Introduction
1 Theoretical and methodological framework
1.1 Old and new threats to national security in the theoretical perspective
1.2 Economic security in the context of national security
1.3 Relations between national economic security and foreign policy
2 Geopolitical and geoeconomic background of Kazakhstan
2.1 Economic background of Kazakhstan
2.2 Energy sources as the main segments of the national economy and its importance in economic security
2.3 Economic and political interests of Russia, China and other superpowers within the region of Central Asia
3 Kazakhstan’s economic security
3.1 Analysis of former strategic documents
3.2 “Kazakhstan 2050”
3.3 Obstacles for diversification
4 Kazakhstan’s foreign economic policies towards Russia and China
4.1 Economic dependency on Russia and China
4.2 Multi-Vector energy policy as an instrument of foreign economic security policy
Conclusion
Literature
Introduction
As Kazakhstan and the other Central Asian countries have emerged, following the collapse of Soviet Union in 1991, the phenomena called “New Great Game” has simultaneously appeared. The reason is that Kazakhstan, along with its neighbors in Central Asia, are extremely abundant in oil, gas and other natural resources, and, due to being located between two global great powers, Russia and China, play a very crucial geopolitical role as a bridge between East and West in the Eurasian continent.
Kazakhstan, in this case, as the most economically developed country in the region, is especially taken into consideration. Its outstanding economic growth during last decade, has contributed to Kazakhstan becoming an active political player in the entire former soviet area. However, its extremely high economic dependence on oil, gas and other hydrocarbon products, as well as other natural resources, along with its geographical location as a “landlocked” country, make Kazakhstan strongly dependent on decisions regarding oil pipeline export routes and its trade partners. Here an extremely crucial role is also played by the geopolitical and geoeconomic context. So, by being surrounded by great powers, such Russia and China, Kazakhstan has to deal with them and with their national interests. The national interests of these two, which have been considerably developed during last decade, have been exerting huge influence on Kazakhstan’s choice of national interests and on the issue of its national security. Especially, in the light of Ukrainian crisis and the outstanding economic growth of China along with the worldwide oil crisis, Kazakhstan’s national economic security faces new challenges and problems. Beyond these external factors, there are also internal ones, such as its poor infrastructure, still weak economy and quality of economic and political governance. Thus, still having a need for diversification of economy on the one hand, and being politically dependent on Russia and economically on China on the other, Kazakhstan has to implement its foreign policy in such a way that it could enhance its economic security, thus, to ensure its national security.
Therefore, having the above mentioned elements and factors, I have come to the conclusion to raise the question of Kazakhstan’s economic security policy as a title for the master thesis. Moreover, there has not been sufficiently broadly-described research about Kazakhstan’s economic security policy in relation to the global powers Russia and China, even they were, but only little.
This thesis aims to identify how Kazakhstan is managing to implement its economic security policy towards them, by balancing these two great powers through its multi-vector foreign policy and Kazakhstan-2050 strategy of development. Also, the thesis has the goal of identifying a linkage between how political and economic dimensions of international relations affect Kazakhstan’s economic security policy internally and externally. Another aim of the thesis is to prove that Kazakhstan needs to diversify its economy in order to decrease its dependence on Russia and China.
Thus, having all these said, I would like to put forward the hypothesis of the thesis, which claims that Kazakhstan decreases its dependence on Russia and China, by using the interests of the two and when the are interests of other global powers. And, by using geopolitical and geoeconomic aspects of multi-vector policy as well as by diversifying its economy, Kazakhstan is able to balance its neighbors in terms of their hegemony and economic dominance.
The master thesis consists of four main chapters. The first chapter contains the theoretical and methodological framework, where the general findings from the literature review on the issue of national security and the issue of economic security within this context are provided. Also in this chapter the connection between economic security and foreign policy of a state will be provided.
The second chapter serves as a background to provide a general understanding of Kazakhstan’s economy in the light of its geopolitical and geoeconomic aspects. Meanwhile, the main sectors of Kazakhstan’s economy, where oil, gas and mineral sources play the most crucial role, were also identified in this chapter.
In the third part of the thesis Kazakhstan’s economic security policy is analyzed , based on the the strategic documents which have been used over the years. The “Kazakhstan-2050” program of Kazakhstan’s strategic plan of development until the year of 2050 is considered to be the core document, through which Kazakhstan’s economic security policy finds its directions. However, due to its internal and external factors, Kazakhstan faces many obstacles on the way to achieving its ambitious goals. This topic is also revealed in the third subchapter in this part of the thesis.
The fourth chapter brings all the elements mentioned in the previous parts together and shows how Kazakhstan implements its economic security policy towards Russia and China, by using their national interests and the interests of other global powers. Therefore, here a multi-vector policy is very relevant and helps to illuminate how important it is in the context of Kazakhstan’ economic security.
The last, but not least, chapter gives a summary of all findings observed throughout the thesis and identifies the perspectives for the future researches in the relevant area.
As for research methods of this paper, I would like to mention that I used a mixed approach. The reason is that a large amount of the data is quantitative and includes statistics, numbers and different indices. However, to better understand the context and political background, it was necessary to look at the qualitative data taken from the text analysis of the relevant to this topic books, political and economic reports, articles and newspapers. Thus, both quantitative and qualitative approaches fill the gaps between the collected information and contribute to construct a proper and well-suited methodology for this thesis.
In this thesis a huge amount of different primary and secondary sources was used. As for primary sources, different kinds of statistic information and data have been taken from the official websites of National Statistical Agencies of Kazakhstan, Ministry of Economics of Kazakhstan and other many governmental institutions, as well as globally acknowledged data sources as WorldBank, Tradingeconomics.org and Trademap.org were used. Also, the official websites of many companies, such as KazMunaiGaz or Caspian Pipeline Consortium were used as primary sources.
When it comes to secondary sources, books, political and economic reports and magazines, as well as many different kind of articles and newspapers have been used. Moreover, due to the knowledge of three languages such as Kazakh, Russian and English allowed me to use different types of sources, thus it helped me to construct a better and more concise knowledge and contributed to, if not fully avoid, but to at least decrease the level subjectivity in the paper.
Beyond all of this, I would like to express my gratitude towards all those people who have contributed to me to write this master thesis.
First of all I would like to say thank you to my family, especially to my parents, for their great support and their belief in me.
Also I would like to say special thanks to the lecturers at the Department of International Relations of the University of Wroclaw, who have given an invaluable knowledge to students in the area of International Relations.
I want to express my gratitude also to Judas Everett, who has helped me a lot, by giving a considerable and useful advices and by doing a proofreading for my master thesis.
Additionally, I would like to admit that due to the being not native speaker of English, this thesis might have some grammar mistakes and incorrectly structured sentences, which are solely my own.
Through all human’s history, it can observed that there has always been dilemma such as security. If to go back to the time of primitive people, it can be seen that they began to live in groups in order to survive and defend themselves from different kind of predators, natural disasters and also living in groups would let people to cope with any kind of problems easier. After, groups became more and began to unite with other groups and create “tribes” – again, with the purpose of survival. After, tribes began to attack other tribes to get their lands, people, food and other commodities, aftermath, we observe that tribes had come to conclusion to unite and create unions and alliances with others, what in the end led to the creation of states. But even the creation of states, as might be observed from the world history, did not solve the problem of security: states have always been fighting and had wars, trying to either conquer or destroy each other. Reason for that has always been political and economic interests of countries. Moreover, we see that the issue of security has been actual at any period of time and in each part of the world, with no exceptions regarding sexual, national, religious or structural diversities of people.
The notion of security has very wide-range variety of meanings and can be attached to different kinds of dimensions. As for example, by referring to the most prominent online internet sources as Oxford or Cambridge English Dictionaries it shows that one of them claims that security is a “state of being free from danger or threat” (Oxford Dictionaries | English, 2017) and another one says that it is a “protection of a person, building, organization, or country against threats such as crime or attacks by foreign countries” (Dictionary.cambridge.org, 2017). So that means security can refer to different kind of issues regarding threats and objects of the security. That is why, as William (2008) poses a good question about it, we should ask “What does it mean and how it should be studied?”
Williams in his work about security studies gives answer for this question, that:
“…for some analysts, security is like beauty: a subjective and elastic term, meaning exactly what the subject in question says it means: neither more nor less. In the more technical language of social science, security is often referred to as an ‘essentially contested concept’, one for which, by definition, there can be no consensus as to its meaning. While in one sense this is certainly true – security undoubtedly means different things to different people – at an abstract level, most scholars within International Relations (IR) work with a definition of security that involves the alleviation of threats to cherished values” –
we observe that in this regard security is “unavoidably political” (Williams, 2008).
Thereby, if we consider security as a notion to make a scientific research, then it is necessary to narrow it down and clarify in what extent it is being used. That is why, as Williams (2008) suggests, in order to apply it to our research question, firstly, it is necessary to clarify the issue of security itself, by putting questions such as:
Since, Kazakhstan’s economic security is a main topic of the thesis, this chapter I decided to start from more general perspective as defining the concept of “national security”, which is also can be named as “state security”.
Beyond giving definitions to determine what does “national security” mean, I am also going to identify what are the old and new threats to national security by analyzing works of different scientists with the background of relevant fields, such as international relations and political sciences.
Why national security? As Buzan pointed out in his “People, States and Fear”, national security assumes that the object of security is nation, which also poses a questions regarding the connections of nation and state. A nation is determined as a group of human beings which shares the same cultural and probably racial heritage, and usually living in one area (Buzan, 1983; p.45).
Nowadays national security is one of the central problems of modern geopolitics. This is due to the fact that, generally, national security is inextricably linked with a state of defending vital interests of the individual, society and state from the internal and external threats. As there are different kinds of objects and subjects involved into the concept, researchers still have struggles with identifying an exact and universal definition for the concept of “national security” despite that tremendous numbers of scientific works and researches have been done till this time.
The first definition of the “national security” was given by Walter Lippmann in 1943, and according to him: “A nation has security when it does not have to sacrifice its legitimate interests to avoid war, and is able, if challenged, to maintain them by war” (cited in Romm, 1993).
Another most prominent definition for this concept was provided by Arnold Wolfers in his work called “National security” as an Ambiguous Symbol”, which was published in the scientific journal “Political Science Quarterly”, in 1952. Wolfers (1952) in his article claims that the security is a concept which can be considered as an “ambiguous symbol” – “may not have any precise meaning at all” and is a value, that one nation might have more or less, and moreover, nation can seek to have it in greater or lesser extent. Also, according to him, security, from objective point of view, means the lack of threats to obtained values, and from the subjective perspective, security means the absence of fears that those values will be attacked.
Leffler (1990) claims that national security is provided when state’s core values are protected, and, consequently, if one state is overacting on the purpose to defend its values, the, most probably, that it can undermine other state’s core values.
Referring to the academic works which were done at the onset of Cold War, it is also can be observed that realistic approach to the issue of international relations was very dominant at that time. The reason for that is the deployment of the new plot on the international arena after World War II.
According to the school of Realism the dilemma for security is the fight for survival. States, being described as the biological creatures by nature and being ruled by the instinct of self-preservation, in the chaotic international arena, are, themselves, the sources of threats to national security for other states and due to the pursuit of their own national interests they might increase the possibility of danger and conflicts. According to Morgenthau, the “political man” is an egoistic creature by origination which always has a necessity to dominate others, and this peculiarity transferred to the state and expressed by implementation of the enlargement policy (Morgenthau, 1967). As a result, it can be observed that states always pursue their own national goals and purposes, and, additionally, they behave egoistically, due to the attached sense of human nature into their core values. That is why, states seek to decrease threats which come from other actors by increasing their capacity of power, assuming that the powerful state (power in the traditional meaning – military) has less possibility to get attack from other state and all these kinds of behavior lead to the situation of constant competition for power (Morgenthau, 1967).
This kind of issue of the interactions between states brings as back to the John Herz’s idea of “security dilemma” which was developed in his work called “Political Realism and Political Idealism” in 1951. According to him, he assumes that (quoted in Winkworth, 2012):
“a structural notion in which the self-help attempts of states to look after their security needs tend, regardless of intention, to lead to rising insecurity for others as each interprets its own measures as defensive, and the measures of others as potentially threatening”.
Barry Buzan in his book “People, State and War” also discussed about Realist and Idealist approaches to the issue of national security. He claims that power does not merely reveals the main template of capabilities in the international arena on the other hand also underscores a main motive for the behaviors of states. When it comes to Idealists, who come with approach through the notion of peace, as he points out, their concept let them to see the issue of security in holistic way, as on contrary to the realists’ approach of fragmented focus, and they put attention straightly on the important issue of war. Because, if war is considered as main threat which comes from the problem national security, then the elimination of this issue would solve the problem almost entirely from international agenda (Buzan, 1991, p.2).
The Liberalism as another direction of international relations studies which investigates the theory of national security, was mostly prominent among states with less defense potential, however with problems which were originated from geopolitical misapprehensions and conflict situations with other states who belong to great powers. The concept of collective security appeared to be as one of the core principles of the liberal-idealists in interwar time. According to this concept it implies a creation of a system which would commit all international actors to prevail any kind of threats and military aggression of any member.
The approach of liberalism to the concept of security gets roots from Immanuel Kant, who mentioned the essentiality of ‘republican’ constitutions which create peace, in his work called “Perpetual Peace”. This work includes also a peace plan, which can be named as the first liberal approach to the issue, however liberal security has been developed by different schools of liberal thought (Williams, 2008.p.30). As for developers of liberal approach towards national security, according to Navari’s article (2008), she provides researchers as Andrew Michael Doyle, who distinguished international, commercial and ideological liberalism and Andrew Moravcsik who has determined ideational, commercial and republican liberalism. Also she mentions authors such as Zacher and Mathews who have developed four tendencies in liberal security thought. Navari (2008) suggests that according to Kant, trade was about to generate conflict, when followers of commercial liberalism considered trade as a beneficial and beneficent growth. When it comes to republican liberals, they claim that peace comes from the liberalism which was developed in the liberal state by that emphasizing on internal approach to the security issue, whereas neoliberals put attention on international institutions and organisations, which could solve a problem of conflicts externally (ibid.).
Commercial or economic liberalism originates from the free-trade ideas that appeared and developed constantly during the XVIII-XIX centuries, particularly in Great Britain. As Morgan (2010) argues that the term “free trade” comprises flows of goods and capital, which take part in internal as well as external economic activities. This kind of tendency of actions between states that contributes to make them more tightly-interdependent and close-knit, would aftermath bring peace between them. Also, Morgan (2010) put forward:
“A regular contention about such domestic economies and this kind of international economic system is that rising economic interdependence ultimately brings about peace and security. Prior to the First World War it was often said that wars would decline because they were bad for business – too costly, disruptive, and expensive for societies to put up with. After the Second World War this view of interdependence was an important influence in the creation of the European Common Market, forerunner of the EU, with integration undertaken not just for greater economic well-being but to promote better political relations among the members so that warfare among them would disappear”.
Last quarter of twentieth century brought a new theoretical approach to International Relations, called Constructivism. Connecting sociological and critical theory approaches, proponents of constructivism claim that the world is constructed socially through intersubjective interactions, as well as agents and structures which made up mutually. According to McDonald (2008), it was pointed out that for constructivists “ideational factors such as norms, identity and ideas generally are central to the constitution and dynamics of world politics”. It was also claimed that constructivism is a less theory of IR or security, but greater social theory, through which the study of security can be approached (ibid.).
Generally, according to constructivism, security it is a social construction. As Karin Fierke claimed that “to construct something is an act which brings into being a subject or object that otherwise would not exist” (quoted in McDonald, 2008), McDonald (ibid) explained Fierke’s words in a way that it does not mean that notion of “security” does not exist or deprived of meaning, but he supposed that it can be understood differently. As an example for this, McDonald provided the issue of conservation of “group’s core values”. However, he mentioned that such a wide-ranged determination of security cannot reveal an information about the group, what kind of values are concerned, what type of menaces might come from and in which way the preservation can be reached, because answers to them might vary, depending on context, and social interaction among actors also can play a crucial role (ibid.).
As the outcome of these kinds of assumptions, constructivists avoid universal and abstract analytical definitions for notion of security, however, the obligation, committed by constructivism, takes different shapes in works of different researchers. Ted Hopf was an example here, because McDonald argues that Hopf emphasized the impossibility of determination universal and abstract arguments regarding security and sources of threat in world politics. The reason is, as it was pointed out, “state political leaders designate other states as “friend” or “enemy” – and approach them as such – on the basis of conceptions of identity” (McDonald, 2008).
To conceptualize a constructivist approach Huysmans (1998) provides very good example as considering security as a “thick signifier”. The reason is, according to him: “signifier receives its meaning through its difference from other signifiers in a chain of signifiers”. Huysmans (1998) also pointed out that security:
“articulates particular understandings of our relations to nature, other human beings and the self. “Security” refers to a wider framework of meaning . . . within which we organize particular forms of life”.
McDonald interpreted his word in a way that the variety of articulations of security assumes different determinations of political community and its main values (McDonald, 2008).
As we were trying to identify and build general theoretical approach from the perspectives of realism, liberalism and constructivism, we can see that the issues of security and concept of “national security” are very complicated. Now, as the main task is also to identify old and new threats to national security, the issue is going to be switched to it.
To identify what are old and new threats to national security, firstly, it should be, again, put the question: “What do we mean by threat?”. As we have come to conclusion that the issue of security and its connection to a state, which is considered in our case as an object of security, along with its understanding are very sophisticated and, can vary in huge and different dimensions. In addition to this, it is also worth to point out that, as there exists the notion of threat, then, a vulnerability should be considered too. If to refer to Buzan (1983), he claimed that the combination of threats and vulnerabilities which are “cannot meaningfully be separated”, creates insecurity. He explained the division among threats and vulnerabilities, which emphasizes a crucial split in security policy, where actors can strive to diminish their insecurity through decreasing vulnerabilities, which are actual to them, or by reducing and removing them. According to Buzan, they play crucial role in ideas of national (level 2) and international security (level 3) and make connection between them and security policy (ibid.).
“What constitutes a threat to national security?” – Barry Buzan claims that the due to the different features of the elements of the states, and, he suggests that threats can come to states in different shapes, types and forms. That is why he classified them by sector such as military, political, economic and ecological (ibid.).
According to Buzan (1983), military threats encompass the core of national security problems. Because it can threaten and damage all the elements of the state. Military action exposes physical basis to tension, damage and dismemberment. Military threats can lead to the distortion and annihilation of institutions and destroy the idea of the state. Buzan (ibid.) pointed out:
“Military actions not only strike at the very essence of the state’s basic protective’ functions. but also threaten damage deep down through the layers of’ social and individual interest which underlie and are more permanent than the state’s superstructures”.
Donald Snow (2017) classified threats as military, semi-military and nonmilitary. He claimed that the military threats had been prominent throughout the world history and especially dominant during the Cold War, while the other two emerged after. According to Snow (ibid.), although, military threats have receded by time, they still remain as immediate threats to national security. However, after Cold War, as the nonmilitary and semi-military aspects of national security have become more popular, Snow stated that they can be broadened by time, depending on the existing threats. For this, economic security was given as an example, where Snow explained that it has been extended to include also environmental security. Terrorism was provided as another example, where national security is concerned by nonmilitary and partly military aspects. Because, it comprises political as well as law-enforcement issues, which is impossible to cope with it only by military arms (Snow, 2017).
Hughes (1982) also makes connection between terrorism and national security, and he describes a terrorism as a war where the secret army that has no uniforms and do clear and open occupations, which aftermath spreads fear and destroys state and social institutions.
Seizure of territory, change of government institutions, control of policy behavior are the political objectives of military threats. However, as Buzan suggests, political objectives may be chased by political methods. Thereby the author put forward that the idea of the state, its ruling ideology and internal institutions, which contribute to spread this ideology, are the main aims of political threats. Moreover, state as a political entity, can be afraid of political threats as well as military ones and, in a situation where those ideas and institutions are disputed, the possibility to intervene to state’s policy gets high, which aftermath increases its vulnerability (Buzan, 1983).
According to Buzan (1983) the political threats come from the clash of ideas, information and traditions, simultaneously highlighting the reasons for the anarchical system of international arena. Going deeply, structural political threats appear when the leading principles of two actors go against each other, especially when those two (not necessarily only two) are not able to ignore each other’s essence. As a result, their political systems will play a “zero-sum” game between each other, no matter whether they want or not (Buzan, 1983).
In addition to this, as we are concerning the issue of political threats to national security, it means that political security underlies a problem. As Holmes (2015) identified political security, that it
“refers to protecting the sovereignty of the government and political system and the safety of society from unlawful internal threats and external threats or pressures. It involves both national and homeland security and law enforcement”.
As another threat to national security, Buzan defines an economic threat and he finds it difficult to attach it to national security, as compare to military and political threats. The reason is the complexity of identifying borders of issues, which can be considered as dangerous to state security within dimension of economics. Because, as author pointed out, that the normal conditions of actors in the economic dimension are risk, competition and uncertainty (Buzan, 1983). Moreover, another reason is, as he claims, the variety of levels in economic sector, where the state is considered as one actor of those levels, due to which it is hard to define clear responsibilities and interests of states, as it is on contrary in the perspective of military and political threats. From Buzan’s points it that the economic threats are very ambiguous and not clear, because in general sense it is about threats to economy of the aimed state, which aftermath can lead to military and political threats however, there are no direct threats to other sectors, as they may occur and hardly affect from military threats. This leads to conclusion, that economic threats on the one hand are not quick and clear in their impact which they produce, and at the lower levels they may be easily considered as regular economic difficulties.
Also, there are a plenty of threats, which for some reasons cannot be interpreted as immediate threats to national security: export practices, import restrictions, price manipulations, default on debts, currency controls and also a set of other threats may pose crucial impacts on the economy of the state. The impacts can vary from loss of income to collapse of industries entirely. However, when it comes to competitive economic activity, they all fall because of its ruthless rules. Buzan considers inability to compete or adapt as a risk of the game, and breakdown can stem from both internal and external factors (Buzan, 1983). [1]
Moving towards the identification of the threats, Buzan (1983) also provided another type of threats to national security which are ecological ones.
He claims that the level and damage from the ecological factors can be in the same range as military and economic threats, because ecological menaces can threaten the physical base of the state and in another sense that it also can destroy its idea and institutions.
Conventionally ecological threats as earthquakes, storms, plagues, floods, droughts have been perceived as a natural factors and come from natural disasters, which are not caused by human beings and that is why they were not considered as a part of national security problems. However, due to the changes of globalization, industrialisation and technological capacities of human activities, causes of ecological threats to one state can originate from other states (Buzan, 1983) but it does not necessarily mean that those states caused this threats deliberately, and additionally, author pointed out some example for ecological threats originated due to human beings’ activity such as trans-fortier pollution, greenhouse effect, global warming, deforestations and etc.
As Holmes (2015) determined environmental security in a way that
“it is an idea with multiple meanings. One is the more traditional concept of responding to conflicts caused by environmental problems such as water shortages, energy disruptions, or severe climate changes; it is assumed that these problems are “transnational” and thus can cause conflict between nations. The other, more recent concept is that the environment and the “climate” should be protected as ends in and of themselves; the assumption is that the environmental degradation caused by man is a threat that must be addressed by treaties and international governance as if it were the moral equivalent of a national security threat. In the past, natural disasters were not considered threats to national security, but that presumption is changing as the ideology of “climate change” and global warming takes hold in the national security community”.
Buzan after describing general threats to national security he also determined another variety of the threats which may originate going along with time, being effected by globalization, developments of industry and breakthroughs in sciences. Author refers to Raymond Aron’s word about “law of change”: “’the military. demographic or economic value of a territory varies with the techniques of combat and production. with human relations and institutions” (Aron, R. cited in Buzan, 1983). He mentioned that military threats can change and be improved by the time, while political and economic threats also can change their shapes, levels of endangering, behaviors and etc. The reason for that is changing context and environment.
As authors pointed above, a variety of threats can change all the time, especially nowadays, since the end of Cold War, in the international arena beyond those classical threats to national security as military, economic, political and ecological, we can observe, that there have appeared new types of them, such as international terrorism, cyberattacks, bioterrorism, diseases, nuclear weapons of mass destruction, organized crime groups (in both levels as 2 and 3), regional conflicts, state failures and etc. (Grossman-Vermaas, D. Finlay and Turpen, 2008; Dupont, 2013; Dörfer, 2017).
In this subchapter the issue of economic security is going to be tackled in the context of national security. In previous part the concept of national security has been approached from different theoretical perspectives, through the identifying what is the national security and what kind of old and new threats do exist by reviewing of different authors, especially Barry Buzan. It can be concluded that an understanding of security is always changing and types of threats to it can also vary respectively.
Again, by coming with question “What is security?”, now should be put another question as “What is the economic security?”. Moreover, it is necessary to interlink it to the security object, which is a state.
Good explanation about economic security gives Holmes in her article “What is national security?” (2015):
“Economic security involves not only protecting the capacity of the economy to provide for the people, but also the degree to which the government and the people are free to control their economic and financial decisions. It also entails the ability to protect a nation’s wealth and economic freedom from outside threats and coercion. Thus, it comprises economic policy and some law enforcement agencies but also international agreements on commerce, finance, and trade. Recently, it has been defined by some in a human security context to mean eradicating poverty and eliminating income inequality”.
Barry Buzan (1983) in his work finds the concept of economic security that it is always interlinked with economic and political dimensions of international arena, which means that economic security, to some extent, is also politicized by the government of the state.
Epstein (1939) in his work claimed that the state in the face of government, is an institute that is fully responsible for its national economic security and thus, must provide all conditions such as liberty, security and freedom to act for its citizens. He also said that economic security is becoming the most crucial and essential element of national security (Epstein, 1939; p.p. 81-82).
Joseph Nye (1974) also did mention about economic security, and he said that due to the overwhelming economic interdependence of states in the world, it is impossible to neglect the significance of the economic security of the state. Because, as he said, the national security is very uncertain concept, and if it generally means survival, most people would prefer more than just survival. The reason is that they want to have some basic needs which depend on their economic situation (Nye, 1974). Thus, Nye (1974) put forward that some countries seek to increase their economic security and capacity of their economy along with their military forces (if they are able to do that, of course), while other, by doing so, might put under threat their physical survival with purpose to obtain other values and basic needs, as prospective enjoyment of economic welfare and political status.
The relationship between economics and security was explained by Legvold and Wallander (2004), and they claimed that wealth is one of the foundations of security, and security is one of the foundations of wealth. In the anarchic system of international relations, states must be able to protect and protect their citizens and sovereign territory, which together constitute their heritage, generating economic activity and causing wealth.
Cable (1995) also talked about economic security and gave four approaches to define it. The first definition is saying that economic security contributes to state’s ability to buy weapons or appropriate technology, military equipment and development its defence capacity. This means that economic security has an immediate influence on state’s capability to defend itself and its core values (ibid.). The second is about instruments and tools that are used to implement economic policy in order to put restrictions and constraints of energy supplies as well as trade and investment boycotts (ibid.). Consequently, according to Cable (1995), this means that nowadays countries, especially Western, tend to concern about their “security of supply” of energy sources such as oil, gas and also some scarce minerals.
The third approach quite tied with the first one, because it points out that the military capacity of the state might be eroded by the relatively poor economic indicators. This generates a need for economic policy response against it. As the result, it can be observed that countries support their domestic producers with the aim to dislodge foreign competitors (ibid). Cable explained it as the “economic warfare” on the international arena.
When it comes to the final approach to define what is the economic security, the author said that it is being secure from threats such as “international crime syndicates, pornography traffickers, narcotics smugglers, dumpers of toxic waste, peddlers of plutonium” (Cable; 1995). Because, as he said, they can undermine the economy of the state and the image of the state itself.
Sheila Ronis (2011) also explains why economic security within the concept of national security. In her book called “Economic Security: Neglected Dimension of National Security?” it was claimed that economic security affects on the state in all senses, especially on its military power. It was based on the example, where the chain of interdependent factors were given as following “Without capital, there is no business; without business, there is no profit; without profit, there are no jobs. And without jobs, there are no taxes, and there is no military capability”.
Moreover, Ronis (ibid.) mentioned that vitality of state’s industrial infrastructure is the one of the most important elements of country’s economy. The reason is that it creates a job for citizens aftermath spreads wealth (Ronis, 2011).
In Poirson’s (1998) article was written that a secure economic environment is a crucial factor that contributes to the private investment and to economic growth in developing countries. Because, by improving the economic security, countries are able to decrease the level of uncertainty regarding the return to investments. This, consequently, leads to the increase of private investment (Poirson, 1998). Porison also mentioned that security factor are dependent on efficiency of resource allocation.
A little differently thinks Losman (2001) and put the importance of economic security under question, and he argued that it is inappropriate issue within the national security. He explained it by giving as an example policies that have been done by the United States through the years.
Some scholars argue that economic security is a compound socio-economic element that is impacted by constantly changing environment of material production as well as external and internal threats of the economy (Grigoreva and Garifova, 2015). It has been mentioned that economic security plays a very crucial role in national security of each state and that nowadays the main aim of the state should be ensuring its national economic security. This includes the involvement of the all economic actors and agents within a country (ibid.). Grigoreva and Garifova (2015) put forward that:
“The national security reflects the ability of relevant political, legal and economic institutions of the State to protect the interests of its key entities in national economic traditions and values. Therefore, its development must be seen in the overall context of the formation of the national security state”.
Additionally, it has been said that the primary factors of economic security of the state can be a geographical situation, its natural resources such as minerals and energy resources, the level of development of infrastructure, country’s industrial and agricultural potentials. Also in the same list were included the level of socio-demographic development and the degree of policy implementation by the government (Grigoreva and Garifova, 2015).
According to Gordienko (2009), economic security of the state means the level of protection of the national economy from external and internal dangers, in which the state is able to ensure a progressive development of its society, including also economic and socio-political stability in the presence of unfavorable external and internal factors.
It has been also stated that economic security of the state is determined by the quality of development of the productive forces and the level of socioeconomic relations, also by development of scientific and technological progress and the use of its achievements in the national economy, by foreign economic relations and international situation (Gordienko, 2009).
Meanwhile, Gordienko (2009) mentioned that the material basis of economic security is based on improved productive forces, which are able to provide increased reproduction, better standards of living for its people and economic independence for the country.
It was also stated that to understand the essence of economic security of a state it is necessary to clarify the links with notions as “development” and “sustainability” (ibid.).
According to Gordienko (2009) the development of national economy is very essential element, because if it does not occur, then there is high probability that the state reduces sharply reduces its ability to resist to negative external and internal influences and threats.
When it comes to sustainability, he said that it is the most significant part of state’s economic security. The reason is that it reflects the durability and reliability of components of national economy system, as well as structural and organizational connections within the system, which in sum shows the capability to confront external and internal threats and negative factors (Gordienko, 2009).
Economic security can also be viewed as a process of creating and strengthening conditions that ensure the reliable functioning of the national economy in the course of its development.
The system of economic security of the state can be defined as a set of interrelated structural elements: material security of production, the state of the workforce, size and progressiveness of the main production capital, development of scientific researches and technological innovations, also, sales opportunities in the national and foreign markets (Gordienko, 2009).
The components of economic security of the state are (Gordienko, 2009) :
According to Klimonova (2014), economic security is a state of the national economy that ensures the satisfaction of the vital needs of the country in material wealth regardless of the emergence in the world economic system or in the country of force majeure circumstances of socio-political, economic or ecological nature.
It was also claimed that economic security is an economic category that characterizes a state of economy in which sustainable economic growth along with optimal satisfaction of social needs, rational management, and protection of economic interests are ensured at the national and international levels (Klimonova, 2014).
Klimonova (2014) put forward that by considering various approaches to the definition of economic security, it is necessary to note that, it must:
Mkrtchyan (2015) identifies five main functions of economic security: protective, regulatory, warning, innovative and social.
Shpilevskaya (2016) said that economic security of the state determines not only successful economic development, but also the need to create mechanisms to protect national economic interests.
The strategy of economic security of a state should be oriented not only to ensuring the socio-economic and socio-political stability of society, but also to ensure national economy with necessary resources, also with protection of exports manufactured products along with maintenance of a sufficient standard of living of the population and etc (Shpilevskaya, 2016).
According to her, the intensive way of development is based on increasing the return on available resources, and this in the modern world can be achieved only with the availability of new technologies. Thus, intensive development is based on innovative solutions in the field of energy, ecology, medicine, etc. But innovations, in themselves, are a consequence of human scientific and research activities. Thus, intensive development can be ensured only by ensuring the high “quality” of human capital (ibid.).
By coming back to Gordienko (2009), it can be found out that there are several compound components of economic security: technological, techno-industrial, monetary, raw materials, energy, environmental, information and environmental. He also added:
The technological component of economic security presupposes the state of the scientific and technical potential of the country, which guarantees, in a very short time, the independent development of the latest technological solutions that provide a breakthrough in the leading sectors of civil and defense production.
The technical-industrial component of the economic security has also been highlighted to the extent that in case of violation of foreign economic relations and internal socio-economic disasters, it can obstinately overcome their unwanted outcomes and stoutly implement expanded reproduction, provide public needs (Gordienko, 2009).
The monetary and credit component gives to a state a possibility to receive, allocate and use domestic and foreign investments. In the same manner it can also settle on them within the limits that ensure the stable functioning of state’s monetary and financial system and satisfaction of social needs in unfavourable external and internal economic conditions (ibid.).
The food and raw materials component assumes the economy of a country to be adequately supplied with food and raw materials in the volumes necessary for the effective functioning of the state’s national economy (ibid.).
The energy component includes ensuring the stability of physical energy supplies for domestic consumption as well as adapting the national economy to new world prices for them. Energy security involves an identification and systematization of events that could directly or indirectly damage the development of the fuel and energy complex (ibid.).
Among the problems that reduce the energy security of the state, include: the deterioration of fixed assets, the disruption of domestic and world energy prices, the pace and scale of privatization in the industry, mismanagement and the fall of labor discipline, which in sum, all of these lead to an increase in accidents in the fuel and energy complex of the country (ibid.).
Energy security was highlighted by Cooley (2011), where he described it as “the assurance of the uninterrupted supply of energy at an affordable price, while respecting environmental concerns”. Moreover, Cooley made a direct links between energy security and national security, by claiming that the former is very important factor. Although, it should be noted that energy security is lesser extent than economic security, but directly affects on each other. The reason is, as it was explained by Cooley, during the recent decades there has emerged a huge demand for energy and mineral resources, especially for hydrocarbons. Due to the large demand for these commodities some countries by using their natural source capabilities can pursue their own national interests, which on the other hand, can undermine others’.
In his chapter, Cooley put forward four main priorities:
Infante (2011) also emphasized an importance of energy security within the economic security and stated that nowadays, when a scarcity for energy sources can be felt and there is an uncertainty in the world market, it is necessary to maintain a proper and careful policy towards energy and economic security. It has been also mentioned that in order to increase energy security and thus economic security, countries should make a transition towards cheap and renewable technologies. So, Infante (2011) on the example of the United States, put forward the following technologies:
Some researchers also make a huge connection between national economic security and human capital. Especially they put attention on the education and how it affects on the economic growth of a state (Shiplett et al., 2011).
1.3 Relations between national economic security and foreign policy
In the previous subchapters, as it was identified what is national security and what is the economic security within this context, in this part, it is expected to determine what kind of relationship between national economic security and foreign policy is there.
The reason the notion of foreign policy is applied to this topic, that it is commonly accepted, that foreign policy is considered as one of the main instruments of implementation national interests and enhancing national security. Especially, when it comes to national economic security it is very crucial issue, because as it can be concluded from previous subchapters, that the problem of national security touches upon not only a whole state, but, since the world is very globalized and interconnected, due to the interdependence, the issue of national security of one state can encompass other states too. In this context, Barry Buzan (1983) put forward relations between level 2 and level 3.
To identify the connections between national economic security and foreign policy, firstly we need to determine what is foreign policy and its elements.
In the core of any human activity exist interests and needs. The same is with the basic philosophy of foreign policy: it is based on national interests, which is appeared to as an integral expression of interests of all members of society, especially who are on the top of power, and those interests, consequently, are implemented through political system.
Also, in any society beyond different interests, there exist controversial ones and society can act holistically only under conditions of coherence of interests, nationwide compromise and harmony of common ideas, goals and values, primarily such as security, territorial integrity, democracy, welfare and etc. Again, to express and achieve national interests – state as the main actor is involved. Moreover, the ensuring of national interests is the main responsibility of foreign policy of any country.
Realizing its functions in international arena, each state conducts certain kind of foreign policy. Basically, foreign policy is the complex of actions, directed to the establishment and support of relationships with international community, also directed to the defense of national interests and strengthening and extending country’s influence on other subjects of the international relations.
Foreign policy is always connected with domestic policy, and in each certain case the priority of whether internal or external policy is defined separately, although usually the priority of domestic policy is dominant one, since it has influence on the shaping of foreign policy, because the foreign policy of states based on the key elements of internal policy.
Foreign policy based on economic, demographic, military, scientific, technological, cultural and other potentials of the country, and their combination determines states’ possibilities of the foreign policy actions which might be in different directions, also it creates the hierarchy of the priorities in the realization of the goals of foreign policy.
Also as other forms of the implantation of foreign policy are establishment of diplomatic relations between countries, creating states missions to the international organisations and memberships in them. Additionally, having permanent links with foreign partners allows state to diversify its combination of the resources and methods of foreign policy activity, also to conduct regular exchange of information, to do visits on different levels, to do negotiations and make arrangements, to solve questions and issues of different kinds.
There are a lot of determinants by which foreign policy can be assessed, such as the levels of sociopolitical and socioeconomic developments, geopolitical conditions of state and her national-historical traditions, aims and needs of ensuring the sovereignty, security and etc. By applying these factors to foreign policy of the country they focus primarily on the concept of national interest. The content of foreign policy is determined by the fact that each nation state in the international arena seeks to realize its interest.
According to Wright (1935), he suggested that:
“By the foreign policy of a state we mean its behavior with reference to the environment outside its territory. It differs from international relations in that it classifies phenomena from the point of view of the single state rather than from that of the world. It results from the continuous effort of the community either to modify the external environment in order to fit its own interests or to modify its interests so as better to fit the changing world environment.”
With this conception, he wanted to explain that, the changes which would affect foreign policy might naturally be classified as “(i) changes in the public opinion of a community with respect to national interests, and (ii) changes in the external environment affecting these interests” (Wright, 1935).
Authors such as Ikenberry, Lake, and Mastanduno (1988) in their work tried to combine economic interests of America with its foreign policy, also they tried to explain how does work American foreign economic policy, by using different approaches as: system-centered, society-centered and state-centered.
The same thoughts can be found in Martin’s (1960) article, where it was claimed that economic security of the state depends on its economic policy, implemented within and outside the country. A considerable attention was put on the issue of foreign policy, by stating that it is necessary to have a complex decision-making process in order to shape foreign policy. He also mentioned that foreign economic policy one should take into account economic and political interests of the country along with its competitors – foreign trade partners (Martin, 1960).
Malmgren (1972) also connects economic policy with foreign policy, and stated that in each economic issue there is almost always a great political pressure. However, he also emphasized an importance of the coordination of domestic issues, because, without it, as it was mentioned, it is quite difficult to ensure proper foreign policy.
Robert Gilpin (2011) in his book “Global Political Economy: Understanding the International Economic Order”, argued that since the world has become very globalized, there is a huge economic and political interdependence between countries. Thus, the element as a foreign policy is involved as a key factor.
Legvold and Wallander (2004) say that in foreign policy there is an undeniable relationship between economics and security. Wealth is one aspect of power, and power is one of the factors that influence security policy. Security interests can force to abandon trading partners or develop foreign economic relations in a less favorable direction. The relationship between security and economy can vary by being a one-way causal relationship, being in mutual dependence or as a compromise (Legvold and Wallander, 2004).
Also it was argued that the connection between the economy and the national security of the foreign countries depends on the geopolitical factors, the state of the economy, the world economic conjuncture and the form of the internal political and economic power. First of all, it depends on the objective and political goals of the political leadership (Legvold and Wallander, 2004). For example, the government that has chosen the industrial path of economic development will rely more heavily on certain sectors of the economy (for example, defense industries) than a government practicing a classically liberal approach based on the principles of non-interference from the state. This determines the choice of trading partners, this determines the choice of allies and partners in the field of security(Legvold and Wallander, 2004).
Posen and Tarullo pointed that due to the globalization of nowadays world, it is important to include the issue of economic security within the national security. Thus, they highlight foreign policy of a state as an inevitable factor. Because though the foreign policy all national interests and concerns can be reached and solved, at least to some extent. Consequently, it was mentioned that “there is potential for considerable mutual reinforcement between economic policy and national security/foreign policy aims” (Posen and Tarullo, n.d.).
A very good linkage between economic security and foreign policy was provided by Christopher Dent (2001), in his article “Singapore’s Foreign Economic Policy: The Pursuit of Economic Security”. Where it was argued that, in order to ensure economic security of the state, a foreign policy should be open and precise, in the sense that in the end it could contribute to “actual technical policy domains of FEP (foreign economic policy), such as trade, foreign investment, international finance, overseas development assistance, and co-operation policies” (Dent, 2001). It was also stated by Dent (2001): “economic security concerns provide a derivative basis for analysing FEP objectives”.
An industrial and human resource development which is described as “associative policy domains” can be also linked to the mentioned above “core” technical policy domains, when they are included in competitiveness-enhancing strategies, accepted by foreign economic policy protagonists (Dent, 2001). Here the significance of economic diplomacy was also emphasized, where, according to Dent (2001), included into state’s foreign economic policy actors and powers manage “multiple levels (for example, bilateral, regional, and multilateral) of economic relations within the international economic system” .
Author also put forward that national ideologies, values, beliefs and ideas, which shape an implementation of foreign economic policy are important, and he described it as an cognitive-ideological approach towards it (ibid.). In the same way “actor-based” factors such as domestic, international, and transnational sources were highlighted as key elements of state’s foreign economic policy (ibid.).
John Stremlau (1994) in his work mentioned:
“we are entering an era when foreign policy and national security will increasingly revolve around our commercial interests, and when economic diplomacy will be essential to resolving the great issues of our age”.
By this statement it can be seen that, the issue of economic relations of countries is very important trend which faces world nowadays.
According to Lubbe (1997) economic security is determined by two key factors, namely: economic capability and external environment. The first relates to foreign economic actors and their ability to undertake economic and political directions which delineate the national interest and also help to minimize its level of vulnerability to externalities. The second relates to the way that large powerful states may shape the environment in which other states exist and pursue their economic security objectives. Some states have a limited ability to influence the external environment and and they have to develop adaptation abilities in order to respond to changes in the environment, this heavily depends on the “quality, economic efficiency and technological sophistication of its economy” (Lubble, 1997).
2 Geopolitical and geoeconomic background of Kazakhstan
2.1 Economic background of Kazakhstan
This chapter aims to provide general information about Kazakhstan and its position in the international arena from the geopolitical and geoeconomic perspectives. The purpose of this subchapter, in particular, is to cover the issue of Kazakhstan’s economy and create a general background of it in order to better understand what kind of problems and obstacles Kazakhstan faces in trying to secure its economic security.
At the beginning of the 1990s, after the demise of the USSR, five countries: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan appeared in Central Asia as new independent states. After the collapse of the Soviet Union, these countries faced very harsh and unforeseen challenges of national transformation which “were imposed on the transition from a centrally planned to a market-based economy” (Pomfret, 2006). Also the fact that the regional development strategies of all 15 countries of USSR were determined by Moscow, these five countries of Central Asia were planned as a single unit, or as part of the single unit of Soviet economy, the aftermath led to them experiencing deep economic crisis, due to the breakdown of the “holistic” USSR into fifteen independent states (Pomfret, 2006). The questions “Why did the crisis happen?” and “Why did those countries experience deep crisis?” have a huge amount of answers from different perspectives. As mentioned before, the over interdependence of the countries, especially by regions, made them weak to the extent that it was difficult to exist separately and independently. As an example for this, Pomfret remarked:
“Attempts to maintain economic links by retaining the ruble as a common currency in 1992–93 exacerbated the problem of hyperinflation and had been abandoned by the end of 1993. Under these multiple adverse conditions, even the ability of the countries to survive was uncertain.”(Pomfret, 2006).
However, after some years of independence, the republics of the former Soviet Union, and Central Asian countries particularly, managed to survive more independently in both political and economic senses. One of the solutions which aided the recovery and on the other hand contributed to keeping an economic and political connection between states was the creation of the Commonwealth of Independent states on 21st of December in 1991, in Almaty, Kazakhstan (CIS website, 2017). Later, in September 1993 an “Agreement on the creation of Economic Union” was signed by the Heads of the member states to create a common economic space which provides an opportunity for “free movement of goods, services, labour force, capital” and also “to elaborate coordinated monetary, tax, price, customs, external economic policy; to bring together methods of regulating economic activity and create favourable conditions for the development of direct production relations” (Cisstat.com, 2017).
When it comes to Kazakhstan, according to Wandel and Kozbagarova, it was third largest economy within USSR, and having 2.7 million square kilometers of territory, Kazakhstan nowadays is in ninth place by size in the world (Wandel and Kozbagarova, 2009). In the map below it is possible to see that Kazakhstan is an almost fully landlocked country which has borders with great powers such as Russia and China, but also has borders with countries like Uzbekistan, Kyrgyzstan and Turkmenistan. In addition to this, having access to the Caspian Sea gives Kazakhstan an opportunity to connect with oil-producing countries as Azerbaijan and Iran.
Map 1. Kazakhstan and Central Asia
Source: University of Texas Libraries – The University of Texas at Austin; link: http://www.lib.utexas.edu/maps/commonwealth/caucasus_cntrl_asia_pol_2003.jpg
Despite the largeness of the territory, Kazakhstan has, comparatively, a very small population of almost 18 millions people, which means it has a population density of 6.6 persons per square km, while in Europe it is almost 33 people on average (Kazakhstan Population (2017) – Worldometers, 2017). Additionally, it does not only have a small number of citizens, but also a very high diversity in the population, where the percentage of the core nation as kazakhs is only 53%, while Russians account for 33% and Ukrainians, Uzbeks, Germans, Uyghurs and other nationalities have 3.7%, 2.5%, 2.4%, 1.5% and 3.7% accordingly. This is probably also a reason why the Kazakh language is the official language of the state, but Russian “is commonly used for interethnic and everyday communication” and has official status too. (Wandel and Kozbagarova, 2009).
In the first decade of independence it can be seen that the demise of the USSR and the reduction of demand for Kazakhstan’s conventional heavy industry products influenced the economy, which led to rapid recession in the beginning of the 1990s, with a harsh recession occurring in 1994. Between 1995 and 1997 the velocity of the government programs of economic reforms and privatization increased, and as a result the aftermath contributed to significant shifting of assets into the private sector of the economy. As good example of this is this statement:“The December 1996 signing of the Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan’s Tengiz Field to the Black Sea increases prospects for substantially larger oil exports in several years.” (International Business Publications, USA, p.42, 2017). Nevertheless, the state’s economy went into decline in 1998, after the financial crisis in Russia and falling oil prices in the world, which in sum appeared as a 2.5% of decline of GDP growth. In 1999 Kazakhstan recovered because of the stabilisation of international petroleum prices and an increasing demand for the bumper grain harvest, which, as a result, “pulled the economy out of recession” (International Business Publications, USA, p.42, 2017).
Generally, since the period of independence Kazakhstan has undertaken very significant economic reforms and achieved considerable success in development (Olcott, 2010). Improvements in the living standards of citizens, macroeconomic and financial stability, favorable conditions for attracting foreign investments into industrial and innovative development – all of them have appeared as results of properly implemented policies and timely taken actions, notwithstanding economic and political crises:
“In general, systematic and sequential resolving of tasks on providing macroeconomic stability, improvement of competitiveness of economy through industrialization and diversification, as well as development of private business assisted in saving stable growth of Kazakhstan economy.” (Ministry of National Economy of the Republic of Kazakhstan, 2016)
This can especially be seen in the GDP trends during the years of independence since 1991 till nowadays (only period between 1991-2015 is available on WorldBank’s website). In Chart 1 it can be seen that in the first decade after the breakup of Soviet Union almost all Central Asian countries were basically at the same level. However, new the millennium brought lots of significant changes, which can be observed in the growth of GDP of the mentioned countries, especially in the case of Kazakhstan it goes without saying.
Chart 1. The trends of GDP of Kazakhstan and other Central Asian countries.
Source: data.worldbank.org (US $ current) Available at: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?contextual=default&end=2015&locations=KZ-UZ-TJ-KG-TM&start=1991&view=chart&year=2015
The incredible growth has happened due to lots of crucial factors of the structural changes in the economy, foreign and social policy. As it was commented in International Business Publications made by the USA:
“In the 2000s, Kazakhstan’s economy grew sharply, aided by increased prices on world markets for Kazakhstan’s leading exports—oil, metals and grain. GDP grew 9.6% in 2000, up from 1.7% in 1999. In 2006, extremely high GDP growth had been sustained, and grew by 10.6%. Business with booming Russia and China, as well as neighboring Commonwealth of Independent States (CIS) nations have helped to propel this growth. The increased economic growth also led to a turnaround in government finances, with the budget moving from a cash deficit of 3.7% of GDP in 1999 to 0.1% surplus in 2000. The country experienced a slowdown in economic growth from 2014 sparked by falling oil prices and the effects of the Ukrainian crisis. The country’s currency was devalued by 19% in 2004 and by 22% in 2015.” (International Business Publications, USA, p.42, 2017).
So, according to the WorldBank, the GDP of Kazakhstan between 1991-2015 increased from 24.88 billion to 184.39 billion USD which means 7.4 times, putting Kazakhstan into the position of having the 2nd largest economy in CIS countries and 50th in the world. However in 2013 Kazakhstan’s GDP was at its highest point of 236.64 billion USD, but within the following 2 years it was reduced by 22%. GDP Per Capita also changed from 1,515 USD to 10,509 USD accordingly (WorldBank, 2017).
Nowadays, Kazakhstan is the biggest economy in Central Asia and the second among former USSR countries (International Business Publications, USA, p.42, 2016). Also it has large variety of oil and gas as well as metal and mineral resources. Beyond significant fossil fuel reserves, Kazakhstan has enormous agricultural potential regarding its boundless steppes which are the main bases for cattle breeding and grain production. In the south region apple and walnut production is developed sector, while both of them grow wild in the mountains that located there. Kazakhstan’s industrial sector of economy mostly relied on the production of mentioned natural resources and relied on a considerable machine building sector interested in “construction equipment, tractors, agricultural machinery and some military items” (International Business Publications, USA, p.42, 2016).
According to the information which was given on the website of Kazakhstan’s Embassy in Netherlands, the country consists of the following five large economic regions:
Map 2. Kazakhstan’s map by economic regions.
Kazakhstan is an industrial country and as such mining and the extraction of minerals are the main sources for economic growth of the country (Kazembassy.ru, 2017). Indeed, when it comes to the overall share of economic sectors in the gross domestic product of Kazakhstan, according to The Statistic Portal (2015), it can be observed that during the last decade the share of industrial sector in the Kazakhstan’s economy was very significant and was fluctuating between 37.62% and 33.23% from 2004 to 2015, meanwhile having increases between 2005 and 2011 at the level approximately to 42% (see Chart 2) (The Statistic Portal, 2017).
Chart 2. Share of economic sectors in the gross domestic product (GDP) of Kazakhstan from 2004 to 2015
Source:https://www.statista.com/statistics/436156/share-of-economic-sectors-in-the-gdp-in-kazakhstan/
The mineral resources base of the country consists of more than 5000 deposits, the forecast value of which is estimated to be tens of trillion dollars. The republic ranks first in the world in the explored reserves of zinc, tungsten and barite, the second – silver, lead and chromite, the third – copper and fluorite, the fourth – molybdenum, the sixth – gold. (Kazembassy.ru, 2017)
Kazakhstan also has significant oil and gas reserves, which are concentrated in the western regions. Today the country belongs to the category of the world’s leading oil producing countries – more than 80 million tons of oil and gas condensate are being produced per year. It is planned to increase annual production to 120 million tons by 2020. Nowadays Kazakhstan is in 9th place in the world for confirmed oil reserves. In addition, the republic occupies 8th place in the world table for coal reserves and the 2nd place for uranium reserves (Kazembassy.ru, 2017; BP.com, 2015; International Energy Agency, 2017).
Traditionally, much attention is paid to the development of agriculture in the country. Kazakhstan is one of the world’s top ten grain exporters and is one of the leading exporters of flour. About 70% of arable land in the north is occupied by grain and technical crops – wheat, barley, millet. In the south of the country rice, cotton, tobacco are grown. Kazakhstan is also famous for its gardens, vineyards and melons and gourds. The leading branch of agriculture remains livestock, the key areas of which is the cultivation of cattle, horses, camels and pigs. Poultry farming and fishing are also developed in the republic (Kazembassy.ru, 2017).
Since independence was declared, to 2012 150 billion USD of foreign investments (according to Kazembassy.ru) and to 2015 222 billion USD (Ministry of National Economy of the Republic of Kazakhstan, 2016) had been attracted to Kazakhstan, which is about 70% of the total volume of all investments attracted to Central Asia. The gold and currency reserves of the country as of June 1, 2012 amounted to about 85 billion US dollars, of which more than 50 billion dollars is accounted for by the National Fund. (Kazembassy.ru, 2017) .
“The base for the stable increase of the economy became increase of the investments into fixed asset. If in 1993 investments into fixed assets comprised 7,3 bln.tenge, then in 2015 they reached 7,0 trillions of tenge by increasing for this period to 966,8 times. An important factor of growth of investments is support of the foreign investors. The government within the frame of attracting foreign investments created conditions on improving business climate in the country and on reducing administrative barriers.” (Ministry of National Economy of the Republic of Kazakhstan, 2016).
As information comes from the website of the Kazakh Embassy in Russian Federation says Kazakhstan ranks third among the 25 most dynamic economies of the first decade of the 21st century, having passed only China and Qatar forward. According to the World Bank classification, the republic was included in the group of countries with an above average income level. Moreover, in the World Bank’s rating on the terms of doing business in 2011, Kazakhstan took 47th place, having bypassed all CIS countries (Kazembassy.ru, 2017) and 5 years after being ranked 41st (National Bank of Kazakhstan, 2017). National Bank of Kazakhstan stated: “Kazakhstan is rated better than Russia, Georgia or any other non-EU former Soviet Republic. The World Bank’s Doing Business 2016 ranked Kazakhstan 41st, up from 53rd in 2015”(National Bank of Kazakhstan, 2017). In 2011, the global competitiveness ranking of the International Institute for Management Development (IMD) ranked the republic in 36th place, ahead of Indonesia, Turkey, Italy and many other countries (Kazembassy.ru, 2017).
According to the Economic Complexity Index (ECI) Kazakhstan stands on 51st place by value of export economy in the world and the 48th most complex (OEC, 2017). The foreign trade turnover of Kazakhstan in 2011 amounted to more than 125 billion dollars. The main export products are products of mining, fuel-energy, metallurgical and chemical industries, as well as the grain industry. The main trade partners of the republic are Russia, China, the states of Europe and the CIS. (Kazembassy.ru, 2017) Also, in 2015 Kazakhstan exported $40.9 bln and imported $31.7 bln, “resulting in a positive trade balance of $9.2B” (OEC, 2017).
In Picture 1 it can be seen that the main sectors of Kazakhstan’s export as of 2015 were: Mineral products (64%), Metals (17%), Chemical products (8.5%), Vegetable products (4.1%), Precious metals (2.2%), Foodstuffs (0.83%) and etc(OEC, 2017). To this point it is also worth mentioning the main destinations of exports (see Picture 2). According to the same source as mentioned above, the top export countries at that time were China ($5.53B), Russia($4.66B), the Netherlands ($3.55B), France ($3.01B) and Italy ($2.93B) (OEC, 2017).
Picture 1. Kazakhstan’s export by sector in 2015.
Source: http://atlas.media.mit.edu/en/profile/country/kaz/#Exports
Picture 2. The countries where Kazakhstan exports. As of 2015.
Source: http://atlas.media.mit.edu/en/profile/country/kaz/#Exports
In the following picture (see Picture 3) were given the main components of the import. As OEC stated: “Its top imports are Other Large Iron Pipes($1.17B), Refined Petroleum ($1.13B), Packaged Medicaments ($916M), Cars ($868M) and Planes, Helicopters, and/or Spacecraft ($556M).” (OEC, 2017). When it comes to imports, they came mostly from Russia ($10.5B), China ($5.61B), Germany($1.74B), the United States ($1.37B) and France ($1.21B), (see Picture 4) (OEC, 2017).
Picture 3. Kazakhstan’s import by sector in 2015.
Source: http://atlas.media.mit.edu/en/profile/country/kaz/#Exports
Picture 4. The countries where Kazakhstan imports from. As of 2015.
Source: http://atlas.media.mit.edu/en/profile/country/kaz/#Exports
Generally, according to Tradingeconomics.com, between 1998 and 2017 exports in Kazakhstan averaged 3.4 bln USD (monthly), reaching the highest of 9.79 bln in June 2011 and the lowest of 0.28 bln in January 1999. Meanwhile, imports averaged 1.96 bln USD reaching the best indices in the value of 4.59 bln in December of 2013 and the lowest of 0.25 bln in June of 1999. Within the same period the balance of trade also fluctuated around 1.45 bln of USD (Tradingeconomics.com, 2017).
The topic of the foreign trade, export and imports are going to unfolded properly in the following subchapters, the importance of energy sources in the national economy and its significance in economic security of the state are interlinked.
Since independence Kazakhstan, as mentioned above, has made lots of crucial changes in its economy and social policy. Within the framework of economic diversification, the State Program of Forced Industrial-Innovative Development has been successfully implemented in the country. In accordance with this strategic initiative, the old are being modernized throughout the country and new enterprises and industries are being opened (Kazembassy.ru, 2017).
The tourism cluster of Kazakhstan also has significant potential which can convert the country’s huge wealth of landscape and unique cultural and historical heritage into new opportunities for further development (Kazembassy.ru, 2017).
Also, a large-scale social modernization of the country is under way – new schools, professional colleges and universities are being built, brand-new medical clinics and hospitals are being opened, the system of social support of the population is being improved. (Tengrinews.kz, 2013) .
Being a leader in Central Asia, Kazakhstan makes a significant contribution to strengthening the stability of the region. Beyond the region, the country has also achieved great successes on the world stage. This is evidenced by Kazakhstan’s chairmanship of the OSCE and the holding of the Summit of this prestigious international organization in Astana in December 2010. A significant initiative of the country was the launch and development of the CICA project, the Asian counterpart of the OSCE. Positive feedback was received for the creative activity of Kazakhstan as the chairman of the leading organization in the Islamic world – OIC. The country is also a recognized leader in the global anti-nuclear movement. In general, Kazakhstan is actively interacting with various partner countries in a number of international organizations – the CIS, the SCO, the Eurasian Economic Community, etc. (Kazembassy.ru, 2017).
In July 2010, the Customs Union of Belarus, Kazakhstan and Russia began to operate, and from January 1, 2012 – the Single Economic Space. Moreover, after some years of collaboration “a new stage of integration” was achieved – theEurasian economic union, which came into force from the 1st of January 2015 based on the agreement about creation which was signed by the presidents of Belarus, Kazakhstan and Russia on 29th of May in 2014, in Astana. These associations are aimed at the effective development of the economies of the participating states and raising the standard of living of the population on the basis of the principle of the freedom of movement of goods, services, financial and human capital across the borders of the three countries (Ministry of National Economy of the Republic of Kazakhstan, 2016).
Kazakhstan along with China is implementing a large-scale project “New Silk Road”, which should revive the historical role of the country as the main connecting link of the continent and turn it into the largest business and transit hub of the region – a kind of bridge between Europe and Asia. As a result of the implementation of this mega-project, by 2020 the volume of transit cargo traffic through the republic should almost double, and by time to be expanded to at least 50 million tons per year (Railways.kz, 2017).
Generally, stable growth of all sectors of the economy, international recognition, political stability became the basis for the prosperity of Kazakhstan society. Kazakhstan is a country looking to the future, which honors its cultural traditions and successfully realizes the great creative potential in today’s highly competitive world.
2.2 Energy sources as the main segments of the national economy and its importance in economic security
The previous subchapter briefly gave an economic outline of Kazakhstan with a background of economic, social and political development during the years since independence. The reason for tackling the issue of creating an economic background of the country as the first step, is the necessity of creating an image, to some extent a perspective, where the elements and some features of the economy can be seen, through which is possible to draw the main links of the thesis. It can be concluded from the first subchapter, that energy sources play a very significant and crucial role in the economy and that is why, in this subchapter this issue will be touched on by using a more holistic and wider approach aiming to reveal more. Subsequently, in this subchapter a connection between energy sources, as the main segments of the national economy, and economic security are going to be established.
This subchapter aims to show the how is the significant are the energy sources in Kazakhstan’s economy. That is why, it would be logical to start from the energy sector’s share in the country’s exports. Also, the importance of the sector should be supported by its significance that has been stable during the years despite the changes in the structure of the economy (see Table 1 and 2).
Prior to independence, Kazakhstan was a typical agrarian-industrial country with an inadequate level of development of the tertiary sector. It is well known that in all former republics of the USSR, such spheres as education, healthcare and social security were developed comparatively quickly, but there was a permanent deficit of goods and services, the inadequate development of trade, consumer services and personal services also did exist (Aliev, 2013).
Over the past two decades, the sectoral structure of Kazakhstan’s GDP has undergone significant changes (Aliev, Olcott, Pomfret).
When it comes to sectoral structure in Kazakhstan’s economy, a table which shows the shares of different segments within the country’s GDP can be found in Aliev’s article (See Table 1). In Table 1 it can be observed that lots of significant structural changes in the Kazakhstan’s economy occurred during the period between 1991-2011. But despite this, mining industry had been stable, moreover had been increased.
For example, as indices show that the share of agriculture had been decreased by almost 25 percent by 2011, meanwhile mining industry and production of services in total had been increased by 16.1% and 22.7% accordingly.
Table 1. Structural shifts in the economy Kazakhstan, 1991-2011,%
| Industry (type of activity) | GDP | ||
| 1991 | 2001 | 2011 | |
| Production of goods | 65.9 | 46.0 | 43.2 |
| Agriculture | 29.5 | 8.2 | 5.0 |
| Industry (within it:) | 27.2 | 32.6 | 31.6 |
|
2.1* | 13.0 | 18.2 |
|
23.7* | 16.5 | 11.4 |
|
1.3* | 3.1 | 2.0 |
| Construction industry | 9.2 | 5.2 | 6.6 |
| Production of services | 34.1 | 54.0 | 56.8 |
| Trade | 8.1 | 12.4 | 13.8 |
| Hotels and restaurants | ** | 0.6 | 0.9 |
| Transport | 6.8 | 10.0 | 7.0 |
| Information and communication | 0.6 | 1.5 | 2.6 |
| Financial and insurance activities | 2.7 | 3.1 | 2.0 |
| Operations with real estate, rent and services to consumers | 7.3 | 10.8 | 8.7 |
| Public administration | 1.3 | 2.3 | 2.0 |
| Education | 4.9 | 3.7 | 3.2 |
| Health and social services | 3.2 | 2.0 | 1.7 |
| Other community, social and personal service activities | 2.1 | 1.9 | 1.2 |
Source: Aliev, 2013 (p. 63), original in Russian: “Таблица 1. Структурные сдвиги в экономике и сфере занятости Казахстана, 1991–2011 гг., %”
* Approximate calculations, ** included in the section “Trade” (Aliev, 2013)
The following table shows in more precise details the shares of the main fields within the industrial sector of the Kazakhstan’s economy between the period of 1991-2011 (see Table 2).
Table 2. Structural shifts in the industry of Kazakhstan, 1990-2010. The shares of industries should be interpreted as a constituents within share of the Industry as a whole.
| Industry (type of activity) | 1991 | 2001 | 2011 |
| Mining industry | * | 44.5 | 61.3 |
| Extraction of fuel and energy raw materials: | 5.7 | 41.0 | 52.2 |
|
2.4 | 38.0 | 50.8 |
|
0.2 | 0.5 | 0.3 |
|
3.1 | 1.5 | 1.1 |
| Mining of metal ores: | 3.0 | 5.4 | |
|
1.3 | 2.1 | |
|
1.7 | 3.3 | |
| Processing industry | * | 46.5 | 31.7 |
| Ferrous metallurgy | 6.3 | 8.5 | 5.7 |
| Non-ferrous metallurgy | 10.2 | 11.7 | 7.5 |
| Chemical and petrochemical industry | 6.5 | 5.9 | 6.2 |
|
2.1 | 3.3 | 2.7 |
|
15.9 | 3.7 | 3.9 |
|
2.8 | 1.0 | 0.2 |
|
15.6 | 2.1 | 0.3 |
|
22.3 | 13.3 | 7.5 |
| Production and distribution of electricity, gas and water | 5.2 | 9.0 | 7.0 |
* According to rough estimates for the extractive and manufacturing industries in 1990, respectively, accounted for about 15 and 80% of total industrial production. (Aliev, 2013)
Source: Aliev, 2013 (p. 65), original in Russian: “Таблица 2. Структурные сдвиги в промышленности Казахстана, 1990–2010 гг. ДоляотдельныхотраслейвВВП, %”
The information provided above might seem old, though the main reason why I provided these tables is to show that during the all years the industry sector, especially mining and processing sectors, whereas the extraction of fuel and energy raw materials in particular have been playing very crucial role (52.2% of industry) in the economy.
When it comes to nowadays condition of the energy sector in Kazakhstan, it can be again observed that it still holds a great stake in the economy. For example, by coming back to the Picture1, it might be seen that the volume of the mineral resources in the exports accounts for 64% which is very significant. Moreover, by going into details and looking carefully, in the picture below it is possible to see what kind of energy products are. (See Picture 5).
Picture 5. Kazakhstan’s export by sector in 2015 (detailed)
Source: http://atlas.media.mit.edu/en/profile/country/kaz/#Exports
According to the Observatory of Economic Complexity: “The most recent exports are led by Crude Petroleum which represent 48.5% of the total exports of Kazakhstan, followed by Refined Copper, which accounts for 6.2%.”(OEC, 2017). As it was also mentioned before, the outstanding economic growth of Kazakhstan during the years of independence was due to large scale production and development of oil, gas and other natural resources production. Being of oil and gas sectors as the main sources of national income led to the overdependence of the national economy on the world prices for oil and demand for national export. In the following chart it can be seen that the there is a clear connection between the prices for oil and Kazakhstan’s GDP trend (See Chart 3). In this point it is possible to state that the energy resources, especially oil and gas are very essential for Kazakhstan’s economy.
Kazakhstan Business Magazine (2016) emphasizes three main types of energy sector: hydrocarbons, coal and uranium. (Dzhantureyeva, 2017)
Hydrocarbons
When it comes to hydrocarbons, according to them in 2016 in Kazakhstan were amounted to 4.8 billions tons of the commercial oil reserves (А+В+С1 and С2 categories), 441 millions tons of condensate, 1.8 billions m3 of free gas and 2.3 billions m3. As an outcome of geological exploration works performed between 2000-2015 an incremental value of oil reserves were estimated for nearly 2.2 billions tons (including 83.4 millions tons in 2015), meanwhile for gas it was estimated around
Chart 3. Trends of Kazakhstan GDP and world prices for Brent Crude oil in the period 1991-2015)
Source: http://www.tradingeconomics.com/kazakhstan/gdp
for 290 billions m3. Also, during these years approximately 1 billions tons of oil as well as 464 billions m3 of gas were produced (Dzhantureyeva, 2017). As it also was stated by Dzhantureyeva :
“Generally, replenishment of oil reserves outstrips its depletion in the subsoils more than in 2 times, but there is an inverse trend in gas industry – it suffers from the lack of resource base replenishment”. (Dzhantureyeva, 2017)
As for subsoil use of hydrocarbons and investments in this field, nowadays there are 271 objects under use, including: 64 under exploration, 92 in process of production and 115 with both exploration and production (Dzhantureyeva, 2017). In sum, the overall volume of money invested in the hydrocarbon subsoil use since 2000 until 2015 accounts for $179.8 billions, $19 billions of which were spent for exploration works. Generally, in the 16 years period the annual volume enlarged in more than 5 times. $15.8 billions were planned to invest in 2016, among which $551 millions were directed to exploration works (Dzhantureyeva, 2017).
“As for the investment and production indicators in terms of individual companies, currently, 87.5% of their total value is accounted for 11 major hydrocarbon subsoil users. Among them:
As the main stakeholder in Kazakhstan’s oil and gas industry, here it is worth to mention the name of the National Company “KazMunayGas” (KMG) which was established in result of merger of “KazakhOil” National Oil and Gas Company and “Oil and Gas Transportation” National Company pursuant to the Decree of the President of the Republic of Kazakhstan as of February 20, 2002 (Official website of KMG, 2017). KMG is “the Kazakhstan’s operator for exploration, production, refining and transportation of hydrocarbons, representing the state interests in the oil and gas industry of Kazakhstan” (Official website of KMG, 2017).
JSC NC “KazMunayGas” helds 28% and 16 % of country’s overall oil production and gas condensate as well as natural and associated gas production respectively. Also, KMG is responsible for 65% of oil delivery through oil pipelines and for more than ¾ by tankers from Aktau port, and stands for 95% of natural gas transportation through gas pipelines. In addition to this “KazMunayGas” refines 82% of entire oil in the country which accounts for 17% of the retail oil products market (Official website of KMG, 2017).
Coming back to the oil production, there are three main oil refineries in cities such as Pavlodar, Atyrau and Shymkent, which are concentrated on oil of Kazakhstan’s origin. More than an half of oil processing comes from the biggest oilfields as Tengiz, Kashagan and Karachaganak and almost 85% of all the oil manufactured in Kazakhstan is for export (Karatayev and Clarke, 2017).
Nevertheless, Kazakhstan is landlocked and transportation is very expensive, that is why the absence of export routes presents a “potential bottleneck” for Kazakhstan’s economy and national interests (Karatayev and Clarke, 2017).
Karatayev and Clarke in their work describe precisely the current roads of oil and gas transportation:
“At the moment Kazakhstan delivers oil by pipelines, tankers and railways to Russia, the Mediterranean coast of Turkey via Azerbaijan and Georgia and to China. with the main routes being:
(i) the Tengiz-Novorossiysk pipeline linking the Tengiz Oil Field via the Caspian Pipeline Consortium’s 1510 km pipe to Russia’s oil terminal in the Black Sea coast;
(ii) the Kazakhstan Caspian Transportation System which consists of three segments:
(a) the Yeskene-Kuryk pipeline which connects Tengiz and Kashagan oil fields with Kuryk on the Caspian Sea;
(b) where a system of oil tankers and oil terminals are used to transport the oil across the Caspian to Baku in Azerbaijan;
(c) where the oil can be moved via the Baku-Tbilisi-Ceyhan pipeline through Georgia and Turkey to the port of Ceyhan on the south-eastern Mediterranean coast;
(iii) the 2228 km Kazakhstan-China pipeline which connects Atyrau to Alashankou in the Xinjiang Uighur Autonomous Province in NW China.”(Karatayev and Clarke, 2017).
In the map below it can be seen the main routes of oil transportation:
Map 3. The main routes of oil transportation.
Source: http://kashagan.today/?p=8852
They also stated that control of the oil export itineraries has crucial impact not only on the security, but also on political decisions and foreign policies within the region (Karatayev and Clarke, 2017). Moreover, Kazakhstan’s national interests on oil export are fundamentally based on “viable” routes to ensure export growth (Karatayev and Clarke, 2017).
Coal
Kazakhstan is also rich for coal reserves, which accounts for about 34 billion tons, whereas 60% of it is hard oil and around 40% is brown coal. Almost 90% of the whole coal industry is located in the Karaganda and Pavlodar regions and overall 70% of the coal is used for domestic needs, meanwhile 30% is exported (Dzhantureyeva, 2017).
Nowadays in Kazakhstan 94% of total investments are allocated among 10 main subsoil users, such as:
Uranium
As it was mentioned in the previous subchapter, Kazakhstan, by having uranium reserves which exceed 900 thousands tons (Dzhantureyeva, 2017), takes 2nd place in the world and holds about 15% of the world’s uranium resources, followed after Australia (1.664 thousands tons) (World Nuclear Association, 2017) and, also, produces 23800 thousands tons which is 39% of overall world production (World Uranium Mining Production, 2015). Approximately 80% of uranium reserves are located in the Chu-Sarysu and Syrdarya areas while the rest is concentrated in Northern parts of Kazakhstan (Dzhantureyeva, 2017). Country reserves are mostly found in “sandstone-type deposits, developed by drillhole in situ leaching” (Dzhantureyeva, 2017).
The main stakeholders in this sector are:
The reason why the topic on hydrocarbons, coal and uranium was tackled is that, these mentioned elements of energy sector are the main ones and from the all what was mentioned above, it can be precisely concluded that, energy sector, as the main sources of national income, play very crucial and significant role in the Kazakhstan’s. Therefore, energy sources are the national security objects as well as political and economical instruments of nowadays, through which national economic security can be implemented. This is why, needless to say that, there are quite obvious and tight connections between the energy sector and national economic security, which can be seen in the legislative documents of Kazakhstan Law.
In the Article 5, paragraph 1, clause 11 of the Law of the Republic of Kazakhstan of January 6, 2012 No. 527-IV “On National Security of the Republic of Kazakhstan” (as amended and supplemented as of December 28, 2016) is stated that “Stable functioning of the subjects of agro-industrial, fuel and energy complexes, transport and manufacturing industries, financial system that fully ensure economic security” are under the national interests of Kazakhstan Republic. (Zakon.kz, 2017) [2]
Also in the clause 11, paragraph 1 of the Article 6 named “Major threats to national security”:
“Damage to the economic security of the state, including the use of strategic resources against the interests of the country, impeding innovation development and growth of investment activity, uncontrolled export of capital and goods outside the country, growth of the shadow economy;” – are described as very threats to national security (Zakon.kz, 2017).
According to Article 22, paragraph 1 clause 3 the national economic security of Kazakhstan includes following: as the one of the provisions of national economic security of Kazakhstan are described the following:
“Energy security, which provides for the state of security of the fuel and energy, oil and gas and nuclear energy complexes of the economy against real and potential threats, in which the state is able to ensure energy independence and their sustainable development to meet the needs of society and the state in energy resources;” (Zakon.kz, 2017).
In the same Article, in paragraph 2 clause 5 was stated that:
“Economic security is provided by decisions and actions of state bodies, organizations, officials and citizens, aimed at: … Further diversification of the economy, preservation and strengthening of the resource-energy basis of the country’s economy;” (Zakon.kz, 2017).
Generally, from juridical point of view, regarding economic security and the use of energy sources everything is quite clear and fair. But it is also well known that the theory and practice are different things. Because, having very well written on the papers legislative documents does not mean that it can provide an economic security entirely and surely. Because, economic security requires and includes lots of economic and political factors both internally and externally.
In terms of strategic aims of domestic and foreign state policy one of their key aims is the efficient use of energy resources and seeking to develop the export infrastructure further (Dzhantureyeva, 2017). Such a large part of the revenue of the whole country depends on this and the governmental budget is no different. In order to develop the economy of Kazakhstan in a sustainable way and strengthen its position on the global marketplace several steps can be taken, such as: transition to international standards for reserve calculation and increased transparency of the sector as a whole.
2.3 Economic and political interests of Russia, China and other superpowers within the region of Central Asia
In this subchapter it is expected to describe the geopolitical and geoeconomic interests of Russia, China and other superpowers as the USA, the EU and Turkey within the region of Central Asia, where Kazakhstan’s case is highlighted. As the main topic is “Kazakhstan’s economic security policy: Balancing Russia and China”, the chapter mainly will emphasize Russia’s and China’s interests.
Central Asia, as it was mentioned before, includes five independent countries, such as Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. Having overall population of
Map 4. Central Asian countries.
Source: https://orexca.com/img/map_central_asia.jpg
about 68.9 millions people (Worldometers.info, 2017) and territories which are extremely rich for oil, gas, uranium and other energy and mineral resources as well as for agriculture and livestock (Pomfret, 2006) seem extremely attractive to neighboring great powers and oversea empires. Also, being located in the heart of Eurasia, Central Asian countries connect West and East, North and South, which aftermath can be considered very important from geopolitical point of view (See Map 4).
From a historical point of view, the Central Asian region is closely connected with the events that historically took place in Russia, China, Iran and the Hindustan Peninsula, where the Silk Road created strong conditions for inter-regional bonds and trade. The demise of the Soviet Union and the emergence of independent states such as Tajikistan, Uzbekistan, Turkmenistan, Kyrgyzstan and Kazakhstan laid a foundation for new types of political, economic and cultural cooperations. Neighboring countries, such as Iran, Russia, Turkey, India, Pakistan and China, having opposing their own strategic interests on the region in terms of economy, politics and culture, nowadays, emphasize the importance of development the new ties with the Central Asian republics (Osuli, 2014; Pomfret, 2006; V.V. Naumkin and others, 2013).
Being in the central part of the continent, these countries experience a large number of economic problems, such as inflation, rising unemployment, declining production, lack of financing as well as water resources and adverse climatic conditions (Osuli, 2014). Moreover, Central Asian republics are extremely interested in solving their domestic economic problems and in reducement of their dependence on Russia, in order to gain access to the markets of other countries, to create a regional transport infrastructure and to establish contacts with the external world. Under the current conditions, nowadays, the five countries of the region are intending to diversify the structure of their own economies and searching for new business partners (Osuli, 2014).
The presence of colossal reserves of oil, gas, coal, ore and other rare minerals, as well as significant opportunities for cotton production attest to an enormous economic potential of this region (Cummings, 2013). Through participation in global summits and membership in a number of organizations, such as the Cooperation of Independent States, the Eurasian Economic Union and the The Central Asia Regional Economic Cooperation (CAREC) Program, it can be observed that, these countries have already taken concrete steps towards new and deep forms of regional cooperation (Cummings, 2013). That is why Russia and China, as neighboring giants, and the USA as oversea superpower along with the EU and Turkey have their eyes on this region, however with different national interests and completely various foreign policies. For these reasons, it is assumed that, each mentioned above superpowers’ interests should be tackled separately.
Russia’s interests
Russian Federation and Central Asian countries since centuries have been having very close historical, economic, political and cultural ties. Russia’s interest in this region has been constantly deepening and strengthening through the over 130 years of dominance and invasion which started in the period of the Russian Tsarist Empire and after continued during the Soviet Union and even nowadays, after the demise of the USSR, Russia has not lost its desire to have an hegemony along with both economic and political power in the region (Allworth, 1994).
The acquisition of independence by the countries of the Central Asian region in the early 1990s, became the starting point in the search for their place in the structure of world politics. In this respect, first of all, diversification of their foreign policy relations are important moments, secondly, restructuration and partial abandonment of the Soviet legacy in the economic and political spheres (Muratalieva, 2014). Therefore, the general orientation of the Central Asian countries on cooperation with the West is conditioned by significant financial and economic benefits, which provide the values of liberal democracy that are adapted to the background associated with Russian Federation and Soviet era. However, it could not entirely prevent the Central Asia from being included into the sphere of Russia’s interest. Although the Russian Federation in the 1990’s experienced the same processes of socio-economic and political transformations by focusing on Western values and giving priority to cooperation with the West, same as the countries of Central Asia did (Muratalieva, 2014;Cummings, 2013). That is why, for most Central Asian countries, Russia remains as a extra-key regional partner, which capable of meeting their military-political, economic, social, cultural-educational needs, not entirely although partially.
All these states have historically close and multilateral ties with Russia which, in turn, make this region having occupied a very important place in the foreign policy strategy of the latter (Laumulin, 2009). Geographically, Central Asia is a vast territory that covers Russian borders from the South. The countries of this region are economic and traditional trade partners of the Russian Federation, because rich in natural resources and most of the produced hydrocarbon resources are being exported through Russian territory. Moreover, these are the states, where a significant part of the population are Russian-speaking citizens (Laumulin, 2009).
Russia’s economic interests in Central Asia are closely intertwined with geopolitical ones, but analytically it is also can be singled out purely economic spheres of interaction that are formed within the framework of business-friendly factors existing in Central Asia. According to Naumkin and his colleagues these are:
1) large and diverse minerals, primarily oil, gas and uranium resources;
2) excessive labor resources, which can be used both by attracting labor migrants to Russia, and by creating labor-intensive industries in Central Asia that are oriented to commodity deliveries to Russia. For example, Kyrgyzstan has a great potential for the sewing industry, which in many ways is already oriented towards the Russian consumer;
3) a large domestic market with a large growth potential, which opens wide opportunities for Russian exports and expansion of Russian enterprises and banks. For now, this is a less competitive market with relatively low requirements for the technical level of products, which opens up opportunities for exports of manufactured goods, with which it is difficult to enter the markets of other countries;
4) preserved old cooperation ties and the existence of objective prerequisites for the development of new ties (a relatively high level of trust in Russia in comparison with some other countries actively penetrating the region, a business environment, a common language of communications and etc.);
5) the possibility of expanding profitable transit from Central Asia and bordering Asian countries to Europe through Russian territory. Russia is not interested in the appearance of transboundary oil and gas pipelines bypassing its territory, but is also ready to participate in the construction and operation of pipelines in Central Asia. (V.V. Naumkin and others, 2013)
Work in all these areas involves solving the priority task for the Russian Federation – creating favorable conditions for foreign economic relations and Russian businesses in the countries of Central Asia. To implement the economic interests, in addition to political, a number of economic institutions were created, such as the Customs Union, EurAsEC, EDB, the EurAsEC Anti-Crisis Fund, the Agreement on the Free Trade Zone in the CIS and the Eurasian Economic Union. (The Ministry of Foreign Affairs of Russian Federation, 2017)
According to Laumulin, the strategic interests of Russia in Central Asia include the following:
In view of the fact that the political niche of cooperation with the Central Asian region was occupied by the United States and a number of Western countries, the Russian Federation relied on the development of interaction in the energy sector, where it had two advantages over its competitors: territorial proximity and a developed transport and communication network closed on Russia. In addition, Russia abandoned the ideological mediation of the economic and political relations with the countries of Central Asia, which favorably was distinguished from the US strategy, the imposed reforms of which by 1993 proved their inefficiency both in Russia and the countries of the Central Asian region. (Muratalieva, 2014)
As a result, trade between the Russian Federation and the Central Asian countries has increased, and in the period from 2003 to 2007 it has tripled. At the same time, if in 2005, 25.4% (3.6 billion dollars) of the total volume of trade fell on hydrocarbon trade, in 2010 this indicator increased to 33% (11.7 billion dollars). (Muratalieva, 2014) Russia became the main importer of Kazakhstan (trade turnover amounted to 10.5 billion dollars) and the third exporter after the EU and China. (OEC, 2017) In Uzbekistan, the Russian Federation has become the first trading partner, accounting for more than a quarter of the country’s total commodity turnover ($ 3 billion). In addition, Russia became the second trade partner of Kyrgyzstan after the China and the first one – of Tajikistan. In Turkmenistan, Russia ranked second after Ukraine and Iran. (WorldBank, 2017)
In Turkmenistan, the Russian economic presence is largely limited: there is only one Russian company ITERA operating, in view of the fact that Ashgabat allows investing foreign companies only in the costly and technically complex development of offshore fields. In addition, as the status of the Caspian Sea remains uncertain, the development of these fields also raises questions of relations with Iran. In view of this, Russian-Turkmen cooperation is limited to the export of Turkmen gas to Russia through the Central Asian pipeline. (Muratalieva, 2014)
In Uzbekistan, Russian companies are involved in the development of a number of gas fields – Shakhpakhty, Kungrad, Kandym, Khauzak, Shady, Zhambai. Russia is also investing in the modernization of the Bukhara-Ural pipeline, and the Central Asian pipeline. At the same time, gas transported from Turkmenistan and Uzbekistan is used by Russia to meet domestic demand, which makes it possible to export gas from Western Siberia fields to Europe at higher prices.(Muratalieva, 2014)
In Kyrgyzstan, the presence of Russia in the economic sphere, in the first place, is indicated by investments in the construction of Kambaratinskaya HPP 1 and Verkhne-Narynsky cascade of HPPs due to the absence of significant hydrocarbon deposits in the republic. (Muratalieva, 2014) However, these projects, in addition to the Sangtuda-1 hydroelectric power station project in Tajikistan, unlike investment projects in Kazakhstan, Uzbekistan and Kazakhstan, are purely geopolitical in nature because they are inexpedient in economic terms, as they were often spoken of as official representatives of the OJSC Inter RAO UES, and a number of its experts.(V.V. Naumkin and others, 2013)
At the same time, according to Muratalieva, the Government of Russia is not willing to support Dushanbe in building the main national energy facility of the country of the Rogun hydroelectric power station mainly for two reasons: first, Tajikistan declared its intention to participate in the CASA-1000 project and the power station built by Russia can subsequently become part of the Western project; secondly, the construction of the hydroelectric power station provokes a sharply negative reaction from Uzbekistan, which can finally undermine Russia’s position in this republic, which, since the second half of 2000s, has taken a course toward strengthening relations with the West. (Muratalieva, 2014)
Russia views Kyrgyzstan and Tajikistan as the main targets of its influence in Central Asia against the background of the pro-Western orientation of Uzbekistan and the neutrality of Turkmenistan. As instruments of influence on these republics, socio-economic levers are used: investments in the construction of hydroelectric power stations and policies for migrants. (Muratalieva, 2014)
When it comes to Kazakhstan, it is the closest Russian ally in the region (V.V. Naumkin and others, 2013; Oliphant, 2013) and as the leading country of the region as well as geographically nearest one gives to Russia huge opportunities to transmit its foreign economic policies to the East and South. The interests of the Russian Federation in the attitude of Kazakhstan are long-term and stable. They were formed in the 1990s and did not undergo any fundamental changes. Nevertheless, in the process of transformation of international relations and the geopolitical situation in Central Asia, and also in connection with the change in the position of Moscow and Astana in the international arena, these interests can vary. According to many writers’ works, at present, Russia is interested in the following:
China’s interests
China’s rapidly growing cooperation with the region in recent years has increasingly taken on the face of a close ligament. What are the interests driving the process? How strong and long-lasting can such a format of interaction be? The topic can be viewed from different angles. Generally, in the panorama-overview plan it can be seen as part of China’s overall policy in the post-Soviet space, however there are so many other aspects and factors which shape other plots of the interpretation.
As the center of gravity of the world development moves towards the Asia-Pacific region, the political significance of Central Asia as the geopolitical core of the Eurasian continent will only increase. Also, China and this vast region with distinctive features are closely connected by historical and geographical reasons.
Map 4. China and Central Asian countries
Source: (Vorobiev, 2017) http://eurasian-defence.ru/?q=node/22703
As Vorobiev described, In Beijing, it is assumed that Central Asia plays a strategically important role in ensuring the national security of modern China (Vorobiev, 2017). The region serves as a sort of deep rear for China as well as for Russia. Moreover, it is also a win-win position in the face of increasingly alarming Beijing reorientation on the US military accents to the Pacific basin, where the competition between two great powers is growing (Vorobiev, 2017). In addition, China’s concern about the Western encroachments into the region on the background of the uncertainty of the Afghan factor is also justified (Vorobiev, 2017).
According to Vasiliyev’s article published in the journal “China in world and regional politics. History and modernity” in 2016, the importance of this region for China is determined by the following circumstances:
Vorobiev claimed that this kind of approach of Beijing to Central Asia is not new. It began to make itself felt even during the stabilization of Soviet-Chinese relations in the 1980s. Even then, China through the Xinjiang Uygur Autonomous Region, began to establish direct contacts with the Soviet Central Asian republics. After some reflections on the collapse of the USSR in late 1991, China firmly established itself in this view. Building its line in the post-Soviet space, China began to highlight the Central Asian region along with Russia. As the first step of China’s geopolitical interest can be considered the solution of border issues in the 1990s, between PRC and its immediate neighbors – Kazakhstan, Kyrgyzstan and Tajikistan (Vorobiev, 2017) which went in peace and tolerant way, although China could raise questions about the borderlines, because among chinese scholars and people in general, exists an opinion which claims that some of territories of Central Asia belong to China’s heritage, which is, in fact, very doubtful and quite arguable. Here is also worth to mention the influence of Russia on the process, though there was nothing to impose or pressure from their side. As the result it can be observed that the borderlines remained the same as they existed before. This case of solving the border issues between Kazakhstan, Kyrgyzstan, Tajikistan and China served as the point where their national interests came across and moreover, the mutual understanding manifested by all participants in the process, served, first, as a solid impetus for the development of the relations between China and Central Asia, and, secondly, began to play the role of a fundamental factor for the further interactions.
The pace of development of China’s economy in the last two decades has been the highest on the planet. Now this country is called even the “workshop of the world” (Gusev, 2017). But for this development huge volume resources is needed, especially hydrocarbons. The main suppliers of hydrocarbons to China in the 1990s were the African countries, primarily Angola, as well as the Persian Gulf states (Saudi Arabia, Oman) (Gusev, 2017). However, over the past ten years, China has begun to develop a new energy strategy and, in this regard, began to pay attention to other sources of oil and gas, primarily to neighboring countries of Central Asia, as well as Iran and Russia (Gusev, 2017). Economically, China, in order to overcome the perceived resource shortage and the problem of sales markets, does not hide serious calculations for neighboring and nearby countries of Central Asia, rich in subsoil and badly in need of ideologically not fixated financial and trading partners (Vorobiev, 2017).
That is why immediately after collapse of the Soviet Union and appearance of the new independent countries in Central Asia, China, being already aware of the importance and attractiveness of the region, started to actively intervene into trade market of the countries aiming and counting for long-term relationships. If China could offer and promise practically all the new for its fresh partners, the Central Asian countries, in the absence of serious industrial goods, were engaged in the capitalization of their territories, that is to say, by placing on the market sources of mineral and energy raw materials, by allocating lands for laying large pipelines, iron and automobile Roads, the creation of infrastructure facilities (Vorobiev, 2017). China did not fail to use this opportunity competently and prudently. They literally broke into the Central Asian states, offering his own and picking up local projects. Thus, the entire region today is becoming a transit space for China in terms of a low-vulnerability, in comparison with the sea and provides an opportunity to land exit in Transcaucasia through the Caspian Sea and further to Europe, to the Middle East, to the Mediterranean (that is, the New Silk Road is recreated on a new technological basis), through Iran to the Persian Gulf and through Pakistan to the Indian Ocean (see Map 6) (Vorobiev, 2017).
Map 6. China’s proposed routes for New Silk Road (One Belt, One Road project) 
Source: http://www.aapacgroup.com/china-kazakhstan-second-rail-link.html
In other words, the Central Asian corridors, which are promising for China, are more rapid and cheaper than the northern Russian routes, which are already operating at the capacity limit. In addition, in the face of Central Asian countries, China has acquired large suppliers of the resources it needs for a long-term perspective and guaranteed recipients of various products with the brand “made in China”. Thus, significant amounts of oil and non-ferrous metals, also more than half of China’s gas imports from the region are imported at convenient prices (Gusev, 2017; Linn, 2017).
As Pantucci and Lain described:
“China is certainly engaging in a different way politically with Central Asia compared to Russia. China’s political role in the region could be described as latent but one that has not yet manifested itself so overtly. It is certainly a more subtle political actor than Russia. However, there are indications that Central Asia plays the role of testing ground for Chinese foreign policy efforts, meaning Central Asia forms what could be described as China’s “inadvertent empire.” The belt and road vision is a prime example of this. It was significant that Xi Jinping announced the Silk Road Economic Belt (SREB) at Nazarbayev University in 2013. This represented a vision that built on something that had already been happening for years in Central Asia. China had long been building infrastructure using linked loans, which allowed domestic companies to “go out” and build in Central Asia. The announcement showed Xi Jinping stamping his name and authority onto a coherent foreign policy that was based on existing activities. China’s “testing ground” has also manifested itself in other formats, particularly those that are multilateral. The SCO is the best example of a structure through which China can test its security policy in the region.” – (Pantucci and Lain, 2016).
Relations between China and the Kazakhstan have been constantly strengthening in a volatile international environment and maintained a favorable trend of healthy and stable development during the years. According to many authors, they can be considered as an example of good-neighborliness, friendship and common development in Central Asia and even in the whole world and it also can be said that the significance of China-Kazakhstan relations in a sense has already overcome the bilateral framework and has acquired an important strategic character(Vasiliyev, 2017; Gusev; Linn 2017). Political mutual trust is the basis of bilateral relations and so, China and Kazakhstan do not have unresolved problems in the political sphere. The parties resolved the border issue, signed the Treaty on Good-Neighborliness, Friendship and Cooperation between the People’s Republic of China and the Republic of Kazakhstan (December 23, 2002), “The Strategy of Cooperation of the People’s Republic of China and the Republic of Kazakhstan in the 21st Century” (December 20, 2006) and other more than 200 documents (Vasiliyev, 2017).
Kazakhstan is one of the most important objects of China’s economic “expansion” in Central Asia. In fact to say that 91.5% of China’s total direct investment in the countries of the Eurasian Union (22.57 billion dollars out of 24.67 billion dollars) invested by China in 2009-2013 falls on Kazakhstan (Vasiliyev, 2017). China’s economic interests in Kazakhstan are closely linked to its energy policy, with the desire to turn Kazakhstan’s oil-bearing zones into a permanent and reliable source of fuel for the growing Chinese economy. This is confirmed by the fact that, for several years already, China has been holding the fifth position in the list of the largest investors in Kazakhstan’s economy, and the overwhelming part of them is targeted specifically to the oil and gas industry. At the same time, the data is still limited, incomparable with the real investment potential of China, the volume of investments (Chulanova, 2017). Because energy is a key factor affecting the internal and external development strategy of each sovereign state. Energy independence and security of the country are directly dependent on the level of development of the fuel and energy sector. Thus, in the face of Kazakhstan, China sees a supplier of raw materials and fuel for its dynamically developing economy, which requires more and more resources every year.
The USA’s interests
Significant geopolitical changes and an unstable situation in the states of Central Asia create prerequisites for the strengthening rivalry between Russia and China for the influence in the region. At the same time, Central Asia is becoming less open to American influence and its programs to spread democracy. The US policy needs to adapt to the existing conditions, so that Washington’s goals in Central Asia are coordinated with its really limited resources and interests (Rumer, Stronski and Sokolsky, 2016). Because, excessive and unrealistic promises, the setting of ambitious but unrealistic tasks, will only lead to mutual irritation and will cause disappointment in both the United States and five countries of the region. On the contrary, all parties will benefit from a policy based on a realistic assessment of the situation and American interests (Rumer, Stronski and Sokolsky, 2016).
Generally, according to some scholars, it has been claimed that as the US military presence in Afghanistan decreases, the importance of Central Asia as a “gateway” to this country in Washington’s strategic calculations will also reduce (Kucera, 2013; Rumer, Stronski and Sokolsky, 2016). Because geographic point of view, this region is too far from the U.S. and its natural resources are very considerable, however scarcely “game changing” (Kucera, 2013). Moreover, Central Asia has become a “barren dessert” for those who are willing to spread democracy and respect for human rights, because of inherited from Soviet period cultural features (Kucera, 2013).
In the US policy in Central Asia since 1991, when five states – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan gained independence, there can be identified three stages (Rumer, Stronski and Sokolsky, 2016).
The first stage called “U.S. policy toward Central Asia 1.0” lasted between the collapse of the USSR and event of 9/11. The United States had there three priorities:
The United States unambiguously rejected the geopolitical approach to Central Asia in favor of a long-term policy of supporting the formation of a democratic system in the region, a free market and economic integration. However, the US leadership did not give priority to Central Asia, what sounds even rhetoric and that is why the American efforts to strengthen stability, security, ensure economic prosperity and improve governance in the region were moderate.
After the events of 9/11, Washington’s attitude towards Central Asia and the nature of cooperation with the states of the region changed dramatically and led to the formation of “Central Asia 2.0” policy (Rumer, Stronski and Sokolsky, 2016). Of course, the interest in implementing a long-term program of political and economic reforms was maintained, but considerations related to military tasks and security came to the forefront. The need for logistic support of the US military operation in Afghanistan, and hence dependence on access to the region’s military infrastructure, has prevailed over the desire to promote political and economic reforms, respect for human rights. Washington began to attach greater importance to security cooperation with the countries where it had bases, and the geopolitical positions of the United States in the entire region. From the zone of secondary attention, Central Asia has become a region that has played an important role in the US strategy, even if it was not connected with its own significance, but with a supporting role in efforts to stabilize the situation in Afghanistan (Rumer, Stronski and Sokolsky, 2016).
The first two stages of America’s relations with independent Central Asia are connected by a common theme: Washington’s actions were the result of politics, priorities and relations with the countries surrounding the region. Now, when the presence and role of US combat units in Afghanistan is substantially reduced, Washington needs to re-define its interests, build priorities and relationships in the region – and in a situation where Russia’s willingness and ability to interfere in the internal affairs of its neighbors have increased. Moreover, the long-term goal of strengthening the influence in Central Asia pursued by both Moscow and Beijing can increase tensions between them, and between the states of the region itself. The rivalry between the two powers encourages the Central Asian states to strive to ensure that Western participation in the affairs of the region is preserved in order to contain the ambitions of Russia and China. All these events are the context for the “US Policy in Central Asia 3.0” (Rumer, Stronski and Sokolsky, 2016).
In 2011, the United States declared their support for Silk Road Economic Belt initiative which is supposed to connect Central Asia to South Asia, namely Pakistan and India. The overall purpose is to contribute to the integration of Afghanistan into neighboring regions and to the development of its economy. SREB concentrates mostly on energy and transportation industry and has the same initiative as China’s One Belt One Road program (Zimmerman, 2015).
Generally, the U.S. interest remain economically not significant, although politically they can have still strong impact. For this there are, as we mentioned before, lots of reasons and one of them is physical distance and another one is surrounding by other great powers, of which geopolitical and geoeconomic significance affects more.
European Union’s interests
The European Union’s policy towards Central Asia was shaped under the influence of a new geopolitical situation formed as a result of the collapse of the USSR in 1991. During this decade, the EU became the closest to the volatile eastern space and the largest economic and geopolitical center of power. Under the new conditions, the EU and the West as a whole have undertaken targeted measures to spread their influence over the former socialist countries. This is primarily such steps as the expansion of NATO and the EU to the East (Laumulin and Seifullina, 2017). On the other hand, the spread of European influence to Central Asia was limited to a number of objective and subjective factors: increased assistance to the countries of Central and Eastern Europe, which diverted the EU forces and resources; Conflicts in South-Eastern Europe; NATO expansion; active intervention of the USA into the Caspian region; struggle for influence in Central Asia between the United States, Russia, China and the Islamic world.
After the collapse of the USSR, the foreign policy of the newly independent states was aimed at establishing equal and mutually beneficial relations with all states of the world. For their part, the countries of the European Union were interested in cooperation with the Central Asian states, primarily based on economic considerations. The EU’s economic interests in Central Asia were based on the possibility of access to the necessary energy resources of the countries of Central Asia and the development of trade and economic relations. To develop trade and economic relations with the countries of Central Asia, it was necessary to prepare a political and legal basis for cooperation.
Given that Europe does not directly border with Central Asia and, therefore, to involve the region in the orbit of European influence, an indispensable condition is the existence of developed transport communications between the EU and Central Asia. That is why, in the early 1990s, the EU actively lobbied 2 major interregional projects: TRACECA (the creation of the Central Asia-Caucasus-Europe trade and transport corridor) and INOGATE (the creation of pipeline communications for the delivery of Central Asian energy sources to Europe) (Sadykova, 2012). Here I would like to highlight the INOGATE program, which is an international program of cooperation in the energy sector between the European Union and the Partner Countries – Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan (Inogate.org, 2017). Consequently, In 1995, it was created as an EU mechanism for the transport of oil and gas to Europe and after the conference in Baku in 2004 and in Astana, this program was transformed into a broader partnership within the framework of the Baku-Tbilisi-Ceyhan project (Sadykova, 2012).
Thus, the 90s of the twentieth century was the period of the formation of the concept of mutual relations of the EU with the countries of Central Asia and the definition of the main areas of cooperation (90s of the twentieth century). With regard to Central Asia, the European Union has chosen a policy of nominating a series of initiatives that combine the motives of both economic and political nature.
Economic initiatives were implemented in the framework of regional projects, based primarily on the desire for access to energy resources and at the level of bilateral trade and economic relations (Laumulin and Seifullina, 2017). The political aspect manifested itself in the formation of a politico-legal basis for the relationship between the EU and Central Asia, in developing a strategy for the countries of Central Asia (Laumulin and Seifullina, 2017; Sadykova, 2012). It should be noted that the formation of the EU strategy towards the Central Asian countries took into account not only the internal development of states in the region itself, but also the geopolitical situation. In the geopolitical game in Central Asia, players such as the United States, Russia, and China were involved.
The geopolitical situation changed dramatically after the terrorist attacks of 9/11 in the United States. The EU almost followed the same pattern of the US, regarding the problem of ensuring security from external threats, which became a major issue on the agenda of the entire international community (Burkhanov, 2007). The world’s leading centers, including the EU, recognized the fragility of the international security system. These events served as the unique catalyst for the revision of the policy towards the Central Asian states, as countries in close proximity to Afghanistan, a source of terrorist danger. Central Asia has moved from the periphery to the center of world politics. It was also necessary to help the EU countries in Central Asia in solving other problems, such as drug trafficking, border security. Europeans recognized that only a peaceful, economically prosperous, democratic Central Asia can become their reliable partner.
Then, according to Sadykova, the EU began to realize the importance of the closer interaction with the Central Asian states on regional security issues and countering transnational threats. And it should be noted that it was at the beginning of the 21st century that the European Union proposed a strategy for the countries of Central Asia and its complementary documents as the “Strategy for a New Partnership with Central Asia” and the “Program for the Main Directions for the Period 2001-2012” (Sadykova, 2012). The adoption of such important documents was due not only to the interest of the European Union in ensuring the security of the Central Asian countries, a significant role was played also by the energy factor (Sadykova, 2012). The same claiming was given by Denison:
“The principle underpinning the EU’s energy outreach towards Central Asia is based on self-interest and focused on gas. The objective is to diversify supplies in order to reduce the dependence of EU member states on gas supplies from Russia, the potential volatility of which has been demonstrated by supply disruptions to core transit/customer states, notably Ukraine, Belarus, Moldova and Georgia since 2006” (Denison, 2009)
Needless to say that the dependence of the EU on energy resources, the threefold increase in prices for them, the gas conflict between Russia and Ukraine led to the fact that the EU began concentrating its attention on finding new alternative ways of providing energy resources. Lack of energy resources led to an increase of the importance of the Central Asian market.
The “Strategy for a New Partnership with Central Asia” adopted in 2007, marked the position and interests of the EU in the region at the present stage and marked the transition to a qualitatively new level of partnership. According to the strategy for solving particularly important problems, the EU will undertake the following:
As it was pointed out by Romanowski, the policy of the EU is concentrated mostly on Kazakhstan, because, 80% of Kazakh oil is imported by the EU. However, over than 75% percent of that oil goes through the Russian territory by its pipelines (Romanowski, 2016). That is why, the EU is looking for other possible ways to import oil, which would be also beneficial for Kazakhstan’s economic security. Also, the need for a diversified policy in the field of external energy resources for the EU opens new horizons for cooperation between the European Union and Central Asia.
Turkey’s interests
“Central Asia is a strategically important region for ensuring the security and stability of the Euro-Atlantic region. Its energy resources are vital for global energy security and it is a major hub for gas and oil pipelines as well as trade corridors.”(Ministry of Foreign Affairs of the Republic of Turkey, 2017)
After the collapse of the USSR, the development of multifaceted ties with the post-Soviet republics of the South Caucasus and Central Asia is becoming one of the most important directions of Turkey’s foreign policy, since this should contribute to the solution of a number of internal and geopolitical tasks that faced it. The main role in the management and coordination of this activity is played by the specially created state structure called “Turkish Agency for Cooperation and Development” (Laumullin, 2012).
Historical responsibility motivates Turkey’s interest in nearby areas, including the Caucasus, the Caspian and Black Sea basins, the Balkans, the Eastern Mediterranean and the Middle East from the Persian Gulf to North Africa and nowadays, since the crucial global geopolitical and geoeconomic changes in the international arena, Turkey has launched its new foreign policy ambitions called the policy of “neo-Ottomanism” (Laumullin, 2012). Turkey is also aspired to become an “energy exchange” of Eurasia, monopolizing energy flows from the east to the west. Here it is worth to mention the commissioned Baku-Tbilisi-Ceyhan pipeline, which supplies 50 million tons of crude oil a year (see Map 7)(Laumullin, 2012).
Map 7. Baku-Tbilisi-Ceyhan pipeline route.
Source: http://www.hydrocarbons-technology.com/projects/bp/bp9.html
Nowadays, Turkey, being located at the point of intersection of the most important, but troubled regions of the world – Europe and Asia, implements an unusually active and ambitious foreign policy. It seems that Turkish diplomacy seeks to reduce to zero its problems with neighbors in the region, solving the problems through a multilateral dialogue. The desire of Turkey to get in the EU is still very high, but on the other hand it seems too optimistic. That is why, Turkey being aware of the probable outcomes of the EU-Turkey ever-lasting negotiations, is trying to implement its own multi-vectoral foreign policy, which emphasizes in this case the importance its ethnic-brothers in Central Asia (see Map 8). Probably for these reasons, since 2000s the Turkish Islamist leadership has returned to the policy of the 1990s, which includes elements of Pan-Turkism, and in result, has a direct impact on Ankara’s relations with the post-Soviet states of the Caucasus and Central Asia, where crosses the interests of Russia, Iran and China .
Map 8. The areal of Turkic Speaking Nations
Source: http://albert-lex.livejournal.com/98348.html
The development of relations with the states of Central Asia, Turkey viewed as a way to achieve its strategic goals – to intensify its policy at the regional and wider international level as well as to increase its geo-strategic importance in the eyes of its Western allies (Stratfor website, 2012). In the 2000s, Ankara realized the need to review its political approaches to the countries of Central Asia (Laumullin, 2012). It was argued to implement more realistic projects and to abandon the excessively ambitious plans for these republics. However, during the rule of Erdogan’s cabinet, Turkey’s policy became more active and multi-vector both at the global and regional levels. The new elite began to place more emphasis on approaches based on assessing their real interests and opportunities. The strategic goal of Turkey, of course, after the implementation of the stage of economic integration, can be the creation of a political union of Turkic-speaking countries and its transformation into a powerful instrument of international politics.This was quite precisely described in the proposed program of the Turkish Justice and Development party (Turkish: Adalet ve Kalkınma Partisi) (Laumullin, 2012).
According to Laumullin, Turkey operates in several directions to implement its policy towards creation of the model of the all-Turkic union. First of all, this policy includes:
1) a strategy that aims a creating single energy basin that should not depend on Russia and which will enable the Central Asian republics to gain direct access to European markets. Here, Turkey will act as the main transport corridor for energy supplies;
2) enhancing the development of business relations and the creation of a unified communication system within the region, which should strengthen the commodity turnover and the system of personal contact exchange both between the leaders of the states and among ordinary people;
3) cooperation in the field of language and cultural exchange, designed to create an ideological basis for integration issues of the Turkic-Islamic world;
4) the gradual strengthening of the political integration of the states of the region through the creation of institutions following the example of the EU (Laumullin, 2012).
Turkey is trying (at least at the official level) also to take a leadership in the fight against the penetration of radical Islamists into the countries of Central Asia. This can give it additional opportunities to strengthen its influence in the region (Stratfor website, 2012).
Relations between Kazakhstan and the Republic of Turkey rose to a new level in 2006 during the VIII Summit of Turkic-speaking countries, where President N.Nazarbayev proposed the creation of a number of institutions within Turkic-speaking countries (the Parliamentary Assembly and the Council of Elders) and as result, it was supported by the Turkish side (Laumullin, 2012). In fact, Astana made an application for solidarity in the Turkic world, but Turkey hesitantly agreed to support Kazakhstan’s claims. Apparently, Ankara understands that without the support of Astana, Turkey will not be able to pursue an effective policy in Central Asia and in general in Eurasia. Also, on the other hand, the growth of the Kazakhstan’s significance in the regional political and economic actor, gives an opportunity to restrain to Turkish ambitions in the Turkic world, especially in Central Asia.
Despite the well-founded and unjustified suspicions of Turkey’s imperial ambitions and claims for leadership in the Turkic world with the aim of creating a political bloc of Turkic-speaking countries, Ankara remains one of Kazakhstan’s most important strategic partners. In addition to close economic and ethno-cultural ties, which are particularly strengthened in the post-Soviet period, both states share common international and geopolitical interests. Also economically, the relationships between Turkey and Central Asian countries have been widening and deepening over last 10 years (Ministry of Foreign Affairs of the Republic of Turkey, 2017) However, Turkey emphasizes the Kazakhstan’s position in Central Asia and gives a priority. When it comes to trade, it had been increasing during the between 1995 to 2010 from $236 million to 2.4 billion respectively (Stratfor website, 2012). But by 2015 the bilateral trade had been decreased by 38% compared to 2014 (Ministry of Foreign Affairs of the Republic of Turkey, 2017). Turkish companies mostly cooperate “telecommunications, petroleum products, food manufacturing and other sectors in Kazakhstan”(Stratfor website, 2012). As it can be noticed, Turkey does not have that much economic influence within the region, however when it comes to geopolitical weight, Turkey can play a crucial role.
As Laumullin claims, both Kazakhstan and Turkey view Eurasia as a natural zone of their political and economic activity and both of them are interested in closer integration in Central Asia. The reason is, Turkey and Kazakhstan agree that the influence of external powers (Russia, China, Iran) in Central Asia should have certain limits (Laumullin, 2012).
3 Kazakhstan’s economic security
3.1 Analysis of former strategic documents
As far as the general theoretical background for notions such as national and economic security was founded and the geopolitical and geoeconomic image for Kazakhstan has been created, in this chapter it is necessary to move towards main issue – Kazakhstan’s economic security.
With the end of the Cold War and the era of bipolar confrontation, the threats to national security of the countries and the menace of various military conflicts in the world, unfortunately, have not disappeared, but have increased. The global equilibrium that had been developing through the years, was disrupted for years. With the demise of one of the systems, the confrontation ended, but a new balance of forces and interests has not yet been clearly found in the world. And therefore, the ensuring national security for Kazakhstan, as a young sovereign state surrounded from all sides by strong and multi-populated states, was a paramount task. After gaining independence, the whole complex of major problems in the sphere of security grew up in Kazakhstan unexpectedly, which required an immediate solution. Therefore, one of the priorities in the state policy during this period was security. A harmonious system of national security adequate to the emerging internal and external situations was a prerequisite for the establishment of Kazakhstan as an independent state, and also provided an opportunity to concentrate on solving the problems of the transition period.
As part of the national security, the economic security of Kazakhstan is directly connected with Kazakhstan’s national security policy, while the latest, in fact, has been developing through the years of independence, by adapting to emerging new global changes and conditions. By looking at the chronological periods of the creation of Kazakhstan’s national security system, it can be seen that the main documents by which the national security has been adjusting are the following:
1993 – “The National Security Strategy of the Republic of Kazakhstan for 1993-2005”;
1999 – “The National Security Strategy for 1999-2005”;
1993 – “Military doctrine (defensive strategy)”;
2000 – “New Military Doctrine (potential threats: extremism, escalation of military conflicts)”;
1997 – “Kazakhstan – 2030” strategic development program;
1998 – “The Law on National Security of the Republic of Kazakhstan (Kassenova, 2005);
2012 – “The Law On National Security of the Republic of Kazakhstan” (The Law on National Security, 2012).
2012 – “Kazakhstan – 2050” strategic development program (The Strategy Kazakhstan – 2050).
Each of them had or have its own importance and significance, as well as aims and priorities. But what can be concluded, is that all of them were developed in order to increase and strengthen the national security of the country, where the issue of economic security was put into priority list.
However, until the end of 1990s, the topic of economic security had not been developed properly. The reason for this is that Kazakhstan, at that time, has become new independent state and was dealing mostly with first priority questions, mainly, as national and military security as well as defining its further foreign policy and self-determination in the international arena. It can be seen in the mentioned above documents of strategic development such as “The National Security Strategy of the Republic of Kazakhstan for 1993-2005”, “The National Security Strategy for 1999-2005”; “Military doctrine (defensive strategy)” (1993).
Indeed, Kazakhstan needed, first of all, to establish its physical borders, to create its legislative system and most important, to establish its own image in the international arena. Regarding country’s image, there were so many issues, as one of them is the abandonment of nuclear weapons, which were inherited by Kazakhstan from the USSR (Muminov, 2014). Needless to say, that it is quite hard to establish reliable relations with a country, which has just appeared on the map and has tremendous amount of nuclear warheads and other types of hard power. Regarding this case Russia, China and Western countries along with the USA, also Iran and India were quite cautious and had many doubts. That is why, aiming at the policy of nuclear weapon nonproliferation in the first years, Kazakhstan repatriated all 1410 warheads back to Russia, and destroyed the nuclear testing infrastructure in Semey region (Nuclear Threat Initiative, 2017). In return, Kazakhstan by signing a decree “On Accession to the Treaty on the Non-Proliferation of Nuclear Weapons” got a guarantee from Russia and the USA for its security, where later the UK, France and China also joined (Muminov, 2014).
However, after the Annexation of Crimea by Russian Federation, which, in fact, has violated the Budapest Memorandum, there is unwillingly rising a question “How can they be as a guarantee after this events?”. Nevertheless, in the beginning Kazakhstan’s independence, when the political and economic situation was quite different, this was necessary, in order to make a stable and nuclear-free space in the Central Asian region, which aftermath led to the strengthening of Kazakhstan’s position in the regional and international arena in peacemaking and bringing stability to the region.
This was one of the turning points in the initial phase of establishment of Kazakhstan’s national security policy through the management of its foreign policy. In result, Kazakhstan not only got acknowledgement from international community, but also ensured for itself a soil for further development of international relations, on global and regional scales, which aftermath entailed to deepening and widening of interactions between countries, in subsequent gave an opportunity to encompass almost all aspects of the state’s life.
Thus, after some years since independence, the issue of economic security was properly touched upon in 1997, when the President of Kazakhstan Nursultan Nazarbayev was proposing during his annual speech to the people of Kazakhstan, the new strategic document of development called – “Kazakhstan – 2030” (The Strategy «Kazakhstan 2030», 1997).
This strategy was a crucial moment for the country’s future development in the upcoming millennium, where Nursultan Nazarbayev precisely described Kazakhstan’s political and economic situation and its internal and external problems. At the same time, he clearly defined the long-term priority objectives of Kazakhstan’s development until the year of 2030 and put forward certain strategies for its implementation (The Strategy «Kazakhstan 2030», 1997).
In this document regarding the economic security, much attention was put mostly on the Kazakhstan’s internal economic policy, and to this existen, was clearly emphasized the issue of the transition from planned economy to open market economy. It was said that due to the being under the Soviet Union, Kazakhstan had been implementing totally different economic policy, which still has impact on people’s way of thinking, thus undermining the economic development of the country (The Strategy «Kazakhstan 2030», 1997). That is why it was necessary to change the system by economic reforms such as large-scale privatizations, support of small and medium business and transition towards market-based economy and increase the share of private sector, which aftermath brings the competitiveness. This kind of approach to economic development was called “Economic growth based on developed market economy with high level of foreign investments” (The Strategy «Kazakhstan 2030», 1997) .
As it was said in the “Kazakhstan – 2030”: “The strategy of healthy economic growth is based on a strong market economy, the active role of the state and attracting significant foreign investment.”
Also were emphasized the existing at that time and, in fact even nowadays, internal problems, most related to the structure and system of economic policy, its management and governance on both country and regional levels. Nazarbayev said that “the state in the economy should play a significant but limited role, creating a legitimate market framework in which the private sector plays the most important role” (The Strategy «Kazakhstan 2030», 1997).
“Kazakhstan – 2030” document for strategic development for these reasons developed a strategy for solution of those kind of problems:
“Accordingly, our duties are as follows:
eliminate persisting administrative interference of the government with trade and production;
complete the process of privatization including real estate, the remaining small- and middle-range enterprises and the agro-industrial complex;
sensibly organize and simplify the central Government and local authorities; – seriously reappraise the role, powers and responsibilities;
establish absolute supremacy of law and protect law-abiding citizens from crime. At the same time apply all power of laws and authorities to those who live a fairly-well-to-do life by using illegal means”.
However, as Nazarbayev mentioned, at the center priority attention is still the appropriate protection of foreign investment and the possibility of repatriating profits. Because, according to him there are several sectors of the economy: the development of natural resources, infrastructure, communications and information – which are of continuing importance for the country (The Strategy «Kazakhstan 2030», 1997). The development of these industries was necessary to have an impact not only on economic growth, but also on the social sphere, as well as on the integration of Kazakhstan into the international community. These are capital-intensive industries, for the development of which both foreign capital was needed and strict strategic control by the state (The Strategy «Kazakhstan 2030», 1997).
That is why the position of Kazakhstan as a major interregional transport center required the establishment of a more liberal regime for foreign investment. This allowed to attract the necessary inflow of finance and knowledge, develop capabilities of the economy and regular trade exchanges with foreign countries (The Strategy «Kazakhstan 2030», 1997). As it was mentioned in the document that an open and liberal investment policy with clear, effective and strict observance of laws, executed impartially by an administration, is the most effective incentive for attracting foreign investment (The Strategy «Kazakhstan 2030», 1997). The development of such a policy had to become one of the main tasks, since it was difficult to imagine how Kazakhstan could achieve a rapid economic growth and modernization without foreign capital, technology of experience.
In order to make the investment climate more favorable, and Kazakhstan became the leader in terms of the volume and quality of attracted foreign investments, President Nursultan Nazarbayev established called at that time “The State Committee for Investments” which nowadays named as The Investment Committee of Ministry for Investment and Development of the Republic of Kazakhstan ((The Strategy «Kazakhstan 2030», 1997; Invest.mid.gov.kz, 2017).
Also was emphasized the importance of the decline in the gross national product of the share of agriculture, the extractive industry and, on the contrary, the growth of the share of processing industries and, above all, science-intensive, with high added value, as well as services (The Strategy «Kazakhstan 2030», 1997).
As it was said by the President, that under favorable conditions in the future, the volumes of the oil and gas production sector which are Kazakhstan’s core industry, as well as the entire extractive industry – will grow significantly. According to him, this gives a benchmark, which should guide the management of country’s structural policy (The Strategy «Kazakhstan 2030», 1997).
However, in order not to become a country with a mono-raw orientation, it was necessary to develop “light and food industries, infrastructure, oil and gas processing, chemistry and petrochemistry, separate sub-branches of machine building, final high-tech industries, services and tourism” even more rapidly (The Strategy «Kazakhstan 2030», 1997). To this extent, steady growth could help to ensure the diversification of the industry. While in the conditions of strong competition with liberal imports, the process of adaptation of industries and entire industries to the market is going on, Kazakhstan’s products, except for raw materials, are not competitive in the world market (The Strategy «Kazakhstan 2030», 1997). That is why Kazakhstan was despite all efforts was inclining towards the heavy raw material structure of production, while the entire civilized and developing world was moving in the opposite direction. Therefore, it was highlighted that the fall in production and its regressive structure is a doubly dangerous factor, which can no longer be discounted (The Strategy «Kazakhstan 2030», 1997).
As Nursultan Nazarbayev mentioned in this document:
“If the free market is really free, it will create new industries in the country. Our task is to present Kazakhstan in the eyes of the world community as an attractive place for investment, actively attract investors to the most important sectors”.
Also much attention was put on natural resources which Kazakhstan has as well as rational subsoil use and development of the industry. Despite the fact that Kazakhstan has so many natural resources, especially energy sources, country was not able to provide even the domestic demand. The reason for this was the lack of appropriate infrastructure and necessary communications for the export of oil and gas to international markets along with transportation systems (The Strategy «Kazakhstan 2030», 1997).
The strategy developed the following principles regarding the use of energy sources:
The first – establishment of long-term partnerships with major international oil companies to attract the best international technologies, know-how and large capital to quickly and efficiently use our reserves.
The second – establishment of pipelines for the export of oil and gas. Only a large number of independent export routes can prevent Kazakhstan’s dependence on one neighbor and monopoly price dependence on one user.
Third – The direction of strategies on the use of fuel resources is to attract the interests of world’s large countries community to Kazakhstan and to its role as a global supplier of fuel. In this case, companies and countries that will invest in the development of the Kazakhstan oil and gas business include the United States, Russia, China, Japan, Western European countries. The economic interests of these countries and companies in the export of our resources on a regular and stable basis will contribute to the development of an independent and prosperous Kazakhstan.
Fourth – With the attraction of foreign investments again, Kazakhstan will accelerate the creation and development of internal energy infrastructure, solve the problems of self-sufficiency and competitive independence.
Fifth – The strategy implies extremely diligent use of future revenues from these resources (The Strategy «Kazakhstan 2030», 1997).
Indeed, this strategy had a great impact on Kazakhstan’s future development, regarding not only country’s economic security but also all spheres of national security. Also, it is worth to mention that economic security of Kazakhstan was very strongly tied with foreign policy, and that is why so much attention was put here. “Kazakhstan – 2030” was some kind of compass, which had been leading country through the years of development to achieve its targeted purposes and interests, directing all governmental and state institutions as well as all Kazakhstan’s society to the right way of development. All of them were engaged and sometimes were forced to develop their own projects within this program of strategy. And indeed, this gave its positive outcome, because generally, almost everything what had been mentioned in the strategy was achieved or it was very close to achieve. Especially economic indices were very promising. So, in result, indeed, Kazakhstan had been experiencing very significant economic changes since 1997. As it was mentioned before, in the second chapter, Kazakhstan for the first time signed Caspian Pipeline Consortium agreement to build a new pipeline routes in 1997, which in fact, was a crucial point for further flow of foreign direct investments to Kazakhstan’s territory. It can be clearly seen in the following graph below:
Graph 3. Foreign Direct Investments to Kazakhstan between 1992-2015.
Source: (Data.worldbank.org, 2017)
But it is still might be unclear to answer the question “How this could affect on economic security?”. Of course, to answer surely to such a question can be difficult, however, basing on the previously given all geoeconomic and geopolitical issues along with strategy of development it can be assumed that Kazakhstan at that time extremely needed investing capital and moreover, foreign technology, which could push country’s economy. As Nazarbayev said that comparatively outdated Kazakhstan’s infrastructure cannot afford both internal and external demands for production, and therefore cannot be competitive in the market and this why the development of the sector is needed (The Strategy «Kazakhstan 2030», 1997).
As long as period of stabilization was achieved, Kazakhstan had to diversify its economy, to move from being a country of with raw material based economy to producing country, in order to not to only depend on the prices for energy sources in the world market. Another point is, by establishing trade partnerships and agreements with different countries, Kazakhstan can manage to prevent its dependence on one neighbour, who could make pressure on the state and its economy. Having a different ways to export the Kazakhstan’s goods, which are nowadays mostly hydrocarbons, gives a room for to be economically, and therefore politically independent.
This kind of approaches led to the emergence to “multi-vector” policy in the late 1990s. In one of the President’s speeches he said:
“… the development of friendly and predictable relations with all states that play an essential role in international affairs and represent a practical interests to our country. Kazakhstan, due to its geopolitical position and economic potential, has no right to confine itself to narrow regional problems. It would be incomprehensible not only to our multinational population, but to the entire world community. The future of Kazakhstan is in Asia and in Europe,as well as in the East and in the West. Carrying out such a policy, we will be able to exclude any manifestation of the threat to the security of Kazakhstan. We will be able to strengthen favorable external conditions for economic and political reforms in our country.” (Kazportal.kz, 2017).
However, despite significant political and economic changes in the country and the process of stabilization of the economy has been established, Kazakhstan still has not diversified its economy, as it can be seen in the second chapter. Kazakhstan still strongly depends on its energy sector and prices for hydrocarbons in the world market.
That is why, in 2012, the President Nursultan Nazarbayev in his annual speech to the people of Kazakhstan announced that the program of strategic development “Kazakhstan – 2030” had been successfully implemented and almost all goals had been achieved. Moreover, he added that Kazakhstan nowadays new strategy for further development, which could lead the country to new perspective goals by adapting to the new changes and challenges in the global world. Thus in 2012, was proposed the new document of strategic development called “Kazakhstan – 2050”.
3.2 “Kazakhstan 2050”
In the previous subchapter were analyzed the previous programs of Kazakhstan’s strategic development, where the program “Kazakhstan-2030” was in the core. In this subchapter is going to be analyzed the strategy “Kazakhstan – 2050” and its importance in terms of national economic security policy. Because, as it was already mentioned, Kazakhstan adheres to this program as the main strategy for country’s development, thus builds its internal and foreign policies according to it.
Probably, it would be better to start from the tagline of the strategy – “New political course of the established state”, which in fact, gives from the beginning a message, that Kazakhstan is going to move towards a completely new policy (The Strategy Kazakhstan – 2050, 2012). The reason for developing a new strategy is not only that Kazakhstan has already implemented its policy and has mostly reached the aimed goals, but also, as it was mentioned before, the new decade brings new changes to the globalized world: political and economic as well as technological and ecological. New changes mean new challenges, especially to Kazakhstan, the economy and infrastructure of which are still weak and need improvements. That is why, in order to survive in the capitalized world where the market-free economy is conditioned by the competitiveness, Kazakhstan has to modernize and diversify its economy and political structure. All of this will have a positive impact on the national economy and will strengthen it, meanwhile making Kazakhstan economically secure. For these reasons, “Kazakhstan – 2050” program, proposed by the President of Kazakhstan, has established new goals and targets, aiming at to get in the 30 most competitive and developed countries in the world (The Strategy Kazakhstan – 2050, 2012).
So, what are the threats and challenges that Kazakhstan (and not only) is going to face in the following decades? “Kazakhstan – 2050” strategy defined the main 10 challenges of the twenty-first century as following:
As it was mentioned in the document, being aware of the global challenges contributes to adjustment of Kazakhstan’s development to these conditions, meanwhile adapting the program of further strategic development in a way that country could get more profit (The Strategy Kazakhstan – 2050, 2012). Also it was said, that Kazakhstan does not have to be afraid, rather prepared and manage its improvement of infrastructure and producing industry, so that Kazakhstan could use this opportunities which brings new decade. Because, these challenges – are opportunities for Kazakhstan. As an example for this was given the possibilities of Kazakhstan’s ecologically clean territories which can produce ecologically clean products. It was said that Kazakhstan has already considered as one of the world’s largest exporters of cereals and moreover, Kazakhstan can easily make tremendous breakthrough in its agriculture. For this country needs a new way of thinking from the governance perspective. All of these in sum could stand against to the threat of global food security (The Strategy Kazakhstan – 2050, 2012).
Also was said about the global energy security, where Nazarbayev emphasized the importance of the transition to new types energy technologies. He said that nowadays most of developed countries are investing into the “alternative” or “green” energy technologies. It is expected that the new kind of energy sources will be able to generate the 50% of total energy consumption, which in fact means the end of “the era of hydrocarbon economy” (The Strategy Kazakhstan – 2050, 2012). It was also said that Kazakhstan is one of the key players in the global energy security, and therefore will not do any single step away from its policy of a reliable strategic partnership and mutually beneficial international cooperation in the energy sector (The Strategy Kazakhstan – 2050, 2012). By understanding the significance of the upcoming trend of renewable energy sources and eco-friendly technologies, Kazakhstan is going to hold an exhibition “Astana EXPO-2017” which will take place in the capital city – Astana (EXPO-2017 Astana, 2017). The concept of the “Astana EXPO-2017” is called “Future Energy” (EXPO-2017 Astana, 2017). The event is aiming to collect the best developments in these areas, and will demonstrate during 93 days
“not only what should be and will be the energy of the future, but also the problems of developing countries related to the needs in it” (EXPO-2017 Astana, 2017). The best experts of these fields will be gathered in Astana and will discuss about what has to be done to provide the “green energy” and about its “availability, environmental friendliness and economy”, which are going to become the main the main trends of the development for the coming decades (EXPO-2017 Astana, 2017). Here is also worth to mention, that a holding a such event gives country new image, new possibilities of improvement, attractiveness and thus, new flow of foreign direct investments. Therefore it is expected that, the Astana EXPO-2017 will have an positive impact on country’s economy, by opening for it a new direction of development, where Kazakhstan can succeed, if the condition of proper management. In the same manner will affect on the political image of the country.
Another point was about the exhaustibility of natural resources, and here it was said that Kazakhstan, which is rich for natural resources, has to improve its subsoil and production management. It was emphasized that country needs a new approach to the attitude towards the natural resources, which means that country has to get know how to properly manage them and accumulate all the revenues in the treasury, and most importantly – how to rationally and effectively convert the richness for natural resources into the economic growth (The Strategy Kazakhstan – 2050, 2012).
The issue of the third industrial revolution was also touched upon, where Nazarbayev highlighted that mankind on the one step towards it, and this revolution shapes a new understanding of production. Thereby, it was said that nowadays human beings live in a completely different technological reality, because new technological breakthroughs significantly change the structure and needs of the market (The Strategy Kazakhstan – 2050, 2012). It was said by Nazarbayev:
“Digital and nanotechnology, robotics, regenerative medicine and many other achievements of science will become everyday reality, transforming not only the environment, but also the person himself. We must be active participants in these processes” (The Strategy Kazakhstan – 2050, 2012).
As far as the main threats and challenges of the coming were defined, Kazakhstan, as it was mentioned before, has to improve and shape a new type of its internal and foreign policies in order to be able to prevent them. For this reason Kazakhstan – 2050 strategy has developed its own purposes of the first priority:
• Further development and strengthening of the statehood;
• Transition to new principles of economic policy;
• Comprehensive support for entrepreneurship – the leading strength of the national economy;
• Formation of a new social model;
• Creation of modern and effective education and health systems;
• Increasing the responsibility, efficiency and functionality of the state apparatus;
• Building an adequate international and defense policy for new challenges (The Strategy Kazakhstan – 2050, 2012).
Following these principles, Kazakhstan moves towards to the new direction of economic policy called “Comprehensive economic pragmatism based on profitability, return on investment and competitiveness” (The Strategy Kazakhstan – 2050, 2012). According to it, it has 4 main principles, which in sum contribute to shape a new approach and attitude towards management of the national economy:
“First. Adopting all economic and managerial decisions based purely on economic feasibility and long term interests.
Second. Defining new markets where Kazakhstan can participate as an equal business partner and create new sources of economic growth.
Third. Creating a favorable investment climate to help build economic capacity, profitability and return on investments.
Fourth. Creating an effective private sector economy and developing public private partnerships. We must do this by stimulating exports with state support” (The Strategy Kazakhstan – 2050, 2012).
Also, in this regard were proposed to maintain a new personnel policy along with modernization of the macroeconomic policy which contains a budgetary, tax, monetary policies as well as the policyof managing public and external debts. According to them, Kazakhstan needs to develop favorable conditions for entrepreneurship and doing business, thus improving its monetary and tax policies, which could lead to the liberalization of the labor and trade markets.
The program of strategic development “Kazakhstan – 2050” again puts much to the development of the infrastructure. It was said that the process of development has to go in two directions such as the integration of the national economy into the global environment and even development of regions within the country (The Strategy Kazakhstan – 2050, 2012). In addition to this it was also mentioned it is important to concentrate on the space outside country, which could be a place for creation of Kazakhstan production transport and logistics facilities abroad. Nazarbayev said that Kazakhstan has to go beyond the framework of existing ideas and create joint ventures such as ports in countries with direct access to the sea, transport and logistic hubs in the key transit points of the world – in Europe, Asia and America and etc. For this purpose it is expected to develop a program of “Global infrastructure integration” in the future (The Strategy Kazakhstan – 2050, 2012).
Kazakhstan being located in the heart of Eurasia, has tremendous potential as a transit zone, which links between West and East, North and South. This gives an opportunity to be a key player in world’s transit traffic. That is why Kazakhstan – 2050 strategy targets the purpose to implement a set of nationwide projects for infrastructural developments, the outcome of which is going to be the increase the volume transit traffic by 2020 twice and by 2050 10 times. Meanwhile the main aim is the promotion of national export only to those world markets where there is a long-term demand for Kazakhstan products and services (The Strategy Kazakhstan – 2050, 2012).
When it comes to country’s internal regions, especially the remoted ones, with the low density, it was proposed to create “infrastructure centers”, in order to provide them with essential and economically important basics of infrastructure. For this reason the transportation system has to be improved properly (The Strategy Kazakhstan – 2050, 2012).
Very special attention was paid to modernization of the state asset management system. In this point was suggested that country has to be organised as a one big corporation, therefore all management staff of the country have to work and think in the same manner, because it is really important to have a whole and coherent system (The Strategy Kazakhstan – 2050, 2012). Here Nazarbayev commented that it is necessary not just to allocate the national budget, but also to invest carefully and rationally. Meanwhile, the main criteria of effectiveness remains return on investment:
The faster Kazakhstan can increase its production potential, the sooner it will become a full-fledged player, not an appendage of the international market (The Strategy Kazakhstan – 2050, 2012).
Thus, in order to maintain a proper investment policy and money management of country’s budget, the National Fund of Kazakhstan Republic has been engaged as a leading actor. At the same time the state in the face of national companies should stimulate the development of the future economy, taking into account the sectors that will emerge as a result of the Third Industrial Revolution. The domestic industry must use the newest composite materials that have to be produced in Kazakhstan (The Strategy Kazakhstan – 2050, 2012).
Also was touched the issue of innovational technologies. According to the strategy, Kazakhstan has to support private companies to invest into new researches and innovations. However it was commented that innovation is quite important, but it is not the main purpose, because Kazakhstan will get benefits only when there is a demand for country’s technologies, otherwise it has no sense (The Strategy Kazakhstan – 2050, 2012). Addition to this, Kazakhstan – 2050 strategy claims that Kazakhstan should those sectors which have a strategic importance and can prove their effectiveness (The Strategy Kazakhstan – 2050, 2012).
When it comes to country’s energy sources, Nazarbayev emphasized that they have to be treated as an important strategic advantages of Kazakhstan for ensuring economic growth, large-scale foreign policy and foreign economic agreements (The Strategy Kazakhstan – 2050, 2012). As it was said before, natural sources will help to make an economic growth, subsequently, it will give an opportunity to accumulate budget and after invest it into the diversification of the economy, The main directions towards which the strategy moves, are:
Also there were Nazarbayev words, saying:
“In the interests of the future of the nation and the security of the state, it is necessary to create a strategic “reserve” of hydrocarbon raw materials. The strategic reserve will become the foundation of the country’s energy security. Thus, we will create another defensive echelon in the event of possible economic upheavals” (The Strategy Kazakhstan – 2050, 2012).
Kazakhstan – 2050 strategy pays much attention for industrialization process in the country. The main aim is, again, the diversification of the economy, which means not to export raw materials, especially energy sources, but also produce competitive final products in Kazakhstan. Looking at this perspective, Kazakhstan is aiming at increase the share of non-primary products[3] in total volume of export twice by the year of 2025, and 3 times by 2040 (The Strategy Kazakhstan – 2050, 2012).
To achieve these goals, it was said that Kazakhstan has to update its production assets in accordance with the latest technological standards entirely by 2050, so that it could provide the foreign markets with competitive products, thus it could ensure its long-term perspectives (The Strategy Kazakhstan – 2050, 2012). However it does not mean that by that time Kazakhstan will have no such products in its export, but will step by step move towards its goal. Here it is also important for financial experts and economists of Kazakhstan to find a free and attractive niches within the global market, where Kazakhstan will have no competitors (The Strategy Kazakhstan – 2050, 2012).
In the same manner was proposed by Nursultan Nazarbayev that the State program on forced industrial-innovative development should focus on the import of industrial capacities and the exchange of technology. For this a subprogram on the creation and development of joint international companies and profitable partnerships for the country is needed (The Strategy Kazakhstan – 2050, 2012).
Kazakhstan’s space base has not also been left without attention. Indeed, Kazakhstan’s Baikonur Cosmodrome is very important for the world space international space studies, especially in for Russia, because it is rented and administered by Russian Federation (Nasa.gov, 2017). However, Kazakhstan, according to Kazakhstan – 2050 strategy, should not take no participation in this field, rather improve its cluster of space services and research in the future. In this regard, was mentioned the importance to finish already launched projects and programs such as an assembly and testing complex of space vehicles in Astana, development of space remote sensing system, also national space monitoring and ground infrastructure system, and a high-precision satellite navigation system (The Strategy Kazakhstan – 2050, 2012).
Also was mentioned the importance of Kazakhstan’s territory, which gives tremendous opportunities for agricultural and stock raising business (The Strategy Kazakhstan – 2050, 2012). By looking at the numbers provided by the US government, it can be seen that country has 85.2 million hectares of agricultural lands, which contain 22.5 million ha and 57.5 million ha of arable and pasture lands accordingly (Export.gov, 2017). However, nowadays, the agricultural and livestock farming sectors are less developed, which seem quite unlogic, because these sectors from time immemorial were the main elements of the industry and work life of the Kazakhs. For these reasons, Kazakhstan needs a significant modernization of these sectors, in order to become a key player in upcoming decades, where it is expected to have a huge demand for ecologically clean and high quality products (The Strategy Kazakhstan – 2050, 2012).
By summing up the document of strategic development “Kazakhstan – 2050”, it also worth to mention that this is not all issues what the strategy touched upon. Kazakhstan – 2050 increased many other questions which in sum can cover all important and essential aspects of country’s life, such as social policy, education, healthcare, tourism, cultural and ethnic relations and etc. Also considerable attention was put on the strengthening of statehood, democracy and languages, which are very important issues nowadays.
Kazakhstan – 2050, as its predecessor – “Kazakhstan – 2030”, serves as the main navigation system of the strategic development of Kazakhstan, and by this time many and many projects and programs have been launched to achieve the established long-term goals. Currently, within the framework of this strategy, Kazakhstan is undergoing the program called “Modernization 3.0” proposed in honor of the 25th anniversary of Kazakhstan’s independence in January of 2017. The tagline of the program is “Third modernization of Kazakhstan: global competitiveness” (Primeminister.kz, 2017).
So, what can be concluded from this subchapter is, that Kazakhstan by 2012 had undergone its initial period of establishment as an independent state. Adopted “Kazakhstan – 2030” strategy in 1997 had been serving as lighting house, and, had succeeded undoubtedly. However, as it was mentioned above, new era brings new challenges. In this regard it was necessary for Kazakhstan to reconsider everything and to define its further goals and directions, towards which is willing to go. Thus, “Kazakhstan – 2050” was proposed and adopted in the end of 2012. However, one should be interpreted correctly, that it is not completely different from its predecessor, rather improved and developed version of it, with modern approaches and vision towards the future development. As it also can be seen that diversification of the economy plays very crucial role in this regard. Kazakhstan’ government understands that the reliance only on the incomes from the of export of natural sources can threaten national economy and its security. That is why, Kazakhstan should develop the system of country-wide modernization, directed to its infrastructure and industries (The Strategy Kazakhstan – 2050, 2012).
3.3 Obstacles for diversification
In this subchapter it is expected to define what are the main obstacles for diversification of Kazakhstan’s economy. Because, by defining existing and conceptual obstacles which impact negatively on the diversification process of Kazakhstan’s economy, can be reached a better understanding of country’s foreign and internal economic policies, in this regard also decisions, which have been made by this time. Also, it would give a better image to understand why Kazakhstan struggles to strengthen and diversify its economy, which aftermath undermines the economic security of the country, by shrinking the room for political maneuvers in the international arena.
According to studies which have been made by many researches from Kazakhstan and other countries, it can be said that there are many problems and obstacles that affect negatively on Kazakhstan’s economy and its diversification. As Rakhzhanov (2016) pointed out, the main reason for the current crisis is very strong commodity dependence of Kazakh economy, because the government did not diversify the economy in the period of high oil prices in the world market. This, according to him, led to the “Resource Curse” of the Kazakhstan’s economy. Because, in the years of incredible economic growth, Kazakhstan had been inflating by petrodollars, which aftermath Kazakhstan’s governance relaxed and stopped reforming the economy. Moreover, as he said, at this time there was a pullback from the market principles of development, and in the country a full-fledged state capitalism was built with some elements of socialism (Rakhzhanov, 2016). And when the flow of petrodollars into the country dried up, the authorities suddenly realized and began to implement structural reforms to cure the systemic diseases of the state. He says, that these structural reforms will not lead to the desired results, because there are unresolved conceptual problems, due to which the state failed to implement reforms in the past. Thus, solve this fundamental problem, it is necessary to conceptually change the approaches (Rakhzhanov, 2016).
Rakhzhanov (2016) listed 4 main basic problems for diversification of Kazakhstan’s economy:
The strategy “Kazakhstan 2050” says that only through political liberalization can modernize the country and make it competitive. In this regard Rakhzhanov commented that this should had been done long before. As it was mentioned, Kazakhstan’s government authorities could not reform and diversify national economy in the period of oil-booming, then, according to the author, what can be expected if the same people do the same reforms and there is no any kind of new approach (Rakhzhanov, 2016)? Although this might seem very provocative, on the other hand there is some truth.
Rakhzhanov pointed out that an overall modernization of the country is impossible without observing two conditions: 1) there must be responsibility for erroneous and failed reforms;
2) modernization is impossible without the competition of ideas and economic policies, as well as various approaches to the development of the country (Rakhzhanov, 2016).
When it comes to the ‘manual management’ of the economy, author says that it has a negative effect on economic growth of the country and leads to the increase of dollarization of deposits within the country. Also he added that the quality of economic program documents remains at an extremely low level. The execution of these documents is even worse. Thus, the joint statement of the government and the National Bank of the Republic of Kazakhstan on the main directions of economic policy for 2015 was initially divorced from reality, moreover, its items were mostly not executed (Rakhzhanov, 2016).
Another point is that author defines the building a “social” state as a factor that contributes to the detriment of country’s competitiveness and business. He pointed out that Kazakhstan being besotted in the period of high economic growth took responsibility to pay high social spendings, which in fact, nowadays can undermine the economic and social stability (Rakhzhanov, 2016). Because, country due to the crisis in the world market, especially when it comes to oil prices and other raw materials, Kazakhstan is suffering from the lack of national income which used to come from the export of mentioned goods. Thus government is paying most of all spendings from the National Fund, which is not unlimited. So, as Rakhzhanov said, if country meanwhile wants to invest in other programs and projects then it probably has to cut or decrease the social spendings, or to impose this responsibility on private sector and economically active population (Rakhzhanov, 2016).
The last but not least point according to the Rakhzhanov’s list of obstacles for the diversification of Kazakhstan’s economy is the state capitalism. According to him, since the independence, Kazakhstan has grown up a state capitalism in the country’s economy and in the result it can be seen that the share of the national companies in the country’s GDP accounts for 43%, whereas in the OECD countries this index on average is at 15% (Rakhzhanov, 2016). In this case, indeed, to decrease the share of national companies the government will have to cut the National Welfare Fund “Samruk-Kazyna” which hold the assets of NOC “KazMunayGas”, Kazakhstan Temir Zholy (National Railways company), KazAtomrom, Samruk-Energo, KEGOC (electric networks), Air Astana, Kazpost, Tauken Samruk (mining sector) and etc. by three times (Rakhzhanov, 2016).
According to him, the state should not engage in business. Because, state capitalism and full-fledged market relations are, in principle, incompatible. State-owned companies are less efficient than private ones. Because of their inefficiency, they are devouring taxpayers’ money. In addition to the fact that state-owned business is inefficient, it creates an environment around itself where there is no real competition and normal market relations. Structural reforms are generally conducted so that the state can help business become competitive. If the state itself owns most of the business assets, the meaning of such reforms is lost (Rakhzhanov, 2016). Although, there is place for truth in his claimings, however, the causing of national companies a negative effect on the diversification not a very factor. The main factor here might a level of corruption, which is, indeed, a devastating feature of Kazakhstani people and its government.
Kazakhstan takes 131st place out of 175 countries in the world (Tradingeconomics.com, 2017). This obviously shows that country is very corrupted and undermines the state’s economy and also the soil to attract foreign investments. Also government authorities are tend to embezzle the state money which were given to launch and to implement the national programs and projects and not only (Akhmetov, 2015). Thus it has an immediate impact on the quality of governance and management of economy in particular. Moreover, on the one hand might seem that corruption in Kazakhstan is scaring of feature of the country for foreign investors, however, on the other hand, it can give a room to bribe country’s authorities in order to sign or get a permission for their businesses.
That is why, even having a very good-written and prepared strategic document for development not always work in the places where the corruption level is extremely high. This leads to mistrust of the citizens to Kazakhstan’s government, aftermath causing effect of social-economic-political gap between the classes, which, in fact, contributes to disintegration of society. In this way, it can be pointed out that corruption is very important problem of Kazakhstan.
What can also be as an obstacle for diversification is already existing infrastructure, which is mostly either poor or old. In addition to this the remoteness of the regions which are located quite far from each other. As an example here can be the lack of proper road systems as highways between the cities of republican importance, which affects negatively on the transportation and delivery system.
Another point the ratio between the country’s vast territory and its small population, might also be as an obstacle for the diversification. Because, Kazakhstan, as it was mentioned in the second chapter that it has a territory of 2.7 million square kilometers with population of almost 18 million people, which in sum makes density around 6.6 person per square km. Moreover, the economically active population accounts only for 9.1 million. In this point can be added that also there is a lack of high-qualified professionals, especially in IT sectors (Salapayeva, 2017). Thus, due to the large territory but relatively small population it be stated that it can cause some struggles for the process of diversification of Kazakhstan’s economy.
Thus, by summing up everything what was said in above, it can be stated that there are many the factors that pull down the process of diversification of Kazakhstan’s economy. In this regard, despite the fact that being abundant for natural resources, Kazakhstan suffers from Resource Curse and Dutch Disease. Subsequently this undermines the economic security of national economy, at the time making it relatively weak to stand against to internal and external factors.
4 Kazakhstan’s foreign economic policies towards Russia and China
4.1 Economic dependency on Russia and China
This chapter is going to move towards case study of the thesis, where Kazakhstan’s foreign economic policy towards Russia and China must be analyzed, in order to find out how Kazakhstan is managing to preserve its economic security in the international arena. The reason why Russia and China were taken as the case studies is that Kazakhstan apart from being geographically surrounded by these two great powers, it is also strongly dependent on them in terms of economy as well as politics. This part of the chapter is going to touch upon the mentioned above issue properly and to explain how and why Kazakhstan is dependent.
In the second chapter it was already mentioned that Russia and China are the main players in Kazakhstan’s economy. According to Tradingeconomics.com (2016), Kazakhstan exported commodities to Russia and China about $3.5 and $4.2 billion USD in 2016 respectively, which account for 9.5% and 11% of country’s overall export value accordingly. Although, it can be seen that, since 2006 the main destination of Kazakhstan’s export has been Italy, which in 2016 holded 20% of overall export, with commodity value for $7.5 billion USD.
When it comes import, Russia and China shared 36% and 15% respectively in the same year, while Italy had only 3.3%. The value of which accounts for $9.1 billion, $3.7 billion and $838 million USD respectively.
In this point it can be proved that Russia and China are the main players of Kazakhstan’s economy. Moreover, being geographically located between the two, Kazakhstan, as it was argued in the previous chapters, has very close geopolitical and geoeconomic ties with them. Thus, by having many different aspects such as geography, politics, economy, infrastructure and industry conditions, as well as culture and demography, Kazakhstan has to implement its economic security policy towards Russia and China very carefully and diligently, in order to stay economically and politically independent from them, at the same time – secured by them.
Economic dependence on Russia
Kazakhstan’s dependence on Russia has been existing from immemorial time. This situation worsened during the Soviet time, when everything was under the control of Moscow, and Kazakhstan, along with other Central Asian states, was in the periphery that was providing the whole USSR with natural sources and raw materials. In order to have a political and economic control over the states, Moscow was not eager to develop hard and proper infrastructure on the territories of the member states. Though, on the other hand, it cannot be denied that Soviet Union contributed a lot in Kazakhstan’s infrastructure.
Nowadays issue of sovereign Kazakhstan’s economic dependence gets its beginning from 1991, after the collapse of Soviet Union (Nurgaliyeva, 2016). Right after this event most of former countries felt that they are still strongly intertwined by economical and political bonds with each other. For these reason the Cooperation of Independent States was created on 21 of December in 1991, in Almaty. (Cisstat.com, 2017). This gave a space for further cooperation of the member states with each other by keeping the economic and political interconnectivity. So, during the first years of independence Russia had been the biggest importer of Kazakhstani products (Trademap.org, 2017).
Having established all its territorial boundaries, and having solved the initial issues of national security by the middle 1990s, Kazakhstan had also made a transition from planned to market economy and adopted its own national currency – tenge. However, Kazakhstan had lack of money and capital to boost its economy. Thus, Kazakh authorities, in the late 1990s, opened Kazakhstan’s market for foreign investors. This led to the appearance of joint ventures with Western companies and flow of FDI into Kazakhstan (Nurgaliyeva, 2016). The crucial increase of oil sector in the economy led to economic growth of the country, subsequently Kazakhstan became able to compete with Russia.
Through the years, the export of crude oil to foreign markets has been the leading element in the Kazakhstan’s economy. In 2016, mineral fuels, oils and distillation products consisted 61% of overall export volume (Tradingeconomics, 2016). In this point one would think that Russia is the main destination of Kazakhstan’s oil export, however according to Trademap.org (2016), Russia imported only 2% of Kazakhstan’s oil production in 2016, whereas the largest part was mainly imported by EU countries (see Chart 1).
Chart 1. The shares of countries in Kazakhstan oil export (2016)
Source: (Trademap.org, 2017)
However, being geographically landlocked between Russia, China and other Central Asian countries and having poor infrastructure inherited from Soviet time, Kazakhstan had no choice to deliver its oil products through Russian territory by using their oil pipeline routes (Olcott, 2010).
So, since March of 2001 the first barrels of Kazakhstan oil started to flow through the Caspian Pipeline Consortium pipelines (Cpc.ru, 2017). As the major part of Kazakhstan’s oil is being imported by Western European countries, it has been delivering mainly across Russian territory, to its port called Novorossiysk, which is on onshore of the Black Sea (See Picture 1) (Chevron.com, 2015). The capacity of the consortium is going to be increased from 28.2 mln tons up to 67 mln tons per year, where Kazakhstan’s share is expected to be at level 52.5 mln tons per year in the following years (Kmg.kz, 2017). Beyond this pipeline system there is another route which goes to Russia from Uzen-Atyrau-Samara with the capacity of 17.5 mln tons (Kmg.kz, 2017).
Picture 1. The route of Caspian Pipeline Consortium.
Source: Chevron.com, 2015
When it comes to general export which goes to Russia, in 2016 it constituted $3.5 billion, and put Russia into 3rd place among the buyers. Here, the main products are ores, slag and ash which accounts for 19%, whereas iron and steel along with inorganic chemicals, precious metal compound, isotope for 17% each. Only 13% is for mineral fuels, oils, distillation products. Other commodities have less significant value.
The role of Russian Federation is much more significant in Kazakhstan’s import sector, where the latter imported from Russia commodities with value of $9.1 billion, which contributes to 36% of all imported goods in 2016. In the table below it can be what types of products Kazakhstan imports from Russia.
Table 1. Imported goods from Russia in 2016.
Source: Tradingeconomics.com (2016)
By analyzing the imported goods, it can be concluded that they are not extremely significant for Kazakhstan’s economy, in the sense that they do not have a direct impact on national economy.
Another extremely crucial element here is that Kazakhstan is very dependent on Russia in terms of politics. Because, beyond that Russia has an image as an classic great power firstly in Post-Soviet area, secondly in Eurasian continent, it has a considerable political weight, that has been shaping Kazakhstan’s internal and foreign policies (V.V. Naumkin and et.al., 2013; Muratalieva, 2014; Friedman, 2010).
Kazakhstan, as a country exposed to Russian influence, through the years has been implementing its foreign policy in such a way, that its implications could lead to the preservation and enhancing of its national security as well as national sovereignty. In this case the multi-vector policy is necessary. Because, by relying only Russia’s shoulder, Kazakhstan would become way weaker to resist its influence, and would limit itself only by international environment that is pleased by Russian authorities.
Nowadays, when Russia is regaining its political influence in the international arena, Kazakhstan and other Central Asian countries are being included into Russian field of influence and are considered as buffer zones (Friedman, 2010). Thus, the sunset of the first and the beginning second decade of 21st century, when the political situation in the international arena after events in Georgia, Ukraine and in Middle East has been changed significantly, Russian Federation, as re emerging great power, is trying to strengthen its hegemony in the Post-Soviet countries, by using any kind of sources of power, both hard and soft.
Kazakhstan, among the Central Asian countries suffers most, because of its geographical, political and economic connectivity. Also, especially after the Annexation of Crimea in Ukraine, the demographic situation in the North of Kazakhstan has become a fearing concern (see Map 1).
Map 1. Russian minorities in Kazakhstan.
Source: (Kuchins et al., 2015).
Within this context, Kazakhstan due to the multidimensional changes in the global world, has changed its internal and external policies towards Russia, however, it does not mean that Kazakhstan is trying to abandon its relationship with this superpower. Rather, it would be more correct to say that Kazakhstan is trying to balance Russian influence, through different tools of foreign policy. So, by using its natural resources and geographical position, Kazakhstan, first of all, is going to enhance its economic security, by diversifying its economy. For these reasons, Kazakhstan’s dependence on Russia has more wide background, rather than only economic one.
Economic dependency on China
China’s extreme economic growth within last 10 years, has made it to become the second largest economy by GDP in the world, which accounts for $11 trillion (WorldBank, 2017). The rising demand for hydrocarbon products during last years, increased China’s interests in Kazakhstan. Thus, since 2006 China’s share in Kazakhstan’s export has been playing a key role, whereas in 2011 the it contributed became a largest partner of Kazakhstan’s economy, by contributing over than $16 billion (Trademap.org, 2017). Moreover, since that time China has been constantly holding the largest share in Kazakhstan’s export (see Table 3).
By looking to the table below it can be seen, what the PRC imports from Kazakhstan (see Table 2).
Table 2. Kazakhstan goods which were exported to China in 2016.
Source: (Tradingeconomics.com, 2017)
In the table below, it can be seen that the percentage of oil products within exported goods to China, has been on the average more than 50%, between 2007-2016 years.
Table 3. Percentage of oil products among the products exported to China, between 2007-2016.
| Year | Value of products, exported to china; thousands of USD | Value of oil products | Percentage |
| 2007 | 5,635,914 | 2,829,552 | 50% |
| 2008 | 7,676,609 | 4,419,471 | 58% |
| 2009 | 5,888,593 | 2,520,232 | 43% |
| 2010 | 10,122,070 | 5,535,793 | 55% |
| 2011 | 16,291,513 | 9,644,602 | 59% |
| 2012 | 16,484,409 | 9,098,789 | 55% |
| 2013 | 14,373,748 | 8,917,092 | 62% |
| 2014 | 9,799,418 | 5,171,197 | 53% |
| 2015 | 5,480,137 | 2,146,013 | 39% |
| 2016 | 4,214,926 | 1,013,013 | 24% |
| Average: | 50% | ||
Source: (Trademap.org, 2017)
So, from these points, it can be concluded that the oil sector is remaining as the main interest for China in imports from Kazakhstan.
The main economic dependence here is that Kazakhstan, as it was said before, has very poor and old infrastructure as well as its industry sector. Only crude oil can be considered as an national income sources. In this case in order to diversify its economy, Kazakhstan has to invest into other sectors of the economy. China’s outstanding economic growth during the last decade, gave it an opportunity to intervene into Central Asian markets, in order to satisfy its demand for oil, minerals and other natural resources. In this case, Kazakhstan, as an oil-rich country with its undeveloped infrastructure is being attractive for China to its national interests.
In the same way China, with its huge market capacity of technologies, machineries and electrical products along with developed industry and eagerness to invest are being seen for Kazakhstan’s authorities as a solution to implement the “Kazakhstan – 2050” strategy.
However, Kazakhstan’s economic cooperation with China has not only economic, but also political sense. Because, by pulling closer China, Kazakhstan firstly, can enhance its economic security, secondly, is able to balance Russian hegemony and political pressure in state’s territory.
On the other hand, by opening its gates for “Red Dragon”, Kazakhstan is falling into risks too. Chinese national interests towards this region are seemed as only economic, although, due to historical background and other multidimensional factors, it can be surely argued. Then, question as “What in this perspective can do towards China?’ could fit to this case.
As an economic of Kazakhstan on great powers such as Russia and China has been analyzed, in the following subchapter Kazakhstan’s multi vectors policy towards Russia and China is going to be touched upon.
4.2 Multi-Vector policy as an instrument of security policy
By analyzing all what has been written in previous chapters, this subchapter is going to cover the last and the most important part of the thesis. The main aim here is to find out how the multi-vector policy is being implemented in Kazakhstan, in order to increase economic security of the country and, at the same time, to balance the global superpowers – Russian Federation and China.
To discover it, several cases have been picked up to be analyzed, and aftermath it could be seen how Kazakhstan is managing to “survive” in its neighbourhood.
Why multi-vector? The reason is that, in the third chapter it was said that in the late 1990s Kazakhstan started to adhere a multi-vector policy, which in fact, entirely shaped country’s system of internal and foreign policy.
As it was said before, during the first years of independence, Kazakhstan was experiencing a strong economic pressure from Russian Federation, mainly due to the oil pipelines in the West of the country. That is why, in the early 2000s, during one of his annual speeches, Nazarbayev said(Nurgaliyeva, 2016):
“The export of energy resources is the most important income for our governments. Therefore, in the interest of all member states, there is a need for a single export policy system for the CIS countries”.
Thus he wanted to create an economic space where export policies would be the same for each member state, and thereby, by bringing Russia to this system, Kazakhstan could ensure its way to foreign markets. This was the initial step for the creation of the Eurasian Economic Union.
However these efforts did not match with Russian interests at that time. The issue of Caspian Pipeline Consortium, where Russian oil companies dictated prices and volumes for oil flow, was an irritating concern for Kazakhstan’s economy. To solve this problem, Kazakhstan had to seek other ways of transportation. Then Kazakhstan resorted to Baku-Tbilisi-Ceyhan (BTC) consortium project, which was firstly initiated in 1998 in Ankara (RIA-news, 2009).
As it was put by Guliyev and Akhrarkhodjaeva (2008):
“The issue of energy transportation routes, especially pipelines, has been a key issue in the geopolitics of the Central Eurasian region. The West has promoted transportation projects that would carry Caspian energy bypassing the Russian territory, such as the BTC, whereas Russia has used its power to keep almost all Central Asian energy exports under control and to prevent any major shift in Central Asian energy exports. The region, thus, has been a playground for Russian-Western rivalry over the access to the vast Caspian resources and control of the exporting routes”.
The negotiations with Azerbaijan on transportation of Kazakhstan’s oil through the BTC pipelines started in November of 2002. As the result, on 16th of June 2006 President Nursultan Nazarbayev signed an agreement on Kazakhstan’s joining the oil pipeline project. The purpose of the Treaty is to create conditions for increasing volumes of transporting Kazakh oil to Mediterranean sea via the East-West energy corridor along with Kuryk-Baku-Tbilisi-Ceyhan route. The agreement provides for Kazakhstan a tanker transportation of Kazakh oil from Aktau to Baku via the Caspian Sea and its further transportation via the BTC pipeline at the level of 7 million tons and extending up to 20 million tons annually (see Map 2) (Guliyev and Akhrarkhodjaeva, 2008; Kmg.kz, 2017).
Map 2. The Baku-Tbilisi-Ceyhan oil pipeline routes.
Source: (Nurgaliyeva, 2016).
This step made by Kazakh authorities, caused a number of unrest and dissatisfaction on the part of Russia. From their side were receiving many feedbacks on BTC project, that it is economically unprofitable and too costly. That is why Russian authorities were insisting to use Russian systems of oil transportation (Nurgaliyeva, 2016). Nevertheless, despite Russian claimings and negative forecasts on project’s profitability, Kazakhstan’s decision to join the oil pipeline system through which Kazakhstan can achieve Black Sea area had succeeded, in the sense that as the result, Kazakhstan increased its oil export capacity up to 25 millions tons in 2008 (ibid.) and according to new project, it is planned to expand it until 38 million tons (Kmg.kz, 2017).
Russia feared that its political and economic influence could be under threat. Therefore, they decided to soften the previously “agreed” conditions for the transportation of Kazakh oil through Russia. The signing of the Protocol between Kazakhstan on November 18 in 2009 and Russia on Amendments to the Agreement of on Oil Transit on June 7 in 2002 represented this softened stance. The protocol opened the door to increasing the transportation capacity of the Atyrau (Kazakhstan) Samara (Russia) oil pipeline from 15 to 25 million tons of oil per year, in the direction of Russia’s western border, either to the Black Sea or the Baltic Sea (Nurgaliyeva, 2016).
Moreover, this step brought Kazakhstan – Turkey relations to the new level, which is very necessary for Kazakhstan to implement its multi-vector policy. Being as brothers by nations, language, history and culture – Kazakhstan finds Turkey as an leverage which could counterbalance other global powers. The significance of their relations can be seen in the following case of Eurasian Union.
Meanwhile, when Kazakhstan was dealing with dependence on Russian CPC- pipelines, Kazakhstan’s foreign multi-vector policy was also developing towards China, by creation of the Atasu-Alashankou pipeline route. The owner of the Atasu-Alashankou oil pipeline is Kazakhstan-China Pipeline (KCP), a joint venture of the national operator of Kazakhstan on the trunk pipeline of KazTransOil JSC and the Chinese company CNOOC (see Map 4) (Kazpravda.kz, 2013). Since the launch of the Atasu-Alashankou in 2006 up to the present moment, 100 million tons of oil was transported to the China. At the same time, the capacity of the pipeline increased from 2.2 million tons in 2006 to 10.4 million tons in 2012 (ibid., Kaztransoil.kz, 2017).
Map 4. Atasu-Alashankou oil pipeline.
Source: (Kazworld.info, 2012)
In 2013, KazTransOil JSC along with Kazakhstan-China Pipeline LLP launched two oil pumping stations – “NPS No. 8” and “NPS No. 10”in Karaganda and Almaty oblasts respectively. They have been designed to increase the capacity of KCP – 20 million tons per year. Beyond the crucial economic meaning, the start of new oil pumping stations brings a social improvement such as creating more than 100 new jobs in production. Mostly this opportunity was used by local people or by residents of nearly located settlements (Kaztransoil.kz, 2017).
However, due to the lack of oil provision, Kazakhstan involved Russia into this project as well. In result on the 1st of January of 2014 there was signed an agreement between KazTransOil and Rosneft “On the provision of oil transportation services in the direction of China on the route Priirtyshsk-Atasu-Alashankou” (Kcp.kz, 2017). Basing on this document it was possible to deliver over that 7 million tons of crude oil. Later, in 2016, was signed additional to the mentioned contract an agreement, which gives an opportunity to increase Russian oil transit up to 10 million tons of oil in 2017 (Kaztransoil.kz, 2017; Forbes.kz, 2017).
This project ensured Kazakhstan with new oil export routes to the extremely large Chinese market. Thus, Kazakhstan reduced its dependence on Russian oil pipelines (Kazpravda.kz, 2013). Although, projects, mentioned above, did not provide Kazakhstan with surely enough guarantee for security of national economy. Since Kazakhstan’s oil is mostly aimed at western markets, it is still dependent on Russian CPC pipelines. Nevertheless, due to these initiatives, implemented by Kazakhstan, it has been proved that multi-vector policy and diversification of energy transportation routes are very important elements in Kazakhstan’s economic security.
Baku-Tbilisi-Ceyhan and Atasu-Alashankou projects were the initial steps in order to Balance Russian and China hegemonies. This trend of Kazakhstan’s multi-vector policy had been existing successfully until the beginning of the new decade (Clarke, 2015). However, in connection with events happening in the global world, new decade brought new agenda for the international arena.
The global economic crisis of 2008-2009, the rise of Russian Federation as a great power, events in South Ossetia, Abkhazia and Georgia as well as the Annexation of Crimea, and moreover, the economic rise of China and political rise of Turkey have affected on Kazakhstan’s internal and foreign policies. In addition to this, the global oil crisis happened in August of 2015 and downtrend of prices for hydrocarbons and raw materials gave a lesson to Kazakhstan that a diversification of the national economy and having multiple accesses to the world markets are extremely needed.
Nevertheless, Kazakhstan by this time has developed stable, friendly and positive relationships with the regional and global superpowers. Moreover, as in connection with the mentioned above global events, Central Asia became more politically important and economically attractive. Subsequently, this increased the interests of the global superpowers, especially Russia’s and China’s. Thus Kazakhstan, by understanding that the global picture is not the same as it was 20 years ago and that the demand for hydrocarbons is going down, had to reconsider its national policy of strategic development. That is why, in the of 2012, Kazakhstan – 2050 was proposed as a “New political course”.
The second decade of the twenty-first century has started from an intersection of interests of the mentioned above global superpowers. Russians in order to regain its economic dominance in the Post-Soviet space called other states to stay under the Eurasian Economic Union, where conditions were favorable mostly for Russia. At the same time, China is on the way to build its own global “Silk Road Economic Belt” program (Clarke, 2015).
Kazakhstan, being in the center these processes, has to defend its economic and national interests. Directed by “Kazakhstan – 2050” document of strategic development, Kazakhstan has to adhere to the principle of economic pragmatism, by which it can enhance and strengthen its national economic security (The Strategy Kazakhstan – 2050, 2012).
When it comes to Putin’s proposal for the creation of Eurasian Economic Union, made in 2011, it was a crucial point for further development of events for next years (Bryanski, 2011). However, the first such an initiative for creation of “common trading bloc”, which could contribute to the economic integration of Post-Soviet countries, was made Nursultan Nazarbayev in his speech at Moscow State University in 1994 (Sarbayeva, 2015). Already at that time, Kazakhstan was looking for an economic space where it could increase its economic growth and export capacity, aiming at the integration with its neighbours, through which commodities can be exported.
However, this proposal at that time did not seem to Russia that much profitable as it is today. That is why, only after 15 years, in 2011 Putin declared his intention to establish the Eurasian Economic Union with the statement that
“It would be naive to attempt to restore or copy something from the past. However, a stronger integration on a new political and economic basis and a new system of values is an imperative of our era” (Bryanski, 2011).
From this point it can be observed that Russia’s interests are not only economic, but also political ones. Nevertheless, on the 1st of January of 2015 the Eurasian Economic Union, with its member states including Belarus, Kazakhstan and Russian Federation, came into power. On the next day the agreement on accession of Armenia and later, on 6th of August in the same year the accession of Kyrgyzstan came into power (Eurasiancommission.org, 2017).
So, at the first glance, the Eurasian Economic Union, which includes 5 member states that make a common market for 182.7 million people and a vast economically integrated territory of 20 million square kilometers might seem very profitable and inevitable for its member states (see Map 3)(ibid.). However, as it was pointed above, everything has its own context and background.
Map 3. The area of Eurasian Economic Union.
Source: Eurasiancommission.org, 2017
By involving states under the umbrella of this organisation, Russia as being the formal and informal “leader”, can directly influence and shape the political clue of the member states within this area. Thus, by dictating conditions favorable for itself, Russian Federation will be able to pursue its interests and simultaneously undermine the others’ (Jarosiewicz and Fischer, 2015). Especially, in this sense, Russia will carefully lead its foreign policy towards other member states, on purpose to defend its hegemony and territory of interest, so that make a global world multipolar and to decrease the influence of other powers such as China, the EU, United States and Turkey within the region and beyond.[4]
In the beginning Kazakhstan was in favor with the creation of Eurasian Economic Union, where it could open for itself a tremendous opportunities for Kazakh economy, especially for exports. Because, Kazakhstan had been trying to pull closer all Post-Soviet countries into the organisation, where all members could have the same rights and conditions (Sarbayeva, 2015). By pursuing a concept of Eurasianism, Kazakhstan wanted to be as a linker-bridge between the East and West, where through the integration it could ensure its national and economic security.
However, the situation has been changed significantly due to several factors. One of them, as it was mentioned before, is the Annexation of Crimea by Russian Federation, where the latter by referring to its responsibility to protect Russians within and abroad the country, intervened to Ukraine and annexed the Crimea (Pinkham, 2017). About this situation, especially were concerned Belarus and Kazakhstan. Moreover, the situation was undermined after Vladimir Putin’s speech during the Seliger 2014 National Youth Forum, where he stated that “Kazakhs never had any statehood” and that Nursultan Nazarbayev has “created a state on a territory that never had a state”, in addition he also added that “Kazakhstan should look for close relations with Russian Federation” by answering to the question about the possibility to repeat the Ukraine scenario in Kazakhstan, where the “russophobic” tendency is allegedly appeared (Dolgov, 2014). The same claims were said often by Zhirinovsky, as for example: “Russophobic moods are being cultivated there[5] as well” (ibid.). Moreover, even nowadays, these kind of thoughts and statements, which call into a question the Kazakh statehood and its sovereignty, are frequently said by Russian authorities during the high level meetings at the Russian Parliament, where as an example can be given the speech, made by State Duma deputy from the Crimean regional branch of the Political Party of the LDPR – Pavel Shperov, during the meeting at State Duma (Garanin, 2017):
“We are a great country … When we, for example, in Kazakhstan call our compatriots a diaspora who live on our lands that are temporarily torn away, and I believe that these lands are temporarily torn away – the borders are not eternal, and we will return to the borders of the Russian state. It will be in the near future. That is, these territories, which are ours, will be returned” .
Surely, Putin’s speech was a turning point for Kazakhstan’s foreign as well as internal policy. Because, by those words he wanted to reassure Nazarbayev that Kazakhstan should stay within Eurasian Economic Union and attach itself to the foreign policy of Russia. However, Nursultan Nazarbayev commented on this by addressing to Kazakhstan citizens(Dolgov, 2014):
“Kazakhstan has a right to withdraw from the Eurasian Economic Union, … Kazakhstan will not be part of organizations that pose a threat to our independence… Our independence is our dearest treasure, which our grandfathers fought for, … First of all, we will never surrender it to someone, and secondly, we will do our best to protect it”.
Also, other comments were impressed by Bakytzhan Sagintayev, who is the first Deputy Prime Minister and lead negotiator of the Eurasian Economic Union(cn.nytimes.com, 2014):
“We are not creating a political organization; we are forming a purely economic union, … It is a pragmatic means to get benefits. We don’t meddle into what Russia is doing politically, and they cannot tell us what foreign policy to pursue”.
For these reasons was pushed a new wave of political and economic concerns among Kazakh authorities about national and economic security issues. Therefore, one of the main targets has become to revise Kazakh history and culture among Kazakhstan citizens and abroad. That is why it was proposed to celebrate the 550 years of Kazakh Statehood Anniversary (The Astana Times, 2015).
Another point is to strengthen Kazakhstan’s economy, to the extent that Kazakhstan has to diversify its structure and find new niches in the world market, where it could be competitive and able to ensure its export routes, in order to trade freely. To reach this aim, Kazakhstan needs to bring in its territory as many foreign investments as possible. Because, by doing so, Kazakhstan could attract new flow of foreign direct investments along with new technologies and knowledge capacity. All of this would contribute to enhancing the economic security of the country, which aftermath will strengthen Kazakh national security. Additional element here is that by attracting foreign investments, Kazakhstan attracts the interests of different global powers. Consequently, if there are many interests of different superpowers, then this could give a guarantee for Kazakhstan’s security, in the sense that. those in sum, can counterbalance Russian hegemony on the one hand and Chinese dominance on the other. Although, these kinds of trends are not clearly and precisely said in Kazakhstan’s national medias, but can be read between the lines.
In 2013, during his visit to Kazakhstan, the Chinese leader Xi Jinping spoke about the project of the “Silk Road Economic Belt”, which must pass through the entire Central Asian region and become the longest and, at the same time, the most profitable transport route, which connects Asia and Europe. According to Xi Jinping, the participation of Kazakhstan, as a long-standing and reliable partner of China, is extremely important for an implementation of the project (Bokarev, 2016).
Since ancient times Kazakhstan and China have been having numerous economic and cultural ties. This is not surprising, because the countries have a common border of almost 2,000 km, and thanks to its location, Kazakhstan is a link between China, Central Asia and the Middle East. The ancient Silk Road also ran through Kazakhstan’s lands. Nowadays, Kazakhstan and PRC are also linked by numerous roads: railroads and motorways, as well as oil and gas pipelines (ibid.).
At the current time, the mutual trade turnover between the countries is approaching $ 20 billion (Kambarov, 2017). In addition, Kazakhstan received almost $ 30 billion from China as an investment in mining (which Kazakhstan is extremely rich for), transport and agriculture, and moreover, will receive about the same amount of money more, in accordance with the Agreement On Industrial Cooperation, signed in March 2015 (Kambarov, 2017). This is why, China is the main trade and one of the main strategic partners of Kazakhstan. This interaction will be greatly strengthened due to the participation of Kazakhstan in the project of the National Youth Union. In addition, on the assurances of the Chinese side, Kazakhstan will significantly improve its economy by gaining access to the markets of the Asia-Pacific region and Europe. (Kambarov, 2017).
Kazakhstan became one of the first countries who supported the Chinese project. The proposal from the PRC coincided with Kazakhstan’s own “Kazakhstan-2050” strategy, which in 2014 proclaimed a new strategy “Nurly Zhol”[6] (“Bright Path”), implying the intensive development of industry, energy and transport infrastructure (Bokarev, 2016).
At present, Kazakhstan and China are actively discussing joint actions, through which each side will achieve its goal within its own economic strategy. As mentioned above, China intends to support Kazakhstan’s industrialization through its investments. A corresponding agreement was reached in 2014, during the visit of Li Keqiang, who is the head of the PRC government, to Kazakhstan (Toleukhanova, 2016). The state program of industrial and innovative development of Kazakhstan assumes the accelerated development of heavy oil and gas along with food industries, as well as other industries. Almost all these projects will involve China. The Kazakh Ministry of Investment and Development regularly holds joint meetings with representatives of the Chinese State Development and Reform Commission, where experts from both sides carefully analyze available industrial projects for the prospect of their financing (ibid.)
In March 2016, Chinese Ambassador to the Republic of Kazakhstan Zhang Hanhui stated that the PRC and the Republic of Kazakhstan had achieved their first successes in their cooperation on the “New Silk Road” project. So, in the near future, it is expected to complete the construction of a highway, designed to connect Western China with Western Europe, which spilled through the territory of Kazakhstan (Bokarev, 2016).
Nevertheless, Chinese Silk Road Economic Belt is intended to develop its routes towards three main dimensions (see Map 5).
Map 5. The main directions of transport routes of Chinese Silk Road Economic belt .
Source: (Zhartay and Semak, 2015).
The North Line is a new Eurasian continental bridge, which includes a cross-border railway (connecting China to Europe via Kazakhstan and Russia), the automobile continental road and the trading system.
The middle line provides for the cross-border railway construction of China-Kyrgyzstan-Uzbekistan. In the future, the railway system of Turkmenistan, Iran and Turkey will join it, and further Europe.
The southern line is a Sino-Pakistani economic corridor, which includes the railway, road, energy pipelines and their escorts (Zhartay and Semak, 2015).
The economic belt of the “Silk Road” is built on the basis of the above-mentioned transport arteries and on an integrated axis of pipeline transport. Within the project, it is planned to develop its own cities and industrial centers. The economic belt of the “Silk Road” is the main initiative that unites industry, population, resources, information and other components of the region’s life in a single system.
As Zhartay and Semak (2015) provided data on expert assessments of the United Nations Conference on Trade and Development (UNCTAD), the volume of trade between the main markets on the Eurasian continent will grow by 1.5 times by 2020 – from 800 billion dollars in 2014 to 1.2 trillion dollars. It is also expected that the trade turnover between China and the countries of the European Union will grow from 615 to 800 billion US dollars, between China and India from 66 to 92 billion dollars by 2020 (ibid.). So, according to experts, the transition to inland corridors creates great opportunities for Kazakhstan.
In the following map it can be seen that Kazakhstan is going to become as one of the main transportation hubs within this project (see Map 6). Thus, the project, initiated by Chinese government could give to Kazakhstan a very significant economic impulse.
Map 6. The perspectives of transport routes for Kazakhstan.
Source: (Zhartay and Semak, 2015).
In January of 2016, Chinese Ambassador in Kazakhstan, Zhang Hanhui, reminded participants of the conference on Chinese initiative “One Belt One Road”, which is, in fact, a more global version of the “Silk Road Economic Belt”, that China and Kazakhstan are going to jointly implement 52 industrial and logistics projects totaling 24 billion dollars (Toleukhanova, 2016).
The director of the governmental Kazakhstan Institute for Strategic Studies, Yerlan Karin, recently said that over the past five years, China has invested over 10 billion dollars in Kazakhstan. “As of the beginning of 2016, 668 Chinese companies worked in Kazakhstan, which is 35% more than in 2013” he said (ibid.)
China’s projects are moving steadily forward. In February of 2015, China launched a cargo railway connection between the business capital of Kazakhstan – in Almaty and Chinese city of Lianyungang, located on the Pacific coast. The number of cargo containers crossing from China to Europe doubled in 2015, and this is not the limit. The International Center of Cross-Border Cooperation “Khorgos” (Kazakhstan), has attracted from the moment of its launch in 2012 an investment counting for $ 3.1 billion (Zhartay and Semak, 2015).
Although the authorities are trying to focus on the diversification of the economy, rather than energy projects, the latter are still of great importance. As Ardak Kasymbek, Managing Director for Economics and Finance of NC KazMunayGas, told journalists in April of 2016, China controls up to 30% of oil production in Kazakhstan (Toleukhanova, 2016).
The most notable recent deal in this area is the acquisition in 2013 by Chinese state oil and gas company CNPC 8.33% share in giant Kashagan field for $ 5 billion (Gordeyeva, 2013).
Although, such cooperation has its advantages for Kazakhstan, however, China’s deep penetration into key industries of Kazakhstan’s economy causes concern that Kazakhstan is going to be in some dependence.
Traditionally, the Republic of Kazakhstan, as it was mentioned before, is a former Soviet republic and is a part of the Russian Federation’s zone of influence. Kazakhstan is Russia’s important strategic partner, and its steps towards China seriously worry many Russian analysts. Of particular concern is the Kazakh-Chinese cooperation in the field of energy. So, at the end of 2011, the work of the Moinak HPP began with Chinese company, playing the main role in its construction (Bokarev, 2016). The launch of the new HPP significantly improved the situation with electricity in the south of the country. Additionally, the issue of Kazakhstan’s energy is fundamental for Russia, since it is inextricably linked with the issue of nuclear energy.
Russia has high hopes for expanded cooperation with Kazakhstan in this area. Kazakhstan possesses huge reserves of uranium at the level of about 12% of the world reserves and it is the world leader in the extraction of this mineral – approximately 39% of global production (World-nuclear.org, 2017). A nuclear cooperation with Kazakhstan promises great prospects for Russia. First of all, for Russia it is extremely advantageous to have such a close source of uranium, located near its borders. Currently, Rosatom buys uranium deposits around the world, but, of course, there is no any country which could compete with Kazakhstan, neither in terms of volume of reserves and ease of extraction[7], nor by options to deliver mined materials to Russia (Bokarev, 2016).
Secondly, by possessing such resources, Kazakhstan is undoubtedly interested in developing its own nuclear power and building nuclear power plants in its territory. Russia intends to participate in this, by providing new technologies and specialists. This will significantly strengthen ties between the countries and bring a considerable money flow. In addition, to increase its revenues from uranium exports, Kazakhstan intends to produce a nuclear fuel as final product in its territory, and here Russia also offers its assistance (Bokarev, 2016).
However, China also became interested in the joint production of nuclear fuel from Kazakhstan’s uranium. Probably, the threat of competition in the most important area for Russia – nuclear energy, was one of the reasons that prompted Rosatom to take an action to maximize its position in Kazakhstan. In the same 2013, when the Chinese leader acquainted the government of Kazakhstan with his initiative of the Silk Road Economic Belt, a subsidiary of Rosatom, Atomredmetzoloto, acquired a controlling stake in the joint Russian-Canadian company Uranium one, which had been the largest developer of uranium deposits in Kazakhstan (U1holding.com, 2017). According to the statements of many media outlets, Russia, thus, took control of almost all the uranium mining in the Republic of Kazakhstan.
Nowadays, another trend in Kazakhstan’s economy is an agriculture. According to the Xinhua News Agency, Chinese companies have expressed their intention to invest $ 1.9 billion in the food industry of Kazakhstan, which should help in the fight against the economic recession, caused by the fall in oil prices (Bokarev, 2016; Farchy, 2016).
China is planning to build its own grain corridor in Central Asia, which will annually export 160 million tons of grain to Africa, Asia and China itself. For comparison: the Russian Federation exports today four times less than China is going to export from its grain center in Kazakhstan. (Bokarev, 2016; Garanin, 2017).
To achieve this target, China is going to take an active part in modernizing the agriculture in Central Asia and create a grain corridor, that will contribute to the sustainable development of the regional economy Garanin, 2017).
In support of their plans for agrarian expansion, the Chinese agencies cite some statistics. According to their data, at present there are 38 million hectares of arable land in Central Asia. Kazakhstan accounts for about 74%, or 28 million hectares. In the future, the total area of arable lands in the region can be increased to 60 million hectares. The Chinese expect that the annual grain harvest will be 225 million tons, while the export volume will reach 160 million tons (Bokarev, 2016).
In order to understand the scale of the Chinese project, it should be recalled that the maximum grain export from Russia is expected at 37.5 million tons (Garanin, 2017). It turns out that Chinese are going to throw four times more into the world market than Russia is exporting today. If this Chinese plan is implemented, Russian plans for agricultural development will have to be revised. In the world market, the supply can significantly exceed an effective demand. As a result, world prices will inevitably collapse. And most probably, according to Bokarev (2017), the producers of grain with a cost higher than the Chinese will be threatened with bankruptcy.
However, among Kazakh population these projects and land reforms, proposed last year, caused an agiotage and fears about the future of Kazakhstan and its national security. Many Kazakh sinologists and political scientists fear and doubt the alleged Chinese economic interests in the agrarian lands of Kazakhstan and about the project “One Belt, One Road” in general (Zakon.kz, 2013). Indeed, from ancient times for Kazakhs the topic about their land, territory, sovereignty and statehood has been and is very essential. That is why, the sharp increase of Chinese investors in Kazakhstan’s economy caused unrest among Kazakh people.
To this extent, Kazakhstan has to find answers to a number of very complex issues as following: 1) does Kazakhstan have sufficient human and professional resources to support the pace of the agricultural boom stimulated by Chinese investments? 2) And, if Chinese workers will be involved for this development, will the Kazakh authorities be able to calm a public anxiety about this?
Thus, in accordance with the events that took place in Kazakhstan in 2016, which were related to the land reforms proposed by Kazakh government that could let foreign investors to rent for long-term periods Kazakhstan’s agricultural lands for their purposes, on 15th of June in 2016 was signed The bill “On Suspension of Certain Rules of the Land Code” (Arystanbekov, 2017). Though this could undermine the Kazakhstan’s economic policy, though it was another step towards national security.
However, on the other hand, Kazakh authorities tend to explain to mass media that Chinese investments into Kazakhstan economy are crucial for future economic growth. Especially nowadays. when oil, gas and other commodities, as natural resources, are experiencing downtrend in terms of world prices. Also, since Kazakhstan has a poor industry and even worse infrastructure, Chinese companies are taking responsibility to invest into development of these sectors, by bringing new know-how and brand-new technologies. Another point is that China, by using its soft power, is creating an image of non-interference into country’s internal affairs and that the project “Silk Road Economic Belt” has no political interests compared to Russia’s “Eurasian Economic Union”, which, in sum, seems more favorable to Central Asian countries, especially for Kazakhstan.
However, general point is that, in order to strengthen its national security, Kazakhstan has to enhance its economic security. For these it needs to diversify its economy and production sectors. By having a strong dependency on export of oil and other hydrocarbons, which go to Western countries mostly through Russian territories, and, moreover, due to the political and economic dependence on Russia, Kazakhstan, in the light of last economic policies towards China, can use Chinese foreign investments in order to counterbalance the Russian influence. This can be seen as a form of Kazakhstan’s multi-vector policy.
However, Kazakhstan’s multi-vector policy is directed towards many directions, to the that extent Kazakhstan in the case of balancing Russia has developed relations not only with China, but also with Turkey. This can be seen in the case of Kazakhstan’s attempt to pull closer and involve Turkey into Eurasian Economic Union. Nurgalieva (2015) described it as a “soft balancing towards Russian dominance” within this organisation.
Indeed, Turkey nowadays has become as one of the important actors in the international arena. Its population of 78.6 million people and GDP value of $717,9 billion makes it 18th largest economy in the world (WorldBank, 2017). Moreover, considering the fact that Turkey and Russia have their interests in Black Sea, where Turkey sees Black Sea as a shipping corridor, which provides strategic routes to deliver exported from Turkey goods to different parts of Europe, such as Eastern and Northern and also to the Caucasus and Central Asia, it gives the room for their clash of interests in this region as well as in Central Asia.
Thus, for the first time about Turkey’s involvement into Customs Union (after Eurasian Economic Union) was quoted by RIA News (2013), where Kazakh president Nursultan Nazarbayev said: “The President of Turkey asked me to join our Customs Union. Let’s take Turkey?”. At the same time, he stressed that abroad he is often told that the Customs Union is being created as a new USSR or “something under Russia”. He said:
“Maybe, we should accept Turkey, which is a big country, and the conversation will end” adressingto Russian President – Vladimir Putin and President of Belarus – Alexander Lukashenko.
Although there are no clear actions on this issue, however, Kazakhstan, most probably would like to have Turkey in the EEC. Also, in light of recent deterioration of Russia-Turkey relations, Kazakhstan has been the most prominent mediator between the two (Ng.ru, 2016). To this can contribute factors of Turkey’s interests in Central Asia mentioned in the second chapter, and Kazakhstan’-Turkey relations in general.
To large extent, the benefits of Turkey’s involvement here is explained mostly by political reasons, rather than economic ones. However, bringing Turkey into Eurasian Economic Union could open new corridor for Kazakhstan’s oil exports through which Kazakhstan, would be able to freely deliver its hydrocarbon products to its Western destinations.
When it comes to Kazakhstan – Russia relations, while reading this thesis, one could think that the former is totally against the latter, however, this case should not be seen in this light. Because, through the years of coexisting in the international arena, Kazakhstan and Russia have been the closest partners by political and economic meanings. They have tremendous amount of different bilateral agreements and stay mostly within the same organisations. This has been clearly emphasizing by all mass-media and Kazakhs authorities, especially Nazarbayev during his messages to the people of Kazakhstan and high-level meetings. However, Kazakhstan due to the events, have occurred within last several years, has had to rethink and reconsider its positions and economic policies along with its political and economic vectors of further development.
That is why, by getting closer with China economically, Kazakhstan aims to decrease Russian influence politically. But, on the contrary, Kazakhstan is also always trying to keep the distance between its Northern neighbor, in a sense that not to neither lose its close ties nor to be “something under Russian influence”. Because, Russia’s security umbrella such as Collective Security along with Eurasian Economic Security could be also a leverage for Kazakhstan’s foreign policy.
When it comes to Kazakhstan’s economic security, from above mentioned issues it can be seen that it depends on large variety of factors. Kazakhstan, being located in the Central Asian region as a landlocked country and surrounded by Russia and China, has lots of geopolitical and geoeconomic contexts to make any politically and economically important decisions. In addition to this, country has neither proper infrastructure nor considerable industry, which would have mitigated the conditions. Thus, in order to enhance its economic security along with its main aim – national security, Kazakhstan has to play a very careful and smart game in the region, especially between the two – Russia and China.
For this kind of reasons, Kazakhstan has to use its multi-vector policy. Thus, Kazakhstani government promoting the nationally essential sectors of its economy for foreign investors all over the world. For example, in the publication published by the Government of the Republic of Kazakhstan (2016):
“The national economy has a new investment drive. Our country is now ranked 41st out of 189 in [the IMF’s] Doing Business rating. Kazakhstan’s labor market efficiency is ranked 18th out of 140. We have opened a green corridor for international investors”.
By adhering to this open-door policy, Kazakhstan is on the way to attract many foreign investors. As one of the results was given the visit of Nazarbayev to Great Britain in 2015, where were signed 40 agreements and projects, with overall cost of $4.6 billion (Government of the Republic of Kazakhstan, 2016). Because, the extractive sectors of Kazakhstan including oil, gas and natural resources are being still attractive for the most of foreign investors. So, the signed with UK agreements include further collaboration with “Britain’s Independent Power Corporation (IPC) for gas pipelines and power, William Hare Group for oil and gas installation steel superstructures, and WorleyParsons for oil and gas engineering expertise” (ibid.).
In order to achieve the mentioned above goals, currently, Kaznex Invest is working to implement the tasks, set by the Head of state, through an implementation of the program, called “Plan of Nation”, namely its 55th and 56th steps, to attract transnational companies and anchor investors. The Government of Kazakhstan implements the following unprecedented measures to create a favorable investment climate, including a new package of incentives and preferences in priority sectors of the economy, as following (Zhanibek, 2016):
Moreover, one of the most important tools of Kaznex Invest will be to establish cooperation and attract investments and large international enterprises to work in Kazakhstan through its representatives all over the world, namely in such countries as the USA, China, Germany, Turkey, the UAE and Russia.
The key tasks of these representatives will are following (ibid.):
This kind of trends of Kazakhstan’s economic policy towards foreign investors contributes to boosting of country’s economy. Although these bright and proper steps were initiated relatively recently, however it shows that many companies and transnational companies are interested in investing into Kazakhstan’s economy. For example, as it was stated in “Invest in Kazakhstan” (Government of the Republic of Kazakhstan, 2016):
“Well known tech giants such as Phillips, General Electric, Samsung, Huawei, Hewlett Packard, and Intel – have all shown interest in becoming tenants at the business campus. Kazakhstan expects around 90 firms will join the roster as it approaches its launch date”.
There also was mentioned, that Kazakhstan has a perspectives to become a “Silicon Valley” of Central Asia (ibid). Indeed, it has been recently announced that a leading worldwide company Cisco launches joint projects in Kazakhstan, in collaboration with Kazakhstan’s National information and communication holding “Zerde” (Kazakh-tv.kz, 2017). This will contribute to the implementation of one of the national programs within the strategy of Kazakhstan-2050, called a “Digital Kazakhstan”, which is, in fact, directed to improving the capacity of innovational technology industry in Kazakhstan (ibid).
However, there are so many already launched such large-scale projects on producing high-tech technologies or high quality brand-new products. Because, Kazakhstan still has to improve its infrastructure and industry, in terms of transportation systems, quality of railways and auto roads, level of labor forces and etc. As for now, Kazakhstan is one the way of self-preparation to further economic strategy development. Although, Kazakhstan-2050 strategy goes almost steady and according to its agenda. Because, large, essential and significant developments are expected in the following decades.
From the mentioned above points it can be concluded, that Kazakhstan’s economic security, nowadays, is still dependent on its neighbors – Russia and China. However, it is possible for the country to enhance its economic security by attracting a lot of investments from different sources all over the world, and, thus, by investing into a diversification of the economy and improvement of infrastructure, industry and human resources on the other. However, here the geopolitical and geoeconomic aspects are important. That is why, Kazakhstan’s multi-vector policy in its foreign economic policy is essentially important, and, by adhering to it, it is possible to keep good relations with everyone, thus, to find new perspectives for the national economy.
Conclusion
By summing up all what has been written in the thesis, several findings as following can be concluded. First of all, it can be clearly seen that Kazakhstan, due to several multidimensional factors, has strong economic and political dependency on its surrounding neighbors, as Russia and China. Thus, by being a landlocked country between the two and having an extremely strong dependence on the export of its hydrocarbon resources, Kazakhstan nowadays, especially in the light of global economic crisis in the oil market along with volatile and unstable situation that affects prices of commodities, has to primarily ensure its economic security.
Secondly, it can be found out that the energy sector has been playing a crucial role in Kazakhstan’s economy, since it has been and still is remaining as the main national income source. However, due to the mentioned above conditions, it is necessary for Kazakhstan to improve and diversify its economy, in order to decrease the dependency on the export of hydrocarbon products, which consequently could diminish the economic and political dependence on Russia. China is a key player here, that could be helpful in this case. China’s economic interest within the Central Asia and Kazakhstan in particular, is an essential factor through which Kazakhstan could counterbalance Russia. However, China’s New Silk Way program which gains its momentum to invade Kazakhstan’s economy on the one hand might seem economically pragmatic, but on the other hand it needs a critical approach to understand what kind of political goals are hidden behind and what type of outcomes can be expected.
Thus, thirdly, understanding all these factors, Kazakhstan has been adhering its national multi-vector foreign policy in order to attract many foreign investors to the country. By doing so, Kazakhstan involves the interests of other global superpowers, as USA, EU countries and Turkey. This in the end could contribute to emerging in Kazakhstan a number of leverages, that can help to break down the Russian hegemony and Chinese dominance in the region.
Additional point here is that Kazakhstan’s national strategy document of economic development “Kazakhstan-2050” is used as another tool to strengthen Kazakhstan’s economic security policy within and outside the country. The document was addressed by President Nursultan Nazarbayev to its people in the dawn of new global economic and geopolitical changes, where in this context Kazakhstan faces new emerging challenges. Kazakhstan-2050 as a “lighting house” is aimed to show the directions of development, that could in the end bring Kazakhstan into the top-30 most developed countries. Here it should be noted that the strategy emphasizes the importance of diversification of national economy, through which Kazakhstan could be no more dependent on oil and commodity market, and, would become able to produce a large variety of final products of high-quality, which would be competitive in the world market.
From the mentioned above points it is possible to conclude that my hypothesis which claims that Kazakhstan decreases its dependence on Russia and China, by using the interests of the two and the interests of the other global powers has been proved . It can also be proved that by using geopolitical and geoeconomic aspects of multi-vector policy as well as by diversifying its economy, Kazakhstan is able to balance its neighbors in terms of their hegemony and economic dominance. However, due to that Kazakhstan is still at the beginning of its way to become a high-developed country, the interests of other global superpowers still remain mostly in the sector of natural resources. Thus, in the light of my analysis, it is quite difficult to argue that there are many interests in the area of new innovative technologies and emerging brand-new products in Kazakhstan. Nevertheless, it can be seen that there is a high potential in the future, where the interests of the foreign investors will be based exactly in the creation of some kind of “Silicon Valley” in Central Asia. As for now, the national projects are still in the stage of self-preparation of country’s infrastructure and industry for further developments.
It also probably can be seen that the issue of Kazakhstan’s economic security in general, and its internal as well as foreign policies towards Russia and China are very wide and complicated, to extent that it has many different aspects of scientific approaches. For these reasons to address better the topic, it is probably also good to include for example, legislative aspects that relate to the research problem. It is needed to identify and analyze how Kazakhstan through its national legislative system deals to ensure its economic security policy towards Russia and China in more depth.
Also, this research did not cover Kazakhstan’s economic security policy within the regional context of Central Asia. Thus, it would be an attractive area for further research to study how the Central Asian countries implement their own national economic security policies towards Russia and China and whether Kazakhstan’s situation is unique with regard to Russian influence or Chinese dominance. What is more, it would be useful to define policy recommendations for Central Asian countries to unite their efforts towards ensuring their national as well as regional economic securities.
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[1] As my thesis concerns issues of economic security, I will touch upon more broadly and properly the topic of economic threats in the following subchapter.
[2] Due to the unfortunate fact that the Law on National Security does not have an official translation, I am presenting in this thesis my observation and understanding of the text of the Law, which I read in my native Kazakh/Russian language. I believe my interpretation of the legal provisions are accurate and close to its ordinary meaning, to the best of my knowledge.
[3] Here are meant non-oil products
[4] This can be seen in the case of Ukraine and also in Armenia, when the latter showed its willing to get closer with European Union.
[5] by there is meant Kazakhstan
[6]Nurly Zhol (Bright Path) is a national initiative program, which works within the framework of Kazakhstan-2050 strategy,
[7] in fact, Kazakhstan’s uranium is located very close to the surface of the earth
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