As a small, poor and isolated country,
Kyrgyzstan, does not have the luxury of picking
its foreign partners. While its leadership
continues to look north to Kazakhstan and Russia
in determining its geopolitical orientation, and
to the West for some semblance of democratic
self-affirmation, it increasingly turns to China
for pragmatic economic cooperation, investment and
financial aid.
Kyrgyzstan's President
Almaz Atambayev paid a state visit to China in
June, precipitating a series of public statements
on policy toward Beijing and a number of
agreements that illustrate the increasing interest
of the Kyrgyzstani leadership in cooperating with
China.
After Atambayev signed a
preliminary agreement in China, Kyrgyzstan's
parliament approved on June 14 a US$389 million
soft loan deal with
China's Export-Import Bank, whereby the latter
will build a south-north electricity line and
improve related infrastructure. At 2% interest for
nine years, the loan is likely larger and cheaper
than one that might be offered by Western- or
Russian-backed development banks.
The
project is meaningful for Kyrgyzstan, as it will
allow the country to transit electricity from its
main hydropower station in southern Jalalabad
through its own territory to Bishkek and the
surrounding northern regions. Kyrgyzstan relies on
transit agreements with Uzbekistan and Kazakhstan
to power its north, as was intended for the
Soviet-era regional energy grid. Regular
accusations of electricity siphoning have brought
the sharing system to near collapse in recent
years and threaten to leave Bishkek and northern
Kyrgyzstan with severe power deficits in summer.
China's interest in the project stems from the
potential to import Kyrgyzstan-origin hydropower
during the summer season via the new lines.
Both sides expressed support for a curious
private Chinese investment in a small oil refinery
in the northern Kyrgyzstani town of Kara-Balta,
along with a minor oil pipeline from the nearby
city of Shymkent to supply the facility. Even at
full capacity, the facility will supply only 65%
of Kyrgyzstan's demand for refined fuel products.
However, the refinery will be the country's
largest, and will exist in isolation in a market
increasingly dominated by Gazprom.
Later,
back in Kyrgyzstan, the People's Liberation Army's
Deputy General Chief of Staff, Ma Syatoyana, met
Atambayev, where the latter issued the Shanghai
Cooperation Organization's boilerplate statement
on their shared threats of separatism, extremism
and terrorism.
Later, a cultural
delegation discussed China's increasing interest
in social ties. Confucian Centers sponsored by the
Chinese government are teaching Mandarin to
middle-class Kyrgyz at several Bishkek
universities. A Kyrgyzstani vice premier even
proposed establishing a Chinese university in the
northern town of Tokmok.
The leadership's
desires to build ties with China are
understandable. While China's practice of offering
investment on a quid pro quo basis is often viewed
with suspicion or derision by Russia and the West,
Chinese terms are generally more favorable than
those offered by the former. Kyrgyzstan is now
considering Chinese investment in a massive
hydroelectric project that Russia has dallied on
for years. China's demand for energy imports may
make it a more natural partner. Yet, considering
Kyrgyzstan's economic stagnation and record of
expropriations, Russia has good reason to remain
circumspect.
Russia's more recent tendency
to demand assets, such as the Dastan torpedo
factor or KyrgyzGaz distribution network, in
exchange for loan forgiveness can be nothing but
worrying for officials in Bishkek. Handing over
state assets such as these, even unprofitable
ones, can mean significant losses of revenue
streams for government patrons and allies.
And while Western companies may offer the
best technology to exploit the country's mineral
resources, the Kyrgyzstani parliament's most
recent flirtation with nationalization of the
Canadian-owned Kumtor Operating Co has sent yet
another warning shot across the bow of foreign
investors from further afield.
Chinese
terms become still more favorable considering the
lack of transparency inherent in China's soft loan
and concessionary infrastructure deals. Compared
with the auditing requirements and performance
targets required for financial assistance by
Western governments and development banks, the
opaque deals with Chinese government agencies are
more profitable for officials on both sides of the
signature page, regardless of the underlying
investment.
Such dealings with China do
not come without political risks for Kyrgyzstan's
leadership. One article in the Kyrgyz-language
press decried the "millions" of Chinese immigrants
that would enter the country with the construction
project, and described Atambayev as having set
Kyrgyzstan on course to becoming the
"Chinese-Kyrgyz Republic". Meanwhile, a youth
movement is petitioning to put the
China-Kyrgyzstan-Uzbekistan railway project to a
popular referendum.
Animosity toward China
is pervasive among Kyrgyzstanis across ethnic
groups, owing to Soviet-era prejudices and to the
Kyrgyz fears of lacking sovereign control of their
own destiny. Nationalist opposition politicians
have been quick to capitalize on the government's
carousing with China.
The Kremlin has
allowed Kyrgyzstan to court China, but its Customs
Union project and its insistence that Kyrgyzstan
sign on may ultimately limit China's economic
interests in the country.
In the interim,
while the Kyrgyzstani leadership approaches China
as a natural economic partner, it will continue to
raise the risk of instigating its restive streets.
Whether Atambayev and his ally, Prime Minister
Omurbek Babanov, can manage to attract significant
Chinese resources without risking their own power
- either to foreign intrigues or domestic unrest -
will likely be the principle foreign policy
question of their reign.
Myles G
Smith is an analyst and consultant based in
Central Asia.
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