25 april 2022
3 min

What logistical solution will Kazakhstan come to?

What logistical solution will Kazakhstan come to?

Paralysis of the logistics chain through Russia to Europe and back. What paths does Kazakhstan have? How much will the cost of logistics increase and what difficulties may arise.

The end of February 2022 was a turning point in Russian-Ukrainian relations, dividing time into "before" and "after" the conflict. The anti-Russian sanctions broke the world record by becoming the absolute leader in number, displacing Iran, a regular in this club.

In light of these events, the global supply chain has been significantly affected, and such an outcome could be very sensitive for the economies of the Eurasian Economic Union (EAEU) member states, whose logistics run through the territories of the embargoed countries.

Dependence on the Russian market

Although Kazakhstan is not directly affected by Western sanctions restrictions, it will, like all of Russia's economic partners in the Eurasian Economic Union, be involved in the storm of events.

The Republic is more integrated than all EAEU members and therefore dependent on all economic processes taking place in Russia. KZT exchange rate is practically inextricably linked with ruble position.

The major part of Kazakhstan oil products goes through Russian ports. While many purchasing countries are turning down oil shipped from Russia for its inability to determine country of origin, as well as for fear of blending with Russian grades - supplies of Kazakh products to European Union countries are delayed.

There is also the technological, agricultural and logistical dependence of Kazakhstan on Russia, which in the absence of quick reorientation poses a threat of crisis for the republic.

Export-import of Kazakhstan to EU countries

According to the Ministry of Trade and Integration of the Republic of Kazakhstan, in January-February 2022, trade turnover between Kazakhstan and the EU countries was $6.0 bln, which is 70.9% higher than in the same period of the previous year ($3.5 bln).

Exports from Kazakhstan to the EU countries in January-February 2022 increased by 84.4% and amounted to - $5.2 bn.

Imports to Kazakhstan from the EU countries in January-February 2022 rose by 14% to $767.5 million.

The growth of exports to the EU countries is justified by the increase in supplies of such goods as: crude oil - by 81.2% ($4.6 bln), ferroalloys - an increase of 2.5 times or (to $96.3 mln), unprocessed aluminum - an increase of 2.5 times or ($58.0 million), wheat - an increase of 13.2 times or ($31.7 million), oil products - an increase of 40.4% (to $94.6 million), natural gas - an increase of 4.3 times or ($35.5 million).

Such positive dynamics in the light of geopolitical events remains a priority task for the economy of the republic.

What solutions does Kazakhstan have?

At the beginning of March the government of Kazakhstan created the Operational headquarters for anti-crisis measures, consisting of leading experts in the field of economy, management and finances of the republic, as well as businessmen and ministers, aimed at resolving the influence of anti-Russian sanctions on Kazakhstan.

During the last meeting a task was set to reorient logistics chains and create alternative routes from Kazakhstan to the EU countries.

One of the options proposed by experts is the development of the Trans-Caspian International Transport Route, which runs through China, Kazakhstan (through the ports of Aktau and Kuryk), the Caspian Sea, Azerbaijan, Georgia, then Turkey and then on to Europe. This route will increase tariffs and affect the delivery time, but will be a safe alternative for exports and imports of the member countries.

According to Murat Amrin, director of the logistics and transportation department of the National Chamber of Entrepreneurs Atameken, Kazakhstan has another additional option for transit of domestic products to EU countries bypassing Russian routes. "We also have alternative routes by transit through Iran in the direction of Uzbekistan, transit through Turkmenistan. Through Iran we can get to Turkey by land, by road, and there is an exit to the ports of Iran. There are some concerns about crossing the border with the Turkmen side, because there are still covid measures in place there," he said.

How much will the cost of logistics increase and what difficulties may arise

Deficits and the cost of logistics will grow, in proportion to the increase in the distance and duration of the supply of goods, Approximate expert estimates indicate that it will grow by 2-3 times. But this picture can last as long as the alternative supply chain.