APRIL 15 2014 (The Conway Bulletin) — The fallout from Ukraine’s revolution and the ensuing standoff between Russia and the West has created a headache for Kazakhstan.

If relations fray further the US and the EU may impose trade sanctions on Russia and these will impact Kazakhstan.

But the Kazakh energy sector is probably more robust than energy minister Uzakbai Karabalin made out last week.

Kazakhstan relies heavily on Russia as a transit country for its oil and it may have to find alternative export routes, but those routes do exist. This might include sending oil south, through Iran to the Persian Gulf.

Around a third of Kazakhstan’s oil exports flow through the Caspian Pipeline Consortium (CPC) which owns the pipeline running from Atyrau in western Kazakhstan to Novorossiysk on Russia’s black Sea coast.

At first glance it looks as if any sanctions on Russia would hit CPC — the pipeline crosses Russia and feeds into a Russian mix of oil. But the CPC has international status and should, in theory, be exempt from sanctions.

Kazakhstan now also exports much of its oil to China, across the Caspian Sea and through the South Caucasus. Mr Karabalin’s concerns about the impact on Kazakhstan’s domestic oil-products market from a sanctions hit Russia also feels slightly overblown.

Kazakhstan has a shortage of refinery capacity and has to import oil products from China and Russia. This has been expensive and has threatened to push up prices.

If the West did impose sanctions on Russia and it did flood Kazakhstan with oil products, prices would drop.

Kazakhstan and the rest of Central Asia are exposed to Russia’s economy. If, under the weight of threatened sanctions, it stutters, so too does Central Asia. Kazakhstan’s energy sector, though, is more sheltered.

ENDS
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(News report from Issue No. 180, published on April 16 2014)