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The Kyrgyz Republic (Kyrgyzstan) is located in Central Asia and is bordered by Kazakhstan to the north, Uzbekistan to the west, Tajikistan to the south and China to the east. The country is approximately 200 000 square kilometres (km2) in area, with a population of 6 million people. Its plentiful water resources make hydropower the most important energy source; it also has significant deposits of coal, but oil and natural gas resources are marginal.
Kyrgyzstan gained independence in 1991 with the dissolution of the Former Soviet Union, but the country subsequently struggled economically. Later in the 1990s, significant structural market reforms contributed to economic growth, and real gross domestic product (GDP) (adjusted to purchasing power parity [PPP]) increased to around USD 20.1 billion in 2015. Poverty, however, remains around 32%. Agriculture is the largest sector of the economy, its main products being cotton, tobacco, wool and meat. Industrial exports include gold, mercury, agricultural products and
Kyrgyzstan has been a member of the World Trade Organization since 1998, and it joined the Russian Federation (Russia), Belarus, Armenia and Kazakhstan in the Eurasian Customs Union in 2015.
The energy sector represents 4% of GDP and 16% of industrial production, and hydropower accounts for two-thirds of energy production. Kyrgyzstan exploits coal and some oil and gas, but most hydrocarbons are imported. In fact, it relies on oil and gas imports for more than half of its energy needs, particularly during the winter months when hydropower production is low. For this reason, regional integration with neighbouring countries is important.
Kyrgyzstan is part of the Central Asian Power System connecting Turkmenistan, Uzbekistan, Kyrgyzstan, Tajikistan and Kazakhstan; however, electricity trade in the grid has fallen substantially since 2009 when Uzbekistan disconnected its supplies to Tajikistan.
New integration plans include the Central Asia-South Asia power project (CASA 1000), which will connect the electricity-exporting countries of Kyrgyzstan and Tajikistan with Afghanistan and Pakistan to supply them with electricity. The project is in the advanced stages of planning and could be operational after 2020.
Suffering from lack of investment, Kyrgyzstan’s energy sector is characterised by aged infrastructure and significant losses. System wear and tear is gauged at approximately 50%: significant deterioration of energy assets and poor sector development are the result of heavy subsidies, particularly for electricity consumption, which drain resources for system maintenance and investment. Unable to finance the necessary rehabilitation of its natural gas network, Kyrgyzstan sold it to Gazprom for USD 1 in 2013. Gazprom is to invest USD 600 million in the system over a 25-year period.
Current energy policy aims to improve energy security by developing indigenous energy sources (mainly hydro and coal) and rehabilitating and expanding transmission and distribution networks. Developing sustainable energy and improving energy efficiency are also priorities. Energy sector ties with China have been strengthened in recent years, and China is financing several key Kyrgyz development projects currently underway. Kyrgyzstan also became a member of the Eurasian Economic Union (EAEU) in 2015.
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