In October and November 2009, Kazakhstan and Uzbekistan stated their desire to end their participation in the Central Asian Power System, the shared regional power grid of the Central Asian region. Long misused, this collective institution is more than ever a victim of the deteriorating relations between governments owing to the question of water management. However, without any regional structure of cooperation, the energy situation of the two most fragile states, Kyrgyzstan and Tajikistan, risks becoming further complicated during winter, leaving them exposed to hard power rationing. Some regions of Uzbekistan and of south Kazakhstan also risk incurring electricity shortages.

BACKGROUND: With the exception of northern Kazakhstan, which is connected to the Russian network, the whole of Central Asia had a collective system of electricity management, established in the Soviet period and maintained with difficulties. The Russian and Central Asian electricity networks have been reconnected since 2000, which has enabled a boost in electricity exchanges: Russia now buys cheap electricity from Kyrgyzstan and Tajikistan, and supplies its own electricity to the northern regions of Kazakhstan. However, the veritable stakes of the Central Asian Power System (CAPS) are internal to Central Asia. All the states have equal stakes in a public company based in Tashkent, the Central Asian United Dispatch Center (CA UDC), which is in charge of the maintenance of a synchronized and balanced system for the transfer and distribution of electricity for member countries. Despite this regional system, electricity transmission remains a major problem due to the absence of connection between certain regions within each country; to the energy interdependency between states, further complicated by bad bilateral relations; to considerable energy loss owing to the poor state of the lines; and to a lack of financing for the construction of new lines or repairing of old ones.

Subject to these multiple problems, the unified Central Asian system risks disappearing. In 2003, Turkmenistan announced that it was leaving the CAPS, instead preferring to connect itself to the Iran system (Iranian Power System) and thereby to reap more substantial benefits. In Fall 2009, Kazakhstan and Uzbekistan declared that they wanted to end their participation in CAPS. On the Kazakh side, the company in charge of the national electricity network, KEGOC (Kazakhstan Electricity Grid Operating Company), has complained for several months of the illegal misappropriation of electricity by Tajikistan, which risks creating large deficits in Kazakhstan’s southern regions. On the Uzbek side, CAPS is regarded as a source of interstate conflicts. The Uzbek state company, Uzbekenergo, has recalled that, henceforth, it wants to make Kyrgyzstan pay for the transit of electricity.

Kazakhstan has assured that it will maintain its commitments toward Bishkek during the winter of 2009-2010, not just as concerns the sale of electricity but equally the supply of the coal and fuel required for the Bishkek thermal power station, one of the country’s foremost. The electricity exchanges between Bishkek and Astana are relatively protected by the good relations between the two governments and are in part regulated by market mechanisms. In 2008, both countries signed an agreement according to which Kyrgyzstan would import more than 250 million kWh produced in Kazakhstan. In addition, for some years, Kyrgyzstan has been trying to export its electricity surpluses during summer, putting them up for auction to benefit from the competition. Accordingly, in 2007, Bishkek exported 200 million kWh to Kazakhstan at 1.52 cents per kWh. In summer 2009, as Uzbekistan had not signed an agreement for the purchase of Kyrgyz electricity, 540 million kWh were again exported to Kazakhstan at a price of 4.6 cents per kWh.

IMPLICATIONS: Uzbekistan’s withdrawal from the CAPS, which remains to be confirmed in practice, risks raising far more severe problems. The country produces half of the electricity re-distributed by CAPS and, in addition, often refuses to play its role as a transit country. It demands high transit fees, which impedes the profitability of the established systems of exchange, as it has done, for example, since 2007 to that between Tajikistan and Turkmenistan. Not having obtained an agreement on the transit tariff  – which has been kept a secret – Tashkent interrupted Turkmen deliveries in January 2009, on the grounds of an operational problem in the Karakul substation, but it refused to allow Tajik engineers to come and diagnose the problem and to help repair it. The electricity deliveries resumed in February after a meeting of the Tajik-Uzbek Commission of Economic Cooperation, but they are still regularly suspended.

The problems caused by Uzbekistan can in part be explained by the condition of its own electricity system. With a production capacity of 11,580 MW in 2008, Tashkent is the largest energy producer in the region after Kazakhstan. However, as in the neighboring states, its entire network is deteriorating; the stations are about thirty years old and require substantial repairs. A Reconstruction and Development Program of the electricity sector for 2001-2010 was supposed to determine the end-of-life date for the existing power stations and to construct new ones, but few changes can be observed. The country’s production levels have reduced in recent years, underlining just how urgent the need is to renovate the entire system, everything from the stations to the transmission and distribution networks. In 2010, demand could even exceed production. The country is therefore having difficulties in maintaining reliable operations, and even more in developing a regional electricity market. In addition, Tashkent has broadly failed in its strategy of partial privatization of the electricity sector: between 2005 and 2007, the tenders put out by Uzbekenergo have had no takers, as foreign investors have taken fright at the Uzbek government’s retroactive measures, at the high level of corruption, and at the maintenance of a low sale price policy for electricity.

Uzbekistan’s attitude toward CAPS can also be explained by the currently intrinsic relationship between the electricity market and water management. The Tajik government continues to declare that it alone will construct the Rogun hydroelectric station and reservoir, and has set aside US$190 million for the project from the 2010 budget. The Kyrgyz government, for its part, hopes to obtain the US$1.5 billion promised by Moscow at the beginning of the year in order to construct the Kambarata station. In transforming water into a geopolitical weapon, both Bishkek and Dushanbe intend to strengthen their position in the arm wrestle against Uzbekistan. For Tashkent, the long-term objective is to retard the emancipation in energy terms of Bishkek and Dushanbe, which are currently dependent on Uzbek gas, and to prevent itself from being weakened within the regional Central Asian game. After years of refusal, the Uzbek authorities today seem ready to envisage the construction of stations, if carried out under the international control of the UN, and perhaps hope to tip the balance in their favor in condemning the integrated electricity system, but such a game can be dangerous.

CONCLUSIONS: Energy is a geopolitical weapon that is used worldwide by many countries; the post-Soviet space is no different. However, this weapon could prove dangerous in Central Asia. The relations between Uzbekistan, on the one hand, and Kyrgyzstan and Tajikistan, on the other, are already very tense owing to the water question and they can ill afford new elements of conflict. In addition, the unprecedented energy crises into which these two states have plunged since 2007 are having drastic social consequences for the populations (a lack of heating in private and public places, closures of schools and companies, production slowdown, and export price increases), which will compound the effects of the global crisis and harm prospects of economic development.

AUTHOR’S BIO: Sébastien Peyrouse, Ph.D., is a Senior Research Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Center affiliated with Johns Hopkins University’s School of Advanced International Studies, Washington DC, and the Institute for Security and Development Policy, Stockholm. He is the co-author of China as a Neighbor: Central Asian Perspectives and Strategies (April 2009) and the author, co-author or editor of seven books on Central Asia in French.