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EU embargo on Russian oil enters in force – what’s next for Central Asia?

Central Asia Materials 7 December 2022 17:37 (UTC +04:00)
EU embargo on Russian oil enters in force – what’s next for Central Asia?
Maryana Ahmadova
Maryana Ahmadova
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BAKU, Azerbaijan, December 7. It is not yet obvious, what are the expectations for the Central Asian countries, as the EU-proposed price cap on Russian oil has just entered into force, however, it is clear that whatever the impact might be, it will definitely have an effect on the global energy market.

In brief, the initial restriction concern only seaborne oil from Russia, while, from February 5, a cap on refined petroleum products will be set. However, the embargo does not apply to Russia’s oil imports coming to the EU through pipelines. The Druzhba oil pipeline exports are still there.

As Allan Mustard, co-founder and co-head of the Trans-Caspian Resources energy startup, Former US Ambassador to Turkmenistan, told Trend, Russia’s control of the Caspian Pipeline Consortium’s oil pipeline to Novorossiysk is of greatest importance to Central Asia.

Kazakhstan’s exports of oil and, thus, oil export revenues depend on Russia keeping the pipeline open, and Kazakhstan would be wise to build an alternative delivery mechanism that circumvents Russia - probably a pipeline but extra tankers might just be possible,” the expert said.

According to the ambassador, the other major Central Asian hydrocarbon exporter, Turkmenistan, ships the bulk of its natural gas to China via pipelines.

“The proposed EU caps, if they are effective, will have only a marginal impact on Turkmenistan’s gas revenues,” he noted.

Mustard thinks that, in general, embargoes disrupt normal trade flows, so naturally prices tend to rise.

“Bear in mind that the refined product embargo doesn’t take effect until February 5th. For the oil embargo, which took effect December 5th, it remains to be seen if this takes supply out of the market. There are alternatives that Russia may use, such as using “dark fleet” tankers, similar to how Iran and Venezuela have sold oil under sanctions. If supply comes off the market, the impact on refined products will depend on whether alternative supplies come on the market (e.g., from OPEC or others) to make up for lost oil,” he said.

Meanwhile, according to the latest data, KazMunayGas, Kazakhstan's national vertically integrated oil and gas company, increased its oil production over the first 9 months of 2022 by 0.9 percent – from 15.9 million to 16.06 million tons year-on-year. Oil refining also saw an increase of 5.8 percent in the reporting period of the current year – from 14.08 million to 14.89 million tons year-on-year.

At the same time, Kazakhstan has agreed to ship 1.5 million tons of oil through Baku-Tbilisi-Ceyhan (BTC) pipeline from January 1, 2023, while its further increase to 6-6.5 million tons is being worked through.

The Turkmenbashi Oil Processing Complex, located in the Balkan region in the west of Turkmenistan, exceeded its refinery processed to 4.08 million tons of crude oil, which is a 10-percent increase from the production plan.

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