The U.S. Treasury Division’s resolution to slap sanctions on Gazprombank poses a possible main headache for Uzbekistan’s burgeoning mining trade, which till now has relied on the Russian lender to finance a $4.8 billion mine growth set to almost double the nation’s copper manufacturing.
With Gazprombank being frozen out of the worldwide funds system, Uzbekistan dangers dealing with disruptions to its flagship Yoshlik mine growth challenge whereas it rushes to establish various collectors or threat being caught up in secondary sanctions.
The U.S. designation of Gazprombank may additionally end in a significant monetary hit for European mining and engineering corporations, banks, and state-backed export credit score companies lively in Uzbekistan, which have so far continued to transact with entities financed by Gazprombank.
Uzbekistan’s total copper output originates from an unlimited mining complicated near Tashkent operated by the state-owned agency Almalyk MMC. The agency is at the moment overseeing the $4.8 billion Yoshlik growth challenge, which by 2026 is deliberate to increase the mine’s copper output by 78 p.c to 264,000 tonnes per yr. Its gold output is about to extend by 50 p.c to 800,000 ounces. The agency’s chairman has claimed the reforms will rework Almalyk MMC into “the leading copper ore processor in the world.”
Uzbekistan is reliant on Russia as its most vital buying and selling accomplice whereas remittances from Uzbek employees in Russia are the equal of 18 p.c of the nation’s total GDP. In Might, Russian chief Vladimir Putin arrived in Tashkent for a two-day state visit throughout which the Yoshlik challenge was mentioned as a part of bilateral talks on additional deepening financial ties between the 2 nations.
Russia’s curiosity in Yoshlik dates again to 2021 when Gazprombank and VEB.RF, Russia’s state owned improvement financial institution, agreed on $2 billion in deals with Almalyk MMC to finance the acquisition of Russian mining tools to be used within the growth. In 2022, an $800 million tranche of the cope with VEB.RF collapsed after the U.S., EU, and the U.Ok. positioned the financial institution and its govt workforce on sanctions lists following Russia’s full-scale invasion of Ukraine.
With Gazprombank now additionally being topic to U.S. sanctions, Almalyk MMC faces the prospect of shedding a second main backer to sanctions and can possible have to hunt a refinancing deal to make up the funding shortfall and keep on the best aspect of U.S. sanctions.
A development strategy revealed by Almalyk MMC in October, earlier than Gazprombank was sanctioned by the US, made it clear that the Russian financial institution continued to be a significant backer of the challenge, extending a $1 billion credit score line, of which $670 million had already been used to buy mining tools from dozens of main European engineering exporters together with Germany’s Thyssenkrupp, Switzerland’s ABB Group, and the U.Ok.’s Weir Group.
The U.S. resolution to ramp up Russia sanctions by designating Gazprombank may end in a sanctions minefield and logistical challenges for Almalyk MMC, and will probably have an effect on European corporations whose exports to Uzbekistan have been not directly financed by the now-sanctioned lender.
Germany specifically has deep monetary hyperlinks with Almalyk MMC after KfW IPEX-Financial institution agreed in a cope with the agency in September 2023 to prepare $2.55 billion in financing to proceed work on the Yoshlik challenge. Throughout German Chancellor Olaf Scholz’s go to to Uzbekistan in September, a primary tranche of 144 million euro was agreed between Almalyk MMC and a consortium of German banks.
Not like the U.S., the U.Ok. positioned sanctions on Gazprombank a lot earlier, first in 2014 following Russia’s invasion of Crimea after which late in 2023 to forestall U.Ok. banks from processing funds referring to Gazprombank. However even after the U.Ok. sanctioned Gazprombank in 2014 it has continued to place its weight behind U.Ok. corporations making an attempt to win contracts on the Yoshlik mine, regardless of the challenge being backed by the Russian lender.
In 2022 a U.K.-led delegation to Uzbekistan helped dealer a 14.2 million euro export deal for tools produced by the British engineering firm Weir Group for use on the Yoshlik challenge. Then in October 2024 the U.Ok.’s export credit score company, U.Ok. Export Finance, introduced that it might threat public funds by guaranteeing a refinancing of the mortgage, this time offered by Spain’s Santander bank. It’s attainable that the collapse of the VEB.RF mortgage in 2022 prompted Almalyk MMC and Weir Group to refinance the cope with the help of the U.Ok. by means of its export credit score company.
For Almalyk MMC, failing to refinance the Yoshlik challenge to exclude Gazprombank may end result within the mine proprietor being topic to secondary sanctions, successfully turning the agency right into a pariah concurrently it seeks to diversify its exports.
