Kazakhstan’s elite have enriched themselves with natural resources. Then came the commotion.

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Kazakhstan’s huge reserves of petroleum, coal and precious metals offered the promise of a prosperous future for the nation after the dissolution of the Soviet Union. The country, the largest of the former Soviet states in Central Asia, alone accounts for 40% of global uranium production.

Yet Kazakhstan’s relative prosperity has failed to shield the country’s rulers from popular anger over corruption, low wages, and the outsized wealth of a small group of oligarchs.

This helped turn resentment over rising fuel prices into a broader protest against the country’s authoritarian rulers and the state of the economy.

The crisis worsened on Friday when Kazakh President Kassym-Jomart Tokayev ordered the police and army to shoot protesters without warning. Clashes between protesters and security forces have already claimed dozens of lives and prompted Russia to send paratroopers to help Tokayev.

“The surprising scale of the turmoil and disorder that we have seen suggests that this is something more than just discontent with rising fuel prices,” said Nigel Gould-Davies, former ambassador. British in Belarus.

“Relatively speaking, Kazakhstan was one of the top performers of the post-Soviet period in Central Asia and had a much better economic record than the states around it,” said Gould-Davies, senior researcher. for Russia and Eurasia. at the International Institute for Strategic Studies, a think tank.

“And yet, that did not prevent this extraordinary eruption,” he said. “The broader comparative perspective of success clearly did not shield the regime from discontent.”

After Kazakhstan became an independent state in 1990 following the demise of the Soviet Union, many businessmen close to the government amassed enormous wealth through privatization and ownership of natural resources.

Some of the country’s tycoons have been embroiled in international banking scandals, and many of the wealthiest are now living abroad in places like London.

People line up for cash at ATMs amid protests in Nur-Sultan, Kazakhstan.


Photo:

STRINGER / REUTERS

Only 162 people represent 55% of the country’s total wealth, according to a report by the accounting firm KPMG. The country has five billionaires on Forbes’ list of global billionaires, from the mining and banking sectors.

“This system of decision-making continues to reflect the interests of a relatively small group of actors, whether counted in terms of individuals or their business vehicles or assets,” wrote researchers Simon Commander and Ruta Prieskienyte in a recent article from the IZA Institute of Labor Economics.

Given Kazakhstan’s position as a major exporter of raw materials, unrest rocked global markets this week as investors pushed up oil and uranium prices.

Uranium jumped about 8% this week, the highest since September, as Kazakhstan is the world’s largest producer of radioactive material and a major supplier of utilities to the United States, China and elsewhere. Traders said that while mining operations did not appear to be affected, concerns focused on the ability to transport uranium out of the country.

Oil prices have also increased. Kazakhstan is a member of the Organization of the Most Petroleum Exporting Countries and produced about 1.7 million barrels of oil per day in November, according to the International Energy Agency, or just under 2% of that that the world consumed every day over the past year.

Chevron Corp., which owns 50% of the joint venture that manages Kazakhstan’s Tengiz oil field, a $ 37 billion project that is four times the size of Paris, said it had cut production after protests at the facility . Exxon Mobil Corp. also owns a stake in the project.

Protests first sparked by rising fuel prices in Kazakhstan have turned violent, prompting a Russian-led military coalition to send troops to the oil-rich country. The video shows government buildings and streets in several towns stormed by protesters. Photo: Mariya Gordeyeva / Reuters

Local bitcoin mining companies have also been affected by an internet shutdown that has forced miners – computers rushing to unlock new bitcoin and validate transactions – offline. In August 2021, Kazakhstan was the second largest cryptocurrency mining site in the world, behind the United States, according to data from the University of Cambridge, after scores of miners fled to the country. last year looking for a nearby location with cheap energy prices after China’s crackdown on miners.

For Kazakhstan, the protests come at a precarious time for the economy.

Kazakhstan has long been considered one of the most prosperous former Soviet countries in Central Asia, growing faster than its neighbors and attracting foreign investment. He built a new capital in the middle of the steppe called Astana – since renamed Nur-Sultan in honor of longtime leader Nursultan Nazarbayev – where the skyline is punctuated by sparkling skyscrapers and shopping malls of western style.

Part of the reason is that the wealth of resources has not reached a large part of the population, instead spawning a large group of tycoons and fueling widespread corruption. The minimum wage is less than the equivalent of about $ 100 per month.

Corruption is a persistent source of anger. Kazakhstan ranks 94th on Transparency International’s Corruption Perceptions Index. The government has repeatedly promised to tackle high-level corruption and privatize state assets, but efforts have failed, observers say.

These underlying issues have now spilled over.

On January 1, a fuel market reform that was first discussed in 2015 entered into force. He ended subsidies on liquefied petroleum gas, which many Kazakhs use for their cars instead of more expensive gasoline or diesel.

Prices nearly doubled overnight, sparking protests in the oil-rich Mangistau region, where up to 90 percent of vehicles run on LPG, local officials say. The government has since promised to reduce the price.

“With few channels to hear and respond to popular discontent, and authorities in major cities often disconnected from the lives of ordinary citizens, the protests over the price of LPG opened a moment of popular frustration that took the government by surprise.” , Zachary Witlin said. , senior analyst at the risk consultancy firm Eurasia Group.

The crisis now threatens to further weaken the country’s economy and affect the investment climate at a time when it is already grappling with high inflation. Annual consumer price increases have been close to 9% in recent months, reaching multi-year highs.

The tightening of state finances during the pandemic meant authorities had little bandwidth to stimulate the economy, leading to stagnant wages and work stoppages affecting several economic sectors, the risk consultancy wrote. Teneo in a note to clients this week.

This week, the country’s sovereign bonds were hit as the crisis deepened and, with local stock exchanges shutting down amid the protests, global investors sold off shares of some Kazakh companies listed in London.

What is happening in Kazakhstan?

Write to Georgi Kantchev at [email protected]

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