Uzbekistan is surpassing Kazakhstan as Central Asia’s most dynamic economy. But to maintain momentum, Tashkent will soon need to negotiate a thicket of challenges relating to the state’s heavy role in the economy, according to an expert who has worked closely with Uzbek officials on economic restructuring projects.

Uzbekistan has placed a big fiscal bet on retooling its economy, running up large deficits to promote a green energy transition, as well as an expansion of the mining and manufacturing sectors. Speaking at a recent event hosted by Columbia University’s Harriman Institute, Louis Skyner, a partner in the UK law firm Dentons’ energy practice, indicated that Uzbekistan’s progress comes with a caveat that officials must soon confront.

“Green energy requires liberalisation,” he said.

Deregulation and privatisation will be big steps for the Uzbek government, which has long maintained tight control over economic activity. Implementing the necessary measures to ensure the renewables sector operates efficiently could cause significant economic pain for Uzbek consumers. The state owns much of the existing power infrastructure, which is outdated. Electricity costs are also heavily subsidised at present, Skyner said. Modernisation likely means significant cost increases.

In addition, Uzbekistan has set ambitious near-term climate targets. Officials have stated they want to generate at least 40% of the country’s electricity needs via renewable sources by 2030, while “reducing specific greenhouse gas emissions per unit of GDP by 35 percent below 2010 levels.”

Another factor exerting liberalisation pressure on Tashkent is the government’s desire to join the World Trade Organization (WTO), Skyner said.

Private-sector funds will be needed to bridge the gap between government goals and its financial capabilities. “Given the scale of resources required and limitations within government finances, the private sector must be the primary investor for the green transition,” Skyner wrote in an analysis in early 2025 and published by the Bourse and Bazaar Foundation.

Skyner noted during the Harriman Institute event that Russia currently enjoys a controlling interest over Uzbekistan’s natural gas supplies, creating a major obstacle for reforming the country’s energy and electricity sectors.

“Russian ownership has stunted productivity and undermines continued development,” he said, adding that while Uzbekistan wants to move away from Russian gas, “there is no viable route yet.”

Luka Linich provided reporting for this article.

This article first appeared on Eurasianet here.