How will Western investments fare in Kazakhstan after the unrest?

The Kazakh unrest has sent a wave of concern across several capitals from Russia and China, Kazakhstan's two neighbors and allies, to Western states, whose companies have invested heavily in fossil fuels-rich country’s energy sector. 

After violent protests expanded across the country, Kazakh President Kassym-Jomart Tokayev invited the Russian-led Collective Security Treaty Organization (CSTO) to help quell the unrest. 

While some CSTO forces began withdrawing from Kazakhstan, a former Soviet republic, Western countries who imposed heavy sanctions on Russia last year are concerned that Moscow might influence Nur-Sultan (Astana) to restrict Western investments.

“If you are a Western oil company your risk profile may have just changed,” said Ed Chow, a former Chevron executive. Around 600 American countries operate across Kazakhstan. 

Chevron runs Kazakhstan’s biggest oilfield, Tengiz, which means sea in the Turkic language, alongside other partners including ExxonMobil. The oilfield is located near the Caspian Sea in Western Kazakhstan, where the recent protests originated. 

In total, American oil companies own 75 percent of the joint venture company, Tengizchevroil, which has operated the field since 1993. Tengizchevroil also provides the biggest revenues to the Kazakh government and the country produces two percent of the world’s total oil production per day. 

The US accounts for Kazakhstan’s second biggest investor after the Netherlands, leaving countries like Russia and China behind in terms of direct investment. During the protests, both Russia and China offered strong support to the Tokayev government while Western countries like the US remained cautious.

As a result, both Moscow and Beijing will probably have greater leverage than Western capitals after the unrest. Also the unrest might dissuade some Western companies to stay away from energy-rich Kazakhstan in the fear that elite infighting or other political disagreements could reignite protests, according to some experts. 

During the unrest, Tokayev curbed the former Kazakh President Nursultan Nazarbayev’s power inside the state. While some accuse Nazarbayev and his family of corruption, the former leader is also credited with diversifying foreign investments in Kazakhstan that balance Russian and Chinese influence.

If Nazarbayev, whose whereabouts have not been disclosed since the protests, loses power completely, it’s not clear how his diversification policy will be affected by the new political balance in Nur-Sultan. But last week the Tokayev government reassured all current and potential investors. 

“The president of our country clearly stated that all foreign investments, not only the US, but Russian and from other countries as well, will be well-protected,” said Yermek Kosherbayev, Kazakhstan’s ambassador to Russia, on Saturday.

Tokayev needs Western investments

Ikboljon Qoraboyev, associate professor of International Relations at M. Narikbayev KAZGUU University, in Nur-Sultan, believes that Tokayev is well aware that the country needs Western investments in order to ensure economic stability. 

Kazakh protests were initially triggered by a 100 percent liquefied petroleum gas (LPG) price hike.

“Energy companies, where most Western investments are concentrated, are the biggest contributors to the republican budget. Their continuous operation is thus very important for economic stability,” Ikboljon tells TRT World. 

Beyond oil and gas, Kazakhstan is also the world’s biggest uranium producer, holding 40 percent of the world’s total production. The country is also rich with rare earth minerals, which are crucial for new technologies like manufacturing electric cars. The unrest significantly affected oil, gas and uranium markets, increasing prices. 

“Any sudden shifts in geoeconomic orientation of the country will undermine this stability. That’s why it would be too stretched to argue about sudden shifts in geopolitical and geoeconomic orientation of Kazakhstan, including in investment policy of Kazakhstan,” argues Ikboljon, an Uzbek academic. 

“Hence, Tokayev made special attention to ensure domestic and foreign investors that the favorable investment climate will be maintained and the government will respect all its commitments and guarantees before foreign investors,” the professor added. 

Ikboljon also thinks that Tokayev’s position does not contradict his alliance with Russia. “For Russia, the positive input in terms of increased legitimacy of CSTO is more important than immediately trying to convert it into concrete paybacks in the geoeconomic sphere,” he said.

“The CSTO and Russia have already gained positive returns from CSTO involvement in Kazakhstan first by proving the CSTO capacity for immediate action and secondly by earning legitimacy both by its capacity to act as well as its decision to withdraw,” he views. 

The range of Western investments

Beside Chevron and ExxonMobil, there are other American companies running in different sectors from agriculture to livestock in a country where nomadic Turkic tribes used to herd their animals across the country’s steppes. 

Despite the unrest, Chevron, whose oil concession in the country expires in 2033, is interested in developing a $45 billion Tengiz expansion project, according to the Wall Street Journal. 

Valmont Industries, a Nebraska-based agricultural equipment firm, continues its joint venture to produce irrigation machines and tools, the WSJ reported. Tyson Foods, an American company, also still maintains negotiations with Nur-Sultan to develop a beef processing plant in Kazakhstan even after the violent protests. 

There are many others too. 

“They range from GE, which has interests in the railroads and alternative energy, to the engineering giant Fluor, to consumer goods companies such as PepsiCo and Procter & Gamble,” Llewellyn King, an energy expert, wrote last year. 

“The total foreign direct investment stood at $161 billion in 2020, with $30 billion coming from the United States,” King added.