Shifting Regional Dynamics Force Russia to Suspend Promised Loan to Kyrgyzstan

The financial crisis and energy deficits have significantly exacerbated political and economic tensions in Kyrgyzstan. It is in these circumstances that the Kyrgyz leadership secured a $2.15 billion package from Russia in 2009, allegedly in exchange for the closure of United States base from the country, but now faces the suspension of the $1.7 billion promised loan for the construction of the Kambarata-1 power station (www.24.kg, January 26, February 18, 20). However, given the continuing and expanding United States presence in Central Asia, improved prospects for US-Uzbek military rapprochement, intensified regional water problems, and China’s growing regional influence, Moscow’s decision to withhold the loan should not come as a surprise.

However, it did appear to reflect Moscow’s concern about misuse of funds by Kyrgyzstan. As the First Secretary of the Russian Embassy to Kyrgyzstan, Vitaliy Skrinnik, suggested, the suspension was due to “misallocation” of previously disbursed $450 million through the fund that “could provide loans to others willing to make some extra cash.” Russian Energy Minister, Sergei Shmatko, has in turn made it clear that Kyrgyzstan should have provided a feasibility study on the Kamabarata-1 project before it could receive the funds (www.24.kg, February 18; Belyi Parus, February 17; “Zentr Aziia, February 18). Meanwhile, reports have circulated about the deterioration of Kyrgyz-Russian relations, which Kyrgyz Prime Minister, Daniyar Usenov, dismissed as rumors, especially in the context of the recently adopted Kyrgyz-Russian economic cooperation program for 2010-2011 (www.24.kg, January 3, February 24, March 1).

Indeed, spoiling relations with Moscow might be out of the question for Kyrgyzstan given the country’s weak regional and domestic position. Exploiting Russian regional geopolitical perceptions and vulnerabilities –something the Central Asian states have been particularly good at– is not. Thus, it remains to be seen whether the reported US-Kyrgyz deal on opening an anti-terrorist training center in southern Kyrgyzstan will persuade Moscow, already worried about Uzbekistan’s leanings to the West, to deliver the promised loan to Bishkek, or actually distance itself and other neighbors from the country (Uzinform, March 8).

For now, however, the “replacement” of the US base at Manas with the “transit center” has not changed Moscow’s disposition to Kyrgyzstan. This much was clear in the alleged conversation between Putin and Usenov published in the “Belyi Parus” internet newspaper, in which the former reportedly quipped that, as in the case of changing the capital’s name from Frunze to Bishkek, the essence of the situation at Manas remained the same (Belyi Parus, December 4, 2009).

As a result, without Russian support, Kyrgyzstan finds itself hard pressed to construct the Kambarata-1 station and rectify its energy deficits. This makes gas-rich, but water-needy, Uzbekistan more content, particularly given Moscow’s position that Tajikistan and Kyrgyzstan consider the interests of their neighbors on water projects, including the Kambarata-1 (Belyi Parus, February 17; www.24.kg, January 26; ENS, February 13, 2009). This Russian concession to Uzbekistan is also tied to the expanding US-Uzbek cooperation following the Andijan events and the West’s criticism that preceded the eviction of the US base from Kharshi-Khanabad in 2005.

Today, Washington and Tashkent want to collaborate, including on the Northern Distribution Network (NDN), given the former’s commitment to disengage militarily from Afghanistan by 2011 and the latter’s concerns about the resulting impact on regional geopolitics and security. In this light, Uzbekistan’s record of an unsteady foreign policy toward major powers raises concern in Moscow over the prospect of US-Uzbek military rapprochement while the US military continues to use Manas, despite its alleged Kambarata-1 deal with Kyrgyzstan.

More broadly, Moscow also senses that its control over Central Asia’s energy resources and exports is weakening in light of Western and Chinese regional energy schemes and attempts by the Central Asian states to pursue independent foreign policies. Securing the participation of the regional states in major projects is therefore imperative for Moscow, which has become more careful and skilful in balancing the interests of water-abundant and gas-rich states in the region. Thus, the suspension of funds to Kyrgyzstan is in some measure a way for Russia to placate Kyrgyzstan’s neighbors (ENS, February 4, 2009; www.24.kg, October 23, 2009).

Finally, withholding these funds helps Moscow to exercise influence on both upstream and downstream countries without substantially jeopardizing its relations with either, while keeping the regional states “on the hook” and “letting them go” when expedient. However, Chinese-Central Asian cooperation on hydropower, energy projects and the expanding role of the US in this sphere, including through the reported anti-terrorist center in Kyrgyzstan, have already started to undermine Russian leverage.

Moscow’s concerns about the use of funds notwithstanding, the changing regional dynamics (intensified water disagreements, growing regional involvement of China, expansion of the Uzbek cooperation with the West and the NDN, as well as the ongoing and possible increase in the US military presence in Kyrgyzstan) compels Russia to be cautious about Kyrgyzstan’s policy course in the shifting geopolitical contours of Central Asia. The suspension of funds to Kyrgyzstan, may help Russia keep both the tricky Kyrgyz and unruly Uzbeks closer in line as it seeks to shore up its declining strategic influence in the region.