SHINY RED GAS STATIONS -- ZEROMAX MAXES OUT THE \

96338 2007-02-13 06:01:00 07TASHKENT237 Embassy Tashkent CONFIDENTIAL VZCZCXRO5655\
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DE RUEHNT #0237/01 0440601\
ZNY CCCCC ZZH\
P 130601Z FEB 07\
FM AMEMBASSY TASHKENT\
TO RUEHC/SECSTATE WASHDC PRIORITY 7031\
INFO RUEHAH/AMEMBASSY ASHGABAT 2544\
RUEHTA/AMEMBASSY ASTANA 8616\
RUEHEK/AMEMBASSY BISHKEK 3129\
RUEHDBU/AMEMBASSY DUSHANBE 3008\
RUEHMO/AMEMBASSY MOSCOW 6985 C O N F I D E N T I A L SECTION 01 OF 02 TASHKENT 000237 \
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DEPT FOR SCA/CEN \
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E.O. 12958: DECL: 02/13/2017 \
TAGS: ENRG EPET PREL PGOV UZ
SUBJECT: SHINY RED GAS STATIONS -- ZEROMAX MAXES OUT THE \
SERVICE SECTOR \
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Classified By: CLASSIFIED BY AMB. JON R. PURNELL FOR REASONS 1.4 (B, D) \
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1. (C) Summary: Zeromax, a Swiss-registered company linked \
to President Karimov's daughter, Gulnora Karimova, has made a \
strong mark in the gasoline service sector through its \
opening of over ten modern, full-service stations under the \
name UzGazOil. UzGazOil appears to have a monopoly on \
high-octane gas and first-rights access to other octanes. \
Long lines are a common sight at these stations in Tashkent. \
Overall Uzbek production of petrochemicals fell in 2006 and \
will likely continue its downslide until foreign exploration \
results in actual extraction and production; something at \
least a few years away. End summary. \
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SHINY NEW STATIONS PROLIFERATE . . . \
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2. (SBU) In 2006, Zeromax expanded into the retail gas sector \
and now operates over ten cookie-cutter service stations in \
Tashkent under the name UzGazOil. A business contact in the \
oil and gas industry told poloff the company plans to build \
more of these modern, bright red, full-service stations, \
squeezing out the privately-owned "Ma and Pop" stations. The \
UzGazOil stations often charge about 100 soum/liter (30 cents \
per gallon) more than other stations for Uzbek-produced 80 \
octane gasoline. It has a loose monopoly on importing Kazakh \
and Russian-produced, higher octane gasoline, and sells it \
for around 1,400 soum/liter ($4.25 per gallon). However, the \
higher octanes (89 and up) are seldom available at UzGazOil \
and almost never at other stations. (Note: Rumor is that \
only certain UzGazOil stations carry high-octane gas, which \
is provided to the well-connected in Tashkent to fuel their \
Mercedes Benzes. A month ago, DCM visited three different \
UzGazOil stations in search of 93 and 95 octane gas. He was \
told at each that they had not carried high octane for a \
month or more. End note.) Most of the gas pumps are \
identical to those used in the U.S. Chevron-Texaco has \
expanded its business in Uzbekistan and supplies lubricants \
to UzGazOil for its oil-changing stations. There are even \
car washes and car vacuums, but not all are in operation. \
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. . . GAS SHORTAGES AT MA AND POP STATIONS \
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3. (SBU) Every morning and evening during rush hour, the \
lines at the UzGazOil stations spill into the street for 80 \
octane. Teenage entrepreneurs walk up and down the long \
lines offering car trinkets, such as air fresheners and \
sunglass holders. These lines are not necessarily a signal \
of high demand, but of fuel shortages, especially at \
privately-owned stations. While gasoline is not (yet) \
rationed in Tashkent as it is in the provinces, UzGazOil \
appears to have first-rights access to supplies. In the \
provinces, such as Urgench, Nukus and Ferghana, gasoline is \
often rationed and also resold on the black market, \
especially during the spring and fall harvest seasons. For \
the moment, UzGazOil stations are only in Tashkent. \
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SLIGHT DECLINE IN PRODUCTION \
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4. (U) Uzbekistan must import oil to meet domestic demand. \
Official statistics state that domestic oil production peaked \
in 1999 at 8.1 million tons, but it has since slid down to \
under four million tons. In 2006, oil production was 3,450 \
million tons, only 0.2 percent higher than 2005. Domestic \
gasoline production is also sliding, along with other \
petrochemical products. According to official 2006 \
statistics, Uzbekistan produced 1,370,000 tons of gasoline, \
down 1.8 percent from 2005; and fuel oil production slid 8.5 \
percent to 895,600 tons in 2006. Combined, total \
petrochemical production fell approximately four percent in \

2006. \
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5. (C) Comment: Zeromax's connections through its unofficial \
CEO Gulnora Karimova to the state energy monopoly \
Uzbekneftegaz, and to Russian-owned Gazprom and Lukoil, \
lubricate business dealings and ensure UzGazOil's gasoline \
supplies. Zeromax has a loose monopoly on high-octane gas, \
although it is not a reliable retailer of it. The company \
appears to be quietly creating a monopoly over consistent \
supply of all other octanes. \
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6. (C) Comment cont.: Uzbekistan needs foreign investment to \
resuscitate its ailing petrochemical industry. In 2006, \
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Uzbekistan diversified the cast of characters involved in the \
energy sector and signed exploration agreements with \
state-owned energy companies in Russia, Malaysia, China, and \
South Korea, among others. Once oil and gas deposits are \
confirmed, actual production is still a few years away. \
Until gasoline production increases and the Uzbek elite \
weaken their stronghold on the energy sector, domestic \
consumers will continue to suffer shortages and high prices \
for high octane gasoline. \
PURNELL \