Wednesday, 23 January 2008

IDENTIFYING PRIORITIES: UZBEK GAS – FOR EXPORT

Published in Field Reports

By Erkin Ahmadov (1/23/2008 issue of the CACI Analyst)

This winter is trying the Central Asians for endurance and resistance to cold. In Uzbekistan, temperatures of -10 degrees Celsius (15 Fahrenheit) during the day and -20 (-5 Fahrenheit) at night hold strong for over three weeks.

This winter is trying the Central Asians for endurance and resistance to cold. In Uzbekistan, temperatures of -10 degrees Celsius (15 Fahrenheit) during the day and -20 (-5 Fahrenheit) at night hold strong for over three weeks. Meteorologists identify the current weather as a result of a slow-moving cyclone that came from Siberia. Such low temperatures have occurred in the region in recent years, however this year the abnormally long and stable duration of cold temperatures cause panic and despair among the people. Perhaps the cold would not be so frightening for the heat-loving people of Uzbekistan, if they had all necessary conditions for overcoming the hardships of the freezing winter – electricity, gas and heating in their houses.

If in energy-importing Kyrgyzstan and Tajikistan, people are quite familiar with constant shortages and limits of using gas, electricity and water, one would expect that in resourceful Uzbekistan it should not be the case.

The fact that this winter happened to be one of the coldest in the past twenty years coincides with price hikes for electricity and gas delivered to freezing Kyrgyzstan, Tajikistan and other trading partners. Negotiations over Uzbekistan’s prices for gas became a much-discussed issue in the end of December 2007. The month was marked by price increase for gas delivered to Kyrgyzstan and Tajikistan from $100-$115 to $145 per thousand cubic meters (tcm). Moreover, following Turkmenistan’s successful negotiations with the Russian “Gazprom” monopoly to pay $130-$150 per tcm for Turkmen gas starting from 2008, Uzbekistan expressed the intention to obtain similar trade conditions for its gas exports. After several rounds of negotiations, Uzbekistan’s request was satisfied.

With the gas price negotiations settled, residents of Uzbekistan face the consequences of living in a country committed to fulfilling the conditions of the concluded export agreements. A paradox is that increased export prices did not translate into improved living conditions for the population, but in fact significantly worsened them. Starting on January 16, people held protest meetings in several regions of Uzbekistan demanding gas, heating and electricity in their frozen houses. Based on the reports of local media, in the city of Ferghana about 300 residents gather every day on the square in front of the city administration building (hokimiyat) requesting the nonstop delivery of gas and electricity. Their demands were not satisfied yet. In the outskirts of the major cities, people also complain of substantial gas and electricity shortages. Residents of the Samarkand and Tashkent regions also protest against unbearable conditions. In the villages, people have already switched to traditional methods of warming their houses – burning firewood, coal and pressed dung. Bukhara is so far the only region where the protest meetings resulted in the immediate resumption of gas deliveries to their houses.

The insufficient supplies of gas, in particular, have effects on other forms of heating. The deficient amount of gas supplied does not allow most boilers to warm the water for heating houses to the necessary temperature, with some of them frozen completely. Some boilers failed simply because of outdated equipment. This is just one of the numerous effects that gas shortages have had on residents of the cities and villages of Uzbekistan.

Uzbekistan’s total gas resources are estimated at over six trillion cubic meters. Currently, Uzbekistan extracts around 60 billion cubic meters (bcm) of gas per year, of which 5 bcm is exported to Kazakhstan, Kyrgyzstan and Tajikistan, and 13 bcm to Russia. This, on paper, should leave enough gas resources for the country’s own needs.

Forecasts suggest that the cold will remain in the region until the end of the season. For the people of Uzbekistan, it means that they need to adjust to the freezing winter of 2008. However, there is not much hope that the state will take appropriate measures in this matter. Starting in 2008, the system of heat supply in Uzbekistan is put on a self-supporting basis. Encountering constantly growing prices for gas, water and electricity, the 10 percent share previously covered by the state budget is not enough. In light of current developments, it is no wonder that the demand for electric heaters and fans raised rapidly in the past few weeks. They are however not of much help, given that electricity is cut off on a regular basis throughout most regions of the republic.

The fact that the people of Uzbekistan took to the streets to remind the government of their needs speaks volumes about the scale of the problem. Moreover, it raises questions about the ways that state income from the export of natural resources is used. In theory, an effective trade strategy should have a positive effect on the welfare of the population. However, in the case of Uzbekistan, it appears to deprives the people, caught by surprise in unusually cold conditions, of the basic means for normal living.
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