Publication: Eurasia Daily Monitor Volume: 4 Issue: 194

Russian officials have announced plans to strengthen economic relations with Kyrgyzstan. Speaking at an October 12 session of the intergovernmental Russian-Kyrgyz Commission for Trade, Economic, and Technical Cooperation, Russian atomic energy chief Sergei Kiriyenko announced that bilateral trade is due to reach $1 billion in 2007 and eventually go up to $2 billion (Interfax, RIA-Novosti, October 12).

Russian officials have long sought to increase bilateral trade with Kyrgyzstan. According to Russian trade data, there was a 44% increase in commerce between Russia and Kyrgyzstan in 2006, with turnover reaching $806 million, and bilateral trade in January-August 2007 was up 75% over the same period last year.

Russia is focusing its interest on energy cooperation with Kyrgyzstan, Kiriyenko said, adding that Russian companies planned to finalize a number of important agreements by the end of this year. The Unified Energy Systems electricity giant, for example, is interested in supporting reforms in Kyrgyzstan’s power sector, as well as building the Kara-Kechin power plant, he said. Combined Russian investments in the Kambaratin-1 and Kambaratin-2 hydroelectric plants, as well as other projects, could exceed $2 billion, he added (Interfax, Itar-Tass, October 12).

In September 2005, Kyrgyz officials indicated interest in Russian investments in the construction of two major hydropower plants, Kambaratin-1 and Kambaratin-2. The projects were expected to involve investments worth billions of dollars eventually, but they have proved slow to materialize as both sides continue feasibility studies.

Russia remains Kyrgyzstan’s top trade partner, responsible for some 30% of Kyrgyzstan’s total foreign trade turnover. Trade between Russia and Kyrgyzstan was up by nearly five times between 2001 and 2006. The boost in trade volume came in the wake of Russia’s 2002 decision to write off some $40 million in Kyrgyz debt. In September 2005 Moscow agreed to restructure Kyrgyzstan’s $184 million debt and extended the repayment period for up to 33 years.

After talks with Kiriyenko, on October 12 Kyrgyz Prime Minister Almazbek Atambayev suggested giving Russia a 37.3% stake in the country’s major defense industry company, Dastan, in exchange for a $30 million payment and a write-off of the remaining debt. In response, Kiriyenko pledged to support Dastan by placing Russian military orders worth some $7 million (Interfax, RIA-Novosti, October 12).

Dastan was formed in 1993 on the premises of a Bishkek defense industry plant that once produced high-speed “Shkval” torpedoes and other military hardware. In September, the Kyrgyz parliament recommended that the government allow the transfer of the 37.3% stake in Dastan to Russian companies.

In the meantime, on October 12 Kiriyenko pledged to help Kyrgyzstan sort out its nuclear-related environmental problems. This year Russia is to start funding projects aimed at containing hazardous waste at former uranium mines, he said, adding that the first project would be implemented near Minkush (Interfax, October 12).

There are some 30 old uranium mines in Issyk-Kul, Naryn, and Jalalabad regions, sites where mining was stopped during the 1950s. However, waste treatment remains a challenging task in these areas, according to Rosatom.

During his trip to Bishkek, Kiriyenko also hailed what he described as positive cooperation at the Kara-Baltin uranium processing plant between the Kyrgyz side and Russia’s Renova group. The plant now has good prospects for dynamic development, Kiriyenko noted (Interfax, October 12).

In April 2006 Kiriyenko traveled to Kyrgyzstan to seek resumed production of processed uranium at the Kara-Baltin plant. The plant was virtually shut down in 2005, mainly due to lack of uranium ore supplies from Kazakhstan.

Moscow and Bishkek have had several top-level contacts recently. Russian President Vladimir Putin and his Kyrgyz counterpart, Kurmanbek Bakiyev, met on the sidelines of the Shanghai Cooperation Organization (SCO) summit in Bishkek on August 16. During the meeting, Putin reportedly pledged to invest up to $2 billion in Kyrgyzstan. Both leaders also had a bilateral meeting at the Commonwealth of Independent States summit in Dushanbe on October 6.

Putin and Bakiyev have repeatedly reiterated their allegiance to the bilateral friendship and cooperation treaty of June 1992 and “eternal friendship” declaration of July 2000. They also pledged to boost investment cooperation by creating a “most-favored” status for Russian companies operating in Kyrgyzstan.

Putin and Bakiyev adopted a joint statement in April 2006 that noted, “Volumes of economic cooperation do not correspond to the potential of the two countries and could be expanded substantially.” Putin and Bakiyev also agreed to support gas giant Gazprom and power grid monopoly Unified Energy Systems projects in Kyrgyzstan.

However, when in June 2007 former Kyrgyz prime minister, and now opposition leader, Felix Kulov suggested initiating a referendum on the possible creation of a union state between Kyrgyzstan and Russia, Russian officials proved reluctant to back Kulov’s idea. Therefore, Moscow appears keen to develop stronger economic ties with Kyrgyzstan, without committing itself to a closer political relationship with Bishkek.