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The Kazakh Lion in winter

Kazakhstan’s former long-time leader is approaching a landmark birthday. But he is resisting any temptation to mark it with a comeback

Nursultan Nazarbayev, the builder of modern Kazakhstan, is successfully recovering from a bout of Covid-19, his associates say, as his 80th birthday fast approaches next week. And he is already preparing to help his country pull through its next big challenge: diversifying revenue away from hydrocarbons amid a global economy decimated by the virus and with huge dents in its demand for oil and gas.

But the political veteran, who stepped down as president last year but retains the symbolic title of ‘first president’ (and continues  to serve as chairman of Kazakhstan’s security council), has no plans to formally return to power, a senior Kazakh official tells Petroleum Economist. Rumours of strife within Kazakhstan’s ruling elite that might motivate his return had been briefly fanned after Nazarbayev’s handpicked successor, President Kassym-Jomart Tokayev, removed Nazarbayev’s daughter from her position as speaker of the Senate in early May.

No rocking the boat

While Kazahstan is grappling with an “unprecedented challenge of balancing the prestige and the authority of the founding president and the power of the elected president”, acknowledges the official, speaking on condition of anonymity, “stability is absolutely important”. “The country is facing a complex neighbourhood, with Russia and China on its borders, the Covid-19 pandemic that negatively affects markets for its natural resources, [and] the challenge of diversifying away from the traditional oil, gas, and other raw materials to manufacturing, agriculture, high-tech [industries] and services.”

0.9pc – Fall in GDP expected this year

Like the rest of Central Asia, Kazakhstan is bracing for a painful economic hit from the global crisis: according to the latest government projections, GDP will shrink by 0.9pc this year, down from a pre-pandemic forecast of 4pc growth. The country’s budget is predicated on oil prices above $50/bl, and the government is scrambling to raise an additional $5.3bn in debt to plug the hole blown in its budget by the hydrocarbons price collapse.

But analysts continue to judge the country resilient, despite its heavy dependence on hydrocarbon revenues, which accounted for 35pc of GDP and 75pc of exports in 2019. This is largely due to the long and complex heritage of Nazarbayev, who ruled Kazakhstan for three decades and is hailed in the region as a nation-builder on par with the founding fathers in the US, Turkey’s Mustafa Kemal Ataturk or Israel’s David Ben Gurion.

Aside from investing heavily in healthcare and education—Kazakhstan is the exception rather than the rule in the region—Nazarbayev’s rule set the foundations for economic reform and social stability in the country. This is why, when it was reported in the second half of June that Nazarbayev had tested positive for Covid-19, many feared his demise could create a dangerous power vacuum in Kazakhstan.

“Nazarbayev’s death would trigger a painful power struggle that would compound the other crises the country faces, as he is still very much in charge of Kazakhstan,” says Vesselin Avraamov, an independent Bulgarian political analyst who focuses on the former USSR.

Steady hand

At the dissolution of the USSR in 1991, a breakup which he never strongly supported, Nazarbayev found himself at the helm of a country that was practically a wreck: an ethnically diverse population of around 16.5mn (compared with 18.9mn today) spread thinly across a vast arid expanse, home to former nuclear testing grounds and notorious Gulag concentration camps where opponents of the communist regime languished.

Today, Kazakhstan is Central Asia’s most advanced economy, and one of the world’s fastest growing, with a GDP of $168.5bn in 2019. In the process, Nazarbayev became revered at home to the extent that, when he abruptly resigned in 2019, the capital city Astana, which he had built from scratch on the ruins of a former Gulag camp in 1997, was renamed Nur-Sultan after his forename.

Nazarbayev used his country’s immense reserves of c.30bn bl of oil and 93.7tn ft³ of natural gas to attract capital: foreign direct investment, most of it focused on the oil and gas industry, increased more than ten times on a GDP basis in the first two decades of his rule. Already by 1995, he had denuclearised the country (which previously held the world’s fourth-largest nuclear arsenal) in a deal with Russia that was financed by the US, consolidated power domestically and implemented an authoritarian neoliberal policy that experts sometimes compare to that of Singapore.

“Nazarbayev’s death would trigger a painful power struggle that would compound the other crises the country faces, as he is still very much in charge of Kazakhstan”

Since then, he has cultivated Kazakhstan’s image at home and abroad as that of a country that punches far above its weight and seeks to maintain close ties with—and even to mediate between—global powers such as the US, Russia and China.

With IOCs such as Italy’s Eni, Chevron, Shell and Total entering fields including Kashagan, Tengiz and Karachaganak, the country became the world’s ninth-largest oil exporter and gradually transitioned from a lower-middle-income to an upper-middle-income country, according to the World Bank. In 2015, Nazarbayev formulated an ambitious vision called “100 Concrete Steps”, which advocated broad institutional reforms designed to grow the economy into one of the world’s 30-largest.

Posterity’s verdict

Critics say that, like those of its neighbours and other former Soviet republics, Kazakhstan’s bureaucracy has often struggled to overcome corruption and mismanagement. Several scandals that touched his political allies may have helped trigger Nazarbayev’s resignation last year and his call for "a new generation of leaders” to step in.

Supporters counter that Nazarbayev cares deeply for his country and did not hesitate to take responsibility for the shortcomings of his rule and his associates.

His legacy may inevitably be mixed. “His fate was typical of a former Soviet leader who found himself in a capitalist reality,” says Stanislav Ivanov, a geopolitical expert at the Institute of World Economy and International Relations of the Russian Academy of Sciences. “Despite the export of oil and gas and other natural resources, a significant number of ordinary citizens of Kazakhstan live in poverty.”

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