Oil Politics: Kazakhstan Walking a Thin Line between Russia and China

Third is regime type. Since independence foreign policy has been used as a legitimizing tool by the governing elites. Given that entirely credible democratic elections do not take place in the country, elites turned abroad to construct an image of international engagement, taking part in a long series of low-cost and high profile international fora rife with symbolic weight, as Edward Schatz explains.

Along the same lines, although with considerably more substance, lies Kazakhstan’s membership in multilateral regional organization. For the sake of conciseness, I’m going to briefly address only two of them, the Shanghai Cooperation Organization (SCO) and the Eurasian Economic Union (EEU). The SCO, a Russia and China-led initiative, is the largest multilateral organization on the Eurasian continent. Its operations focus on Economic, Military and Cultural cooperation. The EEU, a Russia-led initiative, is a much smaller organization modelled on the European Union, but arguably with larger impact on the lives of ordinary Kazakhs. The idea of this organization was floated by Nazarbayev himself in 1994, but became reality much later. Nowadays it constitutes an integrated single market, however with exceptions, and a cumulative GDP of over 4 trillion US dollars (PPP). The union operates through supranational and intergovernmental governing bodies, where all countries are equally represented.


Forth, and crucial, is natural resources endowment. Kazakhstan holds the world 11th largest oil reserves. The Kashagan and the Tengiz oil fields, located in the Norther Caspian region, are among the world’s largest, and currently oil accounts for 70% of national exports and 40% of government revenue.

The Kazakhstan-China oil pipeline runs from the Caspian basin to the Chinese province of Xinjiang, and it is the first China sponsored pipeline to import oil directly from Central Asia. It plays a crucial role in Beijing’s quest for energy security, allowing for diversification from Russia and the Middle East. It is owned by KMG, a Kazak state owned oil and gas company, and CNPC, a Chinese energy giant, ranked 4th in 2017 in Fortune Global 500.

Two other major pipelines are geared towards Russia. The Caspian Pipeline Consortium Pipeline, which runs for over 1500 km, exports oil from the Tengiz field to Russia’s Black Sea coast. Additionally, the Altyrau-Samara Pipeline, north bound, exports oil from the Kashagan field to Russia’s Transneft distribution network. It’s fundamental to notice that both pipelines, even when taken separately, have larger capacity than the one directed to China. The inference is simple: even though China has larger economic capacity, and recently has been more willing to invest in Kazakhstan, Russia still enjoys a better standing on the Kazak oil market due to the historic legacy bounding the two countries together.

Lastly, there is a proposed project for a 500 to 600 barrels-per-day Trans-Caspian Oil Pipeline, which would run from the Kashagan field to the Azeri capital Baku. This development would allow Kazakhstan to export its oil to Europe, through the BTC Pipeline, which connects Baku to Ceyhan, a port on the south-eastern Mediterranean coast of Turkey. This idea is strongly supported by Total, which holds a significant stake in the BTC pipeline, while it is opposed by Russia and Iran.

A smaller, but still relevant role is played by gas pipelines. When compared to its enormous oil capacity, Kazak gas production is modest, and the primary function played by the country is that of guaranteeing the safe transit of Turkmen gas. Ashgabat, on paper, has two major pipelines departing from its territory directed to Russia and China, both transiting Kazakhstan, and a work in progress deal with Iran. However, currently Turkmenistan is going through a rough period. The Central Asia-Center Gas Pipeline, a massive 90 Million mᶟ a year structure controlled by Gazprom is not operational, and China has recently indefinitely postponed the construction of the 4th line of the Central Asia-China Gas Pipeline.

Robert Ballante

Class of 1994. Double degree student of International Relations at the London School of Economics and visiting scholar at the Chinese Academy of Sciences. Robert was born in Saint Petersburg, Russia but at the age of 6 moved to Italy. He spent a year in Australia and currently resides in Beijing as part of his degree at LSE. Robert’s main interests are International Politics, focusing on the post-Soviet area, and Business Development, with a special interest for Startups. Robert is the co-founder of L-Move, an Open Innovation startup that bridges the gap between a business idea and its implementation. Likewise, L-Move provides a platform for the outsourcing of Research and Development problems for corporations.

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