Azernews.Az

Kazakhstan may slash its imports of oil products from Russia, following a row between the two Customs Union members over the details of a crude-for-fuel deal agreed last year, Kommersant business paper reported on Wednesday, according to RIA Novosti news agency.

Kazakhstan has been short of oil products after closing its three major refineries for modernization until 2016. Last year, Russia exported 1.3 million tons of gasoline and diesel products worth 40 billion rubles ($1.33 billion) export-tariff free to Kazakhstan, which is required to compensate for these deliveries with crude oil supplies, under a bilateral intergovernmental agreement.

The formula for calculating the amount of crude oil has not been confirmed, meaning Kazakhstan is losing out by supplying the oil to Russia, because it has to supply it at prices below the price for which it exports oil, Kazakhstan's Oil and Gas Minister Sauat Mynbayev said at a government meeting on Monday.

The Kazakhstan government has in response decided to cut fuel dependence on Russia and boost tolling operations with neighboring China, under which Kazakhstan will pump crude oil to Chinese refineries and bring back refined oil products, he said.

The Kazakhstan government is considering building an oil product pipeline at the border with China to boost refining under tolling contracts, Mynbayev also said on Monday.

The pipeline will operate until modernization of the republic's refineries is completed, he said.

"This means it will operate until we are fully able to reach self-sufficiency [in oil product provision], which will be achieved by the end of 2015," he said.

Kazakhstan intends to refine about 500,000 tons of crude in China this year, Mynbayev said previously.

If Kazakhstan does cut its imports, it would primarily affect Russia's Gazprom Neft, which has around 40 filling stations in that country, the paper says.

Russia's Deputy Prime Minister Igor Shuvalov is due to hold talks in Moscow on Wednesday with Kazakhstan's Deputy Prime Minister Kairat Kalimbetov, including energy issues, Shuvalov's administration told Kommersant.

In a separate dispute which broke out late last year, Astana and Moscow have argued about control of the Baikonur space center in Kazakhstan, Russia's main rocket launch center, with Astana seeking a return to local jurisdiction.

The issue of control over Baikonur and the rent Russia pays Kazakhstan to use the facility have been the subject of ongoing dispute between the two nations ever since Kazakhstan gained independence from the USSR in 1991.