Caspian: Bishkek looks to duty-free Kazakh oil

On 25 July, the Kyrgyz and Kazakh authorities conducted a new round of consultations in Bishkek about Kyrgyzstan’s forthcoming membership in the Eurasian Economic Union of Kazakhstan, Russia and Belarus. The meeting’s agenda covered agriculture, water resource management, the joint control of the border and energy trade. The Kyrgyz delegation was headed by economy minister Temir Sariev while Kazakhstan was represented by Deputy Prime Minister Bakytzhan Sagintayev.

As the two states’ media reported, the key result of last month’s consultations has been Kazakhstan’s promise to consider the possibility of duty-free exports of oil products to its southern neighbour, at the level of 100,000 tons in 2014 and a further 300,000 tons in 2015. Astana has also pledged to examine the Kyrgyz government’s request for a “special customs regime”, to be applied to certain categories of goods that Bishkek considers “strategic” for the domestic market, by the end of August.

This positive demonstration of neighbourly relations comes at a time when Kyrgyzstan is taking pains to resolve a major customs dispute with Kazakhstan. As we reported in our previous issue of Caspian Focus, some 480 road tankers full of Russian fuel have been blocked at the Kazakh-Kyrgyz border since April because of the lack of necessary paperwork. Kazakhstan’s customs officials have repeatedly insisted that the fuel was seized from “smugglers”. In fact, the tankers were shipped to Kyrgyzstan by Russia’s Rosneft whose CEO, Igor Sechin, recently wrote to Kazakhstan’s prime minister Karim Massimov with a plea for help.

While the merchandise has not yet been cleared, despite the direct involvement of Sechin who famously belongs to Vladimir Putin’s inner circle, fuel prices in Kyrgyzstan continue to rise incrementally. This is largely due to seasonal shifts in supply and demand, as well as June’s fire at the Achinsk oil refinery owned by Rosneft in Russia’s Krasnoyarsk region. 

In the present conditions, the seized Russian fuel would be more than welcome in the Kyrgyz market to ease the speculative pressure. As for Rosneft, it will have to pay hefty demurrage charges until the cisterns are allowed to cross the border.

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© 2014 Menas Associates