TRADE AND SECURITY ISSUES REVIEWED AT KYRGYZ

C O N F I D E N T I A L SECTION 01 OF 03 BISHKEK 001589

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/13/2016
TAGS: PGOV PREL PREF PHUM KDEM KG
SUBJECT: TRADE AND SECURITY ISSUES REVIEWED AT KYRGYZ
BORDER, BAZAAR

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Classified By: Ambassador Marie L. Yovanovitch, Reason 1.4 (b) and (d)


1. (C) SUMMARY: On October 19 and 20, SCA DAS Evan
Feigenbaum visited three border posts along the Kyrgyz-Uzbek
border: two closed crossings in the city of Karasuu and one
in Osh, which is being reconstructed but remains open. The
lack of Uzbek-Kyrgyz information-sharing across their border
indicates both sides may continue to restrict the flow of
people and goods. DAS Feigenbaum also visited the Karasuu
bazaar, claimed to be Central Asia's largest outdoor market
and now filled with Chinese consumer goods and Han Chinese
merchants. With the success of Kyrgyzstan's Karasuu market,
the Uzbeks apparently recognize the potential economic
benefits of gaining direct access to Chinese goods, and two
similar markets are being constructed in Uzbekistan: another
open-air bazaar across the Uzbek border from Karasuu, and a
market in Tashkent. Some worry that this will, in effect,
cut out the Kyrgyz by moving goods overland directly into
Uzbekistan. Such economic competition continues to be
subject to the policies of the Kyrgyz and Uzbek Governments,
however, as each determines how best to utilize the official
border posts that vendors rely upon to move their merchandise
from one country to another. END SUMMARY.

DOSTUK: A WORK IN PROGRESS
--------------


2. (SBU) During a visit to the Dostuk border post in the
southern city of Osh on October 19, SCA DAS Evan Feigenbaum,
together with Ambassador Yovanovitch, witnessed first-hand
the construction of new store fronts accompanying the
renovation of the border post. Using U.S. funds provided to
the International Organization for Migration (IOM),the
reconstruction of the Dostuk border post could, according to
IOM, support the flow of over fifty thousand people each day.
With routes for both vehicular and pedestrian traffic, the
renovated border, due to fully reopen by January, will
constitute one of the largest crossings along the
Kyrgyz-Uzbek border. As a result of the potential influx of
people and goods coming into Kyrgyzstan from Uzbekistan,
investors, reportedly from China, have initiated the
construction of a large open-air bazaar adjacent to the
border.


3. (C) IOM Chief of Mission Zlatko Zigic told DAS Feigenbaum
that such an increase in traffic could increase trafficking
in contraband merchandise, people, narcotics and weapons. To
track such illegal activities, the USG has provided to the
Kyrgyz border service detection equipment, including density
scanners, metal and radiological detectors. While pointing
out the large metal/radiological detector--one big enough to
drive a truck through--on the Uzbek side of the border, Zigic
commented that until IOM is able to erect a similar detector
on the Kyrgyz side, it will remain impossible to tell whether
illegal goods or weapons are being smuggled into Kyrgyzstan,
due to Uzbekistan's refusal to share information with Kyrgyz
counterparts. (Note: As part of the completed renovation,
such a detector will be installed on the Kyrgyz side of the
border as well. End note.) Given the lack of
information-sharing and general animosity that clearly exists
on both sides of the border, Zigic confided, Kyrgyz border
security officials could run into difficulties as they
attempt to control the increased traffic going in both
directions.

KARASUU: THE NEXUS OF TRADE AND REGIONAL COMPETITION
-------------- --------------


4. (C) In Karasuu, DAS Feigenbaum visited what is said to be
Central Asia's largest open-air bazaar, before inspecting two
border posts situated near the market. While speaking in
Mandarin Chinese to one of the many Han Chinese vendors
scattered throughout the bazaar, DAS Feigenbaum heard that
despite the harassment some vendors receive from their Kyrgyz
competitors, business has been booming. Eighty percent of
the Chinese merchants hail from the same province, Fujian,

BISHKEK 00001589 002.2 OF 003


along China,s eastern seaboard. Some have brought their
families west but have left them in Xinjiang on the Chinese
side of the border. As Chinese-made products continue
flooding the market, Chinese vendors have made use of these
family and personal contacts in China to access goods and
capital and thus meet the Kyrgyz and Uzbek demand for
inexpensive merchandise. Han traders are able to tap social
networks and commercial ties inside China that many Kyrgyz,
Uzbek, and Uighur traders lack. Some social tension has
emerged between groups: the Chinese merchants offered DAS
Feigenbaum various examples of their distaste for life in
Central Asia.


5. (C) The first border post visited in Karasuu, used
primarily for vehicular traffic, located almost directly
across the street from the Karasuu bazaar, revealed that the
Uzbeks are clearly attempting to control the flow of people
and goods across the border, but also the economic benefits
Kyrgyzstan has gained as a result of the influx of Chinese
consumer goods brought into Kyrgyzstan. The border,
separated by a man-made canal that splits what used to be the
unified city of Karasuu, was closed by the GOU in 2004 and is
scheduled to reopen on November 1. (IOM has verified, as of
November 9, that the border post was, in fact, still closed.
End note.) With no traffic going either way, the border
guards on both sides were left facing one another in Korean
DMZ-like fashion, sneaking pictures of visitors on their
respective digital cameras.


6. (C) The absence of traffic made it easier to see the
construction of what is supposed to be one of the largest
bazaars in Uzbekistan, just across the border. Clearly a
sign that Uzbekistan is hoping to take advantage of the
trade, mostly in Chinese-made goods currently being sold in
Kyrgyzstan, the Uzbek bazaar could present stiff competition
to Karasuu if the GOU is able to establish favorable trade
arrangements directly with the Chinese that reduce Kyrgyzstan
to a waystation on the road from China to Uzbekistan. As the
Osh Director of USAID's Trade Facilitation and Investment
Project Sabir Akimbaev told DAS Feigenbaum, the GOU is hoping
to abolish all barriers to trade, be it tariff or particular
import restrictions, with China in order to ease the flow of
Chinese goods into Uzbekistan. Conversely, customs tariffs
will be raised for Kyrgyz traders. Should that occur,
Chinese merchants will be able to set up shop in Uzbekistan,
thereby limiting the amount of Chinese merchandise traded in
Kyrgyzstan while reducing incentives for Uzbeks to cross the
border for trade. If this plays out as Uzbekistan appears to
want, Akimbaev said this would be detrimental to Karasuu's
growth, as well as to the Kyrgyz economy as a whole.


7. (C) Karasuu's second border crossing is a pedestrian
crossing illegally opened after the Andijon crisis by the
people of Uzbekistan. Used as a pressure valve by the Uzbek
authorities, approximately 30,000 people crossed the bridge
everyday -- now, however, the border crossing has been closed
due to the expected opening of Karasuu's vehicular border
crossing on November 1. With no border posts open in
Karasuu, people have resorted to crossing the border
illegally at various points along the canal. With a large
number of private homes situated on the edge of the canal,
many Kyrgyz and Uzbek families have allowed people to cross
through their territory illegally, usually for a small fee.

COMMENT
--------------


8. (C) With regional trade and security at the forefront of
Kyrgyzstan's foreign policy, border crossing issues along the
Kyrgyz-Uzbek border will continue to be exploited by both
sides, as both governments attempt to control and take
advantage from the flow of people and goods. The influence
of Chinese products and Han Chinese traders also presents an
interesting harbinger of things to come, as it appears that
historic trade patterns are being restored and that
Kyrgyzstan and Uzbekistan may try to dominate the China trade

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by easing the flow of Chinese-made merchandise into their
respective bazaars. Given that fears of a "Chinese takeover"
do exist on both sides of the border, however, it remains to
be seen just how open either Kyrgyzstan or Uzbekistan will be
to what appears to be an unstoppable influx of Chinese goods
and Chinese merchants. END COMMENT.


9. (U) DAS Feigenbaum has cleared this cable.

YOVANOVITCH