Uzbekistan — Buyuk kelajak bo'lgan Davlat!

This blog is dedicated to providing rigorous analysis of current events in Uzbekistan. Debate and criticism are welcome, please inform me if you would like to offer a correction.

Gas Shortages in Toshkent City

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Lines stretching around city blocks; angry shouts as station after station is forced to closed prematurely; gas prices doubling or tripling as desperate citizens shell out everything to get home: this is not the gas crises of the 1970s, but a reality of life in metropolitan Toshkent. Even without an OPEC embargo, gas shortages are an unfortunately regular occurrence in Uzbekistan. The most recent panic in Toshkent City in the week of 20 October highlights another unfortunate side effect of the byzantine administrative division between the capital territory of Toshkent City and the rest of the country. Despite being total self-sufficient in oil production and refinement, and expected to remain so for at least another 30 years at current levels at petroleum production, Uzbekistan consistently faces issues of temporary oil and gas shortages in Toshkent City. This consistent issue is not so much an issue of inadequate petroleum production, although infrastructure in that process does tend to be outdated and wasteful, but a combination of the difficulties inherent in accommodating market forces in a planned economic model, the administrative complexity of importing fuel into Toshkent City, and widespread hoarding by Toshkentchi eager to secure their own daily commutes.

The production of petroleum products in Uzbekistan remains largely unchanged since the development of oil in the region during the Soviet era, with state-owned firms controlled by a board of directors appointed by a coterie of high-ranking officials in various ministries and regulatory bodies responsible for the production and distribution of oil and gas. In the case of gas for vehicles, after being extracted by Uzbekneftegaz, the crude oil is processed and refined by Uzneftmahsulot and then sold to private retailers operating petrol stations through-out the country. Like the petrol-distribution system used during the Soviet Union, the current system functions on the principle of a command-economy, with the charter of Uzneftmahsulot demanding that it attempt to predict how much gas will be needed to service each part of Uzbekistan and how much can be sold on international markets. This dynamic, difficult enough during the Soviet era, is made much more difficult by the liberalization of Uzbekistan since 1991, as the number and nature of actors purchasing gas has introduced more variables that state-owned firms have to cope with. The job of Uzmahsulot is further complicated by the administrative nightmare that is Toshkent City, as well as widespread corruption in the energy industry, further reducing the accuracy with which Uzmahsulot can predict how much gas it will need to export to each of its regional subsidiaries.

Toshkent City sits apart for the rest of Uzbekistan — perhaps even more so then the autonomous Republic of Qoraqalpog’iston in the far West — separated from the rest of flat plains surrounding the Chirchiq River by a complex administrative regime designed to keep the poverty and problems of the rest of the country outside of the pristine capital. Recognizing the issues, both environmental and social, caused by rampant or uncontrolled urban growth, Uzbekistan continued the Soviet-era policy of limiting migration into Toshkent City through a registry delineating the job positions and permits allowing an individual to live in the city. Although frustrating enough for individuals fined repeatedly by overzealous police officers during the months-long process of receiving a residency permit, the additional paperwork required to live in Toshkent City results in many ‘unofficial’ residents either without permits or awaiting permits, causing both public and private officials no end of headaches. For state-owned firms like Uzmahsulot, the inaccuracy of official population counts in Toshkent City, which leaves even more vehicles outside of the city registry, make predicting how much gas is needed more difficult. For business models without flexibility, like Uzmahsulot and other relics of the Soviet system, error-producing factors like this serious disrupt their ability to effectively deploy their resources to appropriate markets.

Like civilian populations everywhere in times of shortage, from flu pandemics to refugees in occupied Europe, ordinary Uzbekistanis have only served to worsen the situation of gas supplies in Toshkent City. During the crisis, Uzbekistanis reportedly began hoarding gas and buying excess quantities, preparing for a future shortage that their own actions were causing. Because gas shipments into the city came on a periodic basis, a consequence of a generally undeveloped network of oil storage from a period with many fewer cars and with much more controlled distribution, hoarding turns a temporary shortage into a major logistics issue as each ‘hoarder’ demands several times the normal amount of gas required by an average commuter, placing a strain on both Uzmahsulot and oil storage facilities.

Widespread corruption in the distribution of oil, with officials often selling their quotas on the side for personal profits, remains a persistent problem that further contributes to an inaccurate calculation of public demand for oil and thus precipitates shortages. Rather than decreasing during times of widespread shortage, corrupt official will often cooperate with criminal elements in society to further exploit the incident for financial gain. Because shortages are usually geographically constrained, because the majority of the issue is caused by the usage habits of a panicked populace not an actual shortage, smuggling becomes profitable for both corrupt officials and private criminals, who can take gas from other provinces into Toshkent City to alleviate the problem. In reality, of course, this only risk spreading shortages to the surrounding area, as actual shortages are created in the hinterland of major cities to feed the demand of urban hoarders. The issue was serious enough in this gas shortage that law enforcement officers were placed in a task force underneath the state gas and oil inspectorate, Uzneftegazinspektsiya, to deal with the issue of smuggling and illegal sale of petrol.

A few days afterwards, this gas crisis seems to be relatively contained, with no reports of elevated prices or shortages after the 23 October. The systemic factors underlying the gas shortages, however, remain and mean that such events will occur again in the future unless Uzmahsulot figures out how to adjust to the uncertainties of the modern world and adapt to a more flexible model of distribution. In the meantime, Uzmahsulot appears to have taken the easy way out, promising to increase overall oil production for domestic use in the future and take the levels of demand during the crisis into account in future storage levels. The country cannot, however, produce enough petrol to feed the demands of a panicked city hoarding fuel, meaning that ultimate it is the model of distribution that need to be changed.

 

 

Sources:

UzDaily. “Uzneftmahsulot to increase production of gasoline”. UzDaily.com, 20 Oct. 2016.

Novosti Uzbekistana. “«Узнефтмахсулот» объяснила, почему в столице снова проблемы с бензином”. Nuz.uz, 20 Oct. 2016.

U.S. Department of Energy. “Uzbekistan: Analysis”. EIA, July 2016.

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Author: Sam

I study international relations and public policy at the University of Edinburgh. My research is focused on political systems and economic development in Post-Soviet states.

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