Speaking on the sidelines of the G8 summit in St. Petersburg, Russian President Vladimir Putin called the project an important contribution to energy security.
Kazakh President Nursultan Nazarbaev, who was invited to St. Petersburg in his capacity as current chairman of the Commonwealth of Independent States, said his country is "entering a very important alliance."
"The creation of a joint gas-processing plant on Russian territory -- because Karachaganak, one of the world's largest gas-condensate fields, is situated on the [Russian-Kazakh] border -- is advantageous in every respect," Nazarbaev told journalists. "First of all, it saves billions of dollars that would have been spent on building a new plant. Secondly, this gas-processing complex will become a joint 50-50 venture."
The venture will expand the capacity of the Soviet-built Orenburg refinery and envisages an annual output of at least 15 billion cubic meters.
The Karachaganak field contains 1.3 trillion cubic meters of gas and 1.2 billion tons of liquid condensates and oil.
Russia's Gas Strategy
RUNNING HOT AND COLD The crisis over Russian supplies of natural gas to Ukraine that erupted on New Year's Day has implications that spread well beyond these two countries and will impact both economic and political policymaking throughout Europe. On January 19, RFE/RL's Washington, D.C., office hosted a briefing the examined the ramifications of the natural-gas conflict.
CLIFFORD GADDY, a senior fellow at the Brookings Institution, outlined Russia's "grand energy strategy," in which Ukraine is perceived as merely an obstacle frustrating Russia's energy ambitions in Western Europe and therefore a nonentity in Russia's broader strategic planning. According to Gaddy, Russia's strategic goal regarding energy is to maximize the role of its own energy resources in the world energy markets, so as to increase its geopolitical influence. To do this, it must reduce competition and maximize dependency on its own energy resources, as well as ensure a stable supply.
TARAS KUZIO, a visiting assistant professor at George Washington University, rebutted Gaddy's argument, claiming that Russia's actions evidenced a complete lack of geopolitical strategy and resulted in strong denunciations by Western countries and a loss of political allies in Ukraine. According to Kuzio, Russian President Vladimir Putin's desire to have a deal signed by the January 4 European Union energy summit outweighed his hope of reinforcing opposition to Ukrainian President Viktor Yushchenko during the run-up to Ukraine's March 26 parliamentary elections.
RFE/RL Coordinator of Corruption Studies ROMAN KUPCHINSKY did not fully agree with Kuzio's assessments of Yushchenko or Ukraine. He outlined three major problems that are feeding the conflict between Russia and Ukraine. The biggest, he argues, is that the state-controlled Russian gas giant Gazprom holds a monopoly on natural-gas sales outside the CIS. Kupchinsky also decried Ukraine's consumption of natural gas, terming it "out of control." Corruption is also a major factor in the conflict, Kupchinsky said, although the extent to which it taints the deal struck between Russia and Ukraine remains unknown.