Economy

Kazakhstan is the ninth largest country in the world. It occupies an area about five times that of France, with a population of around 16 million people – less than the population of the Netherlands. It is bordered by the Russian Federation, People’s Republic of China, Uzbekistan, Kyrgyzstan, Turkmenistan and the Caspian Sea, thus constituting the most expansive landlocked country in the world.

Resources

Kazakhstan is a country with vast resources of raw materials and huge economic potential. Its GDP is estimated at 135.6 billion dollars. According to a list drawn up by the CIA, Kazakhstan ranks 57th out of 228 countries, in terms of purchasing power parity of GDP.

The wealth of Kazakhstan, however, is concentrated in the hands of the few, who benefit from the patronage and support of President Nursultan Nazarbayev. Most of the resources are directly controlled by his immediate family members. Nepotism and corruption hinder the economic development of the country.

99 out of the 105 chemical elements from the periodic table are deposited In Kazakhstan,, 60 of which are used in industry. There are 493 known deposits of 1225 different types of mineral ores.

In Kazakhstan, there are 160 oil and gas fields. The exploited oils deposits amount to 2.7 billion tons. The total volume of confirmed and potential oil deposits is more than 6.1 billion tons, and the gas deposits amount to 6 trillion m3. Currently, the annual extraction amounts to 80 million tons of oil and 11.5 billion m3 of gas. Kazakhstan is also the most promising country in terms of increasing production of crude oil and natural gas.

The main economic partner of Kazakhstan is, as a whole, the European Union, whose share in trade exchange is more than 40%. Kazakhstan is also actively trading with China – 13.4%, Russia – 11.1%, and Ukraine – 5.4%.

Rankings do not tell the whole story

Kazakhstan suffers from multiple fundamental problems – not only in terms of respect for human rights, but also economically. The ongoing changes are gradually striking at the base of its development and threatening its political stability.

Revenues from oil and gas account for over 60% of all budgetary revenues of Kazakhstan. The GDP is strongly correlated with prices of raw materials on world

markets. The economy of Kazakhstan is also diversified in terms of the number of businesses operating. 56% of the country's economy is controlled by the state-owned National Welfare Fund ‘Samruk-Kazyna’, which not only presides over the mining industry, but also all other major companies in the country, ranging from the energy industry, to telecommunications, to banking and the financial sector. The economy is suffering from an acute shortage of small businesses – it is dominated by politicised giants, managed in a manner reminiscent of Soviet times. An extremely large portion of their national income is distributed amongst a small group of people holding power, united not only by bonds of political loyalty, but also by kinship.

The government of Kazakhstan ‘optimises’ the source data, including, for example, the grey zone of economic performance, arbitrarily estimated at several tens of percent. Subsequently, Kazakhstan’s actual results are more favourable than one would expect.
The concentration of income from the exploitation of raw materials lies in the hands of those in the immediate environment of Nazarbayev. This reinforces income inequality and poverty. As is also the case in Russia, only the citizens of the two largest cities – Astana and Almaty – enjoy a standard of living comparative to a ‘European’ level.

Pervasive corruption (133th place among the 174 listed countries according to the Corruption Perceptions Index 2012) promotes the transfer of money from regions, rich in raw materials, to the elites in power. This occurs before the eyes of the people, for whom the mining industry is often the only possible source of income. Difficult living conditions and high food prices, combined with a high birth rate and large average family size, as well as unemployment and lack of opportunities to improve the living conditions of young people, result in an explosive combination. In Kazakhstan, especially in rural areas, people suffer not only from a lack of Internet access and sanitation, but also from a lack of running water and electricity.

International Companies

Kazakhstan is a desired location for business expansion, as evidenced by the years of ongoing oil exploration by Petrolinvest, the market activity of Selena and Ciech, investments of Polpharma, and the recent billion dollar plans for exploitation of copper deposits by KGHM. Ultimately, this investment, however, will not be made. Western oil companies: Total, Eni, and ConocoPhillips, have recently announced their decision to forgo their respective oil production concerns in the country. Anonymous statements of their representatives suggest that Kazakhstan introduces legislative changes, which in the future, may lead to nationalisation of the industry.

Condemned to Europe

The Kazakh elites are, in fact, condemned to cooperation with Europe – regardless of the argument of rapprochement with Russia and China, which is being skilfully employed when negotiating with European politicians. These elites have private bank accounts in Swiss banks, and their children are study at British and French universities. Falling into disfavour in the homeland, might force a necessity to emigrate and seek political asylum in the EU, which, would be the safest haven for them and their assets. In Kazakhstan, property rights do not protect their owners – large fortunes accumulated by local oligarchs can be nationalised at any given time. This lack of confidence will force them to reform the country in line with g the European model, providing protection by means of an independent justice system – as opposed to the autocratic and incumbent President. And this is also serves the interests of European businesses. Another factor, which determines Kazakhstan's interest in Europe, is the necessity for cooperation in the fields of education, science and the transfer of know-how. Kazakhstan’s economy, struggling with a lack of competency and technological problems, desperately needs to develop initiatives in this field .

In addition, further strengthening of business ties with Russia and China will lead to closer political relations with them, which could lead to a gradual loss of independence of the state. In line with Putin's ambitions, the Customs Union with Russia and Belarus is designed to serve as a platform for the institutionalisation of the former Soviet sphere of influence. This is apparent when considering the project aimed at establishing a Eurasian Union with the aegis of Moscow. Recently, this project has been publicly dismissed by Nazarbayev, which led to a sharp deterioration in relations with the looming neighbour. The Russian ‘Baikonur’ Cosmodrome, currently leased from Kazakhstan, has become a hostage in this conflict. The expansive Russia, along with China provides the best guarantee for Kazakhstan’s interests in Europe.