The Untapped Energy Riches of Uzbekistan

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"Uzbekistan currently produces 60 billion cubic meters of natural gas annually…"

While many Western investors remain fixated on somehow acquiring a slice of Turkmenistan's natural gas riches—despite a recent scandal over the country's actual reserves—there's another country further east whose energy and mineralogical reserves have been overlooked: Uzbekistan.

A number of factors are responsible for this oversight, including relative geographical isolation (Uzbekistan, along with Liechtenstein, is one of the world’s doubly landlocked nations).

With a population of 27 million, Uzbekistan is Central Asia's most populous and dominant power. A conservative fiscal policy since 1991, including inconvertibility of the national currency, the som, has shielded its citizens from the hyperinflation that ravaged other former Soviet republics, but the policy previously diminished potential foreign investment.

However, since the global recession that began a year ago, Uzbekistan's fiscal conservatism, previously dismissed by the foreign investment community, has looked more and more like a pragmatic policy that isolated the country from the worst aspects of the recession.

In a move certain to be welcomed by foreign investors, Uzbekistan is slowly moving toward making its currency convertible but until that happens, the country presently offers a fiscal stability unmatched by many of its more free-market neighbors.

And now, the good news about the country's resources: In 2006, Uzbekistan's natural gas reserves were estimated at 1.798 trillion cubic meters. During the Soviet era, Uzbekistan was the USSR's third-largest producer of natural gas, accounting for more than 10% of the Soviet Union's production, trailing only Russia and Turkmenistan.

Uzbekistan currently produces 60 billion cubic meters of natural gas annually, an amount nearly equal to Turkmenistan's production.

Unlike its energy-rich neighbors to the west, Kazakhstan and Turkmenistan, nearly 80% of Uzbekistan's production, about 48.4 billion cubic meters, is currently reserved for domestic use at heavily subsidized rates. Of the remaining 12 billion cubic meters of natural gas that Uzbekistan exports, more than half currently goes to Russia and the remainder goes to neighboring Central Asian states.

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