Petrol prices in Kazakhstan depend on Russian ruble: Shkolnik

Minister of Energy Vladimir Shkolnik has declared that petrol prices in Kazakhstan will depend on Russian ruble, Tengrinews reports.

On August 20, Kazakhstan floated its currency, the tenge, and quickly followed it up by the official reassurance that the prices of food, medicine and petrol would not increase. On September 4, the government of Kazakhstan stopped regulating  prices of AI-92 and AI-93 gasoline, two most common types of petrol. After the announcement, Shkolnik predicted a spike of petrol prices to 140-150 tenge per litter, which was around $0.62 at those days' tenge exchange rate.

After the price regulations were dropped, local petrol stations indeed let the prices rocket to 140 tenge per litter. Later the same day, the prices bounced back to 125 tenge per litter.

Talking to journalists on September 22, Minister Shkolnik once again explained the situation in Kazakhstan. "Today we are talking about AI-92 and AI-93 gasoline. We produce two million tons a year, while we consume three million tons a year. So, we import 1 million tons. It is obvious that if we keep price ceilings while petrol prices are higher in Russia - where we import petrol from - no one will be selling petrol to us and we will be facing a deficit. To avoid the deficit, we gave up the regulation of petrol prices.

"Look what is happening at the market now, Russia is selling AI-92 at petrol stations for 143 tenge ($0.53) per litter, while our petrol stations are selling at 125 tenge ($0.46) per litter. Considering that we are buying petrol at wholesale price in Russia, it is profitable enough for them to export it to us. In August, we imported 74 thousand tons, as of today (in September) we have imported 41 thousand tons. Our reserves amount to 214 thousand tons. (...) There is enough reserves of AI-92," Shkolnik reassured.

Shkolnik went even as far as saying that in dollar terms the fuel prices 'spike' in Kazakhstan was actually a lowering of prices. "Last year we had 128 tenge per litter and the tenge exchange rate was 150 tenge per $1. Divide 128 tenge by 150, the price of petrol was at $0.80 per litter. Today (at the exchange rate of 270 tenge per $1), divide 125 by 270 tenge, you get $0.40 per litter," he said.

But after the currency detour he quickly swung back to the wording adhered by the Kazakhstan government since the tenge was floated: "We are calculating in tenge, however," he reminded before brining the Russian ruble into the picture.

New predictions depend on the tenge per ruble exchange rate, as Russia is the primary supplier of petrol to Kazakhstan he said. "They depends on the exchange rate of the Russian ruble in the upcoming couple of months and the exchange rate of the floating tenge in the following three months. If you give me a correct prediction of the exchange rates, I will tell you what happens with petrol prices. At the previous press-conference I said 140-150 tenge per litter. I based my predictions on the least favorable currency exchange rates. (...) Thank God, the prediction was not accurate. The petrol prices in dollar terms has become two times cheaper than last year," the Energy Minister of Kazakhstan said.

Despite the public outcry, the Minister insisted that "in dollar terms Kazakhstan had the lowest petrol prices among its neighbors. Cheaper than in Kyrgyzstan, and in all the other surrounding countries, including Belarus and Russia".

As for the predicted tenge per ruble exchange rate, Vice Minister of Economy Timur Zhaksylykov said that Kazakhstan tenge would not return to the parity rate of one-to-five againt the Russian ruble that was established after the 1998 devaluation, Inform.kz reported. "Considering that over the past year and a half, Russia has seen a spiraling devaluation we observe strong inflation processes. That means that the prices for goods have significantly increased. In one year, the inflation rate in Russia reached 22-24% or even higher for some goods. At the meantime, in the first six month of 2016, Kazakhstan had the inflation rate of 3.9%. So we (Kazakhstan and Russia) exist in completely different realities in terms of economy," Zhaksylykov said. 

For petrol imported to Kazakhstan from Russia, the inflation rate could possibly mean increasing prices. At the same time, the exchange rate that according to Zhaksylykov would not return to the previous one-to-five parity seem to be beneficial for petrol prices in Kazakhstan.

On August 20, the country transferred to free floating currency, which was quickly followed by the state reassurance that the prices of food, medicine and petrol would not increase.

By Gyuzel Kamalova, editing by Tatyana Kuzmina (Assemgul Khassenova contributed to the story)