As the global economy grapples with geopolitical tensions and disruptions, the recent halt in gasoline exports from Russia has sparked concerns and questions about the fuel supply chain. With Uzbekistan heavily reliant on Russian gasoline imports, the implications of this export ban are profound. Economic analysts shed light on the root causes of the shortage and proposed solutions to address Uzbekistan's fuel dependency.
The decision by Russia to suspend gasoline exports to several countries, effective from March 1 for a period of six months, stems from multifaceted challenges. As per Shuhrat Rasul, an economic analyst, the ongoing conflict between Russia and Ukraine has escalated tensions, leading to targeted attacks on Russian oil refineries by Ukrainian long-range drones. These assaults have inflicted substantial damage, causing a reduction in Russia's gasoline exports.
“There are currently 31 oil refineries in Russia. Russia ranks 3rd in the world in terms of oil refining. In 2023, Russia produced 527 mn tons of oil and therefore processed half of it at home. In December 2022, the European Union imposed sanctions on Russian oil and oil products. With the introduction of sanctions by the European Union, other countries began to buy oil and oil products from Russia,” An economic analyst voiced.
Rasul highlighted the vulnerability of Russia's oil infrastructure, with key refineries concentrated in the western regions, making them susceptible to further attacks. The prospect of prolonged drone strikes raises concerns about a potential exacerbation of the gasoline shortage, particularly affecting critical sectors like agriculture reliant on diesel and kerosene.
“In January and February 2024, Ukraine attacked 7 Russian oil refineries. According to official data, within two months, Russia lost 37% of its exports of gasoline, 24% of diesel fuel, and 19 % of aviation kerosene. In other words, Russia is losing its exports as a result of Ukraine's drone strikes. In March, the losses could be even higher,” Rasul shared.
For Uzbekistan, heavily reliant on Russian gasoline imports, the repercussions are palpable. In 2023, 97.7% of Uzbekistan's gasoline imports originated from Russia, underlining the nation's dependence on its northern neighbor for fuel supply. Rasul emphasized the necessity for Uzbekistan to diversify its sources of gasoline, considering the volatility in Russian exports and the potential for sustained disruptions.
“In 2023, Uzbekistan imported 371,000 tons of gasoline. 100,000 tons of gasoline were imported by "Uzgazuel", 271,000 tons of gasoline were imported by other private enterprises. Russia accounts for 97.7% of gasoline imports. 0.06% of gasoline was imported from Turkmenistan and Belarus.”
While neighboring countries like Turkmenistan and Kazakhstan offer alternatives, challenges persist. Turkmenistan, despite its capacity, sells gasoline at high prices, while Kazakhstan's limited supply constrains its ability to meet Uzbekistan's demand.
“In 2023, 300,000 tons of crude oil were imported from Russia. It is natural to ask why we should buy gasoline only from Russia. Because Russia sold 1 liter of ready gasoline for 0.40 cents. Turkmenistan and Belarus sold 1 liter of gasoline for 0.65 cents. That is, Russian gasoline is much cheaper. Our people think that Uzbekistan is a country rich in oil and gas. But in fact, it is not. Kazakhstan will produce 93 mn tons of oil in 2023. Uzbekistan has 700,000 tons. Not even 1 mn tons. Oil production in Uzbekistan is decreasing year by year,” Rasul explained.
Therefore, an economic analyst, Rasul suggested exploring avenues for cooperation with countries like Iran and Azerbaijan to alleviate the gasoline shortage, emphasizing the importance of establishing strategic partnerships beyond Russia.
“Iran and Azerbaijan can help Uzbekistan in this regard. In 2023, Uzbekistan imported 2,000 tons of gasoline from Azerbaijan. So, we can import gasoline from Azerbaijan. If we want to refine oil ourselves, the price of oil should be much cheaper. In 2023, Uzbekistan produced 1.3 mn tons of gasoline. It is necessary to look at the sanctions in cooperation with Iran. If Iran's oil products are not sanctioned, we should establish cooperation with Iran on the issue of fuel. Because we should not depend only on Russia for oil products.”
In addressing the root of the issue, Rasul proposed structural reforms, advocating for the expansion of private operators in Uzbekistan's gasoline import sector to encourage competition and diversification. However, he cautioned that this alone might not substantially lower gasoline prices. Instead, he urged Uzbekistan to pivot towards sustainable energy solutions, echoing global trends towards green energy and electric vehicles.
As Uzbekistan navigates the challenges posed by the gasoline shortage, the insights provided by analysts like Rasul underscore the need for strategic planning and decisive action. Diversifying fuel sources, promoting competition in the import sector, and investing in sustainable energy infrastructure emerge as critical steps towards mitigating the impact of the ongoing crisis and securing Uzbekistan's energy future.
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