Chinese Boost Presence in Uzbek Market

Chinese Boost Presence in Uzbek Market

Wednesday, 21 October, 2009
China’s growing role in the Uzbek gas industry could lead to increased investment in other parts of the economy, analysts say.

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Under a memorandum of understanding which Uzbekneftegaz, the national oil and gas corporation, signed with the China National Oil & Gas Exploration & Development Corporation, CNODC, in Beijing on September 10, 23 natural gas deposits on the Ustyurt plateau of northwestern Uzbekistan will be handed over to a joint venture called UzChina National Petroleum Corporation, set up in 2005.

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In 2006, the China National Petroleum Corporation, CNPC, acquired a license to explore five potential oil and gas deposits in various parts of Uzbekistan.

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Ravshan Nazarov, an analyst in Tashkent, says the Chinese economy is still growing despite global economic problems. The need for energy to sustain this growth has led the country to search for new sources abroad.

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“Hydrocarbons are one of the most important, especially given the pace of Chinese economic growth,” said Nazarov. “In the 21st century, hydrocarbons are needed at any price. With its rich mineral reserves, Uzbekistan could become a good place to be based.”

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Uzbekistan produces about 60 billion cubic meters of gas and about eight million tons of oil a year. While not an immediate neighbour of China, it is connected by land routes. A new pipeline taking gas from Turkmenistan to China will cross Uzbek territory, and there are plans for a railway linking Uzbekistan and China via Kyrgyzstan.

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Uzbekistan’s economy is isolated and rigidly controlled, and its financial and banking sectors are in poor shape. Analysts say that given the need for investment, the authorities should take pragmatic measures to attract funds to the mineral resource sector.

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Farhat Tolipov, a lecturer at the University of World Economy and Diplomacy in Tashkent, believes that in the circumstances, China is now ideally placed to export goods to Uzbekistan.

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A former official from the Uzbek foreign ministry says the government is becoming increasingly receptive to the idea of exporting gas to markets other than Russia, still the main purchaser. He said recent tensions between Moscow and Turkmenistan, a major gas producer, have encouraged thinking about alternatives. (For more on the Turkmen dispute, see

<a href=" http://www.iwpr.net/?apc_state=hrubbtm353189&l=en&s=b&p=btm&o=353189"> <strong>Turkmen, Russians Divided Over Gas</strong></a>, 10-Jun-09.)

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“Uzbekistan is one of the main suppliers of gas to Russia’s Gazprom company, but it now has doubts about how stable its agreements with Russia are,” he said. “This is a situation where China has a unique opportunity to consolidate its position in our country”.

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The former official added that much would depend on how much President Islam Karimov is prepared to expand ties with China, something he has been wary about in the past because he feared an economic presence could turn into political influence.

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In a further sign of Beijing’s growing economic interest in Uzbekistan, the Chinese firm Uranium Resources signed a deal with Tashkent on September 1 to set up a joint venture to explore uranium deposits at Boztau, near the western city of Navoi.

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(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service has resumed, covering Uzbekistan and Turkmenistan.)
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