In international development and geopolitics, the old real estate dictum often rings true: “location, location, location.” As the largest landlocked country in the world, wedged between vying emerging powers Russia and China, sitting on a wealth of oil and mineral deposits, Kazakhstan’s location is unique – and vital. A potential gateway to the Caspian Sea and on to Europe, Kazakhstan’s future economic growth depends heavily on transport infrastructure and regional trade.
I was in Kazakhstan for the Astana Economic Forum last month, and I was left with strong impressions. Astana itself is a wonder; a city of almost 1 million that has sprung up from nowhere in less than 20 years. The Kazakh economy has seen tremendous progress in the last two decades, and the Forum drew wide international attendance. In particular, Russia, Iran and China were well represented. Delegates from the US— not just from the U.S. government— were sparse. It is a long trip to Astana from the U.S. My feeling is that, from the U.S. perspective, Kazakhstan is both out of sight and out of mind.
Kazakhstan has quietly assembled a recent track record of economic success. Between 2000 and 2013, the poverty rate declined dramatically from 47 percent to 3 percent. In 2013, GDP growth of 6% led to a per capita GDP of $13,000. In education, near universal primary school enrollment, mandatory and free secondary education, and high adult literacy and gender equality led Kazakhstan to rank 1st in UNESCO’s education development index in 2011. Health is a current priority, as is banking sector reform and economic diversification to reduce the dependence on oil exports, but overall Kazakhstan has enjoyed stability and economic growth. Prospects are high, and everyone but the U.S., it seems, has taken notice.
Kazakhstan is the “buckle” of China’s One Belt One Road initiative, and through the Central Asia Regional Economic Cooperation (CAREC) and Corridor Investment Programs, multilateral institutions and development banks have funneled billions of dollars in loans and grants to fund an international corridor that will connect China to Western Europe. This, along with other international infrastructure initiatives, is part of China’s economic strategy to utilize its excess industrial capacity (and workers) while also revitalizing one of the world’s oldest trade routes for modern use. The New Silk Road will serve as an outlet for Chinese exports, as well as a secure route for energy imports, both of which are Chinese strategic imperatives.
Total lending, grants, and technical assistance from the Asian Development Bank (ADB) to Kazakhstan is valued at $3.4 billion, the European Bank for Reconstruction and Development has invested $6.2 billion to date, and the country’s portfolio at the World Bank is $6.8 billion. The newly forming Asian Infrastructure Investment Bank (AIIB) is sure to further increase investment totals. China is Kazakhstan’s main trade partner, and the leading buyer of Kazakh oil and mineral products. In 2005, China purchased PetroKazakhstan, which controls the second largest set of proven oil reserves in the country and has since demonstrated a keen interest in the energy sector.
Kazakhstan sits at a strategic juncture between Russia and China, and while the current regime has leaned towards Russia, the future of this alignment is uncertain. President Nazarbayev, who will be turning 75 in a few days, has no clear political successor and it is unclear which direction Kazakhstan will tack when its current strongman dies or is incapacitated. Given its changing profile, Kazakhstan is exactly the kind of middle income country where the U.S. needs a deeper commercial partnership. While Russia and China are staking their claims, however, the voice of the United States could be louder.
A U.S. focus on counterterrorism, non-proliferation, and seeking improvements in accountable and good governance should not be a surprise given Kazakhstan’s proximity to Afghanistan and Pakistan. In fact, Kazakhstan has provided stabilization assistance in Afghanistan and is a convenient location from which to deploy troops into Central and South Asia. While these issues have driven U.S. – Kazakh relations in recent years, Kazakhstan is interested in a different type of partnership. Kazakhstan wants to reap the benefits of a globalized economy, and develop cutting edge science and technology industries. These are assets the U.S. is uniquely situated to provide.
Kazakhstan’s main trading partners are China, France, Russia, Germany, and Ukraine, and is one the founding members of the Russian led Eurasian Union. China and Russia are busy building transport networks that deepen their ties to Kazakhstan well into the future. Russia and Chinese interest is understandable for many reasons including the fact that as one Kazakh official said that Kazakhstan exports “every element on the periodic table.” This same official said that Kazakhstan considers itself “Russia’s only strategic partner.”
Similar to many middle income countries, there is a clear appetite in Kazakhstan for greater U.S. commercial engagement (not foreign assistance). Kazakhstan very much wants to access technology and innovation, but this is not something one can easily purchase off the shelf. Building this capacity takes time, and the U.S. can help. The U.S. Government should find ways to deepen its relations with this growing and strategically located country.
Article Published in Forbes.com on June 29, 2015.