Parliamentary Elections in Kazakhstan Affect Energy Flows from Eurasia

March 25, 2023

Kazakhstan held competitive elections to the lower house of parliament. Despite some problems, they were the freest in the country's history and were an important step forward in democratization and political pluralism in the country. Ariel Cohen, an American political scientist and expert on international security and energy relations of Russia-Eurasia, Eastern Europe and Middle East regions, assessed the elections to the Mazhilis this way.

"The results of these elections are important not only for the country, promoting President Kassym-Jomart Tokayev's reform program, but also internationally, as they have a geopolitical and economic impact.

Nevertheless, the great powers, China and Russia, and even their Central Asian neighbors, were not thrilled with Kazakhstan's democratic progress, since their internal vectors are directed in the opposite direction," the political scientist said.

He noted that Kazakhstan is strategically and economically important. Its size is comparable with Western Europe and stretches across two time zones, from east to west. It borders Russia and China, as well as three Central Asian neighbors: Kyrgyzstan, Uzbekistan and Turkmenistan.
The country is a major producer of oil, gas, uranium and some rare-earth elements vital to green energy.

"Sparsely populated, landlocked and geographically unprotected, Kazakhstan must walk a careful diplomatic tightrope, balancing the liberal aspirations of younger, more educated, more modern voters while unfriendly or skeptical neighbors are forced to watch. It seeks to distance itself from an increasingly isolated, sanctioned and hostile Russia, while avoiding provoking China or allowing Beijing to fill the vacuum created by Moscow. Kazakhstan must cautiously walk a tightrope amid the massive economic disruption caused by Covid and then Russia's war in Ukraine and the sanctions that followed," the expert said.

The article points out that the election shook the political model that emerged during the country's first three decades of independence, when the ruling Nur Otan party enjoyed a massive and uncontested majority.
"As a result of the election, the ruling centrist Amanat party (Nur Otan's successor) won with only 53.9 percent of the vote. What is most important for the energy and financial markets is that the elections resulted in a centrist Mazhilis designed to accelerate Kazakhstan's de-oligarchization, privatization, break away from Russia and further liberal economic reforms. This centrist bloc of votes was split between the traditional values-oriented People's Democratic Patriotic Party Auyl (10.9%) with its rural social-democratic platform, the newly created urban market-oriented Respublica party (8, 59%), which promises 21st-century market and digital modernization for the new Kazakhstan, and the socially conservative, mostly rural-oriented Aq Jol Democratic Party of Kazakhstan (8.4%), which promises land reform and agricultural modernization. The remaining votes were split between the People's Party (6.8%) and the National Social Democratic Party, representing a more active opposition.

The remaining votes were given to independent candidates or the ballots were spoiled," says the publication.

Although the turnout at the elections was lower than expected (54%), it is still safe to say that these elections will have a decisive influence on Kazakhstani politics and the international energy situation, the expert believes.

"While this centrist coalition generally supports President Tokayev, opposition voices on both the left and the right mostly criticize the government for the slow pace of reforms. Since Tokayev no longer has an unchallenged majority and has to rely on the support of other centrist parties, it is likely that Kazakhstan will pursue several policies that will soon have an impact on global energy markets," Cohen suggests.

According to him, first, we can expect Kazakhstan to start reducing its state-owned enterprises (SOEs) through privatization.

"These vestiges of the Soviet planned economy have long been considered a drain on the economy and an obstacle to business efficiency, but it's not easy to get rid of them. The government has already begun to put pressure on SOEs in areas unrelated to the economy, in particular by restricting their ability to force their employees to vote, influence who they vote for, or run for office. Nevertheless, full economic liberalization has been difficult and controversial because of Kazakhstan's dependence on oil exports and fears that misdirected privatization could inadvertently strengthen the oligarchs. Most likely, we will not see a complete dissolution of state enterprises in Kazakhstan for some time, but we can expect that energy giants, such as oil and gas conglomerate KazMunaiGaz and nuclear industry holding Kazatomprom, will continue to float shares on the stock market," said the political analyst.

"Air Astana, Kazakhstan's national airline, has already announced its privatization with an IPO to take place in 2024. "Kazakhstan Temir Zholy, Kazakhstan's national railway operator, is also planning privatization for 2024-2025, along with more than 600 other state and quasi-state companies and facilities.

According to the expert, we can also expect Kazakh companies to become more open and transparent, with a higher level of compliance with international standards, greater openness to investors, joint ventures and partial liberalization.

"Secondly, we can expect Kazakhstan to accelerate its economic disengagement from Russia, albeit gradually. The economic realities of the world's longest border with Russia mean that Kazakhstan, even while complying with sanctions and redoubling efforts to combat smuggling, will always trade with Russia in an attempt to reduce its dependence. These attempts will mainly rest on securing an expansion of the Trans-Caspian Energy Corridor, also known as the "Middle Corridor," across the Caspian Sea westward through Azerbaijan and Georgia, so that Kazakhstan is no longer vulnerable to Russia, which could choke off Kazakhstan's imports or exports. The recently announced construction of an oil pipeline to the Caspian Sea is a sure step forward in this regard. The pipeline will allow Kazakhstan's oil to be exported through Azerbaijan, Georgia and Turkey to the Mediterranean Sea or through Georgian ports via the Black Sea," the review says.

In addition, the expert expects that Kazakhstan will try to further diversify its economy.

"The path to democracy and the meaning of these elections, like democracy itself, is confusing. Diversification will not happen overnight and will not lead to significant changes in energy exports, although we may see increased imports of means of production and high technology aimed at implementing some of the programs of computerization, gasification, agrarian reform and liberalization put forward by the centrist electoral bloc. The opposition is fragmented: in the capital Astana, for example, more than 40 separate candidates ran for single-mandate seats. Almost universal enthusiasm for opening up civil society is necessary, but not enough for Kazakhstan to build a working democracy, but other Asian countries have achieved it: Indonesia, Korea, Malaysia, Taiwan, Singapore are examples of the difficult road to political and economic freedom. Anyone interested in the interaction between energy and democracy should cheer for the success of Kazakhstan's state-building enterprise," the author concluded.