"The costs of the status quo of water management in Central Asia are very significant"

The costs of the status quo of water management in Central Asia are very significant, and every country in the region – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – loses out from lack of cooperation over water. In an interview with NEXUS, Benjamin Pohl describes how much better Central Asia could do through closer water cooperation.

The following interview with Benjamin Pohl, lead author of the study "Rethinking Water in Central Asia – The costs of inaction and benefits of water cooperation," has recently been published. "The costs of the status quo of water management in Central Asia are very significant," says Benjamin Pohl. "But we can currently observe a lot of progress and optimism on water cooperation in the region."

Nexus Platform: Last year, adelphi and CAREC published "Rethinking Water in Central Asia – the costs of inaction and benefits of water cooperation"? Why this study and focus?

Benjamin Pohl: Central Asia is a very interesting and in many ways unique region when it comes to transboundary waters. Because of its shared Soviet heritage, it features very ambitious water infrastructure that was designed for a single country. That country, however, fell apart in 1991, at a time when the disastrous environmental consequences of the Soviet interventions in the Aral Sea basin’s water cycle became impossible to ignore. The newly independent republics created a number of regional institutions to ensure water cooperation and save the Aral Sea, but that cooperation has remained limited.

There is pretty widespread agreement, within the water community, that transboundary water cooperation is more beneficial than unilateral planning in transboundary basins, but reality in Central Asia (and in many basins elsewhere) does not live up to that theoretical insight. Which begs two questions: Why? And how can reality be improved?

These questions are at the heart of our study, which was financed by the Swiss Agency for Development and Cooperation (SDC). SDC has been active in the region for many years to promote better water governance and transboundary water cooperation, and it was grappling with that very question: how to convince Central Asian stakeholders of the benefits of closer water cooperation?

"Rethinking Water in Central Asia – the costs of inaction and benefits of water cooperation"

And one idea that arose was to ask, well, how much better could Central Asia do through closer water cooperation? If we look at the situation today and compare it to a scenario of close cooperation, what’s the difference? Our study calls that difference the cost of inaction – the difference between what we do have in the status quo, and what we could have in the future. So, inaction does not imply that nothing has been or is being done or that there is no cooperation of any kind, but that there is a cost to keeping things as they are at present, rather than cooperating more closely, to mutual benefit.

And putting that focus on the costs of inaction, which is rather novel in the water world, is an attempt to shift the conversation, to not accept that we start from political borders and then perhaps think about potential benefits that cooperation at some point in the future might bring, but to start from integrated transboundary management and then consider the costs that arise from doing uncoordinated national management instead. Here, we also sought to build on the insight from psychology and behavioural economics that people are not homines oeconomici that treat all gains and losses equally, but that most people prefer avoiding losses to making gains.

So in short, the purpose of our study is to help support the political rationale for improving water cooperation, by raising awareness of the additional prosperity and well-being that would be possible through cooperation.

What are the results of your study?

Benjamin Pohl: The costs of the status quo of water management in Central Asia are very significant, and every country in the region – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – loses out from lack of cooperation over water. Many consequences of limited cooperation, especially the social, environmental and political costs, are very hard to quantify, much less monetize, so giving any figure is always fraught. Yet, we estimated that the annual opportunity costs amount to more than 4.5 billion USD. And that sum underestimates the full, true cost of the only limited cooperation that we have witnessed over the past decades.

What kind of costs are these, and how are they connected to lack of cooperation?

Benjamin Pohl: It will not come as a surprise to readers of this publication that water is connected to many other sectors. Its management has both direct and indirect effects. In Central Asia, costs directly related to water management primarily concern losses in agricultural production due to inadequate seasonal availability of water for irrigation. They also include damages from winter floods, and the costs of new, regionally ‘redundant’ infrastructure built to protect countries against the consequences of unilateral water management.

These economic costs are accompanied by significant social and environmental costs because they damage or destroy rural livelihoods and vulnerable ecosystems in particular – witness the Aral Sea. In addition to these direct effects, insufficient water cooperation causes further negative impacts indirectly. These indirect costs in other sectors often surpass those directly related to water management. For example, in Central Asia lack of water cooperation is related to inefficient trade in energy and other sectors, constrains countries’ access to international finance, and creates political frictions. Ultimately, it might even foster instability and conflict.

The more than 4.5 billion USD only include costs arising from agricultural losses, inefficient electric trade and the opportunity costs of one hydropower plant not yet built for lack of water cooperation which has resulted in lack of access to international finance. Such numbers have to be taken with a significant pinch of salt, of course, as the models from which they are derived include many simplifying assumptions. However, they indicate the order of magnitude of the costs of inaction, of sticking with the status quo rather than seeking to improve cooperation.

If the costs of not cooperating are so significant and concern all countries, why are they not avoided? Why do countries not embrace the opportunities that water cooperation affords?

Benjamin Pohl: I think that, fundamentally, these limitations in cooperation are an unintended consequence of the pressures of political and economic disintegration after the Soviet Union fell apart in 1991. Every newly independent government focused on state- and nation-building, and they underestimated the impact of the infrastructure and nexus interdependencies they inherited, an infrastructure that had been designed for integrated resource management across the region, not for national self-sufficiency, especially not for uncoordinated national strategies. And for various reasons, governments proved unable to build a political consensus on how to better adapt to this disintegration.

During the Soviet era, major dams and reservoirs were constructed in the upstream countries, Kyrgyzstan and Tajikistan, primarily for irrigation in downstream Kazakhstan, Turkmenistan and, especially, Uzbekistan. At the same time, upstream energy needs were satisfied through central planning that drew on downstream fossil fuel deposits. But, after independence, energy prices started rising for upstream countries.

So, water releases from their reservoirs were increasingly driven by their electricity needs in winter, rather than downstream irrigation needs in summer. And downstream countries objected to the plans of upstream countries to build additional hydropower plants which they feared would further impair their irrigation needs. These differing interests have resulted in tensions between Central Asian states, and those tensions were increased by unsuccessful agreements between them on water release regimes and related compensation. And lingering perceptions of intentionality and lack of effort in implementation then compounded mutual distrust. 

That’s the ‘glass half empty’ view. But seeing the current state of Central Asian water cooperation as a failure betrays an unrealistic benchmark. Governments in the region were embarking on distinctive state- and nation-building projects. In that context, the regional organizations that were set up to coordinate and manage regional water resources were not designed to foster regional integration, but to prevent ruinous disintegration. And they were successful in avoiding the disastrous conflict that some observers warned about. At the moment, we can actually observe a lot of progress and optimism on water and other cooperation in the region.

From a nexus point of view, how could the situation in Central Asia be improved?

Benjamin Pohl: There are very strong and obvious nexus links in Central Asia, with the key question being whether to prioritize water use and timing for irrigation (food) or hydropower (energy). These uses are not necessarily competing, but they often do compete under current infrastructure conditions. In principle, adding additional upstream reservoirs could allow enhanced energy production during winter while releasing water for irrigation in summer – and modernizing irrigation infrastructure downstream could reduce water demand. Moreover, a shared electricity network would allow countries to meet currently unmet energy demands, reduce fuel costs, decrease operational expenses (as countries would collectively need far lower aggregate levels of spare and regulation capacity), avoid water spillage for lack of electricity demand, and fully exploit the economic potential of upstream reservoirs because upstream countries’ hydro facilities could serve as cost-efficient power reserves. Managing these resources collectively could thus create significant benefits for all. 

However, such adjustments not only require significant investments and willingness to adapt, they also require significant trust by all sides – that the interests of all users will in fact be taken into account and that the agreements on which the business case for investment relies will in fact be honored. Past agreements that implicitly or explicitly traded water against energy foundered because of a lack of commitment and institutional mechanisms. And because incentive structures were insufficiently well-designed to ensure compliance. Finding and implementing workable agreements requires cross-governmental coordination. And it requires clear signals from the top that there are benefits to bureaucracies for finding and implementing solutions rather than shifting blame. Now, the good news is that, for the past year, we can see such signals being sent. And consequently there is far more optimism in the region that problems can be overcome.   

I guess there is little hope that water management will be easier in the future, right? Or how are Central Asia and its water resources expected to be affected by climate change? And how could a nexus approach help to improve the situation?

Benjamin Pohl: There are a number of secular trends that will complicate water management in Central Asia – demographic growth, deteriorating infrastructure and environmental challenges including climate change. According to a recent UN assessment, water demand for electricity generation and cooling will likely rise, and so will energy requirements for moving, treating and storing water as well as for growing, storing, processing and moving food.

However, there is also significant scope for increasing water efficiency. Central Asia currently has the lowest water efficiency in the world, and making water management more effective could compensate for some of the negative effects that climate change threatens to bring about in the form of above-average temperature increases, altered precipitation regimes, more frequent heat extremes, increasing aridity and glacier melting as well as its associated risks of floods, mudflows and reduced summer water availability. 

As you sound optimistic about Central Asia’s water management potential, could the region serve as a model for other world regions with similar challenges?

Benjamin Pohl: Central Asia can in many ways serve as a hopeful example. First, Central Asia has also given rise to a number of cooperation frameworks at different levels which have helped it cope during the difficult years. Therefore, it has a better developed institutional ecosystem than other parts of the continent – and good practices in one region can serve as inspiration for the extension of cooperation to other locales and issues. It also shows the benefits of polycentric cooperation, cooperation that is not fully reliant on one single framework. That experience with polycentric cooperation might also be interesting for other transboundary basins that want to increase the resilience of cooperation.

Second, political relations in Central Asia have remarkably improved since they reached their nadir during the first 15 years of this century. During that time, Central Asian governments built some new infrastructure that may be ‘redundant’ regional point of view. But it has reduced national dependencies and vulnerabilities and has thereby removed or mitigated potential ‘flashpoints’ of political conflict. So the results of non-cooperation may now contribute to confidence in embracing closer cooperation. All of which shows that there can be progress even after protracted difficulties.

The interview was conducted by Michael Stoyke.

Benjamin Pohl is a Senior Project Manager at adelphi. His research and consulting work focus on climate and resource governance and their relationship to foreign policy, security and development policy. He is responsible for the topic areas foreign policy, diplomacy, and water cooperation.

"Nexus Interview // Water Cooperation in Central Asia“ has been published online on 10 April 2018. Republished with kind permission by Nexus - Water, Energy & Food Security Resource Platform.