As President Kurmanbek Bakiyev confronts a political crisis in Kyrgyzstan, he is not getting any help from Moscow. If anything, the Kremlin appears intent on turning up the heat on the embattled Kyrgyz leader.
Gasoline and diesel prices are now set to rise sharply in Kyrgyzstan after Moscow suddenly slapped new customs duties on refined petroleum products being exported to the Central Asian nation. Prices for refined products could rise as much as 30 percent, stoking fears that inflation might further destabilize the already troubled Kyrgyz economy.
On April 1, Russian Prime Minister Vladimir Putin terminated the preferred customs duties that Kyrgyzstan, as a member of the Eurasian Economic Community (the EurAsEC), had been receiving on Moscow’s gasoline and diesel exports. The apparent justification for the move is the fact that the EurAsEC is being eclipsed by a new Customs Union, comprising Russia, Kazakhstan and Belarus. The Customs Union is set to become fully functional this coming July.
It remains unclear if similar energy-export duties will be applied to Russian petrol destined for Tajikistan, which, like Kyrgyzstan, is a member of the EurAsEC, but is not in the Customs Union.
Many political experts in Bishkek believe Moscow is punishing Bakiyev for his administration’s failure to evict American forces from the Manas air base, outside of Bishkek. In what most observers saw as a quid pro quo, Moscow promised a $2.15 billion aid package in February 2009 on the same day Kyrgyz President Kurmanbek Bakiyev pledged to close the base. The Americans, however, remain at Manas. [For background see the Eurasia Insight archive].
On April 6, a mass protest that turned violent in the provincial capital of Talas, northwest of Bishkek, appeared to usher in a general political crisis in Kyrgyzstan. The demonstration was apparently triggered by popular discontent over price hikes for heating and electricity. [For background see the Eurasia Insight archive]. The inflationary threat posed by the new Russian duties certainly stands to increase the degree of difficulty for the Bakiyev administration as it strives to contain the unrest.
Bilateral Kyrgyz-Russian relations have nosedived in recent months. After publicly criticizing the way the first tranche of its $2.15 billion aid package was used, Moscow in February postponed $1.7 billion intended to help construct the Kambarata-1 hydroelectric station. "This [the new export duties] is a special decision by Russia. It is one of the steps for punishing Kyrgyzstan for disobedience in the geopolitical arena. The first step was stopping the rest of the Russian loan, and this is the next," said Zamir Osorov, an investigative journalist with the MSN newspaper in Bishkek. "This will be very unpleasant for Kyrgyzstan."
Political analyst Alexander Knyazev, an expert at the Bishkek branch of the CIS Institute, suggested that the Kremlin could be planning additional retaliatory steps. "This [the duties] is connected both with the work of the Customs Union and the further deterioration of Kyrgyz-Russian relations, and this is only the beginning," Knyazev told EurasiaNet.org.
The increase "will seriously affect Bakiyev’s position. The protest mood based on social-economic reasons is strong and is increasing among ordinary people, and the expected rise [in prices] of basic commodities and products will heighten the anti-Bakiyev mood," Knyazev added.
Bazarbai Mambetov, president of the Oil Traders Association of Kyrgyzstan, told EurasiaNet.org that oil shipments from Russia to Kyrgyzstan were suspended on April 1. The next day, Russian authorities instituted duties of $193.5 per ton for gasoline and diesel fuel exported to Kyrgyzstan, the AKIpress news service reported on April 5. That could translate into a price hike of almost 30 percent and a corresponding jump in inflation, predicted Sergey Ponomarev, the executive director of the Association of Markets, Trade and Services Sectors in Kyrgyzstan, the RIA Novosti reported.
The Kyrgyz Ministry of Economic Regulations contends that Moscow did not officially inform Bishkek about the introduction of the duties, AKIpress reported on April 5. Ministry officials in Bishkek tacitly complained about Moscow’s move, asserting that a bilateral free trade agreement signed in 1992 entitled Bishkek to keep receiving fuel products from Russia at preferential rates.
In the weeks before the imposition of the new duties on Bishkek, Kremlin leaders were reportedly angered by reports that Kyrgyz business kingpins were buying cheap Russian fuel and then reselling it at international rates to the American military at Manas. In a visible sign of displeasure, Russia’s paramount leader, Prime Minister Vladimir Putin, snubbed Kyrgyz Prime Minister Daniyar Usenov during a visit to Moscow in late February.
Russia’s Regnum news agency reported on April 4 that Usenov was told during his Moscow visit that "certain Kyrgyz citizens illegally re-exported oil products exported exclusively for use inside Kyrgyzstan. According to expert estimates, profits from such activities could amount to $35 million-$50 million per year."
Knyazev, who is considered to have a strong connection to the Kremlin, said the fuel resale allegations likely factored heavily into Moscow’s decision to suddenly introduce the export duties. He also confirmed allegations that senior Russian officials were miffed by Bishkek’s recent attempts to obtain rent for Russia’s use of the Kant airbase outside of Bishkek.
Aza Mihranain, an economics professor at the Kyrgyz Russian Slavic University in Bishkek, suggested that the fuel duties will take a considerable toll on Kyrgyz citizens. "This will affect Kyrgyzstan since the introduction of tariffs on oil products will affect transport costs, which will generate" inflationary pressure, she told EuasiaNet.org. "This is only the beginning . . . Consumers will pay for this."
Nervous drivers in Bishkek are already reporting that the price of gas is rising. "All drivers worry the price will go up 25 percent," said a taxi driver in Bishkek. "My father uses 100 liters a day to drive his tractor during spring planting; what will he do?" In Osh, the gas price rose 3 percent overnight April 5-6.
David Trilling is the Central Asia news editor for EurasiaNet. Chinghiz Umetov is the pseudonym for a Kyrgyz journalist.