Institute for War and Peace Reporting | Giving Voice, Driving Change

Eurasian Worries in Kazakstan

Opponents of new regional grouping fear the effects of committing to Russian-dominated economic regulation.
By Gaziza Baituova

Critics of closer integration with Russia are warning that it poses serious risks to Kazakstan’s economic future.

On October 14, President Nursultan Nazarbaev signed off on an agreement bringing Kazakstan into the Eurasian Economic Union.

The union, which comes into being in January, will create closer economic ties among the three current members – the others are Russia and Belarus. At a summit of the Commonwealth of Independent States held in Minsk on October, a fourth member, Armenia was admitted to the grouping. Kyrgyzstan is expected to join next year.

Kazakstan has always been a loyal ally of Moscow and a committed member of the Customs Union. However, Russia’s new assertiveness and its treatment of Ukraine has rung alarm bells. The Kazak government has no wish to be tied exclusively to an increasingly isolated and erratic Moscow. (See Economic Union Challenges Kazak Foreign Policy.) Pronouncements by Russian nationalists laying claim to northern Kazakstan because of its substantial Slav population have done nothing to calm worries about Moscow’s intentions. (Unease at Focus on Language, Identity in Kazakstan examines some of the issues.)

Public concern about against closer integration with Moscow has only been expressed on a limited in scale so far, but is real nonetheless. So far, opposition has taken the shape of a loose alliance, operating mainly on social media and led by Kazak nationalists opposed to what they see as the encroachment of Russian influence.

In March, a movement called the Anti-Eurasian Union emerged, and in May, protestors in the capital Astana were arrested at a demonstration against accession to the Eurasian Economic Union.

Most recently, a group of some 30 activists held a press conference on October 6 at which they called for a referendum on membership, warning that opening up access for Russian businesses would threaten local producers.

Denis Krivosheev, a financial journalist who was among the organisers of the October 6 press conference, said Kazakstan was now in direct competition with Russia, as both countries relied on exports from their extractive industries.

“The existence of a border and independent economic policies has hitherto allowed them them to coexist in international markets,” he told IWPR. “But now it’s more difficult to mitigate the effects of competition.”

Kazakstan was at a clear disadvantage, he added.

“Russia has been hardened by trade wars and it has the upper hand in everything, including population size and gross domestic product, and it could easily swallow up the Kazak market, buying off or destroying local businesses,” he said.

Krivosheev also warned that being hitched to the now faltering Russian economy could lead to further weakening of Kazakstan’s currency, the tenge, which has already suffered a sharp devaluation this February as a result of a falling rouble. (Anger as Kazak Currency Devalued.)

The government in Astana was trying to convince people that it could always draw on the national fund where oil export revenues are stored.

“But it [the fund] is not a bottomless pit,” he noted.

Elite figures have highlighted the benefits of joining the Eurasian Economic Union.

Speaking on October 6, Talgatbek Abaidildin, a member of the upper house of parliament, said bloc membership would produce “an increase of up to 20 per cent in GDP growth rates” for all the states involved.

However, many economists are sceptical.

Galymbek Akulbekov, an economist and businessman in Karagandy, central Kazakstan, agreed that some sectors of the economy would benefit from joining the grouping, but this would be unlikely to offset the damage done to other industries suffer.

“The country will lose in sectors linked to external markets – banking, manufacturing and trade,” he told IWPR.

And if Russia is hit by more sanctions because of its behaviour towards Ukraine, this will affect neighbours like Kazakstan, where “the government won’t be able to compensate for losses incurred by businesses, and this will lead to stagnation and inflation in the longer term”, according to Akulbekov.

Akulbekov also pointed to Russia’s current efforts to replace Western imports with goods from other markets. Together with weak levels of competition in the Eurasian bloc area, this could reduce the quality of goods and services reaching Kazakstan. (See also Central Asia Keen to Feed Russian Market.)

Tolganai Umbetalieva, director of the Central Asia Foundation for Democracy, noted that Russia is already promoting its automotive industry in the Customs Union and excluding outside imports. As she put it, Russian cars are “not always of high quality”.

Forbes Magazine’s Kazakstan edition reported earlier this month that Russian lobbying had brought about the introduction, in January 2014, of additional regulations for cars imported into the Customs Union, including anti-lock braking systems and a locking mechanism for child safety seats.

The website reported that the rules were mainly meant to stop Kazak imports of cars assembled at a General Motors plant in Uzbekistan, which is not a Customs Union member. Removing this competitor strengthened Russian car imports to Kazakstan in the months that followed.

Umbetalieva said the campaign against membership of Eurasian Economic Union had broadened far beyond its initial support-base, nationalist-leaning Kazak intellectuals, although it was still at an early stage.

“Now liberals who oppose Russia’s policy towards Kiev are expressing support,” Umbetalieva said

Akulbekov agreed that the protest movement, driven by “Facebook activists” was increasingly appealing to people with a range of agendas.

As well the likes of Krivosheev whose concerns focused on the economic implication, Akulbekov noted the involvement of others like political activist Botagoz Isaeva, who fears that the Kazak language will be suppressed within a Russian-dominated union.

“What unites them all is that they are in favour of a referendum,” Akulbekov added.

Zamir Karajanov, an Almaty-based political analyst, agreed that a worsening economic climate could encourage broader support for the anti-union movement.

He argued that its principal powerbase was likely to be among people on lower incomes who would be most vulnerable to price rises.

Krivosheev acknowledged that he and his fellow-campaigners needed to be realistic about how far their movement could go.

“At the moment, it’s individual voices – some of them more vocal, some less. It’s hardly a choir and it will probably never become one. The wider population is busy with its own survival,” he said.

“Those at the top are content with the status quo…. The authorities will ignore such voices of criticism] until the point where they become more persistent and start calling for radical change.”

Gaziza Baituova is an IWPR contributor in Kazakstan.