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. Last Updated: 07/27/2016

Uzbekistan Vows to Double Its Gas Prices

TASHKENT, Uzbekistan -- Uzbekistan warned Russia and its Central Asian neighbors Thursday it would double its gas export price at the start of next year, putting price pressure on a supply chain that stretches to Europe.

Uzbek state pipeline company Uztransgas published a statement in an Uzbek newspaper saying it would charge $100 per 1,000 cubic meters from Jan. 1, 2007, up from $55 to $60 currently.

"Uztransgas has officially informed its trading partners about the higher price for Uzbek gas," the company said.

Russia imports 9 billion cubic meters of Uzbek gas per year, enough to supply a country the size of Austria.

Gazprom, the main buyer of Uzbek gas, has said price hikes from Central Asia do not affect its business, as it transfers gas from the region to other markets, including Ukraine.

Buying gas through pipelines controlled by Gazprom allows Russia to reap profits from high-price Western European markets that cannot negotiate directly with Central Asian producers.

The West is closely watching Gazprom's dealings with Uzbekistan and other former Soviet republics after Russia briefly disrupted gas supplies to Ukraine, the main transit route to Europe, earlier this year in a dispute over gas prices.

Russia and Ukraine settled that crisis by appointing RosUkrEnergo, a Russian-Ukrainian joint venture, as an intermediary to handle all gas trade between the two.

Gazprom has also sought higher prices from other former Soviet countries, which have traditionally imported gas at a fraction of the price paid by Western European clients.

Gazprom has said Central Asian price hikes will be to blame if Ukraine's prices go up. But Central Asian producers want a bigger share of the profits from Gazprom's business.

Gazprom has not commented on the announcement by Uztransgas.

"It's business as usual. It's just a price game that everyone plays," said Artyom Konchin of Russia's Aton brokerage, speaking about the latest price hike.

"Gazprom is never again going to see the price of $40 that they used to get from Asia. Sooner or later, its margins are going to get squeezed. It's just a matter of time."

The move comes just weeks after another big Central Asian gas producer, Turkmenistan, raised export prices after threatening to halt supplies to Russia altogether.

But Uzbekistan is unlikely to seek to anger Moscow after Russia threw its weight behind Uzbek President Islam Karimov's handling of a bloody army crackdown in Andijan last year.

Although Uzbekistan, condemned internationally over Andijan, seems to be emerging from isolation with the West seeking dialogue rather than sanctions, it is still likely to see Russia as the main ally, analysts say.

Russia is keen to raise its gas imports from Central Asia to delay costly development of its own Arctic fields. Uzbekistan plans to raise gas exports to 12.6 billion cubic meters this year from last year's 11.5 billion.

A higher Uzbek gas price is also likely to hit its smaller and poorer neighbors, Kyrgyzstan and Tajikistan, who rely on Uzbekistan for their energy consumption. It is particularly likely to affect primary aluminum production in Tajikistan -- the impoverished nation's main source of income, which requires high energy consumption.