Washington’s potential hidden ace in rift with Russia: Kazakhstan

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As the U.S. sanctions on Russia over its invasion of Ukraine tighten, more than 300 U.S. companies pulling out of Russia are in search of alternatives to set up their regional headquarters. Kazakhstan may prove to be the best bet, both from the economic and geostrategic perspective. This largest Central Asian country is second only to Russia when it comes to natural resources — from oil to titanium, an essential component for both the medical and airplane industries, especially after Boeing recently suspended titanium purchases from Russia. Kazakhstan is also the largest uranium producer in the world.

With food shortages looming, particularly in Africa, due to rising costs and significant cuts in exports from Russia as well as limited access to shipping ports for Ukraine, Kazakhstan — with its agricultural capacity — can help ameliorate those shortages. Earlier this week Roman Vasillenko, Kazakhstan’s Deputy Foreign Minister, invited companies exiting Russia to move their production to his country. He stated emphatically that, “Kazakhstan does not want to be behind a new iron curtain.”

An increased business presence by the United States and Europe would certainly help Kazakhstan to keep itself from falling under the new iron curtain — and boosting cooperation could help reduce current global supply chain concerns caused by Russia’s war in Ukraine.

This land-locked country, located in one of the world’s toughest neighborhoods between Russia and China, has much to offer U.S. and Western businesses. And the Kazakhs are keen to develop equally strong ties with the West and the U.S.

Recognizing Kazakhstan’s potential, in September of 2020, the U.S. Chamber of Commerce announced the launch of the U.S.–Kazakhstan Business Council.

A global push is on to secure critically needed rare earth minerals, and Kazakhstan ranks amongst the world’s leading countries with reserves of chromite, wolfram, lead, zinc, manganese, silver, and uranium — with a significant reserve of bauxite, copper, gold, iron ore, coal, natural gas, and petroleum. The country is poised for a rare earth minerals boom, with corporations such as Glencore, Stans Energy, and Greenland Minerals & Energy leading the exploration.

There are a few issues the U.S. could address immediately that would help solidify good will in Kazakhstan and help facilitate the entry of Western businesses.

The U.S. has exempted the Caspian Pipeline Consortium (CPC) from the sanctions against Russia, but the Atyrau-Samara pipeline, which accounts for 18 percent of Kazakhstan’s oil exports and is operated by national company “KazMunayGas,” might face economic costs. Disconnection of key Russian banks from the SWIFT payment system severely hinders Russian companies’ ability to pay Kazakh exporters — and many Kazakh companies are facing the problem of so-called over-compliance, when traders suspend transactions to avoid any payment and insurance risks caused by international sanctions.

Hollywood expressed support and observed moment of silence for Ukraine during the 94th Academy Awards, but it can do more. While the Hollywood studios are putting new movie releases and projects on hold in Russia, the industry could also decide to bypass Russia’s holding copyrights and award purchasing and distribution rights directly to Kazakhstan, which currently has to request them and buy them from Moscow.

Kazakhstan has had its own challenges, but only two weeks ago, President Kassym-Jomart Tokayev announced a set of reforms triggered by the unrest in January. The measures include a switch from “superpresidential” rule to a presidential republic with a strong parliament, ending the cronyism of the Nazarbayev era by banning the closest relatives of the president from holding political or executive positions, and changes in electoral law to secure formation of a multi-polar competitive and merit-based party system. 

Only time will tell how seriously such measures will be implemented, but a robust economic rapprochement between the U.S. and Kazakhstan would also significantly help those efforts — and would be a blow to Russia, one Putin certainly failed to anticipate.

Sasha Toperich is senior executive vice president of the Transatlantic Leadership Network. From 2013 to 2018, he was a senior fellow and director of the Mediterranean Basin, Middle East and Gulf initiative at the Center for Transatlantic Relations, at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University in Washington, D.C.

Debra Cagan is distinguished energy fellow at the Transatlantic Leadership Network. Previously she worked as a career State Department diplomat and Defense Department official from the Reagan to Trump administrations, including serving as deputy assistant secretary of Defense for Coalition, Peacekeeping, Humanitarian and Disaster Relief; senior director of European, Russian and Eurasian security issues; special adviser for Strategic and Nuclear Policy for Europe; senior adviser to U.S. and NATO military officials. Cagan also led negotiations for a highly enriched uranium agreement with Russia and headed coalition affairs for Iraq and Afghanistan.

Tags American business Central Asia Central Asian trade China distribution rights Economy of Kazakhstan Foreign relations of Kazakhstan global supply chain Kassym-Jomart Tokayev Kassym-Jomart Tokayev Kazakh political shakeup Kazakhstan movie rights Rare earth elements rare earth minerals Russia russian boycott Russian sanctions Ukraine Western investment

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