Tajikistan’s Energy Woes: Resource Barriers in Fragile States
There is finally good news coming out of Dushanbe this year: if all goes well, the capital of Tajikistan will probably get enough power to heat apartments and flats throughout the city, day and night. This marks a considerable improvement from previous winters when state mismanagement of utilities, combined with harsh weather forced severe restrictions in electricity to residential homes. During the winter of 2008 and 2009, electricity to the capital ranged from a few hours a day to none at all in the countryside. Pipes froze and daily water provisions were difficult for families to collect; those lucky enough to have diesel generators had at least some electricity, while most families used wood, coal and blankets to stay warm.
The good news coming out of the capital this winter, however, masks a deeper problem facing the country: Tajikistan cannot meet its residential electricity demands. Despite the good fortune of families in Dushanbe, Tajikistan cannot meet its power demands this winter—much of the country will receive only between 8 and 12 hours of electricity per day, while many rural towns will get little or none. Keeping warm will remain a challenge for many households and the continuing winter energy deficit will mean more hardships for millions of people in Tajikistan this winter.
Yet Tajikistan is not the only Central Asia nation that faces energy shortages. Among former Soviet states, Kyrgyzstan continues to face severe electricity shortages during the winter (Juraev 2009). Last year, in 2010, energy price increases associated with electricity sector may have been a leading cause of unrest in Kyrgyzstan (Daly 2010). Even oil rich Central Asian states face energy difficulties. Uzbekistan, for example, possesses large amounts of hydrocarbons, but they are going into the winter facing severe shortages of gasoline (Fitzpatrick 2010), while Kazakhstan continues to face chronic electricity shortages in the southern part of their country.
Energy shortages are indeed commonplace in Central Asia and they raise a fundamental question for policymakers: how can the energy sector be improved to provide more energy to the people of Central Asia? Using the Tajik experience as an example, this essay discusses the domestic and international challenges facing Central Asian autocrats in their efforts to meet energy needs in their countries. Tajikistan, for example, with its abundant hydroelectric resources needs to better access these resources; however, to harness hydro’s potential, Tajikistan must attract foreign capital and implement significant reforms to its power sector. Unfortunately, there are important barriers to this strategy: years of poor management within the electricity sector, along with weak property rights and high levels of corruption make raising significant capital in the near term unlikely. Tajikistan could import fuel or power from its Central Asian neighbors as an alternative to raising large amounts of foreign capital, but there are also practical obstacles facing them here as we shall see. Persistent international disagreements and an inherited energy system not designed for sovereign states, means more energy shortfalls and therefore more hardships for the foreseeable future in Central Asia.
Economic and Political Dimensions of Energy
Ninety-eight percent of electricity produced in Tajikistan is though hydroelectric power generation. Although hydroelectric power is relatively cheap, this dependence on hydropower results in seasonal fluctuations in production with electricity surpluses created during the summer months and deficits occurring in the winter months. This requires Tajikistan to find alternative sources of energy in the winter to supply sufficient heat and power to the population and it necessitates that Tajikistan secure international energy agreements to supply this power. As we shall see, such agreements have been difficult to achieve.
The Government of Tajikistan maintains exclusive control over the electricity system with no independent actors other than consumers. Barki Tojik, the vertically integrated state owned monopoly, controls all electricity production, transmission and distribution in the country. Despite its dominant position, the company faces serious commercial difficulties and is unable to supply sufficient electricity to meet residential demand. Power is rationed during the winter months while many rural areas receive only limited power during the summer. The quality of the service provided to customers is low with frequent power outages and large fluctuations in voltage that cause damage to appliances and other electrical devices.  There are large stranded losses each summer, because the company cannot get electricity to alternative commercial markets over its ageing, limited transmission infrastructure. Technical and commercial losses are extremely high—around 27%—three or four times the EU average (World Bank 2007).
The power sector in Tajikistan plays a dominant role in the economy. In 2009, the sector accounted for 4.7% of GDP; electricity is also a key input for the two most important exported goods in the country: aluminum and cotton. In 2004, these two industries accounted for 80% of total export earnings (Asian Development Bank 2010), and although this percentage has declined since then, they are still the most important domestic sectors for hard currency. These industries are also the source of commercial problems for the electricity sector. According to a recent report by the Asian Development Bank (World Bank 2010: 101), the main delinquents on electricity payment receivables in 2009 were Tajik Aluminum Company, the large state owned company also know as TALCO, ($22 million), the Ministry of Land Reclamation and Water Resources ($30 million), and water pumping stations ($4.7 million). The latter entities are associated with private production of cotton. These current debts from enterprises and the state are on top of old arrears. Although there is almost no documentation, interviews with industry analysts report that TALCO owes between $50 and $75 million in electricity arrears. No one knows the amount of arrears the government has failed to pay for electricity.
It is not only arrears in receivables and old debts that are causing fiscal problems within Barki Tojik and the power sector, the cost of electricity is extremely low—very likely below cost recovery levels. This means that energy production and distribution is not sustainable at the current price. The average residential price for electricity in Tajikistan is $0.02 per kWh, and even lower for many commercial enterprises. This is the lowest electricity tariff in Central Asia and along with Kyrgyzstan, the lowest among all post-communist states (World Bank 2010: 102).
The need for additional financial resources within the energy sector is crucial, but it is unlikely that the government is interested in reforming the tariff structure or restructuring the sector to make it more profitable to attract foreign capital. President Emomali Rakhmon, like other regional leaders in Central Asia, uses patronage associated with state controlled resources to co-opt opposition leaders and generate opportunities to increase the wealth of his ruling class. The electricity sector has proven to be a crucial resource for generating profits in other industries, while keeping citizens relatively satisfied with their (often meager) provision of energy. It is all part of the autocratic method of economic development. Provide people with small amounts of electricity at low prices, use electricity in domestic industries to generate profits for elites and postpone reforms as long as possible. It may not be a sustainable strategy for the power sector, but it has been a workable political strategy for many Central Asian autocrats.
International Issues over Resources
Another factor influencing the performance of the Tajik power sector includes international cooperation in Central Asia. Electrical production and transmission in Central Asia were not originally designed to function as separate autonomous systems. Instead, the Central Asian electrical system was constructed as a part of the Soviet system where regions traded water for fuel and electricity. This regional system is now in crises, facing multiple obstacles for providing reliable energy in Central Asia states. Although the reasons for this international crisis are complex, the inability to cooperate is directly related to diverse bilateral disputes and resources competition between the states. Without a more cooperative regional approach, additional resource frictions can be expected to continue between Central Asian countries.
International Conflicts on Energy and Water
The electricity system of Central Asian oblasts was designed by the Soviets and managed by a regional transmission operator in Tashkent. It is referred to as the Central Asian Power System (CAPS). In spite of optimism by US officials (Feigenbaum 2007), this regional system has all but collapsed. In October and November 2009, Kazakhstan and Uzbekistan stated their desire to end participation, although they have yet to formally announce it. Turkmenistan already has withdrawn. Whatever the current significance of CAPS, without any new bilateral or multilateral energy agreements, it will be difficult for Tajikistan, Kyrgyzstan and Uzbekistan to provide reliable energy supplies to their population in the near term.
Conflicts between Uzbekistan and its neighbors are perhaps the most serious regional problems among states in Central Asia. In 2008 and 2009 there were extensive and crippling power shortages in Kyrgyzstan and Tajikistan. To make up the winter shortfall, Tajikistan reached agreement with Turkmenistan to buy 1.2 billion kWh of power during the winter months. However, Uzbekistan interrupted Turkmen electricity deliveries to Tajikistan on January 1, 2009 because of ‘technical problems’ in their Karakul substation. Although negotiations continue, there is no bilateral agreement between Dushanbe and Tashkent to transmit additional electricity from Turkmenistan to Tajikistan through the Uzbek power grid. In the meantime, Tashkent has increased railroad duties and all but stopped railway shipments into Tajikistan.
Conflicts over energy are only a part of long standing disputes between both governments over issues ranging from territory and trade, to energy and water. However, the most current manifestation of this long-term dispute is related to Dushanbe’s stated desire to fulfill plans to continue construction on the massive hydroelectric Rogun Dam on the Vakhsh River. Although completion of this facility remains only a possibility, if completed, it would give Tajikistan considerable advantages at controlling water down stream, which could threaten Uzbek agriculture, especially its crucial cotton exports. Uzbekistan vigorously opposes the project and it has taken steps during the past year to pressure Tajikistan to end the project.
Central Asia’s Resource Dilemma
These recent conflicts between Uzbekistan and Tajikistan illustrate a fundamental resource dilemma faced by countries in Central Asia since the fall of the Soviet Union. Downstream countries like Turkmenistan, Uzbekistan and Kazakhstan want access to greater water resources in the spring and summer to support agriculture. The upstream countries such as Tajikistan and Kyrgyzstan depend almost exclusively on hydroelectric power; upstream states therefore have an interest in storing water in the spring and summer to maximize energy generation potential during critical months in the winter, when river water flows decrease. In terms of water resources, Tajikistan and Kyrgyzstan have greater advantages because they can potentially control water flows from the heads of Central Asia’s major rivers on their territories during the spring and summer. This illustrates why the government of Uzbekistan is so concerned about Rogun.
Although Uzbekistan (and to a lesser extent Kazakhstan) face energy shortages, downstream countries have access to hydrocarbons to help generate power in the winter or have access to other electricity markets in the region. So during the winter months, downstream countries have greater resource advantages because they can produce a surplus of electricity or heat for export. These differences in resource demands illustrate asymmetric resource power among upstream and downstream countries in Central Asia. The downstream countries have hydrocarbons but need water in the summer; the upstream countries have water in the summer but need hydrocarbons in the winter. Resource advantages are seasonal and resource needs are competitive—asymmetric at best and zero-sum at worst. These different resource needs suggest future competition and friction unless broader international agreements are crafted by Central Asian states.
The legacy of Soviet infrastructure combined with regional energy disputes and internal dysfunction within the electricity sector has eroded the reliability and availability of energy in Central Asia contributing to chronic energy crises in Kyrgyzstan and Tajikistan. The three largest states in Central Asia—Turkmenistan, Uzbekistan and Kazakhstan—have greater resource leverage over the smaller states on energy. Tajikistan and Kyrgyzstan are directly dependent on hydroelectric power and require electricity and hydrocarbon imports during the winter to meet power demands. Without such imports, both countries are unable to meet domestic power needs in the winter and must ration electricity. These factors illustrate that solutions to Tajikistan’s energy shortages cannot easily be solved in a short time period. International cooperation needs to emerge, along with much greater investment in domestic infrastructure. This requires long range planning and leadership by Central Asian and Western governments, with a strong commitment to sector reforms by the government of Tajikistan.
The electricity sector in Tajikistan has features common to other Central Asian states: the sector is commercially unprofitable with tariffs generally below cost recovery levels; the sector is also poorly regulated by the government and suffers from technical problems due to under investment in equipment and infrastructure. These problems have resulted in chronic electricity shortages associated with declines in electricity production as well as the negative development effects of insufficient power.
Countries that have failed to make any meaningful reforms in their energy sector are now caught in a vicious domestic cycle of infrastructure decline. Low tariffs, high technical and financial losses have resulted in declines in electrical service, power outages and higher operating costs. Declines in service by state run monopolies have reinforced already resistant customers to pay higher prices for electrical services that have declined. Without higher tariffs and increased receivables, cost recovery becomes more difficult to achieve. Governments cannot attract external investors, when the sector is losing money and property rights are perceived as weak. It is a vicious circle of decline.
President Rahmon of Tajikistan, like other regional leaders, is caught between a rock and a hard place: he cannot indefinitely extract resources from the electricity sector while keeping tariffs low without sacrificing the long term sustainability of the sector. Without additional foreign investment and long term cooperative agreements between other Central Asian states, it is unlikely they can keep electrical systems fully operational in terms of production or distribution or provide sufficient amounts of electricity to their populations. They are eroding the commons collectively provided to them under the previous Soviet system. They are taking too much out of the electrical system, without putting enough back in, so that the future integrity of the system is at risk with the possibility of more cold winters for many families.
Michael Cain is currently a Professor of Political Science at St. Mary’s College of Maryland. He will be on leave studying energy issues in China at the University of Macau in 2011. He can be reached at email@example.com. The research for this article was supported in part by a fellowship from IREX (International Research & Exchanges Board) with funds provided by the United States Department of State. The views expressed here do not necessarily reflect the views of these organizations.
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