Shut Up, Borat – the Tinderbox of Kazakhstan Oil
By Mark Leftly REPORTS FROM ASTANA
The gleaming towers of the capital city are monuments to black gold, but the Eurasian state is stuck in the middle between Western demand and keeping its Russian and Georgian neighbours sweet
From the inside of a translucent golden egg 97 metres in the air, one of the world’s great architectural playgrounds can be espied.
The vantage point offers the view of a blue-domed presidential palace flanked by two garish, golden office towers. Behind the palace is a pyramid, designed by Lord Foster of Thames Bank, the architectural colossus behind London’s erotic Gherkin and the wobbly bridge. The venue hosts concerts and drinks receptions. An exhibition none too subtly points out that, at 62 metres, it is nearly three times the height of its Parisian equivalent, the glass- and-metal Louvre pyramid.
In the opposite direction, there is the copper-coloured Ministry of Transport and Communications skyscraper, which stands by the enormous office complex of KazMunayGas, the state-owned energy company. Smack bang in the middle of this construction is a gap of several stories that resembles an entrance without a door. It represents a “gate into the future”, claim the tour guides.
Welcome to Astana, which has been the capital of Kazakhstan for just over a decade. The city’s big, vibrant, eclectic architecture will not be to all tastes, but one thing is for sure: had Sacha Baron Cohen ever visited Astana, Borat would have hailed from a different ‘stan.
The city is the vision of President Nursultan Nazarbayev, and he has been able to build it with petrodollars. There are at least 40 billion barrels of oil lying deep in the ground of a country the size of Western Europe, as well as in the Caspian Sea separating Kazakhstan from Azerbaijan. Only 15.6 million people share a gross domestic product (GDP) of more than $100bn (56bn). GDP growth averaged 9.6 per cent from 2002 to 2007, and it could get even better: the energy minister Sauat Mynbayev forecasts that gas production will be 62 billion cubic metres by 2015, more than double last year’s total.
But all is not as rosy as it seems, now that Russia has reasserted its influence in the region, taming Georgia by force in the dispute over the independence of South Ossetia and Abkhazia. On Thursday and Friday, Astana played host to the Third Eurasian Energy Forum, a conference set up by KazEnergy, Kazakhstan’s powerful association for oil and gas companies. While senior executives from Royal Dutch Shell and ExxonMobil, and political figures including Turkey’s energy minister and the ambassador of South Korea in Kazakhstan, gave talks – few made reference to Georgia. Yet the situation there and its potential impact on the energy industry – particularly the security of supply to the West – was what every delegate spoke about privately over shashlik, lukewarm horsemeat and cigarettes.
Kazakhstan is playing it cool, and last week President Nazarbayev offered to mediate in multilateral talks on the Georgian situation. For Kazakhstan cannot be seen to take sides, as it has huge oil and gas interests in both countries. The Caspian Pipeline Consortium pumps oil from Tengiz in west Kazakhstan to the Russian Black Sea coast; and maintaining good relations with Georgia is the key to diversifying Kazakhstan’s exporting routes, as the country is due to link up with BP’s $3.9bn Baku-Tbilisi-Ceyhan pipeline through the Kazakh Caspian Transportation System.
However, Campbell Keir, Shell’s chairman in Kazakhstan, tells an old joke that illustrates just how dominated the country is by Russia and China: “When a Kazakh wakes up, he opens his eye to the west to see if the bear is growling. If it isn’t, the Kazakh turns his head to the east to see if the dragon is breathing fire. If it isn’t either, the Kazakh gets out of bed.”
The EU is becoming increasingly dependent on Russia for its energy supplies, with fears escalating that it will use the threat of turning off the lights to wield political power. This argument was clearly noted by the US Vice-President Dick Cheney last week, when he talked to officials in Baku, the capital of Azerbaijan, about developing new pipelines out of the Caspian Sea that would not involve Russia. And in the private sector, BP was forced to sack Robert Dudley, the chief executive of TNK-BP, its joint venture with Russia at the end of a long, ugly dispute, – thereby losing a degree of corporate contro. The EU does not need a Kazakhstan that is heavily influenced by Russia.
Privately, however, Kazakh energy magnates back Russia’s growing influence. The head of a supplier to the oil industry puts it bluntly: “We support Russia.”
But he concedes that the diplomatic game has to be played, as Kazakh investments in Georgia and Russia are “50:50″. And an adviser to a Kazakh-Russian joint venture adds: “We are talking to the Georgian government about the future. We have to protect our investments.”
Back at the Astana conference, leading Kazakhs play down the implications of Russia’s renewed political confidence. Kairgeldy Kabyldin, president of KazMunayGas, insists when pressed that the huge number of Western and other countries interested in working in Georgia and Russia will help stabilise relations. In essence, he argues, the Georgian and Russian authorities will be keen to avoid conflicts and disputes in order to secure investment from multinationals.
“A factor of stability will be the participation of private companies [in the Russian and Georgian economies],” says Mr Kabyldin, adding that oil supplies coming by rail through Georgia had only been delayed “by a few days” as a result of the conflict.
Karim Massimov, the Kazakhstan prime minister, tries to soothe any concerns felt by his audience: “Kazakhstan is conscious of its growing international significance as a global supplier of oil, gas and petroleum products, and is aware of the resulting international responsibilities.” Similarly, Mehmet Hilmi Gler, Turkey’s energy minister, argues: “There are common challenges in Eurasia; the objective is world peace.”
Bonifacio Garcia Porras, a cabinet member in the European Commission’s energy department, is a little more direct: “The European Union wants to step up relations with its neighbours. [We are] intensifying the security of our energy supplies. Energy brings us together.”
Later, he adds: “It is important for Russia not to be isolated from Europe. We want to enhance the diversification of supply.”
But was the EU – when talking of new supply routes – falling into “the Nabucco trap”, wondered one senior oil executive on Thursday. Nabucco is an $8bn (6.5bn) pipeline that will pump natural gas from Georgia and Turkey to central Europe. The EU is heavily behind the project, as it seeks to alleviate its supply concerns, but the executive says: “Russia is winning. Russia will let the Central Asian states build it. Read Tolstoy’s last novel and just change the date to 2008.”
Tolstoy’s final work was Hadji Murat, a book about an Avar – the Avars are a nomadic people living in Eurasia and the Caucasus – who joins the Russians he had previously been fighting. The implication is that even though Georgia has just fought Russia over the separatist territories, the country is ultimately in Russia’s sphere of influence. In the final analysis, then, Russia would control Nabucco, meaning that it would not be the independent-energy route the EU craves.
For all this, Mr Massimov, talks of a “multi-vector policy”, meaning that he wants to create new trade routes for the country’s energy supplies. This implies that it would be less reliant on – and therefore more resilient up against political pressure from – Russia as a customer.
However, Shell’s Mr Keir hints that the EU might have to woo Kazakhstan if it is to get the security of supply it so desires: “It is just as attractive for Kazakhs to send energy to Russia as it is to [send it to] Europe. You have to be aware of that.”
Also, as President Nazarbayev pointed out last week, Russia’s and Kazakhstan’s futures are very much tied together, describing his neighbour as “our natural economic and political partner”.
Looking out from the Tower of Bayterek, which holds the golden egg viewing platform, it is hard not to be impressed by what the President has got for his petrodollars. Bayterek was built as a symbol of Astana’s happiness, the gold colour representing strength. This comes from Kazakhstan’s energy supplies; and the EU and US will hope that the country remains independent and tough, ensuring its oil and gas continues to be pumped around the world.
(c) 2008 Independent on Sunday, The. Provided by ProQuest LLC. All rights Reserved.