Who is fighting for energy resources of Kazakhstan

Written by The Frontier Post

Dmitry Ermakov.

The President of Kazakhstan, Kassym-Jomart Tokayev, is ready to launch a fight against the oligarchs. “The time has come to pay tribute to the people,” he said. At the same time, dozens of Russian and foreign corporations are operating in the country, interested in access to oil, gas and nuclear fuel. Could political reshuffles interfere with their business and deprive the republic of investment inflows, RIA Novosti was investigating.
Power to the people
Speaking to parliamentarians, Tokayev blamed the oligarchs for the problems of the state economy: “Oligopolies have limited the development of the free market and reduced the competitiveness of the country. A group of very profitable companies has appeared and a layer of people who are rich even by international standards.” There is a strong stratification in society, the whole system works inefficiently. And now Nur-Sultan is looking for a new format of social contract.
The president did not name a single name. Howe-ver, according to experts on Central Asia interviewed by RIA Novosti, many Kazakh politicians are affiliated with big business. So far, the sanctions have not tou-ched the billionaires, and it is not clear whether it will come to tough measures.
It is only known that the monopolists, as Tokaev called them, will have to contribute certain amounts to the Kazakhstan Khalkyny (People of Kazakhstan) public fund, which is being created to restore the country after the unrest. It will be replenished from public and private sources. The size of the required contributions has not yet been specified.
“Monopolists” publicly did not react in any way. But it can be assumed that among the elites, who received an unambiguous signal from the president, there is a bargaining for a place in the sun.
Local media wrote that two large businessmen – Kenes Rakishev and Patokh Chodiev – left the republic during the unrest. But there are many more billionaires in the country. The Forbes list of the richest people in the world for 2021 includes six from Kazakhstan. Among them, Vladimir Kim, co-owner and president of KAZ Minerals, a copper mining company, made the largest fortune.
Atomic jump
It is the bowels of the country – the basis of its income. True, it is not copper that brings the most, but oil and gas. And uranium: Kazakhstan has 12-14 percent of its world reserves.
According to the US Energy Information Administration (EIA), at the end of 2020, there were 30 billion barrels of crude oil in the republic. According to this indicator, the country ranks second in Eurasia – after Russia – and eleventh in the world.
According to analysts at Oil & Gas magazine, undiscovered hydrocarbon reser-ves on land and offshore could amount to another 60-100 billion barrels. Such resources will satisfy two to three percent of projected global oil demand in the current decade.
Since independence in 1991, the hydrocarbon sector has brought 60 percent of foreign direct investment into the country and more than half of its export earnings.
And uranium from Kazakhstan provides about 40 percent of the world’s demand for fuel for nuclear power plants. At the same time, after the collapse of the USSR, the state abandoned its own nuclear energy – and only last year Tokayev announced plans to create a nuclear power plant with the possible participation of Rosatom.
The January unrest alerted the world energy market: uranium prices rose due to fears that supplies would be disrupted. True, there was no big jump. On January 5, the spot price rose by eight percent to $45.5 per pound, according to S&P Global Platts. However, growth in uranium futures began in autumn, before the events in Kazakhstan.
The authorities are trying to calm the market. The national uranium mining operator, Kazatomprom, assures that they will mine and export as usual.
At the same time, the majority of uranium mines and factories in the country belong to companies from Russia and other countries. Since nuclear fuel and the bulk of hydrocarbons go to the foreign market, the economy of Kazakhstan is closely integrated with foreign corporations. Any political shake-up or redistribution of property worries investors.
Billions down the drain
The Information and Analytical Center of Moscow State University estimated that there are approximately 18,000 operating foreign enterprises in Kazakhstan, with an increase of 16.5 percent in 2021. True, the vast majority are representatives of small businesses. And only more than two percent are the largest market players: Rosatom, Shell, Chevron. Thus, more than 70 percent of the country’s oil business is controlled by foreign giants. Companies from the United States are in the lead, China is in second place, and the EU is in third. British interests are strong. And, of course, a direct neighbor – Russia.
Even liquefied gas, which caused the first unrest in January, is produced in Orenburg by Gazprom. And Rosneft structures own a quarter of the shares of the large Kurmangazy offshore field. Other Russian mining companies are also represented in Kazakhstan: Inter RAO UES, Lukoil, Rusal.
Most of the investment comes, again, from the United States. According to the calculations of the National Bank of the country, their volume in 2021 reached almost $40 billion. Russia invested about three times less.
In the struggle for Kazakhstan ‘s mineral resources, Beijing is on the heels of Washington. In 2005-2020, China invested about six billion dollars. Beijing spent tens of billions more on the development of infrastructure, in which Kazakhstan is directly or indirectly involved. For example, the China-Central Asia gas pipeline runs through the south of the country to the Xinjiang Uygur Autonomous Region. Several joint infrastructure and transport projects are being prepared for launch. Unsurprisingly, unrest in Kazakhstan has unsettled Beijing.
It is noteworthy that Tokaev is a sinologist who graduated from MGIMO and worked for several years in the Soviet embassy in Beijing. It was in Kazakhstan that Xi Jinping once announced the land part of the One Belt, One Road global project. Such a background of the two leaders is unlikely to lead to a cooling of relations.
Moreover, the economy of Kazakhstan needs a speedy recovery: the damage from the riots amounted to two to three billion dollars, according to Tokayev himself during video negotiations with European Council President Charles Michel.
Europe has not yet reacted, although representatives of some countries did not miss the opportunity to criticize the authorities of the republic. German Foreign Minister Annalena Burbock, perhaps hinting at strengthening economic ties and Nur-Sultan’s announced reforms, warned that “one-sided dependence of Central Asian states on Russia or China” is not in European interests.
Great Britain went further – but only in words. Thomas Tugendhat, head of the parliament’s foreign affairs committee, recommended that the government freeze more than £600 million belonging to Kazakhstani politicians after Tokayev ordered the rioters to be shot to kill.
Analysts say Kazakhstani oligarchs, who own joint ventures with foreign companies, will maintain the status quo and not come into conflict with the president. Tokayev himself is also interested in a peaceful solution.
“For the leadership of Kazakhstan, the presence of foreign companies is important, this is the main source of the state budget,” says Temur Umarov, a scientific consultant at the Carnegie Moscow Center.
In his opinion, the topic of the struggle for resources is somewhat exaggerated: “There are no people in power who are clearly opposed to Tokayev, and the only way for the elites to political survival is to cooperate with each other.”
Much in the country’s economy will also depend on the new prime minister, Alikhan Smailov. He is called a balanced, calm official who prefers diplomatic solutions to a conflict.
“His appointment is encouraging. A system that has certainty, including on economic issues, can be effective. The era of “middle mind” did not contribute to this,” explains Andrey Grozin, senior researcher at the Institute of Oriental Studies of the Russian Academy of Sciences.
It is still difficult to judge whether the people who will come to the management of the raw material sector will be able to solve the tasks set. “And the bench for the economic bloc in Kazakhstan is not as wide as we would like,” Grozin adds.
According to him, the reason for such a shortage of personnel is that foreign partners do not ask Kazakhstan to get out of the established image of a supplier of raw materials. The expert draws attention to the launch at the end of 2021 in Uzbekistan of a plant for deep gas processing, capable of producing up to one and a half million tons of fuel per year. “This is a silent reproach to Kazakhstan. There are big blank spots in the field of petrochemistry. Tokayev understands this, he recognized the problem last year,” Grozin draws attention.
Temur Umarov agrees with this point of view, stressing that the new government wants to increase the role of the non-primary sector: “But this is a long process that cannot be completed quickly due to the political will of one person.”
However, Kazakhstan, considered a model state for attracting foreign investment, received a reputational blow.
“Everyone is afraid of the redistribution of property. And they are watching which trend will outweigh: liberalization or pressure on politicians and entrepreneurs,” says Andrey Kazantsev, professor at the Higher School of Economics, chief researcher at MGIMO. does not depend on whether you are from the West or from the East. Everyone understands that an outflow of capital is possible, so investors in Kazakhstan will be cautious in the next year or two.”
Experts admit that Kazakhstan will make some curtsy to the West. But there is almost no doubt that Russia, which supported Tokayev with the deployment of peacekeeping forces, will also receive preferences. Therefore, in business projects where the leadership of the republic plays a key role, concessions to Russian corporations are possible. And first of all – to Rosatom with its nuclear power plant construction project.

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