In February of 2009, Kyrgyz President Kurmanbek Bakiyev traveled to Moscow and secured roughly $2.15 billion in economic assistance, apparently in a quid-pro-quo deal in which Kyrgyzstan took action to evict US and NATO forces from an air base outside Bishkek. Twelve months later, American troops are still in Kyrgyzstan, and Moscow is balking at disbursing the bulk of its pledged aid.
The majority of the Russian assistance pledge came in the form of a $1.7 billion credit to fund construction the Kambarata-1 hydropower station on the Naryn River. In addition, Moscow promised a $300 million loan to be used for a state-controlled development fund, and an additional $150 million in cash to cover gaps in social services. The $450 million was delivered last spring. [For background see the Eurasia Insight archive].
Moscow has yet to extend the $1.7-billion in assistance for Kambarata construction. And it doesn't look like the money is going to be forthcoming anytime soon. That's because the $450 million Russia already has paid out was "not used according to its purpose," alleged Vitaliy Skrinnik, the first secretary at the Russian Embassy in Bishkek.
Kyrgyz officials used the money, Skrinnik told EurasiaNet, to set up a lending fund "issuing credits to others to make money." He did not specify who controls the fund. "Here we had misuse of the money, of $450 million," he said.
While denying that relations between Russia and Kyrgyzstan had since worsened, Skrinnik stated that Kyrgyzstan was not ready to receive more. "Kyrgyzstan has certain obligations. They must establish a structure and develop a program for this loan," he said, suggesting that the Kremlin was exasperated with Bishkek. Now "the Kyrgyz say 'give us the money.' But $1.7 billion is a lot of money."
Alexander Knyazev, director of the Bishkek branch of the CIS Institute, said that Russian officials are unsure of how the money already transferred to Bishkek has been used. "When you are given a grant, you have to report to your donor on how you used the money," Knyazev, who is reportedly well connected to the Russian government, told EurasiaNet. "Russia is still waiting for reports in respect to the $150 million grant and the $300 million loan. There are no reports."
Yet another analyst suggested that Moscow is more concerned with upsetting Central Asia's delicate geopolitical balance than it is with making a bad loan. The Kambarata project has helped focus attention on the volatile water issue in Central Asia. Downstream nations, in particular Uzbekistan, have been outspoken in opposition to projects that could potentially alter water flows. [For background see the Eurasia Insight archive].
"At the moment, it is not the right time for Russia to send the money to Kyrgyzstan due to the water conflicts among Central Asian countries," said Ajdar Kurtov, an analyst at the Russian Institute for Strategic Studies in Moscow. He was referring to Tashkent's anxiety over Bishkek's plans to build a dam upstream and thus, theoretically, reduce the supplies available for irrigation in Uzbekistan. "Moscow doesn't want to take a position and be blamed."
Kyrgyz officials profess to be at a loss to explain why Russian officials are making a fuss. From Bishkek's vantage point, everything is proceeding as planned as far as the Russian assistance goes, said a representative of Kyrgyzstan's development fund, which was set up to handle the $300 million Russian loan. "So far, $100 million of the investment credit went to the first unit of the Kambarata-2 hydropower station. The rest of the money will be going to various micro-credit projects, leasing projects and other projects to support the economy," said Aibek Sultankaziev, a press officer at the development fund.
"The rest of the Russian credit of $1.7 billion will be coming to the Joint Stock Company on construction of Kambarata-1 -- the board of which will consist of Russians and Kyrgyz. I don't know why we haven't received it yet," Sultankaziev added. "I read the Russian ambassador's statement that all the agreements regarding the credit are in force."
In late December, Russia's envoy to Kyrgyzstan, Valentin Vlasov, said that, though there had been "some hesitation" to disperse the money due to the financial crisis in Russia, all agreements on Russian investment in the larger Kambarata-1 project remained valid. "In regard to the loan of $1.7 billion ? all of our arrangements remain in force," the ambassador said, in comments published by the Komsomolskaya Pravda newspaper on December 29.
Soviet engineers began the proposed 1,900-megawatt Kambarata-1 and 360-megawatt Kambarata-2 in the 1980s. By comparison, Kyrgyzstan's largest existing hydropower plant, at Toktogul, has a production capacity of 1,200 megawatts, supplying 40 percent of the country's electricity. Bishkek sees Kambarata-1 as enabling the country to become a net exporter of electricity. "In one or two years, our country will not only completely provide itself with electrical energy and obtain electric power independence, but even will start exporting it," the AKIpress news agency quoted President Bakiyev as saying on January 15.
Work on the smaller Kambarata-2 continues, with plans to open the first turbine this summer, says Albert Abazbekov, the chairperson of Naryngydroenergostroy, the company behind construction of Kambarata-2. Kyrgyzstan is now hoping to secure Chinese assistance to complete the second and third generators. Local news outlets have reported another official saying the project is $200 million short.
"According to our plan, we are going to launch the second hydroelectric generator at the end of 2011," Abazbekov told EurasiaNet. "But financing installation of the second and third generators has not been solved yet. Today, negotiations are being conducted with China. Chinese specialists have already visited us."
Abazbekov added that work on Kambarata-1 should start in April 2011. "This month, or in March, there will be a Kyrgyz-Russian intergovernmental session where Kambarata-1 construction will be discussed."
But without Moscow's $1.7 billion, analysts say the larger Kambarata-1 project will remain on the drawing board. With Bishkek looking to Beijing for support, Kurtov concluded that relations with Moscow, while still strong, currently feature a lot "less romance."