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Hey Big Spender: Uzbekistan Discovers a New Ally to Expand Export of Raw Commodities

This is an abridged version. The full text is avaiable to subscribers to The Russian Energy weekly.

China is replacing South Korea as Uzbekistan’s key partner. Long-term credits on soft terms, huge purchasing capacity, and readiness to help build transportation infrastructure—all these advantages make the Uzbeks willing to place their bets with the Chinese. Natural gas supply is included.

Changing Partners

President Islam Karimov’s recent trip to Beijing has yielded a package of loans and contracts worth $5 bln, the foreign ministry of Uzbekistan reports. The components of the deal have not been disclosed but Uzbek officials say that the money will facilitate an expansion of exports to China—mostly in the form of cotton, natural gas, uranium ore concentrate, non-ferrous metals, and the construction of a third thread of the gas pipeline from Turkmenistan to China. The latter project has already merited a credit of $2.2 bln from China.

The Chinese also want to carry out several gas processing projects in Uzbekistan, such as a unit for producing 60,000 tpy of butadiene rubber, three LPG facilities, and a plant to manufacture LPG cylinder-filling equipment.

The new Chinese ventures are an ominous signal to Seoul. A short while ago Uzbekistan was determined to develop its gas-processing business and a program of switching automobiles from gasoline to gas with partners from South Korea. The Koreans have invested over $2.2 bln in the projects, but the Chinese offer what they cannot, a large and stable market for Uzbekistan’s raw commodities.

According to the Chinese foreign ministry, the volume of Uzbekistan’s export to China between 2005 and 2010 grew from $450 mln to $1.3 bln a year, and China has become the largest investor in that Central Asian country. Its cumulative investments in Uzbekistan are approaching $4 bln. It is also the main buyer of the Uzbeks’ main export commodity, cotton.

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