Kazaks Get Cold Feet on Odessa Pipeline

04-Apr-07

Kazakstan has made it clear that it will not be part of a European pipeline project unless Russia too is involved. NBCentralAsia analysts note that apart from their political allegiance to Moscow, the Kazaks would find the costs of building new pipelines in Europe prohibitive.

A Kazak delegation is to take part in an energy summit in Poland on May 11-12, where one of the topics discussed will be the possibility that Astana might participate in a project to build an oil pipeline through Ukraine - from Odessa on the Black Sea to Brody near the Polish border – and on into Poland. Europe is keen to import Kazak gas directly without having to deal with Russia.

But there is already a spanner in the works. On March 28-29, President Nursultan Nazarbaev told his Polish counterpart Lech Kaczynski that Kazakstan will only participate in the project together with Russia.

Analysts say Nazarbaev’s position is based not just on his preference for Moscow as an energy-sector partner, but also on rational economic calculations.

“Kazak oil will cost more if it is transported [to Europe] via the Caucasus. A solid justification is needed, and that is lacking [for the [Odessa-Brody pipeline]. At the same time, there are two [westward] pipelines already in existence – the Caspian Pipeline Consortium, CPC, route and the Atyrau-Samara pipeline,” explained NBCentralAsia analyst Eduard Poletaev.

Most Kazak oil exports currently go through Russia via the Atyrau-Samara pipeline, which has a throughput of 15 million tons a year, and the CPC pipeline which can take 30 million tons a year. Kazakstan plans to double annual oil exports from 57 to 120 million tons by 2015.

According to Poletaev, Kazakstan depends too much on Russia to go out on a limb with a high-risk European project.

“Kazakstan is heavily dependent on Russia as a transit route, and the relationship would cool if it took part in an obviously anti-Russian project,” said Poletaev.

NBCentralAsia political observer Daur Dosybiev also thinks Kazakstan is unlikely to abandon Russia even if there is a need to develop alternative pipeline routes, because it will carry on being dependent on Russian infrastructure for the foreseeable future.

“I suspect that Kazakhstan’s leadership are basing their policy choices on the reality that bypassing Russia would mean a loss of sales in volume terms, and higher transit costs,” said Dosybiev.

Kazakstan will be in trouble if Russia and Europe fall out over energy. If that happened, said Dosybiev, and no resolution is found, “Kazakstan will be torn between selling its energy resources at a good price and not upsetting the Kremlin,” he added.

(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)