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kazakhstan

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  KAZAKSTAN

REPUBLICAN REFERENCE

Area (sq.km)
2,717,300

Population
16,731,303

Principal
ethnic groups

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

Capital
Astana
(formerly Akmola)

Currency
Tenge

President
Nursultan Nazarbayev

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Background:
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: 260 - (29/08/02)

The Kazaks are having to endure a tightening of dictatorship even as an energy boom is underway, conferring on the regime a certain legitimacy. Producing the goods is somewhat easier when GDP is growing at more than 10% per year, which it is. The general benefits to some degree induce resignation at the more repressive measures of state.

Opposition mounts
Repression can sometimes stimulate, rather than smother, opposition and this is what is happening in Kazakstan. A series of defections is occurring, including people at ministerial and mayoral level. To go into opposition in Kazak it is wise the leave the country, which, unless one is prepared for a drastic fall in living standards, means preparation and forethought, with an ability to salt something away beforehand. In the circumstances of a boom in energy and primary commodities generally, this is only possible for people on top.
Actually there are some, if impecunious, opposition figures abroad who have never held exalted posts. They point to the regime itself as having salted away upwards of US$20bn in Swiss bank accounts and the like. The figure seems absurdly high; but it is not exactly unprecedented, the Shah of Iran emulating his father in secreting billions abroad.
A general muzzling of the press at home and a tight screening of travellers from outside enable the regime to keep a tight rein on things. There is no Khomeini lurking in the wings and no very devout population either, ready to give way to Islamic fundamentalism. The regime at present looks solid.

Booming economy
The prime reason for that remains the economic boom. 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.

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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AGRICULTURE

Kazakstan preparing law on farmland private ownership


By the end of 2002 Kazakstan will adopt a law introducing private ownership of farmland, the Kazak president Nuyrsultan Nazarbayev said while visiting Alma Ata region, Caspian News Agency has reported. 
After the bill is worked out by the government it will be submitted to the parliament in September. 
The bill foresees farmland ownership by direct buy-out, buy-out in instalments within 10 years with the first payment equalling 10 per cent of the land cost, and rent. 
Kazakstan owns about 270 million hectares of land, 90 million are farmland.

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ENERGY

Kazak-Kyrgyz potential in hydroelectric joint projects

As announced by Kazakstan's Prime Minister Imangali Tasmagambetov at a news conference after his recent visit to Bishkek, his country is considering investing US$1.9bn in the construction of two Kyrgyz hydroelectric stations. The visit amounted to the signing of an intergovernmental agreement on the rational use of water and power resources, CEE reported.
Kazakstan has also pledged to purchase 1.1bn kilowatt hours of electricity and 1.250bn cubic metres of water from Kyrgyzstan from July 2002 to April 1st 2003. On the other hand, the Kazak prime minister held talks with Kyrgyz President Askar Akayev and Prime Miniser Nikoloai Tanayev in Bishkek on prospective hydroelectric station projects. The projects were identified as one of the key priorities of bilateral cooperation.

Kazak oil law queried 

Foreign investors, particularly those in the oil and gas industry, have raised eyebrows at Kazakstan's draft law on investments. A conference in London on oil and gas, set up to showcase Kazakstan's perspectives and opportunities, reportedly became the scene of fierce debate and criticism on several clauses in the bill. The bill survived its first round of debates in the Kazak parliament but has yet to be adopted and signed by the President, Caspian Business News has reported.
According to The Almaty Herald, Kazakstan's energy minister, Vladimir Shkolnik who led the Kazak delegation at the conference, explained that the government has no intention of revising existing contracts with foreign oil and gas companies as long as the latter respect all the clauses included in their contracts. However, the minister came under fire from company representatives who attended the conference, stating that even though at present the government is showing restraint, the new law, if implemented, is a virtual open invitation to intervene at any stage.
According to Shkolnik, the new law is meant to be a tool for attracting investments, even though it should also grant the government the legal means needed to protect Kazakstan's national interests without treating investors unfairly. "This Law regulates the relations which are associated with investments in the Republic of Kazakstan and defines the law and economic grounds of the stimulation of investments, guarantees the protection of the rights of investors when carrying out investments in the Republic of Kazakstan, defines the measures of state promotion of investments, and the procedure for settlement of disputes with participation of investors," the introduction reads. Further down the line, article 4 confirms this intention. "The rights and interests of an investor shall be protected fully and unconditionally," the article reads. "[…] 
The Republic of Kazakstan guarantees the stability of the conditions of contracts, concluded between the investors and state bodies of the Republic of Kazakstan, except for the cases when alterations to the contracts are made by mutual agreement of the parties." 
Observers, however, noted that the devil is in the final details. The same article 4 explains that the guarantees mentioned do not cover "alterations in the legislation of the Republic of Kazakstan […] coming into force" - including "alterations and amendments which are introduced to the legislative acts of the Republic of Kazakstan in order to provide national and ecological security, healthcare and ethics." 
The overall majority of foreign oil companies tend to think that this clause implies a considerable investment risk since it is hard to foresee what new laws and modifications in existing ones will be in store in years to come.

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MINERALS & METALS

Kazakstan, EU make steel accord official

Representatives of Kazakstan and the EU have signed an agreement on increasing the quota for the export of steel production from Kazakstan to Europe, the Khabar News Agency reported recently.
Minister of Economy and Trade, Mazhit Yessenbayev, signed the agreement on trading definite steel articles between the Kazak government and the EU as regards coal and steel. The agreement stipulates a boost to the quotas amount on export of individual kinds of plate and sort rolled material from Kazakstan to the EU at an average of 40 per cent.
It is expected that 108,00 tonnes of steel production this year, 110,700 in 2003 and 113,500 tonnes in 2004 will be exported to Europe. In the event that Kazakstan enters the World Trade Organisation, this agreement will be brought into accord with WTO rules. This agreement was signed within the framework of the fourth session of the Council for Cooperation "Republic of Kazakstan - European Union" which was held in Brussels. The delegation from Kazakstan was headed by Deputy Prime Minister and Minister of Agriculture, Akhmetzhan Yessimov.

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NUCLEAR ENERGY

International Atomic Agency to fund four projects in Kazakstan

The IAEA will allocate US$1m to implement new nuclear projects in Kazakstan within the next two years, Executive Director of the Kazak Nuclear Society Natalya Zhdanova told Interfax News Agency.
The IAEA intends to finance four projects in Kazakstan. A senior IAEA official discussed new scientific projects during his inspection trip to the Kazak National Nuclear Centre's Nuclear Physics Institute, Zhdanova said.
The IAEA intends to invest in the production of radio-medicines. It also desires to assist the establishment of the Kazak Nuclear Medicine Centre, Zhdanova said.
In addition, the IAEA, together with Al-Farabi National State University, intends to implement a project to train specialists in nuclear chemistry.

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