December inferiority complex

Chapter I

There is a month in a year which is not in favor of Kyrgyz and Tajik people. It is December. As usually, in this period Dushanbe and Bishkek hold hard talks with official Tashkent about the price for supplied by Uzbekistan natural gas.

Negotiations of 2007 were even harder then usually because there were held the day before the Presidential elections in Uzbekistan.

The second key factor was Ashgabat pressure on "GasProm" because of which Turkmenistan got desired: starting from 2008 the price for 1 thousand of cubic meters of Turkmen gas will grow up for 40% - from USD 100 to USD 140.

By the highest standards, it is not that about price debates between countries, but about the price that Dushanbe and Bishkek have to pay for hydrocarbon resources. For this once it could hit significantly at the economics of courtiers dependant on Uzbeki gas.

While Kyrgyz and Tajiks suffer during negotiations, "GasProm" and Kazakhstan have almost solved their problems with official Tashkent.

Thee first, despite of gas price growth and hard talks with Karimov, could 'sleep well'. Tashkent perfectly understands that "Middle Asia - Center" gas pipeline controlled by "GasProm" is by now the only one powerful through-passage via which Uzbeki gas is exported. Therefore an agreement between Moscow and Tashkent is only a matter of time.

From the other side, Russia has a necessity to keep export monopoly but does not have direct interest to use Uzbeki gas inside Russia. Russian gas monopolist uses purchased in Uzbekistan gas to optimize prices for gas for European consumers. Mixing Russian (more expensive) and Turkmeni-Uzbeki (more cheap) gas, "GasProm" sells it to Europeans at the price that in 2-2,5 times more expensive (these are calculations made taking into account Turkmeni gas price of USD 140 per 1 thousand cubic meters) then buys in Central Asia.

The second, despite of not good relations with Uzbekistan, kept for the first half year old prices for Uzbeki gas. First of all, this is about the fact that Kazakhstan is a key transit country on the gas way to Russia. Second of all, Kazakhstani consumers are more priority for Uzbekistan then Kyrgyz and Tajik. Kazakhs pay their prices in time whereas their regional neighbors have huge debts to Uzbekistan.

Loaned options

Tashkent understands that Astana dependence on Uzbeki gas supply has different character then Bishkek or Dushanbe dependence. Having great wish Kazakhstan could increase extraction of necessary gas volumes inside the country to supply its south regions. Indeed, up to now these plans of Astana are more declarative then practical.

To understand what Uzbekistan expects from the next round of negotiations on gas with Kyrgyzstan and Tajikistan, it is necessary to think logically. You have to be definite right away that official Tashkent is not satisfied with neighboring countries because of concrete problem - chronic debts of Bishkek and Dushanbe for supplied by Uzbekistan gas.

It could be solved via 2 options: try to get 'alive' pay-back or ask for other economically attractive assets.

Tashkent has intentions to use pressure to get finally money back. This desire is more then obvious, but economically not always optimal. Deficit of foreign investments happened because of relations worsening with the West in May 2005 (right after Andijan events) significantly limits Uzbekistan options. It could be noticed even in debt problem with Kyrgyzstan and Tajikistan. If Tashkent has a real option to regulate relations with the West, investments would flow in the country as a river, and Uzbekistan, I suppose, will not get caught in an endless loop with the problem and take the pay-back as assets.

Such scheme is long time but without success tried to be used by "GasProm" towards Ukraine. Russian monopolist not once stated that instead of taking money it could accept as Ukraine gas debt before Russia pay-back for instance Ukraine gas transport system assets. But Kiev understands that if "GasProm" has an access to Ukraine gas taps this would mean, pre se, free-will denial from a part of the national sovereignty.

Better fix losses

An intention of Tashkent to put gas price for Tajikistan on a level of USD 180, for Kyrgyzstan - USD 200 per a thousand of cubic meters says that Uzbekistan tries to come in a sphere of pricing to the level if not average European prices, but to the level which gives a real financial inflow to Uzbeki economics.

We are not talking about average European prices. Even Russia supplies European Union with gas via long distance, and the main Russian gas fields are located in Siberia. The same things could be said about Central Asian hydrocarbon. Uzbekistan could not sell its gas to neighbors for more than USD 300 per a thousand o cubic meters. First of all, the distance is incommensurably shorter; second of all, neighbors' purchasing power is rather low.

To all appearances, Tashkent tries to solve its main problem with fixing losses from Kyrgyzstan and Tajikistan deliveries increasing purchasing prices. If it is not possible to get all pay-back in the whole, it is restructured according to the request of neighbors. From the other side, Uzbekistan could take cream off political dividends. Permanently threatening t increase purchasing prices, Tashkent could increase its political influence on Kyrgyzstan and Tajikistan.

Relatively Dushanbe official Tashkent holds a policy of containment hydroelectric power station cascade construction on Tajik Mountain Rivers. The logic is obvious: Uzbekistan does not want that Tajikistan creates on its territory objects able to regulate drainage to Amudarja. In a case if Emomali Rakhmon could realize his great plans to increase generating capacities, he gets an instrument to counteract Tashkent. Besides, the same instrument is used by Kyrgyzstan in a winter time transforming Toktogul water reservoir in energy regime and creating a real threat of waterlogging a territory of Uzbekistan and Kazakhstan.

Against Kyrgyz, Uzbekistan has strange enough position. On the one hand, it abolished visa regime o the border that could be characterized as unilateral free will gesture. On the other hand, it keeps price bridle in readiness for Uzbeki gas supply. One may think that influence power of official Tashkent on official Bishkek is enough to make Kyrgyz not to open Toktogul locks in winter.

However something opposite happens in practice: Kyrgyzstan continues to heat a little its regional neighbors.

Cucumber seems to be better…

The official legend of Kyrgyzstan sounds as "we do not have another choice then to produce energy on Toktogul water reservoir in winter". At that, everyone knows that surplus or resources is bought by Russia and Kazakhstan. Nothing surprising, if you know the structure of Kyrgyz economics. By summer time in Kyrgyzstan energy resources deficit does not felt so sharp as in winter. By winter, when purchasing grows, deficit becomes pointed. An because Kyrgyz do not have other real sources to fill up the budget, they put Toktogul in energy regime.

By Soviet time Moscow solved the situation by obliging Uzbekistan and Kazakhstan to supply Kyrgyzstan in winter time by lacking energy resources based on reciprocal payment, in other words, for free.

USSR collapse and independent states formation restored to life market relations according to which such "consoling indulgences" were excluded from interstate turn. Neither Uzbekistan nor Kazakhstan wants to supply energy sources to Kyrgyzstan in exchange for the fact that Kyrgyz do not let out Toktogul water surplus. This problem became he most severe in the region, and by now there are no even premises that it could be solved.

Kyrgyzstan and Tajikistan annually are obliged to bow low to Tashkent to prolong gas contracts. In its turn, by winter Uzbeks and Kazakhs suffer from Kyrgyz in fact flooding big territories in Uzbekistan and Kazakhstan.

Today Kyrgyz and Tajiks have to execute complicated talks with Uzbeks about gas. In its turn, Uzbeks and Kazakhs do not real want to solve water problem and deal with Bishkek. Because of abode mentioned reasons, one may think that for the most part subjectively Central Asia reminds a delayed-action mine.

To be continued

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