The Oil Crisis Between Moscow and Astana

​U.S. sanctions against the oil giant Lukoil are expected to have repercussions in Central Asia as well. The Russian company has announced plans to sell its foreign assets — a major issue for a country like Kazakhstan, which exports 80% of its oil through Russian infrastructure but cannot afford to lose access to Western banking systems.

Astana (AsiaNews) – The Russian oil giant Lukoil has announced it will sell its foreign assets following the imposition of U.S. sanctions against the company and Rosneft, the other major Russian player in the sector. A significant portion of Lukoil’s operations are based in Kazakhstan, Moscow’s long-standing partner in oil ventures. The Kazakh Ministry of Energy has stated that the matter “is not on the agenda, but we are assessing it,” reflecting Kazakhstan’s customary caution in balancing between Russia and the West.

The sanctions take effect on November 21, and by that date, all foreign companies must end their dealings with Lukoil and Rosneft or risk losing access to Western banking systems. Former U.S. Ambassador to Ukraine John Herbst noted that “this is the first time the Donald Trump administration is exerting real pressure on the Kremlin,” and if the sanctions are enforced strictly, they will cause serious harm to the Russian economy.

Kazakhstan provides the Russian oil industry with transport corridors and support for energy security. Lukoil carries out strategic projects in the Caspian Sea with Kazakh partners and is directly involved in the Karachaganak and Tengiz oil fields, holding between 5% and 13.5% stakes in various consortia. It also owns 50% of Kalamkas-Khazar Operating and 49.99% of Al-Farabi Operating. Rosneft’s direct operations in Kazakhstan are more limited, though it plays an important role in export infrastructure.

The majority of Kazakhstan’s oil exports — 80% in 2024 — are routed through Russian territory, via the Caspian Pipeline from western oil fields to the Russian port of Novorossiysk, where the oil is loaded onto tankers bound for European buyers. The Russian company Transneft holds a 24% share in this infrastructure, while another 20% is linked to Lukoil and Rosneft. Kazakhstan’s Deputy Energy Minister Sanzhar Zharkeshov stated that “the acquisition of these assets is a matter of commercial relations between companies and involves a series of negotiations yet to be defined.”

Lukoil’s presence in Kazakhstan dates back to 1995, and on October 14 a ceremony was held to mark the 30th anniversary of bilateral relations, attended by President Kassym-Jomart Tokayev, who highlighted that the Russian company has invested billion in the sector, producing 94 million tons of oil and 60 billion cubic meters of gas to date. Another billion in investments are planned for strategic projects in the Caspian Sea. For these contributions, Tokayev awarded Lukoil’s founder, Russian billionaire Vagit Alekperov, the Order of Barys, First Class.

Kazakh economist Meruert Makhmutova believes that potential domestic and international investors would make a great deal by purchasing Lukoil’s assets, which will have to be sold at discounted prices due to the sanctions. Once the sanctions take effect, oil prices are expected to rise — a development that would benefit Kazakhstan, whose economy depends heavily on raw material exports. Beyond extraction capacity, Makhmutova notes, the new balance in global markets will be crucial, given the restrictions the sanctions impose on China and India as well. She concludes: “If these sanctions had been introduced at the start of the war in Ukraine, it would already be over by now.”