CHINESE MAKING BIG FOOTPRINT ON TAJIKISTAN'S INFRASTRUCTURE

C O N F I D E N T I A L SECTION 01 OF 03 DUSHANBE 001650

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E.O. 12958: DECL: 9/5/2016
TAGS: PREL PGOV ECON EAID EFIN ENRG TI CH
SUBJECT: CHINESE MAKING BIG FOOTPRINT ON TAJIKISTAN'S INFRASTRUCTURE

REF: A) DUSHANBE 0419 B) DUSHANBE 0309 C) DUSHANBE 1641

CLASSIFIED BY: Tracey Jacobson, Ambassador, U.S. Embassy,
Dushanbe, State.
REASON: 1.4 (b),(d)

1. (C) SUMMARY: With $637 million in low-interest credits for
roads, a tunnel and high voltage transmission lines, China has
positioned itself as Tajikistan's biggest and fastest-moving
foreign investor. By funding key infrastructure projects, China
seeks to strengthen its ties with Tajikistan and help its
impoverished neighbor, as a safeguard for China's own border.
China's loan package falls within the framework of the
multilateral Shanghai Cooperation Organization (SCO),but with
bilateral cooperation increasing, the Chinese are conscious of
how Russia may perceive their actions. The United States cannot
compete with the scale of Chinese financing, but thus far
China's projects complement our own regional integration
strategy by developing key transportation and energy corridors.
We must ensure that despite the rhetoric of other SCO members
and observers such as Iran, China considers us an ally, not a
threat, in the region, with the same goal of stabilizing and
developing Tajikistan's economy. END SUMMARY.



ROADS AND POWER LINES




2. (SBU) In a two-hour lunch with PolOff August 31, Chinese
Embassy Second Secretary Zheng Wei elaborated on the busy and
fruitful summer for Chinese-Tajik bilateral relations, starting
with the SCO meeting in June, and culminating in the first state
visit of a Chinese Premier September 11-14. According to
contacts in the Energy and Transport ministries, China will
provide credits at two percent interest for three key projects:



--The Dushanbe-Khujand-Chanak road and Shahristan tunnel:
Combined with the Iranian-financed Anzob tunnel, slated to open
November 2006, refurbishment of this road to the northern Uzbek
border could cut travel time between Dushanbe and Tajikistan's
northern commercial capital Khujand by six hours. The $296
million Chinese project will take two years to complete. After
the agreement was inked on June 15, Chinese diggers and
bulldozers from the company China Road were already widening the
sections closest to Dushanbe July 9.



-- South-North high-voltage transmission line: The three-year
$281 million project will link Tajikistan's southern and
northern electricity grids, and establish a high-voltage
corridor to Kyrgyzstan that bypasses Uzbekistan. Construction
will begin in September.



-- Lolazor-Khatlon 220 kV line. The 90-km line will cost $60
million. The Chinese company China Theban Electric Apparatus
Stock Company Ltd. (CTEAS) will be the general contractor on the
Lolazor and South-North lines.



Zheng noted that Tajikistan took advantage of China's "very
special offer" of up to $900 million in low-interest loans to
SCO countries, where Kyrgyzstan made only modest requests, and
Kazakhstan, Russia and Uzbekistan "didn't need the help."




3. (C) She dismissed press reports that China would finance a

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railroad project from China, through Kyrgyzstan, Tajikistan and
Afghanistan to a port in Iran. "The railroad is the Tajiks'
dream," she said. "They've proposed it, but we need to start
with the three projects on the table and then see about further
cooperation." Zheng said the Chinese Premier's September 11-14
visit would piggyback on a SCO meeting in Dushanbe, but may also
lead to increased trade and cooperation agreements.



CAN'T BUY ME LOVE?




4. (C) Zheng asked PolOff if she had seen a recent article in
the Tajik press, naming Russia as Tajikistan's number one
investment partner. Zheng wryly observed that half the article
praised Russian investment in Sangtuda-I and Rogun hydropower
stations, and called Russia Tajikistan's most reliable ally.
The second half of the article lumped together China, the United
States, Europe and other investors. "An interesting point of
view," she smiled, noting China's loans eclipse all other
foreign aid. (NOTE: Embassy staff have been unable to locate
the original article, although given the Russian-dominated media
in Tajikistan, such a pro-Moscow position would not be
surprising. END NOTE.)




5. (C) She wondered out loud whether Russia felt threatened,
but remarked the Chinese loans represented a new strategy of
increased bilateral engagement and an effort to ensure regional
stability with border countries. "China and Tajikistan are
neighbors, but this is the first official state visit from China
in Tajikistan's 15 year history. We are paying more attention
now," she offered.



COMMENT:




6. (C) The Chinese presence in Tajikistan is growing. In
addition to the road and power lines, the Chinese have made big
investments in telecommunications, and have increased exports of
consumer goods to Tajikistan. Exchanges in multiple
sectors-defense, sports, education, political parties-suggest
Beijing is putting money behind its intentions to pay closer
attention to Tajikistan.




7. (C) Despite some raised eyebrows over the amount and terms
of the Chinese loans, most international donors in Dushanbe
agree the credits finance critical infrastructure projects that
would take years to get built through other programs. The
International Monetary Fund (IMF) has some concerns Tajikistan
may start a cycle of debt taking (Reftel C). Without
"meddlesome" safeguards and transparent tender practices, the
Chinese can start much faster than other donors, which teaches
the Tajiks the wrong lesson about attracting foreign investment
and economic assistance -- that it can come fast and cheap
without economic structural reforms. China's credits have
raised Tajik expectations when dealing with the United States
and other international institutions and could cause Tajikistan
to look more and more to Beijing for assistance and investment.




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8. (C) The United States cannot compete with China in terms of
lending or investment. Even forgiving the $17 million in debt
(a repeated Tajik request to the United States) would pale in
comparison. However, it is a good sign that Tajikistan can find
substantial assistance from countries other than Russia. If the
Chinese projects continue on schedule-and if Russia and Iran
continue to drag their heels on Rogun and Sangtuda-II hydropower
stations-China may become an influential counterforce. We will
want to ensure that China understands that U.S. interest in the
region supports, not rivals, its own. END COMMENT.
JACOBSON