The State Oil Company of Azerbaijan (SOCAR) and Kazakhstan's KazMunayGas have agreed to expand oil shipments to 1.7 million tons this year, signaling a significant step in energy cooperation between the two Caspian neighbors. This development was discussed during a meeting between SOCAR President Rovshan Najaf and his Kazakh counterpart Askat Hasenov, where they reviewed the progress of a 2022 agreement facilitating the transportation of Kazakh oil via the Aktau-Baku-Ceyhan route. Last year, shipments reached 1.4 million tons, and the current plan sets a target of 1.7 million tons for 2025.
This expansion is expected to boost revenues for both countries, with Azerbaijan benefitting as a key transit point. Oil from Aktau is shipped across the Caspian Sea to Baku, where it is transshipped and sent through the Baku-Tbilisi-Ceyhan (BTC) pipeline to European markets. In 2023, KazMunayGas transported approximately 1.392 million tons of oil via this route. The growing volume aligns with the directive of Kazakh President Kassym-Jomart Tokayev to increase oil shipments through the Trans-Caspian International Transport Route (TMTM), also known as the Middle Corridor in Azerbaijan.
Photo: KazMunayGas
However, this expansion comes with its share of challenges. Recent drone attacks on the "Kropotkinskaya" pumping station of the CPC pipeline in Russia's Krasnodar region have raised concerns about the security of Kazakh oil exports. While Kazakhstan has assured that oil continues to flow through the CPC pipeline, the damage underscores the urgency of diversifying transport routes. These attacks, attributed to Ukrainian forces, emphasize the need for Kazakhstan to strengthen its energy security measures.
Photo: ship2shore.it
Azerbaijan has expressed willingness to accommodate Kazakh oil via the BTC pipeline, but only up to 2.2 million tons. The reason lies in concerns over maintaining the quality of Azerbaijan's Azeri Light oil, which has a notably low sulfur content compared to Kazakh oil. An increase in Kazakh oil volumes might compromise the quality of Azeri Light, making it unlikely for shipments through the BTC to exceed 2 million tons.
In response to recent developments, Kazakhstan could consider officially classifying the attacks on the CPC pipeline as acts of terrorism against civilian infrastructure. Such a move would send a strong message internationally and highlight the severity of the threat to Kazakhstan's energy security. A more assertive stance against Ukraine, including potential economic and diplomatic measures if further threats materialize, might also be on the table.
Kazakhstan's energy diversification strategy must also consider geopolitical risks. The BTC pipeline itself has been a target of attacks in the past. In 2008, Kurdish militants attacked the pipeline in Türkiye, and in 2020, Armenian forces attempted to strike it with ballistic missiles. These incidents underscore the complexities of ensuring uninterrupted oil flows to Europe.
A comprehensive approach to addressing these challenges could include the potential deployment of Kazakh air defense units to protect key energy infrastructure. Such a move, while politically sensitive, could reinforce Kazakhstan's commitment to safeguarding its energy routes. The strategic partnership with Russia within the CSTO framework also plays a crucial role in this context.
For Kazakhstan, the stakes are high. The proposed increase in oil shipments through the BTC pipeline promises substantial economic gains but also raises complex questions about managing geopolitical risks. Azerbaijan's cautious approach to accepting Kazakh oil reflects broader concerns about the quality and profitability of its own exports.
@2020 Microsoft Corporation / Earthstar Geographics
As Kazakhstan navigates these challenges, a balanced strategy that integrates diplomatic, economic, and security measures will be crucial. The evolving dynamics of the Caspian region's energy landscape require careful management to ensure that increased oil exports translate into sustainable economic benefits without exacerbating regional tensions.
This situation illustrates the intricate balance Kazakhstan must maintain between expanding its energy exports and managing the geopolitical complexities that come with diversifying oil routes. How effectively Kazakhstan addresses these challenges will shape its energy future and its role in the regional power dynamics of the Caspian Sea.
