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 As an outcome of high-level talks in Berlin at the end of September involving German chancellor Olaf Scholz and Kazakh president Kassym-Jomart Tokayev, Kazakhstan is increasing oil supplies to Germany on a long-term basis – by around 2 million tonnes annually, and possibly even more in the future. At first glance, such an agreement is undoubtedly beneficial to both sides:  Berlin is – albeit partially – obtaining an alternative to Russian oil against a backdrop of sanctions introduced by the EU against Russia, which involve a ban on the purchase of the Russian fuel.

Kazakhstan is increasing its exports of oil and diversifying supplies of its fuel – something Astana has been aiming at for a long time now.  Even Russia benefits from this, since Kazakh oil supplies go through its territory via the Druzhba oil pipeline.  But is everything really as rosy for Berlin as it would seem, or are there hidden pitfalls in this?

 Until the war in Ukraine, Germany bought 35% of its total oil imports from Russia – around 28 million tonnes out of just over 80 million tonnes. However, after the second stage of the oil embargo came into effect, Germany began to systematically switch away from purchasing Russian fuel and, according to data from Germany’s Federal Statistical Office (Destatis), just 3,500 tonnes of Russian oil were imported to Germany in January 2023.  This was just 0.1% of Germany’s total import of oil. 

The cessation of oil supplies from Russia has been almost entirely compensated for by purchases of the fuel from Norway, Kazakhstan, the United Kingdom, the United States and the UAE.  In all, Germany imported around 81 million tonnes of crude oil in 2022, as against 81.4 million in 2021, prior to sanctions. The volume of Germany’s oil imports have been consistently falling since 2007.

Russia’s share of German oil supplies has thus fallen to a meagre 0.1% towards the end of 2023.  Berlin is therefore consistently continuing to seek new sources of oil imports.  The purchase of Kazakh oil is important for Germany, and it is no coincidence that in September Olaf Scholz spoke in favour of increasing volumes of crude oil supplies from Kazakhstan.

Germany received a first consignment of oil from Kazakhstan, amounting to 20,000 tonnes, in February 2023.  This fuel is supplied to the oil refinery in the German town of Schwedt, which received Russian oil before the war in Ukraine.  As the Argus Media Group, an international, independent price-reporting agency specializing in the energy and commodity markets notes in a report, the composition of the Kazakh oil is virtually identical to the Russian Urals variety and is thus ideally suited in its characteristics to the Schwedt refinery, which is configured for Urals. This undoubtedly makes the fuel from Kazakhstan even more attractive to Berlin.  

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It should be noted that this plant provides 95% of supplies of petrol, diesel, fuel oil and kerosene to Berlin, Brandenburg and much of north-eastern Germany.  A third of the bitumen essential for road building in Germany is also produced in Schwedt.

Under existing agreements, Kazakhstan should already have supplied Berlin with 1.2 million tonnes of oil this year. However, results for the year show that the amount will be somewhat less, at around 900,000 tonnes.  Astana explains this as being due to “technical delays,” and promises to increase supplies to Germany next year to 2 million tonnes if necessary.   What’s more, as Kazakhstan’s then energy minister Bolat Akchulakov stated at the beginning of this year, the maximum amount of oil that the country can supply to Germany annually is 6-7 million tonnes.  However, experts doubt that Astana will be able to implement such ambitious plans.  

Oil analyst Julian Lee of Bloomberg First Word points out that Kazakhstan may simply not have enough oil to increase supplies to Germany.  Currently, Astana already exports 65 million of its 89 million tonnes of total annual oil production each year.  In March this year Kazakhstan was unable to find enough fuel to supply its European partners.  There is also a shortage of oil products within the country: Kazakhstan has even been forced to buy up diesel from Russia at high prices. It turns out, notes Lee, that while Kazakhstan does not have enough oil to satisfy its domestic market, Astana is increasing exports.

Meanwhile, data from Britain’s Energy Institute show that the volume of production in Kazakhstan continues to fall. This is happening partly due to increasingly frequent power outages at the fields of the state company KazMunayGas.  Oil exports could in theory be increased, but this could only be done through taking the volumes needed away from Kazakhstan’s domestic market, which is not in good shape right now.

Julian Lee notes that according to KazMunayGas’s official data most of Kazakhstan’s available volumes of oil are exported under long-term contracts that already exist, and supplying Germany with the fuel promised in full without breaking these contracts is practically impossible. Lee concludes that there is almost nothing left for Germany.

Poland’s position could be another obstacle to increasing Kazakh oil supplies.  A private report based on the results of its own research by PERN, the operating company for the Polish section of the Druzhba pipeline, states that oil supposedly coming from Kazakhstan has a chemical composition that is entirely identical to the Russian fuel and is indistinguishable from the oil previously arriving at the Schwedt oil refinery from Russia.

Last year, Astana tried to pre-empt such accusations well in advance by giving its oil the new brand name of KEBCO (Kazakhstan Export Blend Crude Oil), to distance it from the Russian Urals brand.  There are no differences in the composition of KEBCO and Urals: this has aroused Warsaw’s suspicions that Berlin is continuing to buy Russian oil under the guise of Kazakh oil, bypassing EU sanctions.  The German authorities’ decision to block the country’s own customs from stopping oil supplies if its checks show that oil from a sanctioned country is entering Germany has poured oil on the fire.

Berlin says the main thing is that it is paying Kazakhstan rather than Russia for the oil, but Poland objects that such an approach still violates the EU’s sanctions since it is possible that all the money ultimately goes to Moscow, given its closeness to Astana.  In Warsaw it is thus claimed that Germany is buying Russian oil as usual, but simply in a roundabout way.

Germany and Kazakhstan’s agreements on oil are also becoming overshadowed by the fact that Germany remains dependent on Russia: Moscow continues to retain influence over Germany because supplies from Kazakhstan go through Russia’s part of the Druzhba pipeline. As Kazakhstan’s energy minister Almasadam Satkaliyev has acknowledged, it is for now difficult even to say what the increase in supply volumes will be: the figure will depend among other things on Russia, which reserves the necessary capacities in the Druzhba pipeline and moreover guarantees the unhindered transit of Kazakh oil through its territory.  The fate of agreements between Berlin and Astana therefore depends on Moscow’s good will.

“We must carefully follow how Russia acts in relation to Kazakhstan’s supplies through Druzhba,” notes Harald Haase, press secretary at the Ministry of Economic Affairs of Schleswig-Holstein. According to him, predicting Russia’s actions is difficult.

Julian Lee puts it more bluntly. He says that as long as the Schwedt refinery receives crude oil that transits through Russia, Moscow will be able to dictate its terms to Berlin thanks to its ability to turn off the tap at any moment.

It turns out that the winners from the German–Kazakh agreements may prove to be Astana and Moscow.  The former will increase its income thanks to a growth in fuel supplies to Germany.  The latter will achieve the same through transit charges and possibly by increasing sales of its own oil to Kazakhstan, if fears about Berlin purchasing Russian oil under the guise of Kazakh oil have real substance.  As for Germany, it will have to feel out and avoid all the pitfalls for the oil coming its way from Kazakhstan.