Russia-Kazakhstan-Uzbekistan Gas Union: The Costs and Benefits for Uzbekistan

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The “Russia-Kazakhstan-Uzbekistan Gas Union” stands at a pivotal crossroads, symbolizing a significant shift in Central Asian energy dynamics. Initiated by Russian President Vladimir Putin, this trilateral alliance aims to transport Russian gas to Uzbekistan via Kazakhstan, marking a historical moment as it is the first time Russian gas is pumped toward Central Asia. However, the union faces scrutiny and cautious participation from Uzbekistan, reflecting the complex geopolitical and economic implications of this energy project. This development, arising amidst acute energy challenges in the region, seeks to address immediate needs but also poses long-term geopolitical and economic questions for the involved nations.

*The Central Asia – Centre gas pipeline. Source: kremlin.ru*

The proposals regarding the export of Russian gas to Central Asia have been aired for a long time, but neither Kazakhstan nor Uzbekistan showed inclination to accept the offer. However, the Uzbek President Shavkat Mirziyoyev on his official visit to Russia together with President Vladimir Putin and Kazakh President Kassym-Jomart Tokayev on October 7, 2023 launched the process of Russian gas shipment to Uzbekistan through Kazakhstan. It is regarded as a historical moment as Russia has commenced the blue fuel export to Uzbekistan passing through Kazakhstan via the Central Asia – Center (CAC) pipeline as Russian President highlighted “the first exports of a kind in the history of these gas pipeline systems, for never before has Russian gas been pumped toward Central Asia”. However, initially, the first blueprint of the trilateral gas union was brought forward dating back to 2002 as a form of the Eurasian natural-gas alliance by President Vladimir Putin, which involved Russia, Kazakhstan, Uzbekistan, and Turkmenistan. Although then Kazakh President Nursultan Nazarbaev was a staunch supporter of the union, other countries did not see the potential advantages for their respective countries.

Whereabouts about the “Tripartite Gas Union”

The idea of the possible establishment of the “Trilateral Gas Union”, which encompasses Russia, Kazakhstan, and Uzbekistan to transport Russian natural gas through Kazakhstan and Uzbekistan, has been brought up by Russian President Vladimir Putin in the discussion with the President of Kazakhstan, Kassym-Jomart Tokayev. By stepping up its diplomatic efforts, President Vladimir Putin reiterated once again his offer about the “Trilateral Gas Union” at Eurasian Economic Council, held in Bishkek, in December of 2022. Putin said “Uzbekistan and Kazakhstan are already short of gas and both of them have to meet their gas export obligations, while the domestic consumption is ratcheting up simultaneously”. He has emphasized that the Russian gas could be a solution and “it could be some kind of energy alliance”. This proposal reflects Putin’s strategic approach to leveraging Russia’s energy resources in regional diplomacy.

Uzbekistan’s Ambivalent Reaction

Uzbek Energy Minister Jurabek Mirzamahmudov clearly mentioned “We do not put our national interests or our national economy at risk, and we will not allow any political conditions to be imposed in exchange for gas, and even if a gas agreement is concluded with Russia, this does not mean an alliance” , he added that negotiations were being conducted to bring Russian gas through Kazakhstan as Uzbekistan does not share border with Russia, by emphasizing it would be a technical contract, not a union. By commenting on the Uzbek Energy Minister’s statement, Russian official Dmitry Peskov said the information about Uzbekistan’s rejection to participate in the “tripartite gas union” is incorrect and asserted that “No one talks about gas in exchange for political demands”. At the same time, Russian Deputy Foreign Minister Mikhail Galuzin said that the three countries are working out the parameters of the gas union project and Russian Foreign Minister Sergey Lavrov also mentioned that Uzbekistan, Kazakhstan and Russia have made progress in discussion of the gas union project. The Russian officials persistently call the energy projects as a “union” to drive a lot of attention whereas the Uzbek side tries to avoid naming it the “tripartite gas union” but stick with a technical contract.

This dichotomy highlights the divergent perspectives between Uzbekistan, which seeks to maintain a purely economic and technical partnership, and Russia, which envisions and promotes the arrangement as a more integrated and potentially strategic “union.”

The “fruits” of the lack of attention on the energy sphere

Indeed, Uzbekistan has lately experienced acute challenges in its energy sector, due to disruption, particularly in frigid winter. The previous Uzbek Minister of Energy, Alisher Sultanov admitted that nothing has been invested from the state in the oil, gas, and power industries in the last 30 years. The lack of attention and the accumulated problems in the energy sector have yielded its “results”. As was the case last year, winters in Central Asia have increasingly been marked by blackouts and breakdowns due to old infrastructure, making it a significant political and social issue in the region.

It also brought economic consequences for Uzbekistan. For example, low gas pressure ceased the production of cement at two cement factories – Kuvasaycement and Akhangarancement. Even the street lighting system in the capital of Uzbekistan, Tashkent, started operating in the restricted-regime, and the Uzbek government stopped the activity of the gas filling stations. The Deputy Minister of Energy Sherzod Hujaev has also confirmed that power disruptions in the energy sector cost annually 6 billion USD dollars.

The same energy crisis has been experienced in the energy-rich Kazakhstan. In 2022, the state of emergency was declared in Kazakhstan as 130 000 people in the city of Ekibastuz were left without heating in a 30C° frost. One should underscore that the energy chaos and energy price crisis has also been a triggering point, which led to spark far-reaching protests in Kazakhstan and virtually trembled the status quo of the incumbent President of Kazakhstan as the government had to resign following protests.

Russia has seen the energy crisis in Central Asia as a “carpe diem” to put forward his “Trilateral Gas Union” and vigorously pushed forward his initiative to have been accepted. Eventually, it ended up signing the agreement on the shipment of Russian gas Uzbekistan through Kazakhstan on October 7 in 2023. Uzbekistan agreed to buy 2.8 billion cubic meters of gas from Russia per year through a commercial contract. Even though there have been many speculations about the formation of the “Trilateral Gas Union”, neither Uzbekistan nor Kazakhstan and even Russia in their readouts, as well as statements at the ceremony to inaugurate the transmission, confirmed about the establishment of the so-called “Trilateral Gas Union”, but they would rather name it as an “Energy project”. The main reason for calling it “energy project” rather than “Trilateral Gas Union” could be that the Uzbek and Kazakh side have walked on eggshells and remained scrupulous to avoid the Western criticism and the imposed financial sanctions on Russia since the President of Kazakhstan promised to follow the sanctions regime.

The geopolitics of the “Energy Project”: short-term benefits with the long-term repercussions

Uzbekistan can meet its growing consumption without gas disruptions and Kazakhstan will have a chance to launch gas infrastructure in its northern and eastern regions as well as modernize its gas transmission system as well

In light of the soaring domestic consumption and the decrease in energy production in Uzbekistan, the government is seeking alternative solutions to iron out its energy issues by importing natural gas to meet its rising domestic consumption. The local gas system has failed to provide sufficient production to consumers.

In this context, Russian natural gas could be a remedy for Uzbekistan to provide for its growing population until the Uzbek government resolves the systematic energy problems.

Analyzing the advantages and disadvantages associated with the importation of Russian gas into Uzbekistan, based on to the Statistics Agency of Uzbekistan, 51.7 BCM of gas was produced in 2022 in Uzbekistan, compared to 53.8 BCM of gas extracted in 2021, or a 4 percent decline, and 46.4 BCM was supplied to satisfy domestic consumption. According to a two-year deal signed with Russia’s Gazprom, Uzbekistan imports 9 million cubic meters of gas daily from Russia. This could help both Uzbekistan and Kazakhstan improve and adjust their own energy infrastructure in the short term. Uzbekistan can meet its growing consumption without gas disruptions and Kazakhstan will have a chance to launch gas infrastructure in its northern and eastern regions as well as modernize its gas transmission system as well.

Another upside of the project is to meet the gas export obligations of both Uzbekistan and Kazakhstan before China. Central Asia supplies about a third of China’s total gas imports and 15 percent of demand through the Central Asia-China gas pipeline. Although China is in search of other alternative sources, such as LNG (liquefied natural gas) from Malaysia, Qatar or other countries, to satisfy its growing economy, the option of importing gas from Central Asian countries and Russia is far cheaper than others. However, both Uzbekistan and Kazakhstan could not fully comply with their contractual obligations with China and had to cease their export to China in the light of domestic criticism and the upward demand for gas in both countries. In this regard, some analysts argue importing gas from Russia could help Uzbekistan to fulfill its obligations before China without any gas disruptions and prevent severe relationship with China, as well as it makes Uzbekistan a reliable energy exporter without damaging its reputation.

However, undoubtedly, the Russian side has had its own interests as quid pro quo. According to the leaked information cited by Kun.uz, Gazprom demanded “the seize ownership of the gas transmission networks” of both Uzbekistan and Kazakhstan. On the one hand, I think it seems far-fetched as both sides (Uzbekistan, Kazakhstan) are skeptical that compromising the ownership of the gas transmission infrastructure could bring serious ramifications as it is fair to say that Russia uses its fossil fuels as a geopolitical leverage. Lola Saidova, a chief researcher of the Institute of Strategic and Interregional Studies (ISRS) under the President, underscored that giving the reins of this strategic sector to another country is out of the question.

On the other hand, it appears plausible that Russia could have asked to use the Central Asia-China gas pipeline to scale up the shipment of gas to China to compensate for the loss of European energy markets. It could lead to losing the potential control of the strategic infrastructure. We should also remember that the Central Asia-China gas pipeline was built to decrease the dependence of the Russian gas export infrastructure. Russia could use its blue fuel as a bargaining chip to make Uzbekistan join the Eurasian Economic Union as a full member, which Uzbekistan has held the observer status since 2020.

Energy security: diversification as the key to safety and certainty

The dependence on a single source of energy could jeopardize the overall security of any country. Uzbekistan’s import of Russian gas is intended for avoiding the deficits especially in the winter. Uzbekistan could use these two years as an opportunity to straighten up its energy issues and reduce its dependency on Russian gas. At the same time, Uzbekistan should consider the options of Turkmen gas imports. On the one hand, Turkmenistan seems a vacillating exporter as it had to halt its gas export to Uzbekistan due to the technical reasons caused by frost during the abnormally cold weather. However, Uzbekistan has signed a contract with Turkmenistan, regarding the import of 20 million cubic meters of gas from Turkmenistan per day (a total of 1.5 billion cubic meters in 3 months) without the participation of the third party. In this case, Uzbekistan ought to engage in signing long-term contracts in the energy sphere with Turkmenistan (the world’s fourth-largest gas reserves) capable of supplying gas to not only Uzbekistan but also the whole Central Asia.

Uzbekistan has lately put many efforts to deal with the energy issues. For example, in 2019, the Ministry of Energy was established to coordinate the single state policy in the energy sphere. However, Uzbekistan should go the extra mile to sort out the accumulated energy problems. There are some suggestions, which are likely to be instrumental to grapple with:

First and foremost, Uzbekistan should put forward the initiative of the establishment of a regular platform or “Energy club” at the level of the Ministries of Energy of Central Asian countries without the participation of the third party to demonstrate the agency. As President Mirziyoyev mentioned: “the energy issues could be a predicament for our countries to reach sustainable development” at the fifth Central Asia Summit in Dushanbe. At this critical juncture, the “Energy club” is likely to be a positive step towards greater collaboration and move towards the integration process in Central Asia as the energy issues are interconnected in Central Asia, it is a regional problem. Central Asian countries should avoid the long-term contracts with fossil-fuel exporter countries beyond the region by using all possible diplomatic tools under their disposal;

Secondly, the system of openness and transparency should be implemented in the energy sector as the signed agreements, documents with foreign exporters, such as Russia remain undisclosed;

Thirdly, it is crucially important to use the full potential of renewable energy in Uzbekistan. In recent years, Uzbekistan has taken positive steps towards renewables, as the International Energy Agency (IAE) has highlighted that Uzbekistan has been progressing toward achieving the solar power capacity target of 4 GW by 2026 and 5 GW by 2030. President Shavkat Mirziyoyev has underscored that the use of renewable energy is an issue of national importance. In this regard, the government should establish a legal base and continue easing restrictions for the investors, as well as create the low-interest credits for the local manufacturers to buy the technical equipment.

In conclusion, as Zbigniew Brzezinski underlined the diversity of energy resources is the source of security in the country. History has proven many times that the dependence on the single source of energy for import brings negative social, political, and economic outcomes for the country. Uzbekistan should embrace the import of Russian gas as a short-term solution and work assiduously on sorting out the energy problems within two years as the agreement with Russia has been a two-year contract in partnership with its Central Asian partners together. The formulation of the “energy agency” could be a nascent step to coordinate the solutions to achieve energy security in Central Asia without involvement of any party beyond the region. Otherwise, after a couple of years, Uzbekistan has to turn to Russia once again for natural gas, but this time could come with serious potential ultimatums.

Main photo: kremlin.ru

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