President Tokayev will deliver his annual state-of-the-nation address on 2nd September. It will be calm, considered and relatively unexciting, which in these turbulent times will feel like a breath of fresh air. It has been a quiet summer in Kazakhstan but there was still work done to develop domestically as well as in wider regional and international initiatives. Tokayev knows that providing a safe and stable environment is key to attracting foreign investment and cancelling out the negative impacts of geopolitical and economic risk.
Nuclear Power. In a search for a solution to the country’s ever growing energy deficit issues, talks are on-going with international companies to construct a new nuclear power plant. CNNC (China), Rosatom (Russia), KHNP (South Korea), and EDF (France) are all bidding. Initially, the Ministry of Energy had budgeted USD10 billion to construct a 2.4 GW plant with a 10-year construction period. It has since revised the spending limit up to USD15 billion. China National Nuclear Corporation (CNNC) is very publicly courting the contract and recently issued a statement saying they could complete the build in only 5 years at a cost of USD5.6 billion. Russian firm Rosatom, however, seems to think the job is already theirs based on historical ties between the two nations. We disagree. Since Russia’s invasion of Ukraine there has been some tension between Moscow and Astana after Tokayev declined to support the assault on Kyiv. This makes who wins the contract, should the project go ahead, hugely significant. It will present not only economic implications but geopolitical ones too. The choice of partner could have significant implications on foreign policy and strategic alliances moving forward. Authorities have hinted that a possible international consortium could be formed to build the plant. Diplomatically this may seem like the sweetest solution but would it be the most successful? Can the four bidders be trusted to collaborate? Whatever decision is reached a nuclear-powered future is firmly on the cards. The government has passed a draft resolution to hold a national referendum on the construction of the power plant. A provisional date for the vote is yet to be announced but it is anticipated it will be before the end of this year. Public hearings on the topic of nuclear power have been convened right across the country. Everything points to it being a strong vote in favour. The state run Samruk Energy company has projected that the national power deficit could double to reach 3 gigawatts by 2029. A nuclear solution would solve that problem but what is not yet clear is if it will create new ones too. The construction of a nuclear power plant comes with a number of notable challenges and risks. Significant water resources will be required which could potentially leave shortages elsewhere. The country also experiences regular, and sometimes significant, seismic activity.
Nuclear Weapons. Kazakhstan chaired the Nuclear Non-Proliferation Treaty Preparatory Committee meeting held late July/early August in Switzerland. Tokayev also met with Izumi Nakamitsu, United Nations Under-Secretary-General of Disarmament Affairs when she visited Kazakhstan to mark the 33rd anniversary of the closure of the Semipalatinsk nuclear test site. During the meeting Tokayev stressed that his country retains a principled stance on disarmament and non-proliferation of weapons of mass destruction. The pair discussed prospects of multifaceted cooperation between UN institutions and Kazakhstan, aimed at promoting international and regional security as well as working towards nuclear disbarment. Kazakhstan has become a regional and world leader in non-proliferation and biosafety. After the Soviet Union fell, and Kazakhstan gained independence, it voluntarily gave up its nuclear weapons – at the time it held the world’s’ 4th largest stockpile. It also dismantled production facilities and capacities for building biological weapons, including the world’s largest anthrax factory in Stepnogorsk. These actions gave a firm moral authority to Kazakhstan on all matters of mass destruction. It also puts it in a strong and trusted position to encourage other nations to do the same. Kazakhstan played a key role in negotiations for the Iran Nuclear Deal. It was the only country that Iran trusted for the supply of natural uranium. As the UN tries to convince more countries to give up their nuclear and biological weapons it is highly likely that it will be Kazakh technical experts who will be allowed in the foreign facilities and laboratories. The doors will be opened wider for them than if they had been sent by the US or EU. Kazakhstan was the first country in history to renounce nuclear weapons. It will always work hard to ensure others will follow their lead.
Military. 2024 has seen Kazakhstan’s defence sector quietly getting a major facelift – all aimed at strengthening national security. New Arlan and Cobra II armoured vehicles have been purchased. Training facilities have been upgraded and new simulators and other education equipment have been installed. Coming soon will be enhanced unmanned aerial vehicle equipment which will boost intelligence and surveillance capabilities. Astana also plans to purchase advanced fighters and anti-aircraft systems. All of this is being done with absolutely no fanfare at all. To shine a light on it could shift the fragile and delicate geopolitical balance. Instead, Astana will spin it as domestic security upgrades and not preparation for cross border conflict. It is a tall tale to tell but Tokayev, as always, will be up to the job and say the need was highlighted after the riots and unrest in his nation in January 2022. In the past Kazakhstan has always taken a moderate defence approach, choosing to rely on Russia and the Collective Security Treaty Organization for extra protection and support when needed. Now however, there is an emerging strategic shift that signals the country desires more self-reliance and independence.
Numbers. Inflation rose slightly in July to 8.6% but this was not unexpected. The inflation forecast for 24/25 financial year remains at 7.5 to 9.5% so despite the small surge it is still within government target margins.The National Bank of Kazakhstan (NBK) has maintained the base rate at 14.25%. We anticipate this rate will not change until early next year to minimise the risk on inflation. Kazakhstan’s economy is performing well overall and we anticipate growth right across all sectors moving forward. Manufacturing, mining, and oil sectors will do particularly well but so too will construction, agriculture, and transport services. By 2025 we expect inflation to have settled at 5.5% to 7.5% with a further dip following in 2026.
Investment. Back in March, the government announced the launch of a new Fast Track system aimed at building a ‘green corridor’ to simplify investment procedures. It is now up and running and the benefits can already be seen. The Chamber of Entrepreneurs hosted a meeting in Aktobe on 14th August. Local authorities, business leaders and the prosecutor’s office were in attendance. In just this single gathering, 27 companies, covering 31 major projects, were issued with certificates for their participation in the programme and given the green light to proceed. Local investors were of course included but so too were representatives from Russia, China, Türkiye, and the USA. Kazakhstan is keen on attracting investments and working closely with international financial institutions and business partners. This Fast Track system will help drastically with that. Kazakhstan’s proactive policy measures are yielding tangible results but untapped potential remains.
Crypto. Kazakhstan continues to tighten up the crypto sector. A trader accused of illegal cryptocurrency activity has been convicted. The defendant has not been named at the time of writing but he has been sentenced to 5 years in prison and had assets worth USD4.19 million confiscated. He has also been banned from mining for the next 10 years. During the trial, prosecutors presented evidence of illegal mining and trading of Bitcoin, Ethereum and Litecoin using foreign crypto platforms. They also alleged the defendant has used Qiwi, Payeer, Perfect Money and Nixmoney to cash out before laundering the money via real estate purchases. The Supreme Court published a statement of its findings on their website. We anticipate seeing more cases like this one as the government continues to crack down and is granted further powers. Also in August, the Agency for Financial Monitory, (AFM) posted on social media that it had “identified 18 crimes related to illegal cryptocurrency transactions and mining.” They added that in 2024, courts have handed down six sentences for the “illegal purchase and sale” of crypto assets. The AFM also said they had blocked illegal crypto transactions worth a total of USD75.4 million. On 2nd August, the AFM also posted that it had recovered more than USD500 million from the “Eolus” crypto “pyramid scheme”.
Kazakhstan’s National Security Committee, working with local police forces, carried out counter terrorism sweeps in Astana, Almaty, and the West Kazakhstan regions last month. Five people were arrested during the raids. Security forces found weapons and ammunition and what they described as “extremist literature”. Among those detainees, two men have previous convictions for violent crimes. Another had been trained in an unnamed foreign terrorist camp. Pre-trial investigations into the accused are ongoing.
Separately, Authorities detained 15 Afghan nationals for having no documentation or expired visas. The individuals are currently being held at an immigration office while identity and background checks are conducted. This latest detention, and possible deportation, highlights Kazakhstan’s clamp down on illegal immigration coming as broader regional tensions are increasing the flow of migrants and send some seeking asylum. The arrests made in both examples highlight Kazakhstan’s commitment to counter-terrorism operations and ensuring national security. The government is committed to pre-empt and neutralise potential threats. It is also committed to stopping the spread of extremist ideologies and the radicalisation of its citizens.
Whether Kazakhstan goes down the nuclear energy road or seeks out a different route considering social, environmental ,and geopolitical risks is not yet clear but … if it is the former then Tokayev’s famous diplomatic skills will be put firmly to the test. His balanced foreign policy approach has so far served him well and has allowed his nation to move forward without relying on any single region or partner. Since Kazakhstan gained independence in 1991 its economy has gone from strength to strength. There is still some lingering Soviet era red tape and cumbersome bureaucracy to overcome but it is slowly being repealed and replaced. Kazakhstan is definitely open for business. And it is keen to remain open for all.