Energy Imperative May Alter Uzbeks' Regional Role
Energy Imperative May Alter Uzbeks' Regional Role
As Central Asia takes tentative steps towards more integrated arrangements for the production and use of energy, the spotlight is falling on Uzbekistan, which has historically been uncooperative with its neighbours and has often used energy disputes to gain political leverage.
Now, however, NBCentralAsia analysts say the weak state of Uzbekistan’s economy could force the country to accept robust regional agreements that could lock it into more productive relationships with other Central Asia states.
Kazakstan, centrally located in the region and a major oil producer, presented the idea of a “common market” for energy during an October 30 meeting of government chiefs from the Shanghai Cooperation Organisation, SCO, a grouping that includes Russia and China as well as Kazakstan, Kyrgyzstan, Tajikistan and Uzbekistan (but not Turkmenistan). Between them, the SCO members are believed sit on more than 20 per cent of the world’s reserves of oil and 30 per cent of its natural gas.
The meeting was held to discuss tactics which regional states could adopt to mitigate the effects of global financial crisis.
“The SCO has all the elements needed to create a [common] energy area,” Kazak prime minister Karim Masimov told his colleagues from neighbouring states. “It would be possible to harmonise the interests of producers, transporters and consumers of energy resources within the SCO framework.”
The common market would require member states to adhere to shared mechanisms for regulating the production, transport and sale of oil and gas, and the creation of shared “banks” and exchanges for energy products.
The SCO meeting appeared to buy the Kazaks’ argument, and issued a final communiqué which talked about “collaboration in creating stable, predictable conditions for reciprocal trade and investment, stronger market mechanisms, making energy use more efficient, and incentivising the use of renewable energy sources”.
Central Asia has several pipelines running in various directions. The Central Asia-Centre, CAC, pipeline built in 1967 links Uzbekistan, Kazakhstan and Russia and has an annual capacity of 50 billion cubic metres of gas. It is used to export Turkmen, Uzbek and Kazak gas. In 2007, a deal was signed to refurbish the existing western branch of the CAC running along the shore of the Caspian Sea, taking Turkmen gas via Kazakstan to Russia. After that, a new pipeline is to be laid along this western route to boost overall capacity.
To the east, work has started on a new 7,000-kilometre pipeline that will take gas from Turkmenistan to China, via Uzbekistan and Kazakstan.
Uzbekistan produces around 60 billion cu m of gas a year, 77 per cent of which is consumed domestically and the rest exported to Russia, Kazakstan, Kyrgyzstan and Tajikistan.
As Uzbekistan serves as a transit route for other states’ fuel exports as well as selling its own gas, it is in a position to exert considerable pressure on its neighbours if it is in a mood to do so. For instance, Tashkent frequently interrupt supplies of gas to Kyrgyzstan and Tajikistan – neither of which has oil or gas of its own – to force them to accept its terms when bilateral disputes arise, for example over the use of water from rivers which rise in those two countries.
NBCentral Asia experts believe that it would no longer be so easy for the Uzbeks to behave in this way if they were bound by regional agreements within a common energy market.
“The exchange of energy resources within a unified SCO energy zone could deprive Uzbekistan of the advantage it now has over its neighbours,” said a commentator in Tashkent.
Uzbekistan’s president Islam Karimov may have little option but to join such a scheme if it comes into being, as he too is reliant on the regional pipeline network, and also on the willingness of other SCO states to invest in his country.
Analysts say isolationist policies in the Uzbek financial and banking systems have contributed to overall economic decline, and the country lacks the resources to fund domestic investment, while major foreign businesses are reluctant to risk money even on energy projects.
Energy experts believe estimate Uzbekistan has sufficient gas reserves to maintain exports of the order of ten billion cu m a year until 2015. The government has embarked on a programme to increase gas exports by using more coal to fuel electricity generation, but that is going to take time.
To increase gas production, said one NBCentralAsia analyst, “the authorities are very interested in getting investment from their major SCO partners, Russia and China”.
Tashpulat Yoldashev, an Uzbek political analyst now in emigration, believes there would be clear economic benefits for Tashkent if it became part of a common energy market – greater investment, larger volumes of fuel transiting the country, and consequently a need to upgrade the energy infrastructure.
NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service resumed in 2008, covering Uzbekistan and Turkmenistan.)
Now, however, NBCentralAsia analysts say the weak state of Uzbekistan’s economy could force the country to accept robust regional agreements that could lock it into more productive relationships with other Central Asia states.
Kazakstan, centrally located in the region and a major oil producer, presented the idea of a “common market” for energy during an October 30 meeting of government chiefs from the Shanghai Cooperation Organisation, SCO, a grouping that includes Russia and China as well as Kazakstan, Kyrgyzstan, Tajikistan and Uzbekistan (but not Turkmenistan). Between them, the SCO members are believed sit on more than 20 per cent of the world’s reserves of oil and 30 per cent of its natural gas.
The meeting was held to discuss tactics which regional states could adopt to mitigate the effects of global financial crisis.
“The SCO has all the elements needed to create a [common] energy area,” Kazak prime minister Karim Masimov told his colleagues from neighbouring states. “It would be possible to harmonise the interests of producers, transporters and consumers of energy resources within the SCO framework.”
The common market would require member states to adhere to shared mechanisms for regulating the production, transport and sale of oil and gas, and the creation of shared “banks” and exchanges for energy products.
The SCO meeting appeared to buy the Kazaks’ argument, and issued a final communiqué which talked about “collaboration in creating stable, predictable conditions for reciprocal trade and investment, stronger market mechanisms, making energy use more efficient, and incentivising the use of renewable energy sources”.
Central Asia has several pipelines running in various directions. The Central Asia-Centre, CAC, pipeline built in 1967 links Uzbekistan, Kazakhstan and Russia and has an annual capacity of 50 billion cubic metres of gas. It is used to export Turkmen, Uzbek and Kazak gas. In 2007, a deal was signed to refurbish the existing western branch of the CAC running along the shore of the Caspian Sea, taking Turkmen gas via Kazakstan to Russia. After that, a new pipeline is to be laid along this western route to boost overall capacity.
To the east, work has started on a new 7,000-kilometre pipeline that will take gas from Turkmenistan to China, via Uzbekistan and Kazakstan.
Uzbekistan produces around 60 billion cu m of gas a year, 77 per cent of which is consumed domestically and the rest exported to Russia, Kazakstan, Kyrgyzstan and Tajikistan.
As Uzbekistan serves as a transit route for other states’ fuel exports as well as selling its own gas, it is in a position to exert considerable pressure on its neighbours if it is in a mood to do so. For instance, Tashkent frequently interrupt supplies of gas to Kyrgyzstan and Tajikistan – neither of which has oil or gas of its own – to force them to accept its terms when bilateral disputes arise, for example over the use of water from rivers which rise in those two countries.
NBCentral Asia experts believe that it would no longer be so easy for the Uzbeks to behave in this way if they were bound by regional agreements within a common energy market.
“The exchange of energy resources within a unified SCO energy zone could deprive Uzbekistan of the advantage it now has over its neighbours,” said a commentator in Tashkent.
Uzbekistan’s president Islam Karimov may have little option but to join such a scheme if it comes into being, as he too is reliant on the regional pipeline network, and also on the willingness of other SCO states to invest in his country.
Analysts say isolationist policies in the Uzbek financial and banking systems have contributed to overall economic decline, and the country lacks the resources to fund domestic investment, while major foreign businesses are reluctant to risk money even on energy projects.
Energy experts believe estimate Uzbekistan has sufficient gas reserves to maintain exports of the order of ten billion cu m a year until 2015. The government has embarked on a programme to increase gas exports by using more coal to fuel electricity generation, but that is going to take time.
To increase gas production, said one NBCentralAsia analyst, “the authorities are very interested in getting investment from their major SCO partners, Russia and China”.
Tashpulat Yoldashev, an Uzbek political analyst now in emigration, believes there would be clear economic benefits for Tashkent if it became part of a common energy market – greater investment, larger volumes of fuel transiting the country, and consequently a need to upgrade the energy infrastructure.
NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service resumed in 2008, covering Uzbekistan and Turkmenistan.)
