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Will Construction Of Kyrgyzstan’s “Chinese Railroad” Start This Year?

The China-Kyrgyzstan-Uzbekistan railroad construction project is the largest project in Kyrgyzstan’s transport sector, according to the authorities in Kyrgyzstan, and its implementation will help realize the transit potential of the republic while connecting it with the countries of southeast Asia. The new railroad will be important not only for the three named countries through which it will pass; it will also shorten the route from East Asia to the Middle East and Southern Europe. The total length of the Kyrgyz branch will be 280 kilometers. It’s worth noting that Beijing developed a feasibility study for this project back in the early 2000s, whereby the route was first determined. The Chinese study proposed building a shorter route across the territory of Kyrgyzstan, which would have been about 250 kilometers long. But the authorities in Kyrgyzstan at the time proposed lengthening the route by over 100 kilometers in order to add more villages to the route, thereby securing access to the economic benefits of the railroad for more citizens. For the longest time, authorities in the three countries couldn’t agree on which gauge to set. This hinged on the fact that China, Turkey and Iran are building using the European gauge of 1.435mm, while Central Asian countries use the Russian standard of 1.620mm. As a result, the parties decided on a so-called transition from one gauge to the other. According to some reports, this transition will be located in Kyrgyzstan in the village of Kazarman. China will build its part of the railroad line to this settlement on its own. Financing for the Kyrgyz part of the railroad will be determined by the authorities in Kyrgyzstan in concert with their counterparts in Uzbekistan and other investors. The project’s cost is estimated at $4.7 billion. In the future, Kyrgyzstan plans to connect the new route with the northern part of the railroad in order to re-export Chinese goods to Russia. Chinese leader Xi Jinping recently hosted President Shavkat Mirziyoyev of Uzbekistan on a state visit to Beijing, where the two leaders discussed the China-Kyrgyzstan-Uzbekistan railroad, among other economic issues. In a conversation with his Uzbek counterpart, Xi Jinping noted that the countries should speed up negotiations and start construction of the railroad as soon as possible, which is a key component of China’s “One Belt, One Road” mega-project.

China’s Sinopec To Join Polyethylene Project In Kazakhstan

The China Petroleum & Chemical Corporation, Sinopec, will become part of a large polyethylene project in Kazakhstan. This was announced on January 29th by the chairman of Kazakhstan’s national oil and gas company KazMunayGas, Magzum Mirzagaliyev, and Sinopec’s president Yu Baocai, during a meeting in China.  The project will begin with the construction of a polyethylene production plant with a capacity of 1.25 million tons per year in the special economic zone in Karabatan, close to the Tengiz field in western Kazakhstan. The plant will produce a wide range of products, including premium high-density polyethylene, which is in constant high demand throughout the world. The plant will help maintain social stability in the region. About 8,000 jobs will be created during the construction phase, and about 850 permanent jobs will be created during the operation period.  “This year we expect the final investment decision to be made, which will be the starting point for moving to an important stage — the start of construction,” Mr Mirzagaliyev commented. To date, license agreements for the use of technologies have been signed with Chevron Phillips Chemical and Univation Technologies, world leaders in this field.

€10bn To Be Invested In Trans-Caspian Transport Corridor

The two-day Global Gateway Investors Forum for EU-Central Asia Transport Connectivity opened on January 29th in Brussels, Belgium. The event brings together high-level representatives from the European Commission, countries of the EU, Central Asia and Caucasus, as well as Turkey. At the forum, the European Commission’s executive vice-president Valdis Dombrovskis announced that European and international financial institutions will commit €10bn ($10.8bn) in support and investments towards sustainable transport connectivity in Central Asia. The forum’s agenda includes discussions of the required investments to transform the Trans-Caspian Transport Corridor into a cutting-edge, multimodal, and efficient route, connecting Europe and Central Asia within 15 days. The European Commission said that Russia's invasion of Ukraine has underlined the urgency to find alternative reliable efficient trade routes between Europe and Asia. The development of transport connectivity is also a means to strengthen regional integration and economic development in Central Asia.  The €10bn commitment is a mixture of ongoing and planned investments which the European Commission foresees to be mobilized for sustainable transport development in Central Asia in the short term. In concrete terms, several significant commitments are being made on the first day of the forum as part of the overall €10bn. The European Investment Bank (EIB), represented by its vice-president Teresa Czerwińska, signed memoranda of understanding totaling €1.47bn ($1.6bn) with the governments of Kazakhstan, Kyrgyzstan and Uzbekistan, as well as with the Development Bank of Kazakhstan. These loans will be made possible by guarantees provided by the European Commission. 

EU And AFD Support Uzbekistan’s Drinking Water And Livestock Sectors

The Delegation of the European Union to Uzbekistan and Agence Française de Développement (AFD), the French Development Agency that implements France’s policy on international development and solidarity, have signed two agreements together. One is to implement the EU’s Drinking Water Program, and the other is for sustainable livestock financing in Uzbekistan.  The agreements provide for new European Union grants, namely €7.9m ($8.5m) for the water program and €4.7m ($5m) for livestock. These grants will finance the technical assistance required for each of the projects, the Delegation of the European Union to Uzbekistan said.  The EU and AFD have confirmed their commitment to continue supporting the government of Uzbekistan in its efforts to create a climate-smart and inclusive livestock sector. Implemented since June 2021 by the Uzbek Committee for Veterinary and Livestock Development, the project for “Inclusive and Climate Friendly Investment Financing in the Livestock Sector of Uzbekistan” aims to make sustainable financing in this sector more efficient. The EU’s contribution focuses on improving access to climate-friendly loans provided by four Uzbek banks — Business Development Bank, HamkorBank, MicrokreditBank, and Xalq Bank.  The Drinking Water Program helps to improve drinking water coverage in three regions of Uzbekistan — Tashkent, Fergana, and Kashkadarya. This project centers on water systems in seven districts within these three regions, providing access to a well-managed drinking water service for around 610,000 people. According to data provided by macrotrends, as of 2020, only 58.83% of the population in Uzbekistan had access to clean drinking water, which is defined by UNICEF as a “fundamental need and human right.” This figure has been in decline year-on-year since 2017, meaning that Uzbekistan ranks second worst in the region after Tajikistan for access to water “on premises, available when needed and free from faecal and priority chemical contamination.” According to UNICEF, only 32% of domestic wastewater is safely treated, whilst the impact of climate change, such as droughts and floods, further complicate the delivery of water and sanitation services.

EBRD Approves New Strategy For Uzbekistan

The European Bank for Reconstruction and Development (EBRD) has approved a new strategy for Uzbekistan, setting out the bank’s priorities in the country until 2029. The EBRD’s strategic approach to operations in Central Asia’s most populous state will be based on activities in three areas: supporting decarbonization, greater water efficiency and cleaner energy; developing the private sector and fostering employment, skills, inclusion and the digital transition; and improving economic governance, the business climate and infrastructure connectivity, the bank said on January 26th. Under the first priority, the EBRD will work with the authorities to further decarbonize the national economy and increase the share of renewable energy in the total power output. It will pay special attention to creating low-carbon pathways and reducing methane emissions under Uzbekistan’s Global Methane Pledge commitments. The EBRD will also support the commercialization and modernization of power distribution and transmission networks, and channel further funds into modernizing and upgrading water, wastewater and irrigation facilities. Under the second priority, the EBRD will expand its support to the country’s private sector by providing direct financing, credit lines to small and medium-sized enterprises, and risk-sharing through local partner banks and trade finance facilities to support increased energy efficiency and women- and youth-led enterprises. Domestic small businesses will continue benefiting from the EBRD’s Business Advisory Services programme. The bank will also promote further digitalization in the private sector, the expansion of e-commerce and the development of local capital markets. Under the third priority, the EBRD will continue supporting the transformation of and governance improvements to state-owned enterprises and banks. It will support privatization, including through pre-privatization engagements; provide advice and financing to encourage the wider use of public-private partnerships; and support public-private sector dialogue through the Foreign Investors Council to help increase foreign direct investment. The bank will continue working to enhance regional and global connectivity, including through policy engagements and financing to improve transport connectivity and regional power trading, and help lower trade barriers. Uzbekistan is the leading recipient of EBRD funding in Central Asia for the fourth year running. To date the bank has invested around €4.28 billion in 147 projects across the country, most of which support private entrepreneurship and investment.

Kazakhstan Freezes Transit Cost of Russian Oil To China

KazTransOil JSC, Kazakhstan’s national oil pipeline operator, on January 26th said it will freeze the cost of transiting Russian oil to China until 2034. Until December 31st 2033 the cost of transporting Russian oil to China through the territory of Kazakhstan will amount to $15 per ton (excluding VAT), the company said.   KazTransOil also said it has extended until December 31st 2033 its contract with Russia’s Rosneft oil company for the transportation of Russian oil through Kazakhstan to China. From 2014-2023, KazTransOil transported 91 million tons of Russian oil to China along the Atasu–Alashankou oil pipeline, which is part of the Kazakhstan-China main oil pipeline system and belongs to Kazakhstan-China Pipeline LLP, a joint venture of KazTransOil JSC (50%) and China National Oil and Gas Exploration and Development Company Ltd (50%). The design capacity of the Atasu–Alashankou pipeline is 20 million tons of oil per year. Russia has been seeking to increase its oil exports to China after western sanctions were imposed on its exports over its invasion of Ukraine.