But major challenges to the project remain
On Thursday, the Kyrgyz Ministry of Transport announced that “representatives of Uzbekistan’s Temir Yollari JSC, the national railway company, arrived in the Kyrgyz Republic to participate in the opening of a joint Project Office to coordinate the construction of the China-Kyrgyzstan-Uzbekistan (CKU) railway.”
This news was not an isolated event but rather further confirmation that Bishkek, Beijing and Tashkent are determined to work together to expand interregional connectivity and further Eurasian integration.
The newly arrived Uzbek contingent in Kyrgyzstan joined 180 Chinese specialists already in the region since last August. The purpose of all this activity in sync with Kyrgyz engineers is to prepare technical reports and feasibility studies for the China-Kyrgyzstan-Uzbekistan railway, a fresh artery for East-West trade. These commitments of personnel are solid evidence that headway is being made for a transport project long on the drawing board.
The China-Kyrgyzstan-Uzbekistan railway
The CKU railway, originally conceived in the mid-1990s, is expected to be about 523 kilometers long (213km in China, 260km in Kyrgyzstan, and 50km in Uzbekistan). The Kyrgyz portion, by far the most complicated, would include some 90 tunnels and steep climbs and descents, including over the Torugart Pass (3,750 meters).
While still not entirely settled, the railway is expected to follow an existing transmontane highway along the Torugart-Arpa-Makmal-Jalal-Abad corridor, according to the Kyrgyz National Railway Company. When completed, the railway will connect Kashgar Rail Terminus in Xinjiang with Uzbekistan’s rail network in Andijan.
After years of delay, the China-Kyrgyzstan-Uzbekistan railway has come back to life.
The main reasons for the project’s newly found buoyancy are the practical need for Eurasian integration, vastly improved diplomatic relations between Uzbekistan and the Kyrgyz Republic, Bishkek’s reduced skittishness toward Beijing, and the determined push by regional governments to line up funding and send experts to complete field surveys over demanding mountainous topography.
Besides, the Ukraine crisis and the disruption of supply chains through Russia have given more urgency to the CKU project.
Sustained commitment
In addition to increased numbers of personnel on the ground, the diplomatic paper trail is clear. Kyrgyzstan, China and Uzbekistan jointly signed a trilateral Agreement of Cooperation at the 22nd Shanghai Cooperation Organization Summit in Uzbekistan in September specifically to advance the project.
Moreover, to maintain a head of steam, Uzbek President Shavkat Mirziyoyev, Kyrgyz President Sadyr Japarov, Chinese President Xi Jinping are fully on board given their multiple statements and meetings over the past months in support of the CKU project.
What’s more, the “Samarkand Declaration” of the Council of Heads of State of the Shanghai Cooperation Organization unequivocally endorsed Eurasian economic integration and connectivity, apparently snookering those who support “bloc politics” before constructive engagement and dialogue.
Possible setbacks
Despite progress, however, several issues may work to delay the high-profile CKU project. First, there exists a long-standing economic and political divide between interest groups in “northern” versus “southern” Kyrgyzstan. This scuffle for power is not insignificant and could throw a monkey wrench into the process of selecting the final path and funding mechanisms for the railway.
Second, it has been suggested that some foreign interests seek to exploit Kyrgyzstan’s volatile internal differences by encouraging “color revolutions” – a well-known instrument for regime change – in order to stymie Eurasian integration.
Third, if the Kyrgyz-Tajik border again turns violent, as happened last September, the CKU railway could be temporarily put on ice. Without inter-regional stability, the viability of any long-term capital intensive project with cross-border dimensions will be brought into question. The Fergana Valley, a complex and agriculturally rich region that straddles Uzbekistan, Tajikistan and Kyrgyzstan, has historically been volatile.
Project funding
It appears that the participating nations have decided to share the costs of financing the CKU railway evenly, but that remains to be seen. Moreover, multiple sources indicate that construction costs will approach US$4.5 billion over several years; that is not petty cash.
Whatever the final number will be, funding will need to be long-term and at concessionary rates to have any chance of success, and preferably in local currency. Many highly ambitious public-private-partnership schemes that have been structured in US dollars in the past have tended to fail from exchange-rate risk, unclear risk-sharing mechanisms, and poor management.
Moreover, if foreign investment banks are to be involved, regional governments should insist on a financial structure that is beneficial in the first instance to the country, which usually means that the host government should assume local currency rather than dollar-denominated obligations.
Already burdened with significant levels of sovereign debt, mostly Chinese, Kyrgyzstan will be hard-pressed to come up with “its share” of the money on terms that do not mortgage the country’s future.
Uzbekistan, on the other hand, given its leadership and ongoing economic transformation over the past years, stands a good chance to attract capital at affordable rates and understands the financial risks associated with taking on hard-currency debt. What’s more, Uzbekistan and Kyrgyzstan are betting that China will step in with more favorable financing terms than Western capital markets might offer, although all options will be pursued.
Russia is not expected to play a direct financial role in the development of the China-Kyrgyzstan-Uzbekistan railway line unless Western interests, other than the international development banks, try to fund the lion’s share of the project, which is unlikely. As such. Russia will remain an observer and serve as a cheerleader on the sidelines.
Overall Eurasian integration remains a top priority for Russia, especially in light of the Ukraine conflict and a hostile Europe.
Curiously, some analysts argue that the China-Kyrgyzstan-Uzbekistan railway line initiative represents one more means to avoid transporting Chinese goods across Russian territory to Europe. While partially true, Russia is not interested in monopolizing East-West trade as long as Eurasian integration presses forward.
Uzbekistan
President Mirziyoyev’s personal involvement is a sine qua non for the success of the China-Kyrgyzstan-Uzbekistan railway line – and so far, he has shown remarkable leadership.
He has repeatedly approved plans to advance the railway initiative and recently ordered the government “to create a project office” to figure out how “to attract an international consulting company and to hold negotiations with investors.” These are all small steps in a complex process and indicate serious statecraft.
In his year-end address to the Oliy Majlis (parliament) and the people of Uzbekistan, Mirziyoyev confidently stated that “it is possible to attract up to $1 billion per year to the agriculture, water management, forestry and transport spheres through public-private partnerships.”
If the situation in the region remains stable, which is expected, there is no reason to think that Uzbekistan will not be able to raise funding on favorable terms for its section of the railway.
Showing real diplomatic skill, Mirziyoyev is in regular contact with his counterparts in China and Kyrgyzstan and engages constructively with Azerbaijan, Armenia, Kazakhstan, Tajikistan, Turkey and Turkmenistan on all matters related to Eurasia integration and connectivity.
Despite geopolitical hiccups, potential funding issues, topographical challenges, would-be inter-regional ethno-cultural flareups and pestiferous external meddling, it seems more likely than ever that the China-Kyrgyzstan-Uzbekistan railway will not run out of steam but rather move forward successfully.
Field surveys are expected to be finished by the end of June. Time will tell if all goes according to plan.
