It's no secret that Kazakhstan's economy and creditworthiness depend on its ability to extract and export crude oil.
Today, the rating agency Fitch Ratings published a report describing that Kazakhstan's oil wealth and the accumulation of export revenues in the National Fund of the Republic have led to the formation of reliable external and financial balance sheets that underlie Kazakhstan's credit rating (BBB/Stable).
However, the agency notes, the bulk of crude oil travels through pipelines that pass through Russia, and this vulnerability has drawn attention because of the war in Ukraine.
While Fitch expects Kazakhstan's relationship with Russia to remain strong enough to ensure oil supplies to international markets, there are risks of disruptions (supply — E) due to the lack of alternative export infrastructure, the report says.
In addition, there are growing fears of a possible disruption of the KTK (Caspian Pipeline Consortium) pipeline, which runs from the coast of the Caspian Sea in northwestern Kazakhstan to the port of Novorossiysk on the Black Sea coast of Russia.
The agency reminds that 80% of Kazakh oil exports transit through the KPC pipeline. According to Fitch analysts, there will be no viable alternatives to CPC for Kazakhstan in the medium term. Transporting crude oil in any significant volume by pipeline across the Caspian Sea is not possible, given the costs and the enormous legal and technological challenges involved.
Tanker transportation through the Caspian is a viable option, but not in the volume that is currently transported through the CPC.
Thus, in the medium term, Kazakhstan's critical dependence on Russia for the transportation of crude oil will remain extremely high. "In our view," says the description of the report, "Russia's desire to maintain strong control over the KPC pipeline, in which it owns 24 percent, is to ensure that Kazakhstan does not seek to strengthen ties with the United States and other Western countries."
