Romania and Kazakhstan: The Background and Outlook of a Partnership
Marin Stanescu, Temporary Romanian Charge d’affaires to the Republic of Kazakhstan
Romania and Kazakhstan have had a long and close history of economic and cultural co-operation. In the recent past, Romania has supplied oil equipment, vehicles, furniture, textiles, footware, foodstuffs and other commodities to the Kazakhstani market under agreements within the Council for Mutual Economic Assistance. Today, when Romania and Kazakhstan have established diplomatic relations at embassy level, both countries are paying particular attention to the development of a bilateral political dialogue and exchanging experiences of the transition to a market economy, democratic reforms and privatisation. A legal framework of 15 deeds has been established to regulate inter-state relations. These documents include declarations on the development of relations, friendship and co-operation between the two countries signed by President of Romania Emil Constantinescu and by Nursultan Nazarbayev, President of Kazakhstan (Bucharest, 21st September 1998, and Astana, 11th November 1999). The declarations regard bilateral relations as a partnership and count on further strengthening of co-operation in all spheres.
The two countries have signed the following documents:
• Agreements on Mutual Guarantees and Encouragement of Investment, 1996;
• Convention for the Avoidance of Double Taxation, 1998;
• Agreement on Trade and Economic Co-operation, 1999;
• Protocol of the Intergovernmental Commission on Trade, Economic, Scientific and Technical Co-operation.
Seven more drafts of bilateral documents, mainly in the sphere of transport, standardisation, certification, veterinary services, etc., are being considered. The main stress is being placed on the development of Romanian-Kazakhstani economic relations. A great deal of input towards the activation of business links was produced by the Intergovernmental Commission on Trade, Economic, Scientific and Technical Co-operation, as well as by economic missions and meetings of businessmen from both countries, especially over the last three years. The growth of mutual understanding and co-operation was facilitated to a great extent by the ‘Romania at the Crossroads’ forum organised by Romanian companies operating in the Central Asian and Caucasian countries.
Despite occupying 14th place in Romania’s turnover, Kazakhstan ranks a firm third (after the Russian Federation and Ukraine) among Romania’s trade partners in the post-Soviet bloc.
Romania’s statistics show that goods turnover between Romania and Kazakhstan reached $103.3m in 1999, including $1.8m of Romania’s exports to Kazakhstan and $101.5m of imports from Kazakhstan. In the first six months of 2000, goods turnover came to $233.9 million, with $6,4m of exports to Kazakhstan and $227.5m of imports from Kazakhstan.
Romania’s overall external trade volume in 1999 amounted to $18,897b, with $8,505b of exports and $10,392b of imports.
Romania imports mineral oils, metals and cotton from Kazakhstan, and exports metallurgical products (heavy bearings and equipment), furniture, transport equipment, machines and devices, plastics to Kazakhstan.
Romania provides assistance to Kazakhstan in its memberships of the Black Sea Economic Co-operation Organisation and of the Danube Commission as an observer. Both Romania and Kazakhstan are participating in the implementation of the international SILKSAT and TRACECA programmes, and INOGATE, the EU inter-state programme for hydrocarbon development.
The significance to both countries of oil sector development is evidenced by the participation of representatives from the Government of the Republic of Kazakhstan and Kazakhstani oil companies in the ‘Caspian Energy to Europe’ conferences (Bucharest, 25th-28th September 1998, and 18th-21st September 1999). Romania, for its part, took part in the 8th International Oil and Gas Exhibition (KIOGE’2000, Almaty, 3rd-6th October 2000) through its main companies, such as PETROM and SILICOTUB, along with 13 other Romanian companies. Kazakhstani officials have a high opinion of Romania’s oil and gas technology and of the potential for bilateral co-operation in hydrocarbon production and refining.
Today, our countries have stepped onto the path to economic transformation. Romania is experiencing accelerated privatisation, including in the spheres of power engineering, mineral resources, defence, heavy engineering, etc.
The process of privatisation of large Romanian companies will imply an increase in capital, with participation by foreign investors from various countries around the world. Among the companies offered for privatisation are the National Romanian Oil Company PETROM, the PETROMIDIA oil refinery at the Black Sea with an annual capacity of 6.5 m tonnes of oil, RAFO-ONESTI, and energy generating, gas producing and processing companies, also energy consuming facilities.
Two Romanian companies – INDUSTRIALEXPORTIMPORT and PETROM-Kazakhstan have been operating in the Kazakhstani market. ROMDRILLING (Kulsary) Joint Venture was also established, but did not start operation for technical reasons.
PETROM is the main oil production and oil products marketing operator in the Romanian market. Being the largest Romanian company, PETROM provided $1b in tax to the national budget of Romania in 1999. On 23rd March 1999, PETROM-Kazakhstan signed a contract with the Investment Agency of the Republic of Kazakhstan for exploration and production in the Zhusaly field (Karaganda and Kzylorda regions) for 25 years. The company has carried out a seismic survey of the area, and requested tenders from local contractors to conduct further operations in the Zhusaly field. The first well is to be drilled in 2000. PETROM intends to invest around $150m in geological prospecting and the construction of oil pipelines, filling stations, etc.
Another contract was signed by PETROM -Kazakhstan with Tasbulat private oil corporation (Mangistau region) for the rehabilitation of old wells in the region. This contract provides for an oil block concession near the city of Aktau, and for $53m of investment.
INDUSTRIALEXPORTIMPORT constructed an oil/gas separation plant in Akshabulak (Kzylorda region), which has been operating successfully since 1999. The Kazakhstani side is very pleased with the quality of the plant constructed by the Romanian partner.
PETROM has signed protocols of co-operation with KAZAKHOIL National Oil and Gas Company, KAZTRANSOIL National Transportation Company, and KAZAKHSTANCASPYSHELF National Company. These documents provide for the implementation of joint projects in the oil and gas sector of Kazakhstan as well as oil transportation along the Supsa-Constanza route. A joint declaration signed on 11th November 1999 in Astana calls for the creation of a work group to study the Constanza-Trieste oil pipeline project. Under this project, an oil pipeline will cross Romania, Serbia, Croatia and Slovenia, joining the Adria pipeline in Trieste. The pipeline would allow transportation of Caspian oil to Europe across the Black Sea, Romania and some other South-Eastern and Central European countries.
The Constanza-Trieste project was proposed by ‘Romania at the Crossroads’ forum, and is co-ordinated by the Italian concern ENI. The project was offered to the USA, Azerbaijan, Kazakhstan, Georgia, Turkmenistan, the Russian Federation and the Czech Republic, and was supported by Romanian, Italian and US companies as well as the governments of countries including Hungary, Slovenia, the Czech Republic and Croatia. Democratic reforms in Yugoslavia will allow Serbia to be included in the Constanza-Trieste project.
This project faces few problems. Moreover, the port of Constanza is connected with Romanian oil refineries by a pipeline network. Romania has offered Kazakhstan a stepwise implementation of the project, including:
• Transportation of Caspian oil to Constanza using the existing infrastructure of the Romanian port;
• Refining of Caspian oil in Romania with oil products to be sold in Europe, using existing infrastructure (a terminal in the port of Constanza in a free economic zone, the Danube-Black Sea Channel, the Rhine-Main-Rotterdam-North Sea communications corridor, and Romanian oil pipelines onward to Serbia (Pancevo)).
These two stages of the project would allow financing the construction of the planned oil pipeline, which costs $1.2b (Constanza-Trieste).
Based on available estimates, transporting one tonne of oil from Constanza to Trieste will cost $12. Half the oil will be transported through the pipeline to Romania, and the remainder to countries participating in the project, which will also allow their refining facilities to be used.
Another programme passed by the Government of Romania in February 1999 provides for the Europe-Central Asia economic corridor to transit across Romania. Romania has plenty of refining facilities in various economic sectors. Our country may become the centre for refining products and producing export-oriented goods for states along the Silk Road.
The economic potential of Kazakhstan and Romania enables co-operation to be intensified in all spheres. Romanian companies can supply mini-plants for oil and gas refining, drilling rigs, pumping jacks, pipelines, well-repair equipment, and chemical plants, and invest in the development of new oil and gas fields as well as the creation of related offshore and onshore infrastructures.
The Foreign Investors Council is a model of co-operation between young democracy and transnational companies Askar Yelemessov
Kazakhstan Investment Policy: Time to Change Priorities Dulat Kuanyshev
The Association of Investors of Kazakhstan: Our might is in unity, and the path to success lies in our solidarity! Serik Tulbasov
Fundamentals of the Legal Regulation of Production Sharing Agreements in the Russian Federation Sergei Gudkov
Production Sharing Agreements: The Legal Aspects Aigoul Kenjebayeva