Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
CENTRAL ASIA REGIONAL
FY 1997 FY 1998 FY 1999 Actuals Estimate Request FREEDOM Support Act............... $600,000 $4,400,000 $9,000,000 Introduction
Assistance to the Central Asian Republics (CARs) is supportive of U.S. strategic interests in terms of national security, economic prosperity, and sustainable global environment. Most importantly, as an energy-importing country, the U.S. seeks an increasingly diversified energy supply. It is also recognized that patterns of energy sector investment and energy use in Central Asia will significantly influence the future political and economic independence of the region. Moreover, these investment and use patterns can hasten or delay Central Asia's emergence as a major petroleum producer in the 21st century, rivaling the Gulf region in its importance to international oil and gas markets. Significant trade and investment opportunities for American business can be provided by growing, market-based economies in the region that are fueled by efficient exploitation of energy resources. Transboundary cooperation on addressing key environmental issues will help assure regional political and economic stability.
The Development Challenge
Particularly in energy and the environment, many of the development challenges facing Central Asia are regional in nature, and require a coordinated response by USAID. Programs for sustainable development of the hydrocarbon resources in the Caspian and Aral Sea Basins, and sustainable water management and electricity trade/contracting in the Aral Sea Basin are specifically focused on interrelated, transboundary issues addressable only through regional cooperation. In the petroleum sector, for example, the legal, economic, technical, and environmental issues of offshore drilling in the Caspian Sea and development of major Transeurasian and Transcaspian export pipelines from Central Asia need to be resolved.
In the water/energy complex, long-term water sharing agreements must address competing uses of water for upstream power generation in Kyrgyzstan and Tajikistan against downstream irrigation needs in Kazakhstan, Uzbekistan, and Turkmenistan. Adherence to such agreements must be factored into the electricity sector privatization programs of the two upstream countries. Privatization in turn will create incentives for the creation of a regional wholesale power pool which will provide a market for hydropower generated upstream, thus increasing those countries' willingness to enter into agreements on the release of water to the downstream countries. USAID has technical advisors in the five countries of the region working with the counterpart entities charged with overseeing the various water and energy subsectors.
Other Donors
The World Bank, the United Nations Development Program, and the EU are heavily involved in environmental efforts in the region. In addition there is substantial collaboration with a wide range of officials at the local and national levels.
FY 1999 Program
Two strategic objectives are proposed as regional objectives since they involve transborder issues and cooperation for their resolution.
In energy, the objective is to establish a more economically sound and environmentally sustainable
energy system as the primary engine of regional economic growth. The primary foci will be on legal and regulatory reform of the respective energy subsectors, and facilitating foreign investment in critical energy infrastructures, such as Transcaspian and Transeurasian export pipelines. In Kazakhstan, for instance, work will continue in the preparation of rules and regulations governing development of onshore and offshore oil/gas resources, and implementation of transparent, cost of service petroleum pipeline tariff methodologies. In Uzbekistan and Turkmenistan, USAID will support the governments in the development and implementation of petroleum laws designed to attract foreign investment. In the electricity area, legal and regulatory reform of the power subsector will continue, along with work to strengthen national and regional power markets, and facilitate intra-regional trade in electricity.
In water management, the underlying causes of the Aral Sea disaster need to be addressed through regional cooperation to promote long-term, international agreements for a multipurpose (power vs. irrigation) management of cascades of dams, and water sharing and quality. Further, legal and regulatory reform in water pricing, privatization of local water use rights, and organization of self-sustaining, non-governmental water user associations will be pursued. This will involve passage of reform legislation and implementing rules and regulations which would establish water user associations, waste management guidelines, and a pollution fines system.
Under cross-cutting and special initiatives, FY 1999 funds are requested for a Central Asian Republics performance fund so as to provide additional resources to those activities achieving results or where new opportunities have emerged to support significant reforms. The regional strategic objectives in energy and environmental management are expected to receive sizable allocations from this performance fund. In addition, these performance funds may, in part, be allocated to CAR bilateral programs if opportunities for accelerated reforms are identified.
CENTRAL ASIA REGIONAL
FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)
Strategic ObjectivesEconomic Restructuring Democratic
TransitionSocial Stabilization Cross-cutting / Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform -- -- -- -- -- Private Enterprise -- -- -- -- -- Financial Reform -- -- -- -- -- Energy 2,000 -- -- -- 2,000 Environmental Management 1,000 -- -- -- 1,000 Citizens' Participation -- -- -- -- -- Legal Systems -- -- -- -- -- Local Government -- -- -- -- -- Crises -- -- -- -- -- Social Benefits -- -- -- -- -- Environmental Health -- -- -- -- -- Cross-cutting / Special Initiatives -- -- -- 6,000 6,000 TOTAL 3,000 -- -- 6,000 9,000
*FREEDOM Support Act (FSA) funds
USAID Mission Director: Patricia K. Buckles
ACTIVITY DATA SHEET
PROGRAM: CAR Regional
TITLE: Energy, 110-S001.5
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $2,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 20001
Purpose: A more economically sound and environmentally sustainable energy system as the primary engine of growth for central asia.
The challenge is to develop a policy framework conducive to private investment and a market economy that will promote efficient, safe and environmentally sound resource recovery including the development of new transportation routes, thereby assisting the region in realizing its potential as a significant contributor to world petroleum supply.
USAID Role and Achievements to Date: USAID has assisted in the preparation of an international oil and gas consortium for the Aral Sea Basin and has aided the Kazakhstan state entity charged with development of Kazakhstan's interests in the Caspian Sea, Kazakcaspishelf. In Kazakhstan, USAID advisors have also assisted in drafting rules and regulations for licensing and environmental safeguards, and preparation of a pipeline tariff methodology, critical in removing policy impediments for investment in and development of oil and gas. Monthly round tables between industry and the U.S. Government, conducted within a consultative and advocacy framework developed jointly by the U.S. Embassy and USAlD/Central Asia, have been of great value.
USAlD's continued work in the power sector of Kazakhstan and Kyrgyzstan has contributed to policy reforms leading to the sale of over 50% of the Kazakhstani electric power system to private investors, including a U.S. corporation, and establishment of the first NIS independent regulatory commission, in Kyrgyzstan. In Kyrgyzstan, assistance has been critical in passing energy and electricity laws, conditions for the World Bank and Asian Development Bank's $90 million loan for Kyrgyzstan power and district heating rehabilitation and modernization.
Overall, progress toward achieving a legal and regulatory environment conducive to private investment has been excellent. For example, in late 1996 the President of Kazakhstan came out strongly in favor of the privatization of, and foreign investment in, the oil, gas and power subsectors, and also ordered that an independent regulatory entity be created. Also, in Kyrgyzstan USAID was instrumental in the issuance of a presidential decree establishing a similar regulatory body. Foreign investment in the power sector in 1996 exceeded the target set by USAID: using the number of international energy companies in Kazakhstan as a rough proxy for such investment, 41 firms were operating, versus the target of 20.
Description: USAID assistance is within the context of a U.S.-Central Asian Republic Regional Energy Initiative focusing on: (a) improving the legal and regulatory framework for oil and gas exploration, production and transportation; (b) identifying future markets for natural gas and defining investment opportunities for expanded and more efficient use of natural gas; and (c) further restructuring and regulatory reform in electric power and strengthening of regional electricity cooperation.
Building on work begun in Kazakhstan, oil and gas sector policy assistance began in mid-1997 in Turkmenistan and Uzbekistan. This assistance is being used to develop a legal and regulatory framework promoting market competition, transparency, and accountability in the power sector. Ongoing power sector work in the region is designed to further strengthen national and regional power markets, and facilitate intra-regional trade in electricity by introducing internationally-acceptable commercial contracts and pricing practices. This is based on USAlD's success in developing a regional power grid in the Baltic countries. This assistance will integrate the Central Asian power markets into
larger and more viable markets for investment in new hydro and gas-fired generation, as well as transmission projects within and outside the region, which may include markets in China and Pakistan.
Host Country and Other Donors: USAID works with counterpart ministries in the governments of Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan, and, to a more limited extent, in Tajikistan. The other bilateral and multilateral agencies include the World Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, and the EU.
Beneficiaries: This assistance will benefit local industrial and residential consumers by ensuring reliable
and efficient energy resources and by expanding the diversity of their energy supply.
Principal Contractors, Grantees, or Agencies: Hagler-Bailly is the principal implementer, but assistance is also being provided by Burns and Roe, the U.S. Energy Association, and the U.S. Department of Energy.
Major Results Indicators: Baseline Target Number of independent regulatory 0 (1994) 3 (2000) agencies established Number of power systems 0 (1994) 2 (2000) opened to private investment Legal and regulatory frameworks 0 (1994) 2 (2000) established for oil and gas exploration and development
ACTIVITY DATA SHEET
PROGRAM: CAR Regional
TITLE: Environment, 110-S001.6
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $1,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2001
Purpose: Improved environmental management capacity to promote sustainable economic growth.
USAID Role and Achievements to Date: Although this strategic objective is a new USAID initiative, current activities are building upon success recorded under the environmental health activities at the country level. USAID's Aral Sea program has provided safe drinking water for a total of 1.1 million persons, improved the health/sanitation practices of 1.5 million persons, and already promoted significant policy changes needed for more efficient water use. The turnover to local officials of water treatment/transmission equipment, plus related training in Kazakhstan, Turkmenistan and Uzbekistan, are graphic demonstrations that USAID has delivered concrete results in the Aral Sea disaster zone.
In an effort to prevent a recurrence of the types of poor planning and resource utilization that led to problems like the Aral Sea disaster, all five republics have participated in seminars for regional water cooperation; are conducting analyses required for the introduction of water pricing; and have established short-term regional water sharing agreements. In Kazakhstan, draft legislation is being prepared for establishing water user associations, a new national environmental law, and a pilot air pollution emissions program. While the first phase in developing a national environmental action plan in Kazakhstan is now underway, legislation in Uzbekistan is being prepared for establishing air pollution standards.
A major recent milestone was the drafting by Central Asian Republics' energy and water officials of the first multi-year, multi-state agreement on the Naryn Syr Darya cascade of dams since the collapse of the former Soviet Union. When adopted and implemented, a legal framework and the necessary institutions which conform to international standards will be established. These include: 1) energy exchanges to secure the appropriate water releases necessary to maintain long-term storage in the Toktogul Reservoir; 2) government guarantees for these energy exchanges, either in energy or currency reserves, 3) payment of operation and maintenance costs of facilities through electricity tariffs; and 4) establishment of lines of credit between governments in order to ensure these measures are taken. The agreement also proposes a new umbrella organization to break the bureaucratic logjam which has existed for the last five years on negotiating agreements for energy and water uses.
Description: Environmental initiatives through FY 1997 were undertaken on a country basis. Having completed these activities, beginning in FY 1998 environmental initiatives will be managed on a regional basis, enabling USAID to more effectively address cross-boundary natural resource and environmental issues in Central Asia. Following the period of Soviet central planning, a legacy of problems related to industrial pollution and environmental degradation remained. While much of USAID's early environmental efforts were focused on environmental health support for the impacted Central Asian population, the challenge now is to reduce levels of urban, industrial, and agricultural pollution in the region, and establish the policy and institutional framework to manage precious natural resources, particularly water resources.
Assistance is also being directed toward environmental policies and practices of the oil and gas industry in the Caspian Sea Basin, where the combination of huge reserves, an inadequate legal and regulatory regime, aged equipment, and need for petroleum revenues, raises serious concerns about potential environmental damage. Finally, inappropriate environmental practices warrant priority attention to climate change initiatives; it is estimated that 80% of green house gas emissions in the region are attributable to the energy sector. Significant environmental damage is caused by the use of
high-ash coal without pollution control devices, the absence of incentives to use cleaner fuel, inappropriate methods for disposal of ash and furnace slag, the flaring of gas at well heads, poorly- maintained petroleum pipelines, and the lack of emission controls for the transportation sector.
USAID assistance is critical for the Central Asians to maintain the needed focus on policy reform, including the introduction of rational water pricing schemes and long-term regional agreements on water sharing, energy exchanges, and water quality control among all the affected states in the Aral Sea basin. Additional emphasis is also being placed on the passage of reform legislation which would establish water user associations, waste management guidelines/requirements, and a pollution fines system. Strong coordination with other donors is essential as USAID begins to phase down its own direct involvement. Such cooperation will offer important opportunities for USAID to use its field experience to leverage substantial resources and help shape the programs and policy agendas offered by other donors.
Host Country and Other Donors: Major host country counterparts include the Interstate Council for Kazakhstan, Kyrgyzstan, and Uzbekistan; the Interstate Council for the Aral Sea - Sustainable Development Commission; heads of state water agencies from each of the various republics; and other ministries of each republic. In addition, there has been substantial collaboration with a wide range of other officials at the local and national levels. The World Bank, the United Nations Development Program, and the EU have been involved in these efforts.
Beneficiaries: All Central Asia citizens will benefit by (1) reducing serious environmental hazards which they encounter in their daily life, and (2) improved economic opportunity as a result of better management of natural resources.
Principal Contractors, Grantees, or Agencies: These organizations include CH2M-Hill Consortium, Harvard Institute for International Development, International Resources Group, and ISAR.
Major Results Indicators: Baseline Target Bilateral and multilateral agreements support sustainable water use management (long-term/short-term) 0/4 (1997) 3/5 (2000) Laws and regulations governing on-and off- shore oil and gas operations are updated No (1997) Yes (2000) Climatic change mitigation measures approved and being implemented under national climatic change action plans and similar environmental planning initiatives No (1997) Yes (2000)*As this is a new S.O., some targets are still being defined.
![[USAID Home]](/images/usaid.gif)
[USAID Home]
[CP 99 Home]