QR Brief May 19, 2023
Author: Bruce Pannier
May 19, 2023
CPC’s QR Briefing, is a summary and analysis of events and trends in the Republic of Kazakhstan (RK). With the decision to switch Kazakh language to a Latinized alphabet, which will be implemented in stages from 2023-2031, the country's name is now being rendered as Qazakstan, and Qazak Republic (QR) is gaining momentum, especially among young people, as a new acronym for the country, replacing RK, to resonate with President Tokayev's rebranding of the country as Jana (new) Qazakstan.
Trade Set to Grow Between Kazakhstan and Sinzyan (Xinjiang)
Trade between Kazakhstan and the Sinzyan-Uyghur Autonomous Region of China may triple and reach $1 billion per year under a new agreement signed May 10 during a meeting between Kazakh Agricultural Minister Yerbol Karashukeyev and regional Communist Party secretary Ma Xingrui.
Sinzyan, which borders on Kazakhstan, accounts for more than 40% of Kazakhstan's trade with China and totaled $382 million in 2022. Karashukeyev emphasized that Kazakhstan attaches great importance to expanding bilateral trade and cooperation in agriculture with China, where there is growing demand for organically grown produce from Kazakhstan.
Kazakhstan is prepared to resume exports to China of frozen and refrigerated meat, fish and dairy products that have been hampered by temporary veterinary restrictions on the Chinese side. The minister stressed that Kazakhstan has earned certification for its systems to control veterinary diseases from the World Organization for Animal Health. “The current practice of reciprocal restrictions related to animal diseases has been a barrier to trade in recent years. I think it is time to reconsider inefficient trade approaches and institute a regionalized approach that won’t restrict imports from the entire country. It is also necessary to expedite harmonization of veterinary and phytosanitary requirements,” said Karashukeev. The Chinese market is also of great interest to Kazakhstan export of grain, beans and oilseeds, the minister noted.
Sinzyan is home to a native Uyghur population, as well as an ethnic Kazakh minority that migrated there in the 1930s to escape widespread famine in Kazakhstan caused by Stalin’s collectivization of agriculture. China has been harshly criticized in international circles for its treatment of Uyghurs in Sinzyan.
Russian Mining Giant Polymetal Relocating to Astana International Financial Center (AIFC)
Polymetal has been operating in Kazakhstan since 2009, when they acquired a gold field called Varvara near the city of Kostonai, adjacent to the Russian border, and since that time have actively sought other projects, purchasing the Bakirchik field in 2014 and renaming it Kyzyl (Kazakh for 'red'). They are known as a sound company that has operated technically difficult mining projects in Russia.
Until this move, Polymetal was registered in the Channel Islands but was subject there to Russian-imposed penalties because it’s a jurisdiction the Kremlin counts as hostile. The company will now be delisting from the London Stock Exchange. Their stock dropped 26% following announcement of the move to AIFC.
Being domiciled in Russia wouldn't suit Polymetal’s non-Russian shareholders, plus they'd be subject to the Western sanctions imposed on Russia's mining and metallurgy sector, and thus, the company likely felt compelled to move somewhere, with Kazakhstan making the most sense, as Polymetal already works in the country and might feel they can use their now strengthened presence to acquire new reserves there and grow their production profile. Polymetal’s shares have traded on the Kazakhstan Stock Exchange, known as KASE, since 2019, and will presumably now become available as well on AIFC’s inhouse stock exchange, known as AIX.
Kazakhstan is a challenging position, seeking to reset Russian influence to the limited extent made possible by the current geopolitical situation in Eurasia and beyond while unquestionably welcoming Polymetal's decision to redomicile to AIFC because it enhances AIFC's status and may make other large companies look more favorably on moving to AIFC.
Kazakhstan Bans Oil Exports to Russian Port of Taman
The Kazakh national railway network Temir Zholy banned deliveries of Kazakh crude to the Russian Black Sea port of Taman as of May 8. The move followed notification by Russian authorities of a fire near the Crimean Bridge after two drones attacked an oil storage facility in Krasnodar Region. The oil loading terminal at Taman, which lies across the Kerch Strait from Crimea, where the Azov Sea meets the Black Sea, has capacity to handle 20 million tons of crude oil, refined petroleum products and LPG per year. In 2022, the terminal exported 7.3 million tons of refined products from Russia and Kazakhstan, while in the first quarter of 2023, the port of Taman had increased that volume by 15% over the same period last year.
Dual-Use Goods Valued at $1 billion Have Disappeared in Transit Through Russia
According to www.forbes.kz, since Russia’s invasion of Ukraine, goods worth more than $1 billion exported from the EU to CIS countries have failed to reach their destination, apparently hijacked en route in the Russian Federation. The reported sum of $1 billion refers only to dual-use goods banned from delivery to Russia.
Inconsistencies in export documents indicate that middlemen, agents, or ghost suppliers have entered false destinations on EU customs declarations, allowing Russia to take possession of aviation components, optical equipment, and gas turbines. The surge in exports of controlled goods from the EU is sufficient to offset around 40% of the decline in exports to Russia and Belarus since the imposition of sanctions in 2014.
Elina Rybakova, a senior fellow at the Peterson Institute for International Economics, noted that discrepancies in international trade statistics are not unusual, but the situation with this "ghost trade" is beyond the scale of usual errors. She recalled that it took the financial sector “almost a decade and numerous fines in the billions for officials to start paying due attention to sanctions.”
Lithuanian Foreign Minister Gabrielius Landsbergis said the EU will need more "political will" to take the steps necessary to enforce the sanctions regime against countries or companies that do not comply. “We are ready in our country to take the steps needed to make sure sensitive technologies do not reach the battlefield,” he said.
In February 2023, the EU, in its tenth round of sanctions, banned the transit of dual-use goods through Russia, which means they cannot enter Russia directly from the EU even if they are destined in the end for another country. The FT previously wrote that the EU may restrict the export of goods to countries that have been detected sending sanctioned products to Russia. The newspaper's sources said that the European Commission has studied a legal mechanism that allows for limiting the sale of a narrow range of goods to certain third countries. At the same time, FT sources noted that some EU countries are dissatisfied with the possible consequences of such restrictions and the potential impact on their relations with third countries.
Lithuania insists on extending restrictions to a wider range of dual-use and sensitive goods, in particular advanced technology and aircraft parts. It wants to stop the shipment of such goods to Russian ally Belarus and has begun considering measures to cease altogether the export of certain goods from Lithuania. Estonia has supported a complete ban on the transit of goods leaving the EU, which applies not only to dual-use goods, but also to other categories of goods. “It is easier to impose a complete ban than an endless list that keeps growing,” said Estonian Minister for Sanctions Erki Kodar.
Antikor Arrests Atameken ex-CEO
Ablai Myrzakhmetov, former CEO of Kazakhstan’s national chamber of entrepreneurs, has been detained by the country’s Anti-Corruption Agency on suspicion of accepting a bribe reportedly of $30 million from a businessman who sought his support in shielding a relative from criminal prosecution. Myrzamakhmetov had resigned from his position at Atameken in February of 2022, shortly after Kantar, along with the chairman of Atameken’s presidium, Timur Kulibayev, the billionaire son-in-law of ex-President Nursultan Nazarbayev. The alleged bribe-giver in Myrzakhmetov’s case is Talgat Boranbayev, younger brother of oligarch Kairat Boranbaev, arrested in March of 2022 and then convicted this March and sentenced to eight years in prison for embezzling funds while CEO at national company QazaqGas. Kairat Boranbayev’s eldest daughter Aliya, who studied art history at London’s Courtauld Institute, is the widow of Aisultan Nazarbayev, Nursultan Nazarbayev’s late grandson who died in 2020 at the age of 30.
Kazakhstan Adds China to List of Visa-Free Countries
The Chinese and Kazakh ministries of foreign affairs have reached agreement on a visa-free regime that allows their citizens to visit each other’s countries for tourism, medical treatment or business for a maximum stay of up to 30 days at a time and for a total of no more 90 days in any 180-day period. Citizens who wish to extend their stay beyond these limits must apply for a visa. Either country may refuse entry to a person for reasons of national security, public order or public health as provided in Kazakh and Chinese legislation.
The agreement is expected to be signed by Kazakh Foreign Minister Murat Nurtleu and his Chinese counterpart during the current visit to China by President Kassym-Zhomart Tokayev, and mirrors exactly the visa-free regime Kazakhstan enjoys with 38 other countries, including the United States. Nonetheless, within 2½ weeks of its adoption, a demonstration against the new agreement took place on May 1 in Almaty at the Central Park of Culture and Recreation, where police detained around a dozen protesters who also voiced support for Ukraine and called for Kazakhstan’s withdrawal from the Collective Security Treaty Organization (CSTO), of which Kazakhstan is a member together with Russia, Belarus, Armenia, Kyrgyzstan and Tajikistan. Similar demonstrations were held in several other Kazakh cities. Applications for these demonstrations had been denied on the grounds that other public events were planned in those locations for May 1, now National Unity Day but celebrated in the USSR as May Day.
Kazakh PM Smailov Visits Tashkent
Prime Minister Alikhan Smailov and his Uzbek counterpart Abdulla Aripov took part in the 20th Kazakh-Uzbek intergovernmental commission on bilateral cooperation in Tashkent on May 5, discussing the prospects for expanding cooperation in industry, agriculture and transportation. Smailov's working visit to the capital of Uzbekistan began with a wreath-laying ceremony at the monument to independence in Yangi Uzbekiston park. On the same day, Uzbek President Shavkat Mirziyoyev received the Kazakh PM. The two discussed bi-lateral trade, new investment projects, and plans for building an international center of industrial cooperation on the Uzbek-Kazakh border.