Sanctions - The Times Of Central Asia

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Lukoil

Kazakhstan Yet to Decide on Potential Purchase of LUKOIL Assets

Kazakhstan holds the legal right of first refusal on any potential sale of LUKOIL's assets within its territory, but the authorities have not initiated negotiations to acquire them, Energy Minister Yerlan Akkenzhenov has said during a recent briefing. In October, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) expanded restrictions affecting Russian energy companies, including certain transactions involving LUKOIL and Rosneft, granting temporary licenses permitting specified transactions and wind-down activities until November 21. The United Kingdom also issued restrictions on October 15. In response, LUKOIL began exploring the sale of its foreign assets, including holdings in Kazakhstan. LUKOIL has maintained a presence in Kazakhstan since 1995. The company currently holds a 13.5% stake in Karachaganak Petroleum Operating B.V. (operator of the Karachaganak field), 5% of Tengizchevroil LLP (which develops the Tengiz field), 50% of Turgai Petroleum JSC (Kumkol field operator), and 12.5% of the Caspian Pipeline Consortium (CPC), the primary export route for Kazakh oil. However, several of LUKOIL’s international projects, such as its involvement in Tengiz and Karachaganak, as well as the CPC, have received exemptions from U.S. and UK sanctions. OFAC recently extended a license allowing negotiations and agreements related to the potential sale of LUKOIL International GmbH or other affiliated entities until January 17, 2026. Speaking at the briefing, Minister Akkenzhenov stated that Kazakhstan is not rushing to engage in any asset acquisition discussions. "The deadline has now been extended until mid-January, and we are all awaiting the conclusion of that period and any further developments. The government is not currently negotiating the purchase of these assets," Akkenzhenov said. "However, many companies around the world are interested, and I would like to remind everyone that Kazakhstan has priority rights under the Subsurface Code. We will decide in due course whether to exercise this right." Akkenzhenov also addressed the ongoing arbitration dispute over the Kashagan oil field, the largest in the Kazakh sector of the Caspian Sea. According to the minister, substantive legal proceedings are not expected to begin before the second half of 2026, with a more detailed review likely to follow in 2027. “Currently, the process is limited to collecting documents. It is premature to speculate on potential arbitration amounts, as the court has not yet accepted the case for detailed consideration,” he said. As previously reported by The Times of Central Asia, Kazakhstan’s arbitration claims against the NCOC consortium developing Kashagan, which includes Shell, ExxonMobil, TotalEnergies, and Eni, exceed $150 billion.

Oil and Gas

China’s Power Play in Central Asia’s Energy Sector

China is steadily expanding its influence in Central Asia’s oil and gas sector through multi-billion-dollar investments, long-term supply agreements, and a growing network of strategic partnerships. From Kazakhstan to Turkmenistan, Beijing’s state-backed companies are securing key upstream and midstream assets, financing new petrochemical and pipeline projects, and positioning themselves as indispensable players in the region’s resource development. This expansion is driven not only by China’s rising energy demand, but also by Beijing’s ambition to establish durable overland energy corridors that reduce reliance on maritime routes vulnerable to disruption. Central Asia’s existing and planned pipelines provide China with rare direct access to oil and gas fields across its western frontier, making the region a focal point of its broader energy-security strategy and a cornerstone of Beijing’s efforts to diversify supply while deepening political and economic footholds across Eurasia. Kazakhstan Eyes Chinese Investment Amid Lukoil Sanctions Kazakhstan may seek to transfer Russian company Lukoil’s stake in the offshore Kalamkas-Khazar oil and gas project to a new partner, with some industry channels, including the Telegram channel Energy Monitor, speculating about possible Chinese interest. Lukoil, which has been targeted by Western sanctions, is reportedly planning to exit Kalamkas-Khazar Operating LLP, a joint venture with KazMunayGas (KMG). Each company currently holds a 50% stake. Some commentators have suggested that a Chinese investor could step in, but no replacement has been officially confirmed. Seconded engineers from KMG Engineering are expected to be withdrawn from the project as of January 1, 2026, with several Kalamkas-Khazar staff members temporarily reassigned to other KMG subsidiaries until a new partner is confirmed. The project is considered highly promising, with earlier estimates citing reserves of 81 million tons of oil and 22 billion cubic meters of gas. New exploration has identified additional oil-bearing structures. A final investment decision (FID) worth more than $6.5 billion was originally expected by the end of 2025. However, U.S. sanctions against Lukoil have delayed progress. Located 120 km from the Kashagan field in the North Caspian Basin, the Kalamkas-Khazar block comprises the Kalamkas-More and Khazar fields. The site is situated in Kazakhstan’s Mangistau Region, 60 km from the Buzachi Peninsula. KazMunayGas Chairman Askhat Khasenov previously confirmed that production was expected to begin in 2028-2029, with peak output reaching four million tons annually. Lukoil was sanctioned by the UK on October 15, followed by the U.S., complicating ongoing negotiations. Despite this, major projects where Lukoil holds minority stakes, such as Tengiz, Karachaganak, and the Caspian Pipeline Consortium, have not been impacted. A Lukoil withdrawal would create a rare opening for China to secure its first significant offshore position in the North Caspian, a zone historically dominated by Western majors and Russian firms. Such an entry would represent a notable shift in Kazakhstan’s offshore partnership landscape. Beijing's Billion-Dollar Energy Deals in Kazakhstan In September 2025, President Kassym-Jomart Tokayev announced a series of energy deals with China valued at $1.5 billion. During his official visit to China, more than 70 commercial agreements totaling approximately $15 billion were signed, several...

Sanctions

Kazakhstan Authorities Deliberate Future of Lukoil Assets

Russian oil giant Lukoil has announced plans to divest its international assets, including subsidiaries, amid ongoing Western sanctions. The company stated the sale is being conducted under a license issued by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which allows Lukoil to wind down its foreign operations in an orderly manner by November 21, 2025. An extension of this deadline may be requested. “Review of applications from potential buyers has begun,” the company said in an official statement. According to industry data, Lukoil currently holds stakes in several key Kazakh projects: 5% in Tengizchevroil (TCO), 13.5% in Karachaganak Petroleum Operating B.V., 50% in the Kalamkas-Khazar project (Kalamkas-Khazar Operating joint venture), 49.99% in Al-Farabi Operating (offshore exploration and production), and 12.5% in the Caspian Pipeline Consortium (CPC). While analysts suggest CPC operations are unlikely to be affected by U.S. restrictions, Kazakhstan may witness a significant redistribution of oil sector investments. Despite this, Kazakh authorities remain cautious in making definitive assessments. Nurlan Zhakupov, head of the Samruk-Kazyna sovereign wealth fund, stated that discussions are ongoing with both domestic and international advisors regarding Lukoil’s shares in Kazakh ventures. “A great deal of complex work is being carried out with relevant consultants, including international ones, on how KazMunayGas can navigate the current situation. Lukoil has major projects in Kazakhstan, so this is a complex and multifaceted issue,” Zhakupov said. Deputy Minister of Energy Sanzhar Zharkeshov emphasized that any decisions regarding the acquisition of Lukoil’s shares fall under the purview of the national oil company KazMunayGas. “Lukoil is KazMunayGas’s partner. They are jointly involved in Kalamkas, Khazar, and other projects. At this stage, the Ministry of Energy is not addressing the buyout or shareholder restructuring, this is a matter for KazMunayGas as an economic entity,” Zharkeshov said at a press conference. Energy Minister Yerlan Akkenzhenov added that decisions on potential buyouts have not yet been made. “This discussion has not yet taken place. The sanctions are still being analyzed, and their full impact on companies and the economy remains to be assessed. I believe a decision will be made soon, within the next few days, before the end of this week,” Akkenzhenov stated. The Times of Central Asia has previously reported on the broader effects of U.S. and EU sanctions on economies across Central Asia.

Sanctions

How U.S. and EU Sanctions Are Rippling Through Central Asia

Russia’s economy has faced renewed pressure following a fresh round of sanctions imposed this past week by both the European Union and the United States. After abruptly canceling a planned meeting with Vladimir Putin in Budapest, President Donald Trump shifted to a more hardline stance, announcing new sanctions. While these sanctions may not cripple Moscow, they are already having secondary effects on Central Asia, particularly on Kazakhstan’s banking and energy sectors. The EU's 19th sanctions package, adopted on October 22, introduces a phased ban on Russian liquefied natural gas (LNG). According to Reuters, short-term contracts will be terminated within six months, while long-term contracts are to expire by January 1, 2027. The package also includes a total ban on transactions with Russian oil giants Rosneft and Gazprom Neft, an expanded blacklist of so-called "shadow fleet" vessels, and sanctions against 45 companies in Russia and third countries supplying military-related technologies. Of growing concern in Central Asia is the inclusion of several regional financial institutions in the EU's sanctions list. These include the Kazakh branch of Russia’s VTB Bank, Kyrgyz banks Tolubai and Eurasian Savings Bank, and Tajik banks Dushanbe City Bank, Kommertsbank of Tajikistan, and Spitamen. These restrictions are scheduled to take effect between November and December 2025. Both Kyrgyzstan’s President Sadyr Japarov and the nation's Foreign Ministry have publicly expressed dismay over the sanctions, with Japarov urging Western leaders to stop “politicizing the economy.” In his speech at the UN General Assembly in New York in September, Japarov criticized the impact of unilateral sanctions, while the Foreign Ministry has stated that the country adheres to its international obligations and maintains an open dialogue with the EU to prevent risks associated with possible sanctions circumvention. The ministry has proposed launching an independent, internationally recognized audit and forming a joint “Kyrgyzstan-European Union” technical working group to facilitate data exchange, transaction monitoring, and risk assessments. In Kazakhstan, the National Bank downplayed the impact of sanctions against VTB. Deputy Chairman Yerulan Zhamaubayev noted that the bank had already been under nominal restrictions, and handles few transactions. “VTB does not affect the country’s financial stability, and we do not expect serious risks for the economy,” Zhamaubayev stated. However, the latest U.S. sanctions may prove more consequential for Kazakhstan, particularly amid efforts to strengthen bilateral trade with the United States, including through the repeal of the Jackson-Vanik amendment. The U.S. Treasury Department has sanctioned Russian oil majors Rosneft and Lukoil. The latter has deep economic ties with Kazakhstan. Just days before the announcement, on October 14, President Kassym-Jomart Tokayev personally attended the 30th anniversary of Lukoil’s operations in Kazakhstan, awarding CEO Vagit Alekperov the Order of Barys, first class. Oil and gas journalist Oleg Chervinsky reported that the joint venture Kalamkas-Khazar Operating LLP, co-owned by Lukoil and KazMunayGas, is directly affected. “Only the Tengiz and CPC projects, which Lukoil operates with American partners, have been exempted from the sanctions,” Chervinsky noted. A final investment decision for Kalamkas-Khazar was expected in December 2025. Yerkanat Abeni, a member of...

Inflation

Inflation in Kazakhstan “Eating Away” at Incomes: Authorities Struggle for Answers

Inflation in Kazakhstan is continuing to erode household incomes, driven by the country’s dependence on imports, rising utility tariffs, and increasing tax burdens. While living costs soar, wages remain sluggish, forcing many families to allocate most of their earnings to essentials such as food, medicine, and utilities. Rising Prices, Stagnant Wages As of August, annual inflation had reached 12.2%, and experts warn it could climb even higher by year’s end. The National Bank’s original 2025 inflation target of 5% has proven to be overly optimistic. “This is a negative, sad trend. It shows that not enough measures have been taken. That it was necessary to tighten monetary policy earlier. It was necessary to contain inflation risks,” said Ramazan Dosov, chief analyst at the Association of Financiers of Kazakhstan. The National Bank’s base rate, its primary instrument for controlling inflation, currently stands at 16.5%. Financier Rasul Rysmambetov notes that the rate is unlikely to be lowered in the near future. However, high interest rates also reduce access to loans for businesses, curbing investment. Despite frequent government statements about inflation-control measures, experts argue that artificial price regulation offers only temporary relief. In his September 8 address to the nation, President Kassym-Jomart Tokayev acknowledged the severity of the issue, stating, “Today, the main problem is high inflation, which is eating away at economic indicators and household incomes. There is no ready-made solution to this problem.” Tokayev called for coordinated efforts across government agencies. At the beginning of 2025, Kazakhstan’s average monthly salary was reported at 424,200 KZT (about $800), reflecting a 24% increase over the previous year. However, this figure obscures wide regional disparities. In many areas, typical monthly salaries range between 180,000 and 230,000 KZT ($330-430). Per capita income reached 194,000 KZT ($362), up 17% from early 2023, but not enough to keep pace with inflation. According to kazkredit.kz, average families now spend up to 95% of their income on day-to-day expenses. In 2023, 52% of income went toward food; that figure has risen to more than 54% in 2025. Halyk Finance, cited by inbusiness.kz, reports that more than half of Kazakhstan’s workers earn below the national average. Salary data reveals stark income inequalities across sectors, with higher wages in mining, finance, and telecommunications, and significantly lower wages in agriculture, healthcare, and public administration. Analyst Arslan Aronov notes that although nominal wages increased by 11.3% in the second quarter of 2025 compared to the same period in 2024, real wage growth was effectively zero due to inflation. Public sentiment reflects the strain. Economists at KZTnomika reported a slight easing of inflation expectations in August 2025, but overall confidence in price stability remains low. Eighty-two percent of survey respondents reported rising food costs, with meat and dairy products leading the list. Among non-food items, medicines, clothing, and cleaning products were most frequently cited. For paid services, rising costs for housing, internet, mobile communication, and healthcare were prominent concerns. Background and Analysis Kazakhstan’s struggle with inflation is rooted in both external shocks and structural...

Russia's War

Central Asians in Putin’s War: Fighting for Ukraine, Forced for Russia

As the war in Ukraine continues to drag on, fighters from across Central Asia have found themselves on both sides of the frontlines. In Kyiv, Kazakh national Zhasulan Duysembin has traded his past life as a sales agent for a rifle, sporting a tattoo of Kazakhstan’s flag on his back as he battles to defend his adopted home. He now fights, he says, to protect his children and believes that “Russia will not stop in Ukraine, it will go further. We must make every effort to ensure that our Kazakhstan does not suffer.” Alan Zhangozha, an ethnic Kazakh who grew up in Kyiv and now serves as a public relations officer in the Ukrainian Army, echoes this sentiment. “Ukraine’s victory will also be a victory for my Motherland,” he told The Diplomat. But as the war drags on, in Kazakhstan, families mourn men like 22-year-old Kiril Nysanbaev - a labor migrant in Russia coerced into signing up for the war who only came home in a coffin. His sister recalls how her brother told her that Russian officers beat and forced him to enlist while he was detained on dubious charges in Chelyabinsk. Nysanbaev was killed in Ukraine’s Donetsk region in March 2024, news that only reached his family three months later. Citizens of all five Central Asian countries have been pulled into the conflict since Russia’s invasion in 2022. Some have volunteered to fight for Ukraine, driven by personal ties or ideals, while others, mostly labor migrants, have been recruited, enticed, or pressured into fighting for Russia. These parallel currents reflect the complex impact of the war on a region that remains officially neutral but was historically deeply entwined with Moscow. While a handful of Central Asians now wear the blue-and-yellow insignia in Ukraine’s defense, far more have ended up in Russia's ranks, often as expendable foot soldiers. From Bishkek to Bucha In November 2022, a Kyrgyz former labor migrant, Almaz Kudabek uulu, announced the creation of the Turan Battalion, a volunteer unit of Turkic-speaking fighters formed to assist Ukraine. “Kyrgyzstan is my homeland; I will always love it. But Ukraine is my home now; I am fighting for Ukraine,” he told reporters. The battalion, joined by volunteers from Kyrgyzstan, Kazakhstan, Azerbaijan, and elsewhere, operates as a semi-autonomous unit supported by private donations and allied Ukrainian brigades. Back in Kyrgyzstan, however, the authorities opened a criminal case against Kudabek, punishable by up to eight years in prison, and local media that covered his story faced pressure. Others have supported Ukraine in tangible, humanitarian ways. Early in the war, members of Ukraine’s Kazakh diaspora erected traditional yurts in cities like Bucha and Kyiv as heated shelters dubbed “Yurts of Invincibility.” These spaces provided food, tea, and electricity during blackouts, a gesture of solidarity that irritated Moscow but drew only a muted response from Kazakhstan’s government. Moscow’s Migrant Recruits: Coercion and Casualties Far greater numbers of Central Asians have ended up fighting for Russia, which hosts millions of migrant workers from...