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BOO: It's Scarier Than You Think

The Sangtuda-1 hydropower plant on the Vakhsh River in Tajikistan. (file photo)
Cash-strapped countries of the world have an option to alleviate their domestic energy shortages: BOO -- Build, Own, Operate. It comes with the promise of a better future but as is true of most things, it also comes with a price tag. In the case of Central Asia, the price for a BOO scheme is giving Russia the biggest strategic edge in the region.

BOO is usually, though not always, seen in poorer countries. A private entity guarantees the funding and construction of a major project, then retains ownership and operates the completed project until the private entity regains all its investment, plus a profit.

Kyrgyzstan and Tajikistan have enormous hydropower potential but do not have the finances to take advantage of this resource. They have opted to allow foreign, state-owned companies to come and construct massive hydropower plants (HPP) on their territories. Leaders of the two countries promise their people -- who once again are facing heating and electricity shortages this winter -- that these projects mean an end to electricity rationing. And one day they might.

But in Tajikistan it has not worked out that way just yet. The Russian company Unified Energy Systems (UES) built the 670-megawatt Sangtuda-1 HPP some 160 kilometers southwest of Dushanbe and the Iranian company Sangob constructed the 220-megawatt Sangtuda-2. UES spent some $720 million and, though the total amount is not clear, Sangob has spent at least $180 million.

Sangtuda-1 is sort of "BOO light." The Russian government owns 66.39 percent of the hydro-plant, UES 14.92 percent, UES subsidiary Inter RAO 2.24 percent, and the Tajik government the remaining 16.45 percent. The plant has four units (which will be important to remember later on).

The fourth and final unit was launched in May 2009. That same month, the plant's management warned Tajik authorities about an unpaid bill of some $18 million. In February 2013, Sangtuda-1's management threatened to suspend operations over $66 million in unpaid bills sparking a debate in the Tajik parliament as to whether Tajikistan had a right to use one generator since the government owned 16.45 percent of the HPP.

Astronomical Sums

By late July 2013, independent Tajik news agency Asia-Plus reported that the country's national power company, Bark-i Tojik, owed a combined $100 million bill for electricity provided by the Sangtuda-1 and Sangtuda-2 HPPs. Tajikistan's state budget for 2014 comes to less than $3 billion, so the state power company's debt represents an astronomical amount of money for the country.

RFE/RL's Tajik Service, Radio Ozodi, reported in early January that Sangtuda-2 suspended power generation for "technical reasons" but an official at the Iranian Embassy in Dushanbe suggested that, if Tajikistan's debt to the power plant, reportedly somewhere between $12 million and $27.8 million, was paid, the problem could be resolved quickly. The Tajik news agency Ozodagon reported on January 30 that the Tajik Minister of Water and Energy Resources Usmonali Usmonov said the plant would resume operations after "technical inspections" were completed, but he did not say when that would be.

Kyrgyzstan completed a deal in 2013 for Russia to build the Kambar-Ata-1 HPP, with a 2,000-megawatt capacity and estimated cost of some $2 billion. The Russian company RusHydro is building the four generators for the HPP and Inter RAO, with a 75-percent stake in the project, will oversee operations. Inter RAO will maintain its 75-percent stake until the project breaks even, after which the Russian company and the Kyrgyz state will share the profits evenly. When the project will break even is difficult to say.

Some Kyrgyz politicians, notably the head of the Ata-Meken party Omurbek Tekebaev, warned against the deal pointing to Tajikistan's circumstances and Kyrgyzstan's own disadvantageous situation with the Kumtor gold mine in the northern part of the country, where, again, a foreign (Canadian) partner is reaping the profits while Kyrgyzstan receives little.

But after these projects are completed and, possibly decades in the future, when BOO becomes BOOT – Build, Own, Operate, Transfer – Kyrgyzstan and Tajikistan should not only be able to provide electricity to their populations, they also should have large surpluses that they can export. (That's part of the CASA 1000 project and doesn't figure in this article.)

Lord Of The Waters

It has been noted that, for Russia, the HPP projects in Kyrgyzstan and Tajikistan are of dubious business value. Some believe the Kremlin has political motives for getting involved in these projects, a way to bind Kyrgyzstan and Tajikistan closer to Russia.

That seems likely, but one could take this attempt at strengthening influence a bit farther.

In Central Asia the ability to give water, or withhold it, even partially, is a huge edge. By owning and operating Sangtuda-1, on the Vakhsh River, a major tributary of the Amu-Darya, and Kambar-Ata-1, on the Naryn River, a major tributary of the Syr-Darya, Russia in effect has control over a large amount of water that pours into Central Asia's two largest rivers. In a largely arid region where nothing is as valuable as water, the implications for downstream countries seem obvious.

One of those downstream countries, Uzbekistan, has been particularly resistant to Russian influence in the region since the collapse of the Soviet Union and several times since late 1991 has opposed Moscow's moves in Central Asia, at times trying to counter them by courting better ties with rival world powers, usually from the West.

The Uzbek government has been loudly protesting large HPP projects in Kyrgyzstan and Tajikistan on the grounds that these power plants and the reservoirs needed for them could disrupt water to Uzbekistan's agricultural fields. Uzbekistan's President Islam Karimov went so far as to say that the misuse of the region's water supplies could be grounds for war.

It's the kind of tough talk that the Kyrgyz and Tajik governments must take seriously, but not the Russian government.

-- Bruce Pannier with contributions from Iskander Aliyev and Sojida Djakhfarova of RFE/RL's Tajik Service

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