Will Kazakhstan Become the Second Belarus in Russia's Imperial Puzzle?

After the large-scale protests in January 2022, Kazakh President Kassym-Jomart Tokayev formulated a number of factors for the country's future stability: ensuring almost full employment, a five-year moratorium on raising officials' salaries, currency stability, and the elimination of smuggling on the Kazakh-Chinese border. 

The idea of pacifying popular unrest by «dekulakization» (dispossession) the «best people» is very popular in patriarchal societies where the idea of the responsibility of elders for younger people is strong and where authoritarian forms of government are supported.

In general, Kazakhstan, surprisingly enough, has always been an obedient student of the IMF: to fight inflation, it has raised the central bank rate and tightened monetary policy, making significant progress in the "transition to full-fledged inflation targeting." 

Kazakhstan is implementing a policy of fiscal consolidation - broadening the tax base, eliminating exemptions, introducing a progressive income tax, and even applying carbon pricing to achieve carbon neutrality by 2060. 

The IMF also welcomed the government's intention to launch a massive privatization of state-owned companies after the pandemic to attract additional investment.

By the way, Kazakhstan is among the top 40 (out of 190 countries) in terms of ease of doing business, and its fiscal system is among the top twenty in the ranking of tax regimes in the world (189 countries). Kazakhstan is among the top 30 countries in the Global Competitiveness Index. The same indicators are available for the level of human capital development.

The Kazakh Way

Tokayev's policy is not purely pro-Russian. For example, the President of Kazakhstan refused to recognize the so-called "DPR and LPR" and the occupation of Crimea and other Ukrainian territories. He was not afraid to say this directly to Putin's face at one of the joint forums.

Therefore, Tokayev's policy is perhaps the most successful example of multi-vectorism or balancing between such geopolitical players as the United States, China, and Russia.

Thus, at the moment, Kazakhstan is one of the main members of the EAEU, which includes five countries: Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia. 

The reason for the emergence of this integration project lies in the macroeconomic theory of "economies of scale" formulated by American economist and Nobel laureate Paul Krugman. 

According to his theory, any quasi-state conglomeration with a population of 250 million to 300 million people is an optimal system for the production and consumption of goods and services. If the population parameters are not maintained, a systemic imbalance begins. 

An economic system with a population of more than 300 million people needs markets and increased exports: otherwise, it will not be possible to provide employment. If the population is less than 250 million, you become dependent on imports. It is no longer profitable to create national production for the entire range of goods. 

By the way, this theory led to the idea of creating the EU. At the same time, this theory found a lively response in the academic environment of the Russian Federation. They quickly calculated that if the population of the USSR was 280 million, the Union could be reformed and preserved without trade and economic integration with the Western world. 

That is why Russia's global survival directly depends on its ability to form a new integration core, because the parameters of the federation do not allow it to create a hermetic economic model. 

At present, the Eurasian Economic Union, of which Kazakhstan is a part, provides such a platform for uniting 250 million people. However, participation in Moscow's integration projects does not prevent Kazakhstan from finding its own island for stable development even in a sea of "inefficiency." 

So far, the EAEU is an extremely weak integration core: 80% of its members' trade turnover is with third countries, and only 20% is mutual trade. If we take Russia, only up to 15% of its foreign trade is accounted for by the EAEU. 

Belarus is the most dependent on this association, with 52% of its foreign trade coming from the EAEU. Kazakhstan's dependence is much lower, at 25%. 

A Difficult Maneuver

In recent years, Kazakhstan has been pursuing the most effective policy of "covert economic maneuver", which consisted of obtaining the largest trade, transit, logistics and customs preferences from participation in the EAEU, on the one hand, and developing alternative areas of international cooperation, on the other. 

As a result, Kazakhstan has reduced the share of trade turnover with the EEU countries to 25% and is no longer as dependent on Russia's economic policy as Belarus. 

At the same time, the republic has increased its GDP and strengthened cooperation not only with China but also with Western countries.

Currently, almost 40% of its fuel resources are produced by companies with Western investments. Oil from Kazakhstan is exported through the Caspian oil pipeline to the port of Novorossiysk.

Just look at the structure of the participants in this project (the Caspian Pipeline Consortium):

• "Transneft (Russia) - 24 %;

• "KazMunayGas (Kazakhstan) - 19 %;

• Chevron Caspian Pipeline Consortium Company (USA) - 15%;

• LUKARCO B.V. (Netherlands) - 12.5 %;

• Mobil Caspian Pipeline Company (USA) - 7.5 %;

• Rosneft-Shell Caspian Ventures Limited (Cyprus) - 7.5%;

• KTK Company (represented by Transneft) (Russia) - 7 %;

• BG Overseas Holding Limited (UK) - 2 %;

• Eni International N.A. N.V. (Italy) - 2 %;

• Kazakhstan Pipeline Ventures LLC (Kazakhstan) - 1.75 %;

• Oryx Caspian Pipeline LLC (USA) - 1.75 %.

In general, Kazakhstan's strategy can be defined as follows: to attract Western technologies and Chinese investments, gradually reducing its dependence on Russia, while strengthening its national identity and emphasizing its independence from Russia. The latter is manifested, in particular, in humanitarian policy and the transition of the alphabet from Cyrillic to Latin.

So, despite the Asian hospitality and smiles during the meeting, Kazakhstan continues its drift towards key geopolitical players in the West (the US, EU, and Britain) and East (China).