Chinese Loans Will Counterbalance Russia’s Affect In Kazakhstan

On 29 Could 2014, the presidents of Kazakhstan, Russia, and Belarus signed a treaty establishing the Eurasian Financial Union (EaEU). One week prior, Kazakhstan’s President Nursultan Nazarbayev and Chinese President Xi Jinping announced funding agreements value US$10 billion. The timing of the 2 occasions displays Nazarbayev’s willpower to use Kazakhstan’s burgeoning financial relations with China to counterbalance potential Russian domination. The most telling sign of this intention was the announcement of a US$1 billion loan from China to modernise Kazakhstan’s Shymkent oil refinery.

Since 2000 Kazakhstan has witnessed an impressive charge of economic development, remodeling the nation into the dominant economic energy in Central Asia. Pushed initially by hydrocarbon exports, Kazakhstan’s growth has resulted in a tenfold improve in per capita earnings over the primary decade of its financial growth. The World Bank now designates Kazakhstan as an ‘upper-middle-income country. Kazakhstan’s per capita GDP of US$thirteen,000 in 2013 places its financial system on a par with EU members Poland and Hungary. Kazakhstan’s economy as a complete is greater than double the 4 other Central Asian nations mixed.

Kazakhstan’s sustained economic growth is reliant on its relationship with China. China-Kazakhstan bilateral trade accounts for approximately 28 per cent of Kazakhstan’s whole commerce volume. At the identical time, Kazakhstan’s deepening financial ties with Beijing are counterbalanced by its extensive trade relationship with the EU and its membership within the Russian-led Eurasian Customs Union, the precursor to the EaEU.

Kazakhstan’s development success and financial progress are the results of a fastidiously constructed ‘multi-vectored international trade coverage, primarily based on the overseas coverage ideas of ‘pragmatism, consistency and balance President Nazarbayev is looking for to implement his formidable ‘Strategy Kazakhstan 2050 which aims to see Kazakhstan grow to be a Europe-to-Asia transportation and power hub.

Members of the Russian-led EaEU are scheduled to determine the legal and regulatory framework to create a Single Economic Space by January 2015. But Kazakhstan has become more and more cautious of Russia’s political affect. Kazakhstan is constrained politically by the far superior navy power of its northern neighbour. Most of Kazakhstan’s population alongside the Russia-Kazakhstan border are ethnic Russians. Fears within Kazakhstan about Moscow’s intentions have heightened due to Russia’s March 2014 annexation of Crimea and ongoing support for separatists in jap Ukraine.

Kazakhstan also fears that Moscow will use the economic union to bolster its sagging economic system at the expense of Kazakhstan’s continued progress. Of specific concern are Russia’s attempts to make sure Kazakhstan’s oil trade stays subordinate to its own oil trade. Oil is a key sector in Russia and underpins both the Russian financial system and the stability of the Putin authorities. In early 2013, Russia saturated the Kazakhstani market with refined petroleum merchandise causing extreme losses to Kazakhstan’s refineries which were pressured to cut manufacturing. In response, the Kazakhstani government imposed a ban on Russian petroleum products which ended 1 January 2014. Astana fears that Moscow will use Russia’s oil commerce laws to exercise an inordinate quantity of management over Kazakhstan’s oil exports to Europe.

For this reason, China’s loan of US$1 billion to modernise the Shymkent oil refinery is a telling sign that President Nazarbayev is making skillful use of Kazakhstan’s economic relations with China to offset potential vulnerabilities.

Inbuilt 1985 in the course of the Soviet period, the Shymkent refinery is chargeable for 30 per cent of Kazakhstan’s refining capability. The Shymkent upgrade will enhance refining capability to 6 million tons per yr and will allow the refinery to produce top quality fuels that meet Euro-4 and Euro-5 standards, making Kazakhstani exports extra engaging to the EU.

President Nazarbayev’s assembly with President Xi was the seventh meeting between to the two leaders in lower than a 12 months. The May 2014 announcement of $10 billion in investment agreements follows President Xi’s September 2013 go to to Astana during which 22 agreements had been concluded between China and Kazakhstan. The agreements, price US$30 billion, included the sale of an 8.33 per cent stake in Kazakhstan’s massive Kashagan oil discipline to the China Nationwide Petroleum Company for $5 billion.During this trip President Xi additionally proposed that China and Kazakhstan work together in building the ‘Silk Street Economic Belt China’s grand vision of a China-to Europe business corridor operating westward from Xi’an by way of Central Asia after which onto Europe by way of Turkey.

As Kazakhstan seeks to placate Moscow with its membership in the EaEU, it should concurrently deepen its partnership with Beijing to preserve its national sovereignty and economic growth. Moscow’s drive to create a Russian-led EaEU will additional incentivise Kazakhstan, along with different publish-Soviet nations, to partner with China in making a Beijing-led economic silk highway.

Micha’el Tanchum is a Fellow at the Department of Middle East and Islamic Studies, Shalem College, Jerusalem, and the Asia and Center East Units, Truman Analysis Institute for the Development of Peace, Hebrew College. Dr Tanchum additionally teaches in the Department of East Asian Research, Tel Aviv College.

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