Russia and Uzbekistan Enhance Economic Ties to Counter China’s Growing Investments

By Frank Fang, Epoch Times
October 22, 2018 Updated: October 22, 2018

Russia and Uzbekistan inked cooperation deals valued at a total of $27 billion on Oct. 19, in part motivated by Moscow’s desire to counter the rise in Chinese investment in Uzbekistan, according to Russian media.

Uzbekistan, formerly a part of the Soviet Union, and Russia signed 785 bilateral agreements and memorandums at the conclusion of a two-day interregional forum held in the Central Asian country’s capital of Tashkent, according to an Oct. 19 article by Uzbekistan media UzDaily.

Russia Deals

Of the agreements signed, 242 of them relate to trade and economic cooperation deals worth $1.2 billion. Additionally, 136 agreements involve the implementation of joint investment projects, with a total value of $1.4 billion.

Among the Russian companies that have signed deals is IMZ Avtokran, which will create a $10 million joint venture for the assembling of modern truck cranes in the Navoi Free Economic Zone, located in Navoi City.

Also among the agreements are six deals with financial institutions in the two countries totaling $864.6 million, one of which involves the National Bank for Foreign Economic Activity of the Republic of Uzbekistan and Russia’s state-owned bank Sberbank. The two agreed to allocate a credit line of $200 million.

According to an Oct. 19 article by Reuters, Russia’s Gazprom signed a production-sharing agreement for the Dzhel gas field in Uzbekistan, where it aims to produce about 300 million cubic meters a year at peak, a small volume by the region’s standards. Additionally, Russian businessman Andrei Filatov signed an agreement with an Uzbek state firm for a project to develop a gas field and build a chemical plant.

The two countries have also begun a geological survey to find a suitable location for the construction of Uzbekistan’s first nuclear power plant, which will cost about $11 billion—financed largely by a soft loan from Russia, according to Reuters.

In total, 79 joint ventures, 23 new trading houses, and 20 wholesale distribution centers will be created in Uzbekistan through deals with Russia, according to UzDaily.

An editorial published by Russian news site Gazeta noted that while Russia continues to be one of Uzbekistan’s main trading partners, other states, such as China, are “ready to challenge that status.”

Beijing intends to use the same strategy that it has utilized in other countries within the Central Asian region, including Kazakhstan and Turkmenistan: “investment in exchange for resources and loyalty,” the article said.

Uzbekistan is rich in natural resources, with gold deposits estimated at about 5,300 metric tons and uranium reserves estimated to be about 190,000 tons, according to official data from the Uzbek government. Currently, Uzbekistan is one of the world’s biggest exporters of uranium.

China has a serious interest in Uzbek uranium. According to the World Nuclear Association, in May 2014, China’s state-run China General Nuclear Power Group agreed to buy $800 million of uranium until 2021. In 2013, 1,663 tons of elemental uranium went to China.

China’s One Belt, One Road

The motivation behind China’s interest in Central Asia, according to Gazeta, is that it considers the region important for its One Belt, One Road (OBOR, also known as Belt and Road) initiative.

Beijing announced OBOR in 2013 as a plan to build up trades routes linking China, Southeast Asia, Africa, Europe, and Latin America. While Beijing has claimed that the initiative is a bid to enhance regional trade, many observers say that what China really intends with OBOR is to increase geopolitical influence and persuade countries to aid its economic and political agendas.

One key OBOR project in Uzbekistan is the construction of the Kamchiq Rail Tunnel, which was built by China’s state-run China Railway Tunnel Group in cooperation with Uzbekistan’s national carrier Uzbek Railways. The project was financed by a $350 million loan from China’s state-run Export-Import Bank of China. The 19-kilometer (11.8-mile) tunnel, which began operating in 2016, is part of the Angren–Pap railway line in eastern Uzbekistan.

According to a Feb. 28 article on China’s official OBOR website, the value of total OBOR investment projects in Uzbekistan was worth an average of at least 10 billion yuan annually (about $1.44 billion).

According to Uzbek government agency, the State Committee on Statistics, Uzbek foreign trade turnover for the first nine months of this year totaled about $23 billion, with China ranking first in foreign trade with about $4.4 billion worth of trading deals, followed by Russia at No. 2 with about $4.1 billion.

Azhdar Kurtov, editor-in-chief of the National Strategic Issues academic journal, explained the difference between Russian and Chinese investments in Uzbekistan.

“Russia can give Uzbekistan what it needs to modernize its industry—Russian technologies,” Kurtov said in an interview with Russian daily newspaper Izvestia. “It is one thing to build roads for the transport of goods between China and Europe, and another to create new industries in Uzbekistan—which Russia is trying to do.”

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