As reported on this blog before, Kazakhstan is turning green on its oil industry and has already threatened TCO with hefty fines should the company not comply with environmental regulations at Tengiz.

The move is apparently part of a wider strategy not to boost oil production at any price, reports the Gulf Times:

The Kazakh government, which had planned to lift annual output to at least 150mn tonnes (3mn bpd) by 2015, now wants to raise standards of environmental protection.

(…)

“It won’t be a tragedy if in 2015 we extract” less than the target, Ural Mukhamedzhanov, the chairman of the Kazakh lower chamber of parliament, said late on Monday in an interview in London. “I would even curb some projects for the sake of the ecological balance.”

The fact that ex-Soviet countries care about the environment is always slightly suspicious. Although Kazakhstan has a rather long tradition of green movements (e.g. the protests against nuclear testing near Semipalatinsk in the 1980s), there are several other ramifications of this new green conscience:

The ambitious production target for 2015 of 3.5 million barrels per day has long seemed increasingly unrealistic as key projects such as Kashagan continue to stall. Thus, under the guise of heightened environmental regulations, the shortfall might just simply be sold with a green label.

Equally important though is the issue of transportation. With the pressure on existing pipelines increasing, the slower growth in output could provide some more breathing space for the strategists in Astana.

As Russian-Kazakh bilateral relations showed some signs of stress over the individual path Kazakhstan seems intent on taking with regards to pipelines, more time could also mean a more space for diplomacy over new transport corridors.

The most important issue with regards to a slower oil production growth is domestic, though: With oil windfalls already massively impacting the national economy, a slower and more sustainable production growth could also ease some of the pressures from which Azerbaijan is suffering at the moment.

Azerbaijan is the world’s fastest growing economy, thanks to an oil boom, but it is already running into serious difficulty. A huge expansion in budgetary spending has pushed inflation close to double digits - in month-on-month terms - and there are early but ominous signs that the non-oil economy is losing competitiveness. The economy is already showing signs of Dutch Disease - and the maintenance of artificial monopolies throughout the economy will serve to exacerbate the problem.