Kazakh oil for Belarus

Victoria Panfilova, columnist of Nezavisimaya Gazeta, specially for Vestnik Kavkaza
Kazakh oil for Belarus

President of Belarus Alexander Lukashenko has invited Kazakhstan to buy shares in the republic's largest state enterprises. The Belarusian leader made such an offer to Kazakh President Kassym-Jomart Tokayev in Yerevan on the sidelines of the Eurasian Economic Union summit. In addition, Minsk plans to buy 3.5 million tonnes of Kazakh oil and oil products annually.

Lukashenko invited Kazakhstan to buy shares in the largest Belarusian companies. “We aim to strengthen our relations greatly. We have put forward a number of proposals concerning trade in 'sensitive' products between our countries and have also invited your country to buy shares in our largest enterprises which are among the top companies in the world. This proves that we trust you very much," Lukashenko said yesterday at a meeting with Tokayev on the sidelines of a meeting of the Supreme Eurasian Economic Council, citing by the BelTA state agency. Lukashenko also noted that his upcoming visit to Kazakhstan will open a new stage in bilateral cooperation.

Tokaev described the head of the Belarusian state as “the most experienced” in the EEU. "We are looking forward to your official visit. The relations between our countries – and this is not an exaggeration or a rhetoric – are of strategic nature," the President of Kazakhstan emphasized.

During the Belarusian leader's visit to Nur-Sultan, an agreement on trade in oil and oil products is expected to be signed. The Belneftekhim concern notes that it is technically possible to supply Kazakh oil to Belarus via Druzhba pipeline through the port of Ust-Luga. But a final solution to the issue of pipeline oil supplies from Kazakhstan is possible only after reaching agreements with Transneft.

Earlier, in 2016-2017, Minsk already bought oil from Kazakhstan, and since it was transited through Russia, the cost of raw materials went up $4.8 million. Now the situation is different. Kazakhstan has seriously approached the issue of exporting its oil to Belarus. The main condition is that Minsk does not re-export Kazakh oil. Kazakh Deputy Minister of Energy Asset Magauov told reporters that the matter concerns deliveries of 3.5 million tons per year. And not just oil, but also oil products. According to him, a regulatory mechanism is being discussed: indicative balances, delivery schedules, obligations of the parties. And commercial details - who will sell and at what price - is the question of the next stage.

According to deputy chairman of the Belneftekhim concern Vladimir Sizov, possible routes for the delivery of Kazakh oil are currently being worked out. According to him, it can be both by rail and by pipeline. "Today, Kazakh oil is delivered to the port of Ust-Luga. That is, oil reaches the border of Belarus and then goes via the pipeline to the north. Nothing prevents it from going further to the Mozyr oil refinery or Naftan. Technically, there’s such an opportunity," the deputy chairman of Belneftekhim said. He recalled that there was already experience in the supply of Kazakh oil by rail to Belarus. It was also transited through Belarus via the Druzhba pipeline. "The volumes of Kazakh oil deliveries depend on the agreements of economic entities and economic feasibility,"  Vladimir Sizov said.

Earlier, Alexander Lukashenko spoke about the possibility of using the Odessa-Brody oil pipeline, and railway transport after it. But getting oil from Gdansk – via Poland – turned out to be the most profitable option, the Belarusian leader said at a recent meeting with Ukrainian journalists. “We could make a link and deliver oil to two oil refineries simultaneously. We will use two lines of the Druzhba oil pipeline initially. And we will use them to deliver oil in reverse mode. Not from Russia but from other places via Poland to us. The third option is getting oil via the ports of Lithuania and Latvia. And everywhere we will contribute to interests of transit countries," the head of Belarus said.

Director of the Group of Risk Assessment (Almaty), political scientist Dosym Satpayev told Vestnik Kavkaza that Kazakh oil would be expensive for Belarus, since it would go through the Russian pipeline system. "Kazakhstan has officially announced that an agreement on the export of Kazakh oil will be ready for the visit of the Belarusian president. At the same time, it was not said what agreements were reached with the Russian side, across which the Kazakh oil route will go. Therefore, it is first necessary to coordinate the issue with Russia. Lukashenko hopes to create a single energy market within the framework of the EEU. Within the framework of a single oil and gas space, he expected to get oil from Kazakhstan at favorable price. But the energy union has not been created, and it is clear that Lukashenko will have to work with Kazakhstan before its creation, which means that price offers will be uncomfortable for Belarus," Dosym Satpayev said.

However, it's not just about economy. Earlier, Belarusian experts suggested that Russia would not give the green light to this project. However, according to Dosym Satpayev, this is possible if Kazakhstan and Russia agree on mutual concessions on transit issues. "We must not forget that Russian oil and gas companies and pipeline companies, for example, Transneft, also have their own interests in Kazakhstan. For example, the supply of raw materials to China through Kazakhstan. It can be assumed that certain agreements and negotiations were held on these topics. Russia will not impede the supply of Kazakh oil to Belarus, and Kazakhstan will create optimal conditions for the transit of Russian oil to China via Kazakh pipelines. This is one of the compromise options," the expert believes.

According to him, the signing of the agreement is taken very seriously in Kazakhstan, although they understand its ritual character - as a step in support of Belarus. "In economic terms, this project is not a key one that would significantly affect Kazakh exports. The main buyer of Kazakh crude oil is Europe," Dosym Satpayev summed up.