VZCZCXRO6487
RR RUEHLN RUEHSK RUEHVK RUEHYG
DE RUEHDBU #1572/01 3650400
ZNR UUUUU ZZH
R 300400Z DEC 08
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 1288
INFO RUCNCIS/CIS COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 0367
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNS/NSC WASHINGTON DC

UNCLAS SECTION 01 OF 03 DUSHANBE 001572 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/CEN 
 
E.O. 12958: N/A 
TAGS: EFIN ENRG PHUM EAGR EAID PGOV PREL TI
SUBJECT: WILL FINANCIAL,  HARVEST, AND ENERGY PROBLEMS CREATE TAJIK 
WINTER STORM ? 
 
Ref A: Dushanbe 1370 
Ref B: Dushanbe 1518 
 
¶1. (SBU) Summary: Inadequate energy supplies and food insecurity 
remain serious problems for Tajikistan heading into the winter.  The 
water level in the Nurek reservoir is lower than it was this time 
last year.  Lower power generation capacity at Nurek may be offset 
somewhat by several factors.  First, the Talco aluminum plant is 
dropping production in the face of declining world demand, which may 
give some more power to cities -- although it is not yet clear how 
much this will help.  New capacity at Sangtuda has come on line and 
for Dushanbe a nearby thermal plant is being upgraded. Power import 
contracts with Uzbekistan and Turkmenistan have boosted imports, 
although Foreign Minister Zarifi told Ambassador on December 29 that 
Uzbekistan was balking on the transit of Turkmen electricity 
(septel).  Rationing of power began earlier this year than last 
year, with all parts of the country outside of Dushanbe receiving 
only six to seven hours of power per day since early October, 
including the northern city of Khujand, despite promises of full 
time power there.   The government will likely break its promise to 
spare Dushanbe power cuts over the winter; intermittent outages have 
been occurring for several months. .  The food situation is becoming 
precarious.  Despite official government statistics showing good 
harvests over the first part of the year, aid organizations say that 
last year's brutal winter destroyed crops, seed stocks, and 
livestock, making it increasingly difficult for the rural poor to 
produce or afford food.  The Food and Agriculture Organization (FAO) 
lists Tajikistan as one of 33 countries in crisis and in need of 
external food assistance, and in its latest report says food 
security in Tajikistan is declining in the post-harvest period when, 
, food security normally would be improving.  Food prices have been 
increasing slightly over the past year.  At the same time, 
remittances from Russia, a critical component of the Tajik economy, 
have been slowing as a result of the international financial crisis. 
 In the face of these problems, the government vacillates between 
claims that the situation is well in hand and pleas for more 
international assistance.  End summary. 
 
Energy Situation Precarious 
 
¶2. (U) The Nurek hydroelectric station supplies 75% of Tajikistan's 
energy.  On December 17 the water level in the Nurek reservoir was 
884 meters above sea level, 1.8 meters lower than on the same day in 
2007, and 28 meters above the level at which power can no longer be 
produced because of insufficient flow over the turbines.  Due to 
this summer's drought, for the first time in its 28-year history 
Nurek's reservoir did not fill up completely, peaking in September 
at 8 meters short of full capacity.  On the positive side, the 
reservoir is dropping by only 30-35 centimeters a day, compared to 
almost twice that rate at this time last year.  This is likely due 
to stricter limitations on power supplies this year, as well as 
slightly higher water inflow due to warmer temperatures. 
 
¶3. (U) Helping the energy situation this year is the 
partly-completed Sangtuda-1 power station, built with Russian 
capital, which will add some 2.7 billion Kilowatt-hours (KWh) per 
year to the grid once all four of its units are operating (Nurek's 
annual capacity is 11.2 billion KWh).  At present only two of 
Sangtuda-1's units are working; a third began production two months 
QSangtuda-1's units are working; a third began production two months 
ago but was stopped to make repairs.  In addition, the Dushanbe 
heating station is currently operating at 84 Megawatts.  But it is 
slated to severely reduce production after January 1, 2009, when 
Uzbekistan will reportedly increase the price at which it sells 
natural gas to Tajikistan from $145 to $300 per 1,000 cubic meters. 
The Ministry of Energy is currently looking at powering the plant 
with domestic coal or low-grade mazut oil. 
 
¶4. (U) Imports are supplementing supplies.  Turkmenistan currently 
supplies Tajikistan with 7 million KWh a day via Uzbekistan's power 
grid at a cost of 3 cents per KWh plus 0.3 cents in transit fees to 
Uzbekistan (ref A).  Although Turkmenistan has agreed to supply an 
additional 800 million KWh through April of next year, the transit 
agreement with Uzbekistan only runs through January 1. Foreign 
Minister Zarifi told Ambassador December 29 that Uzbekistan is 
demanding Tajikistan pay for spare parts and infrastructure upgrades 
before renewing the transit agreement, which they say is at least 
two months away (septel).  Tajikistan similarly awaits renewal of 
the annual agreement with Uzbekistan to supply an additional 600 
million KWh beginning January 1, 2009. 
 
¶5. (U) Talco, Tajikistan's largest industrial enterprise, recently 
announced that it would reduce aluminum production by 10% in 
response to lower world demand.  Since Talco consumes 50-60% of all 
electricity consumed in Tajikistan, this move could free up some 
additional electricity for consumers. 
 
 
DUSHANBE 00001572  002 OF 003 
 
 
Remittances Declining, Compounding Other Problems 
 
¶6. (SBU) Recorded remittances (through the banking system) dropped 
by 14% from September in October, the last month for which data are 
available.  Although the total for the month is still higher than 
October of last year, October is usually the peak month for 
remittances.  Many expect that the financial crisis in Russia will 
cause much steeper declines in successive months.  Contacts at the 
World Bank and the International Monetary Fund say that although 
data are still lacking, they have seen mounting anecdotal evidence 
that Tajik workers are returning from Russia in higher numbers this 
year, due to decreased labor demand in the face of the world 
financial crisis (ref B).  News reports here have been detailing the 
"massive job cuts" in Russia leading to "desperate" efforts by 
Tajiks to return home.  According to local reports, as a result of 
the financial crisis a number of commercial banks in Tajikistan have 
stopped providing loans.  A contact at Amonatbank said the main 
reason is the banks' concern that returning labor migrants from 
Russia, who make up the majority of potential borrowers, simply do 
not have the means to repay loans.  Banks chose to cut off lending 
entirely rather than add to the many existing bad debts.  In 
general, banks had been issuing non-collateral loans in amounts 
under $1,000 and collateral loans up to $100,000. 
 
¶7. (SBU) There are concerns as well about liquidity due to falling 
remittances.  An IMF official noted that the financial crisis may 
temporarily affect banks' cash flow because of reduced inputs from 
trading (ref B).  Although the somoni has slid against the dollar in 
the last few days -- from 3.41 to 3.47 -- national financial 
institutions have assured citizens that the hard currency supply is 
adequate.  There are anecdotal reports that not everyone is 
convinced, however.  Several embassy employees have made large 
withdrawals of dollars in advance of the holidays, saying they were 
not confident that the supply of dollars would be adequate.  Reduced 
remittances, they said, will mean fewer dollars flowing into 
Tajikistan, since the money transfer system is largely dollarized. 
Concern about the stability of banks is also increasing the demand 
for cash somonis, which thus also have been in short supply. 
 
¶8. (SBU) Last week the government announced the formation of a task 
force comprised of officials, academics, and industry 
representatives to monitor the remittance question.  Nevertheless, 
Deputy Minister of Economic Development and Trade Larisa Kislyakova 
said there was still no indication that remittances were being 
affected by the crisis.  She said October's lower numbers were 
attributable to seasonal patterns, lower airfares, and new reporting 
requirements on money transfers.  The airfare argument seems 
implausible: the cost of a one-way ticket from Moscow to Dushanbe is 
currently $400-$800, well above last year's price of $360. 
 
Food Security in Danger 
 
¶9. (SBU) International aid organizations say that one of the most 
worrisome issues this winter is food security.  The FAO's most 
recent list of 33 "countries in crisis requiring external 
assistance" includes Tajikistan, which has suffered from crop 
damage, poor market access, and locust infestations.  There are 
indications that food insecurity is worsening.  According to Zlatan 
Milisic, Director the World Food Programme's Dushanbe office, food 
QMilisic, Director the World Food Programme's Dushanbe office, food 
security normally would show some improvement at this time of year, 
because of the recent harvest and because more migrant workers from 
Russia are home for the winter with money in hand.  Many of this 
year's problems are direct results of last year's difficulties. 
Last year's brutally cold winter destroyed not only that year's 
crops, but also seed stocks and livestock that were important for 
this year's food supplies.  These problems were compounded by high 
food and fuel prices, drought, and the locust problem.  Because of 
high input prices, many farmers planted less, which has resulted in 
lower food production.  The drought that lowered water levels in 
Nurek also damaged rain-fed agriculture, although the severity of 
the damage is not yet known.  According to official government 
statistics, however, as of the end of the third quarter this year's 
harvest was slightly better than last year's. 
 
¶10. (SBU) Mercy Corps' Country Director recently spoke to 
beneficiaries of one of its non-USAID funded cash assistance 
programs in a remote village of Rasht District.  She learned that 
all the village households were still carrying debt to local stores 
and vendors for food borrowed on credit last year.  Concurrently, no 
families are receiving remittances.  Two individuals reportedly 
traveled to Russia but were forced to return when they were unable 
to find work allegedly owing to their poor Russian skills (few are 
well educated in this area and the young are no longer learning 
Russian).  However, other factors such as the global financial 
crisis and the downturn in construction could be equally 
significant.  This village will be cut off from all towns and main 
 
DUSHANBE 00001572  003 OF 003 
 
 
roads if/when the normal winter snows occur.  The Country Director 
expressed extreme concern about what will happen to the villagers 
who lack sufficient food stocks and have no source of winter income. 
 In the past they relied on credit for food when their stocks were 
depleted, but it is uncertain they will be able to do so again if 
they have not repaid last winter's debts. 
 
¶11. (U) The prices for many food items, particularly cooking oil, 
increased dramatically in late summer 2007, and remain high.  Other 
food items have seen modest price drops in recent months, but are 
still above last year's levels.  One bright spot has been the 
continuing decline in fuel prices.  The cost of a liter of gas, 3.80 
somoni ($1.18) in October, has dropped to as little as 2.30 somoni 
($0.68) this month. 
 
¶12. (SBU) Comment: Tajikistan faces potential dangers this winter 
from several directions.  Continuing political problems with 
Uzbekistan and the chronic shortage of winter energy production mean 
another season of power difficulties, which impacts not only living 
conditions but also economic activity.  The financial crisis may 
force many Tajiks working abroad to lose their jobs and return home, 
lowering remittance flows at the very moment there are more mouths 
to feed.  And last year's brutal winter will have spillover effects 
this year in reduced harvests and higher food prices, heightening 
food insecurity. 
 
¶13. (SBU) Comment continued: If this winter turns out to be warmer 
than last year's, Tajikistan's energy problems may not be as severe 
as they were a year ago.  However, the winter will still be very 
difficult for poorer Tajiks, especially in rural areas, because of 
persistent and worsening food insecurity.  The recently issued WFP 
Food Security Update is striking in that it shows no real 
improvement from the normal low point in April on -- that is, this 
year's harvest did not help much.  In some areas, the situation is 
actually worse than it was earlier in the year, and families are ill 
prepared for the winter.  The government, with its dubious harvest 
figures, inaccurate remittance information, or false assurances 
about energy supply, may be underestimating the hardships it people 
face over the next few months.  This is further cause for concern. 
This has not stopped them, however, from issuing an appeal for 
international donor assistance, in the form of cash to the 
government, to combat the impact of the financial crisis. End 
comment.