26.09.2017-02.10.2017 • No: 131 7

THE CHINA--UZBEKISTAN RAILWAY PROJECT: PROBLEMS AND PROSPECTS The China-Kyrgyzstan-Uzbekistan (CKU) delays in the implementation of the CKU rail- in 2006, $4.5 billion in 2012, and $6.5 billion railway project aimed to link Beijing with Cen- way project. in 2013. Since Kyrgyzstan was not able to tral Asia is among China’s main transportation In 2010-2011, the Kyrgyz side tried to resume cover the construction costs, the government policy priorities in the region. The CKU pro- talks on the CKU project with China. In fact, was considering permitting China to lease the ject, which has been on the agenda since the the issue was discussed during the visits of the new railway line, as well as the gold ore, alu- mid-1990s, is also of great importance for Kyrgyz high-ranking officials such as acting minum and iron deposits for 47 years in return China’s Belt and Road Initiative. Under the Foreign Minister of Kyrgyzstan Ruslan Kazak- for fully funding the construction of the CKU project, the railway would start in Kashghar in bayev, First Deputy Prime Minister of Kyrgyz- railway’s Kyrgyz section. However, the related China’s western Xinjiang Uyghur Autono- stan and Prime Minister of debates caused a negative public reaction in the mous Region (XUAR) and run through the Kyrgyzstan , who vis- country. From the political perspective, it is China-Kyrgyzstan border via the Irkeshtam ited Beijing on August 25-29, 2010, April 6-9, worth noting that other regional actors ham- pass and Kyrgyzstan’s Kara-Suu to Uzbeki- 2011 and September 14-16, 2011, respectively. pered the China-Kyrgyzstan-Uzbekistan rail- stan’s Andijan in the Ferghana Valley. Moreo- As a result, on April 17, 2012, an agreement on way project construction. For example, during ver, there is a possibility that the railway could the CKU railway project was signed between the CSTO Summit in Bishkek held in May be extended further to reach Iran’s territory. the Ministry of Transport and Communications 2013, Russia proposed the construction of the The project will create conditions for reliable of Kyrgyzstan and the China Road and Bridge Russia-Kazakhstan-Kyrgyzstan-Tajikistan cargo traffic via Central Asia and Western Company (CRBC). According to the agree- (RKKT) railway project, which could be con- China, especially the XUAR, becoming an im- ment, the Chinese company was required to sidered as an alternative to the CKU railway portant element of goods transportation from prepare a feasibility study report within the project. In fact, at that time President Atamba- China to Central Asia, West Asia, North Af- one-year period and submit its proposals to the yev recognized that the RKKT railway project rica, and even Southern Europe. Kyrgyz government in the first quarter of 2013. was more suitable for Kyrgyzstan than the The CKU railway project was first officially In this context, on May 4, 2012, the working CKU project. proposed in 1997 during the Transport Corri- committee and the China-Kyrgyzstan expert However, the further development of China’s dor Europe-Caucasus-Asia conference in Paris. group on the project held a joint meeting in Belt and Road Initiative, which has been on the The idea was to interconnect the railway net- Beijing. The representatives of the Ministry of agenda since 2013, along with the negative ef- works of China, Kyrgyzstan and Uzbekistan Commerce, Ministry of Foreign Affairs, Min- fects of the financial crisis in Russia on the and receive access to commercial maritime istry of Railways, Export-Import Bank, State Kyrgyz economy that still suffers from struc- routes through the railway networks of Af- Development Bank and other institutions at- tural weaknesses, compels Kyrgyzstan to in- ghanistan, Iran, Turkey and Europe. Consider- tended this event from the Chinese side, while crease the level of China’s investment. Under ing the importance of the railway connectivity the Kyrgyz side was represented by the Minis- these circumstances, the China-Kyrgyzstan improvement, the authorities of China, Kyr- try of Transport and Communications, Minis- talks on the issue of the CKU railway project gyzstan and Uzbekistan held a trilateral meet- try of Finance and other governmental bodies. have been put back on the agenda. For instance, ing in Bishkek on November 5, 1997, during On June 5, 2012, Chinese President Hu Jintao in May-June 2016, the trilateral consultations which the parties agreed to establish a joint and his Kyrgyz counterpart Almazbek At- between China, Kyrgyzstan and Uzbekistan on working committee and expert group on the ambayev, who had arrived to Beijing to partic- the project were held in Beijing. Moreover, the CKU railway project. As a result of the meet- ipate in the Shanghai Cooperation Organiza- September 2016 change of leadership in Uz- ing, a memorandum of understanding on the tion Summit, also discussed, among other is- bekistan and Tashkent’s efforts to improve re- joint project implementation was signed be- sues, the CKU railway project development. lations with China and the Central Asian coun- tween the Ministry of Railways of China, Min- However, despite those promising develop- tries have had a positive impact on the prospect istry of Transport and Communications of Kyr- ments, on April 19, 2013, Prime Minister of of the CKU railway project’s implementation. gyzstan and Ministry of Transport of Uzbeki- Kyrgyzstan announced As a result, on December 19-20, 2016, China, stan providing an opportunity for further inter- that the Kyrgyz government would not accept Kyrgyzstan and Uzbekistan continued the tri- state consultations. After the launch of the the feasibility study report prepared by the lateral talks on the project in Bishkek. Finally, China-Kyrgyzstan talks on the project in 2000, CRBC and submitted on March 14, 2013. Kyrgyz President Almazbek Atambayev and the Chinese side allocated 20 million yuan Moreover, during his speech at a press confer- his Uzbek counterpart Shavkat Mirziyoyev dis- (about $3.012 million) for a feasibility study of ence after the Collective Security Treaty Or- cussed the issue in Bishkek on September 5, Kyrgyzstan’s section of the railway. On Febru- ganization (CSTO) Summit held in Bishkek in 2017. ary 5, 2001, the Kyrgyz government proposed May 2013, President of Kyrgyzstan Almazbek To conclude, the CKU railway that could give building the Balykchy-Jalalabad-Torugart- Atambayev stated that the railroad would not the landlocked countries access to international Kashghar railway route as part of the CKU rail- be beneficial for Kyrgyzstan and Bishkek land and maritime transport lines has the po- way project. should refrain from participating in it. tential to carry 15-20 million tons of cargo per However, both the Tulip Revolution, which led There is a number of economic and political year via Kyrgyzstan. Cargo transit fees would to President Askar Akayev’s ouster in April reasons for Kyrgyzstan to postpone consulta- definitely contribute to the economic develop- ment of the country. The CKU railway project 2005, and the Andijan incident of May 2005 in tions on the launch of the China-led CKU rail- could not only bring benefits for the countries Uzbekistan had a negative impact on the CKU way project. From the economic perspective, along the route but could also promote the de- railway project development. Despite these ad- due to the difficulties experienced by the Kyr- gyz economy over the past years, Kyrgyzstan velopment of the regional and global markets. verse circumstances, in 2006, the Chinese gov- From this point of view, it is highly probable ernment reaffirmed its intention to complete could not meet its financial liabilities to cover the construction of the Kyrgyz section, most of that the China-Kyrgyzstan-Uzbekistan railway China’s section of the railway within the project will be built in the near future. framework of the 11th Five-Year Development which should pass through the Tian Shan Plan. However, the April 2010 ouster of Presi- Mountains. This will significantly increase the dent and the subsequent estimated cost of the project, which already in- clashes between ethnic Kyrgyz and Uzbeks in creased from $900 million in 1997 to $1.34 bil- southern Kyrgyzstan have resulted in further lion in 2001 with a further growth to $2 billion Written by Omirbek Hanayi, Eurasian Research Institute, Kazakhstan

the area to hold tactical and special ex- Politics, Foreign Affairs and Security  The Asian Development Bank (ADB) ercises. has approved a business plan for opera- .  During his official visit to Ankara, Pres- Economy, Finance and Energy tions in Azerbaijan in 2018-2020. It was ident of Russia Vladimir Putin agreed noted that the estimated cost of the ADB with his Turkish counterpart Recep  According to the Energy Market Regu- lending program for three years was set Tayyip Erdogan to take coordinated latory Authority of Turkey, Azerbaijan at $1.6 billion. The ADB’s funds will be steps for setting up and monitoring a exported about 3.94 billion cubic meters used for water, transport, energy pro- combat-free zone in Syria, while reaf- of gas to Turkey in January-July 2017, jects and public-sector management as compared to 3.8 billion cubic meters firming a commitment to build the projects. Turkish Stream gas pipeline and Tur- in the same period of 2016. It was also  President of Uzbekistan Shavkat Mir- key’s first nuclear power plant. The noted that Turkey imported 31.92 bil- ziyoyev signed a decree on measures to sides also agreed to continue lifting mu- lion cubic meters of gas in January-July further streamline Uzbekistan’s foreign tual trade, economic and investment 2017, 26.01 billion cubic meters of economic activity. According to the barriers. which were imported via pipelines, document, the rate of excise tax for new while imports of liquefied natural gas  During his official visit to Tashkent, automobiles manufactured and im- accounted for 5.91 billion cubic meters. President of Tatarstan Rustam Min- ported from Kazakhstan (except for Azerbaijan’s share in Turkey’s total gas nikhanov discussed with his Uzbek those intended for medical purposes) imports stood at 12.3% in January-July counterpart Shavkat Mirziyoyev the de- will be reduced to 2% of the customs 2017. velopment of economic cooperation be- value starting from October 1, 2017.

tween the Turkic republics, including  According to the State Oil Fund of Azerbaijan, the fund’s budget for 2017 Society and Culture the increase in trade turnover and the implementation of investment projects was adjusted. In accordance with the  President of Kazakhstan Nursultan Naz- currently approved budget, the fund’s in the oil and gas, petrochemical and arbayev signed a decree on the celebra- revenues and expenditures for 2017 are chemical industries, automotive and tion of the 20th anniversary of the capi- set at 8.3 billion manats and 14.4 billion mechanical engineering, pharmaceuti- tal city of Kazakhstan – Astana. Ac- manats, respectively. The revenues cals, agriculture, information technol- cording to the decree, the concept of from the sale of Azerbaijani profitable ogy and other areas. Astana’s 20th anniversary celebration oil and gas are forecasted at 7.5 billion  During his official visit to Baku, Turk- themed “Astana – the Heart of the manats, while income from oil and gas Country” is to be approved. ish Minister of National Defense Nuret- transit through the Azerbaijani territory  According to the State Registration Ser- tin Canikli discussed with President of is expected to reach 16.8 million vice of Kyrgyzstan, 35,110 people ob- Azerbaijan Ilham Aliyev prospects for manats. further strengthening cooperation be- tained the citizenship of Kyrgyzstan  According to the Ministry of Energy of tween the two countries with a focus on from 2010 until the first half of 2017. It Kazakhstan, the prognosis of oil pro- joint activity in the military-technical is also reported that 90% of new citizens duction in the country was updated to 85 field. are migrants from Uzbekistan and Ta- million tons in 2017 compared to 81  During his official visit to Astana, Rus- jikistan, while the remaining 10% are million tons forecasted in the beginning former residents of Russia, Kazakhstan, sian Deputy Prime Minister Dmitry of the year. It was also noted that gas Ukraine, Armenia, Azerbaijan, Turk- Rogozin discussed with Prime Minister production is expected to reach 48 bil- menistan, and Georgia. of Kazakhstan Bakytzhan Sagintayev lion cubic meters, while oil processing the expansion of bilateral cooperation in  President of Uzbekistan Shavkat Mir- will amount to 14 million tons. ziyoyev signed a decree on measures to the space industry. In particular, the par-  According to Prime Minister of Russia radically improve the management of ties discussed an upcoming meeting of Dmitry Medvedev, in 2017 a total of the pre-school education system. Ac- the Kazakh-Russian Intergovernmental 242 billion rubles ($4.1 billion) were cording to the decree, the Ministry of Commission for the Baikonur Complex. earmarked for the implementation of the Pre-school Education is to be created in  During his official visit to Tashkent, state programs promoting the develop- the country. The new ministry will de- Chairman of the Senate of the Parlia- ment of agriculture and the regulation of velop and implement a unified state pol- ment of Kazakhstan Kasym-Zhomart agriculture markets. It was also noted icy in the field of pre-school education. Tokayev discussed with President of that in 2016 Russia exported 27.1 mil- Uzbekistan Shavkat Mirziyoyev the is- lion tons of wheat, which made it the  Minister for Religious Affairs and Civil sues of further intensification of inter- world’s largest wheat exporter. In 2017, Society of Kazakhstan Nurlan parliamentary interaction, as well as the Russia plans to export 30 million tons of Yermekbayev and Director of the State Commission for Religious Affairs of promotion of promising projects and wheat. programs of mutually beneficial part-  According to Prime Minister of Uzbek- Kyrgyzstan Zaiyrbek Ergeshov signed a nership within the framework of inter- istan Abdulla Aripov, the country’s memorandum of cooperation in Bish- national and regional organizations. government will permit unrestricted kek. Under the document, the author-  According to official spokesperson of cash sales of foreign currency to indi- ized government bodies will cooperate the Russian Southern Military District viduals beginning October 1, 2017. The in the field of theological education and Vadim Astafyev, the special operations Central Bank of Uzbekistan devalued hold joint scientific and educational forces based in the Rostov Region were the national currency in September events aimed at the strengthening of the sent to the Kadamovsky military train- 2017 allowing its official exchange rate inter-faith dialogue. ing site near Novocherkassk. It was to drop to about 8,100 sums per $1 from noted that the forces were deployed to 4,210 sums per $1.

Prepared by Lidiya Parkhomchik, Dauren Aben, Daniyar Nurbayev