Tokayev hopes Caspian diversifies oil export routes – The Diplomat

Crossroads of Asia | Economy | central Asia

Kazakhstan is once again eyeing the potential of the Trans-Caspian pipeline, but are plans to diversify oil export routes even further tying the Kazakh economy to a doomed fossil fuel industry?

Kazakh President Kassym-Jomart Tokayev called the diversification of oil export routes, in particular the trans-Caspian option, a “priority” in government meeting on July 7. Although Tokayev did not directly mention Russia, the comments came days after a Russian court ruled suspension of operations in Novorossiysk, the Russian port through which most of Kazakhstan’s oil exports pass.

Although CPC filed an appeal that reportedly delayed the shutdown, the incident follows a series of disruptions in Novorossiysk last year that illustrate the vulnerability of Kazakhstan’s most profitable industry to disruptions.

As Paolo Sorbello explained earlier this year“Currently, [CPC] transports two thirds of Kazakhstan’s oil exports. This is about 40 percent of all exports of Kazakhstan.” The dependence of such a critical sector on a foreign entry point is a serious liability. From spills to stormsthere are many risks that can disrupt operations before taking into account the often indirect but difficult to measure policy impact.

Diversification may seem like an obvious solution, but the difficulties of achieving it are just as obvious. As a landlocked country, Kazakhstan depends on the territory of other countries to ensure that its oil reaches world markets, no matter which direction it flows. In addition to the CPC, through which oil from the Atyrau region of Kazakhstan is transported through southern Russia, Kazakhstan can transport oil through Pipeline Uzen-AtyrauiSamara to Russia and from there via the Russian pipeline network to the Baltic terminal of Ust-Luga or Novorossiysk on the Black Sea. Then comes the Kazakhstan-China pipeline network. Kazakhstan also sends oil by rail and tankers across the Caspian, but in much smaller volumes.

Trans-Caspian routes for transporting oil and gas have long been considered, but none of them has yet been implemented.

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Tokayev’s call for a rapid diversification of export routes is “an unrealistic goal to be met in the short term,” Luca Ancheschi, senior lecturer in the Department of Central Asian Studies at the University of Glasgow, told The Diplomat. “[P]Epelines are expensive energy infrastructures that require lengthy rounds of negotiations with transit partners and, most importantly, buyers to build and commission.

Tokayev’s announcement that the “priority” of oil diversification is the trans-Caspian route revives the efforts of his predecessor, Nursultan Nazarbayev, to transport more oil across the Caspian Sea to Azerbaijan and on to Europe. In 2006 yearKazakhstan and Azerbaijan signed a framework agreement on a trans-Caspian oil transportation system, although this left open the question of whether the proposed system would include an offshore pipeline or increased tanker traffic. By 2009the state-owned energy companies of both countries agreed to conduct further feasibility studies and during Nazarbayev’s visit to Francethe then Kazakh president proclaimed “Participation of the French side in the project for the construction of a main export oil pipeline from the Caspian Sea to Baku and Europe.

More than a decade later, there is still no pipeline across the Caspian. Whether Tokayev’s recent emphasis on diversifying oil export routes will actually advance this process is unclear but unlikely.

More importantly, the diversification of oil export routes only further ties Kazakhstan’s economy to an industry that many see as inevitably doomed as climate change motivates a long-awaited global shift away from fossil fuels.

“The regime’s persistence in keeping the entire structure of the economy dependent on the energy sector will one day come into conflict with the reality of the post-oil world,” Ancheski warns. “At this point, it is reasonable to expect a dramatic economic crisis to erupt: the leaders of New Kazakhstan should be prepared to mitigate the risks associated with this scenario, as the post-rentier economy is not only more stable, but also – and perhaps decisively, given the social “The economic grievances that continue to arise in Kazakhstani society is a more just economy.”