Kazakhstan Seeks New Energy Export Routes

Kazakhstan recently expressed concerns about the security of the Russian Port of Novorossiysk, which Astana uses to export most of its oil. Energy Minister Almasadam Satkaliyev said that Kazakhstan will discuss the port’s security following the drone attacks on August 4 that led to the suspension of ships movement in Novorossiysk (Vlast.kz, August 8). Overall, the security of civilian navigation in the Black Sea has worsened since Russia withdrew from the United Nations–facilitated grain deal and the Russian Navy began attacking Ukrainian grain storage facilities.

This is not the first time oil shipments from Kazakhstan have been suspended since Russia launched its full-scale war against Ukraine. In 2022 alone, Russia stopped the transit of Kazakh oil through its territory on four separate occasions, citing reasons from storm damage to the port to clearing World War II–era underwater mines from the bottom of the Black Sea (Kz.kursiv.media, September 28, 2022). Yet, many analysts see political reasons behind Moscow’s threats to Kazakhstan’s oil exports as Astana has refused to support Russia’s annexation of Ukrainian territory.

Kazakhstan transits 80 percent of its crude oil through the 1,500-kilometer Tengiz-Novorossiysk pipeline managed by the Caspian Pipeline Consortium (CPC), which connects the oil fields of western Kazakhstan with Russia’s Black Sea coast, where oil is loaded on tankers and shipped onward to Europe and other destinations (Kz.kursiv.media, September 19, 2022). Kazakhstan’s total oil production stands at 1.8 million barrels per day, or almost 90 million tons, which is projected to increase to 107 million tons in the near future. Apart from the problems with transit through Russia, the added volumes will require new export routes as the CPC’s capacity will not be enough (Tengrinews.kz, August 25, 2022).

One option is exporting Kazakh crude oil to Europe via the Druzhba oil pipeline through Russia. The pilot volume of about 90,000 tons has already been shipped directly to Germany and another 100,000 will be sent by the end of August 2023, according to Kazakhstan’s Energy Ministry (see EDM, March 29; Kazinform, August 8). However, these volumes will make up just over 1 percent of total oil production per annum.

Another promising route is the Trans-Caspian International Transportation Route, known as the Middle Corridor. Kazakhstan is working together with Azerbaijan, Georgia and Turkey, as well as its Central Asian neighbors, to develop this export route, which bypasses sanctions-stricken Russia (see EDM, April 20).

This route was first developed in the 1990s when Kazakhstan started exporting oil from the Tengiz-Chevron oil field by tankers via the Caspian Sea to Azerbaijan. Bringing American companies Chevron and Mobil as strategic investors in Kazakhstan’s fast-developing oil sector in the mid-1990s, former Kazakhstan President Nursultan Nazarbayev also cooperated with the Clinton administration on developing the “Eurasian Transportation Corridor,” which would bypass Russia altogether with oil and gas pipelines running from the Caspian to European markets.

Eventually, the CPC pipeline became the preferred option by foreign investors—until Russia’s war against Ukraine endangered not only oil exports from Kazakhstan but also all civilian navigation in the Black Sea (see EDM, August 15).

Kazakhstan is now increasing oil exports through non-Russian routes under an agreement with Azerbaijan to use the Baku–Tbilisi–Ceyhan (BTC) oil pipeline. Transit through this pipeline has increased 18 times from 19,200 tons in the first fiscal quarter of 2023 to 347,100 tons in the second quarter (Kz.kursiv.media, July 5). Kazakhstan’s oil exports via routes other than Russia have already reached 1.8 million tons. Astana plans to expand exports through the BTC up to between 6 million and 6.5 million tons and to use the Baku–Tbilisi–Supsa pipeline to the Georgian Black Sea Port of Supsa for another 3.5 million tons (Eurasianet, March 23). These volumes are rather small in terms of wholly replacing the Russian routes; however, they give Kazakhstan more options and leverage when dealing with its northern neighbor.

The Middle Corridor, now supported by the European Union and the United States, is quickly becoming a valuable alternative to trade routes running through Russia. The Trans-Caspian route is the practical realization of the multi-vector foreign and investment policy Nazarbayev and Tokayev envisioned and have implemented since independence. This will be even more valuable as an alternative export route for another energy resource—namely, natural uranium from Kazakhstan and Uzbekistan (see EDM, May 31).

The military coup in uranium-exporter Niger on July 26 raised concerns about the security of uranium supplies for civilian use in Europe. It also highlighted Kazakhstan’s role as the world’s largest producer of uranium. Niger’s military junta was quick to announce the suspension of exports of uranium to France, which receives 15 to 17 percent of its nuclear fuel supply from the West African state (ESI-Africa.com, August 2). Niger accounts for more than a quarter of the EU’s uranium supply, but Kazakhstan still remains the largest supplier for the 27-member bloc, with Canada coming in third in 2022 (Euratom-supply.ec.europa.eu, 2022).

Although Russia’s share of natural uranium supply to Europe declined in 2022, state-owned company Rosatom still holds 40 percent of the total uranium conversion infrastructure and 46 percent of the total uranium enrichment capacity in the world (Radio Free Europe/Radio Liberty, September 1, 2022).

At the moment, Kazakhstan has only one plant making nuclear fuel pellets (Ulba-FA is a joint Kazakhstani-Chinese venture). Most of its uranium is enriched in Russia and exported via the St. Petersburg port. As Moscow continues its war of aggression against Ukraine, Western sanctions could eventually include the Russian nuclear energy sector and thus cut off Kazakhstan’s export routes through Russia.

Both China and Russia are targeting Kazakhstan’s uranium production sector, trying to build stronger shares in uranium mines, as well as conversion and enrichment plants (Kazatomprom.kz, December 7, 2022). Some recent deals with Russia have caused tensions within uranium mining companies, such as the sale of a stake in the Budenovskoye mine, which caused the exodus of senior managers at Kazakhstan’s state-run mining agency (Kaztag.kz, May 17).

Similar to the oil deals in the 1990s, Astana is once again looking for Western investors in the uranium sector to balance the influence of its two large neighbors. It has been a core principle of the balanced foreign policy that Nazarbayev initiated in the turbulent 1990s and the current government under Tokayev continues that trend as the geopolitical situation in Eurasia rapidly changes. These investments will also secure uninterrupted supplies to Europe and the United States in the case that Russia’s Rosatom is indeed put under Western sanctions.