All Over the Globe

Central Asia Starts under the Aegis of the World Economic Forum

Eurasia Economic Summit 2000, Almaty, April 26 to 28

ALMATY, March 1


�It will be an unusual Summit. People will not just sit: Hard working, but very informal,� the official spokesman of the World Economic Forum (WEF) announced on March 1 in Almaty.

On April 26 to 28 the Eurasian Summit will be held in Almaty under the aegis of the WEF that was held in Davos. Countries from the Central Asian region and the Caucasus will participate in the Summit. They will pay great attention to neighboring states that are key for the region: China, Iran, Russia and Turkey, the organizers stated.

The Summit initiated by the Kazakhstani President Nursultan Nazarbaev.

�Today about 150 businessmen and politicians confirmed their participation in the Summit. In all we expect 300 to 400 participants,� Thiery Malleret, Summit Responsible, Head of Central and Eastern Europe/Central Asia, World Economic Forum (e-mail: [email protected]. Please, reference on THE GLOBE).

�Participants that are unusual at first sight for the region will also participate in the Summit. For example, heads of Sun Microsystems, the world�s second Internet company. Obviously, they will speak of new technologies. On the whole, as usual, it is not the number of participants that matters to the World Economic Forum, but quality,� Malleret emphasized.

�We hope to create an atmosphere of Davos, an integral part of which is the free contacts,� Dulat Kuanyshev, the chairman of the Investment Committee RK and the main organizer of the Summit from the Kazakhstani side said.

The organizers mentioned the following main objectives of the Summit:

- to give participants the information of the region;

- to encourage highest-level interaction in political and economic spheres;

- to offer private businessmen to share their ideas with political leaders.

Among topics proposed for consideration there are perspective development of the region, domestic and foreign policy, problems of the infrastructure and others.

�For us not only preparation and holding of the Summit are important. We will attentively watch participants fulfilling their promises and agreements,� Malleret emphasized. �We will not have the result at only, by May 1. But significant results will become evident in some months after the Summit.�

Regional Summits under the aegis of the World Economic Forum are not extraordinary events. In the mid April the China Business Summit will be held in Beijing, in May two Summits will be held in Brazil and Egypt, in June � the Central and Eastern European Economic Summit in Austria, etc.

Obviously, the first Eurasian Summit is a call for its organizers. Moreover, it will be held in less than two months. For the time being it is early to speak of the fate of the event, but it is not obligatorily that further Eurasian meetings will be held on a rotary basis in other capitals of the region, Malleret thinks. We shall see what we shall see. THE GLOBE will keep you informed.

Algebra of the Kazakhstan�s oil magic

Either Russia has narrowed quotes or somebody is going to dodge?



Sergeant before the array of soldiers:

�Yesterday there were 10 spades. The first platoon took 5 spades.

Where are the rest 3?�

Comparison of the plans of Kazakhstani producers� supplies to the country�s refineries and their export plans for 2000, as well as actual data of 1999 reveals significant changes to the supplies structure. We find here obvious contradictions. It is planned:

(i) to increase supplies to refineries significantly � by over 70%, i.e. for the domestic consumption;

(ii) to reduce the volumes of export to foreign countries through the oil pipeline to Samara by almost 0.25%;

(iii) to increase the export to CIS countries by almost 40%.

At first sight we may conclude that Russia has seriously toughened its position and does not permit to export the Kazakhstani oil (point (ii)), demanding to increase supplies to Russia (point (iii)) on one hand; and that Kazakhstan itself is going to fill its market with cheap petrol and diesel fuel (point (i), on the other hand. However, after a more accurate analysis we come to a different conclusion: in 2000 somebody in Kazakhstan is going to earn or, if you want - to steal about US$ 100 million.


The table 1 gives the Kazakhstani producers� projected supplies of oil to local refineries and the projected export volume for 2000 signed in the late January by Vladimir Shkolnik, the Minister of Energy, Industry and Trade. All oil-producing companies are divided into three groups: the Western (19 companies), the Northern (3 companies), and the Southern (3 companies). The Western group has an access to the export pipeline via Samara, the Northern group � to the oil pipeline to the Russian refinery in Orsk, while the Southern group is blocked, i.e. it has the outlet to the Shymkent refinery (ShNOS).

In 2000 Kazakhstan plans to produce 30 million 335.8 thousand tons of crude oil, while in 1999 it produced 26.263 million tons (excluding condensate).

Let�s pay attention to some figures from the Table 1. In 2000 the total projected supply volume to all three Kazakhstani refineries is 10 million 195 thousand tons. This evidently exceeds the country�s real demand for fuel, according to any estimation. For example, in the previous year the supply volume to refineries was only 5 million 955 thousand tons (all data for 1999 are taken from the official press release published in Astana by the Ministry of Energy, Industry and Trade on February 2), i.e. they plan to increase supplies by over 70%. Yes, in 1999 there was a petrol deficit in Kazakhstan, but we should not forget that the country gathered the bumper grain crop.

Well, there are other estimations of the Kazakhstan�s demand for fuel of 8 to 9 million tons (Maksat Nurpeisov, Panorama, January 28; Valery Tovshtein, Kazakhstanskaya Pravda, February 9), but these figures are much less than 10,195,000 tons. On the other hand, the Ministry of State Revenues determines the demand for petrol of 580,000 tons per month, i.e. 2 million 320 thousand tons p.a. If we consider that petrol yield is 33%, as it happens at the Pavlodar refinery, the volume of required oil will come to a bit more than 7 million tons. Again it is less than 10,195,000.

Who needs this oil volume inside the country? Let�s suppose that the extra oil has been really planned and that it is to be ( don�t fear, Reader) sold abroad. I offer to compare the projected supply volumes for 2000 with the supply volume in 1999 to each of the three refineries. So,

- the Shymkent refinery - 3.502 in 2000 and 3.382 in 1999;

- the Atyrau refinery � 3.013 and 1.886 respectively;

- the Pavlodar refinery � 3.680 and 0.687 respectively.

Obviously, the main increase is planned for Pavlodar. All supplies of the Kazakhstani oil to the Pavlodar refinery are considered as SWAP, i.e. through Russia: oil from companies of the Western group is transported to the Samara pipeline, while Russia substitutes the equal volume to Pavlodar. The trickery is that if Kazakhstan does not need oil, the latter should not be supplied to local enterprises, as it may be sold to foreign countries.

Brief summary of 1999 �

preparation for 2000

An attentive reader will say that in this year the Pavlodar refinery is under repair. Okay, but let�s consider other figures of 1999:

1. The Pavlodar refinery: 687,000 tons processed, but the volume of supplied oil is somewhat bigger � 774,000 tons by SWAP plus about 150,000 tons through the railway from the Southern group, i.e. over 900,000 tons. About 250,000 tons of oil delivered to the Pavlodar refinery have not been processed � they were sold outside Kazakhstan.

2. The Shymkent refinery: All enterprises of the Southern group � Hurricane (2 million 546 thousand tons produced), Kumkol-Lukoil (1 million 6 thousand tons), the JV KazGerMunai (334,000 tons) � along with Kazakhoil (about 500,000 tons supplied from Aktyubinsk and Atyrau to the Shymkent refinery) transferred about 4 million tons of crude oil to the ShNOS (of the total volume of the Southern group about 300,000 tons were exported to foreign countries by the railway). Only 3 million 382 thousand tons processed. 618,000 tons were not processed, but exported abroad in 1999.

In all over 850,000 tons of oil resold abroad only from the two refineries. Obviously, the motive power of this resale was high oil prices in the world�s markets.

You will say that it is not a secret. The Minister Vladimir Shkolnik admitted the fact of oil resale by the country�s refineries in 1999. But the main element of the trickery�2000 happened in the last week. The government announced that it will collect the due dividends from the oil production inside the country �the royalty � not in cash, but in kind, i.e. it will collect oil (THE GLOBE #15 (433), 29.02.2000).

Royalty in kind � natural grabbing?

Well, to collect the royalty in 2000 in the form of oil, but not in cash. What is the difference, you will ask. The government does this, as a number of oil companies sell oil at a price twice less that accepted in the market. Thus, they underpay significant amounts to the budget.

Let�s look at this from another side: point (ii) � the government permits oil companies to export to foreign countries only 6 million tons (Table 1) instead of 7 million 835 thousand tons in 1999 (the data of the above-mentioned press release by the Ministry of Energy, Industry and Trade). This difference of 1.5 to 2 million tons is equal to the oil volume that the government hopes to get in the form of royalty (it s difficult to give accurate estimations, as it is unclear whether they are going to collect royalty in kind from all companies).

Moreover, I have additional arguments that it is not Russia that restricts the export volume to foreign countries, but the Kazakhstani authorities are cunning. The matter is that in fact, in 2000 the export volume to Orsk (1,800 thousand tons, see the Table) has not changed in comparison with 1,785 thousand tons in 1999.

The conclusion that I come to is: a significant part of this royalty �in kind� will not be used for requirements of the agriculture, as the Minister of Agriculture Sauat Mynbaev states. This oil will be sold to foreign countries.

Let�s apply to common sense. For example, how will you treat the thesis: �everything that belongs to the state, moreover if the state is so poorly governed as Kazakhstan, is being constantly robbed?� Functionaries have nicely prepared for the rich harvest�2000: the cost of oil �paid in kind� may be evaluated as about US$ 200 million.

For whom is this profitable?:

- First of all to those who will gain the right to sell this 1.5 to 2 million tons.

- This is profitable to owners of all refineries (on the sly, they may �re-export� obvious excess � do you remember, the country does not need 10.125 million tons?). Moreover, the Minister Mynbaev �offers to cheapen oil products for the sowing campaign by collecting royalty in kind� (quoted from THE GLOBE, 29.02.2000). Will anybody be indifferent to this difference of prices? Unfortunately, (it is unfortunately for me, as I sympathize with this official), I have to remember: Mynbaev came from Kazcommertsbank, the ShNOS main shareholding.

- This is profitable to the elite, as it lives on oil.

The elite has prepared well and in fact reserved both the export quote to foreign countries and oil in the form of royalty �in kind� to sell. Who is eager to participate in the division of US$ 200 million?

In 1999 61 billion 800 million tenge spent to construction of Astana.

(From statement by the first deputy of the capital Akim

Farit Galymov)

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