Russian website Neft Rossii reports (link in Russian) that Kazakh state energy company KazMunaiGas (KMG) has finally sealed the deal with shady Indonesian company Central Asia Petroleum Ltd. to purchase just over 50 percent in MangistauMunaiGas (MMG), once the country’s largest oil producer.  

The deal needs the approval of the Kazakh anti-monopoly agency, which should be a mere formality, although it will in effect ensure that KMG gains an even more unwieldy grip over the country’s energy resources. Even more importantly, MMG controls the valuable Pavlodar refinery, which the Kazakh government has had its beady eyes on for some time. Just to be accurate, however, it should be noted that KMG already owns a 47 percent stake in the facility.

Complete control over that asset will in the long-term prove far more appealing than the relatively meagre 5.7 million tons of oil output that MMG accounted for in 2007. With domestic fuel prices _ which soared throughout most of last year _ becoming an increasingly sensitive topic, the facility to control supply of this precious commodity will be a useful political lever for Astana pull whenever it requires it. In a slightly inept spectacle, the Kazakh government announced in May that a temporary ban on the export of petroleum products to try and stem rising fuel costs, which in turn have a knock-on effect on the cost of agricultural produce.

Of course, what the country really needs is proper investment into refineries the government already owns, but there is not much sign of that. It is perhaps just as well that the crisis is dissuading many Kazakhs from investing in new and swanky cars, as the petrol on offer is usually so dismal that the vehicles invariably suffer from being watered with it.

Aliyev relaxing in a lair of undisclosed location

Aliyev relaxing in a lair of undisclosed location

On an even juicier note, the MMG deal has a whiff of intrigue about it, since it is widely speculated that none other than the hated Rakhat Aliyev, the president’s prodigal son-in-law and all-round thug, was the company’s main shareholder. Aliyev, formerly head of the successor agency to the KGB, now lives in exile in some unknown European state and has to look on as the Kazakh authorities slice up his patrimony. Or so it is alleged.

Russia’s Gazprom Neft sniffed around MMG for a while, but it never really stood a chance against Nursultan Nazarbayev and his cronies. Blood, after all, is thicker than water – even if it is only by marriage.