I. Introduction

U.S. Government Assistance to and Cooperative Activities with Eurasia
Bureau of European and Eurasian Affairs
January 2007

In 2006, initial euphoria over democratic breakthroughs in 2003-2005 was tempered by the reality of how difficult it is to sustain the momentum of reform. FREEDOM Support Act (FSA) assistance played a critical role in supporting countries that try to move forward on the path toward becoming stable, prospering, free-market, pluralistic democracies. In areas where governments did not reform, FSA assistance sustained constituencies for reform. Georgia and Moldova made significant reform progress, even as they faced the continuing challenge of separatist regions and political and economic pressure from Russia. In Ukraine, free and fair parliamentary elections in March were followed by prolonged political jockeying, stymieing reform progress. The Kyrgyz Republic experienced continuing political turmoil in the wake of the "Tulip Revolution." Armenia's success at reducing rural poverty is a powerful example for the region. Nevertheless, Armenia did little to address corruption or advance political pluralism. In Tajikistan, a flawed presidential election underscored the challenges that still remain in advancing democratization, and basic indicators in Tajikistan for health, education, and corruption still rank among the world's worst. Azerbaijan and Kazakhstan prospered economically, but did not loosen controls over civil society and media. Meanwhile, countries that had been backsliding on reform in previous years fell even further behind in 2006. Russia further restricted democratic freedoms. Uzbekistan further isolated itself from the West, expelling U.S. NGO assistance providers. In Belarus, rigged presidential elections were followed by further crackdowns on dissent, including numerous arrests of opposition activists. Although Turkmenistan's local council elections were the first in its history, the government maintained an iron grip on its people. This could change after the death of Turkmenistan's authoritarian president in December.

While much work remains to broaden the benefits of petroleum-driven high growth rates in Russia and Kazakhstan, the need for further U.S.-funded economic reform assistance is limited. FY 2006 was the last year of funding for economic programs in Russia, with the exception of limited assistance in areas of special importance, including the Russian Far East and the North Caucasus. If current assumptions hold, funding for economic reform in Ukraine and Kazakhstan is likely to phase out in FY 2009. Millennium Challenge Account (MCA) Compacts back efforts to promote economic growth and reform in Georgia and Armenia. In 2006, Ukraine and Moldova received approval and funding for MCA Threshold Programs to combat corruption; both were made Compact eligible. The Kyrgyz Republic received MCA Threshold status in November 2005. FSA assistance complements MCA funds to sustain reform efforts in these countries.

The region continues to confront many serious challenges. Weak democratic institutions and a lack of economic opportunity in Central Asia foster conditions where corruption is endemic and Islamic extremism can thrive, threatening Operation Enduring Freedom. Record-high levels of cheap heroin from Afghanistan transit Central Asia, the Caucasus, and Russia, fueling police corruption, drug addiction, and the spread of HIV/AIDS. In too many Eurasian states, an all-powerful executive restricts civil and political rights and rule of law is either weak or nonexistent. Health- and education-related indicators (e.g., life expectancy, child mortality, and secondary school enrollment) continue to deteriorate throughout the region, endangering countries' ability to sustain economic growth. FSA funding has had a tremendous impact in countries serious about primary health reform, confronting public health threats, combating tuberculosis, and addressing trafficking in persons. Funding from the FSA and Child Survival and Health accounts addressed the growing HIV/AIDS epidemic through programs focused on prevention, care, and treatment efforts. FSA humanitarian assistance and Public Law 480 food aid provided vital commodities and assistance to help meet the basic needs of the region's most vulnerable.

Democracy, economic, and social service reforms remain the core focus of FSA assistance. But FSA funds, along with funding from other accounts - Foreign Military Financing (FMF), International Military Education and Training (IMET), Nonproliferation, Anti-terrorism, Demining and Related Programs (NADR) - and from other agencies, such as the Departments of Defense and Energy, are used to engage Eurasian governments and societies to respond effectively to transnational threats, including terrorism and extremism, the proliferation of weapons of mass destruction (WMD), narcotics trafficking. The Eurasian countries have given key support to the United States in the Global War on Terror. Almost all of the Eurasian countries have actively supported Operation Iraqi Freedom and/or Operation Enduring Freedom. Many have provided overflight rights and, in a few cases, bases for the use of U.S. and Coalition forces. U.S. assistance funds were an important instrument for cementing these strategic partnerships.


While Armenia's economic growth and standard of living surpass most developing category countries, the sustainability of this performance is placed in doubt by the government's inconsistent approach to implementing democratic reforms. The repercussions of historical conflicts further constrain Armenia's development. The long-running conflict with Azerbaijan over Nagorno-Karabakh and closed borders with Azerbaijan and Turkey hamper economic development, drain government resources, and hinder regional integration. By supporting democratic and economic reforms and promoting regional stability, U.S. assistance to Armenia works to transform the country into a stable partner, at peace with its neighbors, where democracy, human rights, and the rule of law are respected and the benefits of sustained economic growth are widely shared.


While Azerbaijan is taking important steps to harness its energy resources, democratic and economic reforms are major obstacles to Azerbaijan's advancement. As energy pipelines are completed and the major offshore fields move toward increased production in 2007, Azerbaijan is expected to benefit from substantial energy revenues. Providing technical assistance to the government on strategic budgeting, combating corruption, avoiding inflation, and establishing a path to sustainable development is a key component of U.S. assistance in the economic growth sector. A principal impediment to Azerbaijan's political, economic and social development is the unresolved conflict with Armenia over Nagorno-Karabakh. The current cease-fire is frequently violated, thereby inhibiting the ability of the United States to provide robust security assistance. U.S.-funded assistance to encourage free and fair elections and to advance media freedom, civil society, and human rights is critical to furthering Azerbaijan's democratic development.


The broad goal of assistance in Belarus is to further its transformation from one of the world's "outposts of tyranny" into a democratic, peaceful and prosperous state. Belarus's authoritarian regime suppresses alternative political voices and sources of independent information. It has enacted retrograde economic policies and its dependent relationship with Russia threatens its political sovereignty and its economic stability. Although the March 2006 presidential campaign and election were illustrative of the country's repressive political environment, they also demonstrated opportunity for change in the form of the considerable momentum and increased unity of the country's democratic forces. Through a transparent, democratic process, the opposition nominated and supported a single candidate who proved effective in building a pro-democracy coalition and turning out small, but credible support at the polls. These results - as well as a five-day demonstration of thousands of protestors following the announcement of fraudulent election 'results' - demonstrated the potential for democratic change.


Georgia's rapid progress on reform since its 2003 Rose Revolution provides a historic opportunity to advance its transition to a free-market democracy by strengthening the rule of law, improving governance, increasing economic growth, and supporting its ability to invest in its people. These steps would increase the appeal for residents of the separatist regions of Abkhazia and South Ossetia to reintegrate with Georgia, fostering a peaceful resolution to these long-standing conflicts and enhancing regional stability. Sustained development is critical for Georgia to consolidate its recent gains. In particular, Georgia must strengthen its democratic institutions and create an environment receptive to opposition and minority voices. Despite significant reforms, rural poverty has increased and there has been little development outside of the capital. Georgia faces increased pressure from Russia as it deepens its Euro-Atlantic ties and becomes a transit corridor for Caspian energy to international markets. The January 2006 energy crisis proved that Georgia is reliant on energy supplies from Russia, a weakness the Kremlin has chosen to exploit. Russian support for separatists continues to hinder efforts to advance peaceful resolutions to the conflicts in South Ossetia and Abkhazia that respect Georgia's territorial integrity.


The major obstacles to Kazakhstan's advancement are an economy dominated by oil exports, a restrictive political environment, and border security concerns. Despite recent years of rapid oil-driven growth, poverty persists in much of Kazakhstan and the economy is undeveloped outside of the energy sector. While Kazakhstan has demonstrated some democratic progress, elections have not met international standards, opposition political parties are largely kept out of the national dialogue, and non-governmental media holdings are for the most part unable to offer objective information. Kazakhstan's vast land and sea borders are not sufficiently guarded against trafficking in narcotics, persons, conventional weapons, and weapons of mass destruction. Kazakhstan seeks a reformed defense establishment with NATO-interoperable units to allow it to better participate in international operations. Internally, Kazakhstan is threatened by the spread of communicable diseases, particularly HIV/AIDS and tuberculosis.

Kyrgyz Republic

The central obstacles to the Kyrgyz Republic's transformation are continuing political turmoil and rampant corruption, which undermine effective governance and feed public cynicism about the political process. Lack of employment opportunities and economic growth are also impediments to the Kyrgyz Republic's future stability and to the survival of democratic institutions. In addition to internal problems, cross-border threats, especially the drug trade and the movement of terrorist groups, threaten to spark regional instability within South and Central Asia. An important focus of U.S. assistance is strengthening the government's capabilities to fight terrorism, halt narcotics trafficking, and combat other transnational threats. In addition, although many of the perceived opportunities for progress that followed the "Tulip Revolution" have yet to materialize, there have been signs of progress and concrete areas for increased cooperation still exist. The government recognizes the importance of advancing reform and welcomes U.S. assistance in improving security, promoting economic development, and addressing social issues. Nevertheless, progress on strengthening democratic institutions and fighting corruption has been uneven.


The United States seeks to assist Moldova, the poorest country in Europe, to become democratic and prosperous, secure within its recognized borders, and a full partner in the Euro-Atlantic community. Moldova is economically dependent on Russia and has been increasingly subject to Russian pressure, including through import bans and gas cut-offs. The unresolved conflict between Moldova and the authoritarian separatist regime controlling the Transnistria region poses a key obstacle, as does Russia's failure to withdraw troops and munitions from this portion of Moldovan territory. Lack of border controls along the Transnistrian section of the Moldova-Ukraine border has permitted weapons proliferation, smuggling, transnational crime and human trafficking. Poverty is driving many of Moldova's young people to seek work abroad, resulting in a major human trafficking problem. Over the past three years, the government has made a strategic turn toward the West and has been making progress on reforms to set Moldova on a path to European integration, renewed IMF and World Bank funding, and an environment more conducive to investment. A new strict Ukrainian-Moldovan customs regime and EU Border Assistance Mission are beginning to choke off elicit trade that supports the Transnistrian separatist regime. Moldova has undertaken an EU Action Plan that provides a "roadmap" for reform, and it began implementing a Millennium Challenge Account (MCA) Threshold Program to fight corruption. In November 2006, Moldova was made Compact-eligible by the Millennium Challenge Corporation (MCC) Board.


Russia has the capacity to act as a strong and effective partner in areas of critical common national interest-non-proliferation, counter-terrorism, energy, and health. Despite Russia's growing wealth, however, it still suffers from serious disabilities such as an uneven distribution of wealth, corruption, a weak commitment to democracy, and growing demographic and health crises. Since President Putin's reelection in March 2004, the government has systematically consolidated power over national mass media, strategic economic sectors, the judiciary, and regional and local governments. These developments, as well as increased pressure on non-governmental organizations, represent major obstacles to achieving a fully free-market, democratic system built on checks and balances. In the social sector, despite seemingly well-intentioned policies and pledges to address issues such as deteriorating health care and HIV/AIDS, health trends are ominous, and government social service programs are hindered by corruption and inefficiency. In the North Caucasus, this problem is compounded by ethnic and religious tensions and historic animosities which exacerbate regional instability and create an environment ripe for extremism.


The major obstacle to Tajikistan's advancement is its government's and public's fear that advancing democratic and economic reform would unravel the fragile stability the country has achieved since its 1992-1997 civil war. But without reform, Tajikistan cannot improve its governance, employment and investment climate to lift the country out of poverty. U.S. assistance is helping the government realize its plans to improve its infrastructure, especially hydro-power, so it can expand its export and trade options to growing markets in South Asia. Tajikistan, a strong supporter in the Global War on Terror, took over responsibility for controlling its border with Afghanistan after the withdrawal of Russian border forces in 2005 and plays a key role in counter-narcotics and counterterrorism efforts. A major focus of U.S. assistance is working with the Tajikistan to staunch the movement of drugs and terrorists across its borders. Tajikistan's democracy and human rights record remains poor, and its November presidential election was flawed. Support to strengthen border security, counter-narcotics efforts, democratic reform, and economic growth is key to helping Tajikistan advance.


It remains to be seen if the December death of President Niyazov will result in a change of course or if Niyazov's repressive regime will live on without him. At a minimum, Niyazov's death offers the United States an opportunity to redefine its relationship with Turkmenistan and encourage the development of a more democratic, stable and prosperous society. At year's end, the situation in Turkmenistan remained largely static, with nearly all independent democratic activity prohibited. Turkmenistan's future hinges on the next generation. Increasing their connection with the outside world is critical to advancing change. Niyazov's education policies limited secondary education to nine grades and severely damaged the quality of the entire educational system. Before Niyazov's death, the government had undertaken some reform in its health system. Turkmenistan's shared borders with Iran and Afghanistan make it a key player in the fight to combat trafficking in weapons of mass destruction, narcotics, and persons.


Ukraine is on its way to becoming democratic, prosperous, and secure, fully integrated into the Euro-Atlantic community. To realize the benefits of democracy, Ukraine still needs to advance reforms in its justice system, economy, and energy security. An important object of U.S. assistance is to ensure that the democratic gains of Ukraine's 2004 "Orange Revolution" are carried through by the newly elected Ukrainian government. The United States continues to promote a legacy of legislation and sustainable institutions that advance democratic reform, human rights, and economic growth. Endemic corruption and destabilizing criminal activity are serious obstacles to progress. The factionalized political environment has slowed the legislative, judicial and market reforms necessary for closer integration with the EU, accession to the WTO, and greater integration into the world economy. The government also needs to take steps to enhance the transparency, security, and diversification of Ukraine's energy sector and to curb one of Europe's fastest growing HIV/AIDS epidemics. Ukraine has begun implementing a MCA Threshold Program to fight corruption. In November 2006, Ukraine was made Compact-eligible by the Millennium Challenge Corporation (MCC) Board.


Uzbekistan's size, large population, and economic prospects give it enormous potential to become prosperous, stable and democratic. Unfortunately, the government increasingly views U.S. assistance as a threat to its rule. Since the 2003 "Rose Revolution" in Georgia, and particularly following the international condemnation of Uzbekistan's violent quelling of disturbances in Andijon in 2005, the GOU has actively limited U.S. assistance to strengthen civil society, independent media, human rights, and political processes. Civil society organizations and community based groups face severe repression. Democratic and economic reforms are stalled. Corruption is endemic and permeates virtually every facet of public life. Despite these difficulties, there are opportunities for the United States to pursue democratic reform and respect for human rights, promote regional stability, counterterrorism, strengthen economic growth, and address health concerns. The United States engages directly with the Uzbek people whenever possible, particularly on health and economic reform and to support those working for improved observance of human rights. Simultaneously, the United States seeks Uzbek participation in regional activities.

Economic and Democratic Reforms in 1998

Image shows Economic and Democratic Reforms in 1998: Northern Tier CEE, Southern Tier CEE, Eurasia, and EU.

Ratings are based on a 1 to 5 scale, with 5 representing most advanced. USAID, drawing from Freedom House, Nations in Transit 1998, Freedom in the World 1998-1999 and EBRD, Transition Report 1998 (November 2004).


Economic and Democratic Reforms in 2005

Image shows Economic and Democratic Reforms in 2005: Northern Tier CEE, Southern CEE, Eurasia Reformers, Eurasia Non-Reformers, EU-15

Ratings are based on a 1 to 5 scale, with 5 representing most advanced. USAID, Monitoring Country Progress in CEE & Eurasia #10 (2006 forthcoming) drawing from Freedom House, Nations in Transit 2005 (2005), Freedom in the World 2006 (2005) and EBRD, Transition Report 2005 (November 2005).