Kazakhstan and Kyrgyzstan exchange blows as latter prepares to join Customs Union

Kyrgyzstan has decreased irrigation water supplies to Kazakhstan twofold, following a three month hold up by Kazakhstan’s customs authorities of the Russian petroleum products destined for Kyrgyzstan, Tengrinews reports.

The Kyrgyz Department of Water Resources declared that the country had used up about 70% of its irrigation water accumulated in its reservoirs and Bishkek and Chu cities started to experience shortages of irrigation water. In addition, the experts of the Department said that it was a low-water season for Kyrgyzstan, which made it impossible to supply the required amount of water to Kazakhstan.

Besides, Kyrgyz government introduced limits on water supply to various regions of the country. The Regional Department of Water Resources of Chu region intends to organize daily patrols of agricultural waterways to make sure that sluices are in correct positions and no unauthorised water intake takes place. Chief of Chui Oblast water management Ruslan Devyatkulov said that Kyrgyzstan would decrease water supplies to Kazakhstan even further and would be supplying only half of the agreed amount.

Kyrgyz Deputy PM Tayirbek Sarpashev threatened to fire the Kyrgyz officials responsible for mishandling the water resources.

How 'dry' is the drought?

According to the Kazakh-Kyrgyz intergovernmental agreement, Kyrgyzstan should supply water to Kazakhstan at a rate of 35 cubic meters per second. But now it flows at about 20 cubic meters per second.

The Ministry of Agriculture and Melioration of the Kyrgyz Republic informed that as of July 9, 2014, the Ortho-Tokoy water reservoir contained 88.4 million cubic meters of water, while the figure at the same time last year was 185.5 million cubic meters, IA Novosti-Kazakhstan reported.

"It was decided to create a command center that will coordinate all the work on optimization of distribution of the water resources. It will be headed by an authorized representative of the government, the governor of Chu Oblast Kanatbek Isayev. The center will be reporting to the government on the situation every two days,” First Deputy PM Sapashev said on July 11, according to IA Novosti-Kazakhstan. The center will also include heads of law enforcement agencies of the region.

The newswire reported that the Kyrgyz government cited unusually small shortage of water this year, noting that a similar drought was recorded in Kyrgyzstan about two decades ago. The government of Kyrgyzstan recalled that during the Soviet era there were four hundred collective and state farms in Chu Oblast. They received water for irrigation on a strict schedule. Now, there are 28,000 farms "and everyone wants to water the fields at the same time."

However, not all are convinced that the water shortages are as bad as they are claimed to be. For.kg cites one of its sources close to the situation as doubting the official statements and saying that there was actual an excess of water and a rise in the mountain rivers as opposed to a deficit.

Vesti.kg said that its department of hydrological forecasts reported that the average annual water basins of Kyrgyz rivers were at  81.25%, and would be at 70.88% during the next two summer months. The website said that any number between 80% and 120% was officially considered within the normal range and even 70.88% was not small enough to call the situation as serious “lack of water”.

Fuel for water

This situation was unfolding, while 1000 fuel tanks destined for Kyrgyzstan were stuck in Kazakhstan, causing fuel prices to spike in Kyrgyzstan. Railway shipments via Kazakhstan are the only source of fuel for Kyrgyzstan. So, naturally, the delays at the border create shortages of fuel in Kyrgyzstan.

It was unclear how Kyrgyzstan was going to deal with the problem. Until recently. Water may be the ace in its deck of the petroleum smelling cards. Now, water shortages are experienced in the very border region of Kazakhstan, where the Kyrgyz fuel tanks are being held off.

In fact, the supply cuts have already hit hard on some in Kazakhstan residing in the border regions with Kyrgyzstan. For them, the only source of water is that supplied by Kyrgyzstan. According to Kazakh TV Channel KTK, farmers in Zhambyl Oblast of Kazakhstan are already losing their crops. Corn and alfalfa have simply burnt under the harsh sun of southern Kazakhstan without ever ripening.

The same sun is burning the paint on 600 precious fuel tanks stuck at Lugovaya station in Zhambyl Oblast on the Kazakh-Kyrgyz border. Another 400 railway tanks are delayed at the Kazakh-Russian border. Kazakhstani customs officials cite the government decree №1402 adopted in December 2013. The decree came into effect on January 1, 2014 and initially banned export of petroleum products from the territory of Kazakhstan for six month. The decree was later prolonged for another six months on July 1, 2014.

Kyrgyzstan’s Association of Oil Traders said that the delay resulted in prices of AI-92 gasoline rising from 38 som to 40.7 som per liter. A-80 gasoline went from 34.8 to 37.1 som per liter and diesel fuel prices went from 40.3 som to 43.7 som per liter.

"The held off goods were shipped to Kyrgyzstan by Kazakhstani residents in violation of the agreement as of December 9, 2010 between Kazakhstan and Russia on cooperation in supplies of petroleum and petroleum products to Kazakhstan that bans export of diesel fuel and gasoline from Kazakhstan out of the Customs Union starting January 1, 2014," said the Customs Control Department of Zhambyl Oblast.

But according to the Association, Kazakhstan delays fuel selectively and the restrictions are applied against Kyrgyz tanks only. Fuel tanks with similar shipping documents going through the territory of Kazakhstan to Tajikistan and Afghanistan, as well as those heading to Kyrgyzstan's south are crossing the customs border in Shymkent Oblast with no delays. Within another week or two, the fuel in Kyrgyzstan might reach 45 som per liter ($ 0.9), the Association said.

Neighbourly problems and political leverages

The fuel shortages, however, are only part of Kyrgyzstan’s looming economic problems. Executive director of the Association for Markets, Businesses, Trade and Services Saparbek uluu Alisher said that a full scale crisis was very likely to hit Kyrgyzstan should it not join the Custom’s Union. In fact, the fuel ban might have not affected Kyrgyzstan had it been part of the Customs Union.

"The border with Kazakhstan is closed. Re-export of goods is completely banned. The budget has a shortage of 2 billion som. According to estimates, the service sector lost 16 -20 billion som [$310-390 million]. In a few months the third phase of the crisis will begin - crisis in the social sphere. Towards the end of the year, our economy may face serious adverse effects," he is quoted as saying by 24.kg news agency.

The country declared its intention to join the ranks of Russia, Belarus, and Kazakhstan within the Customs Union before the year’s end. It asked for $1 billion in aid money from Kazakhstan and Russia to join the Union. Kyrgyzstan wants to use the money for its state-run Roadmap program that is already short of $377 million. Russia agreed to give $200 million as grant money to Kyrgyzstan. And consultations on financial assistance from Kazakhstan were scheduled. 

Some might interpret the latest visit of Kazakhstan's PM to Kyrgyzstan as a signal that this assistance will soon finally reach Kyrgyzstan. 

PM Karim Massimov unexpectedly paid a visit to his Kyrgyz counterpart Djoomart Otorbaev on July 12, according to 24.kg. The press agency wrote that the meeting produced some results: it was agreed to intensify negotiations on Kyrgyzstan's accession into the Customs Union and the Eurasian Economic Space, and to assist the Kyrgyz Republic in implementing its Roadmap. Cooperation in energy and dispute settlement between the two countries' legal entities were also on the agenda.

Kyrgyzstan is dependent on its neighbor Kazakhstan in both trade and logistics. This dependence may well serve as a leverage to speed up the process of Kyrgyzstan’s accession into the Custom’s Union. Moreover, Kazakhstan may be able to bargain itself more profitable terms.

However, neighbors have a tendency to be mutually dependent on each other, so Kyrgyzstan might have a few other aces in its hand. It came as no surprise that irrigation and water supply were among the key issues on the agenda during the latest visit of PM Massimov to Bishkek. 
 
By Dinara Urazova