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Area (


ethnic groups

Kazaks 44.3%
Russians 35.8%
Ukrainians 5.1%
Germans 3.6%
and many others

(formerly Akmola)


Nursultan Nazarbayev


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Native Kazaks, a mix of Turkic and Mongol nomadic tribes who migrated into the region in the 13th century, were rarely united as a single nation. The area was conquered by Russia in the 18th century and Kazakstan became a Soviet Republic in 1936. During the 1950s and 1960s agricultural "Virgin Lands" program, Soviet citizens were encouraged to help cultivate Kazakstan's northern pastures. This influx of immigrants (mostly Russians, but also some other deported nationalities) skewed the ethnic mixture and enabled non-Kazaks to outnumber natives. Independence has caused many of these newcomers to emigrate. Current issues include: developing a cohesive national identity; expanding the development of the country's vast energy resources and exporting them to world markets; and continuing to strengthen relations with neighbouring states and other foreign powers.

Update No: 259 - (25/07/02)

The Kazak regime, dictatorial and despotic though it may be, is acquiring a measure of legitimacy from the rapid growth of the economy and the rising repute of the country abroad as a new oil frontier and exporter of minerals. None of Kazakstan's neighbours, except for Russia, could be remotely described as democratic.

The CICA meeting
In early June Kazakstan hosted a large summit of the Conference on Interaction and Confidence -Building Measures in Asia (CICA). The leaders of 11 nations attended, including Russia, China, India and Pakistan. The Israelis sent a delegation, to which the Iranians objected strongly, referring to them as a "terrorist nation." Talks on the sidelines of the conference improved relations between India and Pakistan although the major players, Vajpayee flatly refused to meet with Musharraf. The CICA has 10 years of history behind it. Two major agreements were signed, the Almaty Pact and the Declaration Against Terrorism. Both are directed against separatism and terrorism.

The Caspian Sea Conference
The Kazaks also participated in a meeting of the five littoral states of the Caspian Sea in Ashkhabad in April, at which not much progress was made. The four former Soviet republics involved don't see eye to eye with Iran that the Caspian Sea should be divided up equally, rather than according to each state's share of the coastline. President Khatami of Iran was unbudging on the issue.

Economy booming
The Kazak economy is growing far more quickly than any other in the FSU at around 10 per cent per annum. With inflation fairly low this is finally bringing some relief to an economically distressed population. Improvement is coming from a very low base, but it is coming.
The Kazaks are doing very well, according to their figures. GDP is soaring, having grown by 9.6% in 2000, 13.2% in 2001 and a prospective 7.6% in 2002. GDP will be doubling every decade at this rate. Of course, growth is likely to slow down after this initial spurt, which owes a great deal to oil and gas, now being exported in volumes.

Oil and gas boom
The flow of oil from three fields in the Caspian region across Russia to Western markets is the mainspring of the economic boom. Foreign direct investment (FDI) has been flooding in, some US$1.45bn in 2000, US$2.7bn in 2001 and a likely US$2.5bn this year. The FDI is concentrated heavily in the energy sector, especially to the three world class projects of Tengiz, Karachagank and the offshore Kashagan. Production of oil is set to double to 1.3m barrels per day by 2005. Other estimates put oil output at nearly 3m barrels per day by 2015.
The Tengiz field alone has 6-9bn barrels in reserves. It is being developed by Chevron, Texaco, ExxonMobil and Lukarco. They plan an output of 19.7m tonnes of oil per year by 2005.
Output is also to be doubled from Karachagnak in the next four years, a huge oil and gas condensate field. But the big one, perhaps the largest find in 20 years is Kashagan in the Caspian, whose reserves are reckoned to be in the 15-30bn barrels league.
Exports from all three fields are going via a pipeline to Novorossysk on Russia's Black Sea coast; constructed by the Caspian Pipeline Consortium for US$2.16bn. The world's energy map is being transformed with Central Asia beckoning as another North Sea, if not another Texas. The 15m population are hoping for spin-offs from the boom in energy. Minerals production is also rapidly on the rise.

Government crackdown
The government under hard-line dictator Nursultan Nazarbayev is cracking down on dissent and the media, imprisoning opposition figures. There is not likely to be any change of regime soon. Most officials want to be around as the revenues from energy start to flow.
A series of strange incidents recently has afflicted the media. They include a petrol bombing at the offices of a business newspaper, threats against editors and the beating up of journalists. President Nazarbayev has denounced them as "acts of wild vandalism."
But the obvious suspects would be officials of his own regime. In Moscow a group of Kazak journalists has alleged that the president ordered the closure of 22 private newspapers and TV stations reporting on an alleged US$20bn from oil deals that have been put in private Swiss bank accounts. The figure seems absurdly high. But then the Shah of Iran did something of the kind. There may be a nemesis in store for Nazarbayev one day. But of Islamic extremism or a Kazak equivalent of Khomeini there is as yet no sign. 

New premier
The government has a new premier in Imangaliy Tasinagambetov, who has a vision for the next decade. He thinks GDP growth of 5-7% possible. He also wants to diversify the domestic economy, even while the trade sector is likely to become more concentrated upon energy and minerals than today, which are 60% at present of total exports. The small-to-medium business sector needs to be encouraged and franchising to spread.
The republic receives cooperation from international banks, confident in its ability to repay. While its economic prospects look rosy, it will not be easy to reduce the figure of those below the poverty line from 35% to 20% of the population in ten years, as the new premier wants. But he is the head of a government presiding over the most dynamic economy in the CIS. That is some consolation for now.

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EBRD providesUS$100m to support agriculture in Kazakstan

Kazakstan's agribusiness sector is set to become more efficient and competitive as farmers, traders and companies dealing in agriculture-related goods get more access to finance following a US$100m loan from the EBRD to two leading Kazak banks.
Kazkommertsbank and Bank TuranAlem are each receiving US$50m under the EBRD-sponsored Warehouse Receipts Programme, which enable banks to on-lend to local agriculture businesses, using receipts for commoditities stored in licensed warehouses as collateral. The loans build on an additional US$5m to Halyk Savings Bank and US$2.5m to Almaty Merchant Bank signed in June, bringing the EBRD's total lending to Kazakstan under the programme to US$107.5m.
Warehouse receipts provide farmers and traders with access to finance, which provides a reliable means of producing, storing and exporting grain at competitive prices. The programme, started in 1998, operates in countries that are major agriculture producers. 
Noreen Doyle, First Vice President of the EBRD, said the programme is an important and proven tool for financing agribusiness, and that the loans would greatly support the development of agriculture in Kazakstan. "We will draw on our successful experiences elsewhere to support Kazakstan's under-nourished agribusiness sector," Ms Doyle said. "This type of lending will not only help financing of a difficult sector but ultimately help the economy through the development of the agribusiness sector."
The deal also marks the first time part of a loan under the Warehouse Receipt Programme, in Kazakstan, is being syndicated to commercial banks which were actively involved in structuring the transaction - Rabobank International of the Netherlands and SG, the corporate and investment banking arm of France's Societe Generale Group.
For further information contact Jazz Singh, EBRD, tel: +44 207 338 7931; e-mail:

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Austrian Raiffeisen in talks for TuranAlem Bank purchase

Austria's Raiffeisen Bank has been currently involved in negotiations for a controlling stake in Kazakstan's TuranAlem Bank, the country's third largest service. Such a purchase would mark the entry into the retail banking market in the former Soviet Union, with the exception of the Baltic states.
Raiffeisen is seeking to increase its 9.7% stake to 50% plus one share following the sale to the bank management of a controlling interest by Kazak businessman, Mukhtar Ablyazov, dpa News Agency reported recently.
Ablyazov, a former energy minister, was jailed on corruption charges in April after becoming one of the founders of the Central Asian country's first broad-based opposition movement, the Democratic Choice of Kazakstan. He and former Governor, Galymzhan Zhakyanov, another founder also accused of corruption, are widely viewed as the country's first political prisoners in recent memory.
A Raiffeisen spokesman in Vienna, quoted by dpa, cautioned that the talks were only at a preliminary stage.
It is also worth noting that TuranAlem is rated by Standards and Poor's as B (long-term), C (short-term) and its outlook was recently changed from stable to positive.
Raiffeisen's timing could not be better. Kazakstan's economy has averaged 12% growth for the last 10 quarters while only 15% of GDP and 25% of the budget come from oil revenues. "I think it would be a good thing," Central Bank Governor, Grigory Marchenko, said on the possible sale.
In Poland, Hungary and the Czech Republic, he said in an interview with The Moscow Times, foreign banks betting on accession to the European Union are buying domestic banks and offering all the types of services that they have in their own countries, including retail and mortgage. "But here, foreign banks have been very limited in their scope of operation, which is very disappointing," he said. "HSBC, (the only foreign bank in Kazakstan) have concentrated on corporate lending. They started issuing credit cards three years after domestic banks."
Marckenko went on to note that "Raiffeisen has a completely different strategy. By buying a significant chunk of an existing bank, they will get a retail bank, a brokerage subsidiary, an insurance subsidiary and a pension asset management subsidiary. So it will be interesting to see a foreign bank moving in with a strategy similar to that which they have in Eastern Europe." The governor stressed that such initiative would help in creating a competitive environment and implementing international standards. "And there is room for one or two more brand names in banking to move in and to do all types of financial services," he concluded.

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KazakOil-Emba eager to take over testing ground

KazakOil-Emba oil company is pressing the Kazak cabinet for permission to resume prospecting activities in the area of a defence testing ground in the western Atyrau region.
The company had barely started activities in Taisongan area under a licence obtained in 1999 when it had to stop for safety reasons, Interfax News Agency reported.
Russia has been renting the plot since 1995, Vice President, Kosan Taskinbayev, said, adding that Russia conducts air force exercises over the area. As a result, military hardware debris, in particular fragments of missiles fired from the Russian Kapustin Yar testing ground, have been falling on Kazak soil, he said. The agreement with Russia is valid until 2005.
KazakOil-Emba invested 724m tenge in prospecting activities in the area over two years and discovered two oil fields, Kondybai and Uaz, with recoverable reserves equal to at least 1.5m tonnes of oil, Taskinbayev said.

Greece offers to invest US$500m in Kazakstan oil projects 

Greece's government wants to invest US$500m in oil projects on Kazakstan's sector of the Caspian Sea, said a Kazak official citing Greece's president Costis Stephanopoulos, AFX News Ltd has reported. 
The officials said Stephanopoulos, who was in Kazakstan for a three-day visit, made the suggestion during talks with prime minister Imangali Tasmagambetov, and that it is now up to Kazakstan to accept the offer. 
The president Nursultan Nazarbayev expressed an interest in a project which could transport Kazak oil to Greece if Kazakstan were included as an equal in the pipeline consortium. 
Kazak experts have been invited to Athens to study the project to build the Burgas-Alexandroupolis link, which could transport Kazak oil to Greece and beyond, the statement said. 

Kazak field 'could be twice estimated size'

Kazakstan said in early July that its offshore Kashagan oilfield was probably bigger than Western oil companies had estimated, and would therefore need export pipelines to Turkey and possibly Iran, the Financial Times has reported.
Vladimir Shkolnik, the Kazak energy minister, described as "conservative" the estimate by the Italian-led consortium developing Kashagan, that 7bn-9bn barrel of oil, more than had come out of Alaska's Prudhoe Bay, could be extracted from the north Caspian field.
He told a conference on Kazak energy in London that Kashagan's reserves could reach 20bn barrels. Kazakstan would therefore need to rely on more than the Russian pipeline and rail network to get future Kashagan output, together with current onshore production, to export markets.
The most likely option was shipping oil west across the Caspian to the new pipeline from Baku in Azerbaijan to Ceyhan in Turkey, he said, but a southern land route to Iran was also being studied.
The final go-ahead to the US$2.9bn Baku-Ceyhan pipeline is expected shortly from a BP-led consortium of oil companies, which Eni, the Italian company which operates Kashagan, and TotalFinaElf, the French group which has a share in Kashagan, have joined in recent weeks. BP became the first company in the consortium to approve the pipeline. Even though the project has been led by a UK company, Washington has championed the Baku-Ceyhan pipeline as giving Caspian oil producers more export choices. 
The Kashagan discovery has whetted oil explorers' appetites for the north Caspian, even though it is a sensitive environment issue to drill in because of its shallowness and marine life. Mr Shkolnik said that he was preparing an auction of other exploration licences, but would not say when.

Caspian oil swaps with Iran to grow fivefold by year-end 

Caspian crude oil swaps from Kazakstan and Turkmenistan through Iran are expected to increase fivefold to 120,000 barrels a day by the end of the year, President of Switzerland-based trading house and crude shipping company, Vitol, Ian Taylor said on 5 July, has reported.
Mr. Taylor added that the amount could quickly increase to around 370,000 barrels per day, though Vitol isn't the only shipper handling the crude swaps.
Oil companies have long eyed the Iranian route as a quick and cheap solution to get crude oil out of the landlocked Caspian region, but have been hampered by US sanctions, which prohibit trade with Iran. Instead, the US has supported costly and complicated pipeline routes that bypass Russia to the north and Iran to the south.
Crude swaps are a relatively simple and cheap way of exporting oil without investing in big infrastructure projects such as pipelines, as the oil is only shipped a short distance and the receiving country hands over the same amount at an export point.
Under the swaps agreement, Iran takes crude oil from Central Asian producers through the port of Neka for its northern refineries in exchange for Iran's Persian Gulf crude, which is easily exported to other markets. Currently, the Kazak oil is tankered across the Caspian from the port of Aktau and Turkmen output is piped across the border to Iran.
Vitol has been instrumental in putting together a US$150 million pre-finance package, mainly backed by BNP Paribas, to fund construction and modification work on the Neka terminal in Iran and two refineries to facilitate the crude oil import from Central Asia.
China Petroleum & Chemical Corp, or Sinopec (SNP), will be carrying out the construction of the port facilities at Neka and expansion of the Tehran and Tabriz refineries to adjust for the different quality of Caspian crude, Taylor said. The Neka terminal is projected to have a capacity of 370,000 bpd by December 2002 and the pipeline to the refineries will have an initial capacity of 120,000 bpd, increasing to 370,000 bpd within six months.
Most of the companies shipping their oil through Vitol for the past year are either state oil companies or other producers working in the region, but not U.S. oil companies due to the sanctions against Iran.
Iran charges a swap fee of US$16 per ton for Turkmen crude and US$13 per ton for Kazak crude as well as making some adjustments for quality differentials.

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Japan gains Kazakstan's CO2 emissions rights

Japan has signed an agreement with Kazakstan allowing Tokyo to count the Central Asian country's carbon dioxide (CO2) emissions cut as part of Japan's own reduction required under the 1997 Kyoto Protocol to curb global warming, government officials said on 7th July, japantoday has reported.
The accord, under which Kazakstan's reductions of about 60,000 tons of CO2 emissions annually will be counted as Japan's over a five-year period from 2008, marks Japan's first deal to trade greenhouse gas emission cuts with another country.

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Kazak political reforms must match economic progress: EBRD head 

EBRD Head, Jean Lemierre, praised the investment climate in Kazakstan recently but warned that political reforms were also needed amid growing concern that the country is taking an increasingly authoritarian road.
"The Kazak economy has been very successful and we should go on building on the very good mix in Kazakstan of economic reform, political reform and transparency," the European Bank for Reconstruction and Development head said.
Kazakstan has won praise in the West for forging ahead with structural economic reforms and was awarded "market economy" status by the United States in March.
However uncertainty has grown over democratic development in Kazakstan in recent months following the closure of almost all critical media in the country and the arrest of two opposition leaders, AFP reported. Addressing a joint press conference with Kazakstan's President Nursultan Nazarbayev, Lemierre described current trends in the country as "a unique mix which must be nurtured in a very efficient way and can bring a lot to Kazakstan."
He was speaking after a foreign investors council meeting, aimed at encouraging dialogue between international companies and the leadership of Kazakstan.
The Central Asian state relies heavily on foreign investment and has attracted billions of dollars to its economy, mainly to its oil and gas sector, since it split from the Soviet Union in 1991.
"Most of the investors, if not all the investors, say that when you compare the situation in Kazakstan with many other countries in the region the situation is better in Kazakstan. Nevertheless there is room for progress," Lemierre said.
Investors have raised questions about the implementation of the rule of law in Kazakstan as well as about issues of taxation, customs and bureaucracy, he added.
Nazarbayev said Kazakstan has been successful in attracting investment compared to its ex-Soviet neighbours and was quick to counter any charges that his country had become less tolerant of political dissent.

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Kazaks expect bumper profits from uranium sales

The Kazak national nuclear company, Kazatomprom, is expected to make a total of US13bn from its sales of uranium products, including uranous-uranic oxide, in 2002-2030, the company's president, Mukhtar Dzhakishev, said at a conference in Almaty on 10th July, Interfax News Agency has reported.
He said that Kazatomprom also plans to transfer some US$2bn of uranium sale revenues to the state budget through 2030.
Dzhakishev said that given the current volumes of uranium production, its reserves will last for 350 years.
A three-day international conference on urgent issues of the uranium industry, which opened in Almaty, was sponsored by Kazatomprom. This conference was being attended by representatives of organisations from Kazakstan, Russia, Tajikistan, Kyrgyzstan and Uzbekistan.
Kazatomprom operates Kazak uranium imports and exports, and is among the world's top 10 uranium producers, accounting for 5 per cent of the world's total uranium production.

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