January 26th, 2015
In this instalment of our series looking at Russia’s relations with the countries along its border, we reach Kazakhstan, Moscow’s closest ally in central Asia. Region specialist Julia Kusznir tells a story of two countries bound together by mutual dependency, but with one or two telling cracks at the edges.
Russia has long seen central Asia as a vital area of its national interests and influence. Its primary interests are to ensure mutual security to safeguard Russian territory from destabilising factors emanating from the region while also protecting the large Russian population that lives there.
Other important factors include trading opportunities and the fact that central Asia is rich in natural resources, not least oil and gas. Russia has also sought to control the production and transport of energy from the region’s producing countries and to limit the influence of the likes of the US and China. Nearly 25 years after the demise of the Soviet Union, Russia still largely controls the export routes of gas and oil from Kazakhstan, Uzbekistan and Turkmenistan.
Russia goes soft
To help achieve its post-Soviet economic goals, Russia has prioritised “soft power” diplomacy. In October 2000, a Eurasian Economic Community (EurAsEC) was established under Russia’s leadership. Its goals were to promote the creation of a customs union and common economic space based on a free-trade regime and unified customs tariffs and regulations.
EurAsEC contained five member states: Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan. The Eurasian Customs Union followed in January 2010, between Russia, Belarus and Kazakhstan, within which trade restrictions and borders would progressively be removed. In May 2014 it was incorporated into the Eurasian Economic Union (EEU), established by the same three countries. It came into force this month, with Armenia joining almost immediately after. Plans have also been announced for Kyrgyzstan to join later in the year.
The five EEU country leaders meeting recently: (left to right) Armenia, Belarus, Kyrgyzstan, Russia and Kazakh president Nursultan Nazabayev EPA
The main goal of the EEU is the creation of a single market for the free movement of goods, services, capital and people, with the option of using a common currency in the future. The members also intend to create a single electricity and energy market by 2025.
Kazakhstan occupies a special position in this Russian-led process of economic integration. Its president, Nursultan Nazarbayev, suggested this idea some 20 years ago. He promoted it for many years as a mechanism for the economic integration of the post-Soviet space and has actively supported Russia’s initiatives in this regard.
The great Russian-Kazakh love-in
Over the past two decades, the two countries have developed close, multi-faceted ties. It has helped that their political and economic elites enjoy close relations dating back to the Soviet era – and that a quarter of the Kazakh population is ethnically Russian.
In 2013 Russian exports to Kazakhstan reached $17.7bn (£11.7bn), while Kazakh exports to Russia comprised $5.8bn. Over the years, Kazakhstan has developed itself into a leading market in Central Asia.
And since it is more transparent and less expensive for Russian investors than their home country, it is seen as offering a more attractive business climate. In 2013 Russian direct investment into the country amounted to about $1.3bn. Both countries have been developing bilateral financial institutions such as the Eurasian Development Bank, whose mission is to develop markets and promote the economic growth of its member states.
Central Asia map
The two countries have also developed well-functioning energy relations. A large portion of Kazakh oil exports are transported through the Russian pipeline infrastructure, controlled by the Russian pipeline operator Transneft. Kazakhstan is also a transit state for Russian gas imports from Turkmenistan via the Central Asia – Center gas pipeline, which is controlled by the Russian gas monopolist Gazprom. Russian energy companies are involved in the exploration of several of Kazakhstan’s oil and gas fields and cooperate in refining.
The picture is similar on the security front. Kazakhstan is actively involved in the Collective Security Treaty Organisation (CSTO), a six-state successor to the Warsaw Pact, and co-operates in more than 60 bilateral defence and military-technical agreements. The two countries also participate in the Shanghai Cooperation Organisation (SCO), along with Kyrgyzstan, Tajikistan, Uzbekistan and China. The SCO’s agenda includes many objectives, from regional/border security to trade liberalisation and the development of joint energy and infrastructure projects.
One area of disagreement is the future development of the Eurasian Economic Union, despite the fact that it is profitable for both. For Russia it is mainly a geopolitical project, an attempt to establish a regional bloc to strengthen her economic and political role in former Soviet territories and to create a counterweight to US and Chinese incursions.
Kazakhstan, by contrast, seeks a pragmatic economic integration that does not close off further political alliances. Notably, on the initiative of Kazakh officials, a few important points were included in the operating principles of the EEU, namely that the union will operate without interfering with the political systems of the EEU member states.
The future development of the EEU depends on numerous economic factors: the West’s 2014 economic sanctions against Russia, global oil prices and the way in which Russia responds to the current economic crises. However, it will also be determined by two other things. First, domestic political developments in Kazakhstan. It is still not clear who will succeed President Nazarbayev, who is 75 years old and has run the country since 1989.
The second question is how Russia pursues its political goals and whether it threatens its partners in the union. Russia’s annexation of Crimea and its support for armed separatists in eastern Ukraine have already given rise to fears in the Kazakh government regarding the growth of a Russian separatist movement for the secession of the country’s northern regions.
It has also raised doubts over the other political initiatives within the alliance, since the EEU’s main institution, the Eurasian Economic Commission is located in Moscow and staffed mainly by Russians. This has prompted fears in Kazakhstan and also Belarus that Russia could use the union to extend its dominance over the other EEU members. Russian relations with China could influence future nature of the union too. In short, Kazakhstan remains one of Russia’s closest allies. But with so much uncertainty in the air, it is impossible to guarantee that the future will look the same as the past and present.
To read previous instalments from our Russia’s borders series, click here.