FULL REPORT: Uzbekistan – Domestic supply chain problems will force Tashkent to import Russian gas

Torchlight Predictions

• Uzbekistan will take delivery of Russian gas in next six months to make up for domestic shortfalls
• President Mirziyoyev will accept Russian offers of help to develop Tashkent’s energy infrastructure
• Tashkent will decrease energy exports to China in next year in order to shore up domestic supply and modernise its supply network

Developments

• Uzbek state-owned gas company Uztransgaz announces it is developing its pipelines to separate deliveries of Russian gas from its domestic infrastructure. (3 March)
• Hours later, Uztransgaz offers a retraction of the statement, saying that the adjustments are not related to the import of Russian gas. (3 March)

Insights

Uzbekistan will import Russian gas in the next six months. In January, Tashkent announced that it had negotiated with Moscow the possibility of reversing the flow of gas in the Central Asia-Center pipeline to deliver Russian gas to Uzbekistan to deal with severe electricity shortages, caused in part by a drastic fall in domestic gas production in 2022. The shortages prompted several protests and led Tashkent to suspend all natural gas exports to store up reserves for Uzbek consumption. Russian gas imports had been expected this month, but Uztransgaz’s conflicting statements mean this timeframe is now unclear. This likely reflects that many Uzbeks fear such imports would make Uzbekistan energy dependent on Russia, but the country’s need for gas means Tashkent will have to turn to Moscow for support. Moreover, foreign technology and expertise are likely to be necessary to modernise Uzbekistan’s ageing infrastructure, which it will need to do if it is to avoid worsening shortages next winter. 

Implications for Business

Operational: Tashkent’s inability to reliably provide energy this winter, especially to its cities, saw much of the country without electricity or heat for homes and businesses. This winter was one of the worst on record for Uzbekistan, but the problem of shortages is likely to ease somewhat as warmer temperatures decrease reliance on gas for heating. However, with domestic gas production remaining at current levels, shortages will recur again towards the end of the year unless Tashkent addresses its energy shortfalls.

Energy: Uzbek energy exports to China will likely decrease in the next year as Tashkent prioritises domestic consumption. The suspension of natural gas exports, and government plans to phase out all gas exports within the next few years, illustrate Tashkent’s concern that persistent electricity and gas shortages pose a high risk of spurring social unrest. It will therefore continue prioritising using gas production to meet domestic needs rather than for export, relying on Russia in the coming year to support managing supply shortfalls. 

Over the longer term, this will put pressure on its revenue generation, making it more difficult for the government to fund expensive efforts to modernise its gas infrastructure as a means to boost production. Russia will likely seek to exploit this, as well as its position as a gas supplier to Uzbekistan, to expand its involvement in the country’s energy sector, such as by providing financing, technology and expertise. That said, Tashkent will likely attempt to balance growing energy ties with Russia with engaging other foreign governments, such as the US and China, in an effort to avoid substantial overreliance on Moscow. 

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