• Geopolicy
• National Security
• Issues of Armeniancy
• Economy

08.05.2008

RUSSIA-CHINA: STRUGGLE FOR THE KAZAKH OIL (War of oil-pipelines)

   

Armen Manvelyan

Kazakhstan is the country number one by its oil reserves in the Pre-Caspian region. According to some information, 2/3 of the Caspian Sea oil is concentrated in the very coastal regions of Kazakhstan. That’s why the collapse of the Soviet Union was soon followed by the struggle for the control over the oil sector of Kazakhstan. If the participants of the first stage of the struggle were Russia and the US, than China joined them in the second stage.

The Kazakh factor: After continuous negotiations and under the conditions of the US political inactivity, the Russian people managed to persuade the Kazaks to construct a new oil pipeline from the oil-rich Tengiz to Novorossisk. The Russian party made such a decision after long hesitations. Before that the official Russia had turned to different steps to reduce the extent of the oil supplied from Kazakhstan. The second country of the former Soviet Union with its oil reserves after Russia had serious transportation problems: there was a net of pipelines of 6000 kilometers length connecting Kazakhstan with the Russian city Samara. Atyrau-Samara oil pipeline was working still at the Soviet period, connected Kazakhstan with the Russian Samara and continued its way to Europe through the oil pipeline of “Drudzba.” As a matter of fact it was the only route the countries could supply the international market with their oil.

The official Astana was looking for an alternative to Russian route. The entry of the American oil companies into the oil sector of Kazakhstan was not welcomed. In 1993 the president N. Nazarbaev signed a contract with the president of Chevron oil company K Derry in Alma-Ata to found the biggest joint oil company on the territory of CIS. For the oilfield exploitation was founded the company “TengizChevroil” the main shareholders of which, besides Chevron became “KazakhOil”, Mobil, “Lukarkon” and “Lukoil” owing 5% of shares¹. In Russia this contract was called the blow over their own interests. The number of oil pipelines connecting Kazakhstan with Samara was reduced. To overcome the Russian obstacle Chevron began pumping a part of the oil to Aktau and Turkmenbashi ports, and from there to Baku. From Azerbaijan the oil cisterns were sent to the oil storage in Batumi port by railway. Due to this complicated scheme Chevron managed to pump the Kazakh oil to the world market. In 1997 for about 3.7 million tones of Kazakh oil was pumped to the Black Sea ports of Georgia by the same route, more than to Samara. Under those conditions Kazakhstan and Russia were actively negotiation on Tengiz—Novorossiysk oil pipeline construction. The contract between the two countries (by the participation of the Omani Sultan) was concluded on July 17, 1992; however, it went into effect only in 1996. It was also furthered by the fact that the construction of the oil pipeline (Tengiz—Novorossiysk) began still at the Soviet period and was half ready. In April 1996 a corresponding contract was concluded between the two parties – Russia and Kazakhstan². The oil pipeline with the length of 1600 kilometers and costing $2 billion was to pump for about 500.000 barrels of oil per day to the oil storage situated in the Russian sector of the Black Sea coast of Novorossiysk. To finish the pipeline construction Russia founded a new consortium which was to finance and built up the pipeline. The official Moscow was in a hurry to strengthen its positions in the Caspian Sea coast. The oil pipeline was to fortify Russia’s domination in the region and, in particular, in the Caspian Basin. By the initiative of official Moscow and with the participation of Kazakhstan and Oman was founded the Caspian pipeline consortium (CPC). Besides the three countries, other oil companies also participated in CPC. On April 27, 1996 in Moscow was signed a contract on the oil pipeline construction by the participation of B. Yelzin and N. Nazarbaev. Russia was holding the majority of shares³. In the newly founded consortium Russia had 24% of shares, Kazakhstan – 19%, the Omani Sultanate – 7%. The American oil giant Chevron got 15% of shares, the Russian “Lukoil”- 12.5%, 7.5 by 7.5% were concentrated in the hands of American Mobil and “RosOil,” 2 by 2% got the Italian Agip Spa and British Gaz, 1.75 by 1.75 to the American Oryx and Kazakh Munaigaz.

In August 2007 the construction of the oil pipeline was over and the oil began flowing to Novorossiysk. However, the official opening ceremony was held later – on November 27, 2001. The next day the first tanker loaded by Kazakh oil of Tengiz mark left Novorossiysk. At first for about 8 million tones of oil per year was flowing through the oil pipeline; however, later on the extent was increased up till 28 million. At that period for about 60 million tones of oil per year was exported to Kazakhstan, 28 million out of which was exported to Novorossiysk and 15 million – Samara. In other words, the exploitation of the oil pipeline increased Kazakhstan’s economic dependence on the Russian pipelines.

Thus, by mid 1990s there was a well-shaped political opinion in Moscow that the US was activating its influence in the region. Under the conditions of the new political realities on July 21, 1994 the Russian president Boris Yelzin signed a document for the protection of the interests of the Russian Federation in the Caspian Sea Basin⁴ prepared by the foreign minister Andery Kozyrev and the National Security Service director Yevgeni Primakov, after which Russia made its oil policy more active, quickly undertaking the construction and restart of Baku-Novorossiysk and Tengiz-Novorossiysk oil pipelines. As a matter of fact, exploitation of these oil pipelines was unambiguously considered to be Russia’s victory in the region.

The Chinese course: China is also very much interested in the Caspian Sea rich with energy resources. And if in the first half of 1990s this country was unnoticeable, than in the second half the situation sharply changed. With its high rate of growth in economy China had excessive demand of energy carriers. Official Beijing even had to quit the supply of the export oil: the local crude oil was hardly enough for home consumption. That’s why China got interested in the Caspian Sea Basin and especially in Kazakhstan. China’s interest in Kazakh oil was also in the interests of Astana. The president Nursultan Nazarbaev was long desiring to separate the Kazakh oil to weaken its dependence on Russia. The west was supporting Kazakhstan’s president putting forward the idea of Baku-Ceyhan oil pipeline construction. But the Chinese course was not included in the US regional plans. The first result of Kazakh-Chinese negotiations was produced in September 1997, when, during his official visit to Astana, the Chinese Prime Minister Lee Pen signed a contract on the Kazakh-Chinese oil pipeline construction. The 3200 kilometer-long oil pipeline with the capacity of 20 million tones and costing $3-3.5 billion was to begin in the Kazakh Atyrau and end in the Chinese town Alashankou. The Chinese party undertook the full financing of the project, but later on, when the oil prices considerably dropped, it was talked about inexpediency of this and other suchlike projects. However, in realization of both of the projects (Atyrau- Alashankou, Baku-Ceyhan oil pipelines) politics remained the priority: the parties financing the pipelines were attaching special importance to the political context of the issue, besides the economic one.

However, the further rise in oil prices favored the realization of the project. In June 2003 during the visit of the president of Chinese People’s Republic Khu Dzintau to Kazakhstan the Chinese national oil company signed a contract on Kazakh-China Atyrau- Alashankou oil pipeline construction with the Kazakh government. The contract supposed not only the oil-pipeline construction: China began making serious investments in the oil sector of Kazakhstan, which strengthened its position both in the Central Asia and the Caspian Sea Basin.

In spite of the efforts of Russia and the west, especially the US, to fail the oil pipeline construction, they didn’t manage. On May 2006 the Kazakhstan-China oil pipeline was launched for the first time, but the official opening was held on December 15 of the same year⁵. In that way Kazakhstan built the first oil pipeline which was to make a detour of Russia to supply China with oil. It was the first oil pipeline built in the Caspian Sea Region countries detouring Russia. The second one, as it is known, is Baku-Ceyhan.

The construction of Kazakh-Chinese oil pipeline was of great importance for Kazakhstan. The country was entering an important and perspective market weakening its dependence on Russia, and, at last, was built an oil pipeline completely passing through its territory. For the oil pipeline exploitation was founded “Kazakhstan-China oil pipeline” company to be controlled by the state oil companies of China and Kazakhstan on equal terms⁶. The parties also negotiated about a gas pipeline construction.

One might say that the president of Kazakhstan partially managed to reduce his country’s dependence on Russian companies, however, the official Astana is still negotiating with other countries, including Iran and Azerbaijan, over oil transportation and other routes.

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Another materials of author

• NEW ENERGETIC SITUATION IN SOUTH CAUCASUS[10.11.2008]
• THE ISSUE OF THE CASPIAN SEA STATUS AND THE TRANS-CASPIAN GAS PIPELINE[27.03.2008]