Kyrgyzstan faces new gas shortages despite Gazprom takeover

By bne IntelliNews May 2, 2014

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Kyrgyzstan's southern regions have had their gas supplies cut off for more than two weeks, the country's national gas utility reported on April 30. The shortages are the result of the failure of Russian gas giant Gazprom, which now owns Kyrgyzgas, to reach agreement with Uzbek suppliers.

According to the Kyrgyz gs company, Uzbekistan's UzTransGas suspended gas supplies on April 10. Uzbekistan has regularly cited payment arrears for suspending gas supplies to Kyrgyzstan in recent years. However, on April 30 Kyrgyzgas insisted UzTransGas still has not resumed gas supplies, despite an advance payment of $70,000,.

The cut off coincided with Gazprom's take over of Kyrgyzgas for a token price of $1. The key to the deal was the Russian giant's pledge to both invest $600m in Kyrgyz gas distribution networks and pay off its debt of $40m to Uzbek and Kazakh suppliers.

The Kyrgyz government has been desperate to secure uninterrupted gas supplies as cut offs have offered extra provocation to the ethnic tension and nationalism that stalks the south. Kyrgyzstan's north receives gas from Kazakhstan at $224 per 1,000 cubic metres; the south is supplied by Uzbekistan at $290.

However, Gazprom's talks with the Uzbek suppliers have also failed to secure a resumption of gas supplies. Gazprom is now formalising its acquisition of Kyrgyzgas and hasn't yet been able to carry out its Kyrgyz operations in full, Kyrgyzgas said.

The Kyrgyz government believes that Gazprom's takeover of Kyrgyz gas distribution networks will solve problems with Uzbek gas supplies because Gazprom is in a better position to ensure uninterrupted gas supplies to Kyrgyzstan, especially in the south. The Russian company will also consider building a north-south gas pipeline in order to ease dependence on Uzbek gas, Kyrgyz President Almazbek Atambayev announced on April 21.

Uzbekistan uses its gas as a bargaining chip in relations with its neighbours, often switching supplies off in winter to obtain concessions from Kyrgyzstan and Tajikistan on the water issues that complicate relations. This, in turn, forces Bishkek and Dushanbe to seek alternative sources of energy and develop projects to tap their hydropower potential, the governments there claim.

Uzbekistan complains that while its upstream neighbours use water in their reservoirs in winter to generate power, but do not release it in spring, when the Uzbek cotton industry needs it. The suspension of gas supplies to Kyrgyzstan may be explained by Tashkent's desire to force Bishkek to release water now, to make up for gas shortages, and thus provide water for the Uzbek cotton fields.

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