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CENTRAL ASIA REPUBLICS REGIONAL
>> E&E Overview >> CAR Regional Overview Introduction
In November 1999, considerable progress toward agreement on a pipeline route was made with the signing of Istanbul Declaration and Intergovernmental Declaration on the Principles for Implementing the Trans-Caspian Pipeline at the Organization for Security and Cooperation in Europe Summit in Istanbul. Secretary of Energy, Bill Richardson, hailed these agreements as a "major foreign policy victory that advances America's national interest," reaffirming Central Asia's importance to the United States. U.S. assistance to the Central Asian Republics (CARs) promotes U.S. national security interests. The United States, an energy importing country interested in identifying diverse sources to meet its energy requirements, has a further interest in the CARs potential to become energy suppliers. This potential and the fact that the region's energy sectors are major contributors to global greenhouse gases warrant providing the CARs with assistance to improve energy efficiency and natural resources management, enabling the Central Asian nations to balance policies of economic liberalization with those of environmental protection and political liberalization. Such policies can help to maintain regional stability, safeguard the global environment, and foster a more enabling environment for investment and economic growth.The Development Challenge
The regional nature of many of Central Asia's development challenges requires coordinated and integrated assistance from USAID. The region's energy sector requires large amounts of capital in order to become a viable sector for U.S. investors and a sustainable source of energy supply. Further, Central Asian Republics must establish free market economies and a legal and regulatory environment that protects investments before American businesses can be expected to try to take advantage of these opportunities. In the petroleum sector, regional approaches are required to address the legal, economic, technical and environmental concerns surrounding offshore drilling in the Caspian Sea and development of the Trans-Caspian and Trans-Eurasian export pipelines. Much progress has been made on establishing a regulatory framework for petroleum development. However, work remains to be done on training and demonstrating techniques of environmental clean-up and energy efficiency, as well as the implementation and enforcement of regulations. The region's political and economic future, to a large extent, depends upon how these resources are managed and used.Another challenge confronting the development of the CARs' energy sectors is the Central Asian republics' low capacity to manage natural resources sustainably and efficiently. The region's energy sector is a major contributor to global greenhouse gases. The Government of Kazakhstan has taken a lead role among transition countries in dealing with this problem, both in the areas of energy and industry privatization, and in policy initiatives. However, the capacity to invest in cleaner technologies is currently beyond the means of most of the CARs.
Kazakhstan and Uzbekistan are major producers of greenhouse gases that contribute to global warming. Eighty percent of these emissions are attributable to the energy sector. Most of the thermal power and district heating installations burn high ash coal and thus discharge large amounts of pollution and greenhouse gases. Investment into cleaner technologies is presently beyond their means. Both countries would benefit from participating in global carbon trading programs as outlined in the United Nations Framework Convention on Climate Change. Participation could mean cleaner air and increased foreign investment in their energy and industrial sectors.
Achieving sustainable water management in the Aral Sea basin is another challenge facing all the Central Asian Republics, and an area in which the countries must improve their cooperative efforts. Regional, long-term, water sharing agreements are required to address the competing demands for water by Kyrgyzstan and Tajikistan for upstream power generation; and by Kazakhstan, Uzbekistan, and Turkmenistan for downstream irrigation. Adherence to such agreements also needs to be factored into the electricity sector privatization programs of the two upstream countries. Privatization will support the creation of a regional wholesale power market for the hydropower generated upstream. Privatization will also create an incentive for the upstream countries to enter into agreements on the release of water to the downstream countries.
Still another challenge faced in the CAR region is the increasing demand for water as population growth in the region continues, and economies recover more rapidly. This increased demand for water resources makes it especially important that regional agreements be in place, and that organizations have the capacity to implement the provisions of the agreements. Some confusion and, at times unnecessary competition, exist among regional water and energy organizations over functions and responsibilities in water resource management. This situation has required that USAID assume leadership in ensuring that both donors and local counterpart organizations collaborate effectively. Finally, regional water organizations must be in place and strengthened to collect reliable data for policy and management decisions on water allocation and conservation.
Inefficient water resource management in agriculture is a related water management problem that needs to be addressed. At the local level, 90% of the Aral Sea Basin water resources are used in crop production, through inefficient irrigation systems. USAID assistance is needed to train personnel, develop rational pricing policies, and to strengthen local user groups in order to transfer irrigation management from central government control to local water users.
With USAID support, the former Interstate Council for Kazakhstan, Kyrgyzstan, and Uzbekistan (ICKKU) - now the Central Asian Economic Community (ICAEC) - has grown in influence and capability to a truly region organization. The first, multi-year, water-sharing agreement for the Syr Dayra River Basin, a major tributary feeding the Aral Sea was signed in 1998 by the Prime Ministers of Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan as a result. ICAEC's strength was tested, and stood the test, recently when the Kazakhstan national, electric company cut a transmission line of the regional power grid over a tariff dispute. At the urging of the regional organization, the Kazakhstani Prime Minister ordered the line reconnected. USAID-funded specialists are now mediating the tariff issue. The regional agreement remains in effect.
In the petroleum sector, USAID assistance addresses legal, economic, technical, and environmental concerns surrounding offshore drilling in the Caspian Sea; onshore production in the region; and development of the Trans-Caspian export pipelines. USAID technical support led to Kazakhstan's adoption of tariffs for domestic oil pipelines that meet international standards. USAID provided assistance to the Governments of Kazakhstan and Turkmenistan to draft regulations for oil and gas operations.
USAID is working in close collaboration with several CAR governments to create National Environmental Action Plans. The initial focus has been on Kazakhstan, as this country has emerged as the regional leader in climate change mitigation activity. Due to USAID's advocacy, Kazakhstan was the first transitional country to announce its intent to take on voluntary commitments and binding greenhouse gas emissions targets. Kazakhstan plans to join the United Nations' Framework Convention on Climate Change and Annex B of the Kyoto Protocol.
USAID supports the privatization of the energy sector. However, the drop in international oil prices early in 1999 decreased the interest of the private sector in advocating for needed reforms. Only two governments supported energy privatization with any enthusiasm. In Kazakhstan, the electricity sector is well on way to privatization with help from USAID and other donors. In Kyrgyzstan, in spite of strong opposition, progress has been made. Without energy sector privatization, there are few market-based incentives to improve efficiency, reduce waste, and consequently lessen the environmental impact of the energy sector. Privatization will support the creation of a regional wholesale power market for the hydropower generated upstream, and will also create an incentive for the upstream countries to enter into agreements on the release of water to downstream countries.
Other Donors
In the environmental sector, particularly water management, USAID works closely with the World Bank (IBRD), Asian Development Bank (ADB), United Nations Development Program, and the European Union. In energy, the IBRD, ADB and European Bank for Restructuring and Development have sector restructuring loans in place.
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Last Updated on: February 05, 2001 |
