Solidarity in Oil: Whose Interest Is The Shortage of Petroleum Products in Kazakhstan and Who Is Paying for It?

All major oil refineries will be stopped for scheduled repairs this year. Shymkent, for example, is already idle, which means that the production of petroleum products has decreased significantly. And this is against the background of growing demand and the ban on the export of petroleum products by all means of transport outside the EAEU. This has already provoked illegal export.

On March 24, 2023, the former Minister of Energy, Bolat Akchulakov approved a list of petroleum products prohibited or restricted for export from the Republic of Kazakhstan outside the customs territory of the Eurasian Economic Union. This is one of the last assignments he carried out before leaving this position. 

The Ministry of Energy also published a draft order on the website of open NPAs, defining new prices for the retail sale of petroleum products and liquefied petroleum gas for refuelling vehicles. The reaction was not long in coming. Restrictions on the issuance of diesel fuel at gas stations were introduced in Almaty.

According to the akimat, there are currently about 8.8 thousand tons of diesel fuel in large network gas stations and oil depots’ stock in the southern capital. What’s the situation in other regions of the country?

Despite mini-refineries having expressed their dissatisfaction, a ban on the export of petroleum products outside the EAEU has nevertheless been introduced until December 31, 2024. Apparently, the threat of social discontent does not bother energy officials.

Senior partner of the law firm ALC Attorneys, Abdymanap Issabayev, told an Orda correspondent that furnace and ship fuel and naphtha fall under the ban. These oil products are not in demand on the territory of the EEC, so they are sold to other countries.

"The fact is that the main source of income for small-capacity refineries is the production and subsequent export sale of such types of petroleum products as fuel oil, furnace and ship fuel, as well as naphtha. The signing of the order may actually lead to the shutdown and closure of most of the small-capacity refineries throughout the country, of which there are more than twenty. The total number of workers involved in the production cycle of the production of petroleum products is tens of thousands of people. Almost all plants have debt obligations to second–tier banks for many billions of tenge,"

the expert said.

Incidentally, the order of the Ministry of Energy itself does not specify for what purposes it was signed. There have also been no comments from officials to date.

"If the factories are stopped, it will actually hit the country's economy since the budget will lose huge cash receipts in the form of taxes, second–tier banks will not be able to get a refund on loans, a huge number of workers will lose their jobs,"

Abdymanap Isabayev added.

Restrictions on trade only within the EAEU seem to be just an excuse. According to the expert, this will not improve the situation of the mini-refineries in any way, as there are very few potential buyers in the Republic of Kazakhstan. This will naturally lead to layoffs and social tension.

What Is to Be Done?

The Mazhilis deputies elected in March may be able to influence the situation. The Republica party, with their stated pre-election economic view, could very well tell the chairman of the lower house what is the best way to proceed. They put in the effort to become legislators for good reason. The NPC party is also noteworthy. Their members have long believed that the country's wealth belongs to the people. The new energy, Minister Almasadam Satkaliyev, could also lend his ear, though he has said that future increases in tariffs for heat energy are necessary due to the networks' deterioration.

If we take into account that the new law could directly lead to the population’s impoverishment and a rise in social tension, deputies of the 8th convocation could, first off and foremost, advocate for the changing or blocking of this order.

Original Author: Alexander Smolin

DISCLAIMER: This is a translated piece. The text has been modified, the content is the same. Please refer to the original document in Russian for accuracy.