Financing Energy Projects In Central Asia: Borrowing Strategies And Political Risks From A Sustainability Perspective

This study examines how borrowing strategies for large-scale energy projects in Central Asia interact with the political risk environment when evaluated from a sustainability perspective. By combining a literature review with comparative case studies, it develops a three-dimensional framework comprising financing structure, sustainability tools, and political risk management. It then applies this framework to seven projects spanning all five Central Asian states (Tengiz, Kashagan, Rogun, Nurek, TAPI, Kambarata-1, and the Masdar solar portfolio), which together span six borrowing archetypes that encompass the region's entire range of financing structures and risk environments. The findings indicate that borrowing strategies and political risk management are determined jointly rather than through sequential decisions. In projects such as Tengiz and Kashagan, ownership structures replace weak contract enforcement. In projects like Rogun, multilateral conditionality serves as an enabling asset that facilitates state financing. In projects like Nurek, diversifying creditors through Islamic finance instruments addresses rehabilitation-specific risk. The TAPI example, however, illustrates a boundary condition where political risk stemming from land fragmentation and armed conflict exceeds the absorption capacity of any existing financing instrument, leading not to higher financing costs but to the absence of financing altogether. The two additional cases extend the framework: Kambarata-1 shows how donor-coordinated trilateral co-financing can convert a long-standing interstate impasse into a joint investment platform, while the Masdar solar portfolio demonstrates that where deep regulatory reform and sustained development-finance participation coincide, private, DFI-syndicated renewable financing becomes viable. The analysis also shows that the environmental effectiveness of sustainability tools, such as green bonds and Environmental, Social, and Governance-linked facilities, depends on the same institutional preconditions that shape the financing architecture more broadly.