The geopolitical landscape of Afghanistan has been tumultuous, with the Taliban's takeover in 2021 triggering a widespread humanitarian crisis and exacerbating existing challenges, including energy insecurity. Amidst these challenges lie opportunities for regional cooperation and sustainable solutions to address Afghanistan's energy crisis, OSCE states in The Effects of the Crisis in Afghanistan on Central Asia’s Energy Sector report.
Energy Sector Overview
Afghanistan boasts substantial untapped energy and mineral resources, including natural gas, oil, coal, and renewable energy sources like solar, wind, and hydropower. Despite this potential, the country faces significant hurdles in harnessing these resources due to underinvestment, lack of infrastructure, and security concerns. Importantly, Afghanistan relies heavily on imported electricity, with Central Asian countries like Tajikistan, Turkmenistan, and Uzbekistan being major suppliers.
Afghanistan's energy security is compromised by an insufficient and unstable electricity supply, exacerbated by limited domestic production and transmission capacity. The country's power grid is characterized by aging infrastructure, technical issues, and vulnerability to security incidents, including attacks on energy facilities by insurgent groups. Frequent blackouts disproportionately impact women and children, contributing to health and socio-economic challenges.
Renewable energy presents a promising solution to Afghanistan's energy insecurity, with abundant solar, wind, and hydropower resources. However, despite government initiatives and international support, progress in developing renewable energy infrastructure has been slow. Challenges include creating a transparent business environment, attracting investment, and addressing water management issues in hydropower development.
Afghanistan's energy landscape is characterized by significant challenges and promising potential. The country heavily relies on imported oil products, which constituted 56% of its total energy supply in 2019. Despite efforts to develop domestic oil production, Afghanistan's oil and gas production remain very low. Recent initiatives by the Taliban to enhance oil extraction signify attempts to address this issue, such as the oil extraction agreement with a Chinese state-owned petroleum company in January 2023.
Renewable energy, particularly solar and hydropower, holds promise for addressing Afghanistan's energy insecurity. However, the implementation of renewable energy projects has faced obstacles, leading to a shortfall in achieving the targets set in the National Renewable Energy Policy, which aimed to add 4,500–5,000 MW of renewable generation capacity by 2032. By 2020, the installed solar capacity at the national level was estimated at only 40 MW.
Hydropower remains the most substantial renewable resource in Afghanistan, accounting for over 80% of domestic power production. However, issues such as the need for significant investment in modernizing infrastructure and ensuring dam safety persist. Additionally, the construction of large-scale infrastructure projects like the Kosh-Teppa irrigation canal raises concerns about water security and transboundary disputes.
Energy Trade with Central Asia under the Taliban
Despite initial disruptions, power trade between Afghanistan and its Central Asian neighbors has shown resilience. In 2021, Central Asian electricity accounted for a substantial 85% of Afghanistan's electricity imports. Notably, trade volumes with Tajikistan and Turkmenistan have seen an uptick over the past two years.
Following the Taliban's takeover, Afghanistan accrued a significant debt to Uzbekistan and Tajikistan, reaching $90 mn within a month. By May 2022, this debt escalated to $100 mn. However, through diplomatic efforts, outstanding debts have been addressed. In 2022, Afghanistan reduced its debt to Tajikistan to $28 mn. Agreements have been extended, indicating continued cooperation in the energy sector.
On February 7, 2024, Hikmatullah Maiwandi, the official spokesperson for Afghanistan's energy company DABS, revealed that a total of $627 mn was paid to Iran, Turkmenistan, Uzbekistan, and Tajikistan. Maiwandi explained that these payments were outstanding debts accumulated by the previous republican government before the Taliban assumed control. This marked the first instance where Afghanistan has made advance payments for electricity.
Afghanistan has faced challenges in power pricing and affordability. Central Asian imports are typically priced higher than on domestic markets. Analyzing the average wholesale prices for imported power from different countries over the years reveals several interesting trends and insights.
Iran: The average wholesale price of imported power from Iran experienced a slight decrease from 2018 to 2021, rising from $6.2 cents/kWh to $5.9 cents/kWh. This indicates a relatively stable pricing trend over the period, with a modest decrease in 2019 followed by a slight increase in subsequent years.
Tajikistan: The average wholesale price of imported power from Tajikistan also exhibited a consistent upward trend over the four-year period, starting at $3.4 cents/kWh in 2018 and reaching $4.4 cents/kWh in 2021. This indicates a steady increase in the cost of electricity imports from Tajikistan to Afghanistan.
Uzbekistan: The average wholesale price of imported power from Uzbekistan showed a general downward trajectory from 2018 to 2021. Starting at $5.2 cents/kWh in 2018, the price increased to $5.0 cents/kWh in 2021, with a slight decrease in 2019 and 2020 followed by a marginal increase in 2021.
Turkmenistan: The average wholesale price of imported power from Turkmenistan also followed a consistent pattern, albeit with relatively smaller fluctuations compared to other countries. Starting at $3.3 cents/kWh in 2018, the price rose to $3.7 cents/kWh in 2021, with minor fluctuations in between.
The Taliban have sought to diversify energy imports by signing agreements with Iran and exploring partnerships with Russia. In 2022, Afghanistan signed a deal with Iran for the supply of 350,000 tonnes of fuel. Agreements with Russia include the supply of one million tonnes of gasoline, one million tonnes of diesel, and 500,000 tonnes of liquefied petroleum gas annually.
Regional Energy Projects and issues
In the perspective of Dimitris Symeonidis, International Policy Advisor, the challenges facing each project cluster are distinct and multifaceted.
"TUTAP and TAP, along with CASA-1000, are aimed at enhancing connectivity between Central Asia and South Asia,"
notes Symeonidis. However, beyond disagreements on tariffs and ownership, he underscores that mere connectivity does not assure energy security or solve underlying problems.
'The reason, for Uzbekistan and Tajikistan, is both outdated production equipment and also decreasing water levels, making hydro unreliable. Tajikistan, together with the ADB, are developing the Roghun Dam but this is also not going to resolve all issues and the Qosh-Tepa canal is only going to make matters worse. What investors see, in contrast to the HPPs developed in Afghanistan, is the lack of insurance. Combining 3 or 5 weak grids does not guarantee large electricity trade volumes and that works as a "repeller" to investors,' Dimitris says.
In contrast, "TAPI presents a different challenge," says Symeonidis. The absence of guaranteed large demand poses a significant obstacle.
'Overall, natural gas is used on a scale 60-80% in all countries for commercial, industrial and electric power production. Such demand is very low and not measured in all 4 countries and also beyond. In this case, also, most investors will shy away of investing in an infrastructure project that does not have guaranteed demand and hence guaranteed income,' Dimitris emphasizes.
Symeonidis also highlights cross-project issues such as the legitimacy of the Taliban regime and unresolved regional conflicts. For instance, tensions with Tajikistan over the treatment of the ethnic Tajik population in Afghanistan remain unresolved.
To address these challenges, Symeonidis proposes several measures. Firstly, he suggests prioritizing projects that ensure reliable electricity production, including solar, wind, natural gas, and nuclear energy. Additionally, he advocates for coal utilization in regions like Afghanistan, where resources are abundant and climate justice considerations are relevant. Symeonidis emphasizes the need for external actors to take ownership, potentially through a board of advisors comprising major investors like China or Turkey.
Furthermore, Symeonidis recommends two pathways for TAPI. Firstly, securing agreements for investments in industry in Afghanistan and Pakistan to spur demand. Secondly, conducting a thorough market analysis to identify potential buyers and prioritizing the development of the port of Gwadar as an LNG terminal.
Despite the challenges, the Taliban have made efforts to stabilize the power sector and attract alternative donors and investors. Projects such as the installation of a third turbine at the Salma Hydroelectric Power Plant (HPP) and the inauguration of the second phase of the Kajaki HPP have been completed with support from countries like India and Turkey. Additionally, China and Russia have shown willingness to collaborate on energy projects, including oil extraction and coal power development.
However, progress on regional energy projects faces numerous obstacles. The completion of transmission lines like TUTAP and TAP has been hampered by funding constraints and disagreements over tariffs and ownership. The CASA-1000 project, aimed at transporting hydroelectric power from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan, has also faced delays, particularly in Afghanistan where construction halted after the Taliban takeover.
Similarly, the TAPI gas pipeline project has encountered financial, political, and security challenges. Despite efforts by the Taliban to revive the project, uncertainties remain regarding funding and the timeline for completion. While Turkmenistan has made progress on its territory, construction in Afghanistan has yet to resume fully.
Eldaniz Gusseinov, a Non-Resident Research Fellow at the Haydar Aliyev Center for Eurasian Studies of Ibn Haldun University in Istanbul, emphasizes that Uzbekistan, strategically positioned in Central Asia, holds significant potential to leverage regional energy projects such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and the Central Asia-South Asia power transmission line (CASA-1000) to address its own energy needs and advance its strategic interests.
'It is important for Uzbekistan to further facilitate the dialog between Central Asia and Afghanistan. Here it is important to mention the interests of major external players like China and Russia. At the summit in central Russia, Putin very clearly emphasized the need to expand exactly different areas of cooperation between the countries of the region,' Eldaniz states.
In discussing the significance of Central Asia as a crucial link between various regions in the Eurasian space, Eldaniz Gusseinov underscores the potential for fostering more advanced and equitable economic development models on the continent, aligning with the trend towards a multipolar world. He highlights the establishment of the "Gas Union" among Russia, Kazakhstan, and Uzbekistan as a notable development, particularly in addressing energy shortages and rising domestic consumption in the latter two countries. Uzbekistan's energy sector challenges, leading to power outages and economic repercussions, make such agreements vital.
The recent agreement to procure 2.8 bn cubic meters of gas annually from Russia as part of a trade deal is viewed as a temporary solution to Uzbekistan's energy requirements, while also aiding Kazakhstan in upgrading its gas infrastructure. However, Turkmenistan, another significant energy supplier in the region, has expressed concerns about Russia's efforts to deepen cooperation with Kazakhstan and Uzbekistan, fearing adverse effects on its interests.
Eldaniz believes that it's crucial for Uzbekistan to mitigate potential conflicts and engage external partners in project implementation via Afghanistan, in collaboration with other Central Asian nations like Kazakhstan. The recent visit of Kazakhstan's President to Khiva is indicative of this commitment. During their meeting, Presidents Tokayev and Mirziyoyev endorsed the establishment of a joint effort between their countries' railway authorities to advance the trans-Afghan "Hairaton - Kharlachi" route. They also pledged joint investment in the Trans-Afghan railway project involving Uzbekistan, Afghanistan, and Pakistan.
According to Uzbek experts, the leaders are eager to establish a cooperative venture to oversee freight terminals at Kazakhstan-China borders and within Uzbekistan, with the aim of bolstering cargo movement along the China-Kazakhstan-Uzbekistan corridor. This initiative is envisioned to position the trans-Afghan railway as a viable trade route from China to Iran via Pakistan.
Eldaniz emphasizes that Uzbekistan holds significant potential to boost its energy exports to Afghanistan, capitalizing on its ample energy resources and strategic Central Asian position.
'The country's energy sector is heavily reliant on natural gas, which constitutes over 85% of its electricity generation, with the remaining share expected to gradually increase in coal usage,' he says.
With abundant hydrocarbons and other natural resources, Uzbekistan is well-positioned to play a stabilizing role in regional and global energy markets.
The country has embarked on energy sector reforms aimed at improving efficiency and capacity, including the restructuring of major energy firms and the development of legal frameworks supporting renewable energy and public-private partnerships. These efforts align with regional initiatives like USAID Power Central Asia, which focuses on updating national energy strategies and advancing clean energy integration.
'Uzbekistan's geographic location makes it a strategic energy corridor for Afghanistan, which is seen as a pivotal point in regional energy security and trade. This presents an opportunity not just for energy trade but also for infrastructure development that could lead to greater economic integration between the two countries,' Eldaniz states.
Eldaniz Gusseinov is a Non-Resident Research Fellow at Haydar Aliyev Center for Eurasian Studies of Ibn Haldun University (Istanbul). He specializes in European and international studies with an emphasis on the European Union's foreign policy and its engagement with Central Asian member states,alongside an analysis of the EU's internal political processes.
Recommendations by OSCE
The recommendations outlined in the report provide a roadmap for enhancing energy security, promoting regional connectivity, and addressing the needs of communities affected by energy poverty and infrastructure vulnerabilities.
Fostering knowledge exchange among Afghan, Central Asian, and international energy experts is crucial for understanding the evolving regional energy landscape and making informed decisions. Developing a community of regional energy specialists can support strategic planning and preparedness for cross-border disruptions, while targeted training and capacity-building initiatives can strengthen technical competencies and policy-making skills.
Comprehensive risk mitigation strategies and early warning systems are essential for safeguarding energy infrastructure against potential security threats and disruptions. Integrating water, climate, and environmental considerations into regional energy collaboration can enhance the resilience of energy systems and promote sustainable development.
Promoting energy connectivity, particularly in border areas, offers opportunities to reduce trade risks with Afghanistan and support the economic development of remote communities. Elevating people-centered energy concerns, particularly for women, on the regional and international agendas is crucial for addressing energy poverty and ensuring the well-being of communities in Central Asia and Afghanistan.
The OSCE can play a pivotal role in facilitating the implementation of these recommendations by leveraging its position and presence in Central Asia. By fostering coordination mechanisms, providing training and capacity-building support, and tapping into its network of energy sector experts, the OSCE can contribute to enhancing regional energy security and promoting sustainable development in Afghanistan and its neighboring countries.
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