A year ago, Kazakhstan’s most significant stress test since independence arose from a bureaucratic decision to end fuel subsidies on propane and butane, which are used mostly by low-income populations for cooking and transportation. Of course, the move resulted in higher prices, which fueled political protests. Those protests soon turned violent. Rioting in Almaty, the country’s largest city, and elsewhere left about 238 dead and about 7,000 arrested. it was a mess. All told, 2,000 people were arrested and/or prosecuted. Foreign Policy magazine said at the time that the loss was estimated to be around $3 billion.
January’s crisis threatened a peaceful Kazakhstan, a major exporter of oil to China and elsewhere, with December output nearing 1.9 million barrels a day.
The Moscow-led Collective Security Treaty Organization (CSTO) sent troops at the request of President Kassym-Jomart Tokayev, but left within a week and were not part of the policing to quell the protests. Some went so far as to predict a Russian occupation of Kazakhstan, but this never happened.
Oil importers and corporate investors were skeptical last year about Kazakhstan’s ability to maintain its energy exports – the lifeblood of its economy. But now the country has got enough time to breathe. Opposition is far away in the rear-view mirror. The government was re-elected with a wide margin. now what? Russia’s crisis remains. China, a significant consumer of Kazakhstan’s oil, is only now starting to reopen.
Six weeks after the January events in Almaty, war broke out in Ukraine, a huge headache for Kazakhstan and the entire post-Soviet space. The war exacerbated Kazakhstan’s political crisis at the time, a surprising fallout from years of stable peace. Tokayev managed to come out completely unscathed, stepping out of the long shadow cast by his predecessor, Nursultan Nazarbayev, who ruled from the late Soviet era until 2019. Tokayev was re-elected last year with 81%, despite the tragedy that befell 2022.
In the critical time between the riots and the elections, Tokayev reformed his administration and discharged the protesters. It was like signing a peace treaty with the people.
In June, a new constitutional referendum was approved, limiting the president to a 7-year term. Tokayev used the referendum and his renewed mandate to pardon most of the protesters, and recover embezzled assets hidden abroad, another staple of pre-Soviet life.
The new constitution prohibited members of the president’s family from holding political and state company positions. He went to check on two of Nazarbayev’s nephews and other relatives of the former president.
Under the referendum, the powers of the Ombudsman for Human Rights were strengthened while women and youth were given a greater presence in government. (Two female candidates contested the presidential election in November for the first time.) Russia’s war with Ukraine was initially a headwind for the Kazakh economy.
There was even concern that Kazakhstan’s neutral status and its strong economic ties with Russia (and membership in the Eurasian Economic Union) would lead to Western sanctions. But Kazakhstan was never on the radar for this, unlike China, which has extended diplomatic and financial aid to Russia and increased their joint military operations over the past year.
Despite initial setbacks, Kazakhstan found a break, with the Kazakhstani currency losing 19% of its value in just three weeks. It has absorbed human capital fleeing Russia, including young men not drafted into the military and sent to Ukraine, hired by companies contracting with Western tech firms. Fifty multinational companies relocated from Russia to Kazakhstan, and UK-based mining giant Polymetal is preparing to relocate to Kazakhstan.
Restrictions a Concern, Still
Kazakhstan refused to tow the Russian line on Ukraine, avoiding secondary sanctions. Russian commerce was somewhat restricted. Russian and Belarusian truckers bringing European goods from Russia to Kazakhstan were required to carry import permits issued within the European Union in order to enter the country.
Kazakhstan refused to tow the Russian line on Ukraine, avoiding secondary sanctions. Russian commerce was somewhat restricted. Russian and Belarusian truckers bringing European goods from Russia to Kazakhstan were required to carry import permits issued within the European Union in order to enter the country.
The country’s largest bank Halyk suspended the use of Russia’s Mir payment cards out of an abundance of caution. The bank is traded in London and is one of the leading blue-chip stocks for Kazakhstan investors. It appears that officials and government oversight asked Halick to go the extra mile. To prevent the oil from being mistakenly approved for Russian crude, officials in Astana renamed oil exported through Russian ports to ‘Kazakhstan Export Blend Crude Oil’.
In all this, it doesn’t seem that Russian and Kazakh ties are in tatters, despite some glitches in oil exports through the Russian port of Novorossiysk on the Black Sea. Russia needs all the goodwill it can get, and so a fight with a long-standing ally is unlikely given the West understands their fear of sanctions. Kazakhstan seems to have gone the extra mile to show it’s neutrality, and its interest in moving towards the norms of western-liberal democracy.
Tokayev’s hosting of the Seventh Congress of World and Traditional Leaders in September, in the presence of Pope Francis I, was another sign that the country believes in international cooperation, not conflict. Kazakhstan watchers refer to this as the government’s long-standing multi-vector foreign policy, which treats North, South, East and West as equal partners.
The Council of Foreign Ministers of the Commonwealth of Independent States, of which Russia is a member, met in Astana in October. A month ago, Tokayev met with Chinese leader Xi Jinping for a post-pandemic trip abroad, something Time magazine called “highly important” to make Kazakhstan his first stop. Astana was also the host city for the heads of state of Russia, Turkey and Qatar in talks about Syria and energy development.
Europe is interested in Kazakhstan despite its distance, hoping that Kazakh exports through the Central Corridor could be an alternative to Russia as well. Italian energy company ENI and local QazaqGaz said in September that they would jointly invest in a new Kashgan gas processing plant to ship gas to Europe. Last year, the EU entered into a “strategic partnership” with Kazakhstan on green hydrogen and raw materials worth $50 billion. The European Union represents 60% of foreign direct investment in Kazakhstan.
The European Bank for Reconstruction and Development has currently invested over $500 million in 14 projects to produce 800 MW of renewable energy in Kazakhstan. Much of this is for infrastructure for state-owned power producers, not for manufacturing wind turbines or solar panels, a market that is mostly Chinese.
China well established; US, not so much
Kazakhstan is far from America’s historical sphere of influence. It was once part of the Russian Empire and the Soviet Union. It has a long border with the world’s second most powerful economy. All trains go west, towards Europe. The US has been involved in fossil fuels since the 1990s. The private sector – led by investment banks Goldman Sachs and Nasdaq – helped establish the country’s Epcot-looking finance center, the Astana International Finance Center.
But a year after the bumpy January 2022, the US has not focused on Kazakhstan despite its energy and geo-strategic position. The country has moved on from last winter’s protest season and successfully marched to the polls without calls for a do-over.
Europe is investing. China is back. He has positioned Kazakhstan as a beachhead for his One Belt One Road policy, a soft power policy of economic development that promotes Chinese finance, Chinese technology and Chinese manufacturing equipment wherever it goes. Kazakhstan is expected to see more activity from China after the pause of the pandemic.
China expanded its cooperation after localizing most of its investments through a number of new projects designed to address local concerns. In 2022, as China deepens its economic cooperation, Kazakh oil exports to China increase by more than 400%.
Importantly, China also came to the rescue of Kazakhstan when Russia was angered by its neutrality on Ukraine. Xi wrote an unprecedented article supporting the sovereignty of Astana. Despite the 2022 dramas, Kazakhstan managed a growth rate of 3.1%, a $111 billion volume in foreign trade, and some greater political liberalisation.
Parliamentary elections are scheduled for 19 March. coincides with the date Nauryz, the Kazakh spring tradition of moving beyond negativity and into renewal. Symbolically, this coincided with the resignation of Nazarbayev in 2019.
I still think that Kazakhstan, while far from it all, is looking to Europe and America to play a major role in their transformation from an old Soviet no-man’s land. To date, Washington has not gone after Kazakhstan for its China relations.
European investment has given Kazakhstan no ultimatum on China, for that matter, but has a single focus there – the energy market.
American companies with money in Kazakhstan went berserk in January and, as the WSJ reported, became some of the largest investors in Kazakhstan in September. Boeing, General Electric. New business announced there. Popeyes, a New Orleans fast food chain, said in December that it plans to open its first restaurant there this year.
The US government rarely talks about Central Asia. In an era of strategic competition with China, however, seeing the region taken under China’s wing will ultimately create fewer opportunities for American companies there. Kazakhstan is roughly the size of Western Europe, and has long been seen as one of the best investments in the region. While last year’s political turmoil had a temporary chilling effect, a year later, it appears the worst has passed, and investors are coming back.
Source: Bis.Crast
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