Publication: Eurasia Daily Monitor Volume: 3 Issue: 6

Officials in Astana followed the New Year’s gas dispute between Moscow and Kyiv with an air of detachment, but the compromise solution reached between Ukraine and Russia runs counter to the economic interests of Kazakhstan. The deal enables Russia to sell its gas for $230 per 1,000 cubic meters and Ukraine to purchase it for $95, thanks to a mixture of cheap Turkmen and Kazakh gas equaling two-thirds of total Russian supplies to Ukraine and Europe, and gives Astana the feeling of being short-changed. Russian President Vladimir Putin confirmed his reputation as an unbending national hero in the eyes of the Russian public, but why, analysts ask, did the face-saving agreement between Gazprom and Naftohaz sign away billions of dollars from Kazakhstan? Who authorized the Kremlin to trade in Kazakh oil? (Karavan, January 6).

Members of the Kazakh government and parliament avoided any comment on the hard-won compromise deal between Kyiv and Moscow, but everyone seems to be aware of Russia’s growing political and economic clout on Astana. In an effort to prevent Russian oil and gas companies from monopolizing Central Asian and outer markets, Kazakhstan is risking its newly shaped ties with Georgia, Ukraine, and its Central Asian neighbors.

Last year’s grain deliveries to Georgia and the red-carpet treatment given to Georgian Mikheil Saakashvili in Astana last April marked a turning point in cooperation between Georgia and Kazakhstan. The developments also run contrary to Moscow’s plan to put a stranglehold on the defiantly pro-Western Tbilisi. Kazakhstan is reluctant to become entangled in the political standoff between Georgia and Russia and strives to get a share of the controlling packages for the Georgian gas pipelines to ensure a more secure long-term foothold in the Caucasian region.

Both Tbilisi and Astana noted Moscow’s ability to bring Ukraine and key European countries to their knees by cutting off vital gas supplies. The Georgian and Kazakh governments took the gas row between Gazprom and Naftohaz as a serious warning.

With its enormous gas reserves of 3.3 trillion cubic meters and favorable geographic location, Kazakhstan could theoretically compete with Russia to control gas pipelines to Europe. Experts believe Astana missed a golden opportunity two years ago when Gazprom gradually took control of the gas supply network running from Turkmenistan to Western Europe. The Kazakh government made a belated move to build its own petrochemical and gas-processing complex at the Karachaganak oil fields, but the project went nowhere. The agreement reached on joint management of the Russian Orenburg gas processing plant may be important for Kazakhstan from a political point of view, but it does not promise any palpable economic benefits.

The entire episode leaves the impression that Moscow intends to use Gazprom primarily as a political tool not only against pro-American Ukraine and Georgia, but also to squeeze “disloyal” countries using Astana’s hands. This attempt can be best illustrated by the ongoing talks between Kazakhstan and Georgia on the acquisition of Georgian Tbilgaz, a company that controls gas-distributing networks. It was quite logical to see the Kazakh national gas transporting company KazTransgaz as the authorized negotiator from Kazakh side. But in reality talks are being conducted by the Kazakh-Russian joint venture Kazrosgaz, in which Gazprom holds considerable sway (Novoye pokolenie, January 6).

According to a previously concluded agreement, Kazakhstan would supply Georgia with relatively cheap gas for $68 per 1,000 cubic meters. However, Astana’s dependence on the only available transit route — through Russian territory — could undermine the agreement.

This threat is clearly perceived in Tbilisi. Speaking in Washington, Georgian Foreign Minister Ghela Bezhuashvili noted that Moscow exploits his country’s 100% dependence on Russian gas supplies to put pressure on his country. He expressed concern that Moscow could prevent Georgia and Kazakhstan from realizing their already-concluded agreement. He added that Russian authorities would do everything to shut down Kazakh gas supplies to Georgia and “will certainly put political pressure on Astana” (Delovaya nedelya, January 6).

Clearly, it was a deep disappointment for the Kazakh government and humiliating in the sense that Gazprom and Naftohaz decided to pose as members of a civilized democracy in Western eyes and restore their reputations as reliable gas suppliers at an economic cost to Kazakhstan.

To some extent, Kazakhstan can compensate for the loss by importing cheap Uzbek gas. On December 29 Kazakh and Uzbek representatives reached an agreement on deliveries of 1.6 billion cubic meters of gas to Kazakhstan in 2006, deliveries that are vital for the south Kazakhstan region (Khabar TV, January 5).

Despite the snowballing debt of $18.5 million for earlier deliveries, Kazakhstan also agreed to supply Kyrgyzstan with gas and is planning to invest $17 million in reconstructing the gas pipeline that links Tashkent and Almaty, running through Bishkek. Such efforts by the Central Asian states to restore energy links, however weak at the moment, are significant in political terms. Russia increasingly demands political loyalty from the countries of the region, and the last thing Moscow wants is any type of alliance among them.