This post is part of neweurasia’s cross-blog survey “2007 in Retrospect”. For an introduction and links to all posts published under this heading, please go to the dedicated site on our homebase. You can also vote for the most important event of 2007 in our online poll.

2007 - the year of black gold. With oil prices soaring towards $100 per barrel, countries blessed with hydrocarbon resources see their coffers swell with petrodollars. Kazakhstan is among them, oil windfalls are growing with each year passing. But the Kazakh government thinks that it got a bad deal during the 1990s, when most of the production sharing agreements were negotiated. The big oil companies, wary of post-Soviet uncertainty and of course also smelling fat margins, factored huge risk premiums into their direct investment in the oil sector.

The Kazakh government would receive comparatively little of the oil profits, and only once most of the projects’ costs would have been redeemed. When Kazakhstan’s post-independence meltdown reverted into healthy economic growth from 1999 onwards and general economic and political stabilisation, the terms of the 1990s deals seemed increasingly unfavourable. Corruption scandals casted a shady light on earlier dealmaking on top of that. Apparently, some big oil companies had greased the wheels of the Kazakh political machine to get things moving in their favour. A new and young elite in Astana seemed increasingly unwilling to accept the terms of these contracts. Along came Russia’s increasingly assertive resource nationalism, with Sakhalin-II and Yukos being only colourful examples.

The tipping point was Eni’s announcement of further cost overruns and a much delayed start of production in Kashagan that made the Kazakhstani government suspend development on the offshore giant field. Now it wants more of the pie in two ways: First, the national oil company Kazmunaigaz is expected to receive a larger stake in the project. Second, the state should receive more of the profits by changing the terms of the PSA - maybe eventually turning it into a royalty scheme. Third, a hefty fine would be levied on the consortium. So far, it seems all consortium members bar Exxon seem willing to put up with this rather substantial revision.

2007 is an important year for Kazakhstan, and one will look back in a few years detecting the beginning of a trend: In line with many other countries in the world harshening their terms for oil companies operating on their territory, Kazakhstan is making sure it is benefitting more from its subsoil blessings. You may want to call this resource nationalism Kazakh style. This graph here gets it right I think - it puts Kazakhstan on par with Chile and Qatar, as a country that aims to maximise its economic benefits, yet does not seek geopolitical expediency like Russia. Kazakhstan not going to deter international investors in the forseeable future. Oil is increasingly becoming scarce, and Kazakhstan has a lot of it. But it needs Western know-how - as the country’s oil is extremely difficult to unearth.

Yet 2007 also marks the beginning of another trend: The growing realisation among the Kazakh elite that with growing participation in the country’s oil projects comes more responsibility. Kashagan is an extremely difficult field with potentially huge socio-economic impacts. By being a big consortium member, KMG will not be able to shy away from taking responsibility. In the current high-price environment and general cost inflation, KMG will also have to shoulder growing costs of the project. The unique chance for the Kazakh state company is that it can equip itself with vital know-how and technical expertise to tackle future challenging developments. And finally, with the government earning much more money in the future, societal pressures over how the oil riches are to be distributed will mount.

Kazakhstan struck back in 2007, but it will realise ever more over the next years that its story with oil is not merely a love affair, but a stressful and potentially dangerous obstacle path.