China-Kyrgyzstan-Uzbekistan railway: start of construction in 2024?

By Kuban Andymen

BISHKEK: On December 28, 2023, the head of Kyrgyzstan’s National Investment Agency announced the commencement of the construction of the “China-Kyrgyzstan-Uzbekistan” railway in 2024. This railway is intended to be a crucial part of the new Eurasian railway corridor, as stated in a material by Boris Kushkov, working in the Korea and Mongolia Department of the Institute of Eastern study of the Russian Academy of Sciences, published in the online journal “New Eastern Outlook.”

Such news appears to herald a new stage in the implementation of the project proposed by the parties back in the 1990s, holding significant importance for the entire Eurasian region due to its prospective role in facilitating continental railway transport, journal-neo.su reports.

Despite the signing of the first cooperation memorandum for this project by the parties in 1997, there were three significant obstacles during the project’s development for many years, with only two being overcome by the beginning of 2023.

The first obstacle was disputes among participants regarding the route of the railway through Kyrgyzstan. While China and Uzbekistan wanted to take the shortest route, thereby bypassing major cities and industrial centers in Kyrgyzstan, Bishkek insisted on a longer route that would align more with the goals of the Republic’s Transport Network Development Program until 2040. Eventually, Uzbekistan and China respected Kyrgyzstan’s claims, opting for the “northern” route.

The second obstacle was disputes over the choice of gauge for the new railway. The existing railway network in Central Asia is dominated by the “Soviet” gauge, which is the Chinese gauge. For this reason, Uzbekistan and Kyrgyzstan insisted on the “broad” gauge, as integrating a railway with a “narrow” gauge into national railway transport systems would be challenging.

After overcoming these two key obstacles and signing a new agreement in August 2022, reflecting all their mutual concessions, the parties in mid-2023 coordinated and accepted the final technical and economic justification for the project. The China-Kyrgyzstan-Uzbekistan railway was also mentioned as a prospective project in the final document of the Central Asia – China summit held in mid-2023.

The prospective significance of the railway is challenging to overestimate. Most existing routes from “China to Europe” are operating close to their maximum capacities: these include routes such as “China-Russia-Europe,” “China-Mongolia-Russia-Europe,” and “China-Kazakhstan-Russia-Europe.” The new “Southern” corridor, providing the “China-Kyrgyzstan-Uzbekistan” route along with another actively promoted railway, “Uzbekistan-Turkmenistan-Iran-Turkey,” will allow an increase in cargo transportation volume on the China-Europe route by approximately 10 million tons per year.

Moreover, being the southernmost railway corridor currently under discussion, it could be the shortest. According to experts from the three countries, the route from eastern China to the southern ports of Europe through this corridor will be 900 km shorter and almost a week faster than any of the existing routes. Additionally, considering the route’s southernmost nature, it may be the most advantageous means for optimizing Chinese exports to other regions, particularly to the Middle East, North Africa, and Central Asia.

Certain prerequisites for the development of the route in these directions are already in place. For instance, Iran expressed interest in participating in the transit route passing from China through Kyrgyzstan and Uzbekistan to the Middle and Near East as early as the end of 2022.

Also, the progress in creating this railway may push the “owners” of competitive projects (primarily Kazakhstan and Mongolia) to make some concessions to China and other participants in prospective Eurasian routes. Now, each of these projects will have one more viable alternative, which is likely to lead to increased competition, despite China’s interest in the parallel development of multiple similar initiatives.

The prospect of starting the construction of the railway in 2024 was discussed during a meeting between the Prime Minister of the Kyrgyz Republic and the Minister of Transport of the Republic of Uzbekistan on December 26, 2023. Presumably, the constructive atmosphere of these negotiations became the prerequisite for the statement that became the subject of this article.

However, the share of uncertainty in this, albeit encouraging, statement by the head of the Uzbek National Investment Agency persists. In particular, the creation of the “China-Kyrgyzstan-Uzbekistan” railway is mentioned in the head of the investment agency’s statement exclusively in the context of attracting foreign investments into the Uzbekistan economy: there is talk of $7-9 billion in investments in the country’s economy from 2024 to 2026.

Since the cost of implementing the Kyrgyz section of the railway is estimated to be several billion dollars, the lack of intention by Kyrgyzstan’s leadership to finance the project from the national budget becomes understandable.

However, the uncertainty about financing remained the last obstacle to the start of construction work: initially, during trilateral negotiations, the independent financing of their respective sections of the corridor by the three countries was discussed.

However, in 2022, the project participants agreed that China and Uzbekistan were ready to finance their sections independently. At the same time, Kyrgyzstan refused to take on such obligations, disagreeing that the smallest republic should bear the expenses for the most expensive and extensive (280 out of 450 km) part of the corridor.

Currently, discussions on financing the Kyrgyz section continue. In particular, Kyrgyzstan’s colleagues have offered assistance in the form of a preferential loan from China. Another proposal involves transferring rights to develop specific deposits in the country as a “barter exchange” for railway construction. The possibility of gradually paying for the cost of work through the transfer of transit rent from Kyrgyzstan to the financing side, estimated at a significant $200 million per year, has also been discussed.

However, all three options did not receive wide support from the republic’s authorities. The President of Kyrgyzstan called for limiting external borrowing due to the already significant volume of Kyrgyzstan’s financial debt to China (and finding other investor countries interested in financing such a large project for Kyrgyzstan is simply not feasible).

This is why it must be assumed that the context of the statement does not allow us to conclude that all obstacles to the implementation of this ambitious project have been overcome by the parties. The project has existed in a conceptual and design dimension for almost three decades.

Thus, despite the revival of discussions surrounding the construction of the railway, increased interest from the parties in its advancement, and the formation of a geopolitically favorable environment for its development, it appears impossible to assert the elimination of all obstacles to its construction in 2024.

Nevertheless, the “financial problem” should be considered more as a bargaining point than the development of a decision on Kyrgyzstan’s participation or withdrawal from the project. At this stage, it is about attempting to maximize profits from participating in the project, while the necessity of its implementation is already recognized without significant reservations.

No one is in a hurry to reject the project: on January 24, 2024, during negotiations in Beijing between the President of Uzbekistan Sh. Mirziyoyev and the Chairman of China Xi Jinping, the importance of the prompt commencement of practical work on the construction of the China-Kyrgyzstan-Uzbekistan railway was once again emphasized as a “corridor destined to become an important component of the Transcontinental Transport and Transit Bridge within the One Belt, One Road initiative.”