bne IntelliNews – Russian Sanctions Complicate Uzbek Energy Sector Overhaul

Western sanctions imposed on Russia after the invasion of Ukraine are holding back investment in energy projects in Uzbekistan, with delivery of key equipment delayed, government officials and industry representatives say bne IntelliNews in Tashkent at the end of June.

One of only two dual-landlocked countries in the world, the main transport route for heavy and bulky equipment to Uzbekistan crosses the Black and Caspian Seas to neighboring Kazakhstan and then to Uzbekistan. However, the war in Ukraine has pushed shipping insurance costs in the Black Sea to prohibitive levels. Moreover, although Uzbekistan has not imposed sanctions on Moscow, some of its suppliers are having problems sending goods through Russia.

This comes at a time when Uzbekistan has embarked on ambitious energy infrastructure construction projects, both renewable energy facilities and gas-powered projects to accompany them.

In one example, the delivery of turbines for combined cycle gas turbine (CCGT) power plants has been blocked because the main route via the Sea of ​​Azov is blocked, while an alternative route via St. Petersburg is complicated by the sanctions, Bakhrom Umarbekov, director of special projects at the Uzbek energy ministry, told reporters on the sidelines of the Uzbekistan Energy Forum in Tashkent.

In response to a question from bne IntelliNews On the impact of sanctions on Uzbekistan’s energy sector, Umarbekov said: “It has been negatively affected to our dismay because these CCGT turbines…are oversized and overweight.”

The potential route via the Black Sea and Sea of ​​Azov, through Russia’s internal waterways, across the Caspian Sea to the Kazakh port of Aktau and then overland to Uzbekistan is currently blocked, said Umarbekov.

Speaking at a press briefing in Tashkent on June 24, Uzbek Deputy Energy Minister Sherzod Khodjaev said that while the equipment could still reach Uzbekistan, the situation was “more uncomfortable”. . He added that Tashkent was exploring alternatives such as the route via Saint Petersburg. The northern route via St. Petersburg, however, is considerably longer and, according to Umarbekov, “the sanctions against Russia are creating problems for us”.

Uzbekistan plans to invest in CCGT plants as backup power sources to complement its growing renewable energy sector. The government aims to achieve carbon neutrality by 2050.

Among CCGT projects in Uzbekistan, in December 2021, the Ministry of Energy announced that a consortium consisting of Electricité de France (EDF), Nebras Power QSC and Sojitz Corporation had won an international tender for the construction of a CCGT plant in the Syrdarya region to help meet the growing demand for electricity in the most populous country in Central Asia. Earlier the same year, Turkish power company Aksa Enerji said it was expanding the scope of its CCGT power investments by building two more plants in Uzbekistan.

Optimize logistics

Nigora Ibadova, manager of the MTO Gas Chemical Complex which, when completed, will convert methanol into olefins, said there were logistical issues and high demand for equipment needed for the new plant.

“Around the world, we see that all facilities are quite busy because there is a booming industry, raw material prices are unstable, so many large premises are busy,” Ibadova said during a press briefing with journalists. However, since the project managers got to the source of equipment early on, this shouldn’t cause any delays. Commenting on the logistics of moving goods to Uzbekistan, Ibadova added, “From a logistical point of view, there may be challenges that we might face for certain equipment.”

However, she added: “We are now creating new corridors and new means of transport. To mitigate these types of risks, we plan to optimize our logistics. In addition, says Ibadova, there are plans to localize the production of some items in Uzbekistan.

Impact of sanctions

Umarbekov told reporters that although the impact of the sanctions on Uzbekistan was unintended, “I hope the sanctions will be corrected so that this type of goods can be transported easily to Uzbekistan.”

Central Asian countries abstained or did not vote during the emergency session of the United Nations General Assembly on March 2, when UN members voted overwhelmingly to condemn the Russian invasion of Ukraine.

As bne IntelliNews reported at the time, countries in the region have significant economic ties with Russia. Uzbekistan’s situation is particularly complicated, as it cooperates with Russia as a security country in Central Asia, particularly relevant in the face of the resurgence of the Taliban in Afghanistan, but tries to maintain a certain distance from Moscow. and to balance the interests of the major powers in Central Asia.

In June, Uzbekistan twice suffered damage from US sanctions targeting the Russian economy. On June 18, the US Department of Commerce imposed secondary sanctions on the Uzbek company Promcomplektlogistic, with the department’s Office of Industrial Security saying it suspected the company of supplying companies in the “military-industrial complex of the Russia”. Then on June 27, Russian private lender Sovcombank said wartime sanctions against Ukraine had thwarted its efforts to buy Uzbekistan’s state bank Uzagroexportbank.