FACTBOX-Key political risks to watch in Kyrgyzstan

By Dmitry Solovyov

ALMATY, Jan 4 (BestGrowthStock) – Kyrgyzstan, rocked by political
violence and upheaval last year, has laid the foundation for
Central Asia’s first parliamentary democracy, but it is unclear
whether the new model will consolidate a country split by
regional and ethnic clans.

The impoverished former Soviet republic, which hosts both
Russian and U.S. military air bases, held elections on Oct. 10
that resulted in five parties winning seats in a new parliament.

A majority coalition was finally formed in December, when
parliament approved a new prime minister and his cabinet.

At the same time, security forces said they had foiled “a
series of terrorist attacks” in the capital Bishkek and in the
south, underscoring the persistent threat of violence.

Below is an overview of political risks in Kyrgyzstan:

POLITICAL REFORM

Kyrgyzstan is unique among the former Soviet republics of
Central Asia in having rejected presidential rule and attempting
to form a parliamentary democracy, following 20 years of failed
authoritarian leadership that saw two revolutions.

Under its new constitution, the president will be limited to
a single six-year term with greatly reduced powers. Parliament
will be the key decision-making body and the prime minister the
most powerful figure.

Ata Zhurt, the Social Democratic Party of Kyrgyzstan and
Respublika formed a governing coalition, having come first,
second and fourth respectively in the election.

Ata Zhurt faction leader Akhmatbek Keldibekov became
speaker. Social Democratic Party leader Almazbek Atambayev
became prime minister, and Respublika leader Omurbek Babanov his
first deputy.

Roza Otunbayeva, a former ambassador to London and
Washington, will remain as acting president until Dec. 31, 2011.
She led the interim government that assumed power after a
popular uprising in April deposed president Kurmanbek Bakiyev.

What to watch:

— Two of the five parties elected to parliament, Ata Zhurt
and the pro-Russian Ar-Namys party, have said they oppose the
parliamentary model. Critics say this may lead to infighting and
problems in pushing through reforms.

— How will parties outside the coalition conduct themselves
in parliament? Voters chose parties with widely divergent
policies and the risk of violence is high should supporters feel
that their parties, including those who failed to pass the 5
percent threshold to enter parliament, are being sidelined.

BLOODSHED AND CHAOS

Officials say 87 people were killed on April 7, when
Bakiyev’s forces shot into crowds in Bishkek. The popular revolt
that day ousted Bakiyev from power. He is now exiled in Belarus.

The worst bloodshed in Kyrgyzstan’s modern history occurred
over several days in June, triggered by attacks by unidentified
individuals in balaclavas in the southern city of Osh.

More than 400 people were killed and unofficial estimates
place the toll much higher. Many victims were shot, but others,
including women and children, were burned inside their homes.

Both ethnic Kyrgyz and ethnic Uzbeks said they had sustained
attacks. The United Nations estimated that 400,000 people,
mainly Uzbeks, fled at the height of the violence, though most
have returned.

Authorities are also concerned about the rise of radical
Islam in Kyrgyzstan, as grinding poverty attracts young people
to militant groups and hardened fighters filter back into the
region after years fighting with the Taliban in Afghanistan.

What to watch:

— Revenge ethnic attacks are possible. There has been
little sign of reconciliation between the groups, and raids by
Kyrgyz forces are likely to breed more resentment among Uzbeks.

— Political violence is also possible. Parties excluded
from parliament have roused their supporters and, should any
party feel its interests are not represented, it can quickly
assemble a crowd of several thousand protesters.

— Raids and arrests of suspected insurgents, or attacks and
statements by radical groups, may provide clues to the extent of
Islamist militancy.

SUPERPOWER POLITICS

Both the United States and Russia operate military air bases
in Kyrgyzstan. Washington’s priority is the Manas transit base,
an important centre for supplying the war in Afghanistan. Russia
also leases a local base, in Kant.

U.S. Secretary of State Hillary Clinton visited Kyrgyzstan
on Dec. 2, seeking support from its new government to retain
Manas. She said Washington would examine again in 2014 whether
it needed the base.

Clinton said the U.S.-led war in Afghanistan was crucial to
preventing terrorism from spilling into neighbouring Central
Asian states.

Moscow sees Kyrgyzstan as part of its sphere of influence
and has in the past criticised Bishkek’s plans to build a
parliamentary republic, believing it could lead to factionalism
or even a power grab by Islamist extremists.

Wrangling began under Bakiyev, whose decision in 2009 to
extend the U.S. lease on Manas — months after announcing the
U.S. military would have to leave — infuriated the Kremlin.

Both Moscow and Washington quickly offered support for
Otunbayeva’s interim government after it came to power.

What to watch:

— Will the lease on Manas be renewed? This will be one of
the key issues facing the new government, which will comprise
some elements fiercely opposed to a U.S. military presence.

— Will Russia use Kyrgyzstan’s volatility as an excuse to
beef up its military presence? It has shown little desire to act
unilaterally, but views Central Asia as its sphere of influence.

— Fuel contracts with the Manas base have been dogged by
allegations of corruption ever since Bakiyev was ousted. The
contracts are a sensitive issue in Kyrgyzstan.

ECONOMY AND INVESTMENT

Kyrgyzstan secured pledges worth $1.1 billion on July 27
from international donors. The money will be used to rebuild the
south and reignite the economy, which the government expects to
shrink by 1.5 percent this year.

The economy is dependent on remittances from citizens
working abroad, mostly in Russia, which comprise as much as 40
percent of GDP. Mining is the other main earner: the Kumtor gold
mine, operated by Centerra Gold (CG.TO: ), supplied a quarter of
industrial output and a third of all exports last year.

Prime minister Atambayev went to Moscow on his first foreign
visit, stressing the importance of economic ties with Russia. He
told his Russian counterpart Vladimir Putin that Kyrgyzstan
would like to join the economic zone that Russia has created
with Belarus and Kazakhstan.

What to watch:

— Will Kyrgyzstan’s new leadership be immune to the
nepotism and cronyism that sparked the popular indignation that
toppled the previous president?

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(Editing by Kevin Liffey)

FACTBOX-Key political risks to watch in Kyrgyzstan