Publication: Monitor Volume: 5 Issue: 122

In its quest for alternative sources of oil, in order to reduce its dependence on Russia, the Ukrainian government has entered into negotiations with Kazakhstan. Prime Minister Valery Pustovoytenko and Industrial Policy Minister Vasyl Hureyev have just held talks on the subject in Kyiv with Kazakhstan’s Minister of Power, Industry and Trade, Mukhtar Ablyazov. The Ukrainian side considers handing over in trust management, or selling outright to Kazakhstan, blocks of shares in the Lysychansk and Kherson oil refineries. Kazakhstan seems prepared to accept Ukrainian metallurgical products in payment for some of the oil deliveries. The Kazakh side would in turn guarantee stable supplies to the Ukrainian refineries, in amounts sufficient to keep them occupied to capacity. The refined products would be marketed partly in Ukraine and partly in third countries by a Ukrainian-Kazakhstani commercial joint venture.

The sides, furthermore, stated their joint interest in the transport of Kazakhstani oil via Ukraine to Europe. That route, the shortest possible from Kazakhstan to Central European and Baltic markets, would involve Georgia and Poland along with Ukraine as keenly interested transit countries. The proposal dovetails with the Ukrainian-Polish plan to pipe Azerbaijani oil via Odessa on the Black Sea to Gdansk on the Baltic coast–a plan being discussed by Presidents Leonid Kuchma and Aleksander Kwasniewski in Warsaw this week. Azerbaijan would probably welcome Kazakhstan’s inclusion in the project because the added volume of oil in transit would increase the project’s commercial attractiveness. Ukraine is simultaneously discussing with Russia the sale of as much as 51 percent of the shares in the Lysychansk and possibly other Ukrainian refineries as part of a deal for guaranteed stable deliveries of Russian crude. Pustovoytenko conferred on that subject by telephone with his Russian counterpart Sergei Stepashin even as the Kazakhstani delegation was en route to Kyiv. But the long-running Ukrainian-Russian talks on the matter have recently bogged down because Russia’s own oil production–and thus its export potential–is stagnating and because Moscow prefers solvent customers paying in hard currency. That situation threatens both to idle some major Ukrainian refineries–including the flagship Lysychansk plant–and to reduce Ukraine’s revenues from the transit of Russian oil to third countries (UNIAN, Eastern Economist Daily (Kyiv), June 22-23). –VS