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Central Asia

Economic meltdown only latest woe for oil-rich Kazakhstan

Andrew Princz, for eTN  Jul 30, 2009

With economic turmoil ravaging world markets, political or economic instability anywhere comes with incrementally higher stakes. Russia's most recent conflict with the Ukraine and last year's clampdown on the Caucasus state of Georgia has undoubtedly had ripple effects. The road ahead for the central Asian nation of Kazakhstan, nestled awkwardly between its powerful Russian and Chinese neighbors, may be equally ambiguous and fraught with potentially-hazardous unknowns.

While in recent years this oil and resource-rich country has quietly enjoyed the fruits of the bonanza of high world oil prices, the recent world economic conditions have left darker clouds on the horizon.

"Very soon Kazakhstan will face many serious problems, and problems with a catastrophic context that only begin with a slowing and stopping of economic growth," warned Murat T. Laumulin, chief researcher at the Kazakhstan Institute for Strategic Studies, a think-tank under the aegis of the office of the country's president.

Laumulin even pegs the instability, at least partially, on his country's influential neighbors. "This is the new Russian neo-imperialism; it is the reality."

The new Putin doctrine
Laumulin describes the new Putin doctrine as a slowly-creeping strategy to reunify the countries of the former Soviet Union - not by political or brutal methods as in the past - but simply by using economic instruments as a measure of force.

Kazakhstan's relationship with Russia is one of accommodation; an important piece of the puzzle is its neighbor's desire for influence in the post-Soviet space. While Russia may tolerate business dealings with the west, the Holy Grail is a continued coordination of military cooperation with Russia. And this, Laumulin says, Kazakhstan understands and even accepts.

What is at stake for Kazakhstan is a romance with the west that began during Gorbachev's Perestroika. Escaping its Soviet heritage in the 1990s, Kazakhstan was open for business. US oil giant Chevron was invited to exploit the vast oil reserves of the Caspian basin, while at the time, lower oil prices did not make tapping these reserves very attractive - until recently, all this had changed.

But Kazakhstan is still firmly under the influence of Russia, which in recent years, has flexed its economic and political muscles - with oil and gas as its main weapon. On its own soil, it has precipitated the withdrawal of foreign companies from the oil and gas business and even jailed businessmen who have strayed away from the Kremlin's grasp. With this, who knows how long Russia will tolerate the Kazakh grandeur of allowing western companies to tap into their vast reserves?

"The current president is the guarantor of the existence of these deals agreed [upon] just after the collapse of the Soviet Union," warned Laumulin, an echeloned former high-level diplomat. "With the corruption facts, I cannot guarantee that after his disappearing, some people from the elite would try to renew these agreements, including Chevron."

The political crisis
This brings us to the second potential crisis for Kazakhstan - a political one. This country may also be on the precipice of a political vacuum that is primed by a power struggle among the political elite as it looks for a successor to strong man President Nursultan Nazarbayev, who has ruled this country since 1989.

"Russia has found the mechanism of power changing from Yeltsin to Putin, Putin to Medvedev. We have no such model, unfortunately," lamented Laumulin, who sees a power struggle already taking place based on clan, regional, ethnic, and geopolitical orientations.

The bets are out on where the cards will fall on the geopolitical sphere. While steeped squarely in the political and economic sphere of interest of Russia, Kazakhstan nevertheless plays an intricate balancing act between its other powerful regional neighbor, the rising and powerful China.

What Kazakhstan may fear even more than Russian domination - a fact under which it has long lived - is a Sino-Russian domination embodied in the uncertain future of the Shanghai Cooperation Organization.

"Many experts regard this organization as the Sino-Russian condominium over central Asia," Laumulin said. "We accept the traditional Russian influence and our historical and political ties with Moscow, but we don't - and cannot - accept the Chinese-Russian domination."

Ultimately, it's a tossup for this vast nation of only 15 million inhabitants in waking up one morning and being economically dominated by either Russian or Chinese interests.

Uncertain future

Despite being the most wealthy and stable country in central Asia, cracks in the country's development already began to be felt during the US sub-prime mortgage crisis, which jolted the mushrooming real estate development projects in the country's decade-old capital, Astana.

The showpiece capital looks more like a multi-colored jewel of modernity with spanking new skyscrapers and soaring construction cranes - cranes that have become more and more silenced as the country becomes impacted by international economic woes.

While there is strong agreement within the political and economic elite on the development of western standards in economic terms, the challenge lies in maintaining a political framework for these changes as it transitions towards a bona fide democratic state. At the moment, Laumulin laments that his nation remains in an impasse.

"Ten years ago, I dreamed about the restoration of the Soviet Union with democratic and normal principals. Then I was dreaming about closer ties with Europe and Eurasia - the post-Soviet space as one geopolitical and geo-economic organization. Now I have no answers. I don't see the light at the end of the tunnel."

Montreal-based cultural navigator Andrew Princz is the editor of the travel portal On August 4, 2009, he will present The Real Kazakhstan in Montreal at CinemaSpace at the Segal Centre for Performing Arts. The evening will be a voyage in image and sound to the Central Asian nation. For tickets, please call the box office at 514-739-7944 or go to

Economic meltdown only latest woe for oil-rich Kazakhstan
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