Kazakhstan aims to strike a deal later this month to sell gasoline to neighbouring Kyrgyzstan, posing a threat to Russia’s market share.
According to the Astana government, Kazakhstan now has a surplus supply of the fuel for the first time in years, following the completion of a lengthy modernisation project at its three main oil refineries. As a result of these upgrades, national production of gasoline rose by 21.8% in the first nine months of 2018.
Addressing reporters in late December, Kazakh Energy Minister Kanat Bozumbayev said he expected a supply agreement to be signed with Kyrgyz authorities this month. Exports would then begin in February, he said.
The minister noted that Kazakhstan had originally intended to start selling gasoline to Kyrgyzstan in November last year. However, both sides took longer than anticipated to approve a draft of the supply agreement, he said.
Kyrgyzstan receives almost all of its motor fuel from Russia, lacking any significant refining capacity of its own. It was contracted to receive 460,000 tonnes of duty-free Russian gasoline last year.
Kazakhstan currently prohibits the sale of gasoline to Kyrgyzstan, despite their both being members of the Eurasian Customs Union (EACU), a body that encourages the free flow of trade. The step was partly taken to ensure Kazakhstan’s own domestic needs were covered, prior to the completion of refining upgrades. In practice this ban was ineffectual, though, resulting in the illegal smuggling of gasoline across the countries’ shared border.
Relations between Astana and Bishkek have improved dramatically since Sooronbai Jeenbekov replaced Almazbek Atambayev as Kyrgyzstan’s president in November 2017. Kazakhstan had introduced strict controls at its border with Kyrgyzstan earlier that year, which Bishkek claimed amounted to an economic blockade. After taking office, Jeenbekov pledged with his Kazakh counterpart Nursultan Nazarbayev to restore ties, and the border restrictions were lifted.
Kazakhstan is looking to tap other gasoline markets in Central Asia as well, including Tajikistan and Afghanistan. Russia’s Rosneft, Gazprom Neft and Forteinvest currently dominate supply in the region.
Under an accord with Moscow signed in 2014, the government in Astana banned the export of motor fuel to countries outside the EACU, which besides Kazakhstan and Kyrgyzstan includes Armenia, Belarus and Russia. It agreed to do so in return for the supply of duty-free fuel from Russia. In October last year, however, Kazakhstan secured the latter’s consent to lift the export restrictions.