Key political risks to watch in Kazakhstan

ALMATY Aug 1 (Reuters) - Kazakhstan's veteran leader was easily re-elected in April to lead Central Asia's largest economy until 2016, but his brief trip abroad for medical reasons in July reignited an old concern -- who will succeed him?


President Nursultan Nazarbayev won 95.6 percent of the vote by pledging stability and economic growth in the mainly Muslim country of 16.4 million people, where the echo of popular revolts across the Arab world is almost inaudible.


Nazarbayev, 71, has ruled Kazakhstan since 1989, two years before independence from the Soviet Union.


Many investors, who have poured more than $120 billion into Kazakhstan since independence, rate the absence of a clear successor as the biggest threat to stability in the vast, oil-rich nation, the world's 9th-largest by area.


Kazakhstan, the world's largest uranium miner and home to the biggest oil discovery in more than 40 years, is seeking a further $100 billion in foreign investment over the next decade.


Below is a list of key political risks in Kazakhstan:




Nazarbayev, who can run for president an unlimited number of times, enjoys absolute power. Public criticism of the president is taboo and there are no opposition members of parliament.


The president, a member of the last Soviet Communist Party Politburo, is genuinely popular. Many credit him with annual economic growth averaging around 8 percent over the last decade.


Per capita gross domestic product, at more than $9,000, has risen twelve-fold since 1994.


In his annual state-of-the-nation speech on Jan. 28, Nazarbayev said he planned to remain president as long as his health and his people permitted.

But an unsourced report in a German tabloid in July that Nazarbayev underwent prostate surgery in Hamburg reminded foreign investors of the biggest uncertainty threatening their business in Kazakhstan: who could eventually succeed him?


As long as he is in power, Nazarbayev will quell a behind-the-scenes struggle for influence and is likely to use his next term in office to groom an eventual successor.

Nazarbayev, a former steelworker, has three daughters but no sons who might make obvious succession candidates.


What to watch:


-- Nazarbayev's health. He appears regularly in public around the country, but any prolonged absence, or less frequent appearances, might signal something is wrong.


-- The emergence of a possible successor. Increased responsibility for members of his inner circle might reveal his favourites. Analysts say possible successors include:


* Timur Kulibayev, his son-in-law, who was appointed head of sovereign wealth fund Samruk-Kazyna after the election. He also chairs several large state firms, including energy giant KazMunaiGas, uranium miner Kazatomprom and rail monopoly Kazakhstan Temir Zholy;


* Karim Masimov, reappointed prime minister shortly after Nazarbayev's re-election. A gifted linguist, he is widely respected by investors but prefers to stay in Nazarbayev's shadow tackling exclusively economic issues;


* Kasym-Zhomart Tokayev, former speaker of the Senate, who was appointed by the United Nations in March as director-general of the U.N. office in Geneva;

* Imangali Tasmagambetov, mayor of Astana, the futuristic capital that has grown under Nazarbayev's close supervision;


* Kairat Mami, formerly prosecutor-general, was appointed speaker of the Senate on April 15. He would automatically assume presidential powers for the remainder of an existing term in the event of Nazarbayev's death.


* Two aides to Nazarbayev have said the president might choose to wait for the "Bolashak generation" -- thousands of Kazakhs whom Nazarbayev has sponsored to study abroad -- to emerge as the next political elite;




Some of the president's closest associates are in their 70s and younger associates are jostling for position.


Some, having appeared to overstep their brief, have fallen out with Nazarbayev, leading to periodic government reshuffles and the redistribution of assets.

Nazarbayev's former son-in-law, Rakhat Aliyev, fled Kazakhstan in 2007 and accused the president of usurping power. His departure led to a purge of security services and a government takeover of several media outlets.


Kazakhstan also wants Britain to extradite Mukhtar Ablyazov, the ex-head of BTA bank, charged with fraud and embezzlement. He denies the charges and says he pushes for political change.


Some analysts say an internal struggle for power within the security services could be an explanation for several blasts in May, which both took place close to buildings belonging to the National Security Committee, successor to the Soviet-era KGB.


Two men were killed in the capital Astana when an improvised explosive device blew up inside their parked car in the early morning of May 24.


On May 17, Kazakhstan's first known suicide bomber blew himself up in the northwestern city of Aktobe, wounding two bystanders. Islamist militants from the same city have been detained in Russia's North Caucasus region in recent months.


In July, security forces killed nine people suspected of killing several policemen in the same Aktobe region.


On each occasion, Kazakh authorities were quick to dismiss the explosions as the work of petty criminals and denied any link to terrorism. Kazakhstan has to date avoided the terrorist bombings and militancy seen in other Central Asian republics.


What to watch:


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


-- More explosions or violence, particularly if targeted at the security services, which could signal a power struggle or an attempt to discredit the authorities.




Kazakhstan has grown more assertive over its abundant natural resources, pushing to revise agreements signed with foreign energy majors in the immediate post-Soviet years, when it was more inclined to make concessions in return for cash.


State companies have bought into, or are looking to acquire, stakes in foreign consortiums. Such acquisitions have sometimes followed accusations of environmental violations, tax evasion or non-compliance with contracts.


Investors and diplomats have in private expressed concern over such tactics, saying they could scare off investment at a time when the economy needs fresh capital to start new projects.


Foreign shareholders in the promising Karachaganak gas venture are preparing to cut their stakes to allow the state to acquire 10 percent. Its owners, including Italy's Eni and Britain's BG Group , have been accused of tax evasion.


BG said on July 26 that talks on the Karachaganak tax dispute could be concluded by the end of this year.


Participants in the Kashagan oilfield consortium have also come under state scrutiny. The world's biggest oil find since the 1960s, it is scheduled to begin production by the end of 2012, but its costly second phase appears to have been frozen.


What to watch:


-- How the Karachaganak and Kashagan episodes unfold. Government approval of Kashagan's second phase, without any change of ownership or contract terms, would be a positive sign for foreign investors;


-- The growing influence of China. Kazakhstan borders China and has secured billions of dollars in investment from Beijing, making it less dependent on the West for capital.




Kazakhstan's wealth, relative to its poorer neighbours, is more evenly distributed among its population. An average monthly wage of $600 is more than six times the average in Tajikistan.


The danger for Kazakhstan is that unrest in a neighbouring country, such as Uzbekistan or Kyrgyzstan, could


Thomson Reuters 



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