Russian military units enter Kazakhstan: Update

Adds CPC pipeline operator in paragraph 6, updated production estimate in paragraph 7

Russian military units have entered Kazakhstan at the government's request after fuel price protests turned violent.

The Collective Security Treaty Organisation (CSTO), a grouping of former Soviet Union countries, said it will send "peacekeeping forces" for a limited time. Argus understands this to be the first time the CSTO has mobilised in this way since it was founded in 1999. Russian state-owned news agency Tass said advanced airborne units are already in Kazakhstan.

The CSTO said the situation is viewed as an external threat, "an invasion of bandit formations trained from abroad." But the origin of the protests appears to be more domestic, erupting after an increase in the price of LPG that is widely used as motor fuel in Kazakhstan. Market participants told Argus yesterday that higher wholesale prices in November were now being passed through at a retail level.

The Kazakhstan government's immediate actions in the face of the protests bear this out. It ordered the prices of LPG, gasoline and diesel to be regulated for six months and the government resigned, having, in the words of President Kassym-Jomart Tokayev, failed to carry out "one of its main tasks — keeping inflation in check."

The extent and apparent severity of the protests led the government to declare states of emergency in some areas. Verifying facts on the ground in Kazakhstan is difficult, with internet coverage again patchy today, according to monitoring watchdog NetBlocks, with telephone communication also problematic. Unverified video footage has variously shown large protests, buildings on fire and soldiers on the streets.

There is no indication the unrest is having any effect on Kazakhstan's crude production or exports. The operator of the CPC pipeline, which transports crude from fields in Kazakhstan to an export terminal on the Black Sea, said all facilities are operating normally. January-loading exports of light sour Caspian CPC Blend crude are scheduled at 1.425mn b/d.

Chevron-led producer Tengizchevroil, the largest exporter of CPC Blend, did not immediately respond to a request for comment about its operations. Kazakhstan's crude output quota under the Opec+ agreement is 1.57mn b/d this month and will be 1.59mn b/d in February. Argus assessed it has been producing above its target recently, with output in December of around 1.65mn b/d. The country's energy ministry attributed this overproduction to seasonal needs.

By Ben Winkley