Kazakhstan plagued by oil theft

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The theft of crude oil has cost Kazakhstan around 104 billion tenge (US$313 million) over the last three years, according to the country’s deputy prosecutor general, Andrei Lukin.

Cases of stealing in the oil-producing heartland of western Kazakhstan are nothing new, although it seems authorities now have a clearer picture of the extent of the illegal trade following major security operations recently carried out against criminal groups.

Speaking at a forum in Aktobe on October 20, Lukin warned that revenue losses from oil theft since 2014 could be even greater than the 104 billion tenge estimate. He indicated the nefarious business had grown so large that “as soon as law enforcement agencies uncover one [operation] for illegally taking oil from the country, another appears.”

Lukin accused the producers themselves of being the main culprits. “An analysis of just 40 of Kazakhstan’s [oil] production companies showed that they sold more oil than they extracted,” he told reporters and lawmakers. Among the countries receiving this oil are Kyrgyzstan, Moldova and Russia.

Trials have been under way in the courts in the western oil city of Aktobe against groups who sold their oil inside and outside Kazakhstan. The head of Kazimptrade, Mirbolat Niyarov, was convicted in August of stealing oil from a CNPC-Akobemunaygaz well in the Temir district.

Also convicted in the case was the deputy commander of the Arlan special police unit, Kenzhegali Burkitov, to whom Niyarov paid 2 million tenge (US$60,000) per month in return for ensuring a clear route from the site to Aktobe. Authorities seized 17 KamAz trucks, two filling stations, several foreign luxury cars, and also discovered several large tanks for storing stolen oil.

In December 2016, corruption investigators and police forces, supported by armoured vehicles, raided the Aktobe refinery and other areas in the city of Aktobe, along with apartments in Almaty. They detained Erkin Izbasar, allegedly a leader in the “Four Brothers” criminal gang, and several of his associates. The detainees are accused of stealing crude oil and finished fuels and then smuggling them across the border to Russia for sale. At the time of the raid, however, Kazakhstan’s National Security Committee (KNB) said in a statement that among those detained were “several adherents of radical Salafism”. Salafism is an ultra-conservative branch of Sunni Islam.

“The illicit oil trade has become a source of financing for the activities of certain organised criminal groups, in particular radical religious sects,” the governor of the Aktobe Province, Berdybek Saparbayev, said at the October 20 forum. Analysts concede that some Salafi groups in Kazakhstan are involved in illegal oil sales but add there are various kinds of Salafi communities in the country and most are not violating the law.

There are suspicions that groups behind the illicit trade are protected by high-ranking officials in the Kazakh government. The owner of the Aktobe refinery that was raided last December is Ilyas Tasmagambetov, the nephew of Imangali Tasmagambetov, who served as head of Kazakhstan’s presidential administration, mayor of Almaty and later Astana, defence minister, and from September 2016 until February 2017, was a deputy prime minister. Ilyas’ father, Kurmangali Tasmagambetov, has been the deputy head of Mangistau Province’s revenue department since late 2014. Mangistau shares a border with Aktobe Province.

None of the Tasmagambetovs have been named as part of the investigation at the refinery.

Lukin did not elaborate on illegal oil production sites. There are an unknown number of such operations in western Kazakhstan, operating on small fields in remote areas that were often opaquely privatised in the mid-1990s. The fields are too small to attract the attention of state oil comany KazMunaiGas (KMG), but they continue operate. They are unregistered and usually do not declare any information about their finances. Such operations are also believed to be under the protection of powerful local officials.

This NewsBase commentary is from FSU OGM publication