Uzbek Gas Hike Leaves Neighbours In The Cold

The economies of Central Asia’s two poorest states are reeling after Uzbekistan raises the price of gas again.

By Jypara Abdrahmanova and Elina Karakulova in Bishkek (RCA No. 526, 11-Jan-08)

Nadezhda Georgieva says her family turned off the gas fires in their apartment in the Kyrgyz capital Bishkek a year ago, when the price of fuel soared overnight.

The reason was simple - while Kyrgyzstan generates its own electricity, it has to import its natural gas from neighbouring Uzbekistan. When the Uzbeks raised the export price of gas from 55 to 115 US dollars per thousand cubic metres for all their customers last year, there was little Kyrgyzstan could do about it.

A few days ago, Georgieva heard that Uzbekistan had raised the price once again, this time to 145 dollars per thousand cubic metres, and her dream of turning the gas fires back on evaporated.

“We can’t afford a luxury like gas now,” she lamented in an interview for IWPR. “Many people in our neighbourhood have already abandoned their gas heating – including one small private hotel.”

Poorer Kyrgyz families have replaced gas-canister heaters by burning wood or coal instead in order to get through the cold, hard, winter. But this has come at a heavy environmental cost.

“The snow in our neighbourhood is black from soot because people are heating their houses with coal, wood and even old tyres,” said Georgieva. “We can hardly breathe and the children don’t have a place to play but what can we do? No one wants to freeze.”

Uluk Kydyrbaev, head of the Bishkek Business Club, which groups the country’s private entrepreneurs, says Kyrgyzstan and neighbouring Tajikistan, which is similarly dependent on Uzbek gas, should have developed more ambitious energy strategies long ago.

Both states should have noted the trends in regional energy markets and pushed to develop their own potential to generate hydroelectricity from their mountainous water reserves.

Kydyrbaev believes only a major injection of private investment capital can help secure the energy futures of both countries and make them less vulnerable to prices rise shocks inflicted by their neighbours.

Kyrgyzstan currently imports around 800 million cubic metres of Uzbek gas annually, which will cost it about 116 million dollars this year. Tajikistan will pay a little less, about 94 million dollars.

With significant investment, Kyrgyzstan could generate far more hydroelectric power than it does at present. However, even the current infrastructure is now crumbling.

“Our electricity cables are deteriorating year by year and need immediate investment,” said Kydyrbaev. “If we don’t do that, we might lose our last [energy] resource and become totally dependent on our neighbours for energy.”

Bazarbay Mambetov, who chairs the Oil Traders’ Association in Kyrgyzstan, warns that matters are coming to a head, as Kyrgyzgaz, the national gas company, may not be able to pay its bill to Uzbekistan this year.

The company suffers from a liquidity shortage owing to widespread non-payment or late payment of bills by both private and industrial consumers.

“People had trouble paying the tariffs when gas was 55 dollars per thousand cubic metres,” said Mambetov. “Now that the price is 300 per cent higher, it could have catastrophic repercussions.”

Shavkat Shoimov, first deputy director of Tajikistan’s national gas company Tajikgaz, says his company is deeply indebted to Uzbekistan for the same reason as its Kyrgyz counterpart.

Uzbekistan’s gas price hike not only leaves families like that of Nadezhda Georgieva facing a cold winter; it also threatens the viability of important industries in the two poorest states of Central Asia.

One mineral fertiliser plant in Tajikistan that was operating on gas power had to close last year after energy costs made its products too expensive.

Asomiddin Saidov, a deputy in the Tajik parliament, says he fears more factories will close soon.

“Gas prices will hit all big enterprises that run on gas, their products will become uncompetitive and as a result many factories will become unprofitable,” he warned.

Galina Lee, commercial director of Bishkektsroimaterialy, a construction materials producer which is one of the biggest Kyrgyz companies, makes much the same grim prediction.

“We are very nervous,” she said about the most recent gas price rise. “We don’t know whether our company will remain competitive on the market.”

Jypara Abdrahmanova is an IWPR contributor in Kyrgyzstan. Elina Karakulova is an IWPR editor in Bishkek.