UKRAINE REDUCING RUSSIAN OIL IMPORTS IN FAVOR OF KAZAKHSTAN.

Ukraine will import 5 million tons of oil from Kazakhstan in 1998, more than double the 2.3 million tons contracted for in 1997. Kyiv announced the agreement yesterday upon President Leonid Kuchma’s return from Central Asia. Earlier this week, Ukraine’s Oil and Gas State Committee announced that Kazakhstani oil deliveries to Ukraine had already reached 2.5 million tons in January-August 1997, well above the planned level and up 31 percent over the same period last year. Conversely, Russian oil deliveries to Ukraine in January-August 1997 dropped to 3.5 million tons, down 35.5 percent from the same period last year.

Ukraine’s means of payment for the extra Kazakhstani oil will include: agricultural products, steel pipes for the expansion of Kazakhstan’s internal oil and gas distribution networks, and inputs in the planned Caspian-Europe transit corridor via the South Caucasus and Ukraine. Kuchma and his Kazakh counterpart, Nursultan Nazarbaev, have further agreed to ask Russian president Boris Yeltsin to increase Kazakhstan’s annual transit quota through Russian pipelines in order to accommodate the growing deliveries of Kazakhstani oil to Ukraine. Therein lies one potential obstacles to Kyiv’s and Almaty’s plan. Russian oil officials, speaking on background, promptly called for limiting Kazakhstan’s transit quota "because increased oil exports from former Soviet republics would adversely affect the international market price of Russian crude." (Russian agencies, October 13, 15, 16) This economic argument will likely add to Moscow’s political reasons for withholding cooperation. Ukraine seeks to diversify its energy imports primarily in order to reduce Russian political leverage.

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