Tajikistan - Foreign Economic Relations

One of Tajikistan's most important trading partners among the Soviet successor states is Uzbekistan, the source of most of its natural gas since independence. In 1994 the two countries concluded a barter agreement, which the International Monetary Fund (IMF--see Glossary) subsequently criticized as disadvantageous to Tajikistan. According to the agreement, Uzbekistan was to send Tajikistan natural gas, fuel oil, and electricity. In return, Uzbekistan was to have mining rights to various metals in Tajikistan, which also would supply electricity to locations in southern Uzbekistan lacking generating capacity, as well as cotton, construction materials, various metals, and other goods. In 1995 Uzbekistan halted its natural gas deliveries several times, citing nonpayment by Tajikistan.

The post-civil war government has emphasized cultivation of economic relations with a variety of Western and Middle Eastern countries, China, and the other former Soviet republics (see table 17, Appendix). In 1991 an Afghan company opened shops in Dushanbe and the northern city of Uroteppa to sell clothing, textiles, fruits, and nuts that the company shipped into Tajikistan from Afghanistan and other countries. The company also planned to export textiles woven in Tajikistan. In 1992 fourteen people were sent from Tajikistan to Turkey to study banking procedures.

Pakistan extended US$20 million in credits to Tajikistan in 1994 for the purchase of Pakistani goods. However, the most ambitious parts of the cooperation plans between the two countries, the completion of the Roghun hydroelectric dam and the highway between the two countries, fell through; the reasons included Pakistan's own economic problems, political opposition in Tajikistan to allocating state funds on such a large scale to a foreign country, and the continued turmoil in Afghanistan and Tajikistan.

Foreign economic relations

As the economic reforms of the Gorbachev regime relaxed restrictions on foreign business activity in the Soviet Union in the last years of the 1980s, Tajikistan began to make economic arrangements with foreign businesses. Despite some interest on the part of the Nabiyev regime in arranging joint ventures with foreign firms, only four such agreements were reached in 1991, and just six more were concluded by 1992. One of the joint-venture agreements of that period brought United States investment in the manufacture of fur and leather products in Tajikistan. Israeli businesses began irrigation projects in Tajikistan in 1992. A deal with two Austrian companies called for construction of a factory to produce prefabricated housing and other buildings to be financed by US$3.5 million raised from cotton export funds. A similar construction agreement was signed in 1992 with Czechoslovakia. In 1995 an Italian company began construction of a textile factory in Tajikistan. One of the most important foreign undertakings in the country was a joint venture with a Canadian firm, the Zarafshon Mining Project, to mine and process gold at three known sites in the Panjakent area of northwestern Tajikistan and to prospect in an area of 3,000 square kilometers for additional deposits. The agreement was concluded in 1994; production began in January 1996.

Post-civil war Tajikistan was heavily dependent on Russia for fuel and other necessities. In 1993 Russia made another barter agreement, by which Tajikistan would send Russia agricultural products, machinery, and other goods in return for Russian oil. Despite the agreements, trade between the two countries encountered serious difficulties. In the 1990s, a sharp drop in independent Tajikistan's cotton production caused it to fall far short of the deliveries promised to Russia. This development impeded Tajikistan's ability to pay for vital fuel imports and disrupted Russia's textile industry. Nevertheless, private bilateral commercial activity expanded to some extent. By 1995 more than twenty Tajikistani businesses had made joint-venture agreements with Russian enterprises.

Membership in the ruble zone required Tajikistan to cede control over its money supply and interest rates to Russia and to comply with the regulations of Russia's central bank. After the civil war, Russia provided a majority of the funds for Tajikistan's budget and had considerable influence over budgetary policy. Russia also sent periodic infusions of cash to the Dushanbe government.

As the old interrepublic delivery system decayed at the end of the Soviet era, Tajikistan, like other republics, reduced sales of some commodities and consumer goods to other republics. At the same time, direct agreements were made with several republics to place commercial relations on a new footing. These pacts included statements of principle on economic cooperation and general promises to deliver products from one republic to the other and to set up joint ventures. In 1992 such agreements were made with Georgia, Armenia, and Belarus, and a separate trade agreement called for Turkmenistan to send Tajikistan natural gas and various other goods in exchange for aluminum, farm machinery, and consumer goods.

More about the Economy of Tajikistan.

Iran and Pakistan

In the early 1990s, Iran pursued economic cooperation as a means of expanding its regional influence by assuming part of the Soviet Union's role as the major customer for Tajikistani exports. The first foreign firm registered in Tajikistan was Iranian. In 1992 pacts were signed for cooperation in the spheres of banking and commerce, transportation, and tourism; a joint company, Tajiran, was established to handle bilateral trade. In October 1992, Iran declared its intention to buy 1 million tons of cotton and 400,000 tons of aluminum (a figure that exceeded Tajikistan's entire aluminum production for 1992).

In the meantime, Russia retained the dominant position in the CIS and, hence, in commerce with Tajikistan that the Moscow government had enjoyed in the Soviet period. Russia and Tajikistan undertook to maintain their bilateral exchange of goods at existing levels as the republics made the transition to a market economy. In 1992 some 36 percent of Tajikistan's imports came from Russia, and 21 percent of its exports went to Russia; about 60 percent of total external trade was with CIS countries, and 45 percent of exports went to those countries. In 1992 a bilateral agreement called for Tajikistan to send Russia fruits and vegetables, vegetable oil, silk fabrics, and paint in return for automobiles, televisions, and other consumer and industrial goods.

The two countries continued to make economic cooperation agreements into the mid-1990s. Iran loaned Tajikistan US$10 million to be used to stimulate exports and imports while offering assistance in dealing with the costs of imported energy. In 1994, the two countries established a commission to promote bilateral economic and technical relations. In 1995 Iran agreed to pay for Tajikistan's importation of natural gas from Turkmenistan; Tajikistan then was to reimburse Iran in cotton rather than currency.

The United States

In 1992 newly independent Tajikistan and the United States expressed an interest in developing trade relations. President Nabiyev made an urgent plea to a delegation from the United States Congress for development assistance, especially in the area of natural resource use. At about the same time, Tajikistan made a barter trade agreement with a United States company to exchange dried fruits from Tajikistan for bricks, greenhouse equipment, and consumer goods from the United States. In 1992 the United States offered Tajikistan credits to use for the purchase of food, and the United States Overseas Private Investment Corporation made an agreement to provide Tajikistan loans and other assistance to promote United States investment. In 1994 the United States established the Central Asian-American Enterprise Fund to provide loans and technical expertise that would promote the growth of the private sector in all the Central Asian states. Generally, however, the level of United States involvement in Tajikistan has remained very low. The first significant undertaking in Tajikistan by a United States firm was a US$40 million textile mill established in 1995.

Russia and the CIS

After Tajikistan achieved independence, it maintained extensive economic relations with other former Soviet republics individually and with the CIS. Relations with the CIS and the Russian Federation preserved some characteristics of Tajikistan's relationship with the Soviet central authorities. Until 1995 Tajikistan remained in the ruble zone rather than establishing its own national currency, as the other four Central Asian republics had done.

In the mid-1990s, the uncertain condition of Tajikistan's economy left the country in a weak position to conduct foreign trade. The balance of trade was consistently unfavorable; in 1994 imports exceeded exports by nearly US$116 million, and by 1995 Tajikistan's foreign debt exceeded US$731 million. Imports consisted mostly of food, energy, and medicines. The main exports were aluminum and cotton, with a large share of the production of both commodities earmarked for export. The income derived from cotton and aluminum sales went largely to pay for Tajikistan's energy imports, to repay foreign debts in general, and to cover government expenses.

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