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Cablegate: Iran's Role in Tajikistan: Limited but Increasing?

VZCZCXRO0458
RR RUEHBC RUEHDE RUEHDIR RUEHKUK RUEHLN RUEHSK RUEHTRO RUEHVK RUEHYG
DE RUEHDBU #0997/01 2371119
ZNR UUUUU ZZH
R 251119Z AUG 09
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 0682
INFO RUCNCIS/CIS COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 0222
RUEHIL/AMEMBASSY ISLAMABAD 0146
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHDC
RUCNIRA/IRAN COLLECTIVE
RUEHDBU/AMEMBASSY DUSHANBE 1423

UNCLAS SECTION 01 OF 03 DUSHANBE 000997

SENSITIVE
SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: N/A
TAGS: ECON EINV ENRG ELTN PREL TI IR
SUBJECT: IRAN'S ROLE IN TAJIKISTAN: LIMITED BUT INCREASING?

REF: A. DUSHANBE 954
B. DUSHANBE 021

DUSHANBE 00000997 001.2 OF 003


1. (SBU) Summary: After a slow start, Iran has become a major
economic player in Tajikistan. The vast bulk of Iranian
investment in Tajikistan is direct state loans and grants for
major infrastructure projects, including the Sangtuda-2
hydropower station, the Istiqlol tunnel, and several highway
segments. The Tajik government has prioritized energy and road
projects that help break its transit dependence on unfriendly
neighbor Uzbekistan. For its part, Iran is interested in
gaining a foothold in the Central Asian market. Despite the use
of Iranian companies on the major government-funded projects,
Iranian trade with and private investment in Tajikistan is
modest. Iranian companies are involved in agriculture, food
production, and construction. Iran's efforts to establish
closer political and cultural ties with Tajikistan have been
more tentative. Although the countries share linguistic and
cultural ties, there remain vast differences in religion and
mentality. End summary.

FOCUS REMAINS ON ROADS AND POWER

2. (SBU) Although the Islamic Republic of Iran was one of the
first countries to acknowledge Tajikistan's independence in
January 1992, until recently it has played only a modest role in
Tajikistan's economy. In recent years, however, Iran has become
involved in several large-scale infrastructure projects, and now
ranks as the second-largest foreign investor in Tajikistan,
after China (ref A). The government of Tajikistan has
prioritized investment in its energy and transport sectors, in
part to decrease its dependence on neighboring Uzbekistan, with
which it has very poor relations. At the moment, all major
rail, road, and electricity transmission lines to Tajikistan
pass through Uzbekistan, which frequently has demonstrated a
willingness to block supplies for little or no reason (ref B).
Iran is responding to this priority by funding the construction
of the Sangtuda-2 hydropower station, the Istiqlol Tunnel, and a
series of road segments.

3. (SBU) Iran's single largest investment in Tajikistan has been
its US $180 million contribution to the construction of the
Sangtuda-2 hydropower station on the Vakhsh River. The
220-Megawatt station's two turbines are scheduled to become
operational in late 2011, on the twentieth anniversary of
Tajikistan's independence. The government of Tajikistan
invested $40 million of its own funding in the project, which is
being built by the Iranian firm Farob under a Build, Operate,
Transfer arrangement. Iran will control Sangtuda-2 for the
first 12.5 years, during which it can sell electricity to any
buyer it wishes, whether inside or outside of Tajikistan. Like
the massive Roghun hydropower project, the construction of
Sangtuda-2 began during the Soviet era but halted after
Tajikistan's independence. The Iranians first expressed
interest in the project in 1995, but due to the civil war and
other delays construction did not begin until February 2006.
During bilateral discussions in March 2008, Iranian Foreign
Minister Manouchehr Mottaki emphasized Iran's interest in
linking the Iranian and Tajik national grids to increase the
capacity of both countries to deal with spikes in consumption.
(It will be some time before the grids are linked, however. New
transmission lines bypassing Uzbekistan would have to be built
through Afghanistan.) Mottaki also expressed interest in having
Iranian companies invest in two small-scale hydropower projects:
Shurob on the Vakhsh River and Ayni on the Zerafshan River.

4. (U) The second largest Iranian-funded project in Tajikistan
is the Istiqlol tunnel, on the highway connecting the country's
two largest cities, Dushanbe and Khujand. The tunnel not only
shortens the travel time by as much as five hours, but it allows
for year-round transit. The previous route involved a tortuous
road over 3,373-meter Anzob pass that was open only 6 months a
year. The tunnel, which is being built by the Iranian firm
Sobir, is being funded by a US $21 million preferential loan and
a $5 million grant from the Iranian government. The Tajik
government provided $14 million in its own funding. Although
there have been two grand openings for the Istiqlol Tunnel -- in
June, 2006 and again in July 2007 -- it is still not fully
operational. The tunnel is often closed, and there are frequent
problems with flooding, ventilation, and lighting. The most
recent closure occurred at the beginning of August, for
unspecified roadwork; the tunnel is not scheduled to reopen
until October. After a 2008 visit by President Rahmon to Iran,
President Ahmadinejad promised to provide an additional U.S. $6
million to enable ventilation, lighting, and other improvements

DUSHANBE 00000997 002.2 OF 003


in the tunnel. According to media reports, however, Iran has so
far only delivered $1 million of the planned total.

5. (SBU) Note: Embassy staff have experienced many of the
tunnel's shortcomings. During a March visit the road surface
was coated with a thick sheet of ice, pitted by craters as deep
as two feet. Several cars that had skidded out of control and
collided with each other or the tunnel walls littered the
roadway. By May the ice had been replaced by a torrent of
running water, high enough that an embassy vehicle began
floating near the northern entrance to the tunnel. The journey
through the tunnel was made more hazardous by rebar and other
sharp obstacles jutting out from the tunnel floor. By June much
of the road surface had improved. End note.

6. (U) Despite the problems with Istiqlol, Sobir won another
tender in October 2007 to work on a portion of the Shagon Zighar
road linking Kulob in Khatlon Province with Darvaz in
Badakhshon. The $46 million project, being funded by the
Islamic Development Bank, is a significant part of the upgrade
of the principal highway linking Dushanbe with the eastern parts
of Tajikistan, known as the
Dushanbe-Kulyab-Darvaz-Khorog-Kulma-Karakorum highway. The
portion under construction weaves through some of the most
difficult terrain in the country.

EVEN BIGGER PROJECTS UNDER DISCUSSION

7. (U) In June 2003, Tajikistan, Afghanistan, and Iran signed a
trilateral protocol preparing for rail passenger and cargo
transfer from Tajikistan through Afghanistan to Iran. In May
2007, President Rahmon made a proposal to President Ahmadinejad
to attract Iranian companies to begin constructing a railroad
from Kolhozabad, Tajikistan, to Meshhed, Iran, via Nizhniy Pyanj
on the Tajik-Afghan border, Kunduz, Mazar-i-Sharif, and Herat.
He also proposed the establishment of several free economic
zones in Tajikistan to support international trade. Some of the
groundwork for establishing this route may already be underway.
In March of this year, President Rahmon launched construction of
the U.S. $130 million Vahdat-Yovon railway. So far the project
is being funded entirely by the Tajik State Rail Company,
although the government hopes to attract foreign investment.
Local media have reported that construction has also begun to
connect Kolhozabad to Nizhniy Pyanj. Taken together, the new
routes would link Dushanbe to the Afghan border. On the other
side of Afghanistan, the rail line linking the Iranian city of
Khavaf with Herat will reportedly reduce transit costs between
the two countries five-fold. According to the Iranian Ministry
of Public Affairs, building the railway through Afghanistan to
connect Iran with Tajikistan will cost some US $4 billion, or $2
million per kilometer.

8. (U) Iran has expressed tentative interest in investing in the
giant Roghun hydroelectric project. Earlier this year, Russian
President Medvedev made statements appearing to favor
Uzbekistan's position that Roghun fails to take into account
downstream countries' interests. Local critics point out that
Uzbekistan promptly promised to provide cheap gas to Russia,
suggesting a quid pro quo. During a February press conference
in Dushanbe, Iranian Ambassador Ali Ashghar Sherdust said Iran
was interested in helping with Roghun.

TRADE AND DIRECT INVESTMENT

9. (U) Figures for Iranian-Tajik trade are somewhat
inconsistent. According to Iranian sources, bilateral trade
between Iran and Tajikistan has risen from US $40 million in
2000 to US $140 million in 2007, making Iran one of Tajikistan's
top trading partners. Other sources report that the trade
exchange amounted to $250 million in 2008, due primarily to
increased cotton exports to Iran. For the period from January
to April 2009, trade between the two countries reportedly
amounted to US $36.3 million. Iranian companies have invested
primarily in Tajikistan's food, power, and pharmaceutical
sectors. According to official statistics there are 52
Tajik-Iranian joint ventures registered in Tajikistan and over
20 Iranian companies currently operating in areas such as
livestock farming, agricultural production and detergent
manufacturing. Iran exports food, construction materials,
detergents, and carpets to Tajikistan while importing cotton.

10. (U) Iran has organized several trade fairs in Tajikistan
promoting Iranian foodstuffs, construction materials, and
agricultural equipment, among other items. Iranian and Tajik

DUSHANBE 00000997 003.2 OF 003


companies have implemented several joint ventures, including the
Tojiron tractor manufacturing plant in Dushanbe; the
Maslojirkombinat vegetable oil factory, also in Dushanbe; the
Pors-Murgh chicken breeding facilities in Qairoqqum, Sughd
province, and Sarband, Khatlon province; the Avicenna mineral
water and beverage production company in Hissar, west of
Dushanbe; and a planned joint venture to produce energy-saving
lightbulbs.

11. (SBU) According to statistics provided by Toghaimurod
Hamdam, Chief of the Investments and Economic Reforms Department
in the Presidential Administration, Iranian companies are modest
investors in the Tajik economy. During the first half of 2009,
Iranian companies invested only $1.0 million in Tajikistan,
putting Iran in sixth place overall, behind Russia ($39.2
million), Kazakhstan ($25.8 million), the Netherlands ($8.9
million), China ($5.7 million), and the United Kingdom ($5.5
million). In 2007 and 2008, Iran was also outside of the top
investors.

CULTURAL TIES AND OTHER SUPPORT

12. (SBU) Iran's role in Tajikistan is amplified to some extent
by its linguistic and cultural similarities. Tajikistan is the
only Persian-speaking country among the five former Soviet
Central Asian republics (though the numerous Russian loanwords
in common Tajik speech highlights the historical differences
between the two countries). According to some local accounts, a
recent draft law establishing Tajik as the official language was
intended to balance Russian influence in the country by
strengthening ties with Iran. The leaders of Iran, Tajikistan,
and Afghanistan frequently discuss the creation of a Persian
economic and political bloc, although few concrete steps have so
far been taken. Rahmon has suggested expanding cultural
cooperation through the establishment of a joint television and
radio station in Dushanbe, although the project remains
unfunded. Iran hosted an educational exhibition in early July
in Dushanbe, at which 40 Iranian educational institutions,
research centers, and industrial parks displayed their
achievements. According to the Ministry of Education, under a
bilateral agreement, over 630 Tajik students are studying in
Iran and well over 950 Iranians are studying in Tajikistan.

13. (U) Iran has sought to cement ties with Tajikistan by
providing humanitarian assistance. During the Tajik civil war,
Iran was one of the major providers of humanitarian aid to
Tajikistan, through the Iranian Red Crescent Society. Iran was
also one of the first countries to provide assistance to
Tajikistan during the energy crisis of winter 2007-2008. Tehran
delivered US $4 million in aid, including 36 train cars of fuel
oil, 23 cars of kerosene, and 20 cars of diesel. The Iranian
Red Crescent Society also provided 20 tons of humanitarian aid
such as medicines, blankets, electric equipments, heaters, etc.
Some Iranian aid is delivered through the Khomeini Fund, which
has an office in downtown Dushanbe. According to contacts, the
fund provides assistance to poor Tajik families, including
funding mass wedding ceremonies for several dozen brides and
grooms.

14. (SBU) Comment: A good deal of Tajikistan's interest in Iran
can be seen as an effort to balance Russian and Uzbek influence.
Tajikistan remains heavily dependent on the two countries:
despite increasing imports from China, the majority of
Tajikistan's food and finished products comes from Russia, and
Uzbekistan exercises a chokehold on fuel imports and freight
traffic. To the extent that Tajikistan can develop viable
transportation and trade links with Iran and China, it can
reduce this reliance. But Central Asia is a long way from
having a Persian bloc. Despite public shows of solidarity
between Iran, Afghanistan, and Tajikistan, the three countries
may share more differences than similarities. Sunni Tajikistan
shares few religious connections with Shia Iran, Soviet-raised
Tajik leaders find little in common with the religiosity of
their Iranian counterparts, and they fear the lawlessness and
insecurity they perceive in Afghanistan. End comment.
QUAST

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