Kazakhstan’s ‘steady as she goes’ approach to international relations continues. President Tokayev is still walking a tightrope between the East, the West and Russia. At the same time he is dealing with the biggest domestic floods for 80 years so home affairs have been his major focus in April. As May begins his priority will remain there. Housing the displaced, feeding the hungry, repairing the infrastructure and finding the money for it all is simply not something that can be side-lined for later. It has to be done now before people begin to protest. He has a very small window in which to accomplish everything. Kazakhstan has short summers and long harsh winters. He must make hay while the sun shines.
Russia. A leaked audio recording has been doing the rounds. In it, Russian General and State Duma deputy Andriy Gurulyov says that Kazakhstan will be his county’s next target. He says military action against its neighbour is necessary as Astana is failing to follow Moscow directives. He goes on to say that the decision to take on Kazakhstan has already been made. We have not been able to independently verify its authenticity but it does have his tone all over it. If it is genuine, he is not the only one stoking a fire of anti-Kazakh rhetoric. Former KGB officer and State Duma deputy Andriy Lugovoy recently released a film accusing Kazakhstan of being Russo phobic. Yevgeny Fedorov, also a state duma deputy, has questioned Kazakhstan’s legal right to sovereignty. Russian media is being increasingly critical of Tokayev and his country which is fanning the propaganda flames. One Russian TV commentator, Vladimir Solovyov, said his country “must pay attention to the fact that Kazakhstan is the next problem because the same Nazi processes can start there as in Ukraine.” Kazakhstan is somewhat the fat golden goose in the region. It is the world’s biggest uranium producer not to mention the host of oil, gas and minerals. Add that it would provide easy logistical access to purchase munitions from China. China will be watching with interest – putting Kazakhstan in the middle of a potential face-off between the two powers. On one hand, selling arms directly to Russia could be lucrative for China. On the other, this same logic applies to Kazakhstan, and does not risk the wrath of NATO. It would certainly be foolish for the Kremlin to even consider fighting on two fronts at this time. Their Ukraine campaign has definitely not gone as it intended, and the flow of munitions from the West looks set to increase too. We doubt a Kazakhstan assault would fare much better. Overall, we do not assess that Russia has the capability at this time to launch another offensive. These utterances are more likely to be aimed at telling Kazakhstan to know its place, to not get any big ideas about emerging from Moscow’s shadow, and to be reticent about any overt cosying up to the West.
USA. The USA has purchased scores of Soviet era aircraft from Kazakhstan. Eighty one of the obsolete planes made up the package which cost USD2.26 million. The USA has not disclosed why it bought them but we can assume that they will soon be making their way to Ukraine where similar aircraft are in use. Expect them to be used as decoys and/or broken down for spare parts. Kazakhstan continues to quietly align itself more with Western nations and that will not go unnoticed by Russia. The sale also points to a major upgrade of Kazakhstan’s fleet. A red flag too to Putin.
Diplomacy. The UK Foreign Secretary, David Cameron, met with his Kazakh counterpart, Murat Nurtleu, in Astana on 24th April. The pair signed a strategic partnership and cooperation agreement between their two nations – one that has been six years in the making. The agreement aims to bolster relations in key areas such as trade and investment, energy, mining, human rights, environmental issues and science. Two new Kazakh-British business agreements were signed off. One between AstraZeneca and the Ministry of Healthcare, will implement an investment project for contract manufacturing of biotechnological products. The other between the Ministry of Transport of Kazakhstan and British company Car Park Transformer, marks an agreement to build 250 road side service stations. The plans will bring investment and employment not only in fuel servicing but also in the retail and hospitality venues included in the plans. Cameron’s visit marks a crucial turning point in UK foreign policy on Central Asia which could trigger other Western nations to follow.
Floods. Flooding that started in late March has now become one of Kazakhstan’s biggest disasters in decades. Ten out of seventeen provinces are now under a state of emergency. The Ministry of Emergency Situations report that over 119,000 people, including over 44,000 children, have been evacuated. Conditions have stabilized in some hard-hit areas but in others the water is still rising. On 21st April the Ural River burst its banks in Oral in West Kazakhstan. The financial impact of the floods is yet to be fully calculated but what is for sure is that the damage to infrastructure and agriculture is huge. More than 1,500 tonnes of food and essential goods worth around USD$1.7 million have already been distributed in affected areas. Prime Minister Bektenov has authorized a plan to provide financial compensation to families impacted and/or displaced. A one off payment of approximately USD850 each is aimed to help victims replace basic appliances and clothing lost in the disaster but just how many families will qualify before the waters recede remains unclear. The Ministry of Water Resources and Irrigation has announced plans to build 20 new reservoirs in eleven of the most flood prone areas to reduce future threats from melting snow and heavy rains. The budget for this has yet to be published. This could turn into the most expensive springtime the country has ever seen.
Numbers. Despite the rising flood waters there is an air of optimism in Kazakhstan at the moment even if not all of the numbers reflect that. Currently, inflation sits at 9.1% its lowest rate since February 2022 but everything suggests that will further decrease slightly by the end of the year and again in 2025. The National Bank has maintained interest rates at 14.75%. In 2023, in spite of increased interest rates, bank lending increased by 20.3%. A closer look at this shows that mortgage lending was up 14.2% but consumer lending had increased by an impressive 34.2%. The next decision on the base rate is scheduled for 31st May. Oil prices are slightly above the base scenario, averaging USD83 per barrel in the first quarter of this year; a fact that favourably impacts Kazakhstan’s trade balance. The International Monetary Fund’s (IMF) latest World Economic Outlook report is out. In it the IMF projects real GDP growth of 3.1% this year and 5.6% in 2025 for Kazakhstan. The Bureau for National Statistics reports that in 2023, GDP growth was 5.1%.
Transport. The government and representatives of the Afghan Taliban have discussed expanding transportation links between Astana and Kabul, with Kazakhstan saying it is ready to participate in projects to develop the Trans-Afghan corridor. If completed, it will reduce transit time between the two countries by 90% which in turn will reduce costs. In recent years exports to Afghanistan have been growing. In 2023, the volume of transportation by rail reached an all-time high of 2.7 million tonnes.
Crypto. There is a new face at the Kazakh crypto coal face. Canaan, one of the sector’s largest manufacturers of bitcoin mining machines has set up a base in the country. It also is part of Canaan’s plans to diversify its operations and participate in mining while continuing to sell mining rigs. The Chinese manufacturer is best known for its ASIC mining machines. The Chairman of the Kazakhstan Association of Blockchain Technologies and Data Centres, Dauren Karashyev, met with Cannan’s Vice President Davis Hui in April. The pair signed an agreement that officially welcomed Canaan into the Kazakhstan Association of Blockchain Technologies and Data Centres. The decision by Canaan to move away from a single revenue stream is to Kazakhstan’s benefit. As crypto prices continue to fluctuate it is possible that other equipment manufacturers may follow their lead. The government’s recent focus on legislative support and the setting out of clear frameworks, guidelines and licencing procedures in this sector could now begin to pay off.
India and Kazakhstan held talks in April aimed at boosting their collaboration against terrorism. Chinese Defence Minister Dong Jun also met with Tokayev during his visit to attend the 19th SCO Council Meeting held in Astana. In his talk with Tokayev, Dong said the region was facing a “complex” security situation as the “three forces” (China’s shorthand for terrorism, separatism and extremism) were “becoming more active”. The meeting concluded with the pair agreeing to strengthen “strategic coordination”.
Anticipate that the national budget will be adjusted and federal expenditures will be reduced to free up funds to address the aftermath of the floods. An era of austerity measures will have to begin but how long that will have to last is as yet unclear. Funding to provide food security nationally will also be needed due to lost crops and agricultural equipment. Kazakhstan’s position on the global political landscape will remain complex and must be well managed in this time of rising risk. Russia will continue to rattle Tokayev’s cage but that will all be to intimidate Kazakhstan and to distract the Russian people from failures in Ukraine. Giving them another ‘enemy’ to complain about will serve Putting well for now. We are sure that Tokayev is smart enough to understand that.