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Tokayev Seems to be to Caspian to Diversify Oil Export Routes – The Diplomat


Crossroads Asia | Financial system | Central Asia

Kazakhstan is once more trying to the potential of a Trans-Caspian pipeline, however do plans to diversify oil export routes simply hitch the Kazakh financial system additional to a doomed fossil gas trade?

Kazakh President Kassym-Jomart Tokayev known as diversification of oil export routes, significantly the Trans-Caspian choice, a “precedence” in a authorities assembly on July 7. Though Tokayev didn’t point out Russia immediately, the feedback got here days after a Russian courtroom ordered a suspension of operations at Novorossiysk, the Russian port that handles nearly all of Kazakhstan’s oil exports.

Though CPC has lodged an attraction, which has reportedly delayed the suspension of operations, the incident follows a lot of disruptions at Novorossiysk within the final 12 months, which illustrate the vulnerability of Kazakhstan’s most profitable trade to disruptions.

As Paolo Sorbello defined earlier this 12 months, “Now, [CPC] transports two-thirds of Kazakhstan’s oil exports. That’s round 40 p.c of Kazakhstan’s whole exports.” It’s a major legal responsibility for such a vital sector to rely upon a international chokepoint. From spills to storms, there are many dangers that may interrupt operations earlier than factoring within the typically consequential, however tougher to measure, affect of politics.

Diversification would appear to be the apparent the answer, however equally apparent are the difficulties of attaining it. As a landlocked nation, Kazakhstan relies on the territory of different international locations to see its oil attain international markets, regardless of which path the oil flows. Along with CPC, which carries oil from from Atyrau province in Kazakhstan throughout southern Russia, Kazakhstan can transfer oil by way of the Uzen-AtyrauiSamara pipeline into Russia and from there by way of the Russian pipeline community to the Baltic terminal of Ust-Luga or Novorossiysk on the Black Sea. Then there may be the Kazakhstan-China pipeline community. Kazakhstan additionally ships oil by way of rail and by tankers throughout the Caspian however at a lot smaller volumes.

Trans-Caspian routes for each oil and fuel have lengthy been contemplated, however none but realized.

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Tokayev’s name for speedy diversification of export routes is “an unrealistic goal to be reached within the quick time period,” Luca Anceschi, a senior lecturer in Central Asian Research on the College of Glasgow, instructed The Diplomat. “[P]ipelines are costly power infrastructures, which, to be constructed and enter into line, require lengthy negotiation rounds with transit companions and, most significantly, patrons.”

Tokayev’s urging that the “precedence path” for oil diversification is the Trans-Caspian route resurrects the efforts of his predecessor, Nursultan Nazarbayev, to move extra oil throughout the Caspian Sea to Azerbaijan and onward to Europe. In 2006, Kazakhstan and Azerbaijan signed a framework settlement on a trans-Caspian oil transport system, although that left open the small print of whether or not the envisioned system would come with a seabed pipeline or elevated tanker transport. By 2009, state power firms in each international locations agreed to hold out additional feasibility research and throughout a go to by Nazarbayev to France, the then-Kazakh president heralded the “French aspect’s participation within the mission to assemble the principle export oil pipeline from the Caspian Sea to Baku and Europe.” 

Greater than a decade later, there’s no nonetheless pipeline throughout the Caspian. Whether or not Tokayev’s latest emphasis on diversifying oil export routes can really transfer the method alongside is unclear, however arguably unlikely.

Extra importantly, diversifying oil export routes solely hitches Kazakhstan’s financial system additional onto an trade many see as inevitably doomed, as local weather change motivates a hoped-for international shift away from fossil fuels.

“The regime’s obduracy in retaining the entire financial system construction depending on the power sector will sooner or later conflict with the fact of the post-oil world,” Anceschi warns. “At that time, it’s cheap to anticipate {that a} dramatic financial disaster will erupt: the leaders of a New Kazakhstan ought to arrange to mitigate the dangers related to that state of affairs, as a post-rentier financial system is just not solely extra steady but additionally — and maybe crucially, given the socio-economic grievances that continues to come up from the Kazakhstani society — a fairer financial system.”

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