Most people who follow the twists and turns in global politics are aware of the imposition of the so-called “price cap” on Russian oil imports following last year’s meeting of G7 Finance Ministers. Although this initiative can hardly be called favorable for Russia, some cases illustrate its dubious usefulness for the West, especially from a political standpoint. In particular, such a paradox can be observed when studying Uzbekistan’s experience of purchasing oil and petroleum products before and after the imposition of the cap.
At the end of April 2023, the Ministry of Energy of Uzbekistan agreed with Gazpromneft to import 300 thousand tons of oil by the end of the year. As a result, imports of oil and petroleum products to Uzbekistan increased by 25% in the last three quarters of 2023 compared to 2022 and by more than $1.25 billion. In particular, the volume of gasoline imported into the country has increased significantly, more than 90% of which was imported from Russia.
However, this solid growth is only the beginning of strengthening Russian oil exports to Uzbekistan. On October 6, 2023, the Russian and Uzbek governments signed an agreement on expanded cooperation in the supply of oil and petroleum products. The country’s major media outlets say Russia plans to increase oil supplies to Uzbekistan up to 1 million tons in 2024, more than three times the volume that the Republic planned to import from Russia in 2023. A tripartite document defining the terms of supply was signed in Moscow on November 4, 2023. The media also reported significantly increased supplies through the Omsk-Pavlodar-Shymkent-Shagyr Oil Pipeline, supplying oil from Russia to Uzbekistan through Kazakhstan.
However, such an increase in the income of Russian companies from oil and gasoline supplies to Uzbekistan cannot be regarded as Uzbekistan’s evasion of the Russian oil price cap imposed by its Western colleagues. This is evidenced by the Uzbek authorities’ official reports regarding the cost of supplies of Russian oil and petroleum products per unit mass. Whereas in 2022 Russia sold a liter of gasoline to Uzbekistan for $0.62, now the average price of gasoline declined by a third to $0.4 per liter. In this regard, Western countries, in principle, cannot in any way blame Uzbekistan for (paradox!) developing trade and economic relations with Russia.
At the same time, it is worth noting the very negative impact of the price cap imposed by Western countries on the export of oil and gasoline to a large neighboring country (Uzbekistan) by countries such as Turkmenistan and Kazakhstan. Their supplies to Uzbekistan have decreased significantly due to the fall in price of Russian oil, and now it is profitable for Uzbekistan to increase imports of petroleum products from Russia by reducing imports from these countries or refusing to search for new suppliers. Turkmenistan’s share in gasoline supplies fell over the year from 11% to 0.6%, and oil supplies from Kazakhstan to Uzbekistan fell by almost half this year. Kazakhstan was, in fact, forced to refuse to further increase oil exports to Uzbekistan until it received more favorable price offers from importers, that is, in case of supply arrangements at a higher price than from Russia. Considering Uzbekistan’s policy of expanding purchases from Russia, this seems very unlikely.
Moreover, the price of Kazakh oil has even increased over the past year. Kazakh oil was renamed Kebco (Kazakh Export Blend Crude Oil) because the Kazakh authorities do not want to incur losses due to the price cap imposed by their Western colleagues on Urals oil (the brand under which not only Russian oil, but also Kazakh oil was sold on international markets). As a result, it became way more expensive than Urals and, accordingly, less attractive and competitive in those markets that have not abandoned Russian supplies.
Thus, this price cap directly created a situation in which Kazakhstan and Turkmenistan (and there are many more countries in a similar situation) suffered significant losses. And now the same countries whose collective work resulted in the imposition of the notorious price cap are actively fighting for the attention of these countries.
Thus, the experience of hydrocarbon imports by the largest country in Central Asia in terms of population (Uzbekistan) shows that the price cap on Russian oil imposed by Western countries unexpectedly has a positive impact on the economies of those countries that seek to strengthen their trade and economic ties with Russia (which is not approved by Western gendarmes-impostors), and some Western countries’ potential partners, whom the same Western countries are so desperately trying to grab hold of, suffer losses. At the same time, the case of Uzbekistan is very indicative in terms of the increased opportunities for Russia, due to the imposition of this price cap, to diversify its oil supplies both by searching for new partners and by building up ties with traditional counterparts.
Boris Kushkhov, Korea and Mongolia Department, Institute of Oriental Studies, Russian Academy of Sciences, exclusively for the internet journal“ New Eastern Outlook”.