Iran’s Turn on Turkmenistan’s Gas Dispute Carousel

Iranian Oil Minister Rostam Qasemi announced November 14 that Turkmenistan had halted gas exports to its southern neighbor over a price dispute. Shortly thereafter, a Turkmen official told Reuters there is no price dispute, but that pipeline repairs are to blame for the gas cut.
For now, the gas is back on, Reuters reports, citing a Turkmen official who said Iran requested repairs to the pipeline. But the episode – complete with contradicting reports from the two sides – looked familiar, and suggested a few possible scenarios.

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.

CNN Blurs Line Between News and Advertising

All this week, CNN International, part of that “most trusted name in news,” has aired a series of reports on Kazakhstan. But what looks to the unsuspecting viewer like more of CNN at its finest appears in fact to be sponsored advertisements paid for by none other than Kazakhstan’s oil-rich government.  Continue reading CNN Blurs Line Between News and Advertising

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.

Continue reading Could Kyrgyzstan’s Microfinance Bubble Burst?

Zhanaozen Trials Set to Leave Many Unanswered Questions

The ongoing trials of those indicted for crimes related to labor strikes in the western Kazakhstan city of Zhanaozen appear unlikely to answer questions about the country’s domestic security policy, or prevent repeat incidents. While President Nazarbayev has declared that the striking workers were acting within their rights, and his ambassador to the U.S. insists that the trials will vindicate Kazakhstan’s progress towards the rule of law, the proceedings appear to demonstrate otherwise. Prosecutors have cast a wide net that entangles striking workers, local activists, opposition politicians, and vague foreign instigators in the plot to destabilize social order in the country.

Continue reading Zhanaozen Trials Set to Leave Many Unanswered Questions

Borders Hardening throughout Central Asia in Anticipation of NATO Pullout

Kyrgyzstan’s Border Guards Service announced on May 9 that the United States will finance the construction of six facilities in Kyrgyzstan for use by Kyrgyz security forces. They will include a barracks, a command center for the Border Guards’ southern services and new checkpoints. The US Embassy confirmed the plans to build the facilities through CENTCOM, though no specifics were provided (paruskg.info, May 11).

Continue reading Borders Hardening throughout Central Asia in Anticipation of NATO Pullout

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.

Continue reading Kyrgyz-Russian Relations Salvaged, as Gazprom Weighs Another Buyout

Nazarbayev Drifts from ‘Multi-Vector’ Foreign Policy

In an interview with Russian state television, Kazakhstan President Nursultan Nazarbayev chided the West for trying to influence other countries through mass and new media, echoing positions long held by the Kremlin. The aging Kazakh leader appeared reasonably healthy and articulate on the issues. But his comments may challenge his long-held multi-vector foreign policy, which sought to advance Kazakhstan’s national interests by balancing those of the West, Russia, and China. With Afghanistan’s future in doubt and domestic stability becoming a question for the first time, Nazarbayev is more openly tying Kazakhstan’s future to Russia.

Continue reading Nazarbayev Drifts from ‘Multi-Vector’ Foreign Policy

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.

Continue reading Troubles at Kumtor Gold Mine May Spill into Bishkek Politics

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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Gambling in Kyrgyzstan: The Thirty-Day Itch

Officials in Kyrgyzstan appear to be of two minds about the country’s gambling industry.

Until a ban came into force on January 1, the sector was booming, relatively speaking. The injunction, drawn up under former Prime Minister Almazbek Atambayev (now president) and his deputy prime minister, Omurbek Babanov (now prime minister), was, they said until a few weeks ago, necessary to crack down on organized crime. Now the Atambayev-Babanov tandem seems to think allowing some gambling could burnish their pro-business credentials.

Continue reading Gambling in Kyrgyzstan: The Thirty-Day Itch

Geographic Engineering Par for the Central Asian Course

Tajikistan has joined the list of Central Asian countries rumored to be planning to relocate its capital.

The construction of a new international airport in tiny Dangara, 100 kilometers southeast of Dushanbe, has invited speculation that President Emomali Rakhmon plans to relocate the seat of government there, RFE/RL reports.

Continue reading Geographic Engineering Par for the Central Asian Course