The Trump administration is trying to broker peace between Russia and Ukraine, but Kazakhstan is adversely impacted by the ongoing conflict. Drone attacks on the CPC threaten Kazakhstan’s oil exports, vital for its economy. Trump’s recent frustrations toward Russia might influence the broader geopolitical landscape.
In recent weeks, the Trump administration has attempted to facilitate a peace agreement between Russia and Ukraine amidst the ongoing conflict, which has entered its third year. Despite efforts to negotiate a ceasefire, Kazakhstan finds itself vulnerable as external tensions escalate, particularly through attacks impacting its primary oil export route, the Caspian Pipeline Consortium (CPC). The CPC is crucial for Kazakhstan’s economy, transporting roughly 1% of the world’s oil.
Recent drone attacks have damaged the Kavkazskaya oil depot in Russia, sparking accusations between Russia and Ukraine. In February, Ukraine had already led to a 40% reduction in CPC’s delivery capacity due to previous strikes. In 2022, Kavkazskaya facilitated the transport of 130,000 tons of oil monthly, highlighting its importance. Major stakeholders in CPC include Chevron, Shell, and Eni, who help maintain its operations.
Kazakh journalist Oleg Chervinsky mentioned that CPC was included in Trump’s ceasefire initiative; however, ambiguity remains on both sides’ adherence to the conditions established. Recent reports suggest that both nations have agreed to a 30-day ceasefire, albeit with stipulations from Russia perceived as unfavorable to Ukraine. Vladimir Chizhov, Russia’s deputy chairman of the defense committee, stated that a joint statement was not adopted due to disagreements, particularly from Ukraine.
Trump’s frustration towards Putin has increased over the perceived attacks on Ukraine’s leadership, specifically targeting President Zelensky’s credibility. The former U.S. President has even hinted at imposing hefty tariffs on Russian oil buyers, marking a significant shift in his rhetoric regarding the conflict and its leaders. This change contrasts sharply with earlier comments where he labeled Zelensky a “dictator.”
Kazakhstan’s energy sector is significantly affected by these developments. The CPC contributed $1.3 billion in dividends last year, vital for funding the Kazakh state budget and national oil company, KazMunayGas. As Kazakhstan aims to boost its oil production to address budget deficits, recent records show production reached 2.12 million barrels per day, primarily driven by the Tengiz oilfield expansion, managed by Chevron.
Plans are underway for Kazakhstan to enhance pipeline exports through Turkey, potentially increasing export capacity to 20 million metric tons per year. However, compliance with OPEC+ production quotas complicates the situation, as Kazakhstan’s output exceeds its designated target of 1.468 million barrels per day. Compensation agreements have been established among Russia, Kazakhstan, and Iraq to address overproduction through 2025.
Analysts from Standard Chartered suggest that market fears of a supply surplus have not yet come to fruition, predicting a shortage of supply relative to demand in the upcoming quarters. The EIA concurs, anticipating 0.1 mb/d excess demand in Q2 and a balanced market in Q3, providing a cautiously optimistic outlook for the oil markets amidst geopolitical tension.
Kazakhstan’s vulnerability in the face of the ongoing Trump-Putin conflict is heightened by attacks on its key oil export route, the CPC. As the U.S. seeks to negotiate peace between Russia and Ukraine, ambiguities in ceasefire agreements add further complexity. Kazakhstan’s increased oil production efforts, vital for its economy, face hurdles in compliance with OPEC+ quotas while market analysts suggest a potential supply-demand imbalance in the coming months.
Original Source: oilprice.com
