Kyrgyz parliament approves sale of gas company to Russia

By bne IntelliNews November 28, 2013

bne -

The Kyrgyz parliament approved the sale of state gas distribution company Kyrgyzgas to Russia's Gazprom on November 27. The unexpectedly easy passage of the deal paves the way for the sale of the cash-strapped national gas company for just $1, raising hopes in Bishkek of an end to chronic energy shortages.

Overall, 68 MPs voted in favour of the bill ratifying the sale agreement in its first reading, according to Knews. Just 15 deputies voted against, despite fears that the opposition and some members of the ruling coalition would attempt to block the deal handing gas distribution over to the Russian state-controlled giant.

Addressing the lower house before the vote, Deputy Prime Minister Taiyrbek Sarpashev reiterated that the government's aim in selling the company to Gazprom is to ensure energy security. Bishkek accelerated work on the deal - which was signed on July 26 - after the country was left without gas supplies during a cold snap in December last year.

That failure sparked demonstrations, and put pressure on Prime Minister Zhantoro Satybaldiyev's government to improve its efforts to serve the population's basic needs. This year, Kazakh supplier KazTransGas has already said that it will not negotiate a new supply deal with Kyrgyzgas for 2014 until outstanding debts are paid off.

"The situation that occurred on December 25, 2012 should be a lesson for us. We do not want the events to be repeated, and are signing a new agreement with Gazprom," Sarpashev told MPs, according to local newswire 24.kg.

Under the deal, Gazprom will pay the token fee to acquire Kyrgyzstan's gas distribution assets, including gas pipelines, storage and distribution facilities. In return, the Russian gas giant will be obliged to pay off Kyrgyzgas debts - estimated at between $30m and $50m - and invest around $600m into the run down infrastructure.

The Russian company has agreed to ensure a steady supply of gas to Kyrgyz customers, who frequently experience gas outages. It will also develop oil and gas fields at Mailuu-Suu and Kugart, to increase domestic production.

Since the latest revolution in April 2010, Kyrgyzstan has moved firmly back under Russian influence. In September last year, Russian President Vladimir Putin secured an agreement that Kyrgyzstan would evict US and coalition forces from the military base at Manas International Airport near Bishkek. In return, $500m of Kyrgyz debt was written off.

In addition, Moscow is co-financing two major hydropower projects: Kambarata-1 and the Upper Naryn Cascade. Russian investors have also purchased Zalkar Bank, successor to AsiaUniversalBank, which was formerly Kyrgyzstan's largest bank.

In another move towards the north west, Bishkek is now pushing forward with plans to join the Russian-led Customs Union. Russian presidential advisor Sergey Glazyev announced on November 12 that both Kyrgyzstan and Armenia will agree roadmaps for accession to the bloc by the end of this year.

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