Publication: Eurasia Daily Monitor Volume: 4 Issue: 67

Kazakhstan is apparently facing Russian pressure to stay out of Western-supported energy projects and maximize the transit of Kazakh oil and gas via Russia. In recent days, President Nursultan Nazarbayev and other officials seem suddenly to be turning a cold shoulder to proposals for Kazakh participation in the Odessa-Brody oil pipeline’s extension from Ukraine into Poland, as well as in the planned trans-Caspian gas pipeline. Astana had recently given these projects favorable consideration. Its sudden cooling seems to reflect Russian backstage pressures as well as the need for a clear Western strategic commitment to these projects and to Kazakhstan itself

On March 29-30, Polish President Lech Kaczynski led a delegation to Astana with an offer for Kazakhstan to join the EU-backed Odessa-Brody-Poland oil transport project as a supplier and stakeholder. Since Moscow has blocked the access of Kazakh oil, via Russia’s Black Sea port of Novorossiysk (or any other route) to Odessa for the last five years, Poland now proposes routing Kazakh oil via Azerbaijan to Georgian Black Sea terminals, from there to Odessa and farther into Poland. In that case, the Poles would extend the pipeline to the port of Gdansk, a major potential gateway for Kazakh oil to the Baltic region.

To the Poles’ and their partners’ surprise, President Nazarbayev conditioned Kazakhstan’s participation on Russia’s participation in the pipeline project as an “obligatory condition” (obyazatelno). He also argued that Georgia’s maritime terminals do not have sufficient capacity for supplying the Odessa-Brody-Poland pipeline. This argument seems somewhat strained, given that pipeline’s relatively small capacity of 9 million tons annually and the current under-utilization of Georgia’s Supsa, Batumi, and Kulevi maritime terminals (the pipeline’s capacity can be expanded with modest investments as can be the terminals’ capacities). According to Nazarbayev, major rail and port construction over a five-year period would be necessary in Azerbaijan and Georgia for transporting Kazakh oil to Odessa. Meanwhile, he insisted, Kazakhstan intends to export its oil via Russia and seeks rapid expansion in the capacity of the pipeline to Novorossiysk — a line largely Russian-controlled (Rzeczpospolita, March 30; Interfax, March 29, 30).

This change of tone seems all the more surprising since Astana had previously evidenced frustration with Russia’s policy to block deliveries of Kazakh oil, not only to Ukraine and Poland, but also to Latvia and Lithuania. The Polish-proposed route to Gdansk could open those possibilities for Kazakhstan. On a more positive note, the Kazakh side expressed its interest in acquiring refining capacities in Poland and Ukraine and investing in the pipeline’s extension as a co-owner. But the Kazakhs insisted that such initiatives would have to depend on Russia’s participation in the project.

The initial reaction in Warsaw seems to be an erosion of Polish interest in the project. According to Energy Minister Piotr Woznyak and other Polish officials, Russian participation would deprive the project of its raison d’etre, which is diversification of oil supplies and transport away from dependence on Russia. Thus, Kazakhstan’s insistence on Russian participation is seen as depriving the project of its strategic significance and priority status. Some Polish experts, however, suggest involving Russia with a minority stake and, if possible, no veto rights in the project (Polish TV, PAP, April 2).

Russian Prime Minister Mikhail Fradkov descended on Astana on March 30, the day on which the Polish delegation left for home. Members of Fradkov’s delegation took it upon themselves to tell the media that the Kazakhs were seeking a substantial expansion in oil exports via Russia: specifically, by expanding the Atyrau-Samara pipeline’s capacity from 15 million tons annually at present to 20 or even 25 million tons, as well as doubling the capacity of the Caspian Pipeline Consortium’s (CPC) line to Novorossiysk from almost 30 million annually to some 60 million tons (Interfax, March 30, 31). Such expansion in those directions would render Kazakhstan heavily and permanently dependent on Russia.

Interviewed in the April 2 issue of Spain’s leading daily, El Pais, Nazarbayev seems to overstate the hurdles to the trans-Caspian gas pipeline project, almost to the extent of dooming it. A Russian translation (Interfax, April 2) has Nazarbayev insisting that the trans-Caspian pipeline has “no prospects because the legal status of the Caspian Sea remains unresolved,” its economic and technical possibilities remain unclear, and the key supplier “Turkmenistan has already signed contracts to sell all of its gas to Russia and China.”

Again, this seems a shift of position only two months after Kazakhstan had seriously begun negotiating the terms of its participation in the gas project. The “unresolved” legal status is a Russian hurdle that can almost certainly be circumvented short of confrontation. As the Kazakhs undoubtedly know, Turkmenistan’s alleged agreements with Russia and China are simply declaratory, with no binding provisions of any kind, leaving Turkmenistan’s future gas exports subject to specific agreements with any consumer countries, including European partners in the trans-Caspian project

Ambiguity also crept into Kazakh Energy and Mineral Resources Minister Baktykozha Izmukhambetov’s April 4 statements while conferring with Azerbaijani officials in Baku on energy transit issues. Izmukhambetov announced that the volume of Kazakh oil supplies to the Baku-Tbilisi-Ceyhan pipeline would depend on other export directions, of which he named the CPC pipeline to Russia and the Kazakhstan-China pipeline. He also announced Kazakhstan’s intention to buy a minority stake in the Russian-controlled Burgas-Alexandropolis pipeline project for the specific purpose of obtaining greater export access to the CPC pipeline. Regarding the trans-Caspian gas pipeline project, he acknowledged its merit — “the shortest route to European markets” — but deferred any detailed discussion until the EU completes a feasibility study and Russia gives its opinion: “Russia is Kazakhstan’s main strategic partner and we must respect its opinion in making decisions on the trans-Caspian gas project” (Turan, Trend, Interfax, Itar-Tass, April 4).

Nazarbayev has accepted Kaczynski’s invitation to participate in the Energy Summit planned to be held in Warsaw in May. It remains unclear whether Kazakhstan would participate there without Russia or would condition its participation on Russia’s. The only quasi-certainty is that Russia is leaning on Astana to drop out of westbound energy transit projects, which Kazakhstan undoubtedly continues to regard as answering to its national interests.