RUSSIA AND KAZAKHSTAN PURSUE ENERGY PARTNERSHIP

During a visit to Kazakhstan on March 30, Russian Prime Minister Mikhail Fradkov and Kazakh officials signed a protocol to keep Kazakh crude oil shipments flowing via the Atyrau-Samara pipeline at 15 million tons per annum. Fradkov also said that Kazakhstan was seeking to increase the amount of crude pumped via the Atyrau-Samara pipeline to an annual 20-25 million tons eventually (Interfax, RIA-Novosti, March 30).

Apart from the Atyrau-Samara pipeline, Kazakhstan exports its crude via two other Russia-controlled pipelines: the Caspian Pipeline Consortium (CPC), which leads to Russia’s Black Sea port of Novorossiysk, and the Kenkyak-Orsk pipeline, which funnels Kazakh oil to Russia’s Orsk refinery.

In April 2006 Russia and Kazakhstan clinched a major deal on the transit of Caspian crude from Kazakh oil fields through Russia to Europe. Russia and Kazakhstan agreed to more than double crude oil deliveries via the Baku-Novorossiysk pipeline, owned by the CPC, from 28 million tons a year in 2005 up to 67 million tons eventually.

Kazakhstan was also keen to avoid direct competition with Russia in terms of oil and gas exports. Russia and Kazakhstan are partners, not competitors, Kazakh President Nursultan Nazarbayev emphasized during his latest visit to Moscow. The Kazakh leader also moved to reassure the Kremlin that Astana still aimed to rely on Russia’s pipeline networks. In 2006, Kazakhstan funneled 43 million tons of crude oil and 24 billion cubic meters of gas via Russian pipelines, Nazarbayev announced after talks in the Kremlin on March 19.

While in Kazakhstan, Fradkov reported that Russia and Kazakhstan were also mulling chemical and petrochemical joint ventures. “We have plans to set up chemical and petrochemical enterprises,” he said after talks with Kazakh Prime Minister Karim Masimov.

Fradkov said both sides aimed to boost cooperation in high-tech sectors to diversify bilateral trade, which reached $13 billion in 2006 or up 35% percent over 2005. “Raw materials, energy resources, and metals still dominate trade between Russia and Kazakhstan, but we intend to boost military cooperation,” Fradkov said. “We are confident that it will improve trade turnover with high-tech exports,” he added (Interfax, Itar-Tass, RIA-Novosti, March 30).

Russian officials also confirmed interest in nuclear cooperation with Kazakhstan. Sergei Kiriyenko, head of Russia’s Nuclear Power Agency, said Kazakhstan’s first nuclear facility could be built in the southwestern port of Aktau in order to utilize the remaining infrastructure of an old Soviet-era BN-350 reactor. Russia views Kazakhstan, a major producer of uranium, as one of its key strategic partners in the nuclear industry, according to Kiriyenko, who accompanied Fradkov to Kazakhstan (Interfax, RIA-Novosti, March 30).

Moscow has been interested in the Kazakh nuclear sector for quite some time. In February 2002, the Kremlin offered to help revive plans to build a nuclear power plant at Balkhash. The project for the power station 400 kilometers northeast of Almaty was designed during the Soviet era, but independent Kazakhstan suspended the estimated $2 billion project, citing financial and ecological concerns. However, in May 2006 Kazakh officials disclosed plans to go ahead with the Balkhash project.

Russia was also interested in developing the uranium-mining sector in Kazakhstan in a bid to supplement domestic production. In July 2006, Russia and Kazakhstan agreed to launch three nuclear joint ventures on a parity basis in uranium mining and enrichment as well as for development of new types of nuclear reactors for domestic use and possible exports to third countries. Russia’s state nuclear construction company Atomstroiexport also indicated plans to build a nuclear power plant for Kazakhstan.

The total cost of the three Russian-Kazakh joint nuclear ventures is expected to reach $10 billion, according to Russian estimates. The mining joint venture was expected to mine 5,000-6,000 tons of uranium a year at the Budennovsk deposit in southern Kazakhstan with estimated reserves of 250,000-300,000 tons. Russia expected uranium from Budennovsk to be enriched in Angarsk, Siberia.

Speaking after talks in Moscow with Nazarbayev on March 19, Russian President Vladimir Putin said that bilateral nuclear energy ties were reaching new highs as Kazakhstan had confirmed an interest in joining Russia’s project to create an international uranium enrichment center in Angarsk. In response, Nazarbayev invited Putin to visit Kazakhstan this summer to discuss uranium enrichment as well as joint development of Kazakh uranium deposits.

Now Putin’s trip to Kazakhstan is set to happen even earlier than expected. On March 30, Kazakh Prime Minister Masimov announced that President Putin was due to visit Kazakhstan in May 2007. The regular top-level meetings between Russian and Kazakh leaders come as an indication of the shared interest in a stronger bilateral energy partnership.