In a world constantly rocked by shifting power dynamics and unpredictable global challenges, Kazakhstan’s even-handed international policy approach should be studied by all nations wishing to strengthen their sovereignty but still actively participate in world affairs. Tokayev continues to masterfully prioritize diplomatic and economic cooperation with China, Russia and the West. Kazakhstan is now firmly the lynch pin that keeps the balance in Central Asia. By keeping close ties with all sides, Kazakhstan is visibly reducing political tensions creating a more cooperative economic atmosphere for trade between Asia and Europe.
Russia. Putin may have won the Russian Presidential Election but he appears to have lost the hearts and minds of his expats in Kazakhstan. An independent exit poll conducted in Almaty surveyed ~1,600 people at a polling station in the Russian consulate. Only 8% of those surveyed said they had voted for Putin. In other Central Asian countries he polled well suggesting that the large number of Russians who have relocated to Kazakhstan since the invasion on Ukraine had done so to avoid being drafted to the front lines, and still oppose the war and their President. Despite this, Tokayev warmly congratulated Putin on his victory glossing over the sentiment of the many Russians living in his country. He described the election as a demonstration of the volume of “popular support for the Russian leader’s strategic agenda.” Kazakhstan remains Russia’s primary trade partner amongst Asian neighbours, with a stable annual trade turnover of USD26 billion.
China. Relations with China go from strength to strength. The two nations have announced the establishment of a mechanism for strategic dialogue between their foreign ministers. Foreign Minister Wang Yi hosted the first such meeting with Kazakh Deputy Prime Minister and Minister of Foreign Affairs Murat Nurtleu in Beijing on 29th March. During the talks, Nurtleu said the countries are good neighbours and partners, and China is a priority direction for Kazakhstan’s diplomacy. The Year of Kazakhstan’s Tourism in China has officially begun. In 2023, Kazakhstan welcomed 367,000 Chinese visitors. This year, the goal is to take that number up to 500,000. China’s President Xi Jinping will visit Kazakhstan in July. Trade turnover between Kazakhstan and China continues to expand, reaching USD31.5 billion in 2023 – up 30% on the previous year.
Ukraine. Ukraine’s President Zelenskyy has been doing to talk show and news circuits and what he is saying is causing alarm in Astana and further afield. According to him, if Ukraine loses the war with Russia, Putin could launch an aggression against Kazakhstan, the Baltics and push on to Europe pulling NATO into a war. In an interview with the American TV channel CBS, he said, “For him, [Putin] we are a satellite of the Russian Federation. Now it’s us, then Kazakhstan, then the Baltic States, then Poland, then Germany, well, at least half of Germany. He will return there”. Ukraine has been a major beneficiary of international military aid but recent events in Gaza have taken The West’s attention and their ammunition. The USA and EU would be wise not to stem the flow – economically and politically it is far simpler to grind down Russia’s military vicariously through the Ukrainians than for NATO to have to become truly involved in combat operations. That said, as we have made clear in prior Special Reports, we do not assess that Russia is capable of (nor truly willing to) pose serious threat to NATO territories. Instead, Zelenskyy’s narrative is a clever effort to galvanise Western public opinion, regain the Western focus that has been drawn away toward Gaza, and ensure a continued flow of funds and ammunition to Ukraine. Again, Russia cannot even achieve its aims in Ukraine, so the notion that it is capable of re-absorbing all of Eastern Europe again is fanciful.
USA. Mr Nurtleu also visited Washington DC in March. He met with US Secretary of State Anthony Blinken, and then later with US Trade Representative Katherine Tai. During the talks, both sides agreed to convene a meeting of the Council on the Trade and Investment Framework Agreement (TIFA) between Central Asian nations and the US in Astana.
Diplomacy. Tokayev’s multi-faceted approach to foreign policy continues to serve him well. He has become a master at not choosing sides and instead focuses on what will benefit his country. His policy approach has elevated greatly Kazakhstan’s position on the international stage. The country is now widely acknowledged to be a masterful facilitator of dialogue and mediation. As we approach the Astana International Forum scheduled to hold in June we are positive that Tokayev’s global standing will be further boosted.
Legislation. On 13th March 13, the Majilis, the lower house of parliament, gave its backing to legislation which will introduce classic jury trials. The reform is aimed to dispel the perception that judges are, under the current hybrid system, unduly influencing juries. The old system sees criminal cases decided by professional and citizen judges working in tandem. Once adopted, the bill will mandate that verdicts reached in cases tried by jury will be decided by 11 individuals without interference from the judge. This doesn’t sound earth shattering to the Western ear but in former Soviet States it is a rarity and it is another of Tokayev’s nods to the West as he moves to modernise his nation. In other legislation, the Ministry of National Economy plans to introduce excise taxes on high-end cigars and other luxury items by October of this year. The Ministry says the new taxes are “to equalize the socioeconomic situation of different segments of the population, to increase the nation’s revenue and to regulate consumption of certain goods.” On paper this may sound like a good plan but in principle we predict that a resultant reduction in consumption, combined with the cost of collecting the tax, that this will do nothing to boost state coffers but will instead create paperwork and red tape.
Floods. The spring thaw has triggered vast floods that have affected at least seven regions in the country with the North being hardest hit. The Emergency Situations Ministry has said that more than 10,000 people, including children, have been evacuated. Bridges have been destroyed, entire sections of highway are now underwater and hundreds of homes have been rendered uninhabitable. Kazakhstan experiences floods every year as snow melts and every year it acts surprised.
Numbers. In 2023, non-raw material exports reached $35.1 billion out of $78.7 billion in total exports. This is up from $26.5 billion in 2022. Back in September, Tokayev’s State of the Union address promised to diversify the economy and move it away from its historical reliance on oil and gas exports and that promise appears to be bearing fruit. Priorities appear to have changed. In 2023, copper, uranium, distillates and ferrochrome contributed 40% to the total amount of national exports. Also in the spotlight has been light industry products and food. Other key non-raw material sectors seeing a surge are chemical products, electronics, automotive, metallurgical and equipment industries. We anticipate the country will remain on a stable growth trajectory over the next two years. Inflation remains elevated but is beginning to slow and we predict ~5% by 2025.
Railways. Kazakhstan has cancelled Kazakh Railways’ (KTZ) freight price hikes after businesses expressed concerns that the additional costs would erode any competitive advantage they had to trade both domestically and internationally. KTZ is bolstering its presence in both China and Russia and by doing so it cements Kazakhstan’s position as the natural hub for freight rail traffic between Russia, Europe and China. KTZ reports that freight rail traffic between China and Kazakhstan increased by 22% in January of this year compared to the same period last year. KTZ is also working with a Russian firm to expand transport and warehousing capacity for Russia-bound freight. Increasing traffic will, in turn, increase revenue making the need for freight price increases obsolete. Win/win for the government, businesses and consumers.
Oil. Oil exports increased in volume last year. Lower prices translated this into diminished earnings but all eyes are on increasing sales. Kazakhstan exported more than 70 million tonnes of oil in 2023, 10% more than in 2022. Revenues totalled USD42.3 billion, a 10% drop year-on-year. Boosting exports may prove to be tricky however. The problem lies here – the Caspian Pipeline Consortium. It is by this route that around 66% of Kazakh oil reaches foreign markets. But here is the issue, the pipeline is also used by Russian oil companies and it runs through Russia ending in the Black Sea terminal of Novorossiysk. The Turkish terminal of Dortyol announced in March that it will no longer accept oil delivered from the CPC amid an increase in sanctions pressure by the United States. Dortyol is only one mid-sized terminal – it is Turkey’s 7th largest import terminal by volume. If more follow Dortyol’s lead, Kazakhstan will definitely have cause to worry.
Crypto. The Chairman of the Board of the Kazakhstan Association of Blockchain Technologies and Data Centers, Dauren Karashyev, met with Canaan Convey Vice President Davis Hui. The pair signed an agreement that officially welcomed China’s Canaan Inc. into the Kazakhstan Association of Blockchain Technologies and Data Centres. The collaboration the two teams is a significant step towards the creation of sustainable blockchain technologies in the future. This collaboration is of particular interest when focusing on performance optimisation and equipment upgrades. Canaan is perfectly positioned to assist with both.
In response to the terrorist attack at Crocus City Hall in Moscow on 22nd March claimed by Islamic State Khorasan (IS-K), Kazakhstan’s Ministry of Internal Affairs has ordered additional security checks be implemented at all shopping centres and concert venues effective immediately. During a 23rd March meeting of the Security Council, Tokayev condemned the attack and reaffirmed his nation’s solidarity with Russia in the fight against terrorism. He also stressed that Kazakhstan stands ready to assist Russian law enforcement agencies if requested to do so. On 7th March, the Russian Federal Security Service (FSB) said it had stopped an IS-K cell from carrying out a terrorist attack on a synagogue. In a FSB raid in the village of Koryakovo in the Kaluga region south west of Moscow, two men were killed. The victims have since been identified as Kazakh. IS-K has leaned heavily into recruitment of Central Asians who can travel freely in the region and use their linguistic and cultural skills to stay under the radar. Security services remain on high alert for sleeper cells both at home and abroad.
The national focus will remain on maximizing domestic interests while encouraging close cooperation with immediate neighbours. Tokayev will continue to walk his diplomatic tightrope but will keep a firm eye on Russia. However, all the hard work he has done pulling his country up by its bootstraps will make it increasingly difficult for Putin to exert significant pressure over Kazakhstan in years to come.