Dateline Kazakhstan

The recent renewed negotiations for a Trans Caspian oil pipeline connecting Kazakhstan and Azerbaijan has resurrected hopes for transport of Kazakh oil via the Baku-Tbilisi-Ceyhan line running through the Caucasus to the Mediterranean. The extent to which this new pipeline would be viable, given Russian and Iranian responses, remains to be seen but the project is part of a broader effort to increase Kazakh oil export capacity. Located in the heart of Eurasia, Kazakhstan today claims to have become the transcontinental corridor connecting markets of China, Europe, CIS and Persian Gulf states. As a part of this strategy, where it stands to gain from an open and connected Eurasia, Astana promotes Eurasianism and a multi vector foreign policy as a counter to the Great Game rivalries that traditionally dominated the region.

Kazakhstan’s principal geo-economic importance and geo-strategic potential is based on its oil and gas producing economy, which is the primary driver of its development. Among the former Soviet republics, it has the second-largest oil reserves and also the second-largest oil production behind Russia (EIA, 2017). Over the past decade, its natural gas production has boosted oil recovery and reduced its dependence on gas imports. Also it is the leading producer of uranium, having 12% of the world’s uranium resources and an expanding mining sector. Over the past 15 years or so, uranium production has increased 15-fold from 1,500 to 22,800 tonnes per year.

Although an oil producer since 1911, its production was stagnant till the 1960s, and increased in mid-1990s with the help of foreign investment, which was more than any other former Soviet republic. The Kazakh government was aware that its resources could generate revenue and lead to development. Therefore, to reduce its dependence on Russian pipelines and also to invite foreign finance and technology for developing its oil and gas resources, it devised options to develop these resources with the aim of achieving security and economic development.  It is today a leading destination for foreign investments among CIS countries.

Inflow of Foreign Direct Investment (FDI) in Kazakhstan hit a new record of US$ 20.7 billion in 2016. The stock of foreign investment in 2016 reached US$ 216.5 billion. Of this, FDI accounted for US$ 139.7 billion, and portfolio investments the remaining US$ 76.8 billion. The majority of investment is in the gas and oil sector, and the United States is a leading source of capital (U.S. Department of State, 2017). With the new investment climate major international oil companies have become partners in Kazakhstan energy projects. Consequently, diversification of export routes is now high on Astana’s agenda. Thus in order to establish its presence internationally, Astana’s economic arm is extending outside national borders through the acquisition of foreign assets.

In 1991, Kazakhstan had undergone a sharp contraction of the economy but by 1995-97 the pace of economic reform and privatization accelerated. Rising oil production and prices helped its economy to grow at an average of 8% per year until 2013, and it became the first former Soviet republic to repay all of its debts to the IMF, 7 years ahead of schedule. With responsible management of its natural resource, rising oil exports and opening of new export routes, major countries and foreign companies began jockeying for greater influence in this landlocked country. Kazakhstan, on its part, demonstrated a willingness to understand the needs of producers, intermediary suppliers, and consumers and now looks destined to become one of the reliable energy sources ensuring global energy security. It is setting challenging energy targets, from diversifying its energy sector to establishing new and greener energy sources.

While chairing OSCE and participating in various international bodies like UN, NATO and EU, Kazakhstan focussed on the need for greater cooperation between nations to ensure energy security for peaceful, stable and sustainable future. Kazakhstan has been a champion of nuclear security and Kazakhstan’s Ministry of Oil and Gas and their departments work to ensure that it fulfils international best practice so that foreign investors obtain fair and secure access to Kazakhstan’s plentiful resources. Kazakhstan is also proactively seeking energy partnerships with the energy producers and consumers of Western and neighbouring countries. It has built good relations with European countries and is acting as a bridge between the East and the West. Several major European energy corporations such as Total of France, EniSpA of Italy, Royal Dutch Shell of Great Britain and the Netherlands, and British Gas have enjoyed success in Kazakhstan (ECFA, 2014).

This success, however, has also meant that Kazakhstan is now the target of neighbours with competing interests. In this new Great Game, the rivalry focuses mainly on oil politics: pipelines, tanker routes, oil consortiums and the signed contracts that are the reward of the new Great Game. With this however, comes the understanding that these pipelines also imply a strategic commitment to cooperate as they cannot be removed or redirected. And it is this that could lead to a new convergence of interests in global geopolitics.

References:

EIA. (2017). Country analysis brief: Kazakhstan. US Energy Information Administration. Retrieved from https://www.eia.gov/beta/international/analysis.cfm?iso=KAZ

U.S. Department of State. (2017, June). Kazakhstan [Investment Climate Statements]. Retrieved 2 November 2017, from http://www.state.gov/e/eb/rls/othr/ics/2017/sca/270019.htm

World Nuclear Association. (2017). Uranium and nuclear power in Kazakhstan. Retrieved 8 May 2017, from http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/kazakhstan.aspx

ECFA. (2014). Kazakhstan: a global energy security partner in turbulent times? Retrieved 8 April 2017, from http://www.eurasiancouncilforeignaffairs.eu/blog/2014/04/30/featured-publication/

Reema

25 February 2018