ALMATY – It’s a winners-and-losers capitalist classic: in 2003, 4 tons of oil and 1,000 cubic meters of gas will be produced per person in Kazakhstan. This is arguably, per capita, the richest country on the whole planet: not only because of oil and gas, but because it inherited more than 60 percent of all former Soviet mineral resources (at least 80 different types of minerals). In spite of all that, roughly 56 percent of the 15 million-plus population remains poor; and invisible to the ballet of Mercedes and Audis of the oil oligarchs in Almaty, the average Kazakh on a salary of US$50 a month still has to queue up under the snow waiting for a bus.
According to Vice Minister of Energy and Mineral Resources, Lyazzat Kiinov, speaking last month at the 11th International Oil and Gas Conference in Almaty, “Oil production in Kazakhstan will be 1.2 million barrels a day by 2005, 2.8 million barrels a day by 2008, and 3.5 million barrels a day by 2015. Kuwait, with its 2 million barrels a day, will be left far behind us.” The ambition is to more than triple the number of barrels per day Kazakhstan currently extracts.
So the myth lingers of Kazakhstan as an immense “new Kuwait” at the heart of the great Eurasian steppes, from the Caspian to western China, from Siberia to the Tian Shan (“Celestial”) mountains. President Nursultan Nazarbayev keeps promising an oil boom. Like Mahathir Mohamad in Malaysia with his “Vision 2020,” Nazarbayev has devised a 2030 economic development strategy: just as a reminder, Almaty’s tallest building, the delightful Soviet Hotel Kazakhstan, has a “2030” illuminated billboard on its roof top (no, they didn’t mix it up with 2003).
Nazarbayev wants Kazakhstan to be “a Central Asian snow leopard” – a development model for other countries. The transfer of the capital from Almaty to Astana (The king of the steppes) is included in the strategy. Nazarbayev knows very well that a country so naturally rich as Kazakhstan cannot but be the ultimate, indispensable geostrategic ally. But real life snow leopards are condemned to extinction. Cynics wonder whether Nazarbayev’s metaphor could indicate the same fate for his dreams.
The expat business community in Almaty and Atyrau (“Oil City” and base camp for the monstrous Tenghiz oilfield, 350 kilometers south) went into scary movie mode when new Kazakh Prime Minister Daniyal Akhmetov recently complained that some existing oil-and-gas contracts are out of touch with reality. But he quickly added that Astana would not try to renegotiate any deals with foreign corporations. No wonder: Nazarbayev in the foreseeable future will be on a hunting expedition for at least $70 billion in foreign direct investment that Kazakhstan needs to turn its natural riches into palpable wealth.
The biggest oil show in town at the moment is the perceived – by the government – slow pace of development at Kashagan in the Caspian Sea, considered to be one of the biggest oilfields in the world. Kashagan is being developed by Agip KCO, a huge consortium set up in November 1997, and now consisting of ENI, TotalFinaElf, ExxonMobil, ConocoPhillips, Royal Dutch Shell and Inpex from Japan. The Chinese wanted to be part of it too, but they were blocked by some of the partners.
Production sharing agreements were signed for a period of 40 years. Nazarbayev wanted everything by the book – which means extraction starting in 2005. But then Agip, blaming technical problems, proposed starting a year later and extracting four times less oil than the original plan. After months of stalemate, Kazakhstan finally agreed to delay the start of production to 2007. But Nazarbayev insists on other conditions – like participation of as many Kazakh companies as possible and close attention to ecological problems.
Six months ago, Nazarbayev approved a state program for developing the 1,894 kilometers of Caspian shoreline shared by Kazakhstan. Minister of Energy and Natural Resources Vladimir Shkolnik has already announced plans to develop new areas beginning in 2004. KazMunaiGaz – the state oil company – will have a go first, and it’s supposed to issue its own tenders for foreign investment in 2005. But in fact the oil and gas community in Kazakhstan knows that foreign corporations can bypass parts of the tender review process if they form a joint venture with KazMunaiGaz.
Oil matters in Kazakhstan usually follow a Byzantine, long and winding road. Take the case of the Tenghiz oil field. The negotiations lasted no less than four years. The joint venture was formalized in 1992. Work on the $2.6 billion pipeline only started in 1997. The pipeline from Tenghiz, near the Caspian, to the Russian Black Sea port of Novorossiysk was only ready in December 2001. There are still production capacity delays. Tenghiz will reach the mark of 1 million barrels a day only in 2012, according to ChevronTexaco’s Eurasian unit.
PetroKazakhstan, which is in fact a Canadian corporation, very active in the country since 1996 and with very close ties with Nazarbayev, will cooperate with Russian giant Lukoil to get access to the critical, Russian-dominated Caspian Pipeline Consortium, whose hub is also in “Oil City” Atyrau, 30 kilometers away from the Caspian shore. The consortium’s pipeline also goes west to Novorossiysk. PetroKazakhstan wants to improve its pipelines from Shimkent, in southern Kazakhstan, to increase its exports to Iran and China. Washington may not like it, but the fact is Nazarbayev wants to explore all possible export routes: east to China, south to Iran, west to Turkey.
Kazakhstan is dying to expand its markets. One day before Latvia voted to become part of the European Union, the Commonwealth of Independent States (CIS) – a very loose confederation of most of the former Soviet republics – voted in favor of a common market. It will begin with Russia, Kazakhstan, Ukraine and Belarus, but it may eventually include all CIS countries.
Almaty, originally a Silk Road oasis devastated by the Mongols and so “remote” from a Soviet point of view that Leon Trotsky was exiled here, usually has the atmosphere of a city built in the middle of a park. Now autumn leaves are falling and it’s already starting to snow – making it impossible to enjoy the superb backdrop of the snow-capped mountains of the Zailiysky Alatau – an arm of the “Celestial” Tian Shan. Appropriately, the death certificate of the former USSR was signed here when the city was still named Alma-Ata, and all of the five Central Asian republics plus Azerbaijan, Armenia and Moldova joined the CIS founded by Russia, Ukraine and Belarus. Nazarbayev, very close to Russia, wants a stronger CIS: Uzbekistan’s Islam Karimov – still infatuated by his strategic relationship with the US – doesn’t.
At the Kazakhstan Investment Promotion Center (Kazinvest), the head of information Zulfira Sadykjanova lists the six priority areas for foreign direct investment: agriculture, the processing industry, industrial infrastructure development, construction, tourism and the “social sphere.” In the past 10 years, Kazakhstan received $22.2 billion in investment. Thirty percent of this came from the US, followed by Britain (14 percent), South Korea (8 percent), Italy (7 percent), and 5 percent each from the Netherlands, Switzerland and Islamic Development Bank member-countries. More than half of all the money was for oil and gas.
Kazinvest lists the country’s many priorities: to explore the Caspian, upgrade refineries, increase oil and gas processing facilities, develop a petrochemical industry, broaden export markets and develop legislation that will attract more investment. Kazinvest of course denies there’s too much bureaucracy, too much corruption, and that it takes too long to get anything approved. Business expats think otherwise. They complain of state bureaucratic nightmares and inefficiency – like waiting 20 minutes to cash a check; and they deplore the severe lack of small and medium enterprises and shortage of skilled workers. Kazakhstan still depends on expensive imports. State salaries are a pittance. In Almaty, every car is a potential taxi because there are no jobs. A German businessman says. “Only a few joint ventures can be considered more or less successful, and they are are mainly related to minerals and metallurgy.”
Decades of demented Soviet practices and avalanches of social cataclysms have cooked up an ethnic mix out of these descendants of Genghis Khan’s hordes that is tolerant and frankly globalized: here we find Kazakh vegetarians, Ukranian Muslims, Russian Buddhists, Uighur Christians, people who have a Kazakh name and look European or look like a Mongol but have a Russian name. They’re only two generations away from nomadism, but visibly, at least in Almaty, are much more stylish, cosmopolitan and cool than any new Russian. Kazakhs just can’t get enough of globalization.
In the middle of all these contradictions, a “dynasty” scenario is brewing. Nazarbayev is arguably one of the richest men in the world. His wife, Sara, is an economist, and head of a children’s charity fund. Dariga Nazarbaeva, the eldest daughter, is the chairman of the board of the Khabar media group, which includes state TV. She is married to go-getter Rakhat Aliyev, who caused so much trouble in the court that he was “exiled” as ambassador to Vienna. Aliya Nazarbaeva, the youngest daughter, was the star of Central Asia’s equivalent of a royal wedding when she married the son of Kyrgyz President Askar Akaev.
Dariga Nazarbaeva is arguably being prepared to follow daddy’s fooststeps. She is the leader of a new “public association,” Asar ( “all together,” in Kazakh): it’s not a political party, at least not yet. But sooner or later leading the media and a political party simultaneously would be the perfect positioning for Nazarbaeva to ascend to the throne in Astana: probably in 2013, say Almaty insiders. Till then, Nazarbayev remains in full control of the snow leopard model – hoping not to be derailed by the ongoing criminal investigation in New York into alleged deal-lubricating bribes from American oil giants to top Kazakhs officials. Many a political analyst in Almaty is convinced that Nazarbayev wants to position his daughter as his successor so he can leave in peace if the going, known as Kazakhgate, gets tough.
Three years ago Nazarbayev forced the Kazakh parliament to give him and his family political and legal rights for life – which include total immunity against any charges, past, present and future. It’s “dynasty” in the steppes: ironically, the original American soap “Dynasty” is still showing on Russian TV. Moneychangers in Almaty kiosks have no need to worry: with Tenghiz, the Baku-Tblisi-Ceyhan pipeline, Kashagan and a proposed pipeline to China, rivers of foreign exchange will keep flowing. But the verdict on the snow leopard is still pending – as a model of development or as an authoritarian and corrupt way of wasting the resources of the richest country in the world.