China Pays Dearly for Kazakhstan Oil

NYT ^ | 03/17/06 | CHRISTOPHER PALA

[TigerLikesRooster]

Christopher Pala for The New York Times

Workers for China National Petroleum who helped build a $700 million pipeline attended an opening ceremony in Atasu, Kazakhstan, in December. A company executive called the pipeline "the new Silk Road."

 

March 17, 2006

China Pays Dearly for Kazakhstan Oil

By CHRISTOPHER PALA

ALMATY, Kazakhstan ? China, which for more than a century turned its back on Central Asia, has reached out to Kazakhstan, Central Asia's biggest country, for one major reason: oil.

In 2005, the China National Petroleum Corporation bought Petrokazakhstan, a Canadian-run company that was the former Soviet Union's largest independent oil company, for $4.18 billion and spent another $700 million on a pipeline that will take the oil to the Chinese border.

Petrokazakhstan was the largest foreign purchase ever by a Chinese company, in this case a state-owned one. Chinese oil producers were already operating four smaller oil fields in Kazakhstan.

"China is being increasingly dependent on Middle East oil and it wants a supply that would be blockade-proof in case of a conflict over Taiwan," said Thierry Kellner, a specialist in China's relations with Central Asia at the Free University of Brussels.

But the Chinese are paying a high price.

Shortly after the sale, Kazakhstan forced the Chinese company to resell a third of its new acquisition to KazMunaiGaz, the state oil company and industry regulator ? and be paid in future revenue. A spokesman for KazMunaiGaz, Mikhail Dorofeyev, has said the deal is expected to be completed by the end of March.

[TigerLikesRooster]

Ping!

[CarrotAndStick]

Remember Kazakhstan Oil Deal Ping.

[lilylangtree]

Very interesting!

[TigerLikesRooster]

This story brings back the memory of all those maneuvers during 90's. Especially, America's ill-fated support for Paskistani ISI's operation to put Talibans into Afghanistan which was in violent factional fighting(Tajiks vs warlord Gulbuddhin Hekmatyar), hoping that Talibans would stabilize the political situation and allow the construction of pipeline(traveling over Afghan,) linking Central Asia and Arabian Sea. I think It was UNOCAL's project.

We know what happened afterwards: Bin Laden, Al Qaeda, and 9/11. I wonder what kind of new world trouble would grow out of Central Asia again over the control of its oil.

[raj bhatia]

Shows you that the basics have to be right. No rule of law or enforcement means no business is possible. A zillion barrels of oil buried underground notwithstanding.

[Bazooka]

The Chinese are not the only ones to pay dearly for oil. At the moment, China gets about 12% of its oil from Sudan (a fair bit!). That's one of the reasons for the Sudanese government to support the ethnic cleansing. So as the Chinese pay with cash and thecnical aid, the people of Darfur and other regions pay with their lives.

[Iris7]

Vladimir Putin has said that international relations are a matter of oil and nuclear weapons. It is interesting that China uses the mega, gigabucks we send her every day for strategic reasons. Certainly expectable, though.

Oil is heavily a matter of bribing the locals. Usually this is done by giving the local big shots $60 a barrel or so. The little guys get nothing. Local folks fight and kill over the money as you would expect. If we won't pay the Big Boys the Chinese will.

[Pro-Bush]

Taiwan is only partly the reason for this deal, not the main one.

[razoroccam]

Thanks for the ping. India lost out on this deal, but in retrospect that may have been for the better.

[Wiz]

Kazakhstan oil competitor of India and Poland ping

[CarrotAndStick]

Ping™

[Thunder90]

Kazakhstan is close to Russia, and has energy agreements with her. Therefore, Kazakhstan is going to sell to Russian customers, aka China.