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the caspian region’s reactions to the current russo-ukrainian war: kazakhstan

The Caspian Region’s Reactions to the Current Russo-Ukrainian War: Kazakhstan

Author:Caspian Policy Center

Oct 26, 2022

* CPC NOTE:  With individual articles for each of the eight countries of the Caspian Region, the Caspian Policy Center is reporting the effects of Russia’s war in Ukraine on the countries of the region

 

Russia’s war in Ukraine has caused volatility of export-import prices in Kazakhstan, as well as destabilization of foreign trade, revealing Astana’s vulnerability and dependence on the volatility of world energy prices. So far, to tackle the economic challenges, the Monetary Policy Committee of the National Bank of the Republic of Kazakhstan has decided to set the base rate at 14.5 percent per annum with an interest rate corridor of +/- 1.0 percentage points. This decision was prompted by the economic situation, the balance of risks, and updated forecasts from the National Bank.  

In August 2022, the annual inflation rate in Kazakhstan surged to 16.1 percent, compared to 15.0 percent in July 2022. Overall, the monthly inflation in Kazakhstan soared to 1.4 percent in August 2022, four times the average August inflation rate for the past five years. That being said, Kazakhstan’s economy has been severely shaken by the consequences of Russia’s war against Ukraine.  Still, Astana continues to find ways to sustain itself amid the current economic disbalance caused by inflation.  

Kazakhstan is the region’s largest energy producer, with oil, gas, and related industries accounting for more than 17 percent of GDP in 2020. According to the International Energy Agency (IEA), Kazakhstan should prioritize the diversification of its oil export routes to sustain its position and survive the consequences of the war in Ukraine. Kazakhstan’s current focus is Trans-Caspian International Transport Route (TITR). The ports of Kazakhstan and Azerbaijan have increased cargo traffic by a factor of 2.5 since January 2022, and the transportation between the Caspian seaports of Kazakhstan, Aktau, and Kuryk, and Azerbaijan’s port of Baku increased 2.5 times to 1.9 million tons in the same period.  

Kazakhstan’s  President Kassym-Jomart Tokayev, at the General Debate of the 77th Session of the United Nations General Assembly (UNGA), stated: “The Trans-Caspian International Transport Route, or Middle Corridor, has received a new impetus. We expect cargo volume through Kazakhstan to increase significantly in the years ahead.”
 Along with the Middle Corridor, the Southern Gas Corridor has become operational, linking the gas fields in Azerbaijan to Georgia, Türkiye, and across the Mediterranean. Also, it has the potential to connect with pipelines across the Caspian Sea, should they ever be built. Following the Western sanctions on Russia, the European Union (EU) signed a deal in July to obtain gas via the Southern Gas Corridor to improve energy security by diversifying sources.  

Tokayev, at the meeting of the Council of Heads of State of the Shanghai Cooperation Organization (SCO) Member States, remarked, “The adoption of the Concept of Cooperation between the SCO countries on the development of efficient economic and transport corridors gave us a major success in improving logistical interconnectedness. We are talking about ‘China-Europe’ rail transportation, the Trans-Caspian international transport route, and plans to build a third railway crossing point on the border of Kazakhstan and China. I invite the SCO partners to use the opportunities opening in this area.’ 

Meanwhile, Kazakhstan’s Ministry of Energy established ceiling prices for wholesale marketable gas in the domestic market for the period from July 2022 to June 2023. Such fixed prices have varied in each region on the domestic market, including for gas purchases to produce liquefied natural gas (LNG). 

Since the outbreak of the war in Ukraine, Kazakhstan’s government officials have not formally spoken out to condemn Russia’s actions. However, during the Saint Petersburg International Economic Forum in June, President Tokayev stated that Kazakhstan would not recognize the self-proclaimed Donetsk and Luhansk people’s republics. This statement has been backed by actions such as sending humanitarian aid, maintaining relations with Ukrainian President Volodymyr Zelensky, and approving the anti-war protests in Almaty. Along with other actions that have displeased the Kremlin, Kazakhstan has attracted Russian firms fleeing the impact of sanctions against Russia and Moscow’s shrill nationalism.  

Moreover, following reports of Kazakhstani firms shipping weapons to Ukraine, former President and Deputy Chairman of the Security Council of the Russian Federation, Dmitry Medvedev, wrote a post on August 2, stating that the Russians “established the first settlements on the wild lands of northern Kazakhstan,” and that “Kazakhstan is an artificial state,” a post that was later deleted. 

Furthermore, Kazakhstan’s widespread civil unrest in January raised concerns about political and economic stability. However, Tokayev has assured foreign investors that the government of Kazakhstan will ensure a stable investment climate and commit to the investors accordingly. President Tokayev also announced political and economic reforms in March that could bring positive changes to the country’s investment climate by increasing privatization and combatting corruption. 

As voting, held mostly by Russian forces, took place in four Ukrainian regions on September 23, Kazakhstan’s Foreign Ministry spokesperson that Kazakhstan would not recognize Russia's annexation of eastern areas of Ukraine.  

‘As for the holding of referendums... Kazakhstan proceeds from the principles of territorial integrity of states, their sovereign equivalence, and peaceful coexistence,’ said Aibek Smadiyarov, the foreign ministry spokesman, on September 26. He has also stated that Kazakhstan reconfirms its readiness to provide all possible assistance to establish political dialogue because Kazakhstan believes that maintaining stability at either the regional or the global level is the most important goal.  
Besides, Kazakhstan is struggling to accommodate thousands of Russians who fled the country after Putin’s September 21 announcement of military mobilization. About 98,000 Russian immigrants have crossed the border since the mobilization announcement, and the Astana government is currently not planning to close Kazakhstan’s borders. During Tokayev’s address to journalists in Turkistan, Kazakhstan, on September 27, he assured that all necessary measures would be implemented to secure the safety of those fleeing, stating that it is “a political and humanitarian matter.” Tokayev is planning on discussing this matter with Russia.  

"We will hold talks with Russia and resolve this issue, taking our people's interests into account," said Tokayev speaking with journalists on September 27. 

Despite all the challenges and Kazakhstan’s broad ties with Russia, particularly by being a member of CSTO and the Eurasian Economic Union, Kazakhstan has so far remained neutral regarding the Ukraine conflict. 


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