Kazakhstan’s economy is based on the income that procured from substantially natural sources, especially oil. According to estimation of the experts, the budget of the country derives from %40 export income and %60 hydrocarbon resources. Therefore, when deceleration or cessation of natural sources to be questioned there is a perceivable impact on the Kazakhstan economy. Especially in new equation that come from after the Russian-Ukrainian war, some problems are encountered about sanctions against Russia and transferring raw materials through the Caspian Pipeline Consortium (CPC) system. In this context Nur-Sultan administration is searching for alternatives to the oil export logistics.
According to Energy Analytics, oil in Kazakhstan is now exported in four directions:
- With CPC main export route- 53 million tons (%79);
- Through Atyrau-Samara (Entrance to the Russian Transneft system) – 12 million tons (%18);
- Over Aktau Harbor – 2 million tons (3%);
- Atasu-Alashankou road to China – 11 million tons per year (1 million tons of these belong to Kazakhstan, 10 million tons belong to Russia).
As it can be seen, almost all Kazakhstan exports (%96) are passing through Russian territories. Hence Moscow, on the one hand opens a ‘window’ to the Nur-Sultan in the world oil market on the other hand has an opportunity to make pressures through blocking Kazakh oil road and transit line.
More frequently mentioned is the need to develop an alternative route for oil exports in Kazakhstan after the CPC has been shut down for a month to clear the seabed mines at Port Novorossiysk and the temporary suspension of the sea terminal by the decision of the Russian court for another month. Likewise Kazakhstan, doesn’t want to be completely bound to the Russia about energy passing. Accordingly Nur-Sultan is showing efforts to be a independent actor in the oil and gas field despite the close relations with Moscow in the energy sector.
Under these circumstances Kazakhstan president Kassım-Jomard Tokayev, gives instructions about a series of measures, particularly focusing on the Trans-Hazar route, to ensure safe and uninterrupted export of domestic hydrocarbon products.
On the other side, production of the oil by Kazakhstan will be expected to come about 100 million tons in the middle of 2024. For this reason, solving to transportation capacity and routes problem for Kazakhstan will be inevitable. According to explanation of the President of Kazakhstan, authorities use transit through Azerbaijan to supply more oil to China and transport oil to Ceyhan Harbor in Turkey with access to European markets, are some of Kazakhstan’s energy line diversification plans.
The main consumer of Kazakhstan oil is the European Union (EU) countries, particularly Italy, France, and the Netherlands, with about 45% (31 million tons) of export volumes. In addition, the recently adopted EU sanctions package envisages refusal to purchase Russian oil from January 1, 2023. Considering that no embargo is being imposed on Kazakhstan’s oil, Kazakhstan president is procuring energy sources when Europe needs it. Same interest, also expressed by European countries who want to avoid dependence of the Russian energy sources. For example, EU Ambassador to Kazakhstan Kestutis Jankauskas recorded the following in his interview in June.
“We are expecting that close co-operation with Kazakhstan and EU including middle lobbies in the fields of diversification of the Kazakhstan’s energy sources, sustainable mining, renewable energy and developing the economy of green hydrogen and enhance to relations with reciprocal benefits.”
With the gradual withdrawal of Russian oil and gas from the EU market, Europe’s demand for alternative suppliers is increasing. In this context, Kazakhstan is a prominent country for the EU.
In the past few days, Reuters News Agency, published news about Kazakhstan’s plans to diversify energy roads to the EU. According to news, Kazakhstan state oil company KazMunayGaz talks with Azerbaijan state oil company SOCAR on allowing the sale of 1.5 million tons of Kazakhstan oil annually through the Azerbaijan pipeline. It has been noted that the parties plan to sign a final contract for oil transport at the end of August and that deliveries will begin in the fall. It has been emphasized that Kazakhstan can sell about 30,000 barrels a day if the agreement is signed. However, commenting on the Reuters report, Kazakhstan Energy Minister Bolat Akculakov said that the government had not such a plan yet:
“I don’t think we sign an agreement about the transportation of oil today. These issues are technically discussed at national companies level because there is a duty like that, however we don’t mentioned about sign an agreement about oil deliveries in September.”
Indeed, in the near future, there is no possibilities to route volumes to the CPC to other routes. 53 million tons of oil shipped to the CPC Marine Terminal in 2021, 60.7 were provided by Kazakh carriers. Other roads cannot carry oil due to their technical capacity. Previous discuss about a possible 1.5 million tons of oil transfer through Azerbaijan represents a small share of the total volume of oil supply. In addition, Aktau and Kuryk ports may face problems with the transport of large-volume oil through the Caspian Sea, undeveloped infrastructure and the lack of a tanker fleet required for these purposes. In other words, diversifying energy routes needs to time and money. However, this does not mean that diversifying oil export roads will be impossible. In 2022, in the middle of many interruptions in the CPC, alternative paths, even in small volumes, can provide flexibility in managing export flows in the long term.Kazakhstan Energy Minister’s indication of discussing about national companies transfer the oil through Azerbaijan shows evaluate this option.
Meanwhile, the evaluation of the option allows Kazakhstan to demonstrate the presence of alternative roads for oil exports to the international community and to Russia. Recent relations between Russia and Kazakhstan have deteriorated, and contradictions have been evident from time to time. While Kazakhstan wants to enter European markets, the continuing oil shortage in the world market is beneficial for Russia based on the current facts. However, neither both sides don’t want to be break their relations in the political sense. For example, Kremlin said Kazakh authorities have not seen political motives in their intention to create alternative ways for the issue of oil. Such a statement is due to Kazakhstan’s importance for Russia, both in a military-strategic way and in terms of key integration and political tools. In the same way, Kazakhstan is not ready to break ties with its neighbor. For example, Kazakhstan President Press Secretary Ruslan Zheldibay, recorded that Russia’s interests will not be damaged in diversification of energy routes:
“Russia has been our strategic partner and ally and continues to be. No action will be allowed to harm their interests. We also wish that similar steps were not taken in Kazakhstan.”
As a result, the diversification of oil transport routes in Kazakhstan in terms of risk management is a significant part of the agenda. Market diversification, especially in Kazakhstan, can be said to mean that it means continuing to focus on Russia as the main transit corridor of oil, as well as access to markets in countries that consume oil for the implementation of independent projects. In other words, Kazakhstan is trying to provide a balance of interest in the search for diversification of energy routes.
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