and were subsequently sued in London for $500 million; the case was settled out of court in 2008, probably to avoid publicizing operational details of the company which had come under the president’s control (Heathershaw 2013, 187–91).⁷ One of the president’s brothers-in-law was reputed to control four-fifths of cotton deliveries, until he was shot by the president’s son in a 2008 family quarrel (Pomfret 2019, 190).

In contrast to the Turkmen rulers, Tajikistan’s President Rahmon has not created an extreme personality cult. Nevertheless, by the 2010s, the country was run as a family company with all major positions in government, the aluminium and energy enterprises, and the financial sector held by members of the president’s extended family. Many of the appointees are poorly qualified and their accumulation of wealth may trigger protest, but the president keeps tight control over the security services (Pomfret 2019 195–6). The president’s eldest son, Rustam Emomali, has been mayor of Dushanbe since 2017 and since 2020 Speaker of the Upper House of Parliament, constitutionally the acting president in case of his father’s incapacity. He is groomed for succession.

Uzbekistan

Uzbekistan is the most populous Central Asian country and at independence its economy was the most diversified. President Karimov ruled as an autocrat from independence until 2016, but he was constrained by an elite who had enriched themselves during the transition. The diversified economy provided wider scope for rent-seeking than in Turkmenistan. The most high-profile rent seeker was the president’s daughter, Gulnara Karimova, who controlled access to many businesses which required licences or faced other regulatory burdens. The most interesting aspect of Gulnara’s career was that the president was eventually unable to protect her, and Gulnara was placed under house arrest in 2013. After her father died in 2016, her conditions appeared to become harsher.

The succession struggle after Karimov’s death in September 2016 was resolved quickly, despite expectations of a power struggle between the former prime minister and other ministers. President Shavkat Mirziyoyev repealed the most onerous Karimov-era restrictions, such as exit visas and limitations on currency exchange, and simplified interaction between ordinary Uzbeks and the authorities by increasing the number of courts and digitizing some government procedures. These popular reforms and some high-profile anti-corruption actions faced little opposition.

Against this picture of the new president fighting an entrenched elite, an alternative narrative could portray the president in a battle over the spoils, brushing aside Karimov-era elite members to create space for his own family to become rich. Mirziyoyev has two daughters (Saida and Shahnoza), a son (Alisher), and five grandchildren, as well as two sisters and a half-brother and sister.⁸ His elder son-in-law, Oybek Tursunov, is the head of Mirziyoyev's presidential administration, while his younger son-in-law, Otabek Umarov is the head of the presidential security services.⁹ Mirziyoyev has used public funds to build new family residences after clearing existing residents from the land; luxurious residential compounds have been constructed in the outskirts of Tashkent and a country retreat in the mountains.¹⁰

Kazakhstan

Kazakhstan has the largest economy in Central Asia and the best educated population. Economic growth in the twenty-first century has been driven by oil and gas exports, and Kazakhstan is also well endowed with a variety of minerals. Privatization of the mining facilities provided the basis for the wealth of a small group of men closely connected to President Nazarbayev. The president himself benefitted from the allocation of rights to oil and gas resources.

The Forbes rich list for Kazakhstan highlights the few people who benefited from the privatization of valuable mining companies.¹¹ Vladimir Ni, who shared offices with Nazarbayev in the Soviet era, was the original beneficiary of privatization of the Kazakh Copper mining conglomerate; after Ni died in 2010, his protégé, Vladimir Kim, became Chairman of the company (Global Witness 2010). Kim topped the 2019 rich list with a net worth of $4.6 billion, followed by Bulat Utemuratov whose company, Verny Capital, acquired the Vasilkovskoye gold mine in the 1990s. Each member of the “Trio” (Alijan Ibragimov, Patokh Chodiev, and Alexander Mashkevich) who benefited from privatization of chromium, alumina, and gas has an estimated net worth of $2–3 billion. The 2021 rich list also included Vyacheslav Kim who made his fortune in fintech.¹² Although these men are all fabulously wealthy, they differ from Russian oligarchs in that they explicitly play no political role – a part often reinforced by their mixed ethnicity.¹³

Presidential wealth in the 1990s came from oil and gas contracts. Kazakhstan inherited the Soviet Union’s largest foreign direct investment project, the joint venture with Chevron to develop the Tengiz oilfield. The contract was revised several times during the 1990s; rent-seeking by President Nazarbayev, mostly with the assistance of a US lawyer, James Giffen, is reported in Hersh (2001). The most high-profile legal case went to trial in the USA in the 2000s, inevitably earning the epithet Kazakhgate.¹⁴ Contracts to develop the offshore Kashagan oil field, discovered in 2000 and the largest new oilfield in the world since the 1970s, and other oil and gas deposits were also controversial.

Nazarbayev reacted forcefully to any opposition from within the elite, and Kazakhs who became rich were often perceived as a threat. When a political movement founded in 2001, Democratic Choice of Kazakhstan, called for decentralization of political power, a strong legislature, and an independent judiciary, the leaders were arrested and imprisoned (Ibadildin and Pisareva, 2020). A prominent target was the president’s son-in-law, Rakhat Aliyev, who was convicted in absentia of murder and treason and died in an Austrian jail in 2015 (Lillis 2019). Other businessmen or officials who appeared to challenge the president were imprisoned on corruption charges or died under suspicious circumstances.¹⁵

As opponents were put in their place outside politics and politicians’ exposure was restricted, it became clearer that authority resided in the presidential office and that the central elite was the presidential family. In contrast to the 1990s, when privatization of state assets and oil and gas deals had been the sources of wealth, in the 2000s the most lucrative activities were TV and other media, mobile phone services and the financial sector, or obtaining exemption from regulations or benefiting from other public policies. Licences or permissions were controlled by the presidential office.

The wealth of President Nazarbayev and his eldest daughter remain closely guarded secrets.¹⁶ Second daughter Dinara lives in Switzerland and keeps out of the limelight, although she and her husband Timur Kulibayev are extremely rich.¹⁷ Youngest daughter Aliya, previously known for modelling designer jewellery, promoting her clothing brand, and owning a beauty spa in Almaty, became even richer after a 2015 government decree expanded recycling obligations and her company ROP operated a monopoly over the disposal of used cars.¹⁸ Nazarbayev’s daughters are fabulously wealthy and under their father’ protection, but the fate of Karimov’s daughters after the Uzbek President’s death was surely a source of concern for Nazarbayev.¹⁹

Nevertheless, when he chose to step down in 2019, Nazarbayev had difficulty orchestrating a successor. While it is believed among the elite that Kazakhstan is not ready for a female president, Nazarbayev’s sons-in-law and grandsons consistently failed to live up to the president’s expectations of a potential successor. The wealthy people outside the presidential family were not pure-blood Kazakhs and hence implausible presidents, and the most prominent Kazakhs had all fallen foul of the president. Nazarbayev’s hand-picked successor Kassym-Jomart Tokayev was a trained diplomat who had served under Nazarbayev for many years as foreign minister and twice prime minister and was already 66 when he became president. Clearly, Nazarbayev intended to continue rule as the power behind the throne.

The Kyrgyz Republic

The Kyrgyz Republic stood out in the 1990s as the most reformist among the new independent states. In part that may have reflected the personality of the president, an academic who had been appointed by Gorbachev after the previous First Secretary of the Kyrgyz republic had mishandled ethnic disturbances.²⁰ President Akayev was open to external advice and adopted a big bang reform strategy. When Akayev’s strategy ran into opposition, he responded by ruling by decree, creating a super-presidency like that in the neighbouring countries.

There is little evidence of corruption on President Akayev’s part, although his family was seen to be benefitting from their position. The decisions of his son and daughter to run for parliament in 2005 elections triggered demonstrations in the capital. Rather than using force against the protesters, Akayev quietly left office and resumed his academic career in Moscow. His successor’s family resumed the corrupt dealings of Akayev’s family.²¹ President Bakayev was overthrown by popular demonstrations in 2010.

The interim president Roza Otunbayeva led work on constitutional reforms that increased the power of parliament and limited the president to a single term, and she announced that she would not compete in the forthcoming presidential election. After Almazbek Atambaev’s term (2011–2017), Kyrgyzstan saw Central Asia’s first peaceful transfer of presidential power following a fair election. However, the system did not work well as corruption remained rife and members of parliament represented personal or regional interests rather than promoting the national interest. President Jeenbekov resigned in October 2020 amidst protests. His successor, Sadyr Japarov, redrafted the constitution to return greater power to the president.

Kyrgyzstan’s history has clearly differed from the other four countries insofar as there has been no long-term president whose family became rich. The potential for such an outcome was visible in the behaviour of children of both Akayev and Bakayev but was cut short by popular resistance (and Akayev’s peaceful abdication). The period of parliamentary democracy was, however, unsuccessful in that the country remained corrupt in the 2010s and voted in a populist president who restored presidential powers.

Presidential Families and the Central Asian Transition

In Central Asia, central planning has been replaced by diverse national economic systems. The political systems have more similarities, with super-presidential regimes in all except the Kyrgyz Republic (and that country is heading in the same direction). The economic and political systems are interconnected insofar as the political elite around the president is also an economic elite that has benefited from the collapse of central planning and is content with the partially reformed economies of the early twenty-first century. Although the economies vary substantially in the degree of state-control over market forces, all are characterized by wealth inequality and much of the wealth has been concentrated in the presidential family.

In Turkmenistan and Tajikistan, the presidents benefitted from capital-intensive facilities built in the final decades of the Soviet Union. Since independence, natural gas in Turkmenistan and aluminium in Tajikistan have provided large revenue flows, especially during the 2000–2014 resource boom when average costs were well below prices. No effort was made to invest in improved efficiency or increased capacity, and most of the revenues appear to have gone into personal accounts rather than the public purse. Other economic activities are often controlled by the presidential families, and some sources of family income have been opportunistic.²² In 2022, the president of Turkmenistan stepped aside for his son to become president, and in Tajikistan the president has created a family-run country and appears to be grooming his son to be his successor.

In the two largest Central Asian countries, Kazakhstan and Uzbekistan, privatization of state assets and state capture by an elite in the 1990s reinforced resistance to democracy. Specifics varied, but initial wealth accumulation was most associated with privatization of valuable state assets and with control over natural resource rents. In Kazakhstan, the beneficiaries from privatization of mineral-related assets became very rich.²³ In the twenty-first century, a major source of wealth has been controlling licences to operate in the banking, media, and telecom sectors. A common feature has been the concentration of wealth in presidential families, as the president’s relatives controlled these licences or regulated monopolies; in Uzbekistan the president’s elder daughter became especially hated for such activities. The first change of presidency in 2016 in Uzbekistan and in 2019 in Kazakhstan appeared to signal a less authoritarian leadership. However, the widespread demonstrations and riots in Kazakhstan in January 2022 that were in part driven by popular opposition to rule by an elite that had grown extremely wealthy during the transition, highlighted that the process of creating a stable post-central-planning economic and political system is not over.

In the Kyrgyz Republic, presidential relatives were responsible for abuse of power for economic gain, but presidential families never became dominant, and when they threatened to do so the presidents were overthrown in 2005 and 2010. From the early 2000s until 2010 control over fuel supply to the US transit centre at Manas airport was a source of rents for the sons of presidents, but it became less important as the US presence was wound down in the early 2010s. After 2011, the Kyrgyz Republic established the region’s most democratic regime, but in less than a decade a populist leader won the presidential election and redrafted the constitution to restore powers to the president.

Why Does the Nature of the Economic Elite Matter?

In the leading market economies, inequality peaked in the first decade of the twentieth century and then declined over the next seventy years, a phenomenon associated with public policy to improve equality of outcome and opportunity (Pomfret 2011). Since the 1980s, inequality has increased, and public policy debates about inequality have centred on the wealth of the top one per cent (or even the top 0.1%), with concerns about fairness and social implications, as well as about links between income inequality and economic growth (Piketty 2013). Aghion et al (2020) emphasize that, in contrast to the super-rich who have inherited their wealth or have a monopoly supported by barriers to entry, innovators who become rich by developing products with a large latent demand play a socially desirable function. This poses a challenge to policymakers seeking to address inequality without discouraging creative destruction.

For Havrylyshyn, those who became rich during the transition from central planning in Central European countries like Poland and the Czech Republic were people who owned successful companies and drove the creative destruction that turned their countries into successful market economies. The wealth differences that resulted may be a matter for public policy – as in high-income countries with the top 0.1% – but issues of fairness must be set against the benefits. Havrylyshyn (2020) argued that Russian and Ukrainian oligarchs differed from the Central European super-rich in that many became involved in politics or continued to be wealthy by staying close to the political leadership, rather than focussing on goals such as increasing productivity or meeting new demand.

The criticism of Russian and Ukrainian oligarchs is too simple. Some privatization processes were non-transparent and corrupt, but an important issue is whether the new owners managed successful companies. Whether in old areas like mining or new areas like finance, media, or mobile phone services, the answer is mixed. Oligarchs may have obtained valuable assets by dubious means, but often their wealth also reflected the turnaround of what had been decrepit state enterprises into more productive companies. For example, the rapid spread of cheap and efficient mobile phone services represented a huge improvement over the Soviet fixed line telephone system, even though allocation of licences was often corrupt and a few oligarchs became very rich (e.g. Vladimir Yevtushenkov of MTS and Mikhail Fridman of Beeline). In other cases, people controlling public utilities (such as Gazprom or Naftogaz) or shadowy companies with supply contracts (such as Itera/Areti) obtained huge incomes, whether or not production or distribution were improved. In Ukraine and Russia, the latter route to wealth became more important, and in Russia after 2000 oligarchs were allowed to survive and prosper only if they did not criticize the government (irrespective of how good they were as entrepreneurs).

In Central Asia, all-powerful presidents have controlled the roads to wealth and the most important roads have been the socially least desirable. Bribes to obtain licences, e.g. to set up a bank or a mobile phone network or for oil and gas exploration rights, were commonplace in Central Asia in the 1990s. In the twenty-first century, payment for access became a major source of revenue for presidential families; in all Central Asian economies where the president had absolute power and protected his trusted family members, the practice (mentioned above with respect to President Berdimuhamedov or to Gulnara Karimova) was commonplace. Regulatory control by presidential relatives is a poor way to determine who can do business. An even more pernicious practice has been to establish regulations that can only be met through a monopoly provider. Apart from control over public utilities and regulatory control, there have been frequent reports of old-style corruption such as padded construction contracts offered without tender, payment for office, and smuggling (Lillis 2022a).

In sum, all transition economies are characterized by economic inequality, but the nature of the economic elite matters. Where wealth has been created by successful entrepreneurial activities, the elite is more likely to appreciate the benefits of market-based reforms. Where creating or maintaining wealth depend on government favour, the elite is more likely to rely on its connections and be suspicious of economic reforms; market failures often represent opportunities and uncontrolled competitive markets are anathema. Where wealth depends on being related to the president, the costs are magnified as the family will abuse the system by pursuing socially undesirable routes to wealth with impunity, and without even minimal checks on competence.

Prospects

What are the prospects for economic reform in Central Asia? After the initial transition from central planning to market-based economies during the 1990s, the reform process stalled in the 2000s. The resource boom reduced the pressure for reform as the hard times of the 1990s were followed by generally more congenial economic conditions between 2000 and 2014. Members of the elite were happy with partial reform from which they could reap substantial rents but suspicious of radical reform that might bring in new competitors both from domestic society and foreign investors. After the resource boom ended, governments claimed to be promoting economic diversification, but reforms were difficult to restart after 2014 because economic reforms involve winners and losers, and the presidential families were themselves among the likely losers.

In the two largest economies, change of president may provide an opportunity for reform. In both Uzbekistan and Kazakhstan, the first president enjoyed a long reign of largely undisputed control, but neither had a son whom they could groom for succession. The second presidents are both former prime ministers and long-term government members which makes them unlikely reformers, but there has been a generational shift. Whereas the first presidents of all the Soviet successor states had spent their entire lives in the centrally planned economy, the Central Asian presidents in 2022 have all spent over half of their adult life in post-1991 economies and may be less suspicious of market forces (Table 2).²⁴

Table 2 Leaders by date of birth

Shavkat Mirziyoyev seems intent on breaking the Karimov family’s economic wealth; Gulnara Karimova is in prison and her sister Lola is in exile, while their businesses and assets, as well as those of their mother’s relatives in the Ferghana Valley, are clawed back for the state. Mirziyoyev may be tempted to follow the model of an autocratic president running a family business, but Uzbekistan has a more complex society and elite than Turkmenistan or Tajikistan. Even Karimov could not protect his elder daughter after her unpopularity reached a critical level.

Mirziyoyev has recognized the need to undertake reforms to promote the country’s integration into the global economy. In 2017, he unified the exchange rate and removed forex controls, and he has been energetic in rebuilding external relations and reviving negotiations on accession to the World Trade Organization. However, after re-election in October 2021, Mirziyoyev found it increasingly difficult to carry out reforms without stoking resistance from those who suffer from reform.²⁵ From January 2022, all civil servants and heads of state-controlled companies, along with their spouses and underage children, have to declare their income and property ownership, which is a serious challenge for Uzbek bureaucrats who have benefited from bribes. This and other reforms that increase government transparency and improve public oversight are unlikely to be accepted by influential groups without a fight. Some reforms have already been rolled back because of resistance from within the system. In 2018, for example, President Mirziyoyev reduced import tariffs on a range of goods, only to raise them again a year later; the reversal was clearly connected to the threat that increased imports posed to competing Uzbek producers. That does not mean that in his second term, Mirziyoyev’s reforms will be thwarted by internal battles among the elites, just that the president will have to tread carefully (Umarov 2021).

Kassym-Jomart Tokayev’s position was more difficult in that his predecessor continued to wield power in the background. Initial steps, such as renaming the national capital Nur-Sultan in honour of his predecessor, seemed sycophantic and many observers saw Tokayev as a pawn of Nazarbayev. Tokayev has become rich, but not super-rich, and there is little evidence of Tokayev using his position as president to strengthen his family’s fortunes. His son Timur is an oil entrepreneur, resident in Geneva.²⁶ Tokayev is officially divorced, and the only evidence of nepotism has been appointment of his brother-in-law Temirtai Izbastin as Kazakhstan's Ambassador to Bulgaria in 2019.²⁷ The events of January 2022 may be a turning point. Tokayev initially took a tough position, ordering police to fire on demonstrators and requesting military assistance from CSTO partners Russia, Belarus, Armenia, Kyrgyzstan, and Tajikistan. However, when it became clear that the main slogan Shal ket! (Go, Old Man) and complaints were targeted at Nazarbayev, Tokayev adopted a softer line towards the protesters, which could foreshadow a break with his predecessor.²⁸ On 5 June 2022 voters passed a referendum amending about a third of the constitution to replace the super-presidential regime with a presidential republic and a strengthened parliament.²⁹ The referendum banned members of the presidential family from holding public office and rescinded special powers for Nazarbayev.

Maintaining a family autocracy is becoming more difficult. Details of how wealth was acquired in all five countries leaked out from court cases in Belgium, the Netherlands, Sweden, Switzerland, the UK, and USA, although few cases ended with serious punishment. More recently, technology is making it harder to hide wealth; financial wealth is revealed through leaks like the Panama Papers, while real estate wealth pictured by satellites or drones can be easily seen on the internet.³⁰ This may trigger protests against family rule, as in Kazakhstan in January 2022, although connectivity is poorer in Turkmenistan and Tajikistan.

Conclusions

Three decades after the dissolution of the Soviet Union, the Central Asian countries and Azerbaijan, despite very different economic transition strategies, have a striking common feature in the emergence of powerful presidential families. Azerbaijan and Turkmenistan have presidents who succeeded their fathers, and a similar outcome is probably imminent in Tajikistan. The first presidents of Uzbekistan and Kazakhstan ruled for over a quarter of a century during which their family members became very rich, but there was no dynastic succession; was this because of their more complex economies and elites (and middle class), or because the presidents’ children were all daughters? In the Kyrgyz Republic presidential relatives were responsible for abuse of power for economic gain, but presidential families never became dominant, and when they threatened to do so the presidents were overthrown in 2005 and 2010.

Despite the caveats, the emergence of powerful presidential families is a phenomenon that is as striking as it was unanticipated. Even restricting the cases to Azerbaijan, Turkmenistan and Tajikistan means that leaders in a quarter of the non-Baltic Soviet successor states gained their position through hereditary succession. In recent years, Central Asian elites have been less divided over further economic reforms than the situation identified by Havrylyshyn in Russia or Ukraine.

The phenomenon raises two questions. Is this a Central Asian pattern, related to culture or some other specific feature, or is it a result of a simple economic structure dominated by a single resource-based activity (oil in Azerbaijan, gas in Turkmenistan, and aluminium on Tajikistan)? The second question is whether family-dominated economies have specific features, and are they good or bad? This paper does not address the first question, but from Central Asia the answer to the second question is that family-dominated economies have been poorly managed.