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Eurasian Heart of Gold

Samantha Brletich

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What is the impact of Kumtor on Kyrgyzstan’s Gold Mining Sector?

Nationalization talks have started again in Kyrgyzstan about the ownership of Kumtor Gold Mine. Kumtor Gold Mine, operated and jointly owned by Canadian Centerra Gold via Kumtor Operating Company (KOC) and the Kyrgyz government, has always been a point of tension in the country. Marred by protests, both anti-Kyrgyz government and anti-Centerra, environmental controversy, and being the center of internal Kyrgyz political and social struggles, Kumtor remains Kyrgyzstan’s largest and the most profitable investment project and the country’s main economic asset.

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The Kumtor Gold Mine, the largest gold mine in Kyrgyzstan located in the Issyk Kul Province, is located 350 kilometers southeast from the capital of Bishkek and 80 km south of Issyk-Kul Lake. The mining operation is open-pit which uses surface mining to extract rocks and minerals. The mine has been in operation since 1997; the lifespan of the mine has been extended to 2023.

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The mine which is currently 100% owned by Canadian Centerra Gold (operated through Kumtor Operating Company or KOC) is a joint-stock company (JSC) which Kyrgyzstan via Kyrgyzaltyn owns “33% of the common shares or 77,401,766” and “as of March 1, 2012, Kyrgyzstan’s interests are estimated at $1.546 billion.”[i] Kumtor currently employs 2,617 Kyrgyz citizens (95% are full-time) out of 3,190 total employees. Kumtor accounts for 20% of Kyrgyzstan’s industrial sector and output and accounts for 8% of its GDP. With current dividends, Kyrgyzstan receives 11.3 million USD per year and KOC pays 108 million USD in taxes to the Kyrgyz government.[ii]

Ata-Meken has submitted a draft law on the nationalization of Kumtor. The last round of talks/negotiations about Kumtor took place 10 December 2014. Calls for nationalization emerged out of the failure to establish a joint-venture of the mine: “due to populism we have lost the chance to set up a joint venture [for Kumtor],” Kyrgyz President Atambayev said in a 1 December 2014 interview.[iii] The currently discussion would have Kyrgyzaltyn swap 33% of its holdings for 50% ownership of the joint venture company operating Kumtor, making ownership 50/50. Alternatively, the Kyrgyz nationalist political parties (Ata-Meken and Respublika) suggest Kyrgyzaltyn own 67% while Centerra holds 33% or Kyrgyzaltyn control 100% of the mine as advocated by Respublika.[iv]

The assertiveness of the Kyrgyz when negotiating mining contracts is due to the feeling that foreign companies operating the mines are not investing in local communities and are not promoting development in the region. This is partly because of past environmental accidents.

In May 1998, a truck toppled releasing 1700-1800 kg of toxic sodium cyanide into the Barskoon River. After the accident, local villagers reported illness (some deaths were reported by never fully linked to the cyanide spill—this is speculative) as the river is used for drinking and for irrigation. After the accident and the lackluster response by both Centerra and the Kyrgyz government, locals blockaded the roads to Kumtor and demanded that the contract be cancelled. This prompted more environmental safeguards such as immediate notification of a spill was to be implemented. Another incident occurred on January 20, 2000 where a KOC truck “carrying 1,500 kilograms of ammonium nitrate, used as an explosive at the mine, crashed, [and] spilling its contents.”[v] Kyrgyz authorities were not immediately notified of the spill.

Because of these accidents, there is concern about the use of land. The Kyrgyz Republic’s “Law on Subsoil” introduced in 1997 “governs relationships arising between the government and individuals and legal entities, and other states while using subsoil” and regulates mineral recovery (extraction), mineral deposits of economic significance, ownership of the subsoil and there within minerals.[vi] The Law states that subsoil is the exclusive property of the Kyrgyz Republic is under protection by the state. This law has been used to regulate mining activities and has been used to justify violations of environmental regulations including operations at Kumtor.

The “Law on Glaciers”—to prevent the degradation of glaciers that supply drinking water to many local villages—was passed by Parliament in April 2014, but was sent back by the President for revisions. The new law would require companies to pay for damages to the glaciers. The glaciers affected would be Davidov, Lysyi and Sarytor as KOC has put rocks on top of glaciers and removed parts of glacial ice violating environmental provisions of the project; Centerra has adjusted their operations to stop the acceleration of water.[vii] Lake Petrov is also in danger.

It is unclear whether or not the environmental laws on glaciers or subsoil are genuine attempts to preserve the environment or are a way for the Kyrgyz government to extract concessions from foreign companies to increase their profits or holdings in a company.

There are also concerns how the mining and the chemical usages to mine the gold will affect the historic freshwater Issyk-Kul Lake. The Issyk-Kul Development Fund became part of the Kumtor operation and KOC/Centerra is required to provide 1% of its gross revenue to socio-economic development of regional sectors aligned with spending is based on government priorities. The fund was started in 2009 and since then 25 million USD was provided to the fund; 4.638 million USD was provided to the fund in 2012 alone. The fund has helped build schools, kindergartens, sports clubs, and irrigation infrastructure which has been impacted by the mining.

To mitigate any significant economic effects of the nationalization of Kumtor, additional gold mining operations exist at Ishtamberdy, Bozymchak and Taldybulak Levoberezhnyi mines. Ishtamberdy is Chinese operated, protested by Kyrgyz locals, and has experienced some controversy including Full Gold Mining JSC threatening to cease operations in September 2013. The mine was to begin production in the second quarter of 2013 creating 600 permanent jobs.[viii]

Bozymchak mine would produce mainly ore and would produce 0.8 to 0.9 tons of gold. Kazakhstan’s Kazakhmys incurred an impairment charge in 2012 of $162 million USD against Bozymchak which reveals a higher operating risk in Kyrgyzstan as the company had to reduce its goodwill.[ix] The first shipment of the concentrate from Bozymchak to Kazakhstan was expected to occur in November 2014.[x] The mine was said to have completed construction in late 2013 providing 600-700 permanent jobs. Taldybulak Levoberezhnyi, an Open Joint Stock Company, is expected to be in operation until 2026: 60% belongs to Altynken (purchased by Chinese Superb Pacific Limited Company in Sept 2011) and 40% belongs to the Kyrgyz government. At the Taldybulak Levoberezhnyi, production was not expected until June 2014 according to AKIPress. In October 2012, locals picketed the headquarters of the mine in Orlovka, Kyrgyzstan. The protesters disputed the “Chinese company’s illegal sacking of Kyrgyz citizens and polluting of the local environment.”[xi]

There are also gold deposits that could be exploited including Makmal and Togolok but they are not as profitable. The Makmal gold mine was once extremely profitable. Operations at Makmal began in 1986 and excavated until 1996 producing 21.47 tons of gold. The mine is in past producer stage and its life has been extended to 2016. Geological reserves after 1996 were estimated at 20 tons of gold. [xii] Mining operations at Togolok will produce 800 jobs and its probable reserves are estimated at 86 tons in the mine deposit and the surrounding area.[xiii]

There are multiple promising gold deposits/sites are Karator, At-Bashy in the Naryn region, containing 5.5 gold reserves and the “Buchuk” gold reserve of 15-20 tons. Shambasei gold resource, a low-risk high-margin project, in Southern Kyrgyzstan has an estimated defined gold reserve of “2.5 million [tons] at 3.4g/t, or 277,000 ounces of gold.”[xiv] Karakazyk in the Chon-Alay district in the Osh region would produce 200-300 kg per year producing 100-120 jobs for the local workforce. These identified sites combined produce less gold and revenue than Kumtor and would provide fewer jobs.[xv]

The nationalization of Kumtor must be mitigated by the countries’ other mineral sectors such as copper, ore, silver, iron and tungsten. To remain economically competitive within the Eurasian Economic Union, Kyrgyzstan must develop sustainable economic and mining practices as the Kyrgyz economy is susceptible to many supply shocks; reliance on Kumtor is too heavy. By developing other sectors of the economy, Kyrgyzstan is shielding itself from a possible economic meltdown. If nationalization were to occur, would the Kyrgyz government be able to support the projects developed by the Issyk-Kul Development Fund? Poor development in the financial sector has led to poor governance of the situation prompting protests that have shut down or suspended operations.

Kumtor protests were rooted in the need to address environmental concerns, contributions to the community, and perceived unequal revenue distribution and fueled by renewed nationalism and the assertiveness of the new post-Bakiev government. South African investors (Talas Gold Company) and Australian investors (Z-Explorer of Manas Resources) have met the same challenges as Canada’s Centerra. If these issues are not resolved, can cause widespread damage to Kyrgyzstan’s gold mining and damage Kyrgyzstan’s reputation as a reliable foreign business partner. Corruption in Kyrgyzstan is also a concern. According to Transparency International 2014 Corruption Perception Index rankings, Kyrgyzstan has a rank of 27 (0 is the most corrupt to 100 which is the least corrupt).

Kyrgyzstan would most likely be unable to run the mine itself: “[KOC] does not earn money on a daily basis. It receives financial support from Centerra for most of the year until it can sell gold and pay back all of its loans.” [xvi] Pay out would not be immediate and the government would have to put the money upfront to benefit the costs. Most of the workers that Kumtor employs would most likely stay unless the nationalization of the mine were to affect their wages and Kyrgyzstan lacks the workforce to replace Centerra’s sector specialists. If nationalized, there would be higher operating costs decreasing revenue. Other companies (or countries) might be interested in developing the mine, but would most likely face the same issues as Centerra Gold leading Kyrgyzstan to become more of a high political risk country.

 


[i] Kumtor Gold. 2013. FAQ: Kyrgyzstan and Centerra. http://www.kumtor.kg/en/about/faq/centerragold-and-kyrgyzstan/ (last accessed 29 December 2014).

[ii] Gullette, David and Asel Kalybekova. 2014. Agreement under pressure, Gold mining and protests in the Kyrgyz Republic. Friedrich Ebert Stiftung. http://library.fes.de/pdf-files/id-moe/10927.pdf (last accessed January 3, 2015). Page. 15.

[iii] Kg.24. 2014. Kyrgyz moves towards Kumtor nationalization. The Times of Central Asia. http://www.eng.24.kg/bigtiraj/173638-news24.html (last accessed 29 December 2014).

[iv] Gullette, David and Asel Kalybekova. 2014. Agreement under pressure, Gold mining and protests in the Kyrgyz Republic. Friedrich Ebert Stiftung. http://library.fes.de/pdf-files/id-moe/10927.pdf (last accessed January 3, 2015). Page. 15.

[v] Norlen, Doug. 2000. The Kumtor Gold Mine: Spewing toxics from on high. Pacific Environment and Resouces Center, September 2000. Bankwatch Web site. http://bankwatch.org/documents/kumtor_toxics_09_02.pdf (last accessed January 4, 2015). Page 2.

[vi] United Nations Economic Commission for Europe (UNECE). Law of the Kyrgyz Republic on Subsoil. United Nations Economic Commission for Europe Web site (UNECE). http://www.unece.org/fileadmin/DAM/hlm/prgm /cph/experts/kyrgyzstan/documents/law.on.subsoil.pdf (last accessed January 5, 2015)

[vii] Centerra Gold. 2012. Environmental and Sustainability Report 2012. Kumtor Gold. http://www.kumtor.kg/wp-content/uploads/2014/01/Eco2012_en.pdf (last accessed January 3, 2015). Page 28-29.

[viii] The State Agency on Geology and Mineral Resources of the Kyrgyz Republic. 2014. The mines of the Kyrgyz Republic. http://www.geology.kg/index.php?option=com_content&view=article&id=200&Itemid=242&lang=en (last accessed Jan 2, 2015).

[ix] Kazakhmys. 2013. KAZAKHMYS PLC HALF-YEARLY REPORT FOR THE PERIOD ENDED 30 JUNE 2013. KAZAKHMYS WEB SITE. http://www.kase.kz/files/emitters/GB_KZMS/gb_kzms_reliz_220813_en.pdf (last accessed January 3, 2015).

[x]The Times of Central Asia. 2014. Kazakhmys to start shipping concentrate from Bozymchak in Kyrgyzstan in November. http://www.timesca.com/news/9961-kazakhmys-to-start-shipping-concentrate-from-bozymchak-in-kyrgyzstan-in-november (last accessed December 30, 2014).

[xi] Trilling, David. 2012. Kyrgyzstan: Chinese Respond to latest mine attack. Eurasianet.org Web Site. http://www.eurasianet.org/node/66121 (last accessed January 2, 2015).

[xii] Kyrgyzaltyn. 2011. Makmal Gold Mining Combinate. Kyrgyzaltyn Web site. http://www.kyrgyzaltyn.kg/en/filialy/63-kombinat-makmalzoloto (last accessed December 29, 2014).

[xiii] The State Agency on Geology and Mineral Resources of the Kyrgyz Republic. 2014. The mines of the Kyrgyz Republic. http://www.geology.kg/index.php?option=com_content&view=article&id=200&Itemid=242&lang=en (last accessed Jan 2, 2015).

[xiv]Proactive Investors. 2014. Manas Resources updates Shambesai gold resource to latest standard

http://www.proactiveinvestors.com/companies/news/58591/manas-resources-updates-shambesai-gold-resource-to-latest-standard-58591.html (last accessed January 3, 2015).

[xv] The State Agency on Geology and Mineral Resources of the Kyrgyz Republic. 2014. The mines of the Kyrgyz Republic. http://www.geology.kg/index.php?option=com_content&view=article&id=200&Itemid=242&lang=en (last accessed Jan 2, 2015).

[xvi] Gullette, David and Asel Kalybekova. 2014. Agreement under pressure, Gold mining and protests in the Kyrgyz Republic. Friedrich Ebert Stiftung. http://library.fes.de/pdf-files/id-moe/10927.pdf (last accessed January 3, 2015). Page. 10.

Samantha M. Brletich is a researcher and writer specializing in Central Asia and governance, security, terrorism, and development issues. She possesses a Master’s in Peace Operations Policy from George Mason University in Virginia, United States. She works with the virtual think tank Modern Diplomacy specializing in Central Asia and diplomatic trends. Her work has appeared in multiple publications focused on diplomacy and Central Asia respectively. She is currently an employee of the U.S. Federal Government.

Central Asia

Greater Eurasia: New Great Game formulate abundant possibilities for Central Asia

Debadatta Mishra

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The title “New Great Game” became the most conversed topic in the contemporary realm of global politics. The heart of the Eurasian continent, the Central Asian region, already witnessed a colonial battle between Russian and Britain. The position of Geopolitical status more fueled up the conflict. The Great Game furnished an unpleasant impact on the entire Central Asian region; it grasps by the Russian empire. Russia’s century-long predominance over the Central Asia region concluded with the collapse of the Soviet Union in 1991. However, it nevertheless has a massive impact over the countries of Central Asian states Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan. Following centuries, they were preceding reappeared different New Grete Game, where the foremost global power countries have engaged. The internal scenario of central Asian states is struggling over hegemonic power. Subsequently, the central Asian nations are well equipped with natural resources like oil, gas like Kazakhstan’s largest uranium producer, that attracts all major countries to penetrate in Central Asia.

The New Great Game impacted both as constraint and opportunity in Central Asia. The central Asian states are adopted the multi-vector approach to the foreign policy due to landlocked country. So, the developed countries are offered various development schemes in the region. Currently, three major powers are Russia, US and China compete with each other to become a prominent player in Central Asia. Every nation is looking for their interest through the region. Nowadays, Washington mostly engaged in the New Great Game, after the US entered in Afghanistan, and it required Central Asian states cooperation to expand the authority of NATO in Eurasian land. Although, following the attack on 9/11, the US mostly keep eyes on terrorism activities and central Asian states are becoming significant for security purpose. Moscow always indeed to the presence in Central Asian internal politics and seems to maintain its status quo. Russia always considered the Central Asian states as his campaign, with the significant military, economic and political influence. Moscow consistently rated Central Asian nations as “soft underbelly”. Russian culture, music, food highly incorporated with Central Asian states, but Moscow seems fallen the economic competition with Beijing. China is somewhat successful in pushing Russian influence in Central Asia.

China expands its control over in the pecuniary sector, Dragon becoming larger trade partner and investor in that region. China’s visionary project ‘Belt and Road initiative’ and China’s strategy to influence and grow its economic power over the Eurasian continent required Central Asian states linear involvement. China shared more than 3000 k.m of the direct border with CA, this is an opportunity for China to enhance its strength and became more dominant rather than other countries. Central Asia is a crucial component in the Geopolitical puzzle. The abundant of natural resource in CA is the primary purpose behind for more intense of New Great Game. The Caspian Sea contains a large amount of natural resource. The superpower countries followed up the pathway of the dependency model, and they create opportunity with precisely inside their acquisition. The new Great Game change the notion of Geopolitics on a broader level. China is steadily expanding its influence over the Eurasian mainland with hegemonic expansion over the south china sea. There is an appearance of another cold war (economic domain) between China and the US; both countries headed for intense competition for global supremacy. That’s why central Asia states played an essential function to determine immense superiority over the Eurasian landmass. All these countries participated in New Great Game implemented the soft power and made an effort to pull Central Asian nations through proffering opportunities. The central Asian States compensated relishes the possibility, although faced reluctance from significant players.  The potential development of the Central Asian Region endures the growth of the Eurasian continent.

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Central Asia

Territorial Disputes in Central Asia: Myths and Reality

Yuriy Kulintsev

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One of the focal points of any state foreign policy is the issue of territorial disputes, irrespective of its geographical size, economic opportunities or geopolitical ambitions. At the same time, in the modern world, the scenario of the use of force as a possible option for China to resolve territorial disputes in Central Asia is hardly probable. None of the parties, including neighboring countries, are interested in intensifying territorial claims and initiating a real conflict. Despite the apparent advantages, a guaranteed response from the international community jeopardizes all benefits for the potential aggressor (for example, Beijing) from possible territorial acquisitions. In addition, the system of control and monitoring has been formed in the region with the direct participation of Russia. The guarantors of the system are, in particular, the SCO and the CSTO; the latter one has a sufficiently deterrent effect on the capacity of regional players to demonstrate invasive intentions.

Meanwhile, the international community developed a civilized way to resolve territorial disputes through diplomatic means such as long-term leasing of land, the creation of joint jurisdictions, etc. China has experience of transferring territories, for example, the 99-year lease of Hong Kong by the United Kingdom or the recognition of Macao as “Chinese territory under Portuguese administration” followed by the signing of the joint Declaration on the question of Macao. Since China became a successful economic power, Beijing has preferred to resolve territorial disputes through diplomatic instruments, rather than from a position of strength.

It should be pointed out that implementing its Belt and Road Initiative, China has never presented it as a charity project. Moreover, the initial goal was the development of the Central and Western regions of China. All foreign countries participating in the initiative expressed their desire to join it on the terms of mutually beneficial development. By accepting China’s offers and agreeing to its loans and investment projects, any of the countries had the opportunity to assess the risks and not participate in them, or to make a choice and develop their own economy on the terms of other financial institutions, such as Western ones. In this case, China acts in the Central Asian region like most major powers interested in strengthening their positions and promoting their political, economic and humanitarian agenda.

Possible allegations of Beijing concluding economic contracts on bonded terms should also be addressed to officials of the “affected” countries who agreed to these proposals from the Chinese side. At the same time, if it appears that one of the parties has not acted in its national interests, this is more a problem of the internal state structure of a particular country and its attitude to the work of its own officials, and to a much lesser extent – a claim to the development of bilateral relations with China.

It is also necessary to distinguish the official position of the state from the statements of individuals who often act in their own interests. For example, an article with the title “Why Kazakhstan seeks to return to China,” which is given as an example in the publication “Land leases and territorial claims of China in Central Asia and the South Caucasus,” was written by an anonymous blogger with just over 80 thousand subscribers (insignificant number according to the Chinese standards). An analysis of how the news was spread geographically by international media, as well as the contents of official statements, confirms the opinion of experts-sinologists that it was an attempt to gain popularity and “collect likes,” and has nothing in common with the official position of Beijing.

Another example of using the foreign policy agenda in the internal political struggle is the statement of the leader of the opposition party of Tajikistan, R. Zoirov, who accused China of moving the borderline 20 kilometers deeper into the territory of Tajikistan.

On the eve of the presidential elections in 2013, Tajikistan’s opposition once again tried to “accuse authorities of surrendering land to China” in the framework of the 2002 border demarcation agreement. China claimed 28 thousand square kilometers of Tajikistan’s territory, but as a result of the negotiations, it received just over 1 thousand square kilometers of high-altitude land unsuitable for life, without proven volumes of large deposits. The results of negotiations can be evaluated in different ways, but each country has the right to seek convenient forms of dispute resolution and debt repayment. In addition, this agreement was ratified by the government of Tajikistan only in 2011. The official representative of the Ministry of Foreign Affairs of Tajikistan described the statement of the opposition as a provocation, due to the fact that the author acts in his own interest. Later, it was revealed that Zoirov’s statement refers to 2011 and was “made two years ago and published just now.” According to R. Zoirov, he determined the distance to the border based on the statements of local residents. The official authorities of Tajikistan, China, Russia and other regional powers ignored information about China’s occupation of Tajikistan’s territory as unreliable.

Recognizing the high public sensitivity of transferring land from one state to repay credit obligations to another, it is necessary to proceed from the analysis of the contents of specific international agreements, the motives for signing them by current authorities, and the national interests of the parties involved. Otherwise, one is likely to discover a distorted interpretation of key events in line with the populist rhetoric of an unknown blogger or to be the recipient of information propaganda carried out by major powers competing for regional influence.

From our partner RIAC

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Central Asia

From Central Asia to the Black Sea

Emil Avdaliani

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(Source: mift.uz)

In early June, China unveiled a new transportation corridor when a rail cargo of 230 tons of electrical appliances worth some $2,6 million arrived in the Uzbek capital of Tashkent. Though distant from the South Caucasus, the development nevertheless has a direct impact on the geopolitics of the South Caucasus energy and transport corridor.

For centuries, Central Asia has been notorious for the lack of connectivity. Highways, railroads and pipelines were solely directed northwards towards Russian heartland. Geography also constrained the development of alternatives, but the problem is that other routes were also purposefully neglected during the Soviet times. Therefore, nowadays breaking these geographical boundaries equals to decreasing Russian influence in Central Asia.

Indeed, over the past 30 years, crucial changes have taken place where newly developed east-west transport links (from China to Central Asia, then South Caucasus) allow the region to be more integrated with the outside world. The primary motivator for this is China. The country strives to involve itself into the region’s economics and politics and, specifically, build ties with arguably the region’s most important geopolitical player – Uzbekistan. Beijing has already taken several important steps. For instance, China has become Uzbekistan’s top economic partner through growing trade and direct investment. Take the most recent example, Beijing-backed Asian Infrastructure Investment Bank (AIIB) will lend $100 million to Uzbekistan to help deal with the coronavirus pandemic and future public health disasters.

The new China-Uzbekistan corridor is some 295 km shorter and cuts five days off the standard 15 days-corridor which goes through Kazakhstan and Russia to reach Europe. As different forecasts indicate, the Kazakhstan-Russia corridor could lose some 10-15% of Chinese freight per year to the new China-Uzbekistan route – a significant number considering the massive amount of goods that move between between Europe and China.

What is crucial here is that the only viable route to ship freight to Europe from Uzbekistan is across the Caspian to Azerbaijan, Georgia and the Black Sea. Another possibility would be sending goods via the Turkmenistan and Afghanistan, then Iran and Turkey. However general insecurity along this route makes the Caspian option more promising.

These infrastructure changes in distant Central Asia as well as steady growth of shipments from China will further boost the fragile South Caucasus transport and energy corridor, which struggles to compete with enormous trade routes which go through Russia and elsewhere.

What makes the Caspian routes more interesting is the progress made in port development in Azerbaijan and Georgia. The ports of Baku and a small city of Alat have notably improved their infrastructure over the past several years. Located to the south of Baku, Alat is particularly promising as an estimated transshipment of the new port complex is potentially up to 25 million tons of cargo and 1 million TEU per year.

Similar trends of improving infrastructure take place along the rest of the South Caucasus corridor. In March, the Georgian government granted the APM Terminals a permit to start the expansion of Potin port. Essentially the project, which will add more than 1000 local jobs, involves the construction of a separate new deep-water multifunctional port (officially still a part of Poti port).

The project consists of two major phases: first stage of $250 million will take nearly 2-2,5 years to complete and will involve the development of a 1 700-meter-long breakwater and a quay with a depth of 13.5 meters. A 400-meter-long multifunctional quay for processing dry bulk cargo and further 150 000 TEUs will be added; the second stage envisages a 300-meter-long container quay. If all goes as planned, 1 million TEU yearly container capacity could be expected. What is more important for the infrastructure of the eastern Black Sea region and the geopolitics of transcontinental transshipment, the expanded Poti port would have the capacity to receive Panamax vessels.

Expansion of Poti will have regional implications. The port already enjoys the role of the largest gateway in the country and a major outlet for Azerbaijan’s and Armenia’s trade with Europe. For instance, liquids, passenger ferries, dry bulk and container traffic go through Poti. Moreover, Poti port also serves as an alternative route for exporting wheat from Central Asia to the Black Sea and elsewhere.

As the work on the Poti expansion speeds up similar developments are taking place in Batumi. In 2019 Wondernet Express, Trammo and the government of Georgia announced plans to build a new terminal with total investment cap of 17,5 million euros. More importantly, the new facility will store up to 60 000 tons of mineral fertilizers coming from Central Asia through Azerbaijan.

From a wider geopolitical perspective, both port expansions enjoy US government support as American business interests are deeply intertwined. PACE terminals, a company which operates in the port of Poti for almost 30 years, is partially owned by a US-based company. This connection raises a possible longer-term vision of Poti’s and Batumi’s development as gateways not only for Georgia, but generally for the South Caucasus and Central Asia.

Overall, these connectivity trends will reinvigorate Trans-Caspian shipping. Moreover, though considered by many as unrealistic, the dormant Trans-Caspian Pipeline (TCP), could gain traction. There is more to the story. I have mentioned the US support for the Georgian ports. Europe and Turkey share an identical position. All parties are interested in breaking Russia’s grip on gas export routes from Central Asia. Support for the east-west corridor across the South Caucasus has been present since the break-up of the Soviet Union, but rarely there have been such promising trends as there are now: steadily increasing China-Europe shipping; Chinese Belt and Road Initiative’s expansion into Central Asia; gradually improving rail-road and ports infrastructure in Georgia and Azerbaijan.

On a negative side, much still remains to be done. For instance, in Kyrgyzstan, through which the new China-Uzbekistan route goes, Chinese cargo has to be shipped by road which complicates shipment operations. Nearly the entire 400 km of the Kyrgyz section of the railway still needs to be built. So far, no solution is in sight as difficult mountainous landscape and Russian opposition complicate the issue. But the overall picture, nevertheless, is clear. Central Asia is gradually opening up, shipment across the Caspian increases and the expansion of the Georgian ports takes place creating a line of connectivity.

Author’s note: first published in Caucasuswatch

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