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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: 277 - (01/02/04)
The various former Soviet republics are well informed about each other and the fall of Shevardnadze has made a big impression in Kazakstan. Elections to parliament are due in October and the events in Tbilisi have given them a new interest and focus.
Nobody supposes for a moment that the regime of President Nursultan Nazarbayev is in serious danger. It is far more repressive than Shevardnadze's in Georgia. It is inconceivable that Nazarbayev would suffer the same fate as his Georgian counterpart. But the elections are likely to be more keenly contested than previously.
He is dealing from a far stronger hand than Shevardnadze ever had. The economy is booming, GDP growing by 10% per annum in the 2000s. Exports of oil and related products are growing even faster, fuelling the boom. There is every reason to expect this expansion to continue. Oil output was 800, 000 barrels per day in 2001, of which 70% were exports. By 2010 it is expected to reach 3.5m bpd, of which 90% will be exports.
Nazarbayev reaches out to business
The Kazak president would prefer to rule with consent and the legitimacy of a popular regime, even if not a fully democratic one. He sees the business class, large and small, as his natural constituency. He has started appealing to small and midsize businesses in a bid to attract the Ak Zhol party. The appeal comes as a former Nazarbayev advisor joins Ak Zhol.
Nazarbayev made a flattering pro-business speech on October 31, at a forum of Kazakhstani entrepreneurs. He posited entrepreneurs as exemplars of patriotism, civil solidarity, responsibility and partnership- and thereby as leaders in a civil society. The speech emphasized Nazarbayev's expressed interest in promoting a strong middle class.
The calculation for this bid for the middle ground is straightforward. The Ak Zhol party, which seeks to gain seats in the next parliament, speaks on behalf of Kazakhstan's businesses. Many of its potential voters own or manage private enterprises. Since Ak Zhol (which means Bright Road) has attracted a milder strain of reformist than the Democratic Choice of Kazakhstan, Nazarbayev hopes to secure its members' loyalty in any broad contest.
But he faces opposition to daughter's succession
Nazarbayev has an opponent in Altinbek Sarsenbayev, former Culture Minister and more recently ambassador to Russia. Sarsenbayev recently criticised the president's eldest daughter, Dariga. She has her own party, Asar (All Together), which she launched recently, in a bid to be the natural heir to her father, much as Ilham Aliyev was in Azerbaijan. She lined up behind her father, saying the party would follow a strategy much like his "Kazakhstan 2030" plan.
Sarsenbayev branded the pro-Presidential parties as "social clubs" beholden to Nazarbayev's instructions. This language served to notify the elite that any step suggesting a dynastic transfer of power to Dariga Nazarbayeva would meet strident criticism. Business leaders have not shown great eagerness to join Asar. And Nazarbayev's opponents have shown little fear in criticizing her.
The contretemps led to his dismissal and, after refusing another government job, he joined Ak Zhol. So did another diplomat, the envoy to Iran, Tulegen Zhukeyev.
Democratic Choice of Kazakhstan leader Galymzhan Zhakiyanov has been in jail since summer 2002 and Nazarbayev's image is fraying. In November, United States Senators Patrick Leahy (D-Vermont) and John McCain (R-Arizona) urged the White House to express solidarity with Zhakiyanov. But the drift of powerful figures toward Ak Zhol probably began to gain momentum, after elections in Azerbaijan prompted worries of similar dynastic games in Astana. The emergence of Asar and the circulation of a controversial draft law on media may be making politicians suspicious about Nazarbayev's approach.
In the end, Nazarbayev may be reaching out to Ak Zhol's voters directly because he cannot be sure of the party's collaboration in 2004. On October 15th, Ak Zhol chairman Alikhan Baymenov publicly called on the government to ratify a Commonwealth on Independent States convention on local elections. In effect, Ak Zhol has joined forces with parties like the Communists and Patriots who define themselves by refusing to work with the president. Ak Zhol is thereby showing authorities that it can cooperate with opposition parties like Communists in case of continuing pressure. Sarsenbayev`s emergence has increased Ak Zhol's potential to influence voting and governing in 2004. But of course the elections are not likely to be 'free and fair.'
Kazakstan the saviour
Kazakstan is benefiting handsomely from now being seen as the prime alternative supplier of oil and gas in Eurasia after giant Russia for the West and Asia itself. It has proven reserves of 15bn barrels of oil and 2 trillion cu. m of gas.
Since then huge fields have come on stream in the Caspian Sea. The Kashagan field has reserves of 15bn barrels alone and likely ones of 40bn barrels, making it the largest find since the discovery of Prudhoe Bay in Alaska thirty years ago.
The IMF in town and very positive
The head of the IMF, Horst Koehler, was in a very upbeat mood in addressing a conference on the 10th anniversary of the Kazak tenge, a highly successful currency. Inflation is in low single figures, declining to 5-6% per annum after hyperinflation in the 1990s, and the economy is booming. "I congratulate Kazakstan on its achievements."
Grigori Marchenko, the governor of Kazakstan's central bank who was elected last year Euromoney's Central Banker of the Year, recalled how the Russian ruble's inflation had reached 2,165% when Kazakstan introduced the tenge on November 15th, 1993. By 1998, inflation was less than 2%, and it has stabilised around 5%, he said.
In a speech to the conference, Koehler noted that over the past decade, "growth in Asia outpaced Europe by 5 percentage points per year."
But no nation has done better than Kazakstan, which for the past three years has seen its economy expand an average of 10% a year. Growth is expected to stay above 8%.
Two months ago, the IMF had decided not to replace its resident representative at the end of his tour, saying there was little likelihood that this Central Asian nation stretching from Europe to China would need to borrow IMF money anytime soon.
The booming economy's locomotive has been oil: sustained high prices and increasing production that in 2003 reached 1 million barrels per day and is set to triple within 15 years, which would make it one of the world's top five exporters.
Koehler lauded Kazakstan's "prudent management of oil revenue," a reference to the US$3bn that have been set aside as a cushion against low oil prices in an offshore fund modelled on Norway's.
Noting that oil wealth "can often be a curse rather than a blessing," he said that "transparency is the key to successfully eliminating lucrative opportunities for fraud and corruption" and is "correlated with better investment and growth performance."
In a federal indictment in New York federal court changing President Nazarbayev's one-time chief adviser on oil matters, James Giffen, with multiple violations of the US Foreign Corrupt Practices Act, Kazakstan's ruler since 1988 is portrayed as pocketing US$60m in the early 1990s in kickbacks from international oil companies. Giffen is due to be tried this year.
Today, oilmen regularly complain of shakedowns in various forms from Kazak officials and members of Nazarbayev's family. The president has denied involvement in any corruption and says his relatives are as free to engage in business as anyone else.
Koehler also said that Kazakstan must not abandon its "unfinished reform agenda" by improving the investment climate while rebuilding the social protection net torn up by the collapse of the Soviet Union 12 years ago.
EBRD to the rescue
Koehler is not the only big banker to have praised Kazakstan recently. Not surprisingly, because the republic is the success story of Central Asia. It has won the plaudits of the President of the EBRD, Jean Lemierre, who praises the reforms made so far.
He puts this in a nuanced way in saying: "Kazakstan has undertaken structural reforms in the financial, transport and telecommunications sectors. A new tax code, a transfer pricing law, a draft law on investments and amendments to the joint stock company law all contribute to healthy economic legislation. The banking sector is efficient and is financing more and more of the real economy.
"Perhaps the element that most differentiates Kazakstan from its Central Asian neighbours was its early position that it would try to attract foreign investment and build a strong economy, in part by building a strong democracy. A lively press developed in Kazakstan, political opposition was fairly vocal and there was a general perception that the rule of law applied to contracts and trade agreements as well as to the broader society.
"Events in the past year, though, have given rise to particular concerns over freedom of the media and political opposition. There have been allegations of wrongful arrest and mistreatment of journalists, and official backlash over reports of the government's failure to disclose funds deposited abroad."
Lemierre went on to note that the republic now belongs to the Eurasian Economic Union, which links together the economies of Russia, Belarus, Krygyzstan, Tajikistan and Ukraine. That is seen by some as a retrogressive step, incompatible with membership of the World Trade Organisation. But Lemierre did not say that.
The EBRD will continue its extensive funding policy to the country, which has seen substantial investments in the oil capital, Atyrau, on the Caspian Sea, where an abundance of oil reserves lie in the Kazak share of the sea.
Kazakstan posts rise in oil, gas condensate output in 2003
Kazakstan's oil and gas condensate output rose 8.6 per cent on the year in 2003 to 51.276m tonnes, an official with the country's Energy and Mineral Resources Ministry told Prime-TASS News Agency on 6th January.
In December 2003, Kazakstan's oil and gas condensate output amounted to 4.621m tonnes. In December 2002, oil output amounted to 3.78m tonnes, while gas condensate production was at 512,800 t.
The oil and gas concentrate output of Kazakstan's state oil and gas company KazMunayGaz, increased 3.7 per cent on the year to 20.384m tonnes in 2003.
The US-Kazak joint venture Tengizchevroil, which is developing the Tengiz oil and gas field, produced 12.748m tonnes of oil and gas condensate last year, down 3 per cent on the year.
The Karachaganak Integrated Organization's (KIO) oil output totalled 5.917m tonnes in the period, up 14.7 per cent on the year.
Russian energy minister pleased with new Kazak oil agreement
Russian Energy Minister, Igor Yusufov, has praised the agreement signed in Astana by Russian and Kazak oilmen on developing reserves in the Caspian Sea.
In reply to a question from RIA-Novosti News Agency, the Russian minister called the signing of the document in the presence of the Russian and Kazak presidents a significant event. "This is a large contract and we expect that extensive reserves will be found in this section," the minister said.
He also expressed the hope that other Russian companies would also take part in developing the Caspian shelf's reserves.
Speaking about cooperation in the energy sector, Yusufov said: "Our countries are developing collaboration in this field." He recalled that there is a long-term agreement between the two countries on oil transport. A decision has also been taken to increase supplies of Kazak oil through Russian territory.
The minister said that Russia and Kazakstan are widening cooperation in the gas sector. He said that representatives of Gazprom and the Karachaganak integrated organisation are holding talks on processing gas from the Karachaganak gas field at the Orenburg gas processing plant on a long-term basis. The plan is to process 7bn cu.m. per year.
Kazakstan will supply the Orenburg plant with up to 5m tonnes of unstable gas condensate from the Karachaganak oil and gas-condensate field.
"We would like, and are hoping, to widen Gazprom's involvement in the Kazak gas industry. There are extensive gas reserves here," Yusufov said. The Russian energy minister recalled that the ministry and Gazprom are continuing preparatory work on draft documents to set up a "gas alliance."
The minister also said that Moscow was interested in widening cooperation in the electricity industry. He said that since June 2000 Russia and Kazakstan's energy systems have been working in a parallel regime. Almost all aspects of organising a joint Russo-Kazak enterprise at the Ekibastuz HEP station are complete.
The minister said: "We are examining new Kazak legislation that came into force on 1st January." He thinks that it has become "more open and gives foreign companies the opportunity to take part in projects on a wide scale" in Kazakstan's energy industry.
"We hope to expand cooperation," Yusufov concluded.
MINERALS & METALS
Crude steel production increase in Kazakstan
Crude steel production rose four per cent year-on-year in Kazakstan in the first 11 months of 2003, totalling 4.614m tonnes, Interfax News Agency has reported, citing figures released by the national statistics agency.
Flat roll production totalled 3.74 million tonnes, up 2 per cent. Tin plate rose 17 per cent to 246,000 tonnes and tin-plated sheet was up 41 per cent to 645,000 tonnes of galvanised steel. Large and small-diameter pipes production increased to 57,44- tonnes, up 12 per cent. Ferroalloys rose 14 per cent to 1.28m tonnes, pit iron was up 3 percent to 3.78m tonnes, and carbon steel sections and angles totalled 19,400 tonnes, up 14 per cent. Ferroalloy production included 905,300 tonnes ferrochrome, up 19 per cent; 116,300 tonnes of ferrosilicon, down 0.3 per cent; 164, 600 tonnes of ferrosilicon manganese, up12 per cent; and 89,800 tonnes of ferrosilicon chrome, down 9 per cent.
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