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kazakhstan to expand oil exports to germany via russian pipelines

Kazakhstan to Expand Oil Exports to Germany Via Russian Pipelines

Author: Samantha Fanger

Jan 30, 2023

Image source: Shutterstock

Kazakhstan's oil company, KazTransOil, announced that it would transport 300,000 tons of oil to Germany via Russian pipelines on January 13. Energy Minister of Kazakhstan Bolat Akchulakov said that a total of 1.5 million tons of oil was planned for export to Germany via Russia in 2023. The deal comes as Germany’s Economy Ministry announced they will halt all direct oil imports from Russia this year.

Export volumes have the potential to increase to up to seven million tons. The oil distributed by state-run KazTransOil will pass through the Druzhba pipeline which connects various parts of Eastern Europe with Russia. The passage of oil to Germany through Russia was approved by Rusia’s Ministry of Energy. 

The oil Germany sources from Kazakhstan is intended to replace some of the 20 million tons of oil a year that Germany had previously sourced directly from Russia. Current European Union (EU) sanctions on the use of Russian oil pertain to oil transported from Russia by sea. Since about 90 percent of Russian oil to the EU used to be transported by sea, the intended impact of this sanction is significant. However, these restrictions do not prohibit imports from countries, like Kazakhstan, that may transport oil via Russian infrastructure. Germany’s previous overreliance on Russian oil caused a dire need for immediate alternatives once EU sanctions on Russian oil and gas came into effect because of Russia’s war on Ukraine that started in February 2022. 

Russia has recently retaliated against Western sanctions by leveraging its control over major oil and gas pipelines in the region. Last September, Russia halted gas exports via the Nord Stream 1 pipeline. Kremlin spokesman Dmitry Peskov said that “problems in pumping arose because of the sanctions imposed against our country and against a number of companies by Western states, including Germany and the UK.”

The Kremlin has tried to maintain its firm grip on European energy dominance in this past year. Several times, Moscow choked off natural gas supplies to Europe through Kazakhstan’s Caspian Pipeline Consortium (CPC) - a route that brings oil from Kazakhstan to the Black Sea. In July, a Russian court decision ordered a suspension of CPC, citing an oil spill that occurred the year prior and an inspection that had “documentary irregularities on plans how to tackle oil spills,” as their reasoning for the temporary suspension. Initially, the court set the deadline of November 30 to repair problems with the facilities; however, the regional transport regulator halted transports in July.

In another instance in July, a Russian court ordered a suspension of the shipment of oil via the Caspian Pipeline Consortium (CPC)—a route that takes oil from Kazakhstan to the Black Sea. The court cited an oil spill that had occurred the year prior and an inspection that had “documentary irregularities on plans how to tackle oil spills,” as their reasoning for the temporary suspension. Initially, the court had set a deadline of November 30 to fix any problems with the facilities; however, the regional transport regulator halted transports in July. 

The CPC transports about one percent of the world’s oil supplies, and oil exports are a significant source of Kazakhstan’s revenue. The day after the pipeline suspension, Kazakhstan’s President, Kassym-Jomart Tokayev, expressed concerns over how the country might consistently continue exporting oil and called for looking further into a pipeline that would bypass Russia. 

The recent move to transport oil to Germany through Russian lines deviates from the much-discussed objective of divesting from Russian-controlled transport routes through diversification. This alternative means of transport would have required oil to be transported through the Middle Corridor, a route that would entail oil shipments crossing the Caspian Sea to then be transported by land via the Baku-Tbilisi-Ceyhan (BTC) pipeline. Using this route to bypass Russia would require an increase in funding for new infrastructure, while still not meeting all of the EU’s oil needs. Though no solidified plans have been announced, such a route could be a significant step towards necessary energy diversification within the region and onward to EU countries as Russia’s war on Ukraine continues. 

Russia’s willingness to agree to the use of its transport infrastructure might make it possible for Kazakhstan to provide additional oil to Germany, though Kazakhstan may require additional oil imports in order to meet their domestic market for oil and keep up with existing oil export commitments to Romania. This opens up a significant possibility that Kazakhstan could turn to Russia in order to import a similar amount of oil for its own use to make up for its contractual exports to the EU -- a deal that, according to some speculators, could be mutually beneficial. Regardless of whether there will be an oil swap between Russia and Kazakhstan, the exports to Germany will require cooperation from Russia.  That, in turn, could set Germany up for continued reliance on Russian energy resources that it had committed to wean itself from.  

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