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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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Gazprom Edging into Soviet Sphere with Kyrgyz Gas Proposal

A delegation from Kyrgyzstan met in Moscow with Gazprom officials to discuss future investments in the former Soviet republic. Recently, a company controlled by a Russian oil tycoon proposed redevelopment of the Manas Air Base in Kyrgyzstan, a key transit hub for the Afghan intervention, suggesting the Kremlin may be revisiting Cold War era strategies for the region.

Kyrgyz President Almazbek Atambayev met in Moscow with Alexei Miller, the chairman of Gazprom, to discuss the possibilities for exploration and production of hydrocarbons in the country as well as natural gas transmission options.

According to Gazprom, the former Soviet republic has more than 200 billion cubic feet of natural gas reserves, though development is inhibited by tough geology and a general lack of infrastructure. Domestic gas production averages around 700 million cubic feet per year and 90 percent of Kyrgyzstan's gas imports come from neighboring Uzbekistan and Kazakhstan.

Bishkek and Moscow in July agreed that Gazprom would acquire a 100 percent stake in Kyrgyz energy company Kyrgyzgaz, which handles natural gas transmission, distribution and sales in Kyrgyzstan. The Kyrgyz Parliament ratified the deal early this month, whereby Gazprom assumes all of the debt from Kyrgyzgaz for $1. Under the terms of the deal, the Kyrgyz government expects Gazprom to start natural gas exploration and help the country achieve gas independence with an initial $61 million investment.

According to a 2007 study from the U.S. Library of Congress, the only resource in Kyrgyzstan with any economic value, however, is gold. Prior to independence in 1991, the Kyrgyz economy relied almost exclusively on the Soviet Union and in 2006, Russia proposed unifying the regional energy sector through the Shanghai Cooperation Organization’s Asian Energy Club.

That same year, the Kyrgyz government negotiated an increase in rent paid by the U.S. military for use of its Manas Air Base, a key transit hub for the international military intervention in Afghanistan, to $150 million per year. Now, with international forces looking for the exit doors in Afghanistan, the Kyrgyz government is mulling the future of the base and the Russians are taking notice.

Kyrgyzstan's economy without the U.S. military presence will need major investments beyond 2014 and last week, Novaport, a Russian airport holding company, proposed a $300 million overhaul for Manas. Novaport, co-owned by Russian oil tycoon Roman Trotsenko, already expressed interest in the Kyrgyz aviation sector and any overhaul for Manas could re-establish Kyrgyzstan as major economic link for Russia.

Russian President Vladimir Putin agreed last year to write off all of Kyrgyzstan's debt. Ethnic tensions in the 1990s erupted in Kyrgyzstan as the Soviet Union started to dissolve, though the country has migrated slowly back to the Kremlin's sphere of influence. U.S. weight in the region, meanwhile, is waning as the 2014 drawdown date in Afghanistan approaches. With Europe breaking Gazprom's grip by courting Caspian suppliers, Gazprom is knocking hard on Soviet doors.

By. Daniel J. Graeber of Oilprice.com


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