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Kazakhstan: Oil To Fuel Chinese Economic Growth

By Merhat Sharipzhan and Bruce Pannier

Almaty, 26 September 1997 (RFE/RL) -- Officials from China completed this week in the Kazakh capital Almaty an agreement worth $9 billion on shipping oil from Kazakh oil fields to China.

The government of China places such importance on the deal that two members of the Chinese Politburo's seven-man standing committee, Li Peng and Li Lanqing, traveled to Kazakhstan for the signing. The deal raises the possibility that more Central Asian oil will go east to Asia than west to Europe.

The China National Oil Corporation won in May a tender to develop the Uzen and Aktyubinsk hydrocarbon fields in western Kazakhstan. As part of the deal, the Chinese agreed to build the necessary pipeline from the fields across Kazakhstan to China's western border.

The agreement nominally is with a Chinese corporation, but in actuality is a government-to-government arrangement. A significant element for the Kazakhs is that their partner in the contract has the force of a major world government, not merely a giant oil corporation seeking to turn a profit.

After China's 15th Party Congress last week it was evident that China will need for its next economic great leap forward even more oil -- perhaps as much as 300,000 tons a day more -- than the estimated 400,000 tons daily it requires now.

Companies such as the U.S.-based Chevron Oil have been forced to conclude deals with Russian companies for the use of Russian pipelines to bring oil out of Kazakhstan. With this leverage, Russian companies have included themselves in a number of energy resource projects in Central Asia.

The proposed Chinese pipeline need never enter Russian territory. Russian companies thus will lack any such leverage of the Kazakh-Chinese oil flow.

For Kazakhstan, this deal is likely to be the first which actually brings in the huge sums of money the government long has anticipated. So far thousands of millions of dollars have been mere numbrs on contracts and estimates, except for small amounts of crude shipped by tanker via the Caspian Sea to Iran.

The schedule for the Sino-Kazakh pipeline (about 3,000 kilometers long from Aktyubinsk to the Chinese border) calls for completion of the pipelines in 60 months. Crude oil shipments, which will eventually reach 20 million tons annually, are to begin immediately after. Kazakhstan's struggling economy can expect major infusions of capital in five years time.

The pipeline's completion may also spur other projects in the region, as companies, particularly those who wish to sell to Asian markets, realize the Chinese may be in a position to get a hard start in Asia by selling oil in excess of need to the Asian tiger states.

The Chinese also have agreed to build a pipeline from the Uzen field 250 kilometers to the Kazakh-Turkmen border, where Turkmen pipelines can connect and bring oil into Iran.

Chinese Politburo member Li Peng called the deal "a new page in Kazakh-Chinese relations," and Kazakh President Nursultan Nazarbayev called it the "contract of the century."