Gazprom takes over gas monopoly in Kyrgyzstan for $1

Dec 11, 2013 12:00 AM

The former Soviet republic of Kyrgyzstan has approved a deal to sell the country’s debt-ridden natural gas monopoly to Russia’s state energy company Gazprom for $1.

The decision, backed by 78 deputies in the 120-seat parliament, hands Moscow control over a strategic asset in the Central Asian state in exchange for a guaranteed supply of fuel.

Under the agreement, Gazprom will gain control over pipelines, gas distribution stations and underground storage facilities owned by Kyrgyzgaz.

Gazprom has committed to invest 20 billion rubles ($610 million) in modernizing the Kyrgyz company’s infrastructure over the next five years.

It will also take over more than $40 million in debt. Kyrgzystan has suffered increasing difficulties in maintaining gas supplies because of rising debts to neighboring Kazakhstan and Uzbekistan

The deal gives Gazprom full control over Kyrgyzstan’s gas sector. But a proviso in the agreement means that the Russian company can only transport its fuel using pipelines belonging to Kyrgyzgaz.

The Kyrgyz government will be permitted to engage independently in gas transportation or support investors in that field at a later date. It will also have a right to buy back the Kyrgyzgaz assets in 25 years.

Kyrgyzstan has been racked by political upheavals in the past decade and two presidents have been overthrown by popular revolts in the impoverished republic.

The strategically important nation, which borders China, hosts both a Russian and an US military base.  The Kyrgyz parliament last month told the US military to vacate its air base by next July.

Russia recently agreed a 15-year extension to the lease on its military base as part of a package of measures that included writing off $500 million of Kyrgyz debt.

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