KREMLIN SHADOW LOOMS OVER KAZAKH-UKRAINIAN TALKS

Despite considerable public interest, Ukrainian President Viktor Yushchenko’s first visit to Kazakhstan was rather anti-climactic.

Official media sources in Kazakhstan did not go beyond the set pattern for covering state visits, namely highlighting a growing trade volume (around $1 billion last year) and discussing economic cooperation in the oil and gas industry.

Neither Yushchenko nor Kazakhstan President Nursultan Nazarbayev disclosed the details of their closed-door talks, which lasted more than two hours. Yushchenko went out of his way to avoid mentioning political aspects of bilateral relations and told journalists that he came to Astana to discuss oil and gas development projects and possible cooperation in the aircraft industry, space technology, and agriculture.

Nazarbayev, however, tried to shift the conversation to political issues, commenting that Ukrainian participation in the Single Economic Space (SES) would be “beneficial and necessary for all of us.” He went on to say that the question of transporting Kazakh hydrocarbons by the Odessa-Brody pipeline to Europe via Ukraine hinges on common decisions among SES member states. Some analysts regard Nazarbayev’s efforts to bring Ukraine back into the fold as a pragmatic strategy for evolving Kazakhstan-Ukraine bilateral relations (Liter, May 31).

But to a considerable extent, Nazarbayev’s “pragmatism” in dealing with his Ukrainian counterpart seems to be prompted by Moscow’s alarm over Kyiv’s attempts to get out from under pressure by Russian oil companies.

Ukrainian presidential aide Alexander Tretyakov recently discussed Kyiv’s position in this triangle, noting that by the year 2006 Ukrainian refineries will import up to 25% of their oil not from Russia but from other suppliers, particularly Kazakhstan. The crisis in Russian-Ukrainian relations may push Kazakhstan’s oil companies in Ukraine’s direction, but no one believes that Russian companies can be pushed out of the Ukrainian oil market so soon. Reportedly, 87.1% of the 24 million tons of oil shipped to Ukrainian refineries last year came from Russia, and only 3.3% came from Kazakhstan. Moscow is not likely to readily relinquish its hold over the Ukrainian market (Zhas Alash, May 31).

Yushchenko’s visit to Astana did not meet all of his expectations. The agreements concluded on the mutual protection of state secrets, cooperation in youth policy, and information sharing have no bearing on the energy crisis in his country. Another agreement that stipulates the monthly delivery of 100,000 tons of Tengiz oil by rail from Kazakhstan is little solace for Ukrainian officials who want access to Caspian oil, according to Ukrainian Fuel and Energy Minister Ivan Plachkov.

The most significant part of the Ukrainian delegation’s visit was the signing of a preliminary agreement between the Ukrainian oil and gas company Naftohaz Ukrainy and the Kazakh national company Kazmunaygaz. The deal envisages setting up a joint venture to build a 52-kilometer long oil pipeline from Odessa to the Pivdenny oil terminal in Ukraine. Kazakhstan will finance this stretch. Astana also declared its intention to buy that terminal, which is currently owned by Russia.

Although Yushchenko expressed an interest in Kazakhstan oil extraction, he did not get an encouraging response. Kazakhstan apparently wants to use Ukraine’s fragile economic situation to advance its own interests. The two presidents reached an agreement on Kazakhstan’s participation to extend the Odessa-Brody pipeline to the Polish seaport of Gdansk. This route gives Kazakhstan access to the Baltic Sea to bring its oil to European markets. Last year Kazakhstan’s oil exports via Odessa slightly exceeded 7 million tons. Astana also hopes to acquire shares in the Odessa-Brody pipeline. Confirming Kazakhstan’s readiness to supply gas and oil to Ukraine, President Nazarbayev noted that all questions of fuel shipments should be finalized with Moscow, as the transit routes run through Russia (Liter, May 31).

Kazakhstan’s Minister of Energy and Mineral Resources Vladimir Shkolnik showed interest in the Druzhba and Adria pipeline networks, a less important project signed by Bulgaria, Hungary, Croatia, Ukraine, Russia, and Slovakia. Ukraine most likely will help Kazakhstan join the project. But first the extremely difficult problem of transportation tariffs must be sorted out with Kazakhstan. And even when all remaining obstacles are removed, and the Odessa-Brody, Druzhba, and Adria pipelines are put into operation, the European market will hardly compare to China, which is projected to consume 600 million tons of oil annually by 2010 (KISI Analytic #1, 2005 at www.kisi.kz).

Astana is trying to add political strings to its promise to help Kyiv solve its energy and fuel crisis. After the talks, Nazarbayev told journalists that, above all, he wanted to know Yushchenko’s attitude towards the Single Economic Space. Yushchenko, alluding to Moscow’s quest for dominance in the SES, said that the Single Economic Space should not start by creating supranational institutions. Quite unexpectedly for the Kazakh side, he proposed military cooperation, which contradicts his earlier voiced intention to sever ties with Collective Security Treaty Organization and join NATO. Within the framework of military cooperation the sides also discussed the possible relocation of the sea-based Zenit missile complex to a launching pad in Kazakhstan (Liter, May 31).

Analysts in Kazakhstan view the future of Kazakh-Ukrainian relations with a great deal of skepticism. As long as these relations are influenced by Russia, some agreements reached in Astana are not likely to materialize.