Crossroads Asia | Economy | Central Asia
The timing of the decision has naturally raised some perplexity, but of greater consequence is the lack of diversification of Kazakh oil export routes.
On July 6, a Russian court ordered the Caspian Pipeline Consortium (CPC) to suspend operations for 30 days. CPC transports oil from Kazakhstan to Russia and to the edge of the Black Sea. Although managing just over 1% of global oil, CPC is critical to Kazakhstan; about 80 percent of Kazakhstan’s oil exports go through the Novorossiysk oil terminal.
The timing of the decision naturally raised some perplexity, which came just two days after Kazakh President Kassym-Jomart Tokayev Charles Michel said this to the President of the European Council by telephone that Nur-Sultan was “ready to use its hydrocarbon potential for the sake of stabilizing global and European markets.”
Early last month, the European Union has imposed a partial ban on Russian oil imports as part of a sixth sanctions package in response to the Russian invasion of Ukraine. But the ban on Russian maritime crude oil won’t go into effect until December. As a Bloomberg article pointed out in late June, Russian oil exports to Europe have had already begun to rise, mainly due to shipments in Italy to Russian-owned refineries and the increase in purchases by Turkey. In any case, Europe’s goal is to reduce its imports of Russian oil and Kazakhstan is an option, but Kazakhstan exports to Europe depend on Russian pipelines.
The chain of events does not necessarily suggest tensions between Kazakhstan and Russia, although some certainly draw this conclusion. Rather, the dirty work of oil transport and the constraints Kazakhstan faces due to the lack of diversification of export routes are at the heart of the matter. On the latter, Kazakhstan faces a geographic conundrum: with Russia or China the main avenues available for oil exports, diversification is not that simple.
A CPC press release about the outage, he explains that in late April, Rostransnadzor, the Russian federal agency that oversees transport, including pipelines, ordered an audit of the company operating the Russian part of the pipeline, CPC-R. After the audit concluded in May, it “revealed a number of documentary violations under the Oil Spill Response (OSR) plan.”
On June 6, the CPC was issued a summons, requiring the violations to be addressed by the end of November 2022. But Rostransnadzor appealed to the court on July 5 for an immediate 90-day suspension of operations in Novorossiysk. The court ruled on a 30-day suspension, which the CPC said it would appeal.
While some will take special note of political timing, as discussed above, this is far from the first problem in Novorossiysk. ace Euractiv noted:
Novorossiysk terminal closures are frequent and it was previously closed in June due to the discovery of 50 WWII-era explosives in the harbor waters. It was also closed in March due to damage suffered during a storm. During the three-week close, the world market lost around one million barrels of oil.
And indeed, the audit identifying problems with the oil spill response plan is not necessarily a shock. In Aug 2021, a spill occurred in Novorossiysk while loading a Greek oil tanker. Although the CPC said the spill was quickly contained, analysis of satellite images from the Space Research Institute of the Russian Academy of Sciences suggested the spill was larger than the company claimed. Evgeny Lupyan, deputy director of the institute, reportedly said: “Estimates show that this is about 40, 60, 80 tons of oil. By all accounts, it is much more than the 12 tons declared by the company. A spill of this magnitude is certainly unprecedented for the Black Sea. “
ON June 29, 2022 The CPC paid Russia 5.282 billion rubles ($ 83.6 million) compensation for damage caused by the August 2021 spill.