Prospects of energy cooperation in Central Asia

The Afghan Government is hopeful to strengthen the national economy and make Afghanistan into a developed country through the TAPI gas pipeline project implementation. That said the project causes a lot of political problems capable of slowing down the pipe-building. How practicable is the TAPI project? What alternatives of regional energy cooperation are feasible?

The Afghan Government is hopeful to strengthen the national economy and make Afghanistan into a developed country through the TAPI gas pipeline project implementation. That said the project causes a lot of political problems capable of slowing down the pipe-building. How practicable is the TAPI project? What alternatives of regional energy cooperation are feasible?

Upon toppling of the Taliban regime international donors made tangible investments into restoration of Afghanistan’s national economy. Official statistics confirms relatively high rates of economic growth (according to the Asian Development Bank, in 2007-2008 the rate of economic growth made 13% while subsequently the dynamic has slowed down). However, these figures seem doubtful and are unlikely to be seen as an indicator of an extensive economic growth of the country: against the backdrop of idle industrial enterprises any newly-commissioned facility inevitably inflates the figures of overall growth.

Over the recent years certain industrial enterprises, including the large ones, decommissioned during the protracted war have been reborn: the textile mill in Kondoz has been restored, the integrated house-building factory in Kabul has been made operational, the reconstruction of major hydropower plants (HPP) is underway – Naglu (Russia, 94 MW), Kajaki (USA, 33 thou KW), Sarobi (22 thou KW) and Makhipar (15 thou KW, Federal Germany, both). In September 2011 the first national railway line between Hairatan and Mazar-i-Sharif (70 km) built by Uzbekistan was launched.

The TAPI Pipeline Project

In many ways, the Afghan Government lays hopes on major ambitious projects which, in its view, are to take Afghanistan into in a bunch of developed nations. The largest of them, as are the expectations of Afghanistan and its neighbors, is the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline project.

The idea to pump Turkmen gas via Afghanistan was born in 1992, and already after one year the Bridas Corporation of Argentina committed itself to the pipeline construction. However, it was promptly driven out by the Unocal oil company of the US which soon allied with the Delta Oil Company of Saudi Arabia.

In 1995 those companies signed an initial version of the agreement with the Turkmen government. In 1997 Ashgabat hosted the summit meeting of members to the regional Economic Cooperation Organization (ECO) which founded an international consortium to implement the Trans-Afghan gas project – Central Asia Gas Pipeline Ltd. Apart from the Turkmen government, the shareholders were Unocal (15%), Delta Oil (15%), Hyundai (South Korea), Gazprom (10%), Crescent Group (Pakistan), Itochu Corporation and Impex (Japan). Later, the share of Unocal was increased up to 46% [1].

Meanwhile, the situation in Afghanistan has changed dramatically: in September 1996 Kabul was seized by the Taliban. Their rise to power endangered international economic cooperation which was gaining momentum. Nonetheless, the US promptly found their bearings and in the same year invited the new masters of Afghanistan to participate in the project. The Taliban delegation was warmly received in the State Department, and then taken to Houston and accorded red-carpet treatment (a propos, the city hosts the headquarters of such energy companies as ConocoPhillips, Shell and Energy Services Group owned by Halliburton). At the time the Taliban supported the project after it had received $400 billion for the analysis of the project feasibility study.

However, after Al-Qaida attacked the US Embassies in Tanzania and Kenya as well as the USS Cole destroyer in Aden in 1998, the US severed their relations with the Talibs and delivered missile attacks on the presumed terrorist bases in Afghanistan. Eventually, the project was frozen. The interest to the project was revived only in 2002 after the Taliban regime had been toppled. The talks with Islamabad were resumed on the Ashgabat’s initiative. And once again the TAPI project was suspended indefinitely because of intensified military operations in Afghanistan in the areas of future pipeline construction.

The project was back on the agenda in 2006 when India declared its intention to participate therein. Since then the preparatory work for the practical implementation of the project has been launched. Finally, the framework agreement was signed in November 2010. Early in 2012 the project participants got down to coordination of gas tariffs and the price of its pumping via Afghanistan. This is a brief historic review of the problem.

Presumably, the pipe line will be laid from the Dauletabad deposit (estimated reserves are 1.7-4.5 trillion cu.m of gas) in the south-east of Turkmenistan across the Afghan territory via Herat and Kandahar, then through Quetta, the capital of Pakistani Baluchistan, up to the Indian border city of Fazilka. Its total length is 1735 km. TAPI design capacity is 33 billion cu.m per annum. The share of Afghanistan will be 500 million cu.m. The cost of the project is $7.4 billion. The Asian Development Bank agreed to participate in the project and is prepared to cover about one third of the overall costs. The pipeline construction completion and the commissioning are planned for 2014.

Geopolitical rivalry over the TAPI project

At a new stage of its development the project caused the clash of geopolitical ambitions of the US and Russia. The struggle over the Caspian power resources has acquired international dimension. According to the US, the TAPI project is becoming a project of the Great Silk Road which signifies a breakthrough in the US efforts in getting access to the mineral wealth of the Caspian and Central Asian regions.

With the beginning of the Afghan campaign the United States entered into a sharp political and economic rivalry with Russia, and is interested in diverting the regional oil and gas flows from Russia, preferably toward potential supply to the West. For this purpose Washington is lobbying the Nabucco pipeline project. While pressing Ashgabat to build the gas pipeline across the Caspian Sea to Azerbaijan (Trans-Caspian pipeline) and connect it to the Nabucco, Washington is seeking to arrange for the transportation of Caspian hydrocarbons to Europe bypassing Russia. The future TAPI pipeline serves the same purpose. A curious fact: despite bygone statements on the status of a neutral state Turkmenistan plays an important supporting role in providing assistance to the US and NATO troops fighting in Afghanistan. Washington and Ashgabat are meticulously concealing the strategic role of Turkmenistan, especially financial aspects of such cooperation. The country supplies American and NATO troops in Afghanistan with fuel on tax-free basis, without any customs payments or duties.

At the same time, Washington is striving to isolate Iran in the international arena and preclude its participation in regional energy projects. For that purpose the United States applied the strongest pressure to India and Pakistan in an attempt to make them give up the development of an alternative Iran-Pakistan-India pipeline project. India surrendered to the American pressure. As to Pakistan, its relations with the US have lately dramatically deteriorated; it has developed an indefinite attitude laying focus on its independence of the overseas partner. As a result, the Iranian project remains stalled for a long time with flimsy hopes for implementation.

As concerns Russia, it has always opposed any attempts to lay the gas lines from the Caspian Basin bypassing its territory – willing to be a monopolist in gas supplies from the region. Moreover, due to Russia’s refusal to pay higher prices for Turkmen gas proposed by the Turkmen President G.Berdimuhamedow and a tangible drop in the volume of its supply to Russia, over the recent months the relations between the two countries have noticeably deteriorated.

However, with the good prospects for reaching final agreements among the key TAPI players and obvious signs of the project’s practical execution, Russia declared its readiness to get involved in it. The rationale was that it would be better if Turkmen gas goes south instead of going to Europe through the Nabucco pipeline, competing with Russian gas supplies through the Nord Stream and, in the short run, through the South Stream pipeline. Moreover, the Nabucco project is further away from the realization than the TAPI venture. Afghanistan and Pakistan supported Russia’s participation in the TAPI project. However, Ashgabat, obviously not without American influence, took a more reserved stance. The official statement of the Turkmen Ministry of Foreign Affairs pointed out that the issues of participation of foreign companies whose home countries were not project participants could be resolved by the countries directly involved in the project (Turkmenistan, Afghanistan, Pakistan and India), if so agreed.

Is the game worth the candle?

At the final preparatory stage of project implementation the key issue would be the feasibility of the project in principle. While technical problems related to the construction have been largely resolved, political problems capable of slowing down the pipe construction remain high on the agenda. First, the composition of an international consortium investing in the project has not yet been determined. So far, potential investors have just been making statements on their investment plans.

Second, the Afghanistan’s pipeline route will go through the areas of combat operations therefore, the problem of the pipe security remains unresolved. Though, presumably, a part of the pipeline will be laid underground, the remaining section would be subject to a potential attack. Initially, Kabul declared that it would dispatch seven thousand troops to protect the line, but soon it revised the strength of the protection force and announced a 12 thousand-strong protection unit.

The territory of Baluchistan (Pakistan), prepared to host the route, also lives amidst civil unrest: anti-government riots are still going on. Finally, inter-government relations inside the “quadrangle” leave much to be desired. It relates to both Afghan-Pakistani and Indian-Pakistani relations. In particular, Pakistan supported by Iran is keen to diminish the status of Afghanistan in the TAPI project and, in all probability, to shut it out of the project. Though, a certain improvement of relations between the project participants has become noticeable lately.

Alternative Cooperation Projects

Some other major projects of regional cooperation with Afghan involvement are also problematic enough, although their practical implementation gives better ground for optimism. Among them is the CASA-1000 project (Central Asia-South Asia – 1000) focused on the transfer of electric power from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan. The framework agreement was signed as early as 2006 at the meeting of the four heads of state. The investor is a consortium of international and regional banks (World Bank, Asian Development Bank, and Islamic Development Bank).

Over the recent years Afghanistan has been supplied with electric power from Turkmenistan and Uzbekistan albeit it has recently suffered energy shortages: Kabul has long been using the fan system of municipal power supply; electricity is available for not more than four hours a day. Numerous workshops and retail outlets use diesel power generators practically unaffordable to the majority of producers because of high prices for diesel fuel.

In August 2008 Energy Ministers of the four states signed another agreement on the CASA-1000 project. As provided by the agreement, 1300 MW of electric power will be supplied to Afghanistan and Pakistan, as 300 MW will be consumed by Afghanistan and 1000 MW – by Pakistan. The length of power transmission line from Kyrgyzstan to Tajikistan will be 477 km, and further to Pakistan via Kabul – another 750 km. According to Afghan Minister of Water and Energy Ismail Khan, the power line will be commissioned in 2013.

The major part of power supply will be delivered to Afghanistan via the transmission line from the Rogun hydroelectric power plant currently under construction in Tajikistan. The estimated output is 3600 MW. In July 2008 Energy Ministers of Afghanistan and Tajikistan also discussed the possibility of construction of a power transmission line from Sangtuda-1 and Sangtuda-2 HPPs.

Russia also expressed its intention to take part in the CASA-1000 project. The respective statement was made at a top level meeting of Afghanistan, Pakistan, Russia and Tajikistan held in September, 2011 in Dushanbe. At a later meeting of the SCO Prime Ministers in St. Petersburg Russian Premier V.Putin said that Russia was ready to invest $500 million in the project. He believes that the overall cost of the project could amount to USD 1.5-2 billion. Other sources quote USD 953 million. Russia’s intentions were reiterated at the meeting with Pakistani Minister for Foreign Affairs Hina Rabbani Khar in the Russian Foreign Ministry in February 2012. InterRAO UES company of Russia is prepared to finance the construction of power transmission line from Tajikistan to Kabul.

To all appearances, the fate of this project will not be a gaudy lot though its story is not yet over. Its “biography” has even more “dark spots” while the reasons for non-implementation of another “frozen construction project” are somewhat different. First, the construction of primary generation sources in Tajikistan is not yet complete. The half-constructed Rogunskaya HPP (largest in the region) gradually decays without finance, as restoration works are underway. [2] With the problem of financing under consideration, the parameters of the waterworks are being revised toward a lower height of the dam.

Moreover, the Rogunskaya HPP has become part of regional geopolitics: Uzbekistan strongly opposes the project since upon its commissioning Tashkent will lose part of the water from the Vakhsh River feeding into the Amu Darya. Uzbekistan has its own extensive energy ambitions related to the build-up of its energy capacity in Central and South Asia. Therefore, already tense, if not hostile, relations between the two countries are getting even more complicated. Uzbekistan warns that in case of a major earthquake in the area of construction an environmental disaster may follow. In an attempt to persuade Pakistan to renounce its support of the project Uzbekistan suggests an alternative – the construction of three HPPs on the Swat River in Pakistan with the potential capacity of 1315 MW, and pledges its readiness to become a project co-investor.

Tajikistan is expected to supply its excessive energy in summertime only which would hardly satisfy all the needs of foreign consumers.

The construction of the Sangtuda HPP, with Iran as the main contractor, has not been completed yet. Nor has the problem of financial support of the project been resolved. So far, the money pledged by Moscow has been no more than a declaration of intent. It is yet unclear who will become a contractor of the transmission line construction and the entire project infrastructure. Finally, the problem of its security across the Afghan territory remains unresolved.

Thus, the above energy projects are choking in endless discussions and flimsy plans without a clear-cut perspective, though they are unquestionably important for the whole region. We can only hope that the leaders of the states concerned, heads of regional and international organizations will become more aware of their responsibility to the peoples of the region and will take every effort to practically implement them in the foreseeable future.

1. Morozova M.Yu. Iran and Afghanistan: Problems of Natural Gas Transportation to South Asian Region // Middle East and Modern Times. Issue26. Moscow, 2005.

2. According to the national Ministry of Finance, over nine months of 2011 the cost of restoration works on the Rogunsky project was about 620 million somoni (more than USD 138.3 million), and more than TJS 200 million were planned to be allocated before the end of the year. The 2012 budget provides for more than TJS one billion allocated for these purposes.