Russia pulls Kyrgyzstan closer with debt and power deals

By bne IntelliNews April 18, 2013

bne -

The Russian Duma ratified two key deals with Kyrgyzstan on April 17, under which Moscow will write off $500m in debt finance the Kambarata hydropower plant. Meanwhile, the cash strapped Central Asian state moves more firmly back into Russia's sphere of influence.

The two deals were originally agreed in September, during Russian President Vladimir Putin's visit to Bishkek. The Kyrgyz parliament ratified them earlier this year. Russia will write off $188.9m in debt immediately, while a further $300m will be forgiven in several tranches over the next ten years.

Putin's meeting with Kyrgyz President Almazbek Atambaev also looks set to result in greater integration between the two countries. While the cash-strapped Kyrgyz government is getting a reduction in its debt burden - much of it run up under former President Kurmanbek Bakiyev - and funding for its largest hydropower projects, Bishkek has also given the go ahead to a continuing Russian military presence in the country. It is also moving rapidly towards membership of the Russian-led Customs Union. Moscow has been struggling to pull other CIS members to join Belarus and Kazakhstan in the club.

Speaking at the Duma session, Leonid Slutskiy - head of the parliament's CIS committee - pointed out that the deal would result in the Russian budget receiving $599m less over a 25-year period, Kabar report. "But it's a complex issue," he admitted. "Russia and Kyrgyzstan are building strategic partnership relations where there are two "centres of gravity". The first aspect is the military-strategic partnership between the two countries ... The second component is the real interest in the Eurasian project, in Eurasian integration and accession to the Customs Union."

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