Russia’s Gas Union project with Central Asian nations is unlikely to yield positive results
Moscow stubbornly seeks a monopoly

ANALYTICS  30 January 2023 - 14:47

Russian shrinking energy influence in the global market amid its full-scale invasion of Ukraine and Western-imposed economic sanctions pushed Moscow to turn to its traditional partners in the post-Soviet region, particularly Central Asia.

In November 2022, Moscow approached Uzbekistan and Kazakhstan with a new project to set up a tripartite gas union. While Russia, with the new project, sought to circumvent Western sanctions and export its natural gas via Kazakhstan and Uzbekistan, both countries seemed to pour cold water on the idea. As such, Kazakh Deputy Foreign Minister Roman Vasilenko cautioned that Kazakhstan would not “allow its territory to be used to circumvent sanctions” and would bear that in mind “when it comes to assessing any potential new initiatives.”

On the other hand, speaking to the Russian state media, a spokesman for President Vladimir Putin sought to dispel increasingly aired suggestions Moscow is pursuing the idea out of political rather than commercial considerations. Given Kazakhstan’s hesitant position to sign an alliance with Russia, Uzbekistan quickly followed suit, citing the growing energy consumption and deadly freezes that hit the country's mountainous areas resulting in human casualties.

According to the Uzbek energy minister, Uzbekistan prioritizes its national interests and will never agree to political conditions in exchange for gas. Simply put, Uzbekistan will not allow any political conditions to be imposed in return.

Shortly after Astana's and Tashkent's rejection of forming a new gas cartel with Russia, some media sources claimed that Russia proposed to take control over significant shares of Uzbek and Kazakh national energy companies in exchange for free additional gas volumes. Therefore, the scheme has encountered strong public opposition in Kazakhstan and Uzbekistan, fueled by fears the deal may come with political strings attached.

In 2021, gas exports from Kazakhstan and Uzbekistan amounted to 7.2 and 2.38 billion cubic meters, respectively, with a significant volume of overall gas production being used mainly for domestic consumption. The gas that is not used domestically is exported primarily to China. Nonetheless, Russia is seemingly eager to push the gas union project, as Moscow, Tashkent, and Astana have signed new cooperation agreements with Russian gas giant Gazprom, cementing partnerships with Moscow.

The Kremlin seeks new markets for gas due to the fact that the European market now shuns. Unlike the Russian media, the Uzbek media dubs the document as a roadmap rather than a gas union agreement but does not provide detailed information regarding the document's main points. Moreover, the Kazakh media used the exact wording to announce the roadmap with Russia on January 18, but Kazakhstan’s government offered a few more, albeit sparse, details.

Russia insistently kept the gas union proposal demand, knowing that the increasing energy crisis in both states would yield grave consequences soon. Besides that, Uzbekistan's and Kazakhstan's exports obligations expand, and as such, they should discuss the possibility of increasing the supply of Russian gas with Moscow. Notably, speaking at the conclusion of the Supreme Eurasian Economic Council meeting in Bishkek, Kyrgyzstan, on December 9, 2022, Putin shared his confidence in the project’s potential mutual benefits for all parties involved.

Although Moscow is confident that the gas union project will become functional soon, some financial and technical issues must be addressed amid Russia's stagnating economy. For example, it will be necessary to modernize gas transportation infrastructure and build new gas pipeline networks.

Furthermore, it will be necessary to build a separate gas transmission system through the territory of Kazakhstan to Uzbekistan, which would be quite an expensive project. According to various estimates, the expected cost of developing internal infrastructure in Russia to supply more gas to Central Asia is estimated at around $4.16 billion.

Uzbekistan and Kazakhstan may benefit from the gas union at least to compensate for energy shortages, though it is unlikely that both states will make serious political concessions to Russia. The fear of Western sanctions will remain a severe threat to the regional states in case of intensive energy cooperation or alliance/union with Russia.

Moscow's energy prospects in Europe are largely neglected shortly after the Ukraine war, and the chances for Russia to weaponize the energy against Europe are poor and unrealistic. Therefore, Russia’s only viable option is transporting its gas to Europe via Kazakhstani and Uzbekistani territories. Notwithstanding, both states will refrain from deepening gas cooperation with Russia framing it only with natural gas transports to China.

Caliber.Az