Russia and Kazakhstan Aim to Bolster Oil Transit to China

Russia and Kazakhstan are set to enhance their energy cooperation by increasing oil deliveries to China through Kazakhstan’s territory.

This was one of the topics discussed during Russian President Vladimir Putin’s recent state visit to Kazakhstan and the Collective Security Treaty Organization (CSTO) summit in Astana.

Speaking to journalists, President Putin highlighted the importance of developing new transport routes for energy exports.

“We have discussed the possibility of creating new routes for pumping our products - petroleum and gas alike - to third countries, primarily the People’s Republic of China, through the territory of Kazakhstan among other optional routes,” he said on Thursday.

Putin described these routes as “lucrative, exciting, and promising,” emphasizing their potential to stabilize the global economy, particularly in the Asia-Pacific region.

“Without a doubt, they will help stabilize the global economy, primarily in the Asia-Pacific region, and we will thus gain an extra opportunity to engage in market operations,” he added.

Kazakhstan has long leveraged its geography to benefit from an oil oversupply from Russia and rising energy demand in China. Officials in Astana have been working diligently to develop the country’s transit potential. For Kazakhstan, increasing transit capacity means going beyond traditional infrastructure, like highways and railways, and focusing on more specialized capabilities, such as energy pipelines. At the same time, Astana is strengthening its ties with Beijing amidst the “trade wars” between the United States and China.

A prime example of this partnership is the Priirtyshsk-Atasu-Alashankou pipeline, a critical link for oil transport from Russia to China. KazTransOil, Kazakhstan’s national oil transporter, and Russia’s Rosneft have collaborated on this pipeline since 2013, starting with an agreement to transport seven million tons of oil annually. By 2015, the volume increased to ten million tons per year, and last year the partnership was extended to 2034.

For KazTransOil, transit is a key source of profitability, and the company actively defends its position, including cross-border tariffs. Despite fluctuations in tariffs, the company has maintained a strong presence in the energy transport market. Currently, the tariff for transporting Russian oil to China via Kazakhstan stands at $15 per ton, excluding VAT.

For Russia, strengthening ties with China aligns with its strategic pivot to eastern markets, particularly as tensions with the West persist. Long-term contracts and investments in eastern pipeline infrastructure have solidified Moscow’s position as a major energy supplier to Beijing.

China’s energy imports from Russia have been on the rise. In 2023, the volume reached 107.02 million tons, representing a 24% increase from the previous year. This translates to approximately 2.14 million barrels per day (bpd), showcasing the growing energy relationship between Moscow and Beijing.

According to data compiled by Worldometer, Russia’s proved oil reserves are estimated at 80 billion barrels, placing the country eighth globally.