Asian Infrastructure Investment Bank (AIIB) intends to co-finance the Rogun Hydro in Tajikistan?

Asian Infrastructure Investment Bank (AIIB) intends to co-finance the Rogun Hydro in Tajikistan?

President Emomali Rahmon starts construction of Rogun Hydro in 2016

The AIIB announced that it is joining the ADB and EBRD in an effort to build a 76 kilometer road and a bridge in Tajikistan. One would wonder why three multilateral banks are needed for such a small ordinary task? The answer is simple – they are helping the Central Asian autocracy to legitimize its unsustainable hydropower mega-project – potential source of major water conflicts in the region. This also may be paving the way for real large donor coming to the project’s rescue.

The Obigarm-Nurobod road section of the existing M41 highway will be inundated once the Rogun Hydropower Project (HPP) reservoir is filled to operating levels and will require construction of a new 76-km M41 highway alignment through mountainous terrain. Task is divided in three sections between AIIB, EBRD and ADB. The AIIB will support Section 3 consisting of an approximately 800-m bridge over the Rogun Hydropower Plant Reservoir, and 640 meters of roadway approaching the bridge, near the town of Nurobod.

The Rogun, 335 meter-high dam on Vaksh (Amu Darya) River, which may support 3,6 GW hydropower capacity, has been for a long expected to distort already problematic water regime in the Aral Sea basin. It may reduce summer flow used for irrigation by seasonal redistribution of water release to winter months. Late President of the downstream Uzbekistan, Islam Karimov, once threatened a war if the dam is to be built. This helped to freeze the project at least for a decade. His successor seems not to understand fully the consequences of the water flow distortion for agriculture or believes that Tajikistan will never have capacity to complete the project.

According to CABAR information agency, this HPP construction for the authorities of Tajikistan is more than just a regular project. It has important economic, social, propaganda and geopolitical components. However, the plant is a “Trojan horse” left half-built by late Soviet regime, thus locking small mountain country on unsustainable development path. For a decade and a half, Tajikistan officials have failed to find sources of funding to complete the Rogun hydropower plant construction.

World Bank once supported a very questionable assessment of the project impacts, by which it was largely aiming to secure energy supply for the planned CASA-1000 transboundary transmission line from Tajikistan and Kyrgyz Republic to Afghanistan and Pakistan. Politicized energy trading scheme, which is stalled today for political and financial reasons, was born out of “New Silk Road” deal for Central Asia, once designed by Hillary Clinton. However, the World Bank always refused to invest directly into Rogun hydro construction  due to obvious financial flaws and poor governance mechanisms. National debt of Tajikistan stands above 66% of its GDP and this project has dim prospects of facilitating debt repayment.

Nevertheless, President Emomali Rahmon made the Rogun a symbol of his rule and once even forced local population to subscribe to USD 60-mln “Rogun bonds”. However, after 10 years of efforts the project is still short of USD 4 bln needed to complete construction.  USD 200-400 million have been allegedly spent annually to support the construction in 2016-19. But progress is very modest: the country so far enjoys annual celebration dedicated to the launch of temporary turbines which capacity so far reached almost 5% of planned capacity of the full hydropower project.

Who else may come to help? Both Russians and Saudis were considering involvement in Rogun, but backed out for obvious lack of guarantees of any satisfactory outcome. Ukraine firmly stands beside Tajikistan in this hopeless task for a simple reason that its major machinery-making corporation  since Soviet times is responsible for producing turbines for this megaproject.

Chinese companies are step by step solidifying their involvement in the mega-project. Initially Chinese state-owned corporation were involved in development of high-voltage transmission facilities which  connect various parts of Tajikistan to Rogun and to electricity export grid. Later some minor Chinese companies became involved as subcontractors at the construction site allegedly hosting 20000 workers. Finally, starting from late 2018 high-level delegations of the largest Chinese hydro-engineering corporation “Power China” started paying regular visits to Dushanbe to discuss “best way to proceed with Rogun Hydro Project”. For example, in April 2019  such delegation consisting of Wang Yongqiang, deputy general manager of China Power Construction International Corporation, accompanied by delegates from  China Export Credit Insurance Corporation, Bank of China and other relevant agencies visited the representative office of Power China in Tajikistan. “During the visit, Wang Yongqiang and representatives of the China Export Credit Insurance Corporation and the Bank of China conducted in-depth consultations with the government departments of the Ministry of Finance and the Central Bank of Tajikistan on the investment and financing of the Rogun Hydropower Project and the project design plan.”

Given high political controversy surrounding the project, Chinese involvement has not been hailed as “advance of the Belt and Road”, which makes it somewhat similar with much smaller Batang Toru Hydro in North Sumatra, Indonesia, where Bank of China without much fuzz pledged to finance (and Power China’s subsidiary to build a dam) in the only known habitat of newly discovered ape species –Tapanuli Orangutan. The difference is that in Sumatra the controversy was not obvious when the project started, while problems of Rogun Hydro are described in water management textbooks.

What happens next? As the ADB, AIIB and EBRD  take on financing road construction, which is  one of the necessary mitigation measures within Rogun Hydropower Project realm, the Government  of Tajikistan will praise this move as long-awaited participation of multilateral development banks in the construction of the troubled dam. And technically speaking, this will be 100% true, whatever innocent faces those financiers will try to make.

Such “international acceptance” will allow the Power China and supporting Chinese financing bodies to act more openly and fully support Rogun Dam completion.

This in turn will allow the World Bank to push further for completion of CASA 1000 transmission lines all the way to Pakistan, where local governments started doubting reliability and economic validity of the scheme. A new Taliban government will find handy the inflow of 50-million transit fees as timely help to building new theocratic regime in Afghanistan.

Finally swollen national debt of Tajikistan, with more than 50% of it to be paid to Chinese financiers, will give the US and European countries new excuse to talk loudly about the “debt trap” in which “China pushes  BRI countries”.

Everyone will be happy, but for millions of people in downstream areas of Central Asia, who may soon experience exacerbated water shortages and declining crop yields, which may lead to a new wave of tensions in this already problematic area.