Kazakhstan Business & Economy - The Times Of Central Asia

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Oil

U.S. Extends Sanctions Exemption for Transit of Russian Oil Through Kazakhstan

The United States has extended a sanctions exemption allowing the transit of Russian oil to China through Kazakhstan until March 2027, according to Kazakhstan’s Ministry of Energy. The license was issued by the Office of Foreign Assets Control under the U.S. Department of the Treasury and is valid until March 19, 2027. “Following negotiations with OFAC, the term of the license for the transit of Russian oil to China has been extended. Cooperation on this issue will continue,” the ministry said in a statement. The ministry added that Kazakhstan and Russia are discussing the possibility of increasing supply volumes. At present, transit continues under existing sanctions exemptions. Kazakhstan transports approximately 10 million tons of Russian oil to China annually under an intergovernmental agreement valid until 2034. Earlier, Islamdaut Akubaev, a representative of KazTransOil, said Kazakhstan had received notification from OFAC regarding an extension of the transit permit until April 2026.

Power Plants

Kazakhstan to Build Eight New Power Plants by 2030

Kazakhstan plans to build eight new power plants and modernize 11 existing facilities by 2030 as part of a national project to expand coal-fired power generation. The project, approved in March, aims to meet growing electricity demand and modernize the country’s energy infrastructure, strengthening the stability of the Unified Power System. According to Kazakhstan’s Ministry of Energy, 7.8 GW of new and upgraded capacity is scheduled to be commissioned by 2030. This includes both newly constructed plants and modernisation of existing facilities . The new construction program, with a total capacity of 5.3 GW, includes projects in several key regions. Plans include a 700 MW condensing power plant in Kurchatov; the Ekibastuz GRES-3 plant with a capacity of 2,640 MW; thermal power plants in Karaganda (350 MW) and Ekibastuz (180 MW); as well as combined heat and power plants in Zhezkazgan (500 MW), Kokshetau (240 MW), Semey (360 MW), and Ust-Kamenogorsk (360 MW). The project also aims to improve the efficiency of existing capacity. According to ministry estimates, modernization will reduce equipment wear by 13%. The Ministry of Energy stated that the initiative is expected to provide a reliable energy base for industrial growth, support the development of the digital economy, and facilitate the adoption of AI technologies. Coal-fired generation, if modernized and compliant with environmental standards, will continue to play a key role in ensuring the country’s energy security. The Times of Central Asia previously reported that Kazakhstan plans to attract at least $15.5 billion in investment for the development of coal-fired power generation. The country is expected to fully meet domestic electricity demand by 2027 and achieve a sustainable surplus by 2029, enabling it to begin exporting electricity. At the same time, the government plans to create a “data center valley” in Pavlodar powered by coal-fired energy.

Railways

Istanbul Strait Rail Project to Boost Trade Along Trans-Caspian Transport Route

On March 31, the World Bank approved a $2 billion loan for the Istanbul North Rail Crossing Project (INRAIL), aimed at strengthening railway connectivity across the Istanbul Strait (Bosphorus) and reinforcing Türkiye’s role as a key logistics hub linking Europe, Asia, and the Middle East. With the Baku-Tbilisi-Kars railway, Turkey serves as a key node in the Trans-Caspian International Transport Route (TITR), also known as the Middle Corridor. The route connects China and Europe via Kazakhstan, the Caspian Sea, the South Caucasus, and Turkey. Turkey's major rail corridors passing through Istanbul, including the Middle Corridor, the Iraq Development Road, and the Turkey-EU corridor, are essential for international trade but currently face a significant bottleneck at the Bosphorus. INRAIL will involve the construction of a 127-kilometer electrified, high-capacity railway line providing a new overland rail crossing of the strait. The project will utilize the rail-ready Yavuz Sultan Selim Bridge and bypass central Istanbul, increasing both freight and passenger capacity while reducing logistics costs and improving reliability across national and intercontinental transport corridors, including the TITR. Once operational, rail freight capacity across the Bosphorus is expected to increase from approximately 3 million tons per year to as much as 50 million tons, significantly improving transit times, reliability, and predictability for freight operators. “By removing a critical rail bottleneck at the Istanbul Strait and enhancing the resilience and efficiency of rail infrastructure, Turkey is boosting its competitiveness and reinforcing its role as a logistics hub,” said Humberto Lopez, World Bank Country Director for Turkey. “INRAIL will also generate benefits for the wider region by connecting to international corridors such as the Middle Corridor and the Development Road, facilitating trade between Europe, Central Asia, and the Gulf.” The project aligns with Kazakhstan and Türkiye’s broader efforts to develop the Middle Corridor. In July 2025, Kazakhstan’s national railway operator, Kazakhstan Temir Zholy (KTZ), and TCDD Taşımacılık A.Ş. signed a cooperation agreement to enhance freight transportation along the TITR. The agreement aims to improve the route’s efficiency and competitiveness by launching regular rail services between Kazakhstan and Turkey, increasing freight volumes along the Baku-Tbilisi-Kars railway, and expanding cargo flows between China and Europe. KTZ has also held discussions with Mersin International Port, part of PSA International, on expanding cooperation to strengthen the Middle Corridor and develop more efficient multimodal logistics links between Asia and Europe. KTZ Chairman Talgat Aldybergenov reaffirmed both sides’ commitment to ensuring stable freight volumes and highlighted Mersin’s role as a strategic transshipment hub for the corridor. To further strengthen the logistics chain, Kazakhstan has proposed leveraging the potential of KPMC, a joint venture between KTZ and PSA International, which is already involved in developing multimodal services along the Xi’an-Istanbul route.

Kashagan

Kazakhstan Expands Kashagan Legal Fight as Arbitration and Claims Mount

For several years, Kazakhstan has been engaged in arbitration proceedings worth billions of dollars, many of which have been conducted behind closed doors. Recently, new details have emerged about one of the largest disputes, involving the North Caspian Operating Company (NCOC). The dispute stems from environmental violations identified during a 2022 inspection at the Kashagan field. Environmental authorities found that the operator, NCOC, had stored approximately 1.2 million tons of sulfur in excess of permitted limits. As a result, the company faced a fine of around $5 billion. Kashagan is one of the largest and most technically complex offshore oil fields ever discovered, with proven hydrocarbon reserves estimated at 4.65 billion tons. The consortium includes seven major international energy companies: KazMunayGas (16.88%); Eni (16.81%); Shell (16.81%); ExxonMobil (16.81%); TotalEnergies (16.81%); CNPC (8.33%); and INPEX Ltd (7.56%). A lawsuit was filed by all consortium members except KazMunayGas, Kazakhstan’s national oil company. The field has long been central to Kazakhstan’s oil production and relations with international investors. Kazakhstan’s interests in the Kashagan dispute are represented by the Ministry of Ecology and the Ministry of Justice. According to the Vice Minister of Justice, Daniel Vaisov, a trial court has already ruled in favor of the state. “A first-instance court has ruled in Kazakhstan, recognizing the state’s position as lawful. Six contractors — excluding KazMunayGas — filed an appeal in March,” Vaisov said. NCOC challenged the environmental inspection results. In June 2023, a court in Astana partially upheld the company’s claims. However, this was overturned in February 2024, when an appellate court ruled in favor of the government, confirming the inspection’s legality. Subsequent developments have further complicated the case. In August 2025, an Astana court overturned the environmental agency’s order, citing procedural violations. The case is once again under appeal. At the same time, the contractors have challenged the $5 billion fine through international arbitration. The proceedings are set to take place in Washington at the International Centre for Settlement of Investment Disputes (ICSID), where the arbitral tribunal is currently being formed, Vaisov said. The case is being closely watched as a test of how far Kazakhstan is willing to push legal pressure on major Western energy investors. Separately, Kazakhstan is pursuing much larger claims against Kashagan consortium members under the production-sharing agreement. In May 2024, Kazakhstan’s Ministry of Energy said claims against Kashagan project developers could reach up to $150 billion. Initially, the government sought $15 billion from NCOC. It later increased its claims by a further $138 billion, citing lost profits linked to oil volumes that investors had committed to supply to the state. The Ministry of Energy has described the dispute as purely commercial, relating to Kazakhstan’s rights under the production-sharing agreement. Officials maintain that the legal proceedings do not affect the investment standing of project participants. Separately, in January last year, an economic court in Astana ordered NCOC to pay 3.5 billion KZT (about $8 million) for excessive flaring of raw gas. In addition to Kashagan, Shell is involved in...

Oil Imports

Georgia May Replace Russian Oil with Imports from Turkmenistan and Kazakhstan

Georgia’s only oil refinery, owned by Black Sea Petroleum (BSP), plans to completely stop importing Russian oil and instead switch to crude supplies from Turkmenistan and, potentially, Kazakhstan. This was announced by the company’s CEO, David Potskhveria. According to Potskhveria, the shift would not only diversify supply sources but also open access to European markets. “We will completely replace Russian oil with Turkmen oil, and then with Kazakhstani oil. This will give us the opportunity to export products to the EU,” he said. The rationale is straightforward: imports of Russian petroleum products into the European Union are currently prohibited. Maintaining previous supply arrangements would effectively block access to European markets. However, switching suppliers presents logistical challenges. As Potskhveria noted, processing of Turkmen crude can begin only after transit issues through Azerbaijan are resolved. For now, logistics remain the main bottleneck. While the refinery is technically ready, implementation depends on securing reliable transport routes. The proposed move away from Russian oil follows earlier developments. In late February, the EU considered including the Kulevi port on a preliminary sanctions list due to its import and processing of Russian crude. The trigger was a shipment delivered in October 2025 by Russneft, involving approximately 105,000 tons of oil to the port of Kulevi. The shipment prompted criticism from the Georgian opposition, which accused the authorities of undermining the sanctions regime and appealed to European institutions. The Kulevi refinery is a relatively new entrant to the regional oil market. It began operations in December last year and has already outlined expansion plans. Its current processing capacity is around 1.2 million tons per year, with plans to increase this to 4.5 million tons. At present, the facility produces fuel oil, diesel, and other petroleum products. Future plans include expanding output to Euro-5 standard gasoline, jet fuel, and Eurodiesel. BSP’s international partners reportedly include Trafigura and Saudi Aramco.

Fuel Prices

Central Asia Avoids Fuel Shock as Global Pressures Build

Central Asia has so far avoided the immediate fuel shocks spreading across much of the world following the U.S. and Israel’s war with Iran. There are no lines at gas stations, no visible shortages, and no signs of panic buying. But that stability sits within a rapidly tightening global market, where disruptions in Asia and policy responses in Europe are reshaping fuel flows in ways the region will struggle to avoid. Across Southeast Asia, governments are already taking precautionary steps. Some state agencies and private firms are shifting parts of their workforce to remote work to reduce fuel consumption and prepare for potential price spikes and logistics disruptions, while Thailand is preparing contingency measures, including possible fuel rationing. China, one of Asia’s largest suppliers of refined fuels, has moved to restrict exports of gasoline, diesel, and jet fuel in an effort to prevent domestic shortages linked to the war. The move is expected to tighten supplies across Asia, especially for countries that rely on Chinese fuel imports. China supplied about one-third of Australia’s jet fuel last year, highlighting the wider regional impact, and roughly half of the Philippines’ and Bangladesh’s in 2024. Vietnam has already warned airlines to prepare for flight reductions in April due to the risk of shortages caused by these export restrictions. Indonesia is also imposing limits on fuel sales. Fuel-related pressures have begun to emerge in Europe as well. Poland has introduced tax measures aimed at reducing fuel prices, with the government saying this will lower prices for consumers. Slovenia, meanwhile, has introduced significant restrictions on fuel consumption. Under new rules, private motorists are limited to purchasing a maximum of 50 liters per day, while businesses and farmers may purchase up to 200 liters daily. The combined effect of war-driven energy shocks and renewed tariff barriers is raising global costs and adding pressure across trade, transport, and inflation. Against this backdrop, Central Asia’s apparent stability is misleading. It is highly unlikely that import-dependent states such as Kyrgyzstan and Uzbekistan will be as well protected as Kazakhstan, which may benefit in the short term from higher crude prices. Starting April 1, Russia is banning gasoline exports in an effort to stabilize its own domestic market. Russia is a key fuel supplier to Central Asia. However, according to assurances from the Ministry of Energy of the Russian Federation, the temporary export ban will not affect supplies to Uzbekistan. Deliveries under intergovernmental agreements are expected to continue, ensuring that at least part of the region’s supply remains uninterrupted. In Kyrgyzstan, despite recent developments, fuel prices and supplies remain relatively stable. The government is considering lowering taxes or temporarily waiving excise duties for fuel importers should the crisis continue. Information from Turkmenistan is difficult to verify independently. Despite reports of fuel shortages at gas stations last year, official media are now indicating a significant increase in domestic gasoline production. The production plan for January-February 2026 was reportedly fulfilled at 122.7%, according to Deputy Chairman of the Cabinet of Ministers Guvancha...