Caravanserai
Energy

Putin's attempts to promote gas union flounder at EEU summit

By Kanat Altynbayev

Russian President Vladimir Putin attends the Supreme Eurasian Economic Council meeting in Bishkek on December 9. [Vyacheslav Oseledko/AFP]

Russian President Vladimir Putin attends the Supreme Eurasian Economic Council meeting in Bishkek on December 9. [Vyacheslav Oseledko/AFP]

BISHKEK -- A rejection of Russian President Vladimir Putin's proposal for a natural-gas union at the Eurasian Economic Union (EEU or EAEU) summit this month is the latest sign that the organisation is on its deathbed, say analysts.

The EEU summit in Bishkek on December 9 brought together Putin and the leaders of the other member states, Armenia, Belarus, Kazakhstan and Kyrgyzstan.

The topics discussed included the economic consequences of Russia's war in Ukraine, which has significantly harmed all EEU countries.

Kyrgyzstan is suffering from curtailed remittances from migrant workers; Kazakhstan is losing billions in oil exports to Europe due to suspicious-looking Russian shutdowns of the sea terminal in Novorossiysk; and the Belarusian economy has entered recession.

The natural-gas reserves of Central Asian countries -- Turkmenistan, Kazakhstan and Uzbekistan -- are shown left to right in estimated trillions of cubic metres. Light blue, green and dark blue columns represent country estimates by OPEC, British Petroleum and the countries' national gas companies, respectively. [Caravanserai]

The natural-gas reserves of Central Asian countries -- Turkmenistan, Kazakhstan and Uzbekistan -- are shown left to right in estimated trillions of cubic metres. Light blue, green and dark blue columns represent country estimates by OPEC, British Petroleum and the countries' national gas companies, respectively. [Caravanserai]

EEU membership has not raised the standard of living in Kyrgyzstan. A resident of the village of Yuryevka in Chui province, Kyrgyzstan, has no utilities and prepares food outside on December 15. [Kanat Altynbayev/Caravanserai]

EEU membership has not raised the standard of living in Kyrgyzstan. A resident of the village of Yuryevka in Chui province, Kyrgyzstan, has no utilities and prepares food outside on December 15. [Kanat Altynbayev/Caravanserai]

However, there was no open discussion of the war in Ukraine -- a sore point for Putin given that the war has achieved none of its objectives since its start about 10 months ago.

More than others, Kazakh President Kassym-Jomart Tokayev emphasised the consequences of the Russian invasion, euphemistically referring to them as "pressure on the economies of EEU countries".

The EEU member states must open their markets to other countries to overcome the "situation caused by the imposition of international sanctions on Russia", his Kyrgyz counterpart, Sadyr Japarov, noted.

At the December summit, Bishkek yielded chairmanship of the EEU to Moscow for the year 2023.

According to economists, next year will be difficult amid international sanctions -- for both Russia and its partners in the EEU, which find themselves bound to Russia through economic ties.

Common gas market

Moscow is ready to create a common gas market with Kazakhstan and Uzbekistan, countries that, like Russia, produce gas, said Putin in a speech at the summit.

His proposal called for those countries to buy gas from Russia, which would benefit Russia as the massive European market turns away from it.

The price of gas within the regional economic union would be much lower than for Europe, Putin claimed.

He spoke at length about why, above all, Central Asian countries themselves need a common gas market.

Kazakhstan and Uzbekistan are obliged to export gas even as their domestic consumption grows, and buying Russian gas could be the solution, he said several times.

"[Kazakhstan and Uzbekistan] are already short of [gas]," Putin said. "They will need additional amounts, additional resources."

Northern Kazakhstan receives Russian gas from Orenburg, and pumping gas to Uzbekistan requires the use of the gas transmission system created back in Soviet times, he said.

"[This Soviet infrastructure] needs to be repaired. Everything there is already worn down," Putin said.

He proposed to build a separate gas transmission system through Kazakhstan to Uzbekistan, as well as internal infrastructure in Russia to supply additional gas to Central Asia.

"It could be some kind of energy alliance," Putin said.

In the end, the summit produced more than 10 documents, mostly technical in nature, signed by EEU member states.

EEU leaders did not have high hopes for the summit in Bishkek and the meeting produced no notable results, Temur Umarov, a fellow at the Carnegie Endowment for International Peace and a specialist on Central Asia, told Kloop, a news website, a few days later.

"The countries' leaders met and talked, essentially justifying the organisation's existence. They announced some basic statistical information that nobody really reads," he said.

"The fact that [the EEU summit] even took place can be considered a success," Kloop pointed out.

Endangering 'national interests'

This is Putin's second attempt to create a so-called "Trilateral Gas Union" that would unite Russia, Kazakhstan and Uzbekistan.

He first voiced his idea on November 28 during a meeting with Tokayev, when his Kazakh counterpart was on a working trip to Moscow.

The Kazakh president gently rejected Putin's proposal, saying that there are issues related to the two countries' gas relations that "need to be discussed".

A week later, Kazakh Deputy Foreign Minister Roman Vasilenko clarified the meaning of Tokayev's remark for journalists.

"It is still too early to discuss its [the gas union's] scope ... Kazakhstan's principled position is that Kazakhstan does not allow its territory to be used to circumvent sanctions."

"These positions have not changed and will be used in evaluating any potential new initiatives," Vasilenko said.

Uzbekistan also declined to join the gas union with Russia.

"We will never agree to political conditions in exchange for gas," Uzbek Energy Minister Zhurabek Mirzamakhmudov said on December 7.

"[Uzbek] authorities do not intend to endanger national interests, the economy, and independence".

"Uzbekistan is negotiating the purchase of gas and electricity from neighbouring countries but not through any alliance or union," he added.

Russian influence

Observers in Central Asia view the events at the EEU summit in Bishkek as evidence that the organisation is ineffective and in practice is a political, not economic, project that Russia tries to use.

Putin is continuing to try to "expand Russia's energy influence in Central Asia through the EEU", Elmira Suranchiyeva, an economist from Bishkek, told Caravanserai. "As key customers refuse Russian hydrocarbons, he wants to sell gas to our countries."

"Even though EEU member states have faced major challenges due to Russia's war against Ukraine, Putin is not trying to take responsibility and solve problems together. He has his own goals," she said.

The current economic crisis is a "litmus test" revealing the EEU's true role in supporting its members, said Suranchiyeva.

"The EEU is only making our situation worse," she said, adding that the union has no future in its current format.

"Whatever alliances there are, they serve only Putin's interests," she said.

By joining the EEU, Kazakhstan forfeited part of its economic sovereignty and came out on the losing end, Almas Chukin, an economist in Almaty, said in March on Facebook.

"The EEU worked to benefit the strong. Russia increased exports to Kazakhstan, but we didn't," Chukin wrote then.

"Something needs to be done about this, and in the current conditions, we need to move to a more independent policy when it comes to foreign trade."

In 2021, Kazakhstan incurred an $11.4 billion deficit on total trade with Russia worth $25.6 billion, according to the Russian Industry and Trade Ministry.

Kyrgyzstan against the Customs Union

Kyrgyzstan's close economic ties with Russia have led inflation in the country to skyrocket, according to Almaz Tazhybai of Bishkek, director of the Kyrgyz Centre for Public Policy Analysis.

"The EEU is dragging us to the bottom," he told Caravanserai.

Russia sees countries such as Kyrgyzstan not as equal partners but as its satellites and even colonies, he said.

In Kyrgyzstan, critical feelings toward the EEU have intensified this year.

In March, Kyrgyzstan against the Customs Union, a civic movement, appealed to the authorities, calling for the country's withdrawal from blocs to which Russia also belongs -- the EEU and the CSTO (Collective Security Treaty Organisation).

In the EEU, no free movement of goods, services, knowledge, people or capital takes place but rather only "shady schemes to enrich corrupt officials and oligarchs", the open letter addressed to Japarov and Kyrgyz lawmakers noted.

"Kyrgyzstan has turned into a monopolistic market for Russian-made goods," it added.

Various pretexts have been employed to block Kyrgyz products' access to the Russian market, inflicting huge losses on Kyrgyz entrepreneurs and substantially diminishing ordinary citizens' quality of life relative to what it was before Kyrgyzstan joined the EEU, according to the group.

Meanwhile, Kyrgyz migrants in Russia "continue to suffer from harsh working conditions, xenophobia, racism and discrimination".

"Under the current conditions, the only correct policy is to protect national interests. We call on the authorities to take urgent and decisive measures to protect our country's economic security in the current force-majeure conditions," the group's letter said.

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