When the State Antimonopoly Service published its maximum retail prices in June, its director put the enforcement plainly: if anyone sells fuel above these prices, we will take measures.
The ceiling for AI-92 in Bishkek and Chuy is 79.9 som a litre. On 6 August the boards at the Bishkek networks read 86.80 to 86.90, on the traders’ own daily figures. That is seven som over the ceiling, about 9%, and it is not a one-day reading. The 86.9 price was already being quoted on 29 July.
So take the official arguments in turn.
The first is that the cap is temporary and the market will come down to meet it. A monitoring run published on 28 July found every regulated grade above its limit at every station surveyed: AI-92 between 84.9 and 88.4 against 79.9, diesel between 98.3 and 99.9 against 93.9, autogas between 46.7 and 48.8 against 45.8. Nine days later the AI-92 board sits where it sat. The regime expires on 30 September, which leaves under eight weeks for a convergence that has not begun.
The second is that the subsidy carries the difference. The cabinet’s order of 25 May fixes acquisition prices at $860 a tonne for AI-92, $940 for AI-95, $950 for diesel and $575 for autogas, delivered to Turksib and Sary-Agach, and pays importers the gap between those numbers and what they actually paid. The budget line is more than 11.3 billion som, about $129 million at the National Bank’s rate of 87.45 to the dollar on 7 August.
Six weeks into the scheme, Kanatbek Eshatov, who heads the oil traders’ association, said no company had received anything. Firms had filed their cost documents; the commission of the economy ministry and the Antimonopoly Service that signs off payment had issued no decisions. That was 6 July, and I have found no announcement since then that the commission has paid anyone.
A fixed price that needs updating two months after it was fixed was not doing the job of a fixed price.
The government’s own conduct suggests it agrees the numbers stopped working. On 24 July the prime minister ordered the scheme reopened. On 29 July the economy ministry proposed extending it to imports from China, Iran, Turkmenistan, Azerbaijan, Georgia and Turkey through any border crossing rather than two rail stations, folding transport and container-return costs into the calculation, and setting new fixed prices in line with current market conditions. A fixed price that needs updating two months after it was fixed was not doing the job of a fixed price.
Enforcement is the third argument. On 28 July that same Antimonopoly Service signed an agreement with the oil traders under which they undertake to sell socially significant products according to an agreed price-change schedule, to keep fuel physically available, and to notify the service when suppliers move wholesale prices. A binding cap in June, a voluntary schedule in July. The service did not need the second document if the first one worked.
That leaves the regional comparison, and it is true. Adylbek Kasymaliev, the head of the cabinet who ordered the scheme reopened, said this week that Kyrgyz prices run 20 to 25 som below Uzbekistan and Tajikistan, on subsidies. It is also a different claim from the one the cap makes. The account of the July agreement puts the unsubsidised price at around 105 som for AI-92, 115 for diesel and 55 for autogas, without naming who calculated it.
Take those figures at face value and do the arithmetic in the open. Against an unsubsidised 105, the pump at 86.90 means the subsidy is absorbing something like 18 som a litre. The ceiling is absorbing zero. The last seven som, between the number the state published and the number on the board, is paid at the pump by whoever is filling the tank.
That is the whole mechanism, and it is worth being clear about who sits where inside it. The importer is compensated for the world price, eventually. The station charges what it charges. The buyer covers the distance between the published number and the posted one. Kyrgyzstan imports more than 90% of its fuel, which is why the world price arrives at all, and why a ceiling written in som has so little grip on it.
Two documents would settle this. The first is the commission’s record: how much of the 11.3 billion som has actually been paid out since 25 May, and to whom. The second is the Antimonopoly Service’s own count of measures taken against stations selling above the ceiling since it published one.
Neither has been published. Until they are, the number on the order is 79.9 and the number on the board is 86.90, and the second one is the one that leaves your hand.
Aigerim Bekova writes on the political economy of Central Asia for Central Asia Wire. The views expressed are her own.