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