In April 1920 in Khiva, the first Khorezm Kurultay (meeting) of the people's representatives took place. The Kurultay declared the abolition of the Khiva khanate, and the program of the mladokhiva activists was accepted as the basis of a new government. The Kurultay formed the Council of People's Mazir. Bolshevik Russia hesitated to acknowledge the formation of a new state, but eventually signed an agreement with it on 13 September 1920. In this agreement, Russia acknowledged the independence of the Khorezm Peoples Republic. Military, political, and economic agreements, which were concluded at that time, promised aid to the Khorezm Republic from Bolshevik Russia. But at the same time, the freedom of economic development of the new country was restricted: «Proceeding from the principle of mutual support...the Republic of Khorezm places all its raw materials at the disposal of the Russian Republic.» This referred to such products as cotton and cotton products, fur materials, carpets, leather goods, wool, and seeds. By doing this, the Republic of Khorezm forfeited its right to have free trade with other countries. Its economy became solely connected to Russia and Russian economic requirements, and it therefore became dependent on Russia. Khiva became the capital of the Khorezm Republic.
The population of the Khorezm Republic in 1918 was 25,000, divided into ninety-four maktialla, which consisted of mainly of people who produced only for themselves or perhaps were engaged in cottage industries. Most of the workers (more than 80 %) were mardihers, but they were not steady workers. The number of factory workers was extremely low. The most popular industry was the cotton industry. Two out of thirty-six cotton-cleaning and oil-pressing factories were located in Khiva. In addition, there were five brick factories, a diesel power station, a bathhouse, and a telephone station (built in 1920-1921) for twenty-one subscribers. The cottage industry consisted of 214 small factories, in which 1,200 people (nearly 25%) of the adult population worked. The representatives of the Muslim clergy occupied 2.2% of the population in the Republic. As the capital, Khiva became the administrative political center of the new republic. The central offices of the new government, and its political and social organizations were located in the city. Among them were the Flazir Council, the Central Executive Committee (since May 1921), and Turkmen and Kazakh-Karakalpak departments. These authorities addressed the political, economic, and cultural development problems of the new country. There were five kurultays of people representatives, four Congresses of the Khorezm Communist Party, Trade Union meetings, Komsomol and dekhkan conferences, and other meetings and congresses. Great attention was paid to the development of culture and education and to medical institutions. A boarding school for homeless children, a club with 800 seats, a library with 200 books, a hospital with 200 beds, a movie theatre, a post office, a drug store and other offices were opened in Khiva in April 1920. Soon a National University, a Party School, teachers' seminars, and different educational courses began operating at the Central Committee of the Communist Party. These educational establishments were ideological centers preparing personnel for the new political system. In 1924, ten schools out of the thirty-six primary and secondary schools in the republic, in which 2,300 pupils were taught, were located in the capital. Ten newspapers and magazines were published in Khiva. In 1924 people living in Khiva received more than 1,000 copies of newspapers and magazines from Tashkent, Moscow, and other towns of Soviet Russia. On the initiative of Khamza-Khakim-Zade Niyazy, a national amateur group of musicians and singers was formed.
All this brought new life to the ancient city and stimulated its social life, but also led to conflict within the population. One month after the proclamation of the Khorezm Republic, the monarchical clergy led an uprising in Khiva. They gathered thousands of religious persons and overthrew the people's government, re-establishing the khan's authority. Djunaid Khan supported the uprising. In September 1920, a large group of Turkmen leaders and their soldiers, headed by Koshmamed Khan, were shot without a trial. Gulam-Ali and others managed to escape. A punitive military group was organized to pursue them. In their pursuit, they destroyed several villages. This caused a mass migration of refugees through the desert into Persia, the destabilization of national relations, and a lessening of the anti-Russian mood in the Khorezm Republic. At the same time, the development of the national liberation movement under the leadership of Djunaid Khan was taking place. On 6 March 1921, the mladokhiva government of Pavlan Niyaz Yusupov was deposed and his legal advisors went to work for Djunaid Khan.
The result of this unrest among the people of Khorezm was that the agreement of 13 September 1920 that proclaimed the Khorezm Republic to be an independent republic was weakened. Bolshevik Russia constantly interfered in the life of the Khorezm Republic. The Central Executive Committee and the Council of National Commissars of the Russian Federation in Turkistan, was organized in September
1919, and began to carry out this policy of interference, Later, this commission was renamed the Turkcomrnission. It had extensive power in representing the Bolshevik government of Russia in Turkistan, but it also had authority in the countries, which had common borders with Turkistan, such as Bukhara and Khiva. The Central Committee of the Communist Party of the Russian Federation, by the special mandate of 10 October 1919, extended the power of the Turkcommission, granting it supreme Party control in Central Asia. This allowed the Turkcommission to influence the development of events according to its own agenda. The Turk commission gave constant attention to rallying the rather weak Khivan communist groups. Russian Bolsheviks put their hope in few supporters and gave extensive military support to them. And they were successful in changing the course of the so-called Khiva Revolution of 1920! The communists stepped over the moderate limits of the political program of mladokhiva activists.
On 10 February 1920, a few days after the end of the in khanate, the Turkcommission sent an official commission to Khiva with emergency powers. This commission had representatives involved in every aspect of the affairs of Khorezm and in reality became the true ruling body of Khorezm and of its people. No meetings were held without the permission of this authorized body. Although on 4 April 1920, a broad spectrum of Khorezm, including the communist commanders of military forces of Russia staying in Khiva, members of the Khiva Revkom, and the mladokhiva activists participated in a meeting of the victorious coalition. In the meeting a decision was made to create a united party — the Communist Committee in Khiva. As soon as the mladokhiva activists became the members of the Committee, they disbanded their own party. Thus, under pressure, the unified authority of the communists was established, despite the absence of an industrial proletariat as the basis of a communist movement. At the same time, the national democratic reform party was liquidated.
However, former mladokhiva activists, as members of local communist organizations, continued to keep leadership in the political and governmental life of the country. They were the basis of the first government of the Republic, which was elected as the first Khorezm Kurultay of national representatives. Pavlan ?1-yaz Jusupov was elected as the chairman of the national flazir Council. The majority of the members of the mladokhiva government, being liberal democrats, envisioned the national democratic development of the country as an independent state. But this was not convenient for Bolshevik leaders in Russia. They wanted to discredit the mladokhiva government. «The government is not efficient and is not popular among the workers», the Party charged.
One episode in the Bolshevik reaction was the severe punishment of the chiefs of the Turkmen tribes in September 1920. An investigation into this incident established the identity of some of those responsible. Shakirov, plenipotentiary representative of Russia in Khorezm, was accused of shooting Turkmen riders. Dubyanskiy, commander of the Bolshevik troops in Russia, was accused of intervening in the affairs of Turkmen groups and using reprisals. However, the true organizers of the tragedy remained at large. Blame for the incident was laid at the feet of the mladokhiva government, and this was used by the Turk-commission as a reason to get more involved in the internal affairs of the Khorezm republic.
M. Safonov, appointed head of the Turk-commission on 19 October 1920, was given the broadest power in the affairs of the republic. Safarov was involved in business activity in the republic, and displayed a general ignorance of the legitimate government of the republic, although he directly involved himself in its affairs. The mladokhiva government made attempts to strengthen its position and to drive Safonov from Khorezm. They took steps to create a national army. They soon realized that events were developing that were beyond their control; in response to the actions of the mladokhiva Communist Party, a campaign was being organized to oppose the power of the local party. The Turkcommission and its plenipotentiary representative, Safonov, allied itself with the Khivan army (Purkhiv). Communist agitators played a key role. The Purkhiv seized control of all the political work in Khorezm and opposed the local Khorezm communist party leaders. As a result, they managed to gain power in the party. All over the country, mass meetings were held. In these meetings, with the assistance of the Purkhiv, the decision was made to remove the mladokhiva government it was deposed on ? March 1921. The creation of Revcom (Revolutionary Committee), which included five people (nominated by the Purkhiv), was announced. Revcom was organized before the convocation of the second All Khorezm Kurultay. Thus, in the Khorezm Republic, a state revolution was accomplished again by outside forces and the legitimately elected government was deposed. Participants in this new revolution hurried to consolidate their victory.
On 15 May 1921 in Khiva, the Second All Khorezm Kurultay was convened. It operated under the direct leadership of the plenipotentiary representatives of Bolshevik Russia. The Second Kurultay ratified a new Constitution, containing articles depriving former government supporters of voting rights, and also banned priests and «parasitic elements» (wealthy dekhkans and handicraftsmen, who used hired labor) from participation in the government, and suppressed the clergy. The decisions of the second Kurultay epitomized the changes taking place in the Khorezm Republic. The policies of the mladokhivans were condemned as unpatriotic.
Occurring simultaneously with changes in the political policy, there was a constant infringement upon the sovereign rights of the Khorezm Republic, and a resulting loss of state independence. The fortunes of the republic were subject to a stream of plenipotentiary representatives. Unfamiliar with the customs and the lifestyle of the republic, its mentality, and religion, they interacted poorly with the local culture. Nevertheless, they supervised the country, artificially motivating class differentiation within the society. They conspired to limit the influence of the clergy and tribal leaders on the population, and to arouse a class conflict in society. Existing committees for the poor in villages were transformed into unions of poor dekhkans, and later into Koshchy Unions. These foreign rulers received their main support from the Khorezm Communist Party. Under the guise of strengthening the party, they carried out an infinite number of re-registrations (December 1920, summer 1921, 1923) and dissolved many organizations and party committees. Their purpose was the creation of a «pocket» party, obedient to the will of the Russian party. The first Congress of the Khorezm Communist Party (December 1921), having discussed the question of armed forces in the republic, decided that it would be possible to limit their numbers to one cavalry regiment and one infantry battalion. This decision meant the death of a Khorezm national army, which was an important symbol of the state's independence. An attack on the independence of the country was in progress.
In autumn 1921, the Central Committee of the Workers Communist Party suggested the economic unification of Turkestan, Bukhara, and Khorezm. On 1 February 1922, the Political Bureau of the Communist Workers’ Party supported this idea. One of the main reasons for economic unification was the need for one currency in these three republics. The main currency was declared to be the Russian chervonetz. The Khorezm Republic was deprived of its national currency — one more important symbol of state independence and sovereignty.
The next step towards the unification of the region was a new agreement between the Khorezm Republic and Russia, signed in June 1922. One item of the agreement announced that the Khorezm Republic was given the right to do business with foreign countries only under the supervision of the Vneshtorg (Foreign Trade Organization) or its plenipotentiary representative. This forced intervention into the sovereign rights of the Khorezm Republic caused confusion even among local communists. At the Third Congress of the Communist Party of the Republic (June 1922), some delegates spoke against these this policy under the slogan «Khorezm for Khorezmians». However, the Central Asian Bureau of the Communist Party ignored these statements. In March 1923. They held the first conference on the economic unification of the Central Asia Republics. The Co-ordination Center of the Middle Asia Economic Council was set up. The main purpose of this Council was to carry out economic reforms on the basis of economic policies and plans, thus, the basic leadership of the political, economic, and financial life of the republic came under the control of Russia and it became an entity within the structures of its state system. The new Constitution, authorized by the Fourth Khorezm Kurultay Council on 17 October 1923, officially transformed the Khorezm Republic into a socialistic construct and confirmed its subordination to Russia. According to the new Constitution, private ownership of land was cancelled, and all land became public property, to be handed to the workers without any repayment. At Kurultay, a very important question about vakufs was solved with this decision: «The peasants on free grounds are not forced to pay the uniform agricultural tax.» These and other Kurultay decisions caused an eruption of national indignation, especially among the clergy, which had been shut out of the economic and political life of the country and also deprived of all civil rights. Turkmen were also dissatisfied with the lack of attention given to their needs, while peasants, handicraftsmen, and merchants were dissatisfied with the land tax decision, which destroyed the economic relations sanctified not only by religion but also by the custom of many centuries.
All complaints about the new reforms went to Djunaid Khan, who supported the country's independence, and the preservation of its customs and religion. His nationalist movement, which was identified by the officials as bas-machestvo, caused anxiety within the government. A few days after the completion of the fourth Kurultay, the Central Committee of the Communist Party asked the Central Asia Bureau to increase the number of Russian troops in the Republic, at the end of 1923, there was an attempt to start peace talks with Djunaid Khan. However, the terms he put forward did not satisfy the officials. Among his terms were the following: 1. To withdraw Russian troops; 2. To give complete freedom to shariat; 3. To restore all former khakirns and aksakals to their positions; 4. To cancel taxes and patents. The negotiations failed, as did the clergy then interceded on behalf of Djunaid Khan.