Key political risks to watch in Kazakhstan

Nazarbayev has not identified any potential successors and this issue is the biggest long-term risk

An intensifying succession struggle among Kazakhstan's political elite and the government's increasingly tough stance on foreign companies have fuelled investor concerns in Central Asia's biggest oil producer.

Home to the world's biggest oil discovery in 40 years as well as considerable metals reserves, Kazakhstan has attracted more than $100 billion in foreign investment since it gained independence in the breakup of the Soviet Union in 1991.

Yet, an unclear succession plan for its veteran leader and aggressive steps by the government to increase the state's role in the oil and gas sector have alarmed foreign investors in the vast steppe nation of 16 million.
Below is a list of key political risks in Kazakhstan.


President Nursultan Nazarbayev, 69, has been in charge for 21 years and has concentrated sweeping powers throughout the Central Asian nation. His current term in office ends in 2012 but he can run for an unlimited number of terms under constitutional changes his political party introduced in 2007.

Nazarbayev has not identified any potential successors and this issue, according to analysts, is the biggest long-term risk in Kazakhstan. Nazarbayev has three daughters but no sons who could make obvious succession candidates.

According to the constitution, in the case of Nazarbayev's death, the speaker of the Senate, the upper chamber of parliament, would assume his powers for the rest of the term.

If the Senate speaker is unable to do so, the speaker of the lower house, Mazhilis, would take over. The prime minister is third in line.

What to watch:

-- Nazarbayev's health. The president seems to be firmly in control of the situation and regularly appears in public. His absence for a prolonged time, or less frequent appearances on state television, could spark worries.

-- Election campaign. Should Nazarbayev choose a successor for the next poll, the candidate would have to be formally nominated by Nazarbayev's Nur Otan political party.

Possible contenders include:

Imangali Tasmagambetov, mayor of the capital Astana
Timur Kulibayev, Nazarbayev's son-in-law
Prime Minister Karim Masimov
Kairat Kelimbetov, head of the state welfare fund Samruk-Kazyna.
Foreign companies, who invested in Kazakhstan heavily throughout its post-Soviet history despite Western concerns about its patchy human rights record, are likely to embrace any candidate who would guarantee the continuity of their contracts.


Several groups led by Nazarbayev's relatives and allies are competing for influence with the veteran leader.

Some members of the "inner circle" have fallen out with Nazarbayev and left Kazakhstan, which has led to reshuffles in the government, changes in asset ownership and brief periods of political instability.

In one such case, Nazarbayev's former son-in-law, Rakhat Aliyev, fled Kazakhstan and accused the president of usurping power after being accused of kidnapping local bankers and planning a state coup.

Aliyev's departure led to a purge in security services and a government takeover of several key media outlets.

What to watch:

-- High-profile corruption cases which have become a common tool of the domestic political struggle, analysts say. Any high-profile criminal cases or accusations could shed light on who in Nazarbayev's inner circle might be falling out of favour.

-- Government reshuffles could signal the weakening of one group and the strengthening of another.


The Kazakh government has taken steps in the last few years to raise its role in the key energy sector, buying stakes in some of the largest domestic projects run by foreign majors.

Acquisitions usually followed campaigns in which the government accused companies of environmental violations or tax evasion or breaking contract terms.

In the latest case, the government has said it wants a stake in the consortium developing the Karachaganak oil and gas field and accused it of tax evasion.

Investors and diplomats have in private expressed concern over the government's tactics, saying it could scare off investment at a time when the economy needs fresh liquidity to kickstart new projects.

What to watch:

-- How the Karachaganak case unfolds.
-- Legislation changes. Moves to toughen regulation in sectors such as mining could signal increasing government interest in industries beyond the strategic oil and gas sector.


Unrest in a neighbouring country, such as Uzbekistan or Kyrgyzstan, could provoke tensions in southern regions of Kazakhstan which border the two nations.

Kazakhstan reacted to the April 7 revolt in Kyrgyzstan by closing the border with its neighbour. There was no major impact on Kazakhstan's economy, dominated by oil and metals exports to Russia, China and Western markets, but some cross-border trade in farming and consumer goods has been hit.

What to watch:

-- The situation in Kyrgyzstan. The interim government, led by ex-foreign minister Roza Otunbayeva, appears to be in control but the impoverished Muslim country remains volatile.

The fear is that radical Islamist groups may use any power vacuum to gain strength, particularly in the restive Ferghana valley straddling Kyrgyzstan, Uzbekistan and Tajikistan.

-- Developments in Uzbekistan. Like Nazarbayev, Uzbek leader Islam Karimov, in power since 1989, has not picked a successor. More populous than Kazakhstan, Uzbekistan is however much poorer and less developed, which exacerbates social tensions.

ALMATY, May 4 (Reuters)

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