Tashkent Turns East for New Energy Investment

The increasing presence of Chinese companies in Uzbekistan could the shift the balance away from Russian dominance of the energy sector, NBCentralAsia experts say. 

In late July, media in Uzbekistan reported that the China-based firm Alcatel-Lucent Shanghai Bell was to upgrade the gas distribution network, backed by a 74 million US dollar loan from China’s Eximbank and funding of 7.5 million dollars from the national gas firm Uztransgaz.

Most of the equipment and materials will be imported from China.

This is the latest sign of the rapid growth of Chinese investment in Uzbekistan.

“[China] is providing loans for long-term infrastructure projects at very low interest rates”, Dosym Satpaev, a political analyst in Almaty, said.

Satpaev argues that China has the advantage over Russia in possessing substantial funds for investment, and is using this to gain ground in Central Asia’s oil and gas sector.

Moscow has to date been the preeminent foreign player in the Uzbek energy sector, and has concluded long-term deals for gas production and exports.

Uzbekistan, which produces over 60 billion cubic metres of gas and eight million tons of oil a year, is located centrally in the region and near enough to China to make exporting fuel viable.

A new gas pipeline from Turkmenistan to China crosses through Uzbekistan, currently under construction, offers a ready-made export route for the Uzbeks, too.

Chinese interest in Uzbek oil and gas increased in 2004, when the national oil and gas company agreed to cooperate with Uzbekneftegaz, and a deal was concluded to let China explore deposits in the Fergana valley, around Bukhara and Khiva, and on the Ustyurt plateau near the Aral Sea.

“China’s presence in the energy sector is growing,” Farhod Tolipov, a political analyst in Tashkent, said. “In order to predict the implications of this, it’s going to be important to see how diverse this [presence] becomes.”

Rovshan Nazarov, an economist in Tashkent, says the Uzbek government is making rational choices in expanding economic ties with China, given the competition between these two regional giants.

“The penetration of Chinese capital will lead to a situation where Russia reduces its presence in the energy sector,” he said.

Another Tashkent-based economist, Viktor Ivonin, thinks Tashkent has little option but to accept Chinese investment, given that Moscow simply does not have more cash available to spend, despite its preeminent position.

This article was produced as part of IWPR’s News Briefing Central Asia output, funded by the National Endowment for Democracy.