In this issue:

1. POINT OF VIEW: Remembering September 11, 2001

4. Ukraine, Turkmenistan negotiate gas deals

1. POINT OF VIEW: Remembering September 11, 2001 (Kyrgyzstan, September 15, 2011-issue 686)

By Giorgio Fiacconi - TCA publisher

BISHKEK (TCA) – The 10th anniversary of 9/11 in the United States and the relevant commemoration brings to debate the ongoing war in Afghanistan and its consequences around the world. This reflection is a natural result of something that taught us to live with terror, triggered a worldwide threat, and forced the development of a new policy for the United States in Central Asia. I would like to consider only the impact that September 11, 2001 had on Kyrgyzstan and Central Asia, since Kyrgyz and Central Asian people are unconcerned with the way the United States has been changing the world, determining new alliances, and affecting economic development. In this part of the world, a considerable amount of the population is composed of youth, while the aged are mostly relegated to areas where communication is poor, people read little, and TV is not always available. The general feeling is that the ongoing war in Afghanistan is the outcome of foreign interests and political struggle. Financial crisis and the way countries are capable of overtaking the lack of employment to win the fight against poverty and lack of governance are much more felt by people than a human rights battle and a distant war where “others” are dying and “others” are getting rich. To be specific, most of the people in Kyrgyzstan and Central Asia, but also in Afghanistan, think that September 11 is a date to be observed only in the United States, while here the date only represents when Central Asia came to the attention of the world and the United States came into the region. People look to such tragic event as the one that brought about worldwide attention and catapulted this region into the international scene. Without it, no one would have brought the plight of Afghanistan, Taliban, Kyrgyzstan and all of Central Asia to the world’s awareness. Of course everyone recognizes that the United States is a world power based on solid democratic principles, but in this region, anti-Americanism has developed in the last ten years. If it were for the people alone, the United States would probably have been kicked out from the military bases long ago. Instead, the United States will stay for a long time, and at the end this augurs well for security and balanced political development. The Manas base in Kyrgyzstan, change names though it might, will remain here. This is for the best. Central Asia is special not just due to the Afghan war or its natural resources (which had been unexploited for such a long time) but as a buffer to potential Chinese expansion and conflict with Russia. Only the United States and its worldwide allies can balance the long unresolved conflict that is not just about resources, but the controlled population explosion in China, the uncontrolled growth in India, and the dramatic decrease in population for Russia, which is sitting on a huge territory in the East that it is no longer able to control. Coming back to September 11, Central Asia has certainly been the biggest beneficiary of that tragic event. The terrorist attack to the United States has changed the way Americans themselves look to their integrity and safety, but also shown that nobody in the world is safe. For the United States, the war in Afghanistan has achieved an undisputed success, starting immediately after the invasion of Afghanistan. In dislodging Al Qaeda from their former strongholds, soldiers have certainly prevented any further attack on American soil. Al Qaeda has continued to operate, moving itself between Pakistan and Somalia, but as far as it concerns Afghanistan, the war became an ongoing battle against the Taliban. While the killing of Osama bin Laden forced the terrorist organization to re-orientate itself, it will certainly not make them disappear, or reduce the worldwide threat. For many years to come, countries will have to continue watching the situation, and spending an incredible amount of resources with the hope that one day we will all live in a better world. The war in Afghanistan will be very difficult to win, but the United States will not be defeated militarily, and this will demand a continuing presence as a deterrent to Islamic expansion that may affect all neighboring countries. The war in Afghanistan has had consequences that nobody expected such as the invasion of Iraq in 2003, and the increase of power in Iran. Today, the United States will have to face a dilemma: after departing from Iraq, it will be impossible to stop Iranian power in the region and thus will force America to remain there. All of this is irrespective of the results related to Syria and the Arab Spring. To reach a new equilibrium will not be easy, but this has nothing to do with religion or conflict of civilization but mainly with economic and political interests. Today, the United States is paying the price for what has gone on for decades with authoritarian regimes supported by them against any human and democratic principles. Pakistan and Iran will be the biggest question marks that may affect Central Asia. In small, impoverished Kyrgyzstan, the base is important for the economy and security. The desire of the U.S. to maintain some military presence will not be taken up in Bishkek but most probably in Moscow and Beijing where Washington will negotiate. In the meantime, the Kyrgyz elite will be content to take their share of profits from the fuel supply and the budget, and will look with great interest toward potential economic endeavors connected with the reconstruction of Afghanistan. Other Central Asian countries such as Uzbekistan and Tajikistan will also benefit from the reconstruction, and will likely be by then a blessing to China and Russia. Not only will America stay, but a new sense of friendship will develop between Central Asian nations.

2. Agriculture revamped in Kyrgyzstan

(Kyrgyzstan, September 15, 2011-issue 686)BY MARIA LEVINA

BISHKEK (TCA) - The Kyrgyz Government has approved a number of the Ministry of Agriculture’s projects, which will be implemented in 2012-2014.

Government projects

According to the Ministry, the total amount of projects is $142.3 million. To implement these projects, $127.9 million will be allocated from the national budget and USAID will loan $14.4 million at three percent per annum. Projects include the creation of a network of agricultural cooperatives instead of small-scale production, improving national food security and creating 8,800 jobs. The project also includes creating seed farms. The great obstacle to agricultural development in the country is outdated or absent agricultural machinery. In order to provide agricultural producers with equipment, leasing companies will be set up. The projects will also help develop credit systems in agriculture. The state intends to support agricultural producers providing funding on concessionary terms. The Ministry of Agriculture intends to create a leasing company for the provision of agricultural equipment. The company will be created with Kyrgyzstan’s dividends from Centerra Gold. According to the Minister of Agriculture Torogul Bekov, the state plans to buy about 1,000 tractors, 500 combines and 3,000 different agricultural machines to lease at 650 million soms annually. The Kyrgyz Government has approved a draft credit system in the agro-industrial complex worth $67 million to be disbursed next year. The money will be directed to the development of cooperatives and seed management.

Collaboration

At a meeting with Hungarian parliamentary delegation, Minister Bekov offered to export Kyrgyz beans to Hungary. The Hungarian MPs suggested supplying to Kyrgyzstan equipment for processing industry and assist in training and internship of local farmers. During his visit to South Korea, Minister Bekov discussed growing onions in Kyrgyzstan by new technologies. South Korea is ready to invest $20 million in onion cultivation in the Chui Oblast. At the beginning of 2012 Korean specialists could start working if all the issues on creating a joint farm are agreed upon. In addition, Korean Testing Laboratory intends to develop biological fuel production in Kyrgyzstan. The technology of producing biogas and processing organic wastes into high quality fertilizers by means of anaerobic fermentation has been known since ancient times and is successfully applied in many countries. Biogas plants help solve the problems of manure disposal, reduce emissions of hotbed gases and, most importantly, improve soil fertility.

Cooperatives

The Minister of Agriculture believes that it is necessary to develop cooperative movement in Kyrgyzstan. According to different official sources, there are from 300-1,000 cooperatives and 318,000 individual farms in Kyrgyzstan. Cooperatives’ output does not exceed three percent in total agricultural output of the country, while in developed countries, they reach 30-80 percent. The main task for Kyrgyzstan is to unite small farms into cooperatives. Developed countries have accumulated experience in supporting cooperatives. Some banks are engaged in the financing of cooperative movements only. Such a financial structure should be created in Kyrgyzstan too, the minister stated. He also proposed introducing some tax benefits for cooperatives, like reducing payments to the Social Fund or not applying the income tax. He believes that taxes paid by cooperative and by farmers should be equated.

Sugar

Sugar is one of Kyrgyzstan’s main food products. In recent years its price has been dramatically increasing. According to the Ministry of Economic Regulation, since the beginning of 2011, the price of sugar has increased 15 percent. The increase is explained by the paucity of domestic production and rising world market prices. Kyrgyzstan imports more than 80 percent of sugar and the growth of stock prices in the foreign market causes an increase in domestic prices. Kyrgyzstan, especially Chui Oblast, can significantly increase the area under sugar beet, but it is necessary to encourage farmers. Currently, farmers have to sell sugar beets at 2,800 soms per ton while the real cost is more than 3,000 soms, stated the Association of Beet Growers. Therefore, sugar producing plants should increase the purchase price for sugar beets. With the current inflation, it is difficult to forecast prices, and sugar mills should create their pricing strategy so that they suffer no damage.

3. Uzbekistan explores tungsten prospects

(Uzbekistan, September 15, 2011-issue 686) By Dilshod Ashurmatov

TASHKENT (TCA) — Uzbekistan is trying to enter the international tungsten market as an independent player. The choice of investor for this purpose raises serious doubts among experts in terms of the success of ongoing efforts. Korean Shindong Resources Co. Ltd and Uzbekistan’s State Committee for Geology and Mineral Resources (Goskomgeo) have established the Uzbekistan-Korea Tungsten joint venture to develop the Sautbay tungsten deposit in the Navoi region. An agreement establishing the JV on a parity basis was signed during the visit of Korean President Lee Myung-bak in Uzbekistan in late August. A project, estimated at $120 million, provides for geological exploration in order to expand the existing resource base and the construction of a mining and processing complex with the designed capacity of 1,500 tons of highly enriched tungsten concentrate per year. According to Goskomgeo, industrial reserves at the Sautbay deposit on C1 category are four million tons of ore containing 19,900 tons of tungsten trioxide. According to analysts, the signed agreement is a long-term prospective. The world prices for tungsten concentrate have been gradually decreasing during the summer due to the declining demand from the world’s steel companies and military and industrial complex, and further pricing is subject to multi-directional factors. “I think the price for tungsten concentrate will soon cease to decline and by 2012 it may increase by 18-20% up to $50,000 per ton due to declining exports by China, although not encouraging prospects for the world economy’s development certainly may pull the prices down,” believes Ilkhat Tushev, an analyst at Central Asia Investments. Today China is the leading exporter of tungsten on the world market (80% of the world production of this strategic raw material). Beijing maintains stable, low prices for tungsten in order to win the market with the sales volume. Preferences created for the tungsten enterprises in China allow using this tactics. “In order to reduce costs and increase profitability of production, given the situation on the international tungsten market, it is necessary to develop our own raw material base,” said Uzbek analyst Anvar Jumayev. Five years ago, Tashkent stepped up its efforts to develop its own raw material base of tungsten. In early 2006, the Uzbek government approved a program to develop tungsten deposits for 2007-2013 with 2,700 tons of the total production of tungsten concentrate. Given that domestic consumers of tungsten can be counted on one hand, the bulk of the tungsten concentrate would be exported. The program provided for the construction of a mining and processing complex during 2007-2008 and the development of Severnyi field at the Yakhton deposit in the Samarkand region starting from 2009 and annual tungsten concentrate production in the amount of 870 tons. During 2010-2012, it was planned to begin industrial development of the Sautbay deposit in the Navoi region with an annual production of 1,260 tons of tungsten. The program was developed in order to load the Uzbek Combine of Refractory and Heat-resistant Metals, which was built in 1956 and worked for the defense industry of the former Soviet Union, to its full capacity. However, the program had not been started due to several financial and technical reasons. According to experts, Tashkent’s current approach in selecting investors to the industry is unlikely to change the situation.

Little-known investors

The first step to revive the tungsten production in Uzbekistan has been the establishment of the Ingichki Metals Uzbek-Russian JV in May 2006, which should deal with the processing of man-made waste of the mining and steel industry — mining waste dumps, enrichment plants tailings at the Ingichki mine in the Samarkand region. Tailing dumps that have accumulated from over 20 years of mining and processing of the deposit contain about ten tons of scheelite – the main mineral which contains tungsten. To implement the project, JV’s founders – the Navoi Mining and Metallurgical Combine and Russia’s Integra were going to build a modular mini-processing plant with the designed capacity of approximately two million tons of ore per year. According to the business plan for 2011, Ingichki Metals was supposed to deliver up to 560 tons of tungsten concentrate to Uzbek Combine of Refractory and Heat-resistant Metals annually. However, these plans were hindered by the financial crisis and Russia refused to participate in the project. Due to declining world prices, the Uzbek government has postponed for an indefinite period the selection of a foreign partner and co-founder for the establishment of a joint venture to restore the tungsten ore production at the Ingichki deposit worth $80 million. The winner of the tender, which was first announced in summer 2008, had to ensure the full recovery cycle of the underground mine to produce at least 300,000 tons of tungsten ore per year, and to build a new processing plant during two years from the date of the joint venture’s establishment. Under these circumstances, Tashkent staked at investors from Korea. In the past two years, the Uzbek government signed an agreement to explore opportunities for the joint development of tungsten deposits in the country with Korea’s Korea Resources, Luxury Energy and Shindong. Uzbekistan could reach agreement on most points with the Shindong. However, some experts believe that, at best, working with Shindong may be limited to the production of half-finished products. “It is worth mentioning that Shindong Enercom is a diversified company, but until recently it was dealing with the production of textiles, agricultural products and construction materials, and it was not involved in metallurgical industry, which is why one should not expect high value-added tungsten products,” believes an analyst Dilmurad Kholmatov. The analyst also added that the Korean company takes part in the Uz-Shindong Silicon JV on the development of quartz deposits in the Jizak region. Back in 2010, the investor intended to build a processing plant for quartz concentrate, and then the plant on silicon polycrystals production. However, no information on the project is now available. “Either very large investors with large-scale investment plans or companies trying to use speculative interest around the world prices for particular raw materials may enter the tungsten market,” believes Kholmatov. “Unfortunately, the last tendency is dominating in the development of solid mineral resources in Uzbekistan.”

4. Ukraine, Turkmenistan negotiate gas deals

(Turkmenistan, September 15, 2011-issue 686)

ASHGABAT (TCA) — The Turkmen television reported on September 12 that talks between Turkmen President Gurbanguly Berdymukhammedov and visiting Ukrainian President Viktor Yanukovych were a success. "We found a common denominator in all issues of partnership, and we see that the Ukrainian side has understanding and willingness to cooperate. We appreciate this and consider this position, which is based on the mutual desire to meet each other halfway, to be the key to the immutability of the creative nature of bilateral relations and their further development and strengthening for the benefit of the peoples of Turkmenistan and Ukraine," Berdymukhammedov said. He pointed to the long-standing and successful practice of Turkmenistan’s cooperation with Ukrainian companies operating in the energy sector, the construction of city infrastructure, and in other important sectors of the Turkmen economy. He said that 29 enterprises with Ukrainian capital had been registered in Turkmenistan and that 63 projects worth nearly $2 billion were being implemented. While emphasizing Ukraine’s interest in full-scale cooperation with Turkmenistan, Yanukovych, in turn, said he was confident that the talks held in Ashgabat would give a new impetus to the development of fruitful relations between the two countries and their peoples. "Ukraine considers Turkmenistan, which occupies a key position in Central Asia, to be a highly promising partner," he said. Ukraine, embittered by Russia’s unwillingness to cut prices for its gas, said on Monday it would try to resume imports of fuel from Turkmenistan. Ukraine is struggling to pay high gas prices under a 2009 contract with Russia and has asked for a reduction in price. Russia initially suggested concessions were possible, but insisted that Ukraine sells Moscow its pipeline grid or joins the Customs Union of Russia, Kazakhstan and Belarus in return. Besides buying gas from Russia, Ukraine also transits it further to Europe, and the row between Kyiv and Moscow has already evoked memories of similar disputes in recent years which cut gas supplies to European consumers during winter. Turkmenistan, Central Asia’s largest producer and exporter of natural gas, is for its part keen to lessen its dependence on gas exports to Russia, supplies to which fell sharply in 2009 due to the global crisis. Trying to boost gas exports and bypass Russia, Turkmenistan has boosted supplies to next-door Iran, launched a pipeline to China and made progress on the planned TAPI pipeline designed to run to Pakistan and further to India via Afghanistan. Alexander Narbut, an independent energy expert, said at a press conference in Kyiv that gas from Turkmenistan would be sold to Ukraine at a very low price. It was reported on September 13 that Turkmenistan is willing to sell gas to Ukraine for 200 USD per 1,000 cubic meters, but that it cannot do so before 2015. Turkmenistan is willing to sell Ukraine gas for reduced prices, but currently, the only gas pipeline in Turkmenistan is a Russian pipeline. An alternative pipeline that could provide Ukraine with gas is expected to be completed in 2015. (Reuters, Interfax)