Kyrgyzstan vs Russia? Independence ho!

After Russian Foreign Minister Sergei Lavrov’s visit to Bishkek Russian media have began to speak about “new confrontation” between two countries.

Today, April 10, Russian side has to present to Kyrgyz officials final version of proposals of bilateral cooperation, first of all, in the power industry.

Kommersant Russian newspaper says that Moscow offers Bishkek to revise agreements or to reconsider terms of fuel supply while Kyrgyz authorities insist on rigorous adherence to former agreements with Russia.

Many media outlets of both countries have written Russia insists that official Bishkek has to fulfill a dozen of inexorable demands such as to give 75 percent of stocks of Dastan plant to Russia and the same share in several hydroelectric stations which Russian companies intend to build in Kyrgyzstan. However, Kyrgyzstan’s Government is not happy with such conditions.

A little bit of history

Russia deliberates on investments in power sector of Kyrgyzstan over recent five years. Local rulers (both deposed and current) do a view of rosy projects of future hydroelectric stations and as consequence – prospects of unprecedented economic growth. Russia promises not only investments but to send specialists and equipment.

Recall, earlier Kyrgyzstan and Russian arranged that Russia will get 48 percent of stocks of Dastan in exchange of $180 millions debt relief. In February 2009, presidents of Kyrgyzstan and Russia Kurmanbek Bakiyev and Dmitry Medvedev came to agreement about their transfer but that time the state owned 37 percent of stocks and the Government decided to issue additional stocks to raise state share up to necessary 48 percents. That was done after holding a meeting of stockholders and the board.

A year after April events, new authorities finally confused themselves in Dastan issue guiding by revolutionary emotions and then by desire to get more money.

The then Ministry of State Property believed that it was possible to hand over a part of stocks to minority shareholders by restoring their share which fell down from 12 percent to 1.5 percent after emission of 2009.

… Then Kyrgyz officials have begun to ladle out stocks of Dastan saying vaguely that other countries show interest to Dastan.

The second agreement between Kyrgyzstan and Russia is construction of Kambarata-1 hydroelectric station and series of hydroelectric stations on Naryn River. Even Kyrgyz-Russian company was established where Russia held 50 percent of stocks and another 50 percent was ownership of Kyrgyzstan. Construction of the hydroelectric station was estimated at $2 billion. In 2008 Moscow promised $1.7 billion loan which wasn’t granted due to known reasons.

Official Bishkek is not happy if Kyrgyzstan’s ownership of shares will be reduced up to 25 percent. To agree means to be slammed by massed patrioteers whose number multiplied after seizure of power in 2010. Does yesterday’s opposition reap as it has sown?

Multivector is not cancelled

When having a working trip to Bishkek, Russian Minister of Energy Sergei Shmatko said Russia “has big interest in implementation of power projects in Kyrgyzstan” and they “are ready to work out a concrete plan for further actions”.

Earlier during his visit in Moscow, Almazbek Atambayev made understand that Kyrgyzstan wouldn’t stay on knees anymore and allow treating it like cad. “Now we would have more pragmatic approach to any investment projects keeping in mind interests of Kyrgyzstan, first of all. Surely, Russia is our strategic partner and we are holding out projects and don’t give them to anyone but, as the saying is, time has come. Hydropower industry market is large in the region while cost price of electric energy is law. Kyrgyzstan has many similar projects. It is another matter that we have to implement them immediately as we need work positions and to raise economy. We cannot wait any longer and we have talked about this with Vladimir Putin. I am very glad he has been actively engaged into this,” Almazbek Atambayev commented on results of the meeting with Russian Prime Minister.

“Let’s talk about this in details what we have to do for economic integration. This is quite necessary and caused by objective needs of both Kyrgyz and Russian economies,” Russian press-service quoted Prime Minister as saying. “We have good prerequisites to restore embarrassed relations.”

Alongside with that authorities of Kyrgyzstan say it is necessary to implement reached agreements not only with Kremlin but with Ankara, Baku and Astana as soon as possible. Multivector remains a keystone for foreign policy of official Bishkek.

Again about Dastan

Meanwhile Kyrgyz officials hope to get something for Dastan by bargaining some politicians in Moscow don’t believe the plant is profitable.

The head of the Russian Presidential Executive Office Sergei Ivanov said answering questions of journalists that “he is not sure Russia needs this plant”. “It wasn’t modernized for 25-30 years at least. We have to think is it reasonable to invest big money in the plant. And the second thing is prices. As I remember a part of its stocks disappeared somewhere, let’s say that. Meanwhile ownership of 48 percent of stocks gives nothing to Russia per se. Anyway we will be unable to manage there. So, we have to take this plant with control stock and manage its work or we have to negotiate in a different way,” he noted.

Probably, Mr. Ivanov meant arrests of stocks when saying “as I remember a part of its stocks disappeared somewhere”. Recall, the interim government nationalized 50.4 percent of stock by a decree in 2010. The rationale was certainty of new authorities that Maxim Bakiyev was the owner of control stock. Stocks are under arrest, i.e. the state doesn’t possess them de facto for this reason it cannot gift or sell them.

By the way the Government intends to make money on dividends for nationalized part of stocks for 2009. Meanwhile they fail to prove that the son of the toppled President is owner of stocks. So, it turns out that Prime Minister together with his team is trying to sell pig in a poke. Who will buy it? By all appearances Russia doesn’t want pig in poke.

Next round or going downhill?

Most likely it is exaggeration to say that Kyrgyzstan and Russia ostensibly near confrontation. It is obvious sides are ready to revise documents accumulated for 20 years which are not executed actually. Surely, debates are possible and the most thing is to defend own state interests.

The process is not smooth, especially that sides call on addressing most complicated issues as soon as possible.

Hurry at an easy pace. This wisdom reflects in the best way possible today’s relationships between Kyrgyzstan and Russia. If the President of the country Almazbek Atambayev shows consistency in his intentions, statements, and affairs then failure of Omurbek Babanov’s Government, which gave a pack of promises “of stability and better life”, brings Atambayev’s strategic plans to naught.

No one self-respecting partner will want to have business with officials not walking-the-talk…

As for Russia’s conditions to increase its share up to 75 percent they are logical. How long they can invest in the country and don’t see any result even in distribution of humanitarian aid, for example?

As Alexey Vlasov, director of the Russian Center on Post-Soviet Area Studies, told in interview to 24.kg news agency, “the marrow of relationships between Russia and Kyrgyzstan is political will: if Russia stands ready to invest in Kyrgyz economy it intends to do this not through loans but by developing industry”.

“It seems the most right way not to feed elite but to give a chance to summon up all resources Kyrgyzstan has in power industry and to try to restart economic project inside Kyrgyzstan. To achieve success is so and in no other way. This will be positively estimated by Kyrgyz society itself,” he summed up.