Dollar and Gasoline – The Cause of Economic Pressure Fluctuations in Tajikistan

Despite the promises of Tajikistan's authorities, the issue of supplying crude oil to the country's first oil refinery in the Dangara district remains unresolved, even after five years.

Recently, the management of the refinery reported a promising agreement with Iran and Turkmenistan regarding the supply of raw materials for the plant. However, this is not the first time such promises have been made, but none have yet been fulfilled.

The launch of Tajikistan's first oil refinery, construction of which began in 2014 and whose operation has been delayed for four years, depends on the supply of crude oil. It is reported that the management's efforts to find partner companies in Iran, Russia, Kazakhstan, and Turkmenistan for oil imports have not yet yielded practical results. The Chinese company "TK-Oil" invested $450 million in building the Dangara refinery. It was expected that with the launch of the first phase of the Dangara oil refinery in the Khatlon region, the capacity to process 500,000 tons of oil annually would be established, and once the project is completed, Tajikistan could process up to one million tons of crude oil each year. Besides meeting domestic demand, Tajikistan would also gain the ability to export gasoline to Afghanistan. Annually, Tajikistan requires 1.6 million tons of gasoline and diesel fuel, all of which is imported. President of Tajikistan Emomali Rahmon, in his speech at the 75th session of the UN General Assembly, emphasized that the republic is almost 100% dependent on imported fuel.

Meanwhile, the market for imported fuel in Tajikistan is destabilized each time fuel prices or the dollar exchange rate rises, which raises concerns among the population due to increasing prices for goods and services.

In recent years, two factors – the dollar and gasoline – have significantly negatively affected the lives of people and prices for goods in Tajikistan. The issue with the dollar is familiar to most people around the world, but the problem with gasoline, which Tajikistan is 100% dependent on importing, is increasingly impacting all sectors of the economy and people’s lives each year.

Previously, diesel fuel was significantly cheaper than gasoline, but now its price is higher, creating difficulties for the agricultural sector, particularly in providing fuel for tractors during the planting season, greatly increasing farmers' costs. The cost of heavy cargo transportation by trucks has also risen. As a result, even the cheapest and lowest-quality Chinese goods are sold in Tajikistan at two to three times the price.

The website "Sputnik" reports that Tajikistan's hopes for energy independence have not been realized. Initial hopes of finding rich oil deposits beneath Tajik soil were dashed, and investments in this sector proved fruitless. Later, several oil refineries were built in Tajikistan in the hope of using domestic oil and gas, but they ceased operations due to a lack of raw materials.

Fuel is one of the key indicators of economic and social progress, as prices for all goods in the country's markets and even the export of products abroad depend on oil and gas prices. For example, if the price of gasoline rises by one somoni, the prices of all goods in the country's markets increase on the same day. Therefore, the question arises: can Tajikistan eliminate its dependence on imported fuel?

Tajik expert Murodulloh Janobilov, in an article for the newspaper "Jumhuriyat," noted that Japan buys over 350 million tons of crude oil annually and processes it at 56 plants, while the Baltic countries also buy oil, not oil products. He added that using two oil refineries, one in the south and one in the north, and ensuring their supply with raw materials could meet 100% of Tajikistan’s needs. According to him, 25,000 different products can be derived from oil: from white nylon shirts to rubber car tires, and one can even buy watches or cameras, but purchasing oil products in our time is a mistake.

However, there is another opinion. According to Farhod Mirzoev, the director of "Gazpromneft Tajikistan," an oil refinery costs at least $500-700 million, and today it is difficult to find such investments. He adds that such a plant in global practice processes a very large volume of oil products, while the Tajik market requires only one million tons of oil products, which is equivalent to less than 20 days of operation for the Omsk oil refinery, which processes 19 million tons of oil annually.

However, some analysts believe that Tajikistan should adopt a multi-faceted policy to stabilize the fuel market, which would include several components, including importing fuel from several countries, processing crude oil at refineries within the country, securing raw materials from various sources, processing by-products, and, most importantly, transitioning to environmentally friendly fuels, including electric cars. This process has already begun, but it requires more resources.

Currently, the price of one liter of fuel in Tajikistan ranges from 10 to 12 somoni, which is more than one dollar. For comparison, the price of one liter of gasoline in Kyrgyzstan is $0.65, in Kazakhstan $0.56, and in Uzbekistan $0.52. At the same time, the lowest wages and monthly incomes in Central Asia are among the population of Tajikistan.

According to a 2019 study by the analytical department of "Picodi.com," each Tajik citizen can only afford to buy 130 liters of gasoline with their monthly salary. In the end, the people of Tajikistan, who earn the lowest wages in the region, are forced to buy the most expensive fuel, and with each change in fuel prices and the rise in the cost of goods, the pressure on the population fluctuates just like the market itself.