Publication: Eurasia Daily Monitor Volume: 3 Issue: 74

As Tashkent drifts closer towards Moscow-led post-Soviet groupings, Russia has lost little time in boosting bilateral economic and political ties with Uzbekistan, Central Asia’s major market. Russian President Vladimir Putin and his Uzbek counterpart, Islam Karimov, conferred by telephone on Friday, April 14. Both leaders reportedly hailed their “highly intense contacts” that have brought “practical results” (Interfax, April 14).

Russia’s top officials have become frequent visitors to Tashkent in recent months. On April 10-12, Russian Federation Council head Sergei Mironov traveled to Uzbekistan. He and his Uzbek counterpart, Ilgizar Sobirov, signed an agreement on cooperation between the upper houses of the two parliaments. Among other things, they pledged “to ensure coordination of work in international parliamentary organizations” (Itar-Tass, April 10). In other words, Russia pledged to back Uzbekistan in international bodies, where Tashkent faces growing criticism over its human rights record.

In contrast to Tashkent’s international isolation, Russia supports the hardline approach taken by the Uzbek regime, including its most controversial action, the Andijan crackdown last May. President Karimov also met Mironov, who confirmed that Russia fully supported the Uzbek leadership’s actions. Mironov also claimed that the organizers of the Andijan unrest aimed at hitting the entire Central Asian region and even Russia (Itar-Tass, April 10).

Uzbekistan’s accession to the Eurasian Economic Community will facilitate integration within the Eurasian economic space, Mironov told Uzbek officials. “Uzbekistan’s membership is a significant and essential addition to the EEC” (Itar-Tass, April 10). Uzbekistan formally joined the EEC during the group’s January 25 summit meeting in St. Petersburg. Tashkent is expected to accede to 20 EEC treaties by June 2006, and the remaining 54 by the end of this year.

Russia’s permanent representative to the EEC and deputy chairman of the committee on CIS economic integration affairs under the Russian Chamber of Commerce and Industry, Yevgeny Mikhailov, traveled to Uzbekistan April 4-7. After meeting with Uzbek Deputy Foreign Minister Ilham Nematov and Uzbekistan’s permanent representative to the EEC, Ostonqul Mirzayev, Mikhailov said: “We have great plans and have to do enormous work.”

Political and economic contacts between Russia and Uzbekistan have intensified significantly in recent months. On February 13-14 a delegation of Russian MPs, led by State Duma speaker Boris Gryzlov, visited Uzbekistan. Gryzlov met with President Karimov and parliamentary speaker Erkin Khalilov, and he reportedly stressed the need to develop bilateral relations, based on “principles of the strategic partnership and alliance.”

On March 13-16 another group of MPs, led by the head of the Duma Committee on CIS Affairs, Andrei Kokoshin, traveled to Tashkent. In all, 12 governmental delegations from Russia, including four parliamentary missions, have visited Uzbekistan within the past five months.

Now Tashkent appears to be encouraging Russian companies to do business in Uzbekistan. The firm Capital Tashkent hosted an Uzbek-Russian business forum April 3-8, at which Russia was represented by over 100 companies from 17 regions.

“All sectors of the Uzbek economy are open for Russian capital,” Uzbek Minister of Foreign Economic Relations, Investment, and Trade, Alisher Shayxov, announced at the forum. “We hope for cooperation with the Russians in the production of tractors, harvesting machines and in processing agricultural products.” Shayxov also said it would be “no problem for us to triple or quadruple our supplies of fruits and vegetables to Russia.”

The Kremlin also encourages Russian companies to expand in Central Asia, particularly Uzbekistan. For example, after meeting with President Putin on April 12, Vladimir Potanin, head of the Interros holding firm, pledged to expand economic ties with Uzbekistan and Kazakhstan, adding that similar attempts failed in the mid-1990s due to the lack of support from the Russian government (Interfax, April 12).

Earlier this month, the Uzneftegaz oil and gas monopoly and Russian gas giant Gazprom started a $1 billion project to explore and develop oil and gas deposits in the Ustyurt plains in Qoraqalpogiston (Karakalpakiya) region. Gazprom’s private airline arranged direct flights from Moscow to Nukus to airlift its experts. The new deposits are expected to yield up 5 billion cubic meters of gas annually (Uzbek Television channel one, April 8).

Furthermore, an influential lobbying group has emerged to support bilateral economic ties. On March 24, the Russo-Uzbek “Economic Dialogue” was launched in Moscow, and executives from major Russian companies such as Gazprom, Lukoil, Norilsk Nickel, Rusal, MTS, and Alga-Eko reportedly attended. The panel was the brainchild of Gulnara Karimova, President Karimov’s daughter.

In 2005 Russia became Uzbekistan’s top foreign trade partner, responsible for 21.7% of Uzbekistan’s total foreign trade turnover. Last year bilateral trade exceeded $2 billion. Uzbek exports to Russia were up 41.6% year-on-year at $1.026 billion, while Russian exports to Uzbekistan were up by 12.7% at $1.034 billion.

Uzbek exports to Russia include cars (31%), services (21.4%), oil products (17.8%), planes (6.8%), cotton (4.3%), farm products (5.4%), and plastics (2.1%). Russian exports to Uzbekistan include metals (23.8%), equipment (14.5%), wood (13%), cars (5.4%), services (5.2%), and other items.

Bilateral investment cooperation has also been an important component of economic ties between Russia and Uzbekistan. There are 433 joint ventures and fully owned Russian companies in Uzbekistan, while a total of 284 Uzbek firms operate in Russia, although most of these are relatively small entities.

Trade between Russia and Uzbekistan was growing fast even before Tashkent’s policy drift away from the West accelerated last year. In 2004, bilateral trade amounted to $1.6 billion or up 43% year-on-year. But now, with a backdrop of increasingly close political ties, Russian and Uzbek businessmen have even more reasons to expand trade.