Oil-rich US ally Kazakhstan looks to
China By Sergei Blagov
MOSCOW
- While Kazakhstan is keen to maintain its "important
military-to-military relationship" with the United
States, when it comes to business, Astana is not afraid
to look to its eastern neighbor and US rival, China.
Especially when it comes to a major new oil pipeline
from western Kazakhstan to China.
On Wednesday,
US Defense Secretary Donald Rumsfeld held talks with
Kazakh Prime Minister Daniyal Akhmetov, Defense Minister
Mukhtar Altynbaev and Foreign Minister Qasymzhomart
Toqaev about expanding military relations. "We talked
about the US support for Kazakhstan's sovereignty and
independence and our important military-to-military
relationship," Rumsfeld said after the meeting,
according to Radio Free Europe/Radio Liberty.
Earlier in the week, Kazakhstan's top oil
company, KazMunaiGaz, said that it would build a new oil
pipeline from western Kazakhstan to neighboring China.
The construction of the 1,300-kilometer, US$700 million
Atasu-Alashankow oil pipeline was due to start in
August, and would take two years to complete,
Kazakhstan's official Khabar news agency quoted Uzakbai
Karabalin, head of KazMunaiGaz, as saying.
Rumsfeld said that Washington was committed to
ensuring the security of Kazakhstan's portion of the
oil-rich Caspian Sea, adding that such security was
important not only for Kazakhstan, but also for the
world. Rumsfeld also asked Kazakh officials to become
more actively involved in the North Atlantic Treaty
Organization's (NATO's) Partnership for Peace program.
"We talked about the relationship that Kazakhstan has
with NATO's Partnership for Peace program and how
important we believe that is, and that we are grateful
for the strong and growing relationship we have and for
the friendship and for the steadfastness of the Kazakh
people," Rumsfeld said.
Relations with
Washington have strengthened since 2001, after the
terrorist attacks on New York and Washington, when
Kazakhstan offered the US-led coalition in Afghanistan
the use of an airport for emergency landings and
refueling. Last August, Astana sent about 30
peacekeeping troops to Iraq to help with demining and
restoring water supplies. It is the only Central Asian
nation to do so - other Muslim nations in the region
being reluctant to assist in the troubled US-led
occupation. "Kazakhstan is an important country in the
global war on terror and has been wonderfully helpful in
Iraq, and I came here to personally say 'thank you' and
express our appreciation," Rumsfeld said.
The
Associated Press quoted the Kazakh Defense Ministry as
saying the two countries signed a five-year cooperation
plan last September for delivery of helicopters,
military cargo aircraft, and ships for Kazakhstan's
Caspian Sea forces. Under the plan, the US will also
supply equipment for Kazakh troops and provide
anti-terrorism training.
Of the five Central
Asian nations, Kazakhstan received the most US aid last
year - $92 million. More than half - $49 million - was
targeted for security and law enforcement programs.
In the pipeline ... With the proposed
pipeline to China, Kazakhstan aims at funneling 73.5
million barrels (10 million tons) of crude oil a year to
China in the first stage, and the amount is to be
doubled eventually, according to Karabalin of
KazMunaiGaz.
The pipeline would need protection
and production guarantees. In terms of politics, China
has pursued aggressive policies against Uighur
separatists in its eastern regions - an approach that
Kazakhstan has effectively backed.
Kazakhstan's
government increasingly is working more closely with
China in the energy sector. In January, foreign minister
Toqaev traveled to Beijing and expressed hope that
construction of an oil pipeline from western Kazakhstan
to China might begin by spring. This projection
underscores Kazakhstan's desire to form broader economic
and security ties with the world's most populous nation
and a rising economic power both globally and in Asia.
Toqaev had traveled to Beijing for a meeting of
the secretariat of the Shanghai Cooperation Organization
(SCO) on January 15, when the body became a full-fledged
membership organization, comprised of China, Kazakhstan,
Kyrgyzstan, Russia, Tajikistan and Uzbekistan.
Since October 2002, Chinese officials have cited
strengthening cooperation in energy as a key tactic for
promoting SCO's goals. At one SCO meeting since then,
Chinese state planner Zeng Peiyan told members that
China hoped to cooperate with Russia and Central Asia to
immunize itself against a potential blockade of energy
supplies from the Middle East. Kazakhstan is China's
most logical source of Central Asian oil; a
groundbreaking for a pipeline in 2004 would make that
association as strong as any in the SCO.
China
is also turning its shared security concerns with SCO
members into treaties that promote Central Asian markets
and protect sources of Chinese energy consumption. China
has pursued exploitation of Kazakhstan's oilfields for
quite some time.
Last August, China National
Petroleum Corporation (CNPC) acquired 35 percent of the
North Buzachi oilfield from Saudi oil company Nimir
Petroleum. Later, CNPC took control of the field by
buying the remaining shares from ChevronTexaco, which
has tussled with Kazakhstan's government.
In
late December, China's Sinopec bought 50 percent of
three large blocs near the Tengiz field. The new
pipeline could make these investments quicker to recoup
and more valuable to Chinese consumers, while sizable
stakes in Kazakh energy projects give China better
access to Kazakhstan's oil.
For Kazakhstan,
Chinese investment partners might provide both money and
latitude. The government has tried for many months to
diversify its export options. For instance, earlier this
month, Kazakhstan announced plans to supply 21,000
barrels of crude per day (one million tons a year) to
Iran in 2004. Kazakh oil is now being shipped to Iran
from Aktau, a Kazakh port on the Caspian coast.
Sweet deal: On Wednesday, Shell
Middle East, through its Shell Kazakhstan Development
arm, said that with its partners it had taken a final
investment decision that could see about $29 billion
invested in the development of Kazakhstan's giant
Kashagan oil field. Shell is a partner in the
consortium, the North Caspian Production-Sharing
Agreement, with ENI of Italy, Total of France,
ExxonMobil Corp, ConocoPhillips and Inpex Corp of Japan.
The move ends months of delays, which have held
up the development of what is estimated to be the
world's largest untapped deposit. The Kashagan field was
discovered in 2000 and is estimated to have 38 billion
barrels of oil, making it one of the largest discoveries
in 30 years. Shell holds 16.67 percent of the project, a
stake which will rise to 20.37 percent on completion of
the previously announced purchase of part of British
Gas' shareholding.
The first oil from Kashagan
is expected to be pumped in 2008. Initial production is
expected to be 75,000 barrels of oil per day, increasing
to 450,000 barrels a day during the first phase of
development. Eventually full field production is
expected to amount to 1.2 million barrels per day.
Kazakhstan's plans to export 3 million barrels a
day of crude by 2015 heavily rely on Kashagan. Such a
volume is more than Russia exports today and would make
Kazakhstan one of the world's top exporters.
The
operating company, AGIP KCO, submitted its development
plan in December 2002. But the Kazakh government refused
to approve the plan because it implied that the first
commercial crude would flow in 2006, instead of 2005 as
previously planned. Subsequently, the Kazakh government
insisted on imposing a fine of several hundred million
dollars that the consortium refused to pay, hence the
negotiations dragged on for more than a year.
BTC approval: On February 23,
Kazakhstan's top oil executive announced that the nation
would formally join the US-backed Baku-Tbilisi-Ceyhan
(BTC) oil pipeline project. "We could sign an agreement
on joining the BTC soon," Karabalin of KazMunaiGaz told
journalists in Astana. Kazakhstan aims at funneling 73.5
million barrels (10 million tons) of crude a year via
the BTC, Karabalin said.
The 1,760km BTC
project, which is already half-built, is due to start
pumping in 2005 from Azerbaijan through Georgia and on
to Turkey. However, it is understood that without Kazakh
oil, the BTC may not reach the planned 1 million barrels
a day peak capacity.
Kazakhstan intends to link
up with BTC through a new port at Kuryk, which in turn,
would serve as a link to another port in Kazakhstan,
Aktau, 76km to the northwest. Eventually, oil from
Kazakhstan's Kashagan field would flow from Aktau to
Kuryk for shipment across the Caspian Sea to Baku and
the BTC. According to International Oil Daily, the port
at Kuryk should be ready by the time the first oil
begins to flow from Kashagan in 2007 or 2008.
Troubled waters: In recent months,
multinational oil companies have reportedly grown
disenchanted with the government of Kazakhstan for its
invasive business practices. These alleged practices
include changing laws in ways that severely undermine
existing contracts and imposing requirements that seem
useless, especially with regard to site inspections.
Moreover, foreign direct investment in
Kazakhstan brought an unwanted by-product: allegations
of bribes and kickbacks, known as "Kazakhgate." A US
grand jury in New York is investigating possible
corruption involving Kazakh officials in violation of
the US Foreign Corrupt Practices Act.
According
to some reports, Kazakh leaders repeatedly lobbied top
Bush administration officials, including Vice President
Dick Cheney, to either contain the criminal probe, or
get it dismissed altogether. US officials reportedly
rejected the Kazakh appeals.
Russian
interest: The Russian government has been keen
to remain in charge of lucrative business to manage oil
transit from Kazakhstan. Russia's deputy prime minister,
Viktor Khristenko, has been lobbying to raise Kazakh
crude transit via Russia to 19 million tons of crude a
year. Khristenko, who was appointed Russia's acting
prime minister earlier this week, was due to visit
Kazakhstan on Thursday for economic talks.
Russia has been eager to maintain its influence
over energy transit routes in the Caspian Basin. Russian
officials pressed the Kazakh leadership to agree to a
15-year deal under which Kazakhstan would commit to
exporting at least 15 million tons of crude oil per year
via the Baku-Novorossisk pipeline.
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