At the September SCO summit in Samarkand, its participants intend to adopt a document on the construction of the China-Kyrgyzstan-Uzbekistan (CKU) railway. This was stated by acting Foreign Minister of Uzbekistan Vladimir Norov.
This project has a long history, it has been repeatedly postponed. The main problem is that the parties cannot decide on the share of financing for each participant.
An economist from Kyrgyzstan, Kubat Rakhimov, in an interview with Rhythm of Eurasia, spoke about the difficulties and economic prospects for the construction of theCKU railway.
“Third Continental Bridge”
– The history of the China–Kyrgyzstan–Uzbekistan railway concept goes back to the mid-1990s, says Rakhimov. – In my memory, the first memorandum on construction was signed in 1996, since then construction has not begun. The project itself looks good, I would even say nice.
Nevertheless, if you look at the geographical map, then, taking into account the mountainous terrain, many questions immediately arise. In general, the railway belongs to the most conservative system of transport communication, which is based on the principle “the smart one will not go uphill, the smart one will bypass the mountain”. Why? Because if you break through a railway tunnel, it will be much more expensive than a regular road one, and a railway bridge cost more than a road one. Therefore, railway systems are not just conservative, they always carefully consider their money, taking into account the two approaches CapEx and OpEx. According to CapEx, you need to build something (capital investments), and OpEx (operating expenses) says – let’s first calculate how the existing infrastructure is successfully used.
The Chinese formally and logically call the China-Kyrgyzstan-Uzbekistan railway project the “Third Continental Bridge”. Why third? Because they call the first continental bridges the railway routes that go from China to Russia and, oddly enough, through Mongolia too. The second part is two railway crossings to Kazakhstan – Dostyk-Alashankou and Altynkol-Khorgos.
Thus, the third way is just through Kyrgyzstan to Uzbekistan and further to Western and South Asia. It would seem that the route is normal, and we need to start building. However, a misunderstanding arose during the discussion. For example, how will funding be provided? For the Kyrgyz section of the railway, two options were proposed: to give a state guarantee or to give for development those mineral deposits that will be located along the route.
Both options were vigorously discussed in the expert community of Kyrgyzstan. Plus, our political specifics, namely the forced change of presidents, has led to the fact that every incoming president says that, they say, I will build this road, this is very important for me. Even when the ex-president Sooronbai Jeenbekov left his post after the events of October 2020, he said so: “I regret that I did not build this railway.”
Now this project has been remembered again, because, firstly, there is a political and geopolitical request for it, and secondly, the question of reorienting logistics flows in the context of geopolitical turbulence has naturally become relevant. It should also be taken into account that Uzbekistan belongs to a rare category of countries that, in order to go to the sea, need to cross the territory of other countries twice.
In this case, Uzbekistan, in order to get to the Atlantic Ocean by rail, needs to cross the territory of Kazakhstan and Russia; in order to get to the Pacific Ocean, it needs to cross Kazakhstan and China. To enter the Indian Ocean, you need to go through Turkmenistan and Iran. What can you do, geography is destiny. Another thing is that the existing railway systems are quite operational. It is not a secret for anyone that Uzbekistan is directly connected with the EAEU market, border crossings with Kazakhstan and Kyrgyzstan (members of the EAEU) are functioning successfully.
It is clear that it would be convenient for Uzbekistan to go through the territory of Kyrgyzstan to the south of Xinjiang, this would allow “straightening” the existing cargo flows. It is also worth considering that southern Xinjiang is now developing well. The Chinese comrades have ambitious plans, they want to create a hub in the city of Kashgar and build an agglomeration around it with a population of six million people.
Accordingly, it would be good for Kyrgyzstan to close the flow of goods from there. I personally visited the Kashgar railway station, they already have their own local intra-Chinese communication, then it’s up to them to go to the border with Kyrgyzstan and lay a railway through its territory to Uzbekistan, connect it with the existing railway network in the border Andijan region.
Who pays for the construction?
“Everything seems to be simple,” K. Rakhimov continues, “but the CKU project runs into two dead ends. The first dead end is finance, and the second is the size of the railway track. In the post-Soviet space, a wide gauge of 1520 mm is used, while the Chinese and international organizations have proposed the construction of a narrow gauge of 1435 mm.
A number of experts spoke out against this, I actively participated in discussions on this matter and proposed building a broad gauge line in the opposite direction into the depths of China, all the way to Kashgar. For example, in Finland there is a Russian standard, the Baltic countries, despite the fact that they are in the EU, also operate a wide gauge.
From the point of view of transshipment container technologies, there is nothing complicated: a platform enters a narrow track, the container is quickly reloaded by cranes onto a fitting platform standing on a wide railway track. Or, for example, there is the Lithuanian experience: they simultaneously use both wide and narrow gauges. There are some nuances, but their railway workers solve them without problems.
Now the most important question is financial. I want to say that, taking into account the specifics of the Kyrgyz society, we will not give up any deposits as a security for investments. There was a project called “resources in return for investment”, but it did not receive wide support from either the elites or the population, so it was abandoned. The external debt of Kyrgyzstan is already very large, and most of it falls on China, it is dangerous to increase it even more. Therefore, Bishkek cannot just take and give a state guarantee to finance construction.
International organizations that were offered to form a consortium, to enter on the principles of a concession, are in no hurry. The project is risky in terms of payback and political unpredictability, especially after the Kumtor case. I proposed a non-standard option for the Republic of Uzbekistan to give a state guarantee for half of this project. That is, if we assume that we have already chosen the route and decided on the technical details, then the final cost will be clear. And if Uzbekistan is able to give a state guarantee for half the cost, then other investors will willingly contribute the remaining half – and China in the first place, and international investment institutions, and possibly the Russian side.
During the entire period of discussion of the construction of the China-Kyrgyzstan-Uzbekistan railway, the Kyrgyz side has made approximately 18 preliminary feasibility studies. And I concluded that some officials from the transport industry simply make money on this – not on the construction of the railway, but simply by making a feasibility study.
Why build an object if you can endlessly write projects and you will be paid for it every year. Now there seems to be some understanding about the project: in September in Samarkand they promise to sign a document on the construction of the CKU. In my opinion, political will on the part of Uzbekistan is needed here. Because the position that Tashkent previously held is no longer suitable, since it has shown its inefficiency. The tactics of waiting and pushing the Kyrgyz side so that the Kyrgyz Republic would pledge something or take more loans showed their inefficiency.
Several years ago, we held an informal brainstorming session with representatives of the Asian Development Bank, and it turned out that the beneficiaries of the construction of the CKU are in the following order: Uzbekistan is in the first place, it has a direct gain in exports and imports, plus Uzbekistan is becoming a full-fledged transit country. China is in second place, it wins in any case, if only because Chinese contractors will obviously build this railway and the idea of a “third continental bridge” will actually come true. They will most likely lobby for a narrow track, Chinese banks will spin in financing, this is their practice, plus Chinese commodity expansion: the more China has export routes, the better.
“Iron” pressure on Kyrgyzstan
Kyrgyzstan remained in third place. Such is the paradox – the road passing through the territory of the Kyrgyz Republic will not provide so many benefits. Even those elites who support the construction of the China-Kyrgyzstan-Uzbekistan railway do not want to realize and accept this. If you want to build an object, then first calculate its cost and payback, and most importantly, find out who will provide funding.
After all, the same Kazakh side is also concerned: if part of the cargo leaves it for the CKU, this project is a competitor for the Republic of Kazakhstan. But Kazakhstan has an advantage in terms of terrain, they have a steppe, there is no need to cross the mountains, punch tunnels, the road already exists – in this regard, they are lucky. The Kyrgyz section of the CKU, whatever one may say, is continuous tunnels, bridges over mountain rivers, there is a continuous mountainous terrain. In fact, there will be no high-speed communication on the CKU. Therefore, having a margin of safety and a developed cargo base, Kazakhstan will dump tariffs for cargo carriers and give them big discounts. Therefore, it is necessary to build the CKU taking into account the Kazakh factor.
So the “third continental bridge” by default should take into account the existing railway network in the region and the fact that at the first stage the growth of the cargo base will be due to the flow from the remaining two routes (through the Russian Federation and the Republic of Kazakhstan. – Ed.) and the transfer of volumes from road transport. All this requires a thoughtful approach and careful calculations on the principle of “measure seven times, cut once.” Well, no one has canceled geopolitical interests in the region, everything is not so simple here either. Let’s wait for September, maybe there will still be some unique solutions to the puzzle, which is already a quarter of a century old, – sums up K. Rakhimov.
Eugeny Pogrebnyak,
Ritmeurasianet.org,
August 11, 2022