Gazprom Works To Advance Russia's Interests In Central Asia

by Bruce Pannier | 20 October, 2008

People in Kyrgyzstan will likely feel warmer this winter, but the extra heat will come at quite a price: the government signed a deal last week to sell Gazprom about 75 percent of the beleaguered state-owned natural-gas company, Kyrgyzgaz. The deal is expected to bring much-needed energy security to Kyrgyzstan and is thus a great benefit to the ...

Gazprom works to advance Russia's interests in Central Asia

The deal is expected to bring much-needed energy security to Kyrgyzstan and is thus a great benefit to the country. But the deal's value to Gazprom, the world's largest gas producer, is at first glance not so easy to see.

Gazprom is already pushing ahead with deals to explore and develop oil and gas sites in Kyrgyzstan. But by Gazprom's own estimates, there is only some 6 billion cubic meters (bcm) of gas in Kyrgyzstan, which currently produces about 30 million cubic meters a year, only about 4 percent of consumption (Gazprom exports more than 150 bcm annually to Europe). Gazprom CEO Aleksei Miller said after signing the deal on October 10 that the goal is to make Kyrgyzstan "self-sufficient" in its gas needs.

But Gazprom cannot expect to make much money selling Kyrgyz gas to Kyrgyz consumers. One possible explanation is that the deal benefits the Kremlin more than Gazprom. And the Kremlin, of course, holds 50.002 percent stake in Gazprom.

Russia already has a military base in Kyrgyzstan -- an airfield at Kant, some 40 kilometers from the capital -- and Russia is Kyrgyzstan's leading trade partner. But Gazprom's control over the state's gas monopoly will give Moscow even more influence in Kyrgyzstan.

Valentin Bogatyrev, an analyst and coordinator at the Kyrgyz think tank Perspective, tells RFE/RL's Kyrgyz Service that Moscow now might have too much influence in Kyrgyzstan. "Right now, 90 percent of the petroleum-product market [in Kyrgyzstan] belongs to Gazprom," he says.

"If we are going to give more shares to Gazprom then we will have become almost totally dependent on Gazprom, and this is not a private company, this is a state company," Bogatyrev adds. "Through this deal, we are becoming dependent on the government of another country."

Changing The Landscape
But others might view the deal as Bishkek changing its dependency from one country to dependency on a more benign country.

Since gaining independence in 1991, Kyrgyzstan has been dependent on neighboring Uzbekistan for gas supplies, and has always been in debt for that gas.

Uzbekistan has reduced and, at times, cut off the flow of gas to Kyrgyzstan, most recently and notably several times last winter, the coldest in the region in 40 years. Sometimes the reasons given for the cutoffs were technical, but more often the cutoffs were because of overdue payments.

But there have also been times when the cutoffs accompanied tensions between the Kyrgyz and Uzbek governments. Since Uzbekistan is its primary supplier of gas, there was little Kyrgyzstan could do when its neighbor cut off or increased the price of gas.

Uzbek and Kyrgyz officials are due to start their annual negotiations on the price of gas in November. But this time, Kyrgyzgaz will go to the bargaining table under Gazprom ownership. This seems to have had an immediate effect on the situation.

The day that Gazprom and the Kyrgyz government signed the new deal, Kyrgyz President Kurmanbek Bakiev met with Uzbek President Islam Karimov. After the meeting, Bakiev said, "Uzbekistan will find reserves to supply natural gas to Kyrgyzstan without interruption in the first quarter of 2009."

Also that day, Kyrgyz state television reported that Bishkek had "asked" Uzbekistan to hand over three gas facilities to Kyrgyzgaz "free of charge." Bishkek claimed the facilities are on Kyrgyz territory.

Gazprom's Kyrgyz deal also sends a message to the Uzbek government. During a visit to Moscow in late August, Uzbek First Deputy Prime Minister Rustam Azimov informed his Russian counterpart, Sergei Ivanov, that Uzbekistan would cancel a contract with Stroitransgaz -- which is partially owned by Gazprom -- to build the potentially lucrative Mubarek gas-processing plant in Uzbekistan.

Now Gazprom is taking away one of Uzbekistan's steady gas customers. It is also a reminder from Moscow to Tashkent that as Uzbekistan charts its foreign policy and tries to balance its ties with the various world powers vying for influence in resource-rich Central Asia, there is one country that can quickly change the regional balance of power.