Identifier
Created
Classification
Origin
10ASTANA154
2010-02-04 08:32:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:
KAZAKHSTAN: STATE TO REGULATE FUEL PRICES
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UNCLAS SECTION 01 OF 02 ASTANA 000154
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/ESC, S/EEE, S/CIEA
STATE PLEASE PASS TO USTDA
E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV EPET SOCI KZ
SUBJECT: KAZAKHSTAN: STATE TO REGULATE FUEL PRICES
ASTANA 00000154 001.3 OF 002
UNCLAS SECTION 01 OF 02 ASTANA 000154
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/ESC, S/EEE, S/CIEA
STATE PLEASE PASS TO USTDA
E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV EPET SOCI KZ
SUBJECT: KAZAKHSTAN: STATE TO REGULATE FUEL PRICES
ASTANA 00000154 001.3 OF 002
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: Since independence, the government has attempted
to manage gasoline prices through various means, including direct
ownership of Kazakhstan's three refineries, crude export duties,
bulk procurement, and state contracts that guarantee crude supplies
to refineries. The Ministry of Energy is preparing legislation on
the regulation of fuel prices that will toughen rules for
wholesalers. Kazakhstan's decision to enter into a Customs Union
with Russia and Belarus will likely bring gasoline prices in
Kazakhstan closer to those in Russia. END SUMMARY.
COMPETITION PROTECTION AGENCY INVESTIGATES RETAILERS
3. (SBU) In November 2009, Kazakhstan experienced a shortage of
gasoline and other fuels, followed by an abrupt rise in prices. The
Competition Protection Agency (CPA) accused distributors of fuels
and lubricants affiliated with KazMunaiGas (KMG),PetroKazakhstan,
and PetroKazakhstan Petroleum Resources of engaging in illegal trade
practices. The CPA also charged a number of companies with
administrative violations, including KMG subsidiary KMG Onimderi,
which allegedly sold fuel at retail prices under an unsanctioned
coupon program.
KAZAKHSTAN DEPENDENT ON RUSSIAN FUEL IMPORTS
4. (SBU) On October 8, 2009, Minister of Energy and Mineral
Resources (MEMR) Sauat Mynbayev announced that "40% of the jet fuel
and 30% of the high-octane gasoline on the domestic market are
imported from Russia." He said the government has two goals: to
keep gas prices steady and to satisfy market demand for gasoline,
jet fuel and other petroleum products. Mynbayev admitted that these
goals can sometimes be at odds, since the price of fuel in Russia is
as much as 40% higher than in Kazakhstan, and Kazakhstani suppliers
naturally prefer to export petroleum products to Russia. Mynbayev
therefore proposed protecting the domestic market by restricting the
price differential to less than 30%. On November 16, 2009, he
suggested adjusting the ratio of high-octane gasoline imports, and
reducing imports of fuel oil and low-octane gasoline. In order to
increase administrative control over domestically-produced gasoline,
MEMR now approves gasoline supply schedules in the regions, using an
on-line database to monitor shipments.
STATE TO ADOPT FUEL PRICE REGULATION LAW
5. (SBU) On January 21, CPA Deputy Chairman Boris Parsegov
announced that MEMR is drafting a law on the regulation of fuel
prices that is expected to be submitted to parliament in March.
"The rules for wholesalers will be toughened," said Parsegov. "That
means that no organization can act as a wholesaler if it does not
have the necessary infrastructure, such as oil storage facilities
and access roads," Parsegov explained.
INFLUENCE OF THE CUSTOMS UNION ON FUEL PRICES
6. (SBU) On November 17, 2009, Mynbayev said Kazakhstan must
coordinate its fuel and lubricants prices with Russia once the
Customs Union goes into effect. "Since the borders will be open,
the transportation of goods will be greatly simplified. We will
inevitably have correlated prices for oil products, whether we like
it or not," he said. "Even if the prices will not be exactly the
same, they will still fluctuate within a certain range and influence
each other. This is an unavoidable result of establishing the
Customs Union," he concluded.
7. (SBU) COMMENT: The government is always under pressure to
manage domestic fuel prices, particularly during harvest season. On
February 3, for example, Minister of Agriculture Akylbek Kurishbayev
told the Senate that the state would purchase 336,000 tons of fuel
at a fixed price for spring sowing and harvesting. A new law to
regulate fuel prices is therefore not unexpected. It would have to
take into account the new Customs Code that goes into effect on July
1, and could lead to closer alignment of fuel prices in Kazakhstan,
Russia and Belarus. However, unless Kazakhstan modernizes its three
ASTANA 00000154 002.3 OF 002
refineries so that they can produce high-octane petroleum products
to meet domestic demand, Kazakhstan will not be able to break its
dependence on high-octane fuel products from Russia. END COMMENT.
SPRATLEN
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/ESC, S/EEE, S/CIEA
STATE PLEASE PASS TO USTDA
E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV EPET SOCI KZ
SUBJECT: KAZAKHSTAN: STATE TO REGULATE FUEL PRICES
ASTANA 00000154 001.3 OF 002
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: Since independence, the government has attempted
to manage gasoline prices through various means, including direct
ownership of Kazakhstan's three refineries, crude export duties,
bulk procurement, and state contracts that guarantee crude supplies
to refineries. The Ministry of Energy is preparing legislation on
the regulation of fuel prices that will toughen rules for
wholesalers. Kazakhstan's decision to enter into a Customs Union
with Russia and Belarus will likely bring gasoline prices in
Kazakhstan closer to those in Russia. END SUMMARY.
COMPETITION PROTECTION AGENCY INVESTIGATES RETAILERS
3. (SBU) In November 2009, Kazakhstan experienced a shortage of
gasoline and other fuels, followed by an abrupt rise in prices. The
Competition Protection Agency (CPA) accused distributors of fuels
and lubricants affiliated with KazMunaiGas (KMG),PetroKazakhstan,
and PetroKazakhstan Petroleum Resources of engaging in illegal trade
practices. The CPA also charged a number of companies with
administrative violations, including KMG subsidiary KMG Onimderi,
which allegedly sold fuel at retail prices under an unsanctioned
coupon program.
KAZAKHSTAN DEPENDENT ON RUSSIAN FUEL IMPORTS
4. (SBU) On October 8, 2009, Minister of Energy and Mineral
Resources (MEMR) Sauat Mynbayev announced that "40% of the jet fuel
and 30% of the high-octane gasoline on the domestic market are
imported from Russia." He said the government has two goals: to
keep gas prices steady and to satisfy market demand for gasoline,
jet fuel and other petroleum products. Mynbayev admitted that these
goals can sometimes be at odds, since the price of fuel in Russia is
as much as 40% higher than in Kazakhstan, and Kazakhstani suppliers
naturally prefer to export petroleum products to Russia. Mynbayev
therefore proposed protecting the domestic market by restricting the
price differential to less than 30%. On November 16, 2009, he
suggested adjusting the ratio of high-octane gasoline imports, and
reducing imports of fuel oil and low-octane gasoline. In order to
increase administrative control over domestically-produced gasoline,
MEMR now approves gasoline supply schedules in the regions, using an
on-line database to monitor shipments.
STATE TO ADOPT FUEL PRICE REGULATION LAW
5. (SBU) On January 21, CPA Deputy Chairman Boris Parsegov
announced that MEMR is drafting a law on the regulation of fuel
prices that is expected to be submitted to parliament in March.
"The rules for wholesalers will be toughened," said Parsegov. "That
means that no organization can act as a wholesaler if it does not
have the necessary infrastructure, such as oil storage facilities
and access roads," Parsegov explained.
INFLUENCE OF THE CUSTOMS UNION ON FUEL PRICES
6. (SBU) On November 17, 2009, Mynbayev said Kazakhstan must
coordinate its fuel and lubricants prices with Russia once the
Customs Union goes into effect. "Since the borders will be open,
the transportation of goods will be greatly simplified. We will
inevitably have correlated prices for oil products, whether we like
it or not," he said. "Even if the prices will not be exactly the
same, they will still fluctuate within a certain range and influence
each other. This is an unavoidable result of establishing the
Customs Union," he concluded.
7. (SBU) COMMENT: The government is always under pressure to
manage domestic fuel prices, particularly during harvest season. On
February 3, for example, Minister of Agriculture Akylbek Kurishbayev
told the Senate that the state would purchase 336,000 tons of fuel
at a fixed price for spring sowing and harvesting. A new law to
regulate fuel prices is therefore not unexpected. It would have to
take into account the new Customs Code that goes into effect on July
1, and could lead to closer alignment of fuel prices in Kazakhstan,
Russia and Belarus. However, unless Kazakhstan modernizes its three
ASTANA 00000154 002.3 OF 002
refineries so that they can produce high-octane petroleum products
to meet domestic demand, Kazakhstan will not be able to break its
dependence on high-octane fuel products from Russia. END COMMENT.
SPRATLEN