Russian Gas Supplies to Uzbekistan Set to Grow

In October 2023, Uzbekistan began importing gas from Russia via Kazakhstan. The initial volume, intended to cover winter shortages, was cited as 2.8 billion cubic meters (bcm) a year (9 million cubic meters per day). That figure looks set to grow considerably, with TASS reporting on March 5 that materials presented to the board of the Kazakh Ministry of Energy stated plans to increase that volume to 11 bcm from 2026.

Daryo.uz expanded on the TASS report, noting that an Uzbek government investment program for the first quarter of 2024 “outlined intentions to boost gas imports from Russia from the existing 9 to 32 [million] cubic meters per day.” And Kun.uz noted that in December 2023 Russia’s Gazprom doubled exports to Uzbekistan at the request of the Uzbek authorities to meet soaring winter demand.

As Russian gas began to flow to Uzbekistan back in October, Gazprom head Alexey Miller said discussions were underway on a 15-year cooperation agreement between Russia and the Central Asian countries, namely Kazakhstan, Kyrgyzstan, and Uzbekistan. In February, Russian Ambassador to Uzbekistan Oleg Malginov mentioned discussions on a long-term agreement and an increase in volume.

A recent World Bank report on achieving net zero emissions in Europe and Central Asia noted that “Central Asia faces a tightening gas supply balance” and would likely be forced to make tough decisions to either form a “Central Asian Gas Union” with Russia or be forced to reduce exports to China.

“A gas union among Russia, Kazakhstan, and Uzbekistan could help plug Central Asia’s supply gap in the short term and sustain healthy levels of pipeline gas flows from Central Asia to China, but it is not without challenges,” the report stated. The World Bank noted that “additional infrastructure upgrades would likely be required to accommodate the higher flows” envisioned.

Given the limited availability of underground gas storage in the region, this is a prime area for investment. The World Bank report pointed out that Central Asia has particularly low storage (8 percent of consumption) and argued that “countries in Central Asia suffered episodes of gas shortages and blackouts during recent winters as a result.”

Kun.uz reported that plans are afoot to expand the storage capacity at Uzbekistan’s Gazli gas storage facility, located in southwestern Bukhara region, in two phases. The first phase envisions doubling storage capacity at Gazli from 3 bcm to 6 bcm. The second phase will seek to increase total storage capacity to 10 bcm. The project’s price tag is cited as $850 million.

The World Bank report went on to note that “[m]odeling results indicate that an additional 10 bcm of Russian gas in the region by 2025 would help maintain stable export levels from Central Asia to China and support growing domestic consumption within the region in 2023–25… The base case without a gas union would see Central Asia’s production and export levels contract between 2023 and 2025.”

The World Bank report does not mention political or corruption risks associated with increasing the gas trade between Russia and Central Asia. These risks are arguably significant and further amplified by the war in Ukraine.

The Gazli gas storage facility mentioned above as a target for investment and capacity expansion is a case in point. A recent RFE/RL investigation found that control of the $850 million Gazli gas storage development, which a previous investigation linked to sanctioned Russian tycoon Gennady Timchenko, “has been transferred to an obscure offshore firm owned by an Uzbek political insider [Bakhtiyor Fozilov] with whom Timchenko has commercial ties.”

In a statement provided after initial publication, Gazli Gas said that in October 2023 it “completed a corporate restructuring resulting in the stake previously held by Russian Forus JSC being transferred to Daxon Holdings Limited, a company incorporated in Hong Kong. Bakhtiyor Fazilov was and remains the main beneficiary of Gazli Gas Storage and no sanctioned individual has ever held a shareholding in the company.” The statement went on to note that the decision to “relocate to Hong Kong was made due to the significant volume of business with Chinese companies.”

Nevertheless, the opacity of such transfers, and the murkiness of the business environment writ large, is ripe territory for corruption.