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.

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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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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Is There a Motive Behind the Uzbekistan Rail Blast?

As our sister blog The Bug Pit reported this week, speculation is mounting that a November 17 “terrorist attack” that knocked out a rail line connecting Uzbekistan with southern Tajikistan may not be all the Uzbeks say it was. One doesn’t have to look hard to find a motive for sabotage. Certainly, the episode seems to have limited archrival Tajikistan’s ability to supply NATO troops in neighboring Afghanistan.

For Uzbekistan, perhaps the most significant aspect of the rail line in question is its complete irrelevance to its own economy, and to its role as the hub of the Northern Distribution Network that is essential for supplying NATO troops. The damage occurred on a section of track after the NDN freight turns off to Afghanistan, in the desert before crossing into Tajikistan. Uzbekistan has no other use for this line and appears in no hurry to see it repaired.

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Moscow Offers Customs Union-Lite to Bishkek

On the southern bank of a tiny river lined with concertina wire, half a dozen empty freight trucks are idling, waiting to enter Kazakhstan. Ken-Bulun may look like a minor border crossing between Kazakhstan and Kyrgyzstan, but it is a doorway to a market of almost 165 million people – the new Moscow-led Customs Union of Russia, Belarus and Kazakhstan. And the truckers are growing impatient.

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Increased Restrictions, Falling Trade on the Kazakhstan-Kyrgyzstan Border

At the main border crossing heading from Kyrgyzstan to Kazakhstan, freight trucks line the road for hundreds of meters for a days-long wait. Cars, taxis and minibuses jostle for the remaining road. The modest bridge spanning the Chui River has been largely gridlocked throughout 2010.

Cross into Kazakhstan, and there are no queues. A crowd loiters around the gates, looking for passengers, family members, business partners. The whole scene is reminiscent more of a prison gate than an international border crossing.

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Interview for Deutsche Welle Documentary

An excerpt from an interview I gave back in 2010 to a DW documentarian on regional trade in Central Asia. It was taken at Dordoi Bazzar outside Bishkek, Kyrgyzstan. He liked the background chaos, as is supposedly adds authenticity.

The first response is to a question regarding whether Russia can lead a Customs Union within the WTO (it can), and whether Kyrgyzstan could join that Customs Union without violating WTO rules (without changes to the CU’s tariffs, it can not).

The second response is to a question on the effect of the Customs Union on trade between China and the EU. There should be little, since most of China’s trade with the EU travels by sea. Some expediters, such as DB Schenker, have been trying to establish a road/rail logistics corridor that would be competitive with sea routes for some products. It is possible that new CU bureaucracy or transit trade regulations could curb any headway the private sector can make in this area.

Russia and its leadership have long relied on customs duties as a major indirect revenue stream, and the CU is a natural extension of that regime.

Kyrgyzstan: WTO or Customs Union – Pick Your Poison

With Putin’s recent invitation for Kyrgyzstan and Tajikistan to join the new Russia-Belarus-Kazakhstan Customs Union, many have wondered whether Kyrgyzstan could join in line with its standing commitments to the World Trade Organization.

One commonly held misbelief is that the WTO and a customs union are mutually exclusive – actually there are several customs unions that function within the WTO (such as the EU). However, WTO rules do not clearly provide for customs unions between WTO members and non-members.

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Putin Assures Central Asia they Want His Customs Union

The question of whether Russia will try to draw more of Central Asia into the recently christened Customs Union of Russia, Kazakhstan and Belarus (CU) was put to rest on May 21. At a meeting of the heads of the Eurasian Economic Community (EurAsEC) member states, Russian Prime Minister Vladimir Putin made clear his intentions to expand the CU further south:

As far as I know, there is not a single member of EurAsEC which would not like to join the work of the Customs Union. We will work with you in this direction.

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