CASA-1000 Negotiations Continue

Negotiations on the CASA-1000 Power Supply Program have continued today in Istanbul. The proposed transmission project will transmit 1300 MW of surplus electricity from existing hydroelectric power sources in Kyrgyzstan and Tajikistan through Afghanistan to power-starved end markets in Pakistan and India. Details over the Power Purchase agreement are still being hotly debated, especially as they relate to war-torn Afghanistan’s increasingly uncertain role. Afghanistan has argued for a stake of 300 MW of the proposed 1300 MW, in addition to a transit fee from Pakistan for the remaining 1000. It is unclear how the Afghan government will enforce its commitments on security in light of its deteriorating internal situation, uncertain election outcomes, and departure of American military forces.

The history of the CASA project has been decidedly rocky as well. The project was initially proposed by the US Department of State and the Asian Development Bank as a viable means for the development and economic opening of Afghanistan. However, once feasibility studies were seriously undertaken by the ADB, they backed out of the project after the proposed costs approached $1 billion. The US State Department, while a nominal partner, is still very much focused on the more lucrative and risky TAPI pipeline project. The World Bank and Islamic Development Bank, the newest supporters of the project, cite that hydroelectric dams situated on the Amu Darya and Syr Darya rivers have extra electricity generating capacities during the summer months, when demand for power in Pakistan and India reaches its zenith.

Each country involved is expected arrange for the financing of the assets to complete the project on their own. The ADB was originally slated to provide 40% of the proposed fund, but now the World Bank with support from the Islamic Development Bank in Saudi Arabia have stepped in to provide $953 million with IDB supervision. Pakistan has secured funding from this pool for $200 million, and negotiations in Washington last month (Feb. 11) and Istanbul today are continuing over who gets what from the remaining funds.

The project remains somewhat unpopular in Kyrgyzstan, where relations with the US have hit a new low point with the closing of the Manas Air Base. Officials in Kyrgyzstan have been notably grumbling about the exports, as the Kyrgyz government has been struggling to provide the necessary electricity for heating, lighting, and hospitals for decades now. Tajikistan is more amenable to the project, in part because it will provide the basis on which to attract foreign direct investment for the Rogun Power Plant, which is one of the highest hydroelectric dams in the world. Nevertheless, the CASA is not without its detractors. The Rogun in particular has invited the ire of Uzbekistan’s government and cotton industry, who claim that the dammed water has ruined arable farmland that used to provide a great portion of the country’s wealth.

More troublingly, US support for the project has tapered off, with the most recent contribution pledging a paltry $15 million to the project. But with the US leaving Afghanistan later this year and being kicked out of Kyrgyzstan, it is understandably cutting its losses with development in what may ultimately be a wild-goose chase. Additionally, a new law was passed in both houses of Congress last month that ostensibly supports Tashkent’s opposition to hydroelectric dams in Tajikistan and Kyrgyzstan. Supposedly the law “directly obliges the US representatives in the boards of directors and international financial institutions to oppose the approval of any loans… that would support projects on the construction of large dams and hydroenergy facilities.” Both Kyrgyz and Tajik officials are concerned about this law, and it was a major point of concern when the World Bank’s Laura Tuck visited Dushanbe earlier last month. Despite these objections, the law is unlikely to be a major point of focus for US policymakers in Central Asia, as it interferes with their longstanding commitment to the CASA-1000 project.

Nevertheless, Afghan ministers remain enthusiastic about the project, with Finance Minister Ishaq Dar discussing both the CASA-1000 and TAPI pipeline project with officials from both consortium’s member governments.

News Briefs:

  • Ilham Tohti, a leading Uyghur scholar and alleged separatist, has been denied access to legal representation, despite having been taken into custody and charged with inciting terrorism and separatist activities more than a week ago. The charges against Tohti have been decried by human rights activists across the globe, who claim that Tohti’s activities constituted an attempt at expanding human rights among the Uyghurs, a Turkic minority that inhabits China’s western Xinjiang region.  Chinese government officials have insisted that evidence supporting their claims is “irrefutable,” though no material evidence has been produced.
  • Free Press Kashmir reports that Indian government officials in the northwestern Jammu and Kashmir region have begun to offer incentives to farmers to stop cultivation of bhang, a cannabis derivative, the production of which has historic ties to the region. Kashmir’s regional government has begun to encourage horticulture and agricultural departments in the region to incentivize the production of other crops, even asking that officials provide “seeds, fertilizers and high yielding exotic plants” at no cost to local farmers.
  • Kazakhstan placed 55th in the 2013 Legatum Prosperity Index in terms of entrepreneurship and business opportunities, ranking it higher than any other Central Asian nation. The report casts a positive light on Kazakhstan, which also placed 47th in terms of overall prosperity. In a related report that reflects the blossoming investment climate in Kazakhstan, Azerbaijan invested $130min the Kazakh economy, the majority of which has been dedicated to Azeri aspirations of stronger agro-industrial ties with Astana.
  • Iran received the second of eight installments of previously frozen assets as part of the terms of the nuclear deal brokered in November. Tehran received the funds after International Atomic Energy Agency (IAEA) Chief Yukiya Amano confirmed that Iran had been progress in reducing its weapons-grade uranium stock. Iran has seemingly utilized the recent warming of relations with the West to attract foreign investment to its petrochemical sector. The National Iranian Petrochemical Company has stated that over $8b will be needed in order for the sector to regain the form it maintained prior to the institution of crippling sanctions.
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