President of Kazakhstan Kassym-Jomart Tokayev ordered to expand transportation capacity bypassing Russia after a series of incidents in the work of the Caspian Pipeline Consortium (CPC), through which about 80% of Kazakhstani oil exports currently pass. The President made the relevant instructions during the meeting on the development of the transport and transit potential of the republic.
The head of state noted that the Trans-Caspian route, a transport system passing through China, Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and further to Turkey and Europe, should become a priority direction for the development of Kazakh oil exports. In addition to transport links, Tokayev instructed to study the issue of expanding the capacity of existing oil pipelines.
“The priority direction is the Trans-Caspian route. I instruct KazMunayGas to work out the best option for its implementation, including the possibility of attracting investors from the Tengiz project. The government, together with Samruk-Kazyna, should take measures to increase the capacity of the Atyrau-Kenkiyak and Kenkiyak-Kumkol oil pipelines,” said Kassym-Jomart Tokayev.
The President of Kazakhstan called for the diversification of oil supplies amid numerous problems with the main oil export route from Kazakhstan, which passes through the CPC. The day before, a Russian court suspended the work of the CPC for a month due to "environmental violations", while the Ministry of Energy of Kazakhstan claims that oil supplies did not stop .
The first problems with CPC began in March: then the consortium stopped oil exports due to technical problems caused by the displacement of the load-bearing frame of one of the floating hoses. In June, CPC again stopped oil shipments. This time, because of mines found in the area of the port of Novorossiysk during the Second World War. At the same time, at the end of June, the head of the Union of Oilfield Service Companies of Kazakhstan, Nurlan Zhumagulov, called CPC "the most profitable route for the export of Kazakhstani oil."
“Russia demonstrates that, despite EU sanctions, it also controls Kazakh oil exports, which is about 8% of oil imports to Europe. This decision should be viewed as pressure on the EU countries from Russia,” Kazakhstani political scientist Dimash Alzhanov commented on the situation around the CPC to The Insider.
Currently, CPC accounts for about 80% of oil exports from Kazakhstan. According to the international analytical agency Kpler, about 67% of Kazakhstani oil from the CPC is supplied to Europe, while the total share of Kazakhstan in the European oil market is estimated at 8%. Thus, Russia can use the CPC as an instrument of pressure on the EU, which announced an oil embargo, which provoked a sharp rise in prices. The main European buyers of oil from Kazakhstan are Italy, the Netherlands and France.
“The position of Kazakhstan is extremely vulnerable, since up to 80% of oil is exported through the CPC. For the past decades, the republic has followed Russia's interests in the CSTO and the EAEU and has not been able to ensure its economic security through alternative supply channels. Understanding this, Russia uses Kazakhstan in its own interests,” Alzhanov believes.
Russia owns a 31% stake in the project, Kazakhstan – 20.75%. The co-owners are also Chevron Caspian Pipeline Consortium Company (15%), LUKARCO BV (12.5%), Mobil Caspian Pipeline Company (7.5%), Rosneft-Shell Caspian Ventures Limited (7.5%), BG Overseas Holding Limited (2%), Eni International NANV (2%) and Oryx Caspian Pipeline LLC (1.75%).
The level of tension between Russia and Kazakhstan rose after Tokayev's statement about non-recognition of the independence of the so-called Lugansk and Donetsk people's republics and respect for the territorial integrity of Ukraine. Moreover, Kazakhstan has explicitly announced that it does not intend to help Russia bypass foreign sanctions; such actions caused a wave of criticism from Russian politicians.