China’s Growing Influence in Kazakhstan

As noted in the Eurasia Daily Monitor, Kazakhstan – despite its efforts to symbolically broaden its foreign policy with recent Presidential visits to places such as Syria, UAE, and the Balkans – and investments such as KazMunayGaz’s recent acquisition of a 75% stake in Romania’s Rompetrol Group, the Balkan pipeline route and East European markets are not the top priority for KazMunayGaz or the nation as a whole. As the article notes, Russia is losing its competition with China for Central Asian energy domains once monopolized by the Kremlin:

“…Only weeks before Nazarbayev’s trip to the Balkan states, Razvedka Dobycha KazMunayGaz (RD KazMunayGaz), an oil prospecting and extracting company affiliated with KazMunayGaz, signed a $930 million deal with the Chinese CITIC Group that allows RD KazMunayGaz to purchase 50% of the shares in CITIC Canada Energy Ltd. (CCEL), which is operating at the Karazhanbaz oilfield in Mangistau region, West Kazakhstan. Karazhanbaz’s estimated oil reserves are only 55 million tons, but the location was strategically important for Chinese oil giants to make inroads toward the energy resources of Kazakhstan.

…Last December CITIC Group acquired 94.62% of the shares in Indonesia’s national energy company for nearly $2 billion and, as promised, sold half of these shares to KazMunayGaz. The deal was welcomed by the Kazakh government, which had become alarmed by unrestrained Chinese expansion into Kazakhstan’s oil sector since the China National Petroleum Company purchased PetroKazakhstan in October 2005. Although last year, under intense public pressure, Astana bought back 33% of the shares in PetroKazakhstan from the Chinese and regained control over the strategically vital Shymkent oil refinery, China still holds key oilfields in Kazakhstan. At the latest session of the Kazakh-Chinese Cooperation Committee in Astana, Wu Yi, the deputy chairman of the State Council of China, stressed the importance of the construction of a Kazakh-Chinese gas pipeline to deliver Central Asian gas to western China. The 1,333-kilometer pipeline project, with annual capacities of 40 billion cubic meters, involves Kazakhstan and Uzbekistan. The Chinese have also reached an important long-term gas delivery agreement with Turkmenistan, which will supply 30 billion cubic meters annually for the next 30 years (Turkistan, November 22).

Despite the political risks, Kazakhstan cannot resist the temptation to reap economic benefits from oil and gas shipment to Iran and the Persian Gulf. Speaking at the latest meeting of heads of governments of Commonwealth of Independent States member countries in Ashgabat, Prime Minister Karim Masimov said he pinned big hopes on the meeting of the Kazakh-Turkmen transport commission scheduled for late November. The Kazakh government intends to sign an agreement with Turkmenistan on construction of a railway line from Aktau seaport in West Kazakhstan to Iran via Turkmenistan. The new rail line would significantly enhance Kazakhstan’s energy export possibilities to the Gulf states (Khabar TV, November 25).

…China’s growing influence in Kazakhstan’s energy sector is not limited to the oil and gas sectors. Recently the China National Nuclear Corporation and China Nuclear Guangdong Power Corporation purchased 49% of the shares in the Kazatomprom nuclear company. But Russia is not alone on the losing side. EU countries also face serious challenge from attractive Chinese, Iranian, and, potentially, Middle Eastern markets for Kazakh hydrocarbons. …EU countries must face the grim prospect of losing the oil battle in Central Asia to the Chinese.”

This entry was posted on Thursday, December 6th, 2007 at 11:02 pm and is filed under China, Indonesia, Kazakhstan, KazMunaiGas, Romania, Turkmenistan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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