"Central Asia + Japan" The Second Tokyo Dialogue
Chairperson's Summary

January, 2007

The second "Central Asia + Japan" Intellectual Dialogue was held in Tokyo January 30, 2007 by Japan's Ministry of Foreign Affairs in collaboration with the Japan Foundation. This track two intellectual dialogue representing one of the "five pillars" of "Central Asia + Japan" Dialogue is called the "Tokyo Dialogue." Five experts from Central Asia, eighteen panelists from Japan, including government officials, and sixty members of audience participated in the Dialogue.

To open the second Tokyo Dialogue, Japan's Senior Vice Minister for Foreign Affairs, Takeshi Iwaya, introduced recent developments between Japan and Central Asia. He described the international environment and Japan's motivation to launch and promote "Central Asia + Japan" Dialogue since summer 2004 and mentioned several events depicting closer ties between Japan and Central Asia, namely, holding the second "Central Asia +Japan" Dialogue Foreign Ministers' Meeting in June 2006, and the visit of then Prime Minister Koizumi to Central Asia in August that same year. Mr. Iwaya also noted that the expertise of specialists was essential to examine from a long-term perspective relations with Central Asia, which is embroiled in many complicated issues. Furthermore, he expressed his expectation that this meeting with energy as its theme would produce useful recommendations to further deepen cooperation between Japan and Central Asian countries, impacting on the intergovernmental dialogues.

Reflecting the recommendation in the first Tokyo Dialogue in March 2006 that "it would be beneficial to discuss more specific themes", energy-related issues were focused on, and "Prospects for Regional Cooperation in Central Asia on Water Resources and Electric Power" and "Prospects for Diversification of Central Asia's Energy Supply Routes" were taken up as themes in the second Tokyo Dialogue.

Regarding "Prospects for Regional Cooperation in Central Asia on Water Resources and Electric Power," it is obvious that Kazakhstan, Uzbekistan, and Turkmenistan have fossil fuel such as oil and natural gas, while Kyrgyzstan and Tajikistan in the upstream of the Syr Darya river and Amu Darya river have water resources, and that regional cooperation is needed for optimal distribution of water resources and electric power.

The exchange system of water and electricity in the Soviet era, where upstream countries received fuel supply in winter while downstream countries were supplied with water for irrigation in summer, collapsed after the independence of the Central Asian countries. Some attempts to forge regional cooperation for water resource management and electricity supply, including the "Syr Darya Framework Agreement" in 1998, have not made substantive progress and have stagnated. Kyrgyzstan and Tajikistan, with scarce fossil fuel, discharge water to a great extent to meet electricity demand at peak time in winter, which causes floods in downstream countries, that is to say, Uzbekistan and southern Kazakhstan. On the other hand, there arises the problem that sufficient water is not supplied to cultivate cotton downstream in summer. Severe budget constraints and the lack of appropriate legal systems resulted in deteriorated irrigation facilities, aggravating water- and soil-related environmental problems. Also, the Aral Sea is continuously shrinking due to using water for irrigation and industry.

In the current circumstances where regional cooperation in water and electricity is faced with difficulties due to the conflict of interests between the upstream countries and downstream countries, it was pointed out that the self-sufficiency policy pursued by each Central Asian country had brought about enormous investment cost and environmental cost. According to a simulation conducted by Tokyo Electric Power Services Co. for which the Japan Bank for International Cooperation sent a team to study the possibility of establishing a flexible mechanism of electricity, it was reported that regional cooperation through the interconnection of power systems would bring about merits including improving supply reliability, reducing power development investment, generation cost and the volume of water discharged in winter.

Considering these issues, the participants expressed the following opinions.

  • Securing political commitment of leaders in each country is prerequisite to achieve regional cooperation in water resources and electricity. Technical simulation is useful to visualize the merits that regional cooperation will bring about, stimulating leaders into regional cooperation.
  • Fully utilizing human networks of engineers and experts who are involved in the existing Central Asia Power System (CAPS) and sharing the experiences and best-practices of such experts are desirable.
  • A need exists to recognize water resources as a valuable commodity and establish a mechanism to pay for both water discharge and fuel supply in foreign currency. One of the ideas is introducing a "charge-fund" approach in cooperation with the World Bank. In this system, consumers in downstream areas will be charged for water usage, and the funds from collected charges will be used to manage and develop water resources in upstream areas.
  • Regarding electric power, it should be agreed among the countries concerned to use the existing CAPS rather than build new power lines with huge cost, and implement the necessary rehabilitation of CAPS.
  • It is also necessary to enhance the capacities of thermal power generation in Kyrgyzstan and Tajikistan.
  • Kazakhstan, the most powerful economy in Central Asia, should examine the possibility of investing in the region.

Regarding possible roles played by Japan, the participants pointed out the following.

  • Japan leads in such areas as water saving, water resource management and energy saving, and therefore can provide Central Asian countries with its excellent technology.
  • Technical assistance should be extended to reform systems including improving managing power-related facilities such as power generation, transmission, and distribution.
  • It is appropriate to start with projects which will be conducted within a country but nevertheless will have regional impacts rather than immediately venture gigantic projects which will go beyond borders.
  • One idea is that Japan offer opportunities to have in-depth discussions at the political level as well as technical level among Central Asian countries.
  • Japan's involvement in solving ecological and social-humanitarian issues regarding the Aral Sea is desirable.

In the second session, "Prospects for Diversification of Central Asia's Energy Supply Routes" were discussed. While the energy resources in Central Asia including oil and natural gas have attracted interest from the international community as non -Middle East and non-OPEC sources, their export is hindered by the fact that Central Asian countries are landlocked. The diversification of export routes of oil and natural gas is an important issue both in economic and political and strategic terms, since the Central Asian countries endowed with energy resources such as Kazakhstan could realize their potential through diversification. Such diversification is also desirable for the stability of supply and demand of the international energy market. Some diversification efforts have already begun. Kazakhstan started exporting its oil to China via the pipeline between Atasu and Alashankou in �Q005. Also, completion of the BTC (Baku-Tbilisi-Ceyhan) oil pipeline in 2006 allows Kazakhstan to export oil to Europe. Turkmenistan and China agreed on the construction of a gas pipeline between Turkmenistan and Xin Jiang Uigur Autonomous Region, China.

Regarding southern oil routes, it is estimated that a Kazakhstan-Turkmenistan-Iran route is the shortest to Persian Gulf. The idea of another route connecting Kazakhstan-Turkmenistan-Afghanistan- Pakistan also exists. As for natural gas, the TAP pipeline with which Turkmenistan could supply gas to Pakistan and India via Afghanistan has been proposed.

Recognizing these facts, the participants proposed the following.

  • Constructing routes supplying energy resources depends on political factors and economic profitability. Still, the diversification of supply routes including non-European ones is essential for the Central Asian countries which are landlocked. However, attention should be paid to the fact that the current level of oil production does not meet the capacity of pipelines under consideration.
  • Constructing southern routes depends on regional political and security situations. For the Iran route, stability of the situation relating Iran is a precondition. Meanwhile prevailing security situation in Afghanistan precludes the realization of the Southern route going through Afghanistan in the short term. However, southern routes cannot be realized just by waiting to see the conditions naturally improved. If oil or natural gas pipelines or power transmission lines go through Afghanistan from Central Asia, certainly producing countries can benefit. Furthermore, transit countries having scarce resources also can get transit fees, which will contribute to reducing economic disparity and eventually to political stability. Therefore, first it is necessary to appeal to people in the countries concerned for understanding the merits and importance of southern routes and then, with this rising awareness, to solicit support for constructing the routes. Also, it is important to promote comprehensive assistance programs ranging from mine clearance to industrial development to improve security and political stability, reducing construction and investment risk. It is indispensable to secure cooperative relations among oil or natural gas producing countries, foreign investors and consumer countries as well as inducing capital and technology from advanced countries to stably develop the cycle of exploration, exploitation, and production.
  • Regarding electricity, it is now being concretely discussed under the initiative of international financial institutions to formulate a project for establishing a power grid supplying surplus electricity produced in Tajikistan and Kyrgyzstan to the southern region. It is expected that this development will give an impetus to establishing a regional power interconnection system.

The Central Asian countries endowed with resources tend to strengthen state control of energy resources against the background of high energy prices. However, bearing in mind the possibility that prices may go down, these countries should cooperate with foreign investors for resource development. When governments wish to change energy related politics, they should make such changes with no contradiction to the existing legal framework and in consultation with foreign investors in a manner acceptable to the international community.

Regarding Japan's role, participants expressed the following opinions.

  • Cooperation between the Central Asian countries and Japan, a consumer country, is important. Concretely speaking, dialogues at the governmental level regarding improving the investment climate and prospects on energy demand-supply, cooperation for the petrochemical industry, and technical cooperation for geological surveys are conceivable.
  • Japan should deal with the development of Caspian crude oil and exploitation of new supply routes at the same time.
  • It should further contribute to the stabilization of Afghanistan, which is a prerequisite to materialize southern routes, in cooperation with the Central Asian countries and international community.
  • Research on southern routes should be done with the joint participation of governmental officials and business people.

At the second Tokyo Dialogue, the significance of the development and transportation of Central Asia's energy resources for global energy security was reconfirmed, and the recognition was shared that from economic, political, and strategic perspectives, it was meaningful to pursue the diversification of supply routes. It was recognized that for the future peace, prosperity and stability of Central Asia, efficient use of water and energy resources was essential, that the governments of the Central Asian countries should sincerely promote regional cooperation, and that Japan could play significant role in this area.

I hereby report the outcome of the second Tokyo Dialogue and hope that this summary will be used as a reference in future "Central Asia + Japan" intergovernmental dialogues. The participants in the second Tokyo Dialogue recommended that a track two meeting with a specific focus could provide meaningful input to intergovernmental dialogues and proposed "Environment and Development," "Technological Innovation," "Utilization of Human Resources," and "Human Resources Development and Environmental Problems" as possible themes of the future Tokyo Dialogue.

January 30, 2007

Akiko Fukushima
Chairperson of the second "Tokyo Dialogue"
Senior Fellow
The Japan Foundation

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