Central Asia: long-term challenges and short-term crises

17 March 2009

Central Asia [1] is an arid region. Its fertile plains are former deserts made arable by vast irrigation systems. Most of the water comes from the high mountain ranges of Kyrgyz Republic and Tajikistan (and to a lesser extent from Afghanistan) channelled downstream to Kazakhstan, Turkmenistan and Uzbekistan by the Amu Darya and Syr Darya rivers. Over the last century Soviet engineers harnessed these water resources with an extensive system of dams, reservoirs and irrigation canals to support the rapidly growing populations of the downstream countries and their agricultural production that in turn supported the Soviet Union. The reservoirs also produce electricity, but local peak demand for electricity is in the cold winter months, when water needs to be stored for summer irrigation release. During Soviet days, downstream countries provided the upstream countries with gas and coal in the winter to allow them to generate heat and power without releasing water needed for the summer.

With the breakup of the Soviet Union the elaborate water and energy sharing agreements among the Soviet Republics of Central Asia broke down, and the previously integrated regional water and electricity infrastructure became fragmented and suffered from lack of maintenance. With overuse and poor water management agricultural yields fell, and the water levels of the Aral Sea dropped precipitously, leaving behind a mere remnant of what was previously one of the largest inland seas in the world.

As a result, the provinces around the Aral Sea suffered great hardships and increases in poverty. While the Central Asian republics of the Former Soviet Union have avoided military conflict over scarce water resources, their relations have at times been strained, especially between Tajikistan and Kyrgyz Republic on the one side and Uzbekistan on the other.

Over the last two years two interrelated developments have aggravated this difficult situation: First, the two poor upstream countries, Kyrgyz Republic and Tajikistan, have started to develop their hydro resources for export. Downstream countries, and especially Uzbekistan, consider this a challenge to their water security. Secondly, changes in precipitation and temperatures threaten the supply of water and energy in the region. This has created – together with rising food insecurity and the impact of the global economic crisis – the potential for a ‘compound crisis’ in the region in 2009 that combines humanitarian, economic and environmental threats especially for Kyrgyz Republic and Tajikistan.

Let us look in turn at these two issues: the long-term opportunities and challenges of unlocking the hydro resources of Central Asia, and the short term threats of a compound crisis.

Long term hydro development opportunities

The Soviets planned and built hundreds of dams to regulate the water flow in the Aral Sea river basin for irrigation use and for generating electricity. Among them was Rogun dam in Tajikistan, planned for a height of 335m and started in 1976, but never finished, since the break-up of the Soviet Union and Tajikistan’s subsequent civil war brought construction to a halt in 1991 [See Figure 2].

In May 2008 the country’s President, Emomali Rakhmon, announced that construction had resumed [2]. While initially drawing on the country’s limited budgetary resources, the Tajik government hopes to attract foreign financing for this project.

When completed, the dam will generate 3600MW of power. This is enough to supply much of Tajikistan’s electricity needs and to allow exports to Tajikistan’s neighbours, including to Afghanistan and Pakistan through a 1000MW transmission line, which has yet to be constructed.

While a preliminary dam built in Soviet days was washed away by floods in 1993, there remains a network of huge tunnels and caverns carved inside the mountains on both sides of the river. These will house the eight turbines that will eventually generate the power. While the completion of the dam is still expensive at a planned cost of US$2.2B, the fact that a significant part of the work has already been carried out strengthens the economic justification for pushing forward with the project.

The plan is to complete the dam in stages over the coming 8-10 years, while filling the reservoir could take up to 18 years, although power generation would start earlier. The dam is to be built of rock and earth, which will allow it to absorb potential seismic shocks better than a concrete structure, an important consideration in this earthquake-prone region. While eager to involve others in the financing, the government intends to retain control over the dam and its energy output, a fact that may deter others from participating.

Another potential obstacle is that some downstream countries object. Uzbekistan has been especially concerned that the large storage requirements of the new dam will endanger the essential supply of water to the millions of Uzbeks dependent on the river’s uninterrupted flow during the summer months when irrigation needs are highest.

Rogun is the largest of the dams currently on the drawing board in Central Asia. Others are under consideration, among them the Kambarata 1 and 2 dams in neighbouring Kyrgyzstan with a joint capacity of 2260MW and an estimated cost of US$2B. The total capacity of currently planned hydro investments in Kyrgyzstan and Tajikistan is 11,360MW at a total estimated cost of US$10.2B [3].

These projects share similar characteristics. First, because of their high costs they cannot be funded by national resources alone – Rogun’s cost is about 85% of Tajikistan’s gross national income (GNI), Kambarata’s cost is 77% of Kyrgyzstan’s GNI. The two countries will have to attract public or private investors from abroad if they are to proceed.

Second, the hydro dams will generate large quantities of electricity that can meet the rising national energy needs of the countries at costs much lower than imported energy and will help avert the energy shortages currently prevailing during the winter months in Kyrgyz Republic and Tajikistan. Surplus power can be exported to neighbouring countries, where electricity is also in short supply and generation costs are at least three to ten times higher.

Moreover, peak demand for electricity in South Asia falls in the summer, which is also the time of greatest water release for downstream irrigation needs. This makes power exports from Central Asia to Pakistan and eventually to India particularly attractive. Major regional transmission lines are under construction or being planned to allow power exports from Kyrgyzstan and Tajikistan.

Third, global climate change is threatening Central Asia’s long term economic and ecological stability as global warming is melting glaciers in the region at an alarming rate. In the last 50 years the waters stored in the glaciers of Central Asia are estimated to have shrunk by 25% and they are projected to shrink by another 25% over the next 20 years [4]. These numbers are at best guesswork for now, but they do reflect the broad trends that will likely see major changes in water flows of the principal rivers in the region. Greater water shortages in the long term will force Central Asian countries to use their available water much more efficiently than has been the case so far, especially in irrigation [5]. But they will also make cooperative approaches to rational storage and allocation of scarce water resources across the region much more important if peace and prosperity in the region are to be preserved.

If foreign financing is to be attracted, detailed feasibility and environmental impact studies still need to be conducted for the new dams to assure that benefits outweigh costs, and that potential negative environmental and social impacts can be adequately mitigated. In the case of Rogun, the World Bank has initiated such assessments in preparation for possible funding [6]. In view of the concerns of the downstream countries, the rules of international water conventions need to be respected. There are various ways of dealing with the allocation of transnational water resources:

• a) Downstream countries could pay upstream countries for the summer release of water stored in the winter. This in effect was the practice during Soviet days, when downstream republics provided upstream republics with free gas and coal to generate electricity and heat during the winter months. After the dissolution of the Soviet Union, upstream countries argued that water should be treated as a commodity and paid for by downstream countries (at least in terms of the cost of maintaining and running the dams and turbines), while downstream countries rejected this notion on the grounds that water in transnational rivers is a common good shared equally by all riparians.

• b) Downstream countries could build dams and reservoirs on their territories to catch the waters released by the upstream countries during the winters for summer use. Such reservoirs have already been constructed (in Uzbekistan) and more are currently under construction (the huge Golden Century Lake in Turkmenistan) or planned (Kokserai reservoir in Kazakhstan) [7]. The problem with these downstream reservoirs is that they are an inefficient and partial response. Since they are located in flat land rather than deep mountain valleys they are more expensive, provide little or no hydroelectric capacity, and lose lots of water to evaporation and seepage.

• c) A third option is to build dams and reservoirs upstream along the same river or river system in sequence. This allows the release of water from the higher reservoir for electricity generation in winter, while catching and storing the water in the subsequent reservoir for summer release. In the case of Rogun dam the downstream Nurek reservoir could serve this purpose; for Kambarata dam the downstream Toktogul reservoir is available.

Among these options, the last one may well be the most feasible for the Central Asian region, but it requires a level of trust among countries that is currently not universally present. The practical question then is whether a mechanism can be found to provide appropriate guarantees for the downstream countries that create the minimum of trust to permit cooperation in this critical area.

Currently various efforts are underway to try and find such a mechanism. This includes a High-Level Group set up in 2006 by the Eurasian Economic Community (EurasEC – with Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan as members) to develop a strategy for the efficient utilisation of water and energy resources in Central Asia. It has been working on a strategy document but apparently has not yet reached agreement [8].

The Central Asia Regional Economic Cooperation Forum (CAREC – whose participants are Afghanistan, Azerbaijan, China, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan and Uzbekistan, as well as six multinational institutions, including the Asian Development Bank and the World Bank) has also prepared an energy sector strategy under which member countries agreed on the broad principles for the development of the region’s hydroelectricity resources. The Shanghai Cooperation Organisation (SCO – with China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan as members) in its 2007 summit agreed to develop an ‘energy club’, but so far little is known about its practical implementation and how it would address the hydro power issues of Central Asia.

While the preparation of regional strategies and broad understandings are helpful for creating a platform for dialogue and improved mutual understanding, the key will be the pragmatic implementation of major specific river basin projects, such as Rogun for the Amu Darya and Kambarata for the Syr Darya. A practical way to achieve this would be the creation of a consortium of partners, including all directly affected countries, as well as possibly one or more of the big neighbours (such as China or Russia), the international financial organisations and private financiers. The Government of Tajikistan has in fact invited Afghanistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan to join such a consortium. Kazakhstan has responded positively to this invitation [9].

Such consortiums would operate under a carefully crafted agreement that lays out the key water and energy sharing arrangements, the financing and management responsibilities, and the arbitration mechanism in case of unresolved disagreements. International financial institutions could be asked to provide guarantees, which in turn would be counter-guaranteed by the regional member governments. Perhaps the best example of a successful internationally backed river basin agreement with lasting success is the Indus Water Treaty which was signed in 1960 between India and Pakistan after years of arduous negotiations with the support of the World Bank [10].

In sum, there are great potential benefits to Central Asia and its neighbours that argue for the swift implementation of cooperative solutions for the development of Central Asia’s ‘blue gold’. The principal responsibility for this rests with the countries of the region, but the big neighbours and the international community can do much to help create a supportive environment:

• Offering financial support for appropriately structured regional consortiums.

• Funding neutral third-party analyses of costs and benefits and of their distribution across countries.

• Creating opportunities for constructive dialogue and trust building among the regional players.

• Stressing the shared long-term interests of all concerned.

Of course, even under the best of circumstances, the construction of new hydro capacity is a long-term proposition. Measures to encourage more efficient utilisation of available water resources and emergency steps to prepare for water and energy crises when they threaten, as is the case right now, also need to be promoted as a matter of high urgency.

A compound water-energy-food crisis

Against the backdrop of the opportunities and challenges of long term hydro energy development in Central Asia, a water and energy situation that is already difficult and tense at best during years of normal weather can quickly deteriorate into a major humanitarian, economic and political crisis for the region when climatic conditions are adverse.

The years 2007-9 have been particularly problematic, since normal climatic cycles (probably linked to the El Nino-La Nina phenomenon) appear to be intensifying and are overlaid on the long term effects of global warming. The last major drought in the region occurred in 2000-01. In 2007, a new drought period began with an unusually hot and dry summer in much of Central Asia, followed by an exceptionally cold and dry winter.

The winter of 2007/8 had its most severe impact in Tajikistan, where parts of the country had to do without electricity for weeks at a time, shutting down businesses and schools, limiting hospital operations, and forcing families to live without heat or light during the winter months when temperatures as low as -30°C were not uncommon. Even the capital, Dushanbe, was severely affected by power cuts.

Tajikistan’s situation was aggravated by the fact that Uzbekistan, plagued by its own winter energy shortages, suspended gas exports and limited transfer of electricity through its territory. At the same time, the food situation in the country deteriorated, as farmers had to eat or sell their seed stock, cattle ran short of feed, aquaculture suffered from frozen ponds and streams, and food supplies from neighbouring countries dwindled along with rising prices [11]. Kazakhstan, the main grain exporter in the region, temporarily banned exports, including to some of its neighbours, reinforcing the damage done by the world food crisis beyond its borders.

The summer of 2008 was once again unusually dry in large parts of Kyrgyz Republic and Tajikistan, with the result that the major reservoirs of these two countries, Toktogul and Nurek, experienced sustained levels much below normal. Like Tajikistan, Kyrgyzstan depends on electricity for the winter months. Going into the winter 2008/9, both countries had to ration electricity in large parts of each country for months on end. Fortunately, so far this winter has been relatively mild, so the humanitarian impact has been less severe, even though the economic and social costs of the disruptions of power supply are once again significant.

The international reaction to the unfolding water and related energy crisis in Central Asia involved emergency assistance for Tajikistan in 2008. Among others, the US provided nearly US$2.5M in emergency relief to Tajikistan in 2008 [12]. The World Bank provided a US$6.5M emergency grant for rehabilitation of key energy facilities and to assist with the development and implementation of the Government’s Energy Emergency Mitigation Action Plan [13]. The World Bank also provided up to US$5M in grants for emergency agricultural farm inputs and animal husbandry [14]. The FAO carried out an assessment of the food security situation as a basis for a coordinated response by the international community. The UN organised flash appeals for emergency assistance for both Kyrgyzstan and Tajikistan, with mixed success.

Concerned by the indications of a severe crisis, the UNDP organised a meeting of international organisations and bilateral donors in July 2008 to share what information was available on the crisis situation. The meeting concluded that an in-depth assessment was urgently needed and under the leadership of the UNDP a report on the compound crisis was prepared and released in January 2009 [15]. It concluded that Kyrgyzstan and Tajikistan are indeed threatened by a combination of water and energy shortage, high food prices and a looming recession resulting from the impact of the global economic crisis. The report noted that:

• Kyrgyztan’s and Tajikistan’s key reservoirs, Toktogul and Nurek, were respectively 20% and 9% below normal at the end of 2008, with rigorous restrictions on winter water releases essential if reaching ‘dead levels’ of these reservoirs (at which electricity production ceases) are to be avoided.

• Kyrgyzstan and Tajikistan have been hit by an ‘electric shock’ due to lack of power – the estimated impact of the winter 2007/8 blackouts amounted to US$280M in Tajikistan, or 7% of the country’s GDP; with the extended blackouts especially in the provinces, but increasingly also in the capital cities, significant economic losses are again expected during the current winter 2008/9.

• Both countries have large population segments suffering from food insecurity, some 1.5M people in the case of Tajikistan, as a result of high incidence of poverty and high local food prices, even after international food prices receded from the exceptionally high levels reached during the summer of 2008.

• Finally, with their heavy dependency on minerals and cotton exports and on migrant workers’ remittances – in the case of Tajikistan remittances are estimated to have reached 50% of GDP in 2008 – both countries are likely to see drastic reductions in foreign currency earnings, budget revenues and household incomes which will aggravate their already difficult economic and social condition.

The impact of this compound crisis is exacerbated by the tense relations between Tajikistan and Kyrgyzstan on the one hand, and Uzbekistan on the other. Despite an agreement at the CIS Summit in October 2008 among the presidents of the region which was to have facilitated the provision of gas and electricity to Kyrgyzstan and Tajikistan in exchange for prudent management of winter water releases, Uzbekistan blocked electricity transmission over its territory from Turkmenistan to Tajikistan and also cut off gas supplies to Tajikistan over an apparent disagreement on price. In return, Tajikistan threatened to draw down more of its water resources during the winter and curtail releases during the subsequent summer.

Under these circumstances it is critical that the international community and the big neighbours collaborate in assisting the upstream countries cope with the ecological, economic and social crisis that they now face. This requires assistance in addressing the underlying issues that cause their vulnerability to recurring droughts (limited power generation capacity, inefficient water and energy use, weak institutions), and engagement in a high level diplomatic dialogue to ensure the current tensions between upstream and downstream neighbours do not lead to tit-for-tat reactions that could turn into interstate conflict.

Honest brokers required

Central Asia lies at the hub of a rapidly integrating Eurasian super-continent, surrounded by some of the biggest and most dynamic economies on the globe. Its stability and prosperity is critical not only for Central Asians but for all of Eurasia and the rest of the world. Central Asia faces many opportunities and constraints. Among them the region’s water and energy resources stand out because of the great potential that they represent, but also because of the complexity of the challenges that they present to each of the countries, to its neighbours and to the rest of the world. It is essential that Central Asian countries promptly address both the long term development opportunities and the short term threats of the compound crisis in which water and energy scarcity plays a huge role. But they cannot do it alone. They need the help of their neighbours as well as the help of the wider international community.

The international organisations – the United Nations and the multilateral development banks, including the World Bank – have a special role to play, because of their technical and financial capacities and their ability to act as honest brokers. Despite all the pressing challenges elsewhere in the world, it is important that the international community pay close attention to the developments in Central Asia, especially the developments in the water and energy domains.

Johannes F Linn is Senior Fellow and Executive Director of the Wolfensohn Center for Development at The Brookings Institution in the US, and a Special Adviser for the Central Asia Regional Economic Cooperation Program (CAREC). He previously served as Vice President for Europe and Central Asia at the World Bank. Email: jlinn@brookings.edu




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