By Nurzhan Zhambekov
According to the official statements of the Georgian President Mikhail Saakashvili, which was broadcast on radio “Georgia” Kazakhstan has become the largest investor in Georgia. (KUB.kz, February 10)
The Caucasus Republic’s head of state has come up with an ambition to turn the Black Sea coast of Adjaria into an international resort. There is an agreement between the government of Georgia and Kazakhstan’s second largest bank Turan Alem, whereby the Kazakh side would commence construction of new hotels in Adjaria in the year 2007. Previously the Kazakh bank had already stated its willingness to invest into Georgia up to a billion US dollars. The bulk of the investment would involve reconstruction of tourist sites in Adjaria. In addition, the Kazakhstani entity is primarily interested in Batumi refinery. (mizinov.net, February 9)
The leading specialist of the Georgia’s prime minister’s apparatus Nikolai Lagidze believes that the aforementioned phenomenon has an enormous importance for Georgian economic development and growth. The Batumi refinery has been processing the Central Asian oil and has been an integral part of “Eurasian corridor,” specifically in the context of this corridor the purchase of and privatization of the Batumi refinery is newsworthy and groundbreaking. (KUB.kz, February 10)
Most importantly, the relations between Georgia and Kazakhstan revolve around natural gas. During the recent visit of Georgian Prime Minister, Zurab Nogaideli to Astana, there was an agreement reached. In that agreement, Kazakhstan would supply Georgia with natural gas at a price of 68 US dollars for thousand cubic of meters. The agreed price is very favorable to Georgia given that the South Caucasus state is in desperate need for this high-value commodity after recent disruptions of gas supplies to Georgia as well as Russia’s energy dispute with Ukraine. (vesti.ru, February 10)
However, since Kazakhstan is a landlocked country and depends almost entirely on Russia for its energy exports, the Central Asian economic giant is not capable of transporting its natural gas to Georgia without the help of Gazprom, which owns transmission pipelines in the Russian territory. Nevertheless, the agreement between Astana and Tbilisi had a positive impact on Georgia’s leverage in its ongoing negotiations with the Russian energy behemoth. The fact that Kazakhstan is ready to provide Georgia with natural gas at a relatively low price, Georgia managed to get a concession from Gazprom in price reduction. Instead of 230-250 US dollars, Georgia will be able to purchase Russian natural gas for 110 US dollars in the year 2006. (vesti.ru, February 9)
During the official visit of President Mikhail Saakashvili in October 2005, the President of Kazakhstan, Nursultan Nazarbaev expressed interest in increasing the transit of Kazakh oil through Georgia to the West. The Georgian president once again reiterated that the economic reforms implemented in Kazakhstan are a good example for cash-strapped Georgia. (Kommersant, October 2005)
Nursultan Nazarbayev in turn mentioned that Georgian-Kazakhstan relations go beyond present and extend into far history. “The Georgian czar David IV used the Kazakh ancestors – kipchak warriors in the war against Turks. In response to Saakashvili noted that Georgia provided hotel Iveria to Kazakhstan for reconstruction and renovation. (Kommersant, October 2005)
Moreover, Kazakhstan and Georgia have been working on the grain terminal in the port city of Poti in Georgia
The growing positive economic relations between Kazakhstan and Georgia may have an impact on the strategic alliance and partnership between Astana and Moscow. The Russian establishment does not favor Kazakhstan’s independent foreign policy with the ‘democratic’ and solely Western-oriented countries such Georgia and Ukraine as the Russia’s relations both with Georgia and Ukraine critically deteriorated as a result of energy disputes since January. On the other hand, Kazakhstan has stepped in to fill the vacuum and extend its leverage into the CIS countries including Georgia and Ukraine in terms of gas supplies.
In the past five years, buoyed by high oil and metal prices in the international markets, Kazakhstan has become a regional power in the Central Asian region and the Caucasus.
It is premature to conclude that Kazakhstan will continue to extend its economic influence to its neighboring countries by investing in banking, construction and oil, since Kazakhstan’s economy heavily relies oil and gas and Kazakhstan is mindful of Russian displeasure with Kazakhstan’s independent foreign policy. In addition, what direction Kazakh and Russian relations will take remains to be seen as Kazakhstan has opened a pipeline Alashankou-Atasu into China last year to decrease dependence on Russia for energy transport. Moreover, Kazakhstan is set to join Baku-Ceyhan-Tbilisi to further diversify its energy exports away from Russia.
Undoubtedly, Kazakhstan is becoming a major force to reckon with in the Commonwealth Independent States particularly for Russia, as Kazakh energy production is projected to increase threefold up to 3.5 million barrels a day given Kashagan promising oilfield in the next decade putting Kazakhstan potentially in top ten oil producers
The relations between largest CIS states have been positive so far as Kazakhstan totally depended on Russian territory to transport its energy and Kazakhstan has been mindful of a large Russian minority. However, the status quo of the 90s is changing.
Russian and Kazakh relations will be tested in the light of future Kazakh and Russian competition for energy exports and investment in Central Asia and the Caucasus in the next decade and the relationship will definitely have far-reaching implications for the entire Eurasian region.
Kazakhstan’s economy is growing in leaps and bounds, at a whopping 9.4% increase in GDP in 2005, matching the increase in 2004.
As positive as that impressive figure sounds, it is almost entirely the result of the current price of oil, and is not necessarily indicative of the state of the Kazakh economy.
… the “Dutch syndrome” – harm to a country’s industry caused by excess cash inflows from sales of natural resources – looms as a major threat to Kazakhstan’s longer-term economic well-being.
The only sector rivalling energy in terms of rapid expansion is the construction industry, whose share in the country’s overall gross domestic product (GDP) growth has soared from 9.3 percent in 2004 to 27.1 percent in 2005.
That trend is largely explained by construction of Kazakhstan’s new capital Astana, launched in 1997 on the site of a desert village and that has sprung up in a decade thanks to oil revenues.
Kazakhstan would do well to diversify; while likely on the short term, high oil prices are not necessarily guaranteed in the long run.
For more on Kazakhstan’s affliction with the “Dutch Disease,” check out Ben’s post.
Kazakh opposition leader Altynbek Sarsenbaiuly was found very dead today; his hands had been bound behind his back, and his head shot from both the front and back.
The Kazinform state agency reports that Sarsenbaev was killed while hunting. At least Kazakh police haven’t called this a hunting accident yet. In November of last year, an opposition figure’s death was called a “suicide” after the opposition figure managed to shoot himself twice in the chest, and once in the head.
Maybe politicians should just stop hunting altogether; it doesn’t seem to be ending well lately.
According to RFE/RL, the police already have a history of brutality with this family:
In November 2005, the opposition alleged that police had beaten two of Sarsenbaev’s nephews.
That allegation came days after Sarsenbaev was injured in a meeting between the opposition with some citizens at a campaign rally. Sarsenbaev said at the time that he was surprised by the ferocity of the attack.
“First of all, we never thought [the authorities] would resort to such banditry,” Sarsenbaev said at the time. “We’ve been in this country for 14 years [of independence], and any kind of injustice used to have certain norms and limits. To go beyond these limits means to go out of control. Now we see that those in power are ready to go beyond the accepted limits. We’ll see what’s going to happen in other regions we’re going to visit.”
The Kazakh Interior Ministry’s Press Office and the Almaty regional police were not available for comment.
The second politically motivated murder in three months does not look good for Kazakhstan, especially when given Nazarbayev’s popularity, they are so flagrantly unnecessary. Corruption like this must be rooted out quickly, and forcefully. If Nazarbayev doesn’t take this upon himself, he will be associated with it.
The Kazakh opposition has publicly accused the government of being behind both murders.
Bulat Abilov, a cochairman of Naghyz Ak Zhol who identified Sarsenbaev’s body at the place where it was found, spoke at today’s press conference. He accused the country’s security services of being behind the two murders. “We want to state that the authorities are responsible for these murders,” he said. “None of them was investigated to its conclusion. It is the country’s president, Mr. Nazarbaev, who has a personal responsibility for this.”
Nazarbaev’s press service announced that a press conference on the opposition figure’s death would be held in Astana today. But the event was later cancelled. No reason for its cancellation was given.
A teenager was just jailed for a pretty horrific murder in Kazakhstan… the type of thing that could stimulate a made-for-TV movie someday.
A spokesperson for the prosecutor’s office in Karaganda reported that the jailed man had throttled an unemployed woman, 34, following a quarrel after drinking alcohol. Then, the murderer and his 17-year-old associate performed a sexual act on the corpse, dismembered it and ate her kidney and an eye. The underage boy then tore out the second eye from the eye-socket and crushed it with his foot.
The investigation had also established that they cut out a star on their victim’s chest and buried the body in a garden.
You know the perpetrator is insane when he elects to eat the eye…
Cannibalism is (almost) never a laughing matter. Good thing the criminals are being put away for good… oh wait.
…last Tuesday the boy was exempted from criminal liability due to a new amnesty law coming into force.
According to Russland-Aktuell, Kazakhstan plans to build a nuclear power plant. Prime Minister Danial Akhmetov said that a delay in the building would mean a slow-down in the modernisation of the country. When in 1999 plans were unveiled that a nuclear power plant was to be built in the Balkash area, there were protests against its construction.
Interestingly enough, protests against nuclear issues were integral part of Kazakhstan’s own Glasnost experience. In 1990, there were widespread demonstrations in Semipalatinsk, a city in northern Kazakhstan – close to the former underground testing grounds of the USSR’s nuclear arms program.
Why would a country like Kazakhstan need nuclear energy when its own abundant hydrocarbon resources are energy source enough? Well, taking into account that the country also has a lot of uranium under its soil and is currently reviving the extraction of the metal, the move might reflect Kazakhstan’s desire to diversify its economy and not loose ground in cutting-edge research in the field of nuclear technology. In the light of current discussions about the end of oil within the next decades, it might also be quite a farsighted move.
As briefly mentioned in an earlier post, Kazakhstan is looking into possibilities of extending its demand base towards Europe. Now, a member of the EU, Poland, has called on Kazakhstan to do so. According to New Europe, Poland urges Kazakhstan to participate in the Odessa-Brody pipeline.
How would that work? Well, in a drive towards energy diversification amidst the Ukrainian-Russian gas row, the EU said that it is interested in Caspian oil, transported via Azerbaijan (hence the BTC). Oil would have to be shipped across the Black Sea and then fed into a potential pipeline in Odessa.
In Austria, Der Standard also pays some close attention to this matter, and had an article in its print edition today that underlines Kazakhstan’s strategic weight and growing significance in the light of the recent gas turmoil.
However, a lot of this spotlight on Kazakhstan is based on assumptions and sketchy forecasts on future oil supply. 150 million tons of oil by 2015, a number mentioned recently by a government official (who are known to rather inflate such data), might as well be too optimistic.
President Nazarbayev doesn’t want to waste time after having been sworn in for a third presidential term recently. He is dealing blows in a couple of directions. First, his cabinet’s performance is not really satisfactory:
Kazakh President Nursultan Nazarbayev on Monday criticized his Cabinet for poor strategic planning, overspending and other mistakes.
Also, the Kazakh diplomatic corps is taking far too much time off:
The ambassador of Kazakhstan to Uzbekistan spent 112 days away from the sojourn country. Some ambassadors spend 60-100 and 200 away from their sojourn countries,” – N. Nazarbayev observed
Slightly reminiscent of practices in other countries of the region.
Kazakhstan’s Central Bank is hunting for dozens of radioactive dollars. Pardon?
The Kazakh central bank said in a letter to financial institutions the radiation level of the U.S. dollar notes was 100 times above normal. A Kazakh citizen brought them into the country in November, it said.
Mind you, but that become quite common if Kazakhstan were to become the world’s number one Uranium producer.
Kazakhstan’s domestic economy might not lack hydrocarbon resources, but it seems as with all the investment abound, an acute shortage of skills becomes ever more evident.
The landmarks of tertiary education in Kazakhstan, modern and Western-style institutions (like for instance KIMEP), focus heavily on social sciences and management, but what is needed most now are quite practical crafts:
Highly skilled non-professional occupation experts like woodmen, carpenters, crane operators, piplelayers, bulldozer drivers, mechanical trades, repairers, drivers, turners, millers, maintaining operators, etc are of strong demand for at present.
While for many of these professions, job applicants wouldn’t need a university degree, there is another side to this. If Kazakhstan was to import less human capital from abroad (especially in the extractive industries), it could need some more ‘homegrown’ engineers that are up-to-date with the newest tools and technical developments.
And, in general, Kazakhstan’s higher education performance is quite bad. There has been a radical decline in public expenditure towards universities in essence reducing the real expenditures by about 70% between 1992 and 2002. For more background on the financial situation of Kazakh institutions of higher education, read this PDF. Also, a recent report by USAID can help put Kazakh education spending into perspective:
Particularly low is the spending on tertiary education; at 10.2 percent of per capita GDP in 2002, it is less than half of the LMI-FSR average and less than a third of the average for all LMI countries; the gaps with expenditure per student in tertiary education relative to Bulgaria and Romania are similar.
However, a large amount of money is being spent on high-profile scholarships, i.e. the Bolashak program, through which around 100 students are studying mainly in the US and Europe each year, mainly in the social sciences and management.
Nevertheless, that shouldn’t mean that Kazakhstan cannot offer competitive education prospects to its citizens at all. That’s also proven by the relatively large number of international students studying there (see this for an Indian perspective). However, the little amount of cash being spent on the future labour force of the country is worrying, especially in those sectors showing the highest growth rates and future potential:
For Kazakhstan to achieve transformational growth and reduce its dependence on oil, more emphasis should be given to higher education. Such efforts are necessary to stay competitive in the region with a highly educated labor force.
According to the World Bank, far more flexibility and lifelong learning opportunities are needed soon to keep skill shortages from becoming a serious impediment to growth.
The outlook for the Kazakh economy could darken because right now, the country is far too relient on oil and is not taking off in other sectors that could also cushion the negative aspects of the ‘Dutch Disease’. Already, analysts say that the spectacular GDP growth rates are due to high oil prices and are eventually unsustainable. From that same RFE/RL article:
In addition, he adds, the ailing education system is unable to produce high-quality specialists, and therefore the national economy is likely to face a scarcity of qualified resources in the future.
Let’s remind the Kazakh government of one of its own statements:
Reformation of the educational system by opening it up to the world knowledge and experience, scientific and technological achievements by training highly qualified professionals with the best managerial skills always helps to transform the society into a progressive and democratic one.
It’s all a matter of priorities. Certainly, projects like this one are good for the psyche, but the money spent on the facade might be worth much more inside the brains of future generations.