Invest In Kazakhstan Maintaining The Flow P 44 50

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Transcript of Invest In Kazakhstan Maintaining The Flow P 44 50

Page 1: Invest In Kazakhstan   Maintaining The Flow P 44 50

Anthony Robinson explains why developing Kazakhstan’s export arteries is vital

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Page 2: Invest In Kazakhstan   Maintaining The Flow P 44 50

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CHINA TIPS THE BALANCEMoscow’s hard-nosed tactics have made Central Asian governments increasingly receptive to Chinese offers of investment. The benefits have already been impressive. After decades of leveraging its sole-buyer status to pay rock-bottom prices for Central Asian gas, much of it effectively re-sold at much higher prices to consumers in Europe or Ukraine, Gazprom was forced to change tack last year and pay ‘European’ prices of up to $150 per thousand cubic metres for Central Asian gas delivered to the Russian border.

At the same time, it stepped up investment in Uzbek and Turkmen gas fields, which was much cheaper and easier than developing its own distant and difficult gas fields beyond the Arctic Circle and the Barents Sea. Moscow also hoped to pre-empt China and the EU by securing the bulk of new supplies.

But the strategy of locking in increased volumes of gas from Central Asia has been undermined by the depth of the current economic recession in Russia and its main export customers in Ukraine and Europe. Heavily indebted Gazprom has been hit by a double whammy of sharply falling gas sales to Europe, partly as a result of its New Year cut-off in gas sales to Ukraine, and significantly lower income overall. Russia’s export gas prices have fallen in line with the global reduction in traded gas prices, which are linked to the oil price, albeit with a six-month delay.

After seeking to buy all the gas on offer from Central Asia, Gazprom suddenly found itself committed to importing more gas than it could sell to domestic and European customers. Rather than cut domestic production too sharply, it unilaterally curbed its purchases from Central Asia in April, as warmer spring weather reinforced the broader decline in demand from mining, metals and other big gas consumers hard hit by the recession.

Accustomed to deference from its former Soviet colonies, Moscow was offended when Turkmenistan insisted that contracts for the construction of a planned new 30 billion cubic metre export line from Turkmenistan, through Kazakhstan to Russia, would be awarded by an open international tender process – and not just handed to Russian companies.

Shortly after announcing this decision, the flow of Turkmen gas to Russia was interrupted by an explosion at a pumping station near the Turkmen/Uzbek border. The Turkmen authorities blamed excess pressure that had suddenly built up because Gazprom had not notified its Central Asian suppliers in advance of its decision to reduce demand.

The contrast with China could not be greater. Beijing forecasts economic growth at up to 8 per cent in 2009 and remains committed to securing stable foreign sources of energy and raw materials to fuel its continuing economic growth over the

next decades. With nearly $2,000 billion of foreign reserves, Beijing is increasingly perceived as a source of investment capital, as well as a growing market.

Despite concern over Chinese companies’ occasional old-fashioned disregard for increasingly tight environmental regulations, Central Asian governments welcome Beijing’s proclaimed policy of mutually beneficial solutions and respectful negotiations. It has also been noted that when Chinese companies offer to finance and help build big infrastructure projects such as pipelines, they get on with the job with eye-watering speed – unlike Russian projects, which tend to drag on for years, as the CPC pipeline saga illustrates.

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