Foreign Investment Remains a Risky Business
Foreign Investment Remains a Risky Business
Russian oil and gas companies have started to invest more heavily in Uzbekistan, but NBCentralAsia observers say that they are underestimating the political risks involved in investing in a country whose allegiances may change.
They argue that if the political climate turns, Tashkent could force Russian energy companies out, as they have done with western companies in the past.
Russian oil and gas company Soyuzneftegaz is planning to invest over 2 billion US dollars in Uzbek energy over the next four decades - an announcement made during a visit by Russian deputy prime minister Sergey Ivanov to Tashkent in early July, part of the Russian-Uzbek intergovernment commission on trade and economic cooperation.
Most of Russia’s big names in energy are staking their claim in Uzbekistan, where Russian companies account for half of the total investment in oil and gas.
Soyuzneftegaz develops oil and gas fields in the Gissar and Ustyurt regions by a profit-sharing agreement. Gazprom and Lukoil have been working in the country for the past few years, and Rosneft and Stroitransgaz launched their negotiations to start geological exploration at the beginning of the year.
External sources say Uzbekistan has 80 million tonnes of oil and 1.8 trillion cubic metres of gas, while the state sets a far higher figure.
But local analysts say that Russia’s flurry of activity in Uzbekistan has been sparked by its desire to secure a place on the Uzbek market rather than a need for more energy.
The main goal for Russian companies is to prevent its competitors in China, Malaysia and Korea from winning control over the Uzbek energy market, says analyst Kudrat Shukurov.
Uzbekistan’s increasingly authoritarian political course has distanced it from the West, and it has sought closer alliances with eastern countries.
Shukurov says that in a bid to up energy extraction, Russia is “ignoring the risks” that were flagged up by several western energy companies in the past who were forced to leave after the state revoked their licences.
Two years ago, the state company Uzbekneftegaz said that it wanted to dissolve its profit-sharing agreement with the British company UzPEC, arguing that UzPEC was not honouring its investment obligations – allegations the company flatly denied.
Last year, the UK company Oxus Gold Mining and the US’s Newmont Mining were forced to hand their ventures over to the state by presidential decree.
Warning signs of foul play were raised again this year when Uzbekneftegaz claimed that Gazprom was also not fulfilling its investment promises.
An NBCentralAsia source in the National Committee for the Salvation of Uzbekistan says that there is a “fairly real” danger that the rules of the game will change, with dire consequences for Russia.
No one can guarantee that Tashkent will not force Russian companies to leave or push them into bankruptcy if the country’s political course takes a turn, warns the source.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
They argue that if the political climate turns, Tashkent could force Russian energy companies out, as they have done with western companies in the past.
Russian oil and gas company Soyuzneftegaz is planning to invest over 2 billion US dollars in Uzbek energy over the next four decades - an announcement made during a visit by Russian deputy prime minister Sergey Ivanov to Tashkent in early July, part of the Russian-Uzbek intergovernment commission on trade and economic cooperation.
Most of Russia’s big names in energy are staking their claim in Uzbekistan, where Russian companies account for half of the total investment in oil and gas.
Soyuzneftegaz develops oil and gas fields in the Gissar and Ustyurt regions by a profit-sharing agreement. Gazprom and Lukoil have been working in the country for the past few years, and Rosneft and Stroitransgaz launched their negotiations to start geological exploration at the beginning of the year.
External sources say Uzbekistan has 80 million tonnes of oil and 1.8 trillion cubic metres of gas, while the state sets a far higher figure.
But local analysts say that Russia’s flurry of activity in Uzbekistan has been sparked by its desire to secure a place on the Uzbek market rather than a need for more energy.
The main goal for Russian companies is to prevent its competitors in China, Malaysia and Korea from winning control over the Uzbek energy market, says analyst Kudrat Shukurov.
Uzbekistan’s increasingly authoritarian political course has distanced it from the West, and it has sought closer alliances with eastern countries.
Shukurov says that in a bid to up energy extraction, Russia is “ignoring the risks” that were flagged up by several western energy companies in the past who were forced to leave after the state revoked their licences.
Two years ago, the state company Uzbekneftegaz said that it wanted to dissolve its profit-sharing agreement with the British company UzPEC, arguing that UzPEC was not honouring its investment obligations – allegations the company flatly denied.
Last year, the UK company Oxus Gold Mining and the US’s Newmont Mining were forced to hand their ventures over to the state by presidential decree.
Warning signs of foul play were raised again this year when Uzbekneftegaz claimed that Gazprom was also not fulfilling its investment promises.
An NBCentralAsia source in the National Committee for the Salvation of Uzbekistan says that there is a “fairly real” danger that the rules of the game will change, with dire consequences for Russia.
No one can guarantee that Tashkent will not force Russian companies to leave or push them into bankruptcy if the country’s political course takes a turn, warns the source.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
