Rogun Dam on pause: the project for billions froze in anticipation of money
The future of the large-scale Rogun Dam project in Tajikistan has once again turned out to be in question: financing from key development partners, including the World Bank (WB), is postponed until Dushanbe fulfills a number of conditions. According to experts, this is a direct response to the complaints of the ecological community and the concerns of people living in the lower reaches of the Amu Darya River, which indicate serious environmental risks of building such a large hydroelectric power plant.
A new ambitious and at the same time risky stage in the implementation of a large–scale hydropower project – the construction of the Rogun Dam in Tajikistan – poses difficult tasks for the country. The project, designed not only to ensure the energy independence of Tajikistan, but also to become a source of significant export revenues, at the same time becomes a serious test for its financial stability. The confirmation by international rating agencies such as Standard & Poor’s Global Ratings (S&P) of Tajikistan’s long-term and short-term sovereign credit ratings at “B/B” with a stable outlook would seem to reflect a positive assessment. But at the same time, S&P points to the high cost of the project, which is unlikely to ever pay off. The reality is that by the end of this year, the republic is likely to face a budget deficit, the cause of which is the gigantic construction of the Rogun Dam itself.
The Rogun Dam project, which was resumed in 2016 as a continuation of the Soviet unfinished construction, has already required investments exceeding $ 3 billion. Recall that the history of the construction of the Rogun Dam began in the Soviet era. The first steps were taken in 1976, but after the collapse of the USSR and the subsequent civil war in Tajikistan, the project was frozen. In 2004, the authorities attempted to revive the construction: Dushanbe signed an agreement with a Russian company, but disagreements on key issues – equity participation, height and type of dam – led to the termination of the contract in 2007. After that, Tajikistan decided to continue working on its own, but attracting investors to implement such a controversial project turned out to be difficult.
The turning point was 2016, when, having received a positive opinion from the World Bank, Dushanbe initiated an international tender for construction works, the estimated cost of which amounted to $ 3.9 billion. The winner of the tender was the Italian company Salini Impregilo S.p.A. In the same year, the channel of the Vakhsh River was blocked and the construction of the dam began. The first hydroelectric unit was launched in 2018, the second in 2019. Since then, there have been no significant breakthroughs in construction. To complete the project, it is necessary to install six more turbines and increase the height of the dam from the current 135 m to the design 335 m and find 6.4 billion dollars. This impressive amount, equivalent to about 40% of Tajikistan’s projected GDP for 2025, casts doubt on the economic feasibility of the project. The Rogun Dam is becoming an prohibitively expensive enterprise, which forces the government to reduce spending on other vital areas, according to the S&P report.
Moreover, a significant part of the assistance in the form of grants depends on the preservation of Tajikistan’s status as a “least developed country”, which is likely to be revised in 2026. The loss of this status can create a serious gap in financing, forcing the government to seek more expensive commercial loans or invest its own funds, which will become an unbearable burden on the budget.
Despite the interest of foreign investors who, visiting the construction site, express surprise at the scale of the project, they are in no hurry to provide financial assistance. The World Bank, despite Dushanbe’s ambitious goal to complete construction by 2035, has already suspended further financing of the project at this stage, explaining that Tajikistan has not fulfilled a number of conditions. In particular, it is necessary to develop and approve a macroeconomically sound financing plan that will eliminate an excessive increase in public debt. We are also talking about the formation of a sustainable commercial model of the project and the conclusion of long-term agreements for the supply of electricity both for the domestic market and for regional buyers. It is necessary to create a reliable financial and commercial base for the operation of the project. And also to ensure an increase in the level of safety of the dam itself.
Alexander Kolotov, director of the Rivers Without Borders Public Foundation, told Nezavisimaya Gazeta that the report of the Inspection Council on the results of the on-site inspection of the complaint is planned to be discussed at one of the next meetings of the Board of Directors of the World Bank. However, the exact date of this discussion remains unknown. “In any case, I would like to note that the justification of the S&P rating explicitly states that the Rogun Dam is one of the main risk factors for the economy of Tajikistan. Therefore, the question is natural: how appropriate is it for international development banks to increase this risk by issuing more and more loans for such a megaproject?” emphasizes Alexander Kolotov.
Moreover, there is a serious threat of deterioration of the financial situation in Tajikistan, due to the tightening of migration requirements from the Russian Federation. Any negative trends in the Russian economy, the weakening of the ruble or changes in migration policy can strike both the welfare of Tajik households and the entire financial system of the state. The situation is aggravated by the continuing weak diversification of Tajikistan’s economy, which is still heavily dependent on raw materials industries – gold mining, metallurgy and agriculture – sectors with a low level of added value.
Victoria Panfilova (Nezavisimaya Gazeta)
Original (in Russian): Рогунская ГЭС на паузе: проект на миллиарды замер в ожидании денег
