EurasiaNet Business & Economics - Does Dushanbe Want to Distance Itself From Russia?

BUSINESS & ECONOMICS

DOES DUSHANBE WANT TO DISTANCE ITSELF FROM RUSSIA?
9/07/07

Tajikistan’s decision to cancel a contract with a Russian conglomerate to develop a dam and an aluminum plant may be a signal of Dushanbe’s disenchantment with its close working relationship with Moscow. At the very least, the contract cancellation marks a diplomatic setback for Russia, which has aggressively reasserted its economic and political influence across Central Asia over the past two years.

Tajik officials announced August 29 that they were cancelling a 2004 deal with the aluminum giant RusAl, under which the Russian company was to spend roughly $2 billion on finishing the Rogun dam, along with modernizing the Tajik Aluminum Plant -- formerly TadAZ and now known as Talco -- and the construction of another aluminum smelter nearby. In a statement, President Imomali Rahmon attributed his government’s action to "the Russian company’s failure to honor its commitments." Both RusAl representatives and Russian government officials have been reluctant to comment on Dushanbe’s action.

Work on Rogun, roughly 110 kilometers east of Dushanbe, began in 1976 and was suspended in the early 1990s, amid the economic chaos associated with the Soviet collapse. Much of the work already done was destroyed in a 1993 mudslide. Construction plans were revived in 2004, during a visit by Russian President Vladimir Putin to Tajikistan. The dam and aluminum projects were seen as interconnected, with Rogun envisioned as supplying the electricity needed to operate the plants.

Almost three years after the signing of the deal, virtually no work had been performed by RusAl. A dispute over the height of the Rogun dam kept construction on that project stalled. RusAl wanted the dam to be about 285 meters high, with an annual power-generating capacity of 2,400 megawatts (MW). The Tajik government, meanwhile, called for the original blueprint to remain in place, envisioning a 355-meter-high dam that could generate 3,600 MW per year. Completion of the dam according to the original specifications would enable Tajikistan to become an exporter of electricity.

Wrangling over the aluminum plants may have been an even larger factor in spurring the deal’s collapse. RusAl had reportedly sought a significant stake in Talco -- something that the Tajik government steadfastly refused to grant. Talco, which has about 12,000 employees, accounts for nearly half of Tajikistani export revenues, and Tajik authorities did not want to cede any control over the country’s primary income generator. When RusAl executives realized that their attempts to gain a share of Talco were futile, they reportedly lost interest in the deal, according to a report published by the Kommersant daily August 30.

Other observers say regional politics likely played a major role in upsetting the deal. Uzbekistan has expressed vocal opposition to Talco’s modernization, citing ecological concerns. However, political analysts believe Uzbekistan’s opposition was, and remains, rooted in Tashkent’s desire to remain Central Asia’s political powerhouse. Uzbek officials reportedly worry that realization of economic development projects in Tajikistan would greatly increase Dushanbe’s political clout vis-a-vis Tashkent. In addition, construction of the Rogun dam could potentially deprive Uzbekistan of water needed for irrigation. [For background see the Eurasia Insight archive].

Russia, in gaining the upper hand in the Central Asia’s geopolitical chess game, has faced a difficult task in balancing divergent Uzbek and Tajik interests. Some analysts believe that RusAl executives may have been taking a cue from the Kremlin, which perhaps saw "stall tactics" concerning Rogun/Talco as the best option for finessing Uzbek-Tajik tension over the development projects. The Kremlin in recent years has faced criticism in the West for using the country’s energy companies as instruments of diplomatic policy. [For background see the Eurasia Insight archive].

The Tajik decision to cancel the contract appeared to catch the Kremlin off guard. In the weeks before the announcement, there had been few signs of problems in bilateral relations. Following the recent Shanghai Cooperation Organization military exercises, for example, Putin and Rahmon met August 17 in the Chelyabinsk Region. During that meeting, Putin lauded Tajik-Russian political, economic and military cooperation, and Rahmon noted that bilateral trade had jumped 70 percent during the first half of 2007.

Some analysts suggest Tajikistan’s action concerning RusAl might be an extension of Rahmon’s evident desire to reduce Russia’s cultural influence in Tajikistan. Since March, the president has promoted a campaign to promote economic austerity, while taking concurrent action to promote a distinctly Tajik national identity. To punctuate the campaign, Rahmon dropped the Slavic "ov" ending to his surname. [For background see the Eurasia Insight archive].

Other experts believe any turbulence in Tajik-Russian relations will prove temporary. Underlying this belief is the fact that Tajikistan’s economy remains dependent of remittances sent home by Tajik migrant workers in Russia.

Russian and Tajik officials continue to work on ways to regulate conditions for the migrant laborers. [For background see the Eurasia Insight archive]. On August 21, Russian Interior Minister Rashid Nurgaliyev and his Tajik counterpart Mahmadnazar Salihov held talks in St. Petersburg on labor migration-related issues, including crime. In 2006, Tajikistani migrants committed 8,200 crimes in Russia, and 1,200 crimes were recorded against them, Nurgaliyev said. On September 17-20, Russia is due to host a Russian-Tajik inter-parliamentary forum in Moscow and in Orenburg. Those meetings are also expected to focus on labor migration.

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