Kazakhstan: Connecting East And West

Courtesy of Ozy, a detailed look at Kazakhstan:

It doesn’t take more than a few minutes in Astana — Kazakhstan’s futuristic new capital — to make you forget what little you may have assumed about the country, most of it no doubt from a certain Sacha Baron Cohen movie.Until about a decade ago, Astana was “an insignificant provincial town,” according to Amanzhol Chikanayev, the city’s lead architect. That’s when longtime President Nursultan Nazarbayev decided to move the capital to this empty stretch of grassland and build a city essentially from scratch — one to match his grand ambitions for the nation.

Worker in one of the oil fields of Jangaozen. With more than 63,000,000 tons of oil extracted per year in Kazakhstan, the country became the second-most leader for oil extraction among the countries of the Commonwealth of Independent States, second only t

Worker in one of the oil fields of Jangaozen, Kazakhstan

After more than $10 billion in investment, most of it fueled by the country’s oil boom (it currentlyranks 14th among oil exporters and is poised to rise), the result is a towering urban center of glass skyscrapers and gleaming domes, the physical embodiment of the country’s vision of itself as a 21st-century global player.

“As this century progresses, Kazakhstan should become a bridge for dialogue and interaction between East and West,” Nazarbayev declared in a speech last year. As part of its push to raise its international profile, Kazakhstan’s leaders fought to win the 2010 presidency of the Organization for Security and Cooperation in Europe (OSCE), a respected regional body; rolled out the red carpet for international negotiators for this past spring’s nuclear talks between world powers and Iran; and is bidding to join the World Trade Organization and host the 2022 Winter Olympics in Almaty, its largest city.

It’s heady stuff coming from a country best known in the West as the home of Borat. But Kazakhstan has already defied the skeptics with its march up the development and economic rankings, just two decades after the collapse of the USSR laid waste to its entire social structure. Back then, says Central Asia expert and former ambassador to Azerbaijan Ross Wilson, Kazakhstan was one of the former Soviet republics “people were more concerned about.”

Kazakhstan is now the largest and most developed country in what was, until recently, a forgotten corner of the world. Wedged south of Russia, west of China and north of Iran and Afghanistan, Central Asia is attracting attention from global powers for its strategic location and, more importantly, its abundant natural resource wealth. And with its untapped oil reserves in the Caspian Sea and stable, if not democratic, government, Kazakhstan has enjoyed the biggest economic windfall of any of the countries in the region.

In explaining the country’s rise, “You don’t want to overplay the human factor, but Nazarbayev has turned out to be more capable and more deft” than any of the other leaders in Central Asia, says Wilson, now director of the Dinu Patriciu Eurasia Center at the Atlantic Council think tank.

ITAR-TASS: ASTANA, KAZAKHSTAN. APRIL 8, 2011. Nursultan Nazarbayev takes oath of office during his inauguration ceremony as President of Kazakhstan, at the Independence Palace.

Nursultan Nazarbayev takes the oath of office during his inauguration ceremony as president of Kazakhstan.

One of Nazarbayev’s key decisions: giving up the stockpile of 1,400 nuclear weapons, left by the Soviets, in the early 1990s. “That earned his country a lot of credibility and help,” Wilson says.

Since its independence in 1991, the country’s GDP has increased nearly tenfold. GDP growth has averaged above 7 percent over the last decade, according to World Bank data, roughly on par with India. Indeed, the World Economic Forum, a nonprofit research group based in Switzerland, ranked Kazakhstan 51st in its 2012-2013 “Global Competitiveness Index,” ahead of India and two other emerging economy BRICS — South Africa and Russia.

After a dip during the global financial crisis, forecasters are now predicting the Kazakh economy will pick back up, thanks in no small part to the start of production at its Kashagan oil field , the largest field discovered in the world in the past 35 years.

That find and other oil and gas development have caught the eyes of leaders in Beijing, always on the lookout for ways to feed their population’s insatiable appetite for energy. New Chinese president Xi Jinping came to Astana last month as part of a swing through Central Asia, where he touted his vision for a new “Silk Road” connecting Western China with the Middle East and Europe, much as ancient trade routes through the region connected East and West. Kazakhstan — and its oil and gas — are pivotal to any such strategy .

Growing ties with China will test Kazakh diplomats’ finesse as they also try to juggle relations with global rivals like Russia, Europe, the United States and Iran.

Kazakhstan is now the largest and most developed country in what was, until recently, a forgotten corner of the world.

But the most immediate challenges Kazakhstan faces are at home, where some Soviet legacies cannot be toppled as easily as the Stalinist-era apartment blocks now being torn down in the Astana’s old city. Exhibit “A” is the country’s patronage-fueled, personality-driven authoritarian regime, which retains power over virtually every major feature of national decision-making, down to the block-by-block planning of the new capital.

“Kazakhstan has always sought to position itself as a ‘land of democracy’ in ‘the heart of Eurasia,’” writes Deirdre Tynan, the Central Asia project director for the International Crisis Group, an NGO focused on preventing conflict, in a recent blog post . “But in one crucial respect it is no different from many ex-Soviet states: The first phase of dismantling state power after the collapse of the Soviet Union was the reconcentration of wealth within the hands of a very small group.” 

When it comes to Kazakhstan’s future, ask any foreign investor or other outside observer what they fear most and you’ll get the same answer: a political succession crisis.

Nazarbayev is modern Kazakhstan, having taken the helm in 1990 as a Communist party functionary and then winning three successive presidential elections.  Given his stewardship of the Kazakh economy, the president remains broadly popular. But he is now 73, and whispers about ill health are percolating.

“There’s huge uncertainty as and when and after Nazarbayev leaves the scene,” says Wilson. “We knew more about political succession in the dark old days of the Soviet Union than we do here.”

And as Tynan points out in her blog, “None of the normal democratic structures are in place to weather significant stress.” Wilson says Nazarbayev has cultivated some “capable lieutenants.” But if he really wants to keep Kazakhstan headed in the right direction, Nazarbayev might want to look at strengthening his country’s political institutions and civil society. Now that would be a legacy.

This entry was posted on Friday, February 14th, 2014 at 6:14 am and is filed under Kazakhstan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

Comments are closed.

Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.