Publication: Eurasia Daily Monitor Volume: 3 Issue: 197

Astana played host to the Commonwealth of Independent States Energy Council on October 13, a meeting that triggered mixed emotions in Kazakhstan. The session was orchestrated by the head of Russia’s Unified Energy Systems, Anatoly Chubais, who optimistically reported that the meeting was “a very important step” in efforts to synchronize the energy supply systems of CIS countries with those of the European Union. He stressed that the technical and legal problems related to energy cooperation with EU countries had been “practically settled.” Chubais added that CIS countries and European Union members were at the same level in terms of the development of their energy infrastructure (Kazakhstanskaya pravda, October 14).

However, the rosy prospects that Chubais outlined cannot be taken for granted, and the disastrous Moscow blackout last winter remains a chilling reminder. Astana realizes very well that Russia, cornered by European demands for more transparent energy cooperation and an agonizing shortage of electricity in its regions, is desperately seeking to shore up its weakening influence on the Kazakh energy sector. In this context, the Russian side’s insistence on connecting CIS countries with interstate power lines can be seen as Moscow’s attempt to assert control over the energy policies of its former domain. The head of the Kazakh Energy Grid Operating Company (KEGOC), Kanat Bozumbayev, applauded a statement by Chubais suggesting that the Russian government is ready to invest $81 billion over five years to increase its power-generating capacity. But critics have many reasons to question Russia’s financial resources; over the last four years Russia has swung from being an electricity exporter to become dependent on imports. Chubais, who admitted that Russia is facing an “extremely complicated situation” with electricity supplies, stressed the need to “correct [Russia’s] export and import policy” (Aikyn, October 16).

Chubais made it clear that Russia, struggling with a surge in electricity demands, was planning to substantially reduce the power it supplies to Ukraine, Belarus, the Caucasus, and the Baltic states in the winter months. At the same time, Moscow intends to increase investment in Kazakhstan’s efforts to construct additional power generating facilities at the Ekibastuz-2 hydroelectric power station, near the southern border of Russia.

But the generous gift from Russia could turn into a Trojan horse. West Kazakhstan and Aktobe regions are dependent on Russian electricity suppliers, because the power lines from northern Qostanay region to western parts of the country pass through Russia. On October 1 the Russian electricity supplier, Inter RAO EES, announced a 9.5% rise in electricity prices for businesses and state enterprises in Aktobe region. Electricity bills for residents of Aktobe region increased by 21.3% between 2005 and 2006. The Russian electricity company claims that West Kazakhstan region owes $20 million for consumed electricity. Aktobe region, where electricity rates are the highest in the country, needs government subsidies of 30 million tenge to keep residents supplied with Russian electricity until the end of the year (Nachnem s ponedelnika, October 13).

In the past the Kazakh government made weak attempts to include the Aktobe and West Kazakhstan regions into the national power grid, but without success. The latest project envisages the construction of a 500-kilometer power line to link the western regions with North Kazakhstan. But without investment funds, the plan is a long way from implementation.

Meanwhile, Russia is set to take advantage of the deplorable state of Kazakhstan’s electricity infrastructure. KEGOK and the Unified Electricity Grid of Russia (RAO EES) reached an agreement whereby North Kazakhstan will supply electricity to the Urals region of Russia in exchange for Russian power supplies to West Kazakhstan and Aktobe. KEGOK president Bozumbayev has estimated that Kazakhstan needs to invest $4 billion to develop new energy sources (Express-K, October 18).

Astana apparently is fed up with Moscow’s high-handedness and inflexibility regarding energy issues. The existing energy partnership with Russia and declared “common interests” are increasingly creating obstacles for Kazakhstan rather than solving energy problems.

In addition to electricity, the two countries are taking different approaches to gas supplies. Moscow jealously reacted to Kazakhstan’s plan to build a gas pipeline along the Caspian seabed, citing potential environmental threats. Nevertheless, speaking recently in Astana, the head of the European Commission on Eastern Europe, the Caucasus, and Central Asia, Hughes Mingarelli, stressed the significance of the project for the European Union, a shared interest that is another source of irritation for Moscow. Kazakhstan is willing to risk spoiling relations with its neighbor for the sake of energy independence from Russia’s Gazprom monopoly. Part of this attempt is the proposed gas pipeline from Kazakhstan to China, which remains on the drawing board (Novoye Pokolenie, October 13).

In light of the ongoing discussions on energy issues between Moscow and Western countries, there is little reason to believe that Chubais is sincere when he speaks approvingly about plans to build an “energy bridge” between the CIS and the European Union. But the European energy market does hold huge potential for Kazakhstan. Astana’s growing independence from Russia in shaping its energy strategy is bringing that country nearer to the EU, and eventually, Astana will have to make a choice between Europe and Russia.