Uzbekistan's has entered into an $850mn gas storage expansion project with companies linked to sanctioned Russian state-sponsored oligarch (“stoligarch”) and close personal friend of Vladimir Putin, Gennady Timchenko, with Russia planning to increase gas deliveries to Uzbekistan fivefold, RFE/RL has reported.

The project, situated at Uzbekistan's principal gas field near Gazli in Bukhara region, was linked to Timchenko by an RFE/RL investigation.

The majority 60%-stake in Gazli Gas Storage, the entity overseeing the gas storage expansion, has been transferred from Forus, a Russian company linked to Timchenko, to Daxon Holdings Limited, based in Hong Kong, as part of a new energy investment plan initiated by Uzbek Prime Minister Abdulla Aripov on February 14. The plan was conceived to address chronic energy shortages suffered by Uzbekistan in recent years.

Daxon’s ultimate beneficiary is said by RFE/RL to be Uzbek energy tycoon Bakhtiyor Fozilov.

According to RFE/RL, a secret Uzbek government report said the project did not make economic sense, and an assessment in a confidential report by Boston Consulting Group also called it “impractical.” The report also raised alarm about the risk to energy security posed by Forus exercising control over the project.

As bne IntelliNews has reported, Uzbek President Shavkat Mirziyoyev fired the mayor of Tashkent as recently as January, protesting at his “empty words” amid power and gas outages that afflicted the capital last winter.

In February the Uzbek government signed off on a new plan to invest $500mn on significantly increasing its imports of Russian gas by reversing pipeline flow in Kazakhstan—a country that neighbours Russia—to supply Uzbekistan with sufficient gas to meet the rapidly expanding energy needs of the fast-growing economy.

Uzbekistan, whose own gas reserves have not been sufficient to meet annually surging demand, started receiving supplies of the fuel from Russia in October. Under a two-year deal with Gazprom, Uzbekistan imports will more that quintuple to 9mn cubic metres (mcm) of gas daily, while the country’s gas storage facility capacity will grow from 3bn cubic metres (bcm) to 10bcm by 2025.

Gazprom has agreed to send 2.8bcm of gas to Uzbekistan annually from 2025 under the new supply deal signed with Tashkent last year. The volume could increase in the future as Uzbek’s economy continues to expand.

Uzbekistan has been exporting gas to China but, given rising domestic demand, Uzbek officials have said that they plan to cease exports of gas altogether by 2025.

RFE/RL's investigation, supported by corporate documents and expert analysis from Kristian Lasslett, a criminology professor at Ulster University, has revealed some of the details of the structure of the new gas deal with Fozilov, an Uzbek energy magnate with connections to Russian and Uzbek political circles, controlling Daxon.

Fozilov is at the centre of a network that benefits from Uzbekistan's lucrative oil and gas industry. It involves key Moscow figures and former Uzbek security officials' relatives. Fozilov's companies have secured multi-billion-dollar contracts as part of the new Uzbek energy plan.

Fozilov is chairman of Eriell Group, which dominates the Uzbek state energy sector that he previously owned through an offshore company together with Gazprombank and a Russian company called AMGA Consulting that shares a Moscow address with companies owned by Timchenko and his son-in-law, RFE/RL reported.

The ownership of Daxon involves a complex structure of Hong Kong-based firms, including Kenfame Limited and Denmount Limited—both under Fozilov's control—and Sunworth Limited, owned by Fozilov's cousin, Sanjar Samiev, RFE/RL also said.

Kenfame Limited and Denmount Limited, hold 34% and 33% stakes in Daxon, respectively; and Sunworth Limited holds the remaining stake. Kenfame Limited was founded by Russian businessman Ivan Yegorov, according to the investigation. Yegorov has been linked to Timochenko.

The investigation also highlighted Aida Chachkhalia, Forus's founder and a legal associate with ties to Timchenko, who remained the sole shareholder until December 2021. Yegorov later acquired a stake in Forus.

Following an investigation by the Dossier Center, the Ukrainian government imposed sanctions on Yegorov, citing his role in allegedly helping Timchenko evade sanctions.

Tashkent is attempting to steer a delicate course between its continued economic and energy reliance on Moscow and need not to invoke the ire and secondary sanctions of Washington, which is seeking to isolate Russia. Unlike its neighbours in Central Asia, Uzbekistan holds only modest deposits of oil and gas and has become increasingly dependent on hydrocarbon imports from Russia and its neighbours.

UPDATE: 

Uzbekistan’s Gazli Gas Storage LLC denied media speculation that ia $850mn gas storage project was in any way linked to Russian stoligarch Gennady Timchenko in a statement emailed to bne IntelliNews on March 7.

The company described the claims made by RFE/RL investigation as “unfounded and defamatory media speculation alleging hidden interests” held within the company,” the company said in a statement “to set the record straight”.