For the third time since the beginning of the military invasion of Ukraine, Russia has blocked the export of Kazakh oil to the EU through the terminal in Novorossiysk. Is this the Kremlin’s reaction to President Tokayev’s course?
There are such coincidences! On July 4, 2022, the President of Kazakhstan, Kassym-Jomart Tokayev, in a telephone conversation with the President of the European Council, Charles Michel, expressed his readiness to help the EU overcome the current energy shortage.
And on July 5, the district court in the Russian port of Novorossiysk ordered to suspend the operation of the sea terminal for 30 days, through which the main flow of Kazakh oil passes in the European direction.
The oil pipeline of the Caspian Pipeline Consortium (CPC), laid from the huge Tengiz field in western Kazakhstan through Russian territory to the Black Sea, ends in Novorossiysk. At the consortium’s facilities in Novorossiysk, Rostransnadzor discovered violations of environmental legislation and demanded in court to suspend their production activities for 90 days.
This does not mean any actual case of environmental pollution. According to the Russian media, citing the CPC, the regulator revealed “documentary violations under the oil spill response plan.” In other words, the operation of the oil loading terminal was suspended for a month due to incorrectly drawn up instructions.
Kremlin sends signals to Tokayev to comply
“I think the shutdown of the terminal that ships oil near Novorossiysk from the CPC pipeline is one of a series of events occurring for purely political reasons,” Mikhail Krutikhin, a Russian energy expert and partner at the consulting company RusEnergy, told DW.
This is not the first time that court decisions have been made in Russia, as he put it, “either for political reasons or in order to squeeze out part of the property in favor of state-owned companies.” An example of this is Gazprom’s entry into the Sakhalin-2 consortium. “There are a lot of such ‘environmental’ reasons in the history of the Russian oil and gas sector,” Krutikhin recalled.
Putin took offense at Kazakhstan and started a trade war
“I am inclined to consider the decision of the court as a response to the last statement of the President of Kazakhstan. He expressed a desire to help with oil and gas from Kazakhstan to solve the problems of the European Union, where some shortage may form due to the embargo on the supply of Russian oil and petroleum products, and as a result of the fact that Russia is reducing gas supplies to the European Union,” Mikhail Krutikhin commented on the situation.
The third stop of the CPC since the beginning of the invasion of Ukraine
The court’s decision should not be seen as a direct response to Tokayev’s statement about his desire to help the EU with energy, Leyla Aliyeva, a political scientist and expert on Eastern Europe from Oxford University, said in a conversation with DW.
“Rather, it was a reaction to the increasing tendency of Kazakhstan to behave independently, and it fell into the same stream.” In this regard, she recalled Tokayev’s June speech in St. Petersburg at the SPIEF, where he spoke about “how he treats separatist movements in Ukraine. Of course, everything that is being done now, in the post-Soviet space, should be perceived in a political context” , Alieva is sure.
The decision of the court in the Russian Federation will entail the third long stoppage of the shipment of Kazakh oil in Novorossiysk during the war between Russia and Ukraine that began on February 24.
On March 22, the port announced that as a result of a storm, two of the three remote mooring units (TLUs) used to load oil into tankers were out of order.
“During the 20-year history of the oil pipeline, it has never failed because of the wind,” noted the German economic newspaper Handelsblatt, which even then suspected Russia of deliberately disrupting the export of Kazakhstani oil to the European market.
The publication referred to the data of the German Meteorological Service (Deutscher Wetterdienst, DWD), which recorded in those days a strong, but quite typical storm for this region, and not at all a destructive hurricane.
One of the two decommissioned TLUs returned to service on April 23, but Kazakhstan’s oil production fell by about 12 percent this month, according to the International Energy Agency (IEA). Another TLU was repaired before July 1.
In the meantime, on June 15, allegedly planned work began in the port waters to search for underwater mines from the Second World War, and CPC was again able to ship oil for export within 10 days only through one TLU. Then the search for “explosive objects” was extended for another 10 days until July 5. Well, on this day, the district court was sitting in Novorossiysk, which closed the entire terminal for a whole month.
The Kremlin wants to test the reaction of Kazakhstan with such a court decision, Leyla Aliyeva suggested. “Kazakhstan can negotiate and make some concessions. I think that this is exactly what is counted on. But the effect, in fact, from such pressure is usually the opposite. Countries are beginning to more intensively look for alternative sources of supplies, alternative alliances and markets,” – said the political scientist.
Baku-Tbilisi-Ceyhan oil pipeline as an alternative for Kazakhstan
However, the question arises, how to deliver the raw materials they need so much now to the Europeans? The route through Novorossiysk is becoming more and more unreliable, pumping through the Russian part of the Druzhba oil pipeline and further to Ust-Luga in the Baltic also looks unpromising, since tankers under the embargo and sanctions against the Russian Federation are unlikely to want to enter this Russian port.
That is why Kassym-Jomart Tokayev, in a conversation with Charles Michel, called on the European Union, according to official reports, “to cooperate in the development of alternative transcontinental corridors, including the Trans-Caspian international transport route.”
This, in particular, is about the export of Kazakh oil bypassing Russia along the bottom of the Caspian Sea to Azerbaijan, where the oil pipeline begins, going from Baku through Tbilisi to the Turkish Mediterranean port of Ceyhan. This would be a viable alternative to the increasingly unreliable CPC. But for this, an oil pipeline in the Caspian still needs to be built.
Kazakhstan actually already has access to the Baku-Tbilisi-Ceyhan oil pipeline, but so far the volumes of deliveries of Kazakh oil through it are minimal: “Perhaps, additional options will be sought here too,” Leyla Aliyeva suggested.
From the West, Kazakhstan will be involved in the search for joint solutions for the delivery of energy resources from this country to the EU, Aliyeva is sure.
“I think that very serious negotiations are going on now regarding alternatives to Russian oil and gas. And since Kazakhstan is a very important source, first of all, of oil, I think that it is very closely attracted by both the United States and the EU as an alternative source energy resources,” added a political scientist from the University of Oxford.
Will Kazakhstan make concessions to the Kremlin?
For Kazakhstan, stopping exports through the port of Novorossiysk will be a “big and long” problem until alternative solutions are found, Mikhail Krutikhin is sure.
Kazakhstan has no alternatives to send oil to the EU, and it is only possible to partially compensate for the stoppage due to a difficult route – “by small tankers through the Caspian Sea to Azerbaijan, from there via small oil pipelines or by rail to Georgian ports, then – by tankers by sea or to Makhachkala, and from there – along the Russian oil pipeline to the same Novorossiysk”.
Nevertheless, Kazakhstan is unlikely to make concessions to the Kremlin, Krutikhin believes. “Kazakhstan shows that it is a sovereign state pursuing its own policy. I think no pressure will make the leaders of Kazakhstan abandon their position against aggression,” Krutikhin said, referring to Russia’s military invasion of Ukraine.
The role of oil from Kazakhstan for Germany and the entire EU is growing
Germany has been buying Kazakh crude oil for more than two decades, but its share of the German market has grown rapidly in the past few years. In 2021, Kazakhstan, having overtaken Norway and the UK, for the first time took 3rd place among the largest countries supplying oil to Germany after Russia and the United States.
And when the EU embargo on Russian oil comes into force at the end of 2022, the role of this Central Asian country in supplying not only Germany, but the entire European Union can grow significantly. Indeed, in 2019, before the coronavirus pandemic, Kazakhstan, with a share of 7.65%, already entered the top five oil suppliers to the European Union, slightly ahead of even Saudi Arabia and the United States.
For the European market, Krutikhin does not expect big problems in connection with the shutdown of the terminal and the cessation of deliveries of Kazakh oil to this region. “This may worsen the supply of oil refineries in the EU, but I cannot estimate the scale of these possible troubles. After all, there is no shortage of oil on the world market now – it has become much cheaper when the market understands that there is no shortage and that a drop in demand is possible as a result of the expected economic recession “, – Krutikhin analyzes the situation.
Kazakhstan and Russia: who will be able to deliver a more tangible blow to whom?
Both Kazakhstan and Russia are far from having exhausted their possibilities to deal each other a mutually sensitive blow in case the confrontation continues.
“I do not rule out that Kazakhstan can use the oil pipeline from Omsk through Pavlodar and further to China. It carries 10 million tons, and this is Rosneft oil. But I think that by the same” court decision “it can be replaced with Kazakh oil and sent her to China,” suggested Mikhail Krutikhin.
Russia, in turn, could hit those Kazakh energy companies that have joint projects with the Russians, for example, on the shelf of the Caspian Sea. But Kazakhstan also has the tools to make life difficult for its Russian partners, Krutikhin adds. “In particular, Gazprom’s Orenburg gas processing plant works only because it receives gas from northern Kazakhstan. Otherwise, it will stop.”
The unleashing of a trade and economic war between Russia and Kazakhstan will further intensify the processes of disintegration in the post-Soviet space
. “We have seen this for a long time. The economic, financial influence of China in Kazakhstan and other countries of Central Asia is much greater than the influence of Russia. And it is getting stronger. The importance of Turkey is strengthening. And, given the policy of Russia and its attitude towards the civilized world, this section will be strengthened “, – says Mikhail Krutikhin.
The current conflict has revealed a changed balance of power in the region, Leyla Aliyeva adds: “We must take into account that the EU has become a real counterbalance. The EU now ranks first in Kazakhstan’s exports and is the main one in direct investment in Kazakhstan. During this time, there have been quite serious changes in terms of balance of power in Central Asia and especially in relation to Kazakhstan”.
Leaders in the former Soviet Union and Eastern Europe are closely monitoring the balance of power in the region as Russia’s conflict with Ukraine and the Western world changes as a result of Russia’s conflict with Ukraine and the Western world, Aliyeva says: in it, although it can bring a lot of problems to those who go to confront it.”
Source: Russian service DW
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