MOSCOW. (Dr. Igor Tomberg for RIA Novosti) - Following Turkmenistan's example, Uzbekistan will raise the price of exported gas to $100 per 1,000 cubic meters as of January 1, 2007. The news was made public by Uktam Eshmurodov, deputy director general of Uzbekistan's transport monopoly, Uztransgaz.
The price hike was motivated by changes on the global market and growing transportation expenses. "We will charge all foreign consumers, including our Central Asian neighbors, $100 per 1,000 cubic meters," Eshmurodov said.
Uzbekistan and Turkmenistan are the largest producers of natural gas in Central Asia. Uzbekistan annually produces about 60 billion cubic meters of gas and exports it to Russia, Kazakhstan, Kyrgyzstan and Tajikistan. In the spring of 2006, the management of Uztransgaz said it would increase total exports from 11.5 to 12.6 billion cubic meters.
According to its agreement with Russian gas monopoly Gazprom, it will deliver 9 billion cubic meters of gas to Russia, compared with 8.15 billion in 2005. Exports to neighboring Kazakhstan, Kyrgyzstan and Tajikistan will increase from 3.35 to 3.6 billion cubic meters.
The change in the export price did not come as a surprise, since the government of Uzbekistan had discussed raising it to $100-$120 per 1,000 cubic meters in July of 2006. One of the reasons for this was Turkmenistan's decision to raise its export price to $100. Kazakhstan will most likely soon follow the lead of its neighbors.
In May 2006, Russian President Vladimir Putin and Kazakhstan's President Nursultan Nazarbayev discussed the possibility of Russia buying Kazakh gas at market prices, specifically at $140 per 1,000 cubic meters.
In 2007, Gazprom plans to buy about 67 billion cubic meters of gas in Central Asia. Company spokesmen say the rise in prices will not affect Russian consumers, because nearly all gas imported from Central Asia is resold to former Soviet countries, primarily Ukraine. But the simultaneous increase in gas prices by the three Central Asian gas providers may lead to a rise in prices for Ukraine and create problems for the Russian gas monopoly.
Last winter's gas spat with Ukraine showed that when Kiev has no money to pay for gas, it starts to siphon it without permission from the export pipeline to Europe. Deliveries to Europe are too important a commitment for Gazprom to neglect, and so the company will most likely do everything possible to keep down the increase of prices for Central Asian gas.
Gazprom, which has a monopoly on gas exports from Turkmenistan, Uzbekistan and Kazakhstan, is pursuing a flexible policy towards the three countries. This pliancy is motivated by its desire to maintain control over gas deliveries from Central Asia. Gazprom is aware of the threat posed by China and other potential rivals on the regional gas market. But these factors also give the Central Asian gas producers additional room for maneuver, primarily in gas pricing.
However, their possibilities are limited by their resources.
For example, Turkmenistan may fail to fulfill a contract with China on the delivery of 30 billion cubic meters of gas. After making deliveries to Russia, Ukraine, Iran and Kazakhstan, Turkmenistan will fall short by at least 11.5 billion cubic meters of the gas it needs to honor all its commitments this year.
Russia and Kazakhstan have signed an agreement on setting up a joint venture to refine gas from the Karachaganak field, which essentially means that Gazprom will assume control of gas exports from Kazakhstan's main deposit.
Uzbekistan's plans to increase gas exports to 10 billion cubic meters fully depend on the success of its new investment policy. But the rapidly growing presence of Russian companies, especially Gazprom and LUKoil, in Uzbekistan will play a major role in determining export routes for Uzbek gas.
So Central Asian countries, whose resources are no match for Russia's, will have a limited possibility to influence the development of the local gas market, and a limited ability to maneuver between the major powers, a practice euphemistically described as "a multivectoral policy".
Experience has shown that Russia's minor and fully justified concessions regarding higher purchasing prices were in some cases sufficient to restore a balance between competing interests on the regional gas market. In addition, the Central Asia-Center gas pipeline is so far the only delivery route for Central Asian gas to external markets. Gazprom's refusal to increase the pipeline's capacity to 100 billion cubic meters has dramatically increased the rivalry between the three gas-producing states in Central Asia, and reinforced the Russian company's position as an arbiter.
In short, gas-producing countries now see that it is better to come to terms with each other than allow consumer states to exploit their differences.
In my view, Russia's agreement to raise purchasing prices was both politically justified and necessary to create fair conditions on the gas market. Russia should work jointly with Turkmenistan, Uzbekistan and Kazakhstan to supply gas to European consumers at prices that the Central Asian producers consider fair. Moreover, the regional gas-producing countries' common interests give rise to a need for cooperation in production and sales.
Igor Tomberg, Ph.D. (Economics), is a leading research associate at the Center for Energy Studies, the Institute of World Economy and International Relations, Russian Academy of Sciences.
The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.
