EurasiaNet Eurasia Insight - Kazakhstan to Investors: Increasing the State's Role in Energy Development is the "Main Dimension" of Government Policy

EURASIA INSIGHT

KAZAKHSTAN TO INVESTORS: INCREASING THE STATE’S ROLE IN ENERGY DEVELOPMENT IS THE "MAIN DIMENSION" OF GOVERNMENT POLICY
Joanna Lillis 2/12/08

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President Nursultan Nazarbayev used his state-of-the-nation address to confirm Kazakhstan’s new-found assertiveness in energy policy. He also indicated that, over the near term, the government will strive to strengthen the country’s relatively weak social safety net.

Despite the fact that Kazakhstan has scored a major diplomatic triumph late last November � securing the chair of the Organization for Security and Cooperation in Europe in 2010 � international relations occupied a relatively low-profile place in Nazarbayev’s speech. [For background see the Eurasia Insight archive].

Nazarbayev began his address, carried on the presidential website, by recalling how Kazakhstan recently managed to boost its stake in the Kashagan oil field at the expense of foreign investors. [For background see the Eurasia Insight archive]. He then went on to pledge to continue this trend. "The main dimension in the oil-and-gas sector is boosting the position of the state as an influential and responsible participant on international oil and energy markets," he stated. "Work must be continued in this direction."

In connection with Nazarbayev’s comments, Kazakhstani Prime Minister Karim Masimov announced that negotiations with foreign companies seeking to strike energy-related deals have been suspended until government officials can re-formulate the country’s tax code. According to the Russian news agency Itar-Tass, the new tax code may not be ready until September.

Nazarbayev gave the speech in parliament, whose lower house consists solely of deputies from the president’s own Nur Otan party and a handful of appointees representing ethnic groups. [For background see the Eurasia Insight archive]. The priority after last year’s election, he said, is to implement manifesto pledges: more than doubling pensions and child benefits in the coming years, increasing state benefits by 9 percent from 2009 and doubling public-sector salaries by 2012.

Amid Kazakhstan’s recent economic boom, low-income groups have been hit hard by spiraling inflation, which in 2007 rose 18.8 percent year on year. The economy has also been affected by the global credit crunch, forcing Kazakhstan to downscale its 2008 growth forecast from 9 percent to the 5-7 percent range. With this in mind, Nazarbayev called on the government to fight inflation, and draw up a financial stabilization blueprint. He was short on specifics but � in a sign that he is aware of public dissatisfaction as incomes fail to keep pace with inflation � he ordered expenditure cuts in all areas other than the social sector.

"Everything that can wait, without which we can live one-two years, should be suspended - maybe roads, construction and something else," the president said. Such austerity would enable the government to better combat inflation, and, in Nazarbayev’s words, "increase the country’s reserves in case of a fall in prices for energy and raw material resources, which also may take place."

Observers hoping to hear details about Kazakhstan’s intentions as OSCE chair came away from the address disappointed. Nazarbayev flagged up the country’s winning the chairmanship as a sign of international recognition, but laid out no timetable for the implementation of reform pledges made by the government, including liberalizing party registration rules and adopting new media and election laws. [For background see the Eurasia Insight archive].

Nazarbayev called for the development of a new state program, tentatively titled Path to Europe, which would set out Kazakhstan’s agenda for chairing the OSCE and also boost economic cooperation, attract new technologies and improve Kazakhstan’s legislation. Yet, even though the OSCE chair was Kazakhstan’s most significant diplomatic achievement, Nazarbayev’s attention, when examining international relations, seemed to be turned eastward. He first discussed regional groupings in which Russia and China played influential roles, namely the Collective Security Treaty Organization and the Shanghai Cooperation Organization. He then spoke about relations with Kazakhstan’s neighbors - Russia, China and Central Asian states - and only then did he bring up the need for "constructive cooperation with the USA, the EU and NATO."

On the domestic political front, Nazarbayev indicated that Kazakhstan would continue its current course, which he described as "the Kazakhstani model." According to the president, this model seeks to combine "generally-accepted rules of democratic development and the traditions of our society."

For Nazarbayev loyalists, the speech, while perhaps not inspiring, was praiseworthy. "I did not hear anything new, but I heard what I wanted," said Member of Parliament Gulzhana Karagusova.

At the same time, some of the president’s domestic political critics expressed disappointment over Nazarbayev’s vague references to democratization. "It seems that we cannot expect any serious political steps towards political reform," said Zharmakhan Tuyakbay, chairman of the National Social Democratic Party.

The president’s speech also dampened nascent speculation that Kazakhstan might hold fresh parliamentary elections either later this year or next, so that it would not assume the OSCE chair with a one-party parliament. Nazarbayev firmly endorsed his party’s exclusive role in the political process. "At the current stage, the model of a dominant Nur Otan party can be viewed as the optimum form for Kazakhstan’s political system," he said. Despite the pro-presidential party’s near monopoly on legislative seats, Nazarbayev insisted that "there are no obstacles for the emergence of new parties and [the] expression of one’s own opinion."

This assertion prompted the publication of an acerbic commentary in the Delovaya Nedelya newspaper, a media outlet not usually known for outspoken criticism of the country’s leadership. "[Y]ou can ascertain what an important role a party (one, at least) plays from the official TV news bulletins every evening, preferably on an empty stomach," it commented.

In unusually sharp tones, the paper added that the speech had failed to address the real problems facing Kazakhstan, ranging from poverty, inflation, banking sector difficulties and industrial unrest. "Among the 4,697 words which the president’s state-of-the-nation address consisted of, a lot which were expected of him were missing," it concluded.

Editor�s Note: Joanna Lillis is a freelance writer who specializes in Central Asia.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

The views expressed in this publication do not necessarily represent the position of the Open Society Institute and are the sole responsibility of the author or authors.