May 13, 2008

Russia and Kazakhstan Are Not Frenemies

Looks like Russia and Kazakhstan are not frenemies, but best friends forever -- kinda.

Last week, Eternal Remont noted Kazakhstan’s drive to cut Russia out of new export routes, via boat, across the Caspian. At $125 a barrel, anything is possible these days.

Now comes word that Russia and Kazakhstan will also double the capacity of the existing Caspian Pipeline Consortium (pictured). If everything goes according to plan, the beast will pump a whopping 67 million tons of oil a year to Russian spigots at Novorossiysk on the Black Sea.

While the new build is vital if Russia is going to supply the planned Burgas-Alexandropolis pipeline in Southeast Europe, the deal will impact just about everyone currently pumping oil out of Kazakhstan. This includs Chevron, ExxonMobil, KazMunayGaz, and Agip of Italy. What's more, Moscow has been openly pressuring western companies to commit their stock of Kazak oil to the Burgas-Alexandropolis line upon completion.

And just in case anyone was under the impression this was a request, the Russian Federal Tax Service has already issued retroactive claims against Chevron and ExxonMobil for “unpaid taxes.”

Suddenly that Kazakh boat brigade to Azerbaijan is looking pretty darn good. How do you say “Aye Captain” in Kazakh?

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