EurasiaNet Business & Economics - USAID Official Outlines Plan to Build Central-South Asian Electricity Links

BUSINESS & ECONOMICS

USAID OFFICIAL OUTLINES PLAN TO BUILD CENTRAL-SOUTH ASIAN ELECTRICITY LINKS
Joshua Kucera 5/04/06

A newly announced US plan to foster stronger energy links between Central and South Asia aims to marginalize Uzbekistan while making it easier for Kazakhstan, Afghanistan and Pakistan to meet their growing needs for electricity. A broader goal is the reduction of Russia’s growing energy influence in the region.

As part of the Regional Energy Market Assistance Program (REMAP), the US Agency for International Development (USAID) will aim to make it easier for Central Asia’s main electricity producers, specifically Kyrgyzstan and Tajikistan, to connect with power consuming neighbors.

Top US officials first spoke about the plan during a congressional hearing in late April. [For background see the Eurasia Insight archive]. Several American experts believe the initiative is a response to Russia’s aggressive moves in recent months to expand its energy role in Central Asia. Perhaps the highest profile move was a deal signed in early April between Russian President Vladimir Putin and his Kazakhstani counterpart, Nursultan Nazarbayev, in which the Central Asian nation pledged to significantly increase the amount of oil it exports via Russia. [For background see the Eurasia Insight archive]. The American plan wants stronger Central-South Asian energy and trade links to counterbalance Russian influence.

A significant preliminary step in the program will involve the drafting and implementation of reforms to open the way for development of Tajikistan’s and Kyrgyzstan’s electricity export capacity. [For additional information see the Eurasia Insight archive]. USAID officials are hoping that Dushanbe and Bishkek can emulate Kazakhstan’s experience. Kazakhstani officials have implemented measures to make the country’s electricity market the most open in Central Asia, said Robert Ichord, USAID’s Chief of Energy and Infrastructure for the Bureau for Europe and Eurasia. The US energy company AES Corp. now operates six power plants in Kazakhstan.

"Very early on the Kazakhs made the reforms, developed the competitive market, opened their market to private investment. So we have a major investor, a US company, in Kazakhstan. It’s in that context that REMAP will build on this base," Ichord said in an interview with EurasiaNet.

Kazakhstan, with its abundance of oil and gas, is the key factor in US strategic thinking. US Vice President Dick Cheney is scheduled to arrive May 5 in the Central Asian nation, and energy issues will dominate his discussions with Kazakhstani leaders.

Many in Washington hope REMAP will help prevent Kazakhstan from developing closer energy links with Russia, a development that could tip the region’s geopolitical balance firmly in Moscow’s favor. Kazakhstan’s demand for electricity is increasing at about a 10-percent rate per year, and importing electricity would be cheaper than Kazakhstan developing its own additional power-generating capacity, Ichord contended.

Driven by oil-and-gas development, the Kazakhstani economy has been growing at a roughly 10 percent pace in recent years, and Nazarbayev has announced plans for the country to join the ranks of the world’s top 50 economies within the next decade. [For background see the Eurasia Insight archive]. A 2004 World Bank study served as the basis for the development of REMAP. That study said Kazakhstan � which now has a small electricity surplus � should become a net power importer between 2015 and 2020. At the same time, the export potential of Tajikistan and Kyrgyzstan are expected to grow to many times their current levels: in Tajikistan from 1,607 Gigawatt-hours last year to 20,887 in 2020. Kyrgyzstan’s exports figure to grow from 2,645 Gigawatt-hours last year to 12,167 in 2020. Much of this growth will be in power stations set to come online over the next decade. Planned in the Soviet era, there is now little domestic need for their prodigious capacity. One such plant is Tajikistan’s Sangtuda I, which is projected to begin generating electricity in March 2007.

The same study showed that South Asia is suffering from a lack of electricity-generating capacity, thus enhancing Tajikistan’s and Kyrgyzstan’s export prospects. As of 2003, Afghanistan’s electricity needs were roughly 750 Gigawatt-hours yearly, while the country’s power generating capability stood at 285 megawatts. Meanwhile, Pakistan’s energy needs are projected to grow at about 6 percent a year, meaning Islamabad could become a net importer as early as this year, the study estimated

In developing REMAP, US officials are ignoring some aspects of the study. For instance, the World Bank report suggested that China, Russia and Iran could possibly serve as markets for Tajik and Kyrgyz electricity. The REMAP plan pointedly leaves China, Russia and Iran out of the export picture. The two-year, $3.3 million REMAP program emphasizes the strengthening of regional power transmission systems, mainly to build links from Kazakhstan to its southern neighbors. The plan also envisions the development of a blueprint for electricity exports to South Asia to fill the growing demand of Afghanistan, Pakistan and India. Afghanistan has no national power grid, and its connections with Turkmenistan, Uzbekistan and Tajikistan are small and in poor repair. Ichord characterized the improvement of Afghanistan’s connections with the South Asia as a medium- to long-term goal.

The hub of the Soviet-era Central Asian power grid is in Tashkent, and part of REMAP will be designing a way to make the grid work without going through Uzbekistan. "Right now you have to go through Uzbekistan, so that’s one of the issues with strengthening the grid and dealing with the current, and hopefully not forever, political constraints in Uzbekistan," Ichord said. Turkmenistan is no longer part of the regional grid.

While REMAP appears promising on paper, the plan must overcome several significant geopolitical hurdles if it is ever to become a reality. Tajikistan’s and Kyrgyzstan’s ability and willingness to implement needed reforms remain uncertain. But perhaps the most significant obstacle is Russia’s heavy involvement in Tajikistan’s electricity market. For example, the Kremlin-controlled energy entity, Unified Energy Systems, is completing construction on the Sangtuda-1 power plant, and will retain a 75 percent ownership stake. [For background see the Eurasia Insight archive]. Regional experts say there is virtually no chance that a Russian energy company would strike a deal that is deemed damaging to the Kremlin’s geopolitical interests. Likewise, Tehran is helping Tajikistan build a power plant, Sangtuda-2, which upon completion will export electricity to Iran.

Editor�s Note: Joshua Kucera is a Washington, DC,-based freelance writer who specializes in security issues in Central Asia, the Caucasus and the Middle East.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

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