KYRGYZ-RUSSIAN ECONOMIC COOPERATION FACE DEADLOCK
Negotiations between Kyrgyzstan and Russia on large energy projects are deadlocked due to Moscow’s demands to revise the existing agreements. While most local observers support Bishkek's intention to adhere to the current agreement, others contend that the country's leaders need to consider Moscow's proposal.
During a visit of the Russian energy companies’ delegation led by Energy Minister Sergey Shmatko to Bishkek on March 27-28, 2012, the Russian side voiced its demands to revise the earlier-signed agreements and increase its shares at the “Kambar Ata 1” hydropower station and the hydropower plant cascade on the Naryn River, which they plan to build in Kyrgyzstan, to 75 percent instead of the previous 50 percent. Moscow argues that the current conditions “do not reflect the real contributions of the two parties.”
The Kyrgyz leadership categorically refused to agree to the proposed changes in the agreement, claiming that the sides need to adhere to the existing agreement. Moreover, Bishkek demanded from Moscow to come up with a concrete plan for activities and an exact date for launching the project. “We insist on the adherence to the existing agreement and in case the Russian side fails to provide feedback by the agreed date Bishkek will seek new investors who will be willing to implement these projects,” the Kyrgyz Prime Minister Omurbek Babanov stated at the governmental session. According to the head of government, a number of countries including China and Turkey have expressed their interests in these projects.
It is notable that on 27 March, 2012, Babanov and Shmatko signed a special joint protocol, according to which the sides agreed to finalize all details by April 10, 2012. However, as the Kyrgyz Foreign Minister Ruslan Kazakpayev said, despite the fact that the Kyrgyz side has sent its proposals and suggestions to its Russian partners on time, it has not yet received any feedback from Moscow.
The agreement on construction of the above-mentioned hydropower projects was signed in 2008. The project was estimated at US$ 2 billion and foresaw the creation of a Kyrgyz-Russian joint company involving the Russian state-owned “Inter RAO UES” and the Kyrgyz state-owned “Electric Stations” companies. According to the agreement, the joint company’s shares were divided equally between the two states. The Russian side agreed to allocate US$ 1.7 billion for this project. However, in 2010 it accused the Kyrgyz authorities of misusing a US$ 450 million grant provided for the project and blocked the transfer of funds.
Besides the “unpleasant situation” around the energy projects, Moscow also expressed its intention to acquire 75 percent of the “Dastan” military plant in Bishkek instead of the previously agreed 48 percent. The Russian side contends that the plant’s shares have depreciated due to the wearing of its equipment. Bishkek rejected Moscow's arguments, claiming that the plant’s production volume has increased five times since the agreement was signed. It has to be mentioned that under the 2009 agreement, Kyrgyzstan was supposed to hand over 48 percent of the plant’s shares to Russia in exchange for a debt relief of US$ 180 million.
Many expected a solution to the ambiguous deadlock during the visit of Russian Foreign Minister Sergey Lavrov to Kyrgyzstan on April 4-5, 2012. However, no public statements regarding the issues mentioned above were made during and even after the visit.
In light of a lingering silence from the Russian leadership, most local political experts consider Moscow's position as an attempt to pressure Kyrgyz leaders. Continuous rumors about the possibility of Russia introducing customs duties on fuel products for Kyrgyzstan, which is frequently mentioned in Russian mass media, can serve as evidence of Moscow flexing its muscles to the Kyrgyz leadership, the experts contend. According to Nurjigit Kadyrbekov, if Bishkek yields to the Kremlin's conditions, it will face huge domestic public discontent leading to a significant loss of trust in the government. The current leaders will be viewed as betrayers of the country's national interests, Kadyrbekov states.
At the same time, some experts believe that the “impudently-behaving” Kyrgyz leaders risk a serious aggravation of their relations with Moscow. According to this alternative view, this is not the time to confront with Moscow and if Russia promises to bring real investments, Kyrgyzstan needs to consider the Russian proposals. In the meantime, all experts agree that facing these ambiguous challenges, both sides need to understand the each other's positions and try to come to compromise.