Page 5 - FSUOGM Week 02 2022

FSUOGM COMMENTARY FSUOGM

Kazakhstan rolls back fuel

reforms amid unrest

The unrest shows the political risks involved in fuel reform, even if those
reforms are justified on an economic basis

KAZAKHSTAN KAZAKHSTAN has reimposed fuel price caps latest unrest has vindicated that concern.
in a bid to quell protests following its worst The Central Asian country has also faced calls
WHAT: unrest since declaring independence in the early from international institutions such as the World
Unrest has swepted 1990s. Bank to do away with the subsidies. The fiscal
throuugh Kazakhstan. Anti-government protests and subsequent burden they represent limits Kazakhstan’s ability
riots have swept across the Central Asian coun- to curtail fiscal deficits, and they also compete
WHY: try in recent days in response to a hike in fuel with other spending needs such as roads, schools
Kazakhstan’s government prices, namely for LPG. The government had and healthcare.
has reversed a policy to jacked up prices as part of a plan to phase out In addition, the subsidies create market dis-
hike fuel prices. fuel subsidies, which cost the budget greatly and tortions. Not only can they potentially encour-
has stifled investment in supply. age wasteful consumption, but they also can
WHAT NEXT: The government’s resulting crackdown, result in fuel shortages when international fuel
Authorities appear to which has involved bringing in troops from Rus- prices are high, as traders are encouraged to send
have regained control, sia and other members of the Moscow-led Col- more supplies to other markets that offer higher
reducing the prospect of lective Security Treaty Organisation (CSTO), has rates. The government has in the past resorted
a further escalation. led to the deaths of at least 164 people, according to export bans on some fuels to try to prevent
to local media reports. Kazakhstan’s presidential this. But given the significant land border that
office, meanwhile, said on January 9 that nearly Kazakhstan shares with Russia, this has been
6,000 people had been arrested. difficult to implement, simply driving the trade
According to reports, authorities have underground.
regained control in affected cities, reducing the On January 5, Kazakh President Kass-
prospect of a further escalation. ym-Jomart Tokayev ordered the introduction of
180-day price controls for LPG and other com-
Fuel reforms mon fuels such as diesel and gasoline. He said
Kazakhstan has been working to phase out fuel that maximum LPG prices should not exceed
subsidies for a number of years, but progress has prices at the end of last year, and that the govern-
been slow, as the government has sought to avoid ment was unable to respond quickly to the steep
public backlashes over high energy costs. The hikes in LPG prices that triggered the protests

Week 02 12•January•2022 www. NEWSBASE .com P5