BISHKEK COURTS ASTANA FOR BIG INVESTMENT

Kyrgyz President Kurmanbek Bakiyev paid an official visit to Astana, Kazakhstan, July 4-5 at the invitation of Kazakh President Nursultan Nazarbayev. Bakiyev was given an exceptionally warm, brotherly welcome, and he was obviously satisfied with the outcome of his visit, despite some difficult talks on energy issues and border protection. Discussion on both topics will continue.

The two sides focused on trade and economic, financial, and humanitarian cooperation, and they also discussed ways to invest in Kyrgyzstan’s crippled economy. Bakiyev noted that, despite the economic chaos in his country resulting from political turmoil, Kazakh investments in the Kyrgyz economy have doubled since 2004, now reaching $200 million. The Kyrgyz president rightly described Kazakhstan as “the number one investor” for his country (Kazakhstanskaya pravda, July 5).

At least in economic ties, Kazakh-Kyrgyz relations have surpassed the relationship that existed under former Kyrgyz president Askar Akayev. Astana accepted the March 2005 Kyrgyz Tulip Revolution as a fait accompli and pragmatically rushed to recognize the legitimacy of Bakiyev’s presidency in light of the two countries’ interdependent economies. In the first quarter of this year the trade volume between the two countries reached $61.8 million, a 10.4% increase over to the same period in 2005. Kyrgyz exports to Kazakhstan rose by 34.3%, for a total of $24.3 million. The rising trade volume places Kazakhstan Kyrgyzstan’s second-most important trade partner, trailing only Russia.

Even so, relations between the two ethnically related neighbors are not problem free, as a recent meeting of the Intergovernmental Commission for Bilateral Cooperation, held before Bakiyev’s arrival in Astana, made clear. Representatives of the Kazakhstan Electricity Grid Operating Company (KEGOC) raised the thorny question of Central Asian power lines, which run through Kazakhstan and which Kyrgyzstan uses to transmit its electricity. KEGOC insists that the Kyrgyz government should conclude an agreement with Kazakhstan on electricity transmission fees, but the Kyrgyz side is reluctant to agree on the grounds that the Central Asian electricity grid was recognized as the common property of all Central Asian republics in Soviet times.

Eventually the two sides reached a compromise solution: the Kyrgyz government accepted KEGOC’s claims, but at the same time Bishkek demanded that Astana repay the millions of dollars Kazakhstan still owes for electricity supplied in early 1990s. Astana argues that the debts were paid in-kind by delivering 400,000 tons of coal from Kazakhstan in 2002 and 2003.

However intricate the problems of energy cooperation, Bishkek and Astana have no alternative but to find mutually acceptable solutions. South Kazakhstan needs Kyrgyz electricity as much as Kyrgyzstan needs Kazakh investments to help build the Kambarata-1 and Kambarata-2 hydropower stations that are vital for the Kyrgyz economy. Kyrgyz Deputy Prime Minister Daniyar Usenov believes Bishkek could lease the Kirov water reservoir to Kazakhstan to produce electricity. Such a deal would bring in the big investment needed to upgrade electricity facilities in Kyrgyzstan (Aikyn, July 4).

Bishkek, crippled by an acute shortage of diesel oil, hopes for regular fuel deliveries from the Shymkent refinery in South Kazakhstan. But Kazakh suppliers are reducing oil deliveries to their Kyrgyz neighbors. In the first half of this year the Shymkent oil refinery delivered only 25,000 tons of fuel, a drop in the sea compared to the 400,000 tons supplied in previous years (Express-K, July 4).

However, it seems that Astana has few available funds to pour into the energy projects offered by Bishkek. The government is contemplating construction of the Moynak hydroelectric power station in South Kazakhstan, a project that will cost $250 million. If implemented successfully, Kazakhstan would then be able to potentially to export its electricity to China.

In Astana Bakiyev promoted Kyrgyzstan’s Issyk Kul resort region and all of Kyrgyzstan as attractive destinations for foreign tourists. Tourism seems to be among the few sectors that promise palpable financial benefits to the Kyrgyz economy, although the Kazakh government is in no hurry to start construction of a highway to Issyk Kul through mountainous areas, because the price tag is too steep even for the thriving Kazakh economy. During Bakiyev’s visit the two sides signed an agreement that settles a decade-long row over ownership rights regarding resort houses on Lake Issyk Kul and recognizes the vacation sites as property of the Kazakh government. Clearly, at the moment these facilities are a burden to Kyrgyzstan’s tight budget.

The two sides also signed agreements on labor migration, border control and security information sharing, education, and training Kyrgyz border guards in Kazakh military academies. They also adopted a joint statement on cooperation. Bishkek is also increasingly aware of the security dimensions of cooperation with Astana, particularly after the March 12, 2006, armed incursions by Islamist militants on the border area with Tajikistan and Uzbekistan. Speaking at the summit of the member states of the Conference on Interaction and Confidence Building Measures in Asia (CICA), held in Almaty on June 17, Bakiyev remarked that the countries of the region should concentrate their efforts primarily on border security and the fight against terrorism. In this matter Bakiyev gets Astana’s full support.