As the price of oil drops and Kazakh government revenues shrink, the government has begun a more stringent evaluation of its energy sector. It was announced yesterday that oil treatment facilities and refineries that work with Russian gasoline suppliers will need to be closed due to low or even negative profit margins. Kazakhstan’s Energy Minister Vladimir Shkolnik additionally reiterated another problem inherent in Kazakhstan’s energy market, namely that it lacks sufficient refining capacity to process its own crude oil to produce gasoline, instead needing to import these products from Russia for further reprocessing. Shkolnik also commented on his son Igor’s sale of his stake in the Orsk Refinery, under the management of Russian Roseneft.

Despite the cost strictures, to meet domestic demand, Skholnik said he is considering the construction of two nuclear power plants, likely with aid from Russia. The two physical sites will be located at Kurchatov and Balkash, and the technology used to construct these will be from the Western nuclear power equipment supplier Westinghouse. The cost of each of these nuclear reactors will be roughly $3-4 billion. Today, Kazakhstan imports some 644 GWh, and most domestic electricity generation comes from coal fire plants (73%) and gas, wind, and renewables covered the rest.

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News Briefs:

• Exchange rates between the ruble and the Kyrgyz som has changed once again, with the most current prices being 0.87 soms per ruble, while the Euro trades at roughly 68 soms. The dollar trades currently at 60.1 soms, and the ruble shows no signs of picking up despite the heavy Central Bank intervention. This new currency equivalence is unfortunately bad for Kyrgyzstan as it raises the costs of its exports to Russia (which are mostly re-exported Chinese goods), in an already demand-light environment.

• Militants trained by the Islamic State have been arrested in Kyrgyzstan, according to the spokesman for Kyrgyzstan’s State committee for National Security. It is still unclear how many Kyrgyz nations are fighting in Syria for terrorist groups, but recent estimates made by political figures in Kyrgyzstan put the number at between 225-500.

• The economy of China’s westernmost province of Xinjiang economy expanded some 10% in 2014, far faster than the national average of 7.4% (unadjusted estimate). The National Statistics Bureau also reports that the average disposable income of Xinjiang residents rose some 11.5% and fiscal revenue from taxes increased by 10% as well.

• The Diplomat has an interesting article about the prospects for a regional partnership that would divide Central Asia between a strategic triangle of India, China, and Russia due to new efforts on the part of Russia to engage strategically and economically with India and China, mirroring the American foreign policy “pivot to Asia” strategy released in 2011. Russian diplomats, according to the article, see the election of Narendra Modi, who is pursuing a more activist foreign policy less in line with Washington’s interest, as an opening to exploit a closer relationship. Both India and China, however, are in competition for Central Asia’s energy markets – energy security was cited by a prominent member of India’s Parliament as a “key nexus” of India’s foreign policy.

• The Ukrainian government has been pushed back along the outskirts of Donetsk by separatist forces after a rebel offensive devastated the five month long truce that had held steady since September. The two zones of conflict yesterday are around the suburb of Maryinka and the town of Pesky near the airport, which has been a persistent area of conflict.

• A group of US Congressional Democrats, led by Bob Menendez of New Jersey, have given Obama 2 months to secure a nuclear deal with Iran. They guaranteed Obama in a letter obtained by Politico that they would not support the passage of a bill slapping additional sanctions on Iran until March 26, giving the US team led by Wendy Schiller breathing room and denying Republican attempts to quickly squelch the foreign policy initiative.