A Dollar for GTS

By Mikhail Agadzanyan

Purchasing of gas transporting system of Kyrgyzstan by Gazprom was hardly noticed on the background of other events in the world with participation of Russia. Meanwhile, the agreement of Russia gas corporation with Kyrgyz partners is out of the frames of exclusively economic transaction.


Russian-Kyrgyz contract gave the experts the ground to talk about another proof of Gazprom’s expansion, and along with it about energy interests of Moscow in foreign markets. The deal has become known yet this May. In the beginning of July its main provisions has been uncovered. By the end of the past month Moscow and Bishkek concluded an intergovernmental treaty with the affiliate company of Gazprom in the Republic. Russia corporation possesses 100% of participation interest in the establishing Kyrgyzgaz company and is authorized via entity with the republican registration to transport, distribute and sell gas in the territory of Kyrgyzstan. Respectively, Gazprom gains the right mediated by Kyrgyzgaz on all gas pipelines, gas-distributing stations, underground gas storages, land lots and other property, rights and interests, specified in the agreement.


The price of the deal is just formal. Gazprom purchased the whole gas transporting infrastructure of Kyrgyzstan for 1 USD. The case is that the debts of gas industry of the republic, which Russia undertook to settle, are estimated over $50 mln. Except for that, Russia undertook to invest into Kyrgyz gas transporting market no less than 20 billion RUR during 5 years.


A complicated situation in gas industry, which is a net-consumer of energy source, i.e. of low interest for foreign investors, forced Bishkek to make an extraordinary move. Due to actual lack of other alternatives. Concession of rights for the total industry was made in exchange of the liability of Gazprom to supply Kyrgyz consumers with blue fuel without interruptions. Known difficulties of the Republic in energy (and not only) relations with Uzbekistan, which during all these years has supplied gas to the local market, pushed Kyrgyzstan to make a “1 dollar deal”.


For this the republic obtains a guarantee for stable supplies and preferential way of price formation. There are suggestions that the deal also touched upon the issues of settlement by Bishkek of multi-million credits of Moscow. Although, it’s clear that the both capitals do dot really speculate on this, evidently that the 1 dollar price of the contract included also this direction of mutual settlement of financial liabilities of the Republic towards Russian creditors.


The main motivation of Kyrgyzstan, as we may assume, is connected with that it does not want to depend on direct Uzbek gas supplies any more. After the cold winter of 2012-2013 the risk not to control the domestic situation after interruptions of gas supplies has grown for local authorities. And together with its grew also Central Asian “shares” of Gazprom, which has entered this summer Kyrgyz market as the main energy player.


Gas consumption market in the Republic is not big – about 1 billion cubic meters annually. Limited scopes of sales of the energy source, the liabilities of Gazprom to settle the debts and accomplishment of programs on reconstruction and modernization of Kyrgyz GTS make the economic efficiency of the project challengeable. And in the essence, simply dubious. But Kyrgyz interest to maintain the industry acting coincided with Russian interest to enhance its positions in Central Asian region, and also to fix the good name of Gazprom as constantly growing company, aimed to develop foreign markets.


Develop does not necessarily mean to overtake. Although 1 dollar price leads to these thoughts. Beside other foreign political dividends for Moscow, connected with Kyrgyz contract within Central Asian direction of strengthening, we can’t ignore indirect messages of Gazprom to some of its current or potential partners within post-Soviet area. And first of all it’s worth to note the version about forwarding of Gazprom message primarily to its “obstinate” Ukrainian colleagues. The later still attempt to prevent Russia to take over dominating positions in its gas transporting system and keep on insisting on three-party consortium of Ukrainian, European and Russian companies.


Naturally, Ukrainian gas market is far not the same as Kyrgyz one. Another scale of consumption, quite different locations at the map of transit ways from Russia to the European gas market of priority. But the model of Gazprom’s approach to tune partners for cooperation is observed here and there. Prolonging the solution of the issue on suggested by Russian gas corporation plan of 50% Ukrainian GTS concession, Kiev risks finding itself in the situation of Bishkek. The situation of “1 dollar contract” in exchange for the guarantees of gas supplies to the disturbed people.


Translated by EuroDialogueXXI from politcom.ru