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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: 266 - (27/02/03)

The Kazak republic has been recording phenomenal rates of economic growth and looks forward to more to come. But there are certain clouds on the horizon.

Iraqi crisis poses problems
Kazakstan was not a front-line state in the war against al-Qaeda in late 1991; nor is it at all important in the overthrow of Saddam. But his departure could have profound effects on its future all the same.
Oil prices are likely to tumble down if Saddam goes. The industry is talking of US$15-16 per barrel by next year. This would be a disaster for Kazakstan. Its economic boom is premised on oil prices of over US$25 per barrel, where they have comfortably been for several years. Time will soon tell what will be happening here.
An oil boom has been under way in Kazakstan for some years. It has coincided with a primary commodities boom, as world demand and prices for metals rose along with the price of oil. GDP growth in the last three years has been phenomenal, around 10% per annum, for instance 13% in 2002 and 7-9% this year, moreover with inflation declining to 5 to 6% annually.

Opposition took heart prematurely
The favourable times have emboldened opposition forces to demand greater genuine democracy. An earlier opposition movement, they knew, had been dispersed, its leader being forced into exile and denied the chance to stand for the presidency against the incumbent, Nursultan Nazarbayev, three years ago, which guaranteed a walk-over at his re-election. The oppositionists this time round mistakenly thought that greater prosperity and contacts with the West would persuade the president to open up the system to enable the younger, better educated technocrats and businessmen to participate more creatively in public life.
They could not have more totally wrong. Nazarbayev's reaction has been still more brutal than three years ago; he now puts his opponents in jail and does not just content himself with their exile.
The main players in the drama are Nazarbayev and his ex-premier and former supporter, Galimzhan Zhakiyanov, who used to be governor of Pavlodar, an industrial province on the border with Russia. A year ago, Zhakiyanov launched a new opposition group called the Democratic Choice of Kazakstan (DCK), with strictly limited aims of reforming, not replacing the regime. The premise, as he now admits in prison, was naïve; he and his co-founder businessman and former energy minister, Mukhtar Ablyazov, were openly denouncing the corruption of the regime and asking it to renovate itself from within.
This over-optimism was doubtless sparked by an unprecedented event. The launch of DCK came just days after Nazarbayev had ousted his son-in-law, Rakhat Aliyev, married to his favourite daughter, Dariga, who runs most of the printed and electronic media. Her husband, for his part, had cornered the lucrative sugar market. His dismissal and arrest seemed to mean that Nazarbayev was serious about combating corruption. It is understandable that the DCK leaders thought that they could become the liberal opposition, as it were, to a liberalising president.
They had totally misread the situation; Nazarbayev obeyed his oldest deepest instincts as a long-time stooge of Soviet power in the region. Any weakness would prove fatal, he must have thought. An ardent supporter of Gorbachev in his time, when the former First Secretary General was about to make him the Soviet premier in 1991 just before the August coup, he has had ample time to reflect on Gorbachev's mistakes. His central one, he must have long worked out, was to tolerate anyone, like Yeltsin, who was more radical than himself.
In August last year, perhaps taking a leaf out of the Soviet coup-plotters ' book eleven years ago, he acted. The DCK top two were arrested, charged and found guilty of treason. Zhakiyanov was sentenced, to seven years, and Ablyazov also, to six years. It was what Gorbachev should have done to Yeltsin in early August 1991, Nazarbayev must have concluded, and, like his Kazak counterpart, he would still be in power. Nazarbayev soon widened his purge, as Stalin would have approved. Within days of the sentences, members of the DCK were sacked and media outlets controlled by Ablyazov were foreclosed. The daughter of an outspoken editor was found dead in a police cell. In November an opposition journalist, Sergei Duvanov, was arrested on the eve of his departure to address US civil rights groups. The regime continues to beat up journalists and denounce the opposition at Soviet-style mass rallies with rent-a-crowd supporters bussed in from the provinces.
Nazarbayev's daughter, meanwhile, and her spouse have been let off lightly. He is now enjoying a gilded exile in Austria, whose capital, Vienna, is rather more agreeable a place than Astana, the new Kazak capital, out in the provincial sticks.
But that would have been a better fate than the one facing Zhakiyanov. He is held in a far northern prison camp, a former part of the gulag, which is hot and mosquito-ridden in summer and subject to howling blizzards in winter. Imprisoned with common criminals, many suffering from TB, HIV and other contagious diseases, the aim appears to be to break his spirit and make him grovel with an apology or to break his body. It remains to be seen if Zhakiyanov has the makings of a Kazak Mandela in him.

The foreign investment picture clouds
Kazakstan should be the hottest place for foreign investors in Eurasia, at least for those in the energy and minerals sectors. But somehow this is not the case. There has long been talk of a massive surge of FDI, some even talking of US$100bn within a decade or two. But that is all hype. The real venue for FDI in Eurasia is not Kazakstan, but China, which attracted US$50bn or more in 2002.
The Kazaks have a land of eternal promises, but less performance in commercial results. That is what several multinationals appear to be concluding. In the 1990s companies were lured in on highly advantageous terms. Not so now. The very fact that Kazak energy, especially oil, is seen as so much more valuable post 9:11 than hitherto gives the government more in the way of bargaining power. Their terms are now tougher.

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Kazak banking sector comes under S&P's microscope

The international rating agency Standard & Poor's has taken note of the Kazak banking system's rapid pace of growth, Interfax News Agency reported. An S&P report devoted to this subject says that the last few years have see the system develop at an exceptionally rapid rate, although its low starting point should be kept in mind. Last year, the system's share in the country's GDP was only around 20%.
S&P's view is that the quality of assets in Kazakstan's banking system evokes no serious concern, and it is not likely to run into any problems commensurate with those it faced in the previous decade.
On the other hand, S&P expressed concern about the extremely high growth of lending volumes, which agency specialists think could indicate potential pressure on the country's financial system.
The major increase in the credit portfolios at Kazak banks far outstrips the high rates of economic growth (9.6% in 2000 and 13.23% in 2001) the report cited credit analyst, Denis Deripasko, as saying.
The major Kazak banks - Kazkommertsbank (ratings B+, B, stable outlook), and the bank TuranAlem (B+, B, stable) - doubled the volume of loans extended. S&P thinks that such lending growth could seriously threaten the quality of bank assets in the event the economy slows, when a revenue downturn would reduce borrowers' ability to pay back loans.
Nonetheless, the agency saw lending volumes slow appreciably last year. S&P notes a serious improvement in the management and evaluation of risks achieved by such rated banks as Kazkommertsbank, TuranAlem, the National Bank of Kazakstan (B, C, stable), Nurbank (B-, C, stable) and several others in the past few years.
"Standard & Poor's will continue to keep a close eye on their policy, especially in view of the recently noticed significant expansion of lending and increased activities in more risky directions like lending to private individuals, and also to small and mid-sized business," Deripasko noted. Kazakstan's long-term forex commitment rating as assigned by S&P, is BB, its short-term rating B, with an outlook of positive.

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Valyut-Transit Bank to issue 5bn tenge bond

Kazakstan's Valyut-Transit Bank plans to place a bond issue worth 5bn tenges this year, the bank said in a press release. Cited by Interfax news Agency, the bank said shareholders approved the bond issue at a special meeting at the end of last year. 
The bank will place 5bn bonds with a face value of one tenge that mature in eight years. The bonds carry a 9% coupon paid quarterly. Valyut-Transit Bank completed the placement of five-year bonds worth US$10m last summer. Face value is US$100. The bonds carry a semi-annual coupon of 11.5% annually in the first year and the rate in subsequent years will be set by the board of directors by will not be less than 6% annually.

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China to import up to 50m tonnes of Kazak oil

China is ready to import up to 50m tonnes of oil from Kazakstan every year, Kazak Energy and Mineral Resource Minister, Vladimir Shkolnik, said. He noted that during an official visit to China by Kazak president, Nursultan Nazarbayev, the Chinese side proposed to receive up to 50m tonnes of oil per year from the former Soviet republic.
Shkolnik said that at the moment KazMunaiGaz and China National Petroleum Corporation are developing a feasibility study for the construction of an oil pipeline from Western Kazakstan to China. "This pipeline will be effective if the necessary amount of oil is supplied - at least 20m tonnes," he said, Interfax News Agency reported.
Speaking about the pipeline transport system being set up in the republic, he said "we will link up our pipeline system so that we will be able to transport oil in reverse from eastern and central regions to the west and back."
In connection with this, he noted that construction of the first phase of the Kenkiyak-Atyrau pipeline (from Aktobe region to Atyrau) would be completed in March 2003. Moreover, construction of the Zhusaly-Kumkol pipeline is beginning, which will be subsequently extended to Aralsk in the south. "This circular pipeline system will be part of the capacity to supply oil to China," the minister added. Kazakstan produced 47m tonnes of oil in 2002 compared with 40m tonnes in 200. The republic plans to produce up to 52m tonnes of oil in 2003.

Karachaganak gas processing plant to cost US$1bn

The Kazak government said it would cost something like US$1m to build a gas processing plant at the Karachaganak gas condensate field in West Kazakstan. The former Soviet republic needs the plant to recycle the gas produced as Kazakstan raised oil production, Prime Minister, Imangaly Tasmagambetov, said at a cabinet meeting, Interfax News agency reported. 
It could take three years to build the facility. "Kazakstan plans to raise production of liquid hydrocarbons, and this will naturally incur an increase in gas extraction and processing," Tasmagambetov said. "Unless the gas is recycled, Karachaganak will remain nothing but a field," he said. A feasibility study for the gas processing plant and connecting pipeline, initial capacity 5bn cubic metres of gas annually, should be ready by the end of this year. It was originally thought that the Kazak government and shareholders of Karachaganak Integrated Organisation (KIO), which is developing the field, would pay roughly 60% and 40% of the costs, respectively. KIO has already invested more than US$3bn in the Karachaganak project. This could rise to more than US$3.5bn in 2003. The Karachaganak field contains more than 1.2bn tonnes of oil and condensate and 1.35 trillion cubic metres of gas. 
KIO is owned by the BG Group and ENI (32.5% each), ChevronTexaco (20%) and Russia's LUKoil (15%). KIO produced more than 5m tonnes of condensate and 4.7bn cubic metres of gas at Karachaganak in 2002. In 2001, it produced 4m tonnes of condensate and 3.75bn cubic metres of gas. This year, KIO plans to produce 7m tonnes of liquid hydrocarbons, rising to 12m tonnes annually in 2008.

Kazakstan to export 16m tonnes of oil through CPC

Kazakstan plans to export 16m tonnes of oil through the Caspian Pipeline Consortium (CPC) system from Tengiz to Novorossiisk in 2003, Kazak Energy and Mineral Resource Minister, Vladimir Shkolnik said. About 12m tonnes of oil were transported through this pipeline in 2002, he said. He reminded that the final draft capacity of the pipeline, launched in 2001, would amount to 67m tonnes of oil per year, reports New Europe.
The initial capacity of the pipeline was 28m tonnes. The minister also noted that by 2015 Kazakstan plans to increase oil production to 150m tonnes, including 100m tonnes from the Kazak sector of the Caspian Sea.
Regarding the development of infrastructure to transport oil from Kazakstan, Shkolnik said that a long-term agreement was signed with Russia in 2002, valid for 15 years, on the transit of Kazak oil through Russian territory. This will allow the republic to export at least 17m tonnes of oil along the Atyrau-Samara route to the European market per year. The minister noted that Kazakstan is expanding oil exports through the port of Aktau in the Caspian. Kazakstan plans to produce not less than 52m tonnes of oil and gas condensate in 2003, compared with about 47m tonnes last year.

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EBRD makes first investment in Kazak insurance market

The EBRD is making an equity investment in one of the leading Kazakstan insurance companies, Kazkommerts Policy (KPIC). The investment, the EBRD's first in the country's insurance sector, will help KPIC expand its retail business, further improve corporate governance, facilitate cooperation with international insurance operators and, potentially, attract strategic investors. 
The EBRD will acquire 35 per cent of KPIC's capital and voting rights, subscribing for 53,846 ordinary shares. The remaining shares are owned by Kazakommertsbank (KKB), the country's largest bank.
Jonathan Woollett, the EBRD's Director for Non-Bank Financial Institutions, said the Bank sees significant growth opportunities in the Kazak insurance market and is pleased to make its first investment in a transparent and forward-looking local insurance company. The EBRD expects this investment will help demonstrate the increasing strength of the Kazak insurance market. In particular, building on strong insurance-sector supervision and successful pension reform, the Bank believes there will be increased opportunities in the insurance sector for the EBRD and other investors.
In the opinion of the Managing Director of Kazkommertsbank, Eldar Abdrazakov, participation of the EBRD in the share capital of the subsidiary insurance company will expand its possibilities. "Above all, this will make it possible to strengthen its capitalisation and increase the volume of premiums collected and the acceptable risks. But the main thing is that we expect the EBRD to contribute its Western standards and its experience of working in the insurance field", considers Abdrazakov.
KPIC is a non-life insurance company that serves mainly corporate clients but is gradually increasing its presence in the retail market. Its majority owner, KKB, has been an EBRD client since 1996 and is an important strategic partner in the Kazakstan financial sector.
The EBRD is one of the largest investors in Kazakstan, particularly outside the oil and gas sector. It committed €175 million to the country in 2002 through 14 projects. 
For further information contact Julia Zilberman, EBRD, tel: +44 20 7338 6640; E-mail: 

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KASE targets foreign securities trading

The Kazak Stock Exchange (KASE) may begin trading securities from foreign issuers and derivatives on commodity futures in 2003, KASE President, Azamat Djoldasbekov said at a recent press conference in Almaty, reports New Europe. 
He also explained that KASE was legally unable to directly trade in commodities, as the stock exchange did not have the right to act as a commodity exchange. As a result, at the moment the exchange "is looking for a legal way to get around this ban by proposing to issue derivatives on derivatives, which will be secured by commodity assets," Djolasbekov said. "There is currently a certain amount of interest from market participants in these papers," he said. 
The head of the KASE information and analysis department, Andrei Tsalyuk, said that the turnover on the exchange in 2002 will amount to the equivalent of US$24.6bn, up 140% from 2001.

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