Afghanistan – Energy Transition Platform

November 11, 2024 Rachana Desale No Comments

The following blog aims to provide an overview of the historical background of regional Cooperation in South Asia’s electricity sector, the current status, including challenges and drivers, and the prospects of cross-border cooperation in the region, considering political, economic, and climate change-related aspects.

2. Background

Looking at history, regional cooperation is not an unknown phenomenon. The ancient Silk Road connected East and West Asia, facilitated trade, and benefited the countries¹. The “Sarak-e-Azam,” built during the 16th century by the Afghan Sultan Sher Shah Suri, is yet another example of connectivity in the region. It connected the cities of Agra and Sasaram in the first stage; later, the road was extended to Kabul. Today, the road is known as the “Grand Trunk Road,” connecting India, Pakistan, and Bangladesh.

Unfortunately, colonialization and rivalries between superpowers in the last three centuries, security concerns, and post-colonial cross-border conflicts among the countries during the last decades have hampered connectivity in the region.

In the 20th century, the first institutionalized approach to facilitate regional Cooperation in South Asia started with the establishing the South Asian Cooperation for Regional Cooperation (SAARC) in 1985 Dhaka, Bangladesh. Despite SAARC’s existence for decades, South Asia is still one of the least integrated regions in the world, where the share of intra-regional trade accounts for only five percent³ of the region’s total trade. Labeled as a study-driven regional institution, many scholars and policymakers question SAARC’s capacity to be an effective platform to foster regional cooperation.

Regional cooperation in the energy sector /cross-border electricity trade (CBET) in South Asia was, until recently, limited to bilateral cooperation between the countries, mainly India-Bhutan, India-Bangladesh, and India-Nepal. Thus, the cross-border trade is currently limited to the BBIN ⁴sub-region of South Asia.

The CASA-1000 high-voltage transmission line from Central Asia is the first major interregional power project to facilitate electricity transmission between Afghanistan and Pakistan. For the time being, the extension of this line to other South Asian countries, such as India, is not contemplated.

The following will discuss the current status of CBET in South Asia, followed by an analysis of the main challenges and drivers and the prospects of CBET in the region.

3. Current Status of CBET in South Asia

As mentioned, CBET in South Asia is currently limited to bilateral trade between the BBIN countries and cannot be expanded beyond the sub-region. About 700 MW of electricity is traded between India and Nepal via different transmission routes. Bangladesh imports 1,160 MW from India, while Bhutan exports approximately 2,325 MW to India.⁵India and Sri Lanka lack a direct electricity connection, but there are plans for cross-border connectivity via undersea cables or overhead transmission lines.

In the financial year (FY) 2021-22, around 16,820 GWh of electricity was traded among BBIN countries. The electricity exchange within the BBIN nations has increased nearly 2.2 times since 2014, totaling 7,705 GWh. In FY 2021-22, India imported 7,597 GWh from Bhutan and exported 7,302 GWh to Bangladesh and 1,921 GWh to Nepal⁶. For the FY 2022-23, the net power transaction in the BBIN region was at 15,160 GWh⁷.

Table 1 below summarizes the CBET capacity and electricity trade volume within the BBIN sub-region.

Particulars	Quantum (MW)	Electricity Transacted (GWh) in FY22
India-Bangladesh	1,160	7,302 (Export from India)
India-Nepal	~ 700	1,921 (Bi-directional)
India-Bhutan	2,325	7,597 (Bi-directional)

Although current trade is limited to a bilateral level, several initiatives for trilateral trade in the BBIN subregion are also underway. One such initiative is the export of electricity from the 900 MW Upper Karnali hydropower plant (HPP) in Nepal to Bangladesh—a project developed by the Indian private developer GMR. Another project is the 1,125 MW Dorjiling HPP in Bhutan, aiming to deliver power to Bangladesh via India.

The first tangible initiative within the BBIN sub-region of South Asia to excel in the current bilateral-to-trilateral trade has been concluded recently with the signing of an MoU between Nepal, India, and Bangladesh. Nepal will export its surplus power from June to November via India to Bangladesh, whereas during the first phase, the trade is limited to 50 MW⁹.

Considering the political tensions between India and Pakistan, there will be no noticeable collaboration between the two countries in the near future. This situation is affecting not only the cooperation between the two countries but also disrupting connectivity on a regional level.

In addition, the political situation in Afghanistan since August 2021 is another serious obstacle to enhanced and seamless power trade in the region. Despite the country’s insecurity, Afghanistan was considered, during the last two decades, the key linkage between Central and South Asia, with major regional projects, such as the CASA-1000 transmission line, Turkmenistan-Afghanistan-Pakistan Transmission Line (TAP), and TAPI.¹⁰ gas pipeline planned to be routed through Afghanistan. It was aimed that these regional energy projects would enhance energy trade and have a spill-over effect on other economic sectors in Central and South Asia. Although the World Bank announced in February 2024 the resumption of the CASA-1000¹¹ project The future of TAPI and TAP still needs to be clarified. Besides economic factors, geopolitical considerations will determine the future of these regional projects.

4. Drivers and challenges for CBET in South Asia

In addition to the aforementioned geopolitical rivalries in the region, various challenges and drivers (see Table 2 below) are decisive for Regional Cooperation in the power sector in South Asia.

The political, economic, and systemic asymmetry vis-a-vis India is a clear bottleneck. This multi-dimensional imbalance causes, particularly in the region’s smaller countries, hesitance to foster cooperation. The imbalance is also visible in the vast differences in quantity and quality of required electricity infrastructure, which not only makes an enhanced CBET difficult but also leads to serious challenges in attracting foreign investment in generation and transmission. Moreover, the need for more policy and regulatory frameworks in many countries on a national level is another challenge to seamless cooperation. For example, India is the only country in the region with dedicated CBET guidelines; no other country has yet developed a similar guideline that outlines the framework for regional electricity cooperation. Finally, the lack of a functioning regional institution that fosters collaboration, coordination, and trust and is positioned to draft an accepted and holistic decision-making process is another major obstacle for CBET in the region.

However, despite the existing challenges, many factors have been recognized by the countries as enablers/drivers to overcome the current impediment. This is particularly valid for the BBIN sub-region, considering the development since 2014, as indicated in the previous section.

The recent conflict in Ukraine has once again reminded the regional countries of their huge dependency on fossil fuel imports and its impact on the countries’ economies. Therefore, enhanced regional cooperation through electrification of the energy sector improves energy security and supports the countries in achieving the envisaged NDC targets. Regional cooperation is an important pillar, considering the complementarity potential in terms of resources and their demand in the region. Besides the required policy and regulatory framework, an essential pillar for seamless cooperation is upgrading and expanding the in-country transmission infrastructure, followed by expanding cross-border interconnection. A coordinated approach covering policy, regulatory, and infrastructure-related aspects would encourage international development partners and private investors to invest in the required infrastructure. The existing bilateral trade from the region and the experience from other regions can be utilized to improve current cooperation, even if only the BBIN countries are involved at this stage.

Considering India’s preference toward BIMSTEC, it would be realistic to commence the enhanced cooperation within this regional institution; however, it should also be noted that long-term isolation of Pakistan and Afghanistan would have not only political implications but would also limit the economic opportunities that regional Cooperation offer through connectivity to other regions, such as Central Asia. Therefore, it is essential to consider the most viable option for the time being without neglecting the implication of a possible isolation of Pakistan and Afghanistan. As BIMSTEC offers opportunities for Cooperation with Southeast Asian countries, the possible extension of Cooperation to Pakistan and Afghanistan will pave the way for collaboration with another important region- Central Asia.

Enablers/ Drivers	Challenges
• Achieving energy security by reducing current dependency on fossil fuel imports and accelerating electrification of the remotest areas	• Pakistan-India political tensions are the central impediment towards seamless CBET in the region
• Meeting NDC targets by trading surplus clean energy and exploiting the untapped potential of renewable energy using domestic and cross-border transmission lines	• Political, economic, and systemic power asymmetry vis a vis India is perceived as a bottleneck for enhanced regional cooperation
• Increased number of cross-border transmission lines and established mechanisms	• Inadequate/ poor electricity infrastructure within each country and across borders for a seamless two-way flow of electricity and challenges in attracting foreign and private investments for building new hydropower/ RE projects and transmission lines
• Strong experience and ecosystem of bilateral trade and access to international best practices through the initiatives of development partners	• Inadequate policy and regulatory framework on a national level to facilitate enhanced CBET
• Regional institutions, serve as a possible option to anchor regional CBET initiatives	• Lack of dedicated engagement modality or institutional platform at the regional level to foster cooperation, coordination, trust, and a holistic decision-making process
• Electricity cooperation provides spill-over benefits and boosts cooperation in other sectors

5. Prospects of enhanced CBET in South Asia and conclusion

As stated, the political tensions between Pakistan and India are considered the main impediment to enhanced regional electricity cooperation in South Asia. Therefore, cooperation between these two countries in a critical sector, such as the electricity sector, is not realistic for now. This situation hinders collaboration between these two countries and disconnects Afghanistan from regional Cooperation in South Asia. In addition, the existing disconnect between these countries impedes inter-regional Cooperation between South Asia and the energy-rich Central Asia, which would facilitate power trade and open up the path to collaboration in other key economic sectors.

Considering the current stagnation on a regional level, it can be concluded that the prospects of cross-border cooperation in the axis between Afghanistan, Pakistan, and India are not very promising until the leaderships of Pakistan and India resolve the existing political issues.

On the other side, the recent positive developments within the BBIN countries, focusing on an economic rather than political agenda, indicate that cross-border Cooperation in South Asia is not impossible. India, the key regional player in the sub-region, is pursuing the enhancement of cooperation and has shown a willingness to facilitate trilateral power trade between the regional countries. The MoU between Nepal, India, and Bangladesh on the transmission of power from Nepal to Bangladesh via India can serve as the basis for future multilateral electricity cooperation in the sub-region. Moreover, the countries view CBET as an opportunity to enhance energy security and expedite the process of clean energy transition in their countries.

The establishment of the BIMSTEC¹² Energy Centre in Banglore, India, indicates India’s commitment to enhancing regional power cooperation. India favors BIMSTEC due to its geoeconomics focus and alignment with the country’s Act East policy.

India’s active engagement in the BIMSTEC regional platform, which also includes the Southeast Asian countries of Myanmar and Thailand, further reduces the chances of SAARC playing a pivotal role in enhancing regional electricity cooperation in South Asia. This, in turn, confirms the statement above that in the near future, regional cooperation will be limited to the BBIN sub-region and will not expand to Pakistan and Afghanistan- a situation which could be considered as an opportunity by other players, such as China, to achieve its geo-economic objectives in the broader region. The ongoing discussion¹³ the expansion of the China-Pakistan-Economic Corridor (CPEC) is a clear sign of China’s willingness to expand its influence in this belt, which might further reduce the prospects of an interconnected South Asia.

Therefore, it is of utmost importance to pursue enhancing cooperation in the BBIN sub-region without neglecting the importance of including Pakistan and Afghanistan in the regional framework in the long-term. This is a challenging task, but the only option is to facilitate long-term peace, prosperity, economic development, and a just green transition in the region through the creation of interdependency, where each country views regional cooperation as an opportunity rather than a burden.

¹The Silk Road: Bridging Middle East and Asia
²https://aisrs.org/31/the-grand-trunk-road-gt-road-a-historical-highway-of-harmony-and-heritage
³https://www.worldbank.org/en/programs/south-asia-regional integration/trade#:~:text=Intraregional%20trade%20accounts%20for%20barely,of%20at%20least%20%2467%20billion.
⁴Bangladesh-Bhutan-India-Nepal
⁵USAID-SARI/EI, Role of Cross Border Electricity Trade in Enabling the Renewable Energy Deployment & Integration in India/ South Asia Region, July 2022.
⁶POSOCO Monthly Reports of March 2021 and March 2022, https://posoco.in/reports/monthly-reports/
⁷POSOCO Monthly Report of March 2023, https://posoco.in/reports/monthly-reports/monthly-reports-2022-23/
⁸POSOCO Monthly Reports of March 2021 and March 2022, https://posoco.in/reports/monthly-reports/; USAID-SARI/EI, Role of Cross Border Electricity Trade in Enabling the Renewable Energy Deployment & Integration in India/ South Asia Region, July 2022
⁹ https://indianexpress.com/article/news-today/nepal-india-bangladesh-agreement-cross-border-electricity-trade-9602203/
¹⁰Turkmenistan-Afghanistan-Pakistan-India
¹¹https://www.worldbank.org/en/news/press-release/2024/02/15/world-bank-group-announces-next-phase-of-support-for-people-of-afghanistan
¹²Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation
¹³https://www.voanews.com/a/extension-of-china-pakistan-corridor-to-afghanistan-presents-challenges-/7178387.html

Afghanistan

December 1, 2021 Rachana Desale No Comments

ONAI – Climate Change Studies Organisation for Afghanistan

INDEX;

Introduction
Background
Impact of Afghanistan
Conslusion & Recommendation

Introduction

The current fragile political situation in Afghanistan has not only humanitarian and economic consequences for the country itself, but it could result in a spread of insecurity and destabilization of the region between Central and South Asia, with disruption of regional economic cooperation efforts between the regional countries that have started in the recent years. In particular, the regional energy projects experienced unprecedented progress during the last two decades. Projects such as CASA-1000, the TAPI gas pipeline, TAP, and TUTAP were promising endeavors to facilitate cooperation among the regional countries of Central and South Asia and extend this cooperation to other sectors, such as trade and transport.Due to its geographical location, Afghanistan is considered the main linkage to the two strategic regions- Central and South Asia. However, the recent regime change resulting in a takeover by the Taliban has caused uncertainties regarding the implementation of the ongoing and planned regional projects.

This blog will assess the implication of potential long-term isolation of Afghanistan due to the recent taking over by the Taliban on the ongoing and future regional energy cooperation between Central and South Asia.

Background

According to the World Bank (2017), South Asia is one of the least integrated regions in the world, where the total share of intra-regional trade is five percent of the total regional trade. Compared to South Asia, the ASEAN regional trade accounts for 25 percent of total trade (ibid).

Figure 1: Intra-regional trade in South Asia (World Bank, 2017)

Despite the fact that the South Asian Association for Regional Cooperation (SAARC) was established in 1985 to enhance regional cooperation in South Asia, the organization is labeled by many experts as a study driven institution that has not realized that “real cooperation does not rest in intention but implementation” (Sridharan, 2007). Even the SAARC Energy Centre (SEC) establishment in 2006 could not move towards the creation of the intended regional energy market.

Scholars believe that the existing disagreement in SAARC is rooted on a bilateral level (ibid), with the Kashmir conflict between India and Pakistan at the center. Moreover, the multi-faceted conflict between Afghanistan and Pakistan and other South Asian countries has caused the current stagnation within SAARC. In addition to the political issues on a regional level, the countries of South Asia also suffered from country-specific matters on a policy and implementation level that impeded effective steps towards regional cooperation (World Bank, 2008; Singh et al.,2015).

Under consideration of the political circumstances in South Asia, there were two options- continuation of the status quo or searching for new ways of cooperation that will result in economic growth and prosperity through cooperation in key areas, such as the energy sector. To overcome this stagnation, an extension of the cooperation efforts to Central Asia was proposed, focusing on projects in the energy sector. In that regard, the ESMAP[1] report from 2008 published by the World Bank can be viewed as one of the key documents of the extended regional energy cooperation between Central and South Asia, with Afghanistan as the main transit route (World Bank, 2008).

The vision of the creation of Central Asia South Asia Electricity Market (CASAREM) started with the initiation and planning of the CASA 1000 project, which aims to transmit power from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan with a total capacity of 1,3000 MW. The project is currently under implementation, and the scheduled completion is 2024. Another critical project is the Turkmenistan- Afghanistan- Pakistan (TAP) 500 kV interconnection that shall provide up to 4,000 MW of electricity to Afghanistan and Pakistan (Ministry of Finance, 2016). In addition, the TUTAP (Tajikistan-Uzbekistan-Turkmenistan- Afghanistan-Pakistan Interconnection) concept envisages the supply of surplus electricity[2] from Central Asia to Pakistan (Asian Development Bank, 2014).

Figure 2: Central Asia- South Asia Power Projects (CAREC, 20

The 1,600 km TAPI gas pipeline, which is the first interregional project involving India, shall provide 33 billion cubic meters (BCM) of natural gas from Turkmenistan to Afghanistan, Pakistan, and India (European Union, 2016). The implementation of Phase 1[3] of TAPI (Asian Development Bank, 2020), supported by ADB, has started in Turkmenistan, and Afghanistan has inaugurated the start of works on Afghanistan soil in February 2018 (Pannier, 2018).

Figure 3: The TAPI Gas Pipeline (European Union, 2016)

The ongoing interregional projects are at a different stage of implementation and the regional countries, despite existing financial, economic, and also security-related impediments, view this interdependency approach as a win-win situation for all involved countries. They shall not only facilitate energy security and economic development but also pave the way for political stability and peacebuilding in the broader region.

However, the situation has changed with the collapse of the government in Afghanistan and taking over by the Taliban, who now have control over the Afghan territory. Although the Taliban have announced a caretaker government, no country has recognized their administration up to now. Despite the fact that the international community has requested the Taliban to consider the inclusivity aspect in their government, which comprises the consideration of all ethnic groups of the country and the inclusion of Afghan women in all levels of governance, up to now, the Taliban have not shown real intentions to accept the conditions of the international community.
The ongoing situation has a massive impact on the humanitarian situation of millions of Afghans, particularly women and children, but could also have a considerable impact on the political and economic situation of the broader region between South and Central Asia. The aforementioned regional energy projects also face an uncertain future in the light of recent developments in Afghanistan, which could have implications on the envisaged regional cooperation efforts between Central and South Asia if Afghanistan is politically and economically isolated.

In the following, the possible implication of Afghanistan’s isolation for regional energy cooperation is discussed.

Impact of Afghanistan’s possible long-term isolation on inter-regional energy trade between South and Central Asia

The taking over of Kabul on 15 August by the Taliban has changed the dynamics in the region between Central and South Asia entirely. Major financial institutions such as the World Bank[4] , the International Monetary Fund (IMF)[5] , and the Asian Development Bank have halted their operations in Afghanistan. As a consequence, all ongoing and planned development projects have been stopped since 15 August 2021.

The support to Afghanistan is limited to humanitarian assistance through the United Nations in order to prevent a humanitarian disaster during the upcoming winter. The current humanitarian crisis is exacerbated by a devastating drought throughout almost all country provinces, whereas over 14 million people suffer from food insecurity (World Food Programme, 2021).

No country within the international community has recognized the Taliban as the legitimate government of Afghanistan, and the United States has frozen all the country’s financial assets (Latifi, 2021). Possible recognition of the Taliban government is based on conditions, including forming an inclusive government, respecting human and women’s rights, and counterterrorism assurances (Watkins et al., 2021). International recognition is of the few remaining levers the United States and other countries can utilize to pressure the Taliban government (ibid). The frozen assets of over USD 9.5 billion (Latifi, 2021), although having enormous consequences for millions of Afghans, is another pressure tool of the international community to bring the Taliban on a path that conforms to international norms of the 21st century.

Even countries such as Pakistan, Qatar, Russia, Iran, and China, who had very close exchanges with the Taliban over the years, have not recognized the Taliban regime. The mentioned countries have not closed their diplomatic representation in Kabul, but as expressed by the Russian foreign minister Lavrov the international recognition “is at the present juncture not on the table” (Nichols, Psaledakis, 2021). India, an important stakeholder in the region, fears that the Taliban will allow the influx of fighters through Pakistan into Kashmir (NRP, 2021) and has indicated huge concerns about Taliban rule in Afghanistan. Therefore, diplomatic relations between New Delhi and the Taliban regime depend not only on the decision of international stakeholders but also on the regional dynamics between Pakistan and India and the developments in Kashmir.

The Central Asian countries have taken different paths in regards to relations and possible recognition of the Taliban. Whereas Uzbekistan, Turkmenistan, and Kyrgyzstan have either met with the Taliban or even sent their envoys to Kabul, Tajikistan’s President has expressed his concern and openly criticized the lack of Tajik representative in the Taliban government.

The foreign minister of Uzbekistan visited Kabul last week with the aim, among others, to secure the planned bilateral projects, such as the Surkhan-Pole Khumri 500 kV transmission line and the railway projects from Mazar-e Sharif in Afghanistan to Peshawar that will open South Asian ports for Uzbek good (Eurasianet, 2021a). Turkmenistan has similar economic interests and has even met the Taliban beginning of this year and then shortly after the taking over of Kabul, discussing the implementation of TAPI and other projects (Eurasianet, 2021b) which indicates a very pragmatic approach on both sides focusing on economic gains.

Kyrgyzstan expressed in a statement from the President’s office its concerns over “the formation of a theocratic state “(Pannier, 2021); however, it also sent a delegation in September to Kabul who met the acting minister of the Taliban.

In contrast, Tajikistan that shares a long border with Afghanistan, is one of the main electricity exporters[6] to the country and a primary stakeholder in the CASA-1000 project, expressed its deep concerns over the Taliban and the Tajik President accused them of human rights abuses against the Tajik minority in the Panjsher valley (AlJazeera, 2021)[7] . The Taliban, in response, accused Tajikistan of interfering in Afghanistan’s internal affairs and dismissed the claims of the President (ibid). The relation between the neighbors remains charged with tensions, and if continued, it can be a real impediment to political and economic cooperation between the neighbors.

A recognition of the Taliban by the United States and their allies seem equal to the loss of another of the few remaining leverages over them and could increase the probability of continuing the Taliban’s repressive and exclusive governance form. This decision would open up the international stage for the Taliban without any tangible concessions regarding human and women rights and the formation of an inclusive government, which will worsen the situation of the people, particularly that of women and girls.

On the other side, continuing the current situation may result in a complete collapse of the Afghan economy. Without a recognized government in place, major international financial institutions and donor agencies involved in the regional projects will not be able to restart their activities and finance the projects where Afghanistan is a key transit route. This situation will not only impact Afghanistan but will also have an enormous impact on the economies of Central Asian countries, which are very much dependent on revenues from current and future regional energy projects. Moreover, this state will close the envisaged inter-regional cooperation between South and Central Asia for years, if not decades.

Furthermore, complete isolation of Afghanistan could also facilitate opening new sanctuaries for various militant groups who have agendas beyond the Afghan border. Considering the recent attacks of the ISIS-K in Kabul and other provinces, the threat is real and requires joint efforts from neighboring countries, regional powers, the US, and Europe.

However, the question remains on how to engage with the Taliban in this regard.

Conclusion & Recommendations

Taliban need international recognition to avoid political isolation as they experienced from 1996-2001 and prevent a complete collapse of the economy which will definitely cause internal challenges to their anyhow fragile governance which lacks support by the people.

The international community has announced certain conditions before assessing the recognition of the Taliban government in Kabul, where the formation of an inclusive government representing all sections of the Afghan society, the respect of human and women rights, freedom of speech and freedom of expression, the access of girls and women to education and maintaining of a vibrant civil society and a free media, build the fundamental pillars and that shall be uncompromisable. However, to ensure the implementation of the conditional recognition, it is necessary that a monitoring mechanism supervised by an independent international body led by the UN is place. A violation of the commitments made by the Taliban shall imply that the reconsideration and possibly deprivation of the recognition and freezing of the financial and development aid support to the Taliban.

Because Afghanistan will continue to depend on international aid for the following years, development aid is another substantial leverage for the international community to push through its demands.

Based on the mechanism above, which includes an independent and regular oversight of the commitments made by the Taliban, the international community could assess a conditional recognition, the recommencement of financial support, and the restart of national projects financed by international financing institutions and donor agencies.

Regarding regional projects, the international community may choose a different approach under consideration of the regional nature and the involvement of various parties. These projects have economic weight for the involved regional countries and are also of enormous political importance as the created interdependency can improve peace and security in the broader region.

A withdrawal from the regional projects may cause pressure on the Taliban in the short term, but in the long term, such a decision could negatively affect the economic and political climate of the region between Central and South Asia. The ongoing and future projects, in particular in the energy sector, have gone through years of planning and negotiation processes, and the international community and also the involved countries have spent millions of USD on the endeavors; therefore, it is not advantageous to withdraw from these projects at such as critical juncture just because of disagreements with a single party.

In contrast, these projects can be utilized as an additional pressure tool on the Taliban since they also signaled their support to these projects and, therefore, are willing to cooperate rather than seeing them in an isolated position.

Besides the major international donor, the regional countries could also conduct, in a coordinated manner, bilateral and multilateral talks with the Taliban. For the involved regional countries with substantial economic benefits from the energy trade, these projects are part of their long-term economic strategy for developing and opening new markets for their goods and services. Thus, they will seek ways for continuation of the projects and will coordinate their efforts with the international stakeholders to secure the political and financial support of international organizations.

In terms of financial management of the expected assets generated from the regional projects for Afghanistan, a special purpose fund could be established, and the money can be channeled through an independent body monitored by the UN. This independent body can then invest these funds through an off-budget mechanism on development projects from which the Afghan people can directly benefit and where the Taliban administration is not in direct control of the funds and its expenditure. This approach can change later, and the funds can be diverted to the Afghan financial institutions if the Taliban have fulfilled the conditions of the international community and proven themselves as an accountable and reliable administration.

It can be concluded that the ongoing inter-regional energy projects are of importance for political stability and economic development of the region between Central and South Asia and, therefore, a continuation of the projects is critical to achieve the expected long-term political and economic goals in the region. The management and oversight mechanism in regards to Afghanistan can help to have control over the Taliban and shall be led by the United Nations. This approach will ensure that the projects can be continued, the people of Afghanistan are not isolated and the Taliban are under regular monitoring by the international community measuring their actions towards the Afghan people, the region and the international community.

[1] Potential and Prospects of Regional Energy Trade in the South Asia Region (ESMP) published by the World Bank in 2008

[2] CASA-1000 HDVC line provides power only during five months of the year; therefore, the line can be used for the remaining months of the year for surplus supply from Central Asia to Pakistan

[3] AFG and PKA sections of the TAPI pipeline, with a capacity of 11 billion BCM/annum

[4] https://www.bbc.com/news/business-58325545

[5] https://www.reuters.com/world/asia-pacific/imf-suspends-afghanistans-access-fund-resources-over-lack-clarity-government-2021-08-18/

[6] Imports account for over 75 percent of Afghanistan’s currently available electricity, whereas Tajikistan, with 24 % (144 MW), is the second-largest supplier after Uzbekistan (Source: DABS, 2021)

[7] https://www.aljazeera.com/program/inside-story/2021/10/2/how-will-the-taliban-handle-its-dispute-with-tajikistan

Bibliography
Asian Development Bank (2014) ‘Central Asia- South Asia Regional Energy Trade’ [Power Point Presentation]. Available at: http://www.carecprogram.org/uploads/events/2014/Regional-Energy-Trade-Workshop/Presentation-Materials/009_104_209_Session2-1.pdf (Accessed: 17 August 2017)

Asian Development Bank (2020) Transaction Technical Assistance – Turkmenistan-Afghanistan-Pakistan- India (TAPI) Gas Pipeline Project (Phase 1). Available at: https://www.adb.org/projects/52167-001/main (Accessed: 15 October 2021)

Eurasianet (2021a) ‘Uzbekistan foreign minister jets into Afghanistan for talks,’ Eurasianet, 07 October, Available at: https://eurasianet.org/uzbekistan-foreign-minister-jets-into-afghanistan-for-talks (Accessed: 08 October 2021)

Eurasianet (2021a) ‘Turkmenistan: Taliban of brothers’, Eurasianet, 07 October, Available at: https://eurasianet.org/turkmenistan-taliban-of-brothers
(Accessed: 08 October 2021)

European Union (2016) TAPI natural gas pipeline project- Boosting trade and remedying instability. Brussels: European Union.
Latifi, A.M. (2021) ‘Taliban still struggling for international recognition, AlJazeera English, 07 October, Available at: https://www.aljazeera.com/news/2021/10/7/taliban-afghanistan-international-recognition (Accessed: 11 October 2021)

Nichols, M., and Psaledaki, D. (2021) ‘Russia’s Lavrov says Taliban recognition ‘not on the table,’ Reuters, 25 September, Available at: https://www.reuters.com/world/europe/russias-lavrov-says-taliban-recognition-not-table-2021-09-25/ (Accessed: 05 October 2021)

NRP (2021) ‘With The Taliban’s Rise, India Sees A Renewed Threat In Kashmir,’ NRP, 14 September, Available at: https://www.npr.org/2021/09/14/1036877490/with-talibans-rise-india-sees-renewed-threat-in-kashmir (Accessed: 12 October 2021)

Pannier, B. (2018)’ Afghan TAPI Construction Kicks Off, But Pipeline Questions Still Unresolved,’ Radio Free Europe, 23 February, Available at: https://www.rferl.org/a/qishloq-ovozi-tapi-pipeine-afghanistan-launch/29059433.html (Accessed: 10 October 2021)

Pannier, B. (2021) ‘Kazakhstan, Kyrgyzstan Open Channels with The Taliban, Radio Free Europe, 01 October, Available at: https://www.rferl.org/a/qishloq-ovozi-tapi-pipeine-afghanistan-launch/29059433.html (Accessed: 10 October 2021)

Singh, A., Jamash, T., Nepal, R. and Toman, M. (2015) Cross-Border Electricity Cooperation in South Asia. Washington: World Bank.

Sridharan, K. (2007) Regional Cooperation in South and Southeast Asia. Singapore: Institute for Southeast Asian Studies.

Watkins, A., Olsen, R., Mir, A. and Bateman, K. (2021) Taliban Seek Recognition But Offer Few Concessions to International Concerns. Washington: United States Institute of Peace.

World Bank (2008) Potential and Prospects for Regional Energy Trade in the South Asia Region. Available at: http://documents.worldbank.org/curated/en/380071468306294151/pdf/462820ESM0bBox1egional1energy1trade.pdf (Accessed: 10 April 2017).

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World Food Programme (2021) Data Afghanistan. Available at: https://www.wfp.org/countries/afghanistan (Accessed: 10 October 2021)

Afghanistan

November 15, 2021 Rachana Desale No Comments

Introduction

With the state collapse on 15th August and the subsequent taking over by the Taliban, Afghanistan once again looks into an uncertain future. The recent developments led to the breakdown of the civilian state institutions and the entire security sector and had devastating consequences for the country’s economy. The banking system is near to collapse, the inflation is soaring, and , people are desperate as most of them have lost their jobs and are short of cash.

This month, the UNDP announced that if the current political and economic crisis is not addressed; as much as 97 percent of the population will sink below the poverty line until mid-2022. In addition, Afghanistan is suffering from severe drought, with over half of the country is in an acute food security crisis.[1] (FEWS, 2021), which will worsen during the upcoming winter.

The international community has pledged over USD 1 billion as humanitarian assistance to the country in order to avoid a humanitarian disaster. However, the implementation process is still on a slow path and has to be expedited to bring the urgently needed aid to the beneficiaries.

The state-owned power utility Da Afghanistan Breshna Sherkat (DABS) still provides electricity to its customers. However, due to a lack of revenues and the daily increase of due payments, the utility will soon not be able to pay the due payments to the foreign and domestic power providers and will not be able to cover its operational costs. Thus, the risk of a complete collapse of the utility within the next weeks is imminent.

Therefore, it is essential to consider preventive measures that include the continuation of DABS’ operations and alternative options in case of a decrease of the available on-grid power.

The following blog starts by providing a background of the power sector of Afghanistan, then illustrates the current situation of the power sector, and concludes with a proposed emergency plan to rescue the power sector from collapse.

Background

Afghanistan is a country that possesses vast resources for electricity generation from renewable sources such as hydro, solar, and wind. The country’s hydro generation potential is estimated at 23,000 MW, whereas the wind potential is 67,000 MW (Ministry of Energy and Water, 2015). With 300 sunny days per year (Ghalib, 2017), Afghanistan has excellent potential to generate a significant part of its electricity demand from solar energy.

Despite the vast potential for domestic power generation, the country is importing more than 75 percent of its power from Central Asia and Iran (DABS, 2020). Around 20 percent is generated on Afghan soil, with hydropower as the premier source of generation.

In terms of institutional arrangements, the Afghan power sector was led by the Ministry of Energy and Water.[2] responsible for all activities on a policy level, whereas DABS was the state-owned power utility responsible for the supply of electricity to consumers and the operation and maintenance of generation, transmission, and distribution in the county. Despite the efforts of the international community and Afghan stakeholders, the third pillar that shall have been responsible for regulation purposes was never in place. The recent changes ordered by the former government led by Ashraf Ghani that dissolved the Ministry of Energy and Water and replaced this institution with two independent authorities was a step leading to further complications of the situation without tangible results in regards to clarity on roles & responsibilities and increase of accountability and transparency.

Figure 1: Afghanistan Grid System & Power Imports (Gencer et al., 2018)

Worth noting that with the collapse of the Ghani-led government and taking over of the country by Taliban, the two independent authorities- NAWARA and ESRA- have been replaced by the Ministry of Energy and Water.

Despite the progress made during the last two decades where the connection rate was increased from less than 5 percent to over 30 percent, the power sector of Afghanistan continued to suffer from challenges in this area . The main issue, besides the lack of robust and accountable institutions and operational inefficiencies (e.g., up to 45 percent losses[3] ) was the huge dependency of the country on imported electricity from neighboring countries, mainly Tajikistan, Uzbekistan, Turkmenistan, and Iran. According to DABS, still over 75 percent[4] of the electricity is still imported from neighboring countries, which costs Afghanistan over USD 280 million annually (Jahanmal, 2020).

Figure 2: Power Sector- Import/Domestic Ratio & Connection Rate (dated: 2018)

The reasons behind the decision for power imports rather than developing the vast domestic resources of the country go beyond the scope of this brief concept note and, therefore, will not be discussed further. However, one can clearly state that the lack of sufficient domestically generated electricity and the country’s huge dependency on imports was a main impediment to Afghanistan’s economic self-reliance.

The current situation, in particular in the light of the recent development in the country, has worsened the conditions of the power sector of Afghanistan.

Current situation of the power sector in Afghanistan

According to reliable sources from within DABS, the utility is on the verge of complete collapse if the international community does not provide the required financial means to maintain a basic level of operation of the utility. Current figures indicate that DABS’ due payments are at USD 85 million[5] whereas the total revenue collection as of 27th September is only USD 49 million- a deficit of USD 36 million. Considering the fact that DABS will not be able to collect any additional revenues in the upcoming months but still has to continue the supply of power, the number of the due payments will further increase.

If DABS cannot pay the power suppliers, the involved countries and the Independent Power Producers (IPPs) will most probably stop the supply of power to DABS and, depending on the contractual conditions, claim even additional compensations and penalties from the utility.

This situation would mean that the power utility has to stop operations due to a lack of financial means to purchase power, pay its personnel and cover its O&M costs. Moreover, the domestic generation of power provided by hydropower will also decrease during the winter months. Emergency operations through diesel generators and utilization of existing thermal power plants will be too costly and, considering the current financial situation of DABS, not a feasible option.

Consequently, not only will the Afghan people remain without light, but critical public services, such as the health and water supply sectors, will not be able to continue operations. If this situation occurs, it will not further deteriorate the catastrophic humanitarian situation but may also lead to an uncontrollable political destabilization of the country.

To avoid the mentioned collapse of the power sector of Afghanistan, urgent support is required. The focus shall be here on the continuation of power supply to critical public services, such as health and water supply, and the provision of financial support to DABS to pay its bills, personnel and maintain the existing power generation facilities and transmission & distribution networks.

Alternative options during the current emergency situation

Considering the criticality of the situation, it is of utmost importance to assess the acute crisis and provide a viable solution to avoid a complete collapse of the power sector.

To achieve this, it is crucial to prioritize the supply of public facilities, such as hospitals and water supply utilities, to ensure the delivery of these services to the people. This means that DABS has to adjust its operation and focus on providing electricity to critical public infrastructure.

For this, the utility shall also provide a realistic emergency plan that contemplates the emergency operation’s technical and financial/ commercial aspects.

Within the approach mentioned above, the supply of power to private customers shall not be neglected, and alternative supply options must be contemplated. A viable option during the emergency phase could be installing off-grid solar rooftop systems and supplying DC- solar home kits to the people. Whereas installing solar rooftop systems (0.1-1 kW) could be a viable solution for cities such as Kabul, the DC solar home kits could cover semi-urban and rural areas of the country.

Through this two-fold approach, DABS will continue to provide electricity to critical public services institutions , and satisfy its private customers’ electricity needs by providing off-grid solutions. The advantage of the off-grid solutions is that the current burden on DABS will be reduced, and the beneficiaries are also released from paying bills to the utility, which they anyhow cannot afford at the moment.

However, considering the current situation of the banking sector and the financial liabilities of DABS, the plan mentioned above is not implementable without the support of the international community. The international community does not recognize the current administration of the Taliban and, therefore, formal communication on a bilateral and multilateral level between the Taliban and the international community, including international financing institutions and bilateral donor agencies, is not possible at this stage.

Thus, the only viable option remains the pro-active engagement of the United Nations in the process. The United Nations shall commence its direct communication with DABS’ leadership and ask them to provide an emergency plan that considers the aforementioned aspects. Moreover, the United Nations could take the lead to discuss the current financial constraints of Afghanistan with the Central Asian countries and Iran and also the few Independent Power Producers and provide the required guarantees on the due payments to ensure the continuation of the power supply to the DABS’ network.

Furthermore, through its agencies such as UNDP, the UN could draft a distribution plan for the off-grid solutions and make the required arrangements to start the installation and distribution of the systems, respectively. The UNDP could seek cooperation with the World Bank-initiated program- Lighting Global- which has the experience and certified suppliers in Asia who could provide the tools.

Conclusion

The current situation of the power sector in Afghanistan is critical and requires the international community’s urgent attention. A possible collapse of the country’s power sector has enormous consequences for other public services and can also lead to the further deterioration of the volatile situation of the country.

To avoid the disastrous effects of such a collapse, it is therefore of utmost importance to that United Nations take the lead and draft in collaboration with the technical staff of DABS a comprehensive emergency power supply program that ensures the continuation of power supply to critical sectors, such as water supply and health. Moreover, the plan shall foresee the provision of off-grid solutions to private consumers and the provision of required financial guarantees to power suppliers (imports and IPPs) to ensure the continuation of the electricity supply by DABS.

[1] Famine Early Warning Systems Network- https://fews.net/central-asia/afghanistan

[2] In 2020, the Ministry of dissolved and two new independent authorities were established- National Water Regulatory Authority (NAWARA) and Energy Services Regulatory Authority (ESRA)

[3] Technical and commercial losses (Power Sector Masterplan, 2013, p. 3-14)

[4] The figure varies between 75 and 80 percent; Considering the seasonal variations in terms of domestic capacity and demand (summer vs. winter), 80 percent is to be a realistic figure

[5] Imports and Independent Power Producers (IPPs)

Bibliography
Ghalib, A. (2017) ‘Afghanistan’s Energy Sector Development Plans’ [Power Point Presentation]. Available at: https://www.ekonomi.gov.tr/portal/content/conn/UCM/uuid/dDocName:EK-236901;jsessionid=K-M8GZmdX0-bSKpv0O7NR8_CD-VSxKcz_UZZqpyDWSK6Oq9YaU-M!3487174 (Accessed: 20th September 2017).

Gencer, D., Irving, J., Meier, P., Spencer, R. and Wnuk, C. (2018) Islamic Republic of Afghanistan Energy Security Trade-Offs under High Uncertainty: Resolving Afghanistan’s Power Sector Development Dilemma. Available at: http://documents.worldbank.org/curated/en/136801488956292409/Islamic-Republic-of-Afghanistan-energy-security-trade-offs-under-high-uncertainty-resolving-Afghanistans-power-sector-development-dilemma (Accessed: 29th September 2021).

Jahanmal, Z. (2020)’ Afghanistan Annually Pays $280 million for Imported Power, Tolonews, 30th August, Available at: https://tolonews.com/business/afghanistan-annually-pays-280m-imported-power (Accessed: 30th September 2021).

Ministry of Energy and Water (2015) Renewable Energy Policy. Available at: http://www.red-mew.gov.af/wp-content/uploads/2014/11/Afghanistan-Renewable-Energy-Policy-English-and-Dari.pdf (11th June 2017).