Big Oil Will Be a Big Test for Kazakhstan

nytimesThis vast Central Asian country, the size of western Europe with just 15 million inhabitants, proved an instructive vantage point for scrutinizing the massive oil spill in the Gulf of Mexico, and above all its enormous consequences for societies, business and politics.

On May 28, at a White House news conference, President Barack Obama talked of "corruption" pervading the U.S. Minerals and Management Service, and of the "scandalously close relationship" between big oil companies and regulators.

If even the United States, with its democratic checks, balances and institutions, finds it hard to constrain Big Oil, what are the chances that Kazakhstan, carved just 19 years ago from Soviet collapse, can square up to challenges posed by a huge influx of money chasing huge deposits of oil, gas, uranium and a host of other natural resources?

From President Nursultan Nazarbayev on down, Kazakh officials are fond of reminding listeners that this is a young state. The phrase is offered up not quite as an excuse for some of the more visible failings: among them, corruption — often involving oil money, according to court cases here and abroad — and a lack of free speech.

But it does also signal a genuine dilemma. Independence came suddenly here, replacing a Communist system that had portrayed itself as eternal, and used both repression and paternal care of basic education, housing and health to persuade citizens that it was strong. How does a state that knows little of capitalism handle both individual buccaneers and large companies that smell money to be made?

There is what one might call a business answer on this, and a more classic human rights one. The first view, as expressed by Richard Evans, former head of BAE Systems and now an adviser to the Kazakhstan government, is that "the great thing about Kazakhstan since the 1990s has been stability." President Nazarbayev, who turns 70 in July, is one of just two rulers of former Soviet republics — the other being Islam Karimov in neighboring Uzbekistan — to hold power to this day.

In addition, Mr. Evans noted at a conference sponsored by the International Herald Tribune, "I think there's a recognition that the economic management has been really good."

Major oil companies have found business terms shifting — often as the Kazakhs grew more adept at handling their affairs. More recently, officials have won plaudits for restructuring three banksthat defaulted without resorting to a state bailout. As Gillian Tett noted in the Financial Times: "The Kazakh government faced down some of the more aggressive Western banks by insisting on something rarely seen anywhere in the world — an orderly restructuring, with creditor haircuts, of a still-functioning bank."

Mr. Nazarbayev has just caused a minor political sensation, too, by declining to sign into law a proposal — unanimously passed by the one-party Majlis, or lower house of Parliament — to make him "leader of the nation," with immunity from prosecution, also for his family, and the power to make policy even after retirement.

Opposition voices were skeptical. Mr. Nazarbayev's rejection of the bill "made me absolutely happy for five minutes," said Yevgeniya Plakhina, a journalist. She and others then realized that the measure could still take effect under Kazakh law if the bill is not formally sent back to Parliament for reworking.
Ms. Plakhina, 25, writes for Respublika, a business magazine that is alternately silenced or appears with difficulty. She and Adil Nurmakov, 31, a political researcher and an avid blogger, represent what might be called the human rights view on Kazakhstan.

In this view, the vaunted stability has come at the cost of never having known a free election. They have grown up since the Soviet collapse and they sense that government should both be more accountable and offer citizens more choice.

Despite recent shifts, "the authorities are hostages to their own mistakes," said Mr. Nurmakov. Having engineered things for so long — Mr. Nazarbayev's party got 88 percent in the most recent election for the Majlis — it would be hard to ease up, lose votes and then try to explain previous majorities, Mr. Nurmakov argued.

Ms. Plakhina hopes to leave on a British scholarship to London for a year. The government also has been mindful of education, subsidizing university education in the West for thousands of youths on the condition that they return for at least five years to work at home.

Prime Minister Karim Massimov — himself no slouch, speaking Russian, two dialects of Chinese, Arabic and "some English" — said he surrounds himself with these bright young graduates to keep him on his toes.

Mr. Massimov, of Uighur descent, embodies Kazakhstan's other dilemma — the geostrategic pull. Central Asia is being yanked out of isolation. Its importance as a transit route between China and Europe grows daily. Everyone wants a share of this once remote place — historic ally Russia, resource-hungry China, troubled neighboring Kyrgyzstan, Islamists, Western democrats and Big Oil.

As in Russia's Far East, the siren sound of unsated China is unmistakable. One complication: Kazakhstan borders the Uighur areas of western China that last year exploded in violence. But Lou Jiwei, chief executive of China Investment Corp., is clear. China will bring capital, and technology, to secure supplies. "Kazakhstan and China are very close neighbors," he said, "so why not do this?"
As for the West, it reluctantly acceded to Kazakhstan's current chairmanship of the Organization for Security and Cooperation in Europe. Mr. Massimov, in an interview, called this an important recognition "that we achieved something" — though foreign diplomats insist that, where human rights are concerned, it is not enough.

Indeed, the Kazakh chairmanship began after the jailing of Yevgeny Zhovtis, the country's leading human rights campaigner, sentenced to four years in September after being found guilty of vehicular manslaughter. The imprisonment has imparted a chill to other rights advocates.

Larger even than China in Kazakhstan's present and future is Big Oil, and even more so since the spill off Louisiana. Whatever sophistication the government has brought to its dealings with Chevron, ConocoPhillips, Shell, Total and others, regulation is relatively skeletal and getting locals into the operations still difficult.

Several oil executives made clear their horror at the Gulf of Mexico. Kazakhstan's major field at Kashagan in the north Caspian — the biggest find since Prudhoe Bay in Alaska in the 1970s — is particularly sulfurous. Something much smaller than Deepwater Horizon would poison swaths of a country that in the 1950s was used — and fatally contaminated — as an atomic testing range by the Soviets. So even Western technology appears frail. "I wouldn't want even to imagine the consequences," said the oil and gas minister, Sauat Mynbayev. They would be "large-scale, and sad."


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