Iran-China Railroad – Tajikistan’s Latest Mega-Distraction?

With work essentially stopped at Rahmon’s marquee ‘project of the century’, including thousands of layoffs of construction workers who might be wishing they had gone to Russia this summer, time has arrived for Tajikistan to come up with a replacement nation-saving mega project. Perhaps this is why we are again hearing talk of a plan to build a railroad linking the country with China and Iran.

The line would run from Iran’s existing spur to Herat to southern Tajikistan, assumedly near the US-funded bridge at Nizhny Pyanzh, then proceed to Yavan, through the Rasht Valley to Kyrgyzstan’s Alai Valley, cross the Irkeshtam Pass and descend to Kashgar, in southwestern Chinese Xingjiang.

The project has been kicking around for years, though somehow has never gotten off the ground. Perhaps that somehow was the likely multi-billion dollar tab that no one is committed to picking up. Or the technical complications of building the line at high altitudes and through narrow river valleys. Or the fact that China, Iran, and the Central Asian republics all use different rail gauges. Or that existing lines already link Iran and Central Asia. And that Afghanistan is a war zone. And occasionally, so is the Rasht Valley.

All that aside, Iran and Tajikistan have started talking up the project again of late. Kyrgyz officials expressed no interest in the project as recently as June, and rightly so, it would only pass through a remote and sparsely populated valley. Then this month, Iran’s ambassador in Bishkek recently announced that Iran would pay for the stretch through Kyrgyzstan, which was swayed by the no-risk proposition. While any charity is generous, this stretch is short and almost entirely flat. The Tajik line would also not connect to Kyrgyzstan’s own nation-saving mega project, a rail line that would connect China and Uzbekistan across the Torugart Pass, north of Irkeshtam across an impenetrable range.

Kyrgyzstan has bandied that rail project around since at least the mid-90s, though Atambayev and Babanov have all but staked the country’s economic future on the idea. The two repeatedly insisted after repeated results-free trips to Beijing that ‘every issue related to the project is solved, except financing’. When talking about two threads of iron to cost Kyrgyzstan about 40% of a year’s GDP, financing is really the issue, is it not? Thus, Kyrgyzstan is left with two bad options: rails for minerals, or rails for tolls. Either Chinese enterprises would get privileged access to mineral concessions, or would be permitted to run the railroad to recoup the costs. Both options bring serious political risks for Bishkek, as I have argued in the past.

Tajikistan would have to offer China a similar deal. Like when Dushanbe unceremoniously gave away 1,100 sq km of mountainous territory to China in 2011, or when leases agricultural land to Chinese farming enterprises, Dushanbe will have to test its people’s patience yet again. Iran may be willing to pay for Kyrgyzstan to play nice, but the initial ascent from China and the descent through the Rasht Valley will be by far the most costly aspects of the project. Iranian media already acknowledges this, and provides some decidedly low-ball figures. The Rogun stoppage shows just how far Tajikistan can go with this projects without massive foreign backing, which is, not far. Heavily-sanctioned Iran can’t possibly have the cash lying around for a huge up-front outlay.

Even if China could be enticed to cover the cost, the whole plan would run up against the US policy of ‘No Silk Roads Lead to Persia’. Despite the possibility that this particular railroad might be more valuable to Afghanistan than alternatives options to expand Uzbek or Turkmen spurs into Afghan territory, it seems quite likely that the US will veto any progress while US troops are on the ground. And after they are gone, will the investment be protected?

Iran is supposedly still in the feasibility study phase – a process that in this part of the world means “study just how great an idea this is”. Rail investment best addresses the need to move heavy, often low-value-added goods, in large bulk, and without a tight time schedule. Marble in Balkh? Oil in Faryab? Afghanistan’s now-legendary Angyak copper deposit would be far removed from the line. Realistic studies of the rail lines viability would have to measure the actual probability of success of such nascent ventures. They would also have to measure them against the next-best alternative, not against the status quo. In this case, Iran and China have an existing rail link through Turkmenistan, Uzbekistan, and Kazakhstan. Cutting across Afghanistan and Tajikistan would save some time. But containerized trucks can already do the same thing, and without the need to switch wheels three times. Without greatly increased demand for freight services between the countries involved, such a rail line may not make economic sense. But as Rogun shows, nation-saving mega projects are bigger than economics. They’re about national mobilization, national pride, and, perhaps, national distraction.

This post was originally published by Registan, with full maps and links.

Citizen Journalism in Kyrgyzstan’s Capital

The following was posted for the Sustainable Cities Collective, a global site covering urbanism and sustainable development of urban spaces.

Bishkek, capital of the ex-Soviet republic of Kyrgyzstan with a population of approximately 1 million (though no one knows for sure – that is a different story), is notoriously dark at night, considering its population density and streetlighting infrastructure. Many bulbs have been out for years, leaving huge swaths of the city off its several main streets in the dark after sunset. Few seem to associate the lack of street lighting with an increase in street crime, which everyone acknowledges has risen precipitously over the past two decades of independence.

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Could Kyrgyzstan’s Microfinance Bubble Burst?

Late last month, the Kyrgyzstan’s National Bank abruptly shuttered 94 microfinance lenders, allegedly for charging well above the industry-average interest rate of 38 percent. But observers fear the move will do little to cool what appears to be an overheating microfinance market.

Kyrgyzstan’s poor, unbanked and largely rural population, along with its lax regulatory environment, has triggered a microfinance boom in recent years. A microfinance institution (MFI) can be founded with only 100,000 Kyrgyz soms ($2,175); staff need no expertise in microfinance, let alone banking. With so little data and transparency, a crisis analogous to the US subprime mortgage meltdown of 2008, where the riskiest loans at the fringes of the market ended up sinking the entire economy, is not difficult to picture.

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Interview on Central Asia’s Fast Food Industry

Below is an interview for EurasiaNet’s Yigal Schleifer’s food and food industry blog, Kebabistan:

For those of you who missed it, Central Asia-based Eurasianet contributor Myles Smith had a great story out of Bishkek about Begemot (“hippopotamus”), a local fast food chain that’s revolutionizing the Kyrgyz food scene by selling western-style burgers. Curious to learn more about the story, I sent Smith — a freelance analyst who has lived in Kyrgyzstan and Turkmenistan for the last five years — a few questions to find out how this Central Asian McDonald’s was working its way into the hearts and stomaches of Kyrgyz eaters and — most importantly — just how does the “hippo” burger stack up against a Big Mac and its other “western” competitors:

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Bishkek Burger Barons Channel Ray Croc’s Spirit

This is a tale of a hippo emulating a behemoth. The outcome is a Central Asian version of a Happy Meal.

For a region that has long associated the term “gamburger” with Turkish-style mutton sliced from a spit, the meals served up at Begemot are a bit unfamiliar—beef patties on a fresh white bun, layered with cheese, lettuce, tomato, pickles, ketchup and mayonnaise. Even stranger, the food is served up in less than five minutes, even at peak hours, and made to order by an assembly line of young men and women dressed in clean red and white uniforms. Continue reading Bishkek Burger Barons Channel Ray Croc’s Spirit

Kyrgyz-Russian Relations Salvaged, as Gazprom Weighs Another Buyout

Kyrgyzstan President Almazbek Atambaev, in an interview with the Russian daily Kommersant on April 10, said that while some may want to drive a wedge between Russia and Kyrgyzstan, “this will be hard to do.” Considering Atambayev’s streak of bewildering statements on Russia, and Kyrgyzstan’s policy over the last month, fallout appears to be becoming a permanent possibility.

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Southern Kyrgyzstan Tinderbox Awaits Next Spark

A recent International Crisis Group (ICG) report on tensions in Kyrgyzstan’s south has raised pointed questions about the country’s underlying stability. The ICG report, “Kyrgyzstan: Widening Ethnic Divisions in the South,” calls the current peace in Osh “superficial,” noting that “neither the Kyrgyz nor Uzbek community feels it can hold.” The ICG describes the central government as unwilling or unable to remove nationalist Osh Mayor Melis Myrzakmatov and engage in the long-term effort that would be required to mitigate mistrust and dislocation between the two communities.

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Troubles at Kumtor Gold Mine May Spill into Bishkek Politics

A sharp cut in the production forecast of Kyrgyzstan’s lone large industrial enterprise could spell disaster for the country’s finances. A labor strike by workers at the mine in February led to an immediate freeze on production, which led to the company revising its 2012 production forecast from around 600,000 to around 400,000 ounces. The announcement led to an immediate downward revision of Kyrgyzstan’s industrial output and GDP for the first quarter of 2011 by 2 percent. But the government’s growing reliance on indirect taxation for revenues means Bishkek can expect ever greater fallout when the operations of Kumtor are disrupted.

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US Secretary of Defense Seeks to Shore Up Manas Air Base

Secretary Panetta visited Kyrgyzstan on March 13 to solidify that Bishkek honors its commitment to the agreement to host the U.S. military’s Transit Center at Manas International Airport outside Bishkek. The agreement lasts through mid-2014, though U.S. forces will need the base at least through the end of that year. Previous negotiations have been volatile, though each has ended in the U.S. paying a significantly higher price in exchange for business continuing as usual. Yet, given Moscow’s interest in avoiding a haphazard U.S. evacuation of Afghanistan, there is reason to believe that agreements over the Manas base will be extended as long as needed.

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Azerbaijan Planning Oil Refinery in Kyrgyzstan

Azerbaijan’s state oil company, SOCAR, is negotiating with authorities in Kyrgyzstan to set up a refinery in the country. While the project may help the Kyrgyz economy, it remains unclear whether it will help wean Bishkek off Russian energy supplies or force Kyrgyzstan simply to swap its dependence on Russian refined fuel for a dependence on Russian crude oil.

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Ski Industry in Central Asia Shows Signs of Life

On a recent, cool March morning in a village near Bishkek, 20 Austrian tourists boarded an aging helicopter for the 30-minute flight to 4,000-meter-high peaks. Over the course of a week, they each pay over $4,800 for 12 hours of flight time in the Kyrgyz Air Force Mi-8MTV, giving them access to some of the world’s best heli-skiing. Meals, accommodation and local cultural excursions were included in the package.

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China-Kyrgyzstan-Uzbekistan Railway Brings Political Risks

The below article originally appeared in the March 7, 2012 edition of the Central Asia and Caucasus Analyst, a bi-weekly publication of the Central Asia-Caucasus Institute and the Silk Road Studies Program Joint Center.

The signature infrastructure project of Kyrgyzstan’s new leadership is a 268 kilometer railroad line that would link China with Kyrgyzstan’s southern provinces and Uzbekistan. President Atambayev insists that Kyrgyzstan would profit greatly from inter-regional transit trade if the US$ 2 billion-plus line were built. Restrictions on Kyrgyzstan’s once lucrative practice of re-exporting Chinese goods to Russia and Kazakhstan have been increasingly curtailed by new Customs Union rules, leaving Bishkek searching for new sources of national income and employment. While the railroad would lower the costs for traders, its price tag in both monetary and political terms will not be insignificant.

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