Gregory Gillespie, M.A. La Salle University, Philadelphia, Pennsylvania, USA

ISBN 338.23:620.9 :[574]:355.45 (5-191.2)

Gregory Gillespie, M.A. La Salle University, Philadelphia, Pennsylvania, USA

Position: U.S. Embassy, Moscow, Russian Federation & Doctoral student in Public Administration Contact:

UnderstandingEnergyPolicyofKazakhstanandtheFutureofEurasianSecurity

Abstract

Thepurposeof this paperis to investigate, examine, and analyzetherolethat Kazakhstan has played in Central Asian development, specificallyin regards to energypolicy, and how itwillultimatelyaffect futureregional security. The collapseof theSoviet Union and the independenceof theRepublics that followed in 1991 provided the CentralAsian states an opportunityto build national identities and move awayfrom the stronghold of Soviet rule and policies. Although the Republicof Kazakhstan was the last to declareits independence andfull sovereigntyfrom Communistrule, its progress made as an individual statehas far surpassed its neighbors.Kazakhstan’svast amount of natural resources, including gas and oil, have conducted the main role in allowing the countryto useits domesticblessings in orderto build its economy and becomearegional power.

Kazakhstan’s energyindustryandmarket will beexamined to provide an understanding of how aformer Soviet Republicis ableto developveryswiftlyafter aswitch to a market economyameretwentyyears after theswitchfrom a central planned economy. Themost important relationship that will be discussed is with Russia,whosedominant regional powerand historyhas shaped Kazakhstan.How has the United States’ energypolicieswith Kazakhstan affected thesecurityin theWest, as wellas the ongoingWar on Terror?Thelack of knowledge about Kazakhstan among Americans has prompted me to examinethis topic. Kazakhstan’s geopolitical position willbekeyto thefutureof U.S. foreign policyand security.

Key words: energy policy, international security, Eurasia, regional development, Kazakhstan

BackgroundInformation: Independent Kazakhstan

Four times the sizeof Texas and apopulation of 15 million, the Republicof Kazakhstan triumphs over its neighbors with the economyofthe sizeofallCentral Asian nations combined.[1]

A combination ofasurplus of natural resources and recent political stabilityhavepaved wayfor Kazakhstan to becomearegional securitypower in the twenty-first century.In orderforthe United States to deepen ties and development in Central Asia, the first decadeof Kazakhstan’s independencefrom theSoviet Union mustbe examined and understood toanalyzewhyitis an important asset to an increasinglyglobalizingsociety.

Aftercenturies of Russian and Soviet Rule, Kazakhstan was faced with a pivotal challengein December 1991: thedeclaration ofsovereigntyand the need for constructinga national and political identity,as wellasaneweconomy. Over time, Moscow had madethe decisions forKazakhstan, built massive infrastructureand arms projects, deported Slavs and Germans to its lands, andforced Russification policies ofusingRussian as the dominant language. Kazakhstan’shistorywith Russia and theSoviet Union is the most important factor in understandingits policies and state security.

President Nursultan Nazarbayev as led apolitical regimefrom theCommunist Partyto a national democracyin Kazakhstan. He essentiallysingle handedlyled Kazakhstan to the21st century. Nazarbayev hasremained in powersincebeforeKazakhstan’s independence, and recent legislaturehas declared himas President forlife, in addition to automaticallygrantinghim criminal immunity. Thefact that a democraticstatewould essentiallyapproveof an authoritarian regimewould cause concern and uproar for manyWestern states, but thecontext ofNazarbayev’s position is critical forunderstanding Kazakhstan’s historyand political agenda.

Thepeople overwhelminglysupport him, and in his last election in 2005 Nazarbayev swept up over 91%of thevote. Hetrulylives up to the imageof apeople’s president, growingup in an extremelypoorfarming village, which was avictim of Soviet collectivization policies. Nazarbayev isalso known to reallyinteractwith Kazakh citizens, oftenchatting, dancing and sharing with fellow people on thestreets duringpublic events.

Followingindependence,President Nazarbayev tried to preserveasenseofcommunity amongthe Russian residents livingin Kazakhstan byensuring good jobsand equal access to the centers of powersaroundthe country. Bydoingthis, he was able to appeaseRussiabyshowinga commitment to theprotection and fosteringofethnicRussians.2At the same time, working with allethnic minorities on keyissuesallows for peace, thereforeleadingto virtuallyno political revolutions in attempttooverthrow Nazarbayevand his government. The1995 Constitution of Kazakhstan granted Russian as an official languageof theRepublic. Nazarbayev did notwant to limit therights of the largeRussian-speakingpopulation. Bypreservingthe educated Russian population and allowing them equal rights within Kazakhstan, perhaps then theywould not emigrate back to theRussian Federation, allowingKazakhstan to reap thebenefits of aneducated class duringacritical timeof state-building.3Instead of movingtowards thedirection of establishingaKazakh societywith privileged status for ethnicKazakh people, Nazarbayev has worked towards buildingatolerant multiethnic society. Thereis also religious freedom,and a largebalancebetweenIslam and Orthodoxy, withsupport for constructionof both mosques andchurches. Byavoidingpolitical turmoil and social unrest, there can beawider focus on

2Goldman, Minton F.Rivalryin Eurasia: Russia, TheUnited States, and theWar on Terror. Santa Barbara: ABC-CLIO,LLC. 2009. 6

3Cohen, Ariel. Kazakhstan: TheRoad toIndependence, EnergyPolicyandthe Birth of aNation. Washington, DC: TheCentral Asia-CaucasusInstituteSilk Road Studies Program. 2008. 23

economicdevelopment, buildingsecurityties, and expandingthe energyindustryacross the region.

Thebiggest fear forKazakhstan at the end of thetwentieth centurywouldbethe contraction ofthe“DutchDisease,”a coinedreferenceto what theNetherlands had experienced with their economyafteradiscoveryofanaturalgas field in 1959, definedas an increaseof exploitation of natural resources willinevitablylead to a declinein themanufacturingsector. Dutch Diseasecauses domesticresources to shift awayfrom tradedcommodities,such as manufacturingofgoods,towards non-tradedgoods, such as transportationand otherdomestic services.In order tocombat the disease, states need to enact aggressivepolicies.4In the caseof Kazakhstan, thegovernment made aneffort to studythe Dutch Diseasein the early1990s, allowingNazarbayev to learn from Norway’s success, thereforecontinuing success of Kazakh energypolicy.5

Kazakhstan has been faced with the challengeofbeinglabeled asa “petro-state.”Many

analystsbelievebeing anoilexportingstateleadsto a lack of transparence,alack of separation of powers withinthegovernment, a lack of equitable distribution ofwealth and power,and high levels of state debt.6Also, astate’s industrial sectors outside ofthe energyindustryfrequently suffer when there arenewfound discoveries and increasingproduction ofoiland gas.In apetro- state, the onlyactors invited bythegovernment todevelop business policies arethose whose

onlyinterest is in oil. Theybecome theonlynon-state actors that thegovernment hears, leading

4Sabonis-Helf, Theresa.“TheRise ofPost-Soviet Petro-States: EnergyExports and Domestic Governancein Turkmenistan and Kazakhstan.” In the Tracks of Tamerlane: Central Asi a’s Path to the21stCentury. Washington, DC: CenterforTechnologyand National SecurityPolicy. 2004.

160

5Ibid., 160

to thefavoringof theenergyindustryover others,resultingin politicization.7Kazakhstan had chosen asingle economic effect in terms of being a petro-state, instead ofapolitical-economic interactiveeffect.8

Kazakhstan also opened its markets to foreign investors, which was what US policymakers werehopingfor. Nazarbayev’s policies swiftlypaid off.In 1994, United States President BillClinton tripled the amountof American aid to besent to Kazakhstan, from $91 million to $311 million in 1995.9Byaccomplishingdemocratization and establishingamarket economyearlyon in the1990s, Nazarbayevwas able to open up the UnitedStates’ opinion of Kazakhstan, which would in turn return further investment and securityinterestsin the country and Central Asia.

Another event in 1991 helped Kazakhstan becomewhat it is todayin termsof regional security. With the formation ofthe Commonwealth ofIndependent States (CIS), Russian President Boris Yeltsin was quite pleasedwhenKazakhstan sought membership into the union as the first non-Slavicstate.Byextendingasphereof influenceand power back into Central Asia, thereweredreams ofanotherRussian/Soviet-dominated union goinginto thetwenty-first

century, similar to theunion that all therepublics had belonged to in 1922underLenin.10While

maintainingaclose relationship with Russia, but separate enough to dictateits own energyand securitypolicies, Kazakhstan is ableto extend itsposition into Russia and the Caucasus,as well

7Sabonis-Helf, Theresa.“TheRise ofPost-Soviet Petro-States: EnergyExports and Domestic Governancein Turkmenistan and Kazakhstan.” In the Tracks of Tamerlane: Central Asi a’s Path to the21stCentury. Washington, DC: CenterforTechnologyand National SecurityPolicy. 2004.

160

8Ibid., 160

9Goldman, Minton F.Rivalryin Eurasia: Russia, TheUnited States, and theWar on Terror. Santa Barbara: ABC-CLIO,LLC. 2009. 38

as throughout therest ofCentral Asia.In additionto this, Kazakhstan was able to gain American support earlyon, specificallyin terms offoreign energyinvestment, whichhas shaped its contemporarysociety.

Predictions ofPowerandPolicy Before9/11

Accordingto manypolicymakers andanalysts, Kazakhstan was not necessarilyon the radar of extreme importanceto theUnited States in regards to regional securityand power.In actuality,Uzbekistan was perceived most likelyto become theCentral Asian regional power. Becauseof its largeterritory,abundanceofresources, and population ofapproximately25 million, it was concluded that Uzbekistan would be able to takeon theleadissues that were common to Central Asia, as wellas beingableto resist influencefrom outsidepowersand extremist neighbors.11Over adecadelater, this haschanged, with Kazakhstan takingcenterstage as aregional powerhouse.Thepast fewyears haveseen adrastic changeinattitudes and interests between Uzbekistan andthe United States, includingUzbekistan’sIslamicmovements andgroups hopingto changeits political structure. Thus, Kazakhstan willrear itself to continueto bethe United States’ main interest in the region.

TheUnited States’ maininterestswerenot aboutthe energyindustry, becauseitwas- believed that Central Asia’s oil andgas would notreallyaffect theenergysecurityof West. Policymakers stressed that political openness andtransparencyshould befostered in thesestates, so that theywould not fallinto the influenceof anti-Western, extremist powers, ornon-state actors. And whywould this be theprimaryconcern forthe United States?It was not becauseofthe abundanceof energyand natural resources. TheSoviet Union’s legacyin Central Asiawas of

11Nichol, Jim. “CentralAsia’ Security:Issues andImplications forU.S.Interests.” Congressional ResearchServicePolicyPapers. 30August 1999.LexisNexis,LaSalle University. Accessed 14November2010

extreme importanceto thebalanceof regional powers. Manybelieved thatanyform of political instabilityin Central Asiawould spillover into neighboringstates, such asUnited States allies, includingTurkey. Even though todayKazakhstanis now freeof nuclear warheads and other weapons of mass destruction, itwas onlyjust recent that its stockpiles were cleared.TheUnited States feared that thesematerials in the region would raise thedanger ofproliferation to radical Third World regimesandterroristorganizations that were alltoo closegeographicallyto Kazakhstan.12

Lastly, itis necessaryexaminethe role that Chinawas playingin CentralAsiaduringthe

late1990s, compared to that of today. Although China’s economywasgrowingduringthis time,

itwas not as exponential as it is today.It is evident that United States policymakers werenot able to predict the wideranges of affects China would haveon Central Asian states, as wellas countries across theglobe. Kazakhstan, Kyrgyzstan, and China haveworked together to build connectingroadsand infrastructureprojects, in addition to surpassing$1 billion in annual trade.

In 1992,aregional railwaywas opened that linked Druzhba, Kazakhstan to Urumqi, China.13This project was just thebeginningof whatwould ultimately affect regional security with Kazakhstan and its neighbors. PakistanandChina also assisted Kazakhstan and Kyrgyzstan to upgradethe Karakaroum Highwaythat connected theChinese cityof Urumqiwith Pakistan. Theincreasingphysical closeness between CentralAsian states and terrorist-plagued states such as Pakistan should beflaggedwith extreme caution. Themovement of illegal drugs, immigrants,and terrorist activitywas alreadyofgrave concernto theWest when Central Asiawas devoid of

12Nichol, Jim. “Central Asia’ Security:Issues andImplications forU.S.Interests.” Congressional ResearchServicePolicyPapers. 30August 1999.LexisNexis,LaSalle University. Accessed 14November2010

13Ibid.

Soviet rule and power. The constant fear ofinfiltration byterroristgroups into Central Asia and the Caucasus is clearlyevident between theUnited States and Europe. At thesame time, the European Union sponsored the Transport Corridor Europe-Caucasus-Central Asia(TRACECA) project in 1993.14This massivetransportation infrastructureproject’sgoal was to re-create the historical “silk road”thatlinked the East and West. Theseprojects havepaved way, literally, to recognizingCentral Asian states’status as adevelopingregion.

Kazakhstan ina Post-9/11 World

With the War on Terrordeclared after theterrorist attacks in the United States, Central Asian states’position werepivotal forfightingwars in Afghanistan andIraq. Kazakhstan has granted theUnited Statesemergencylandingprivileges fortheAir Forcefor those aircrafts engaged in operations in Afghanistan, as wellas flyingrights through Kazakh air space.15

Supportingthe militaryin the vast terrain in theMiddle East is difficult enough, but with akeyallyin thenorth, theUnited States and Kazakhstancan recognizetheirstrategicplans for the region, also bolsteringties amongst each other.Kazakhstan has also sent a small groupofarmy engineers to the multinational militaryforces inIraq, furtheringsupport for Western powers.16

Theyears following9/11provided Nazarbayev with opportunities to proveKazakhstan’s

rolein regards to regional security.On September8, 2006, the foreign ministers ofKazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan gathered in theeastern Kazakh cityof

14Nichol, Jim. “Central Asia’ Security:Issues andImplications forU.S.Interests.” Congressional ResearchServicePolicyPapers. 30August 1999.LexisNexis,LaSalle University. Accessed 14November2010

15Peimani, Hooman. Conflict and Securityin Central Asia and the Caucasus. Santa Barbara: ABC-CLIO,Inc. 2009. 133

16Cohen, Ariel. Kazakhstan: TheRoad toIndependence: EnergyPolicyandthe Birth of a

Nation. Washington, DC: TheCentral Asia-CaucasusInstituteSilk RoadStudies Program.

2008. 95

Semipalantik, on thefifteenth anniversaryof its nuclear testing groundbeingclosed, to sign a monumental document that would guaranteethe Central Asian states’commitment to structuring regional security. TheCentral Asian Nuclear-Weapon-FreeZone(CANWFZ) pledged that the member states would notresearch, develop, manufacture, or stockpile anynuclearexplosive device. Theyalso agreedto notallow outsideparties and non-stateactors toconduct anytypeof activityregardingthe implementation of nuclear construction on the states’territories, nor assist those outsideof their borders. This treatywasparticularlyimportant becauseitinvolved allofthe Central Asian states,includingTajikistan whohas been plagued bycivil war and terrorist activity. Theadoption ofthis treatyeven receivedassistancefrom theUNGeneral Assemblyand the UN Disarmament Commission, which revealed efforts from an outsidepower to ensurethat the agreement conforms to thestateprinciples andguidelines.17

Lastly, itis important to note thelack of dangerous attention given to Kazakhstan’s

people in apost-9/11 world. As of 2008, therewereno reported terrorist attacks on Kazakh soil or againstits citizens abroad.18Perhaps Nazarbayev’s attempts to providepeaceto theregion on the level of nuclear securityhavetrickled down tothe human level.

All in all, Nazarbayev knows what Kazakhstan has to live up to. His leadership is conducive to changing anation to a point that neighborsand competitors in alldirections will stop and wonder what Kazakhstan is doingright.

ResourceSecurity:Oil andGas Exports ofContemporaryKazakhstan

17Weitz,Richard. Kazakhstan and the NewInternational Politics of Eurasia. Washington,DC:TheCentral Asia-CaucasusInstitute. 2008. 61

18Cohen, Ariel. Kazakhstan: TheRoad toIndependence: EnergyPolicyandthe Birth of a

Nation. Washington, DC:TheCentral Asia-CaucasusInstituteSilk RoadStudies Program.

2008, 26

As with manycolonized states, much of Kazakhstan’s infrastructureand technological development would nothavebeen possible, or at least notasfast, without Soviet policies in theregion. Even after declaringindependence,Kazakhstan still relies on Russia as beingits biggest client for its energyindustry. All of Kazakhstan’sgasexports and 90%of its oil exports travel thru or to theRussian Federation.19Itis through Russia’s Gazprom pipeline

system that much of Kazakhgas isexported to Europe. Kazakhstan’s oil does reach allmajor

markets, viatheBlack Sea, Persian Gulf, tankers,and railroad.Oil bound forUkraine is transferred byrailroad toits ports, and another75,000 barrels per daytravelin smalltankersfrom the Kazakh port cityofAktau to Baku, Azerbaijian and Neka,Iran.20As an up-and-comingcustomer, in 2001 Chinareceived 85,000 barrels of oil per daybywayof theAtasu-Alashankou pipeline.

In 2005,Kazakhstan exported approximately1 million barrelsof oil perday.There are hopes to triplethis figure to over3 million barrelsper daybytheyear 2015.21This expected and enormous outlook shows Kazakhstan’s commitment to utilizingtheir amountof natural

resources and upgrading production, ultimatelyputtingthe nation on alist of powerful oil nations.If thesefigures arereached, Kazakhstanwould be considered in thesame categoryas Kuwait,Iran,andIraq asthe world’s main oil exporters. Thesamedevelopmental model hasbeen applied to Kazakhstan’sgas industry. Bytheyear 2015, itis expectedthat outputtillbe40-

19Cohen, Ariel. Kazakhstan: TheRoad toIndependence: EnergyPolicyandthe Birth of a

Nation. Washington, DC: TheCentral Asia-CaucasusInstituteSilk RoadStudies Program.

2008. 134

20Ibid., 129

21Ibid., 115

50 billion cubic meterofgas peryear, which would beKazakhstan the thirdlargest producer of gas in Central AsiafollowingTurkmenistan andUzbekistan.22

Specificpipeline construction projects havebeencrucial to Kazakhstan’s energysecurity. Oneof themostimportant routes of energysecurityis The CPC: Caspian PipelineConsortium. This pipelinesystem stretches over 1,580 kilometers, connecting Kazakhstan’s Tengizand Karachanganak oilfieldswith theBlack Sea’s port of Novorossiysk, Russia. Bythe turn of the century, the United States had investedover $2.6billion into the CPC, makingitthe largest

single American investment in Russia at thetime.23It currentlycarries approximately565,000

barrels of oilper day, and upon its expansion in thenext fewyears, by2015 that amountwill morethan doubleto 1.34million barrels of oilperday.24Afterthis time, Kazakhstan will increaseits oil export capabilitythrough this system of pipelines to over 92million tons of oil peryear, compared to thecurrent 45 million. Thus, Russiawillcontinueto retain its status as the main export route for Kazakh oilbeyond theyear2015.

As aresultof diplomaticbusiness and cooperation, on May29, 2008,Nazarbayev signed into alawaKazakhstani-Azerbaijiani agreement, which would provide Kazakh oilto international markets bymeans of theBaku-Tbilisi-Ceyhan pipeline.25Even though this is

another choicethat Russiahas objected too, the benefits of this agreement for Kazakhstan are

22Cohen, Ariel. Kazakhstan: TheRoad toIndependence: EnergyPolicyandthe Birth of a

Nation. Washington, DC: TheCentral Asia-CaucasusInstituteSilk RoadStudies Program.

2008. 241

23Ibid., 134

24“Kazakhstan: Major Oiland Natural Gas Projects”May2008, U.S. Energy Information

Administration:Independent Statistics and Analysis.

25Cohen, Ariel. Kazakhstan:TheRoad toIndependence: EnergyPolicyandthe Birth of a

Nation. Washington, DC: TheCentral Asia-CaucasusInstituteSilk RoadStudies Program.

2008. 245

multilateral. A business plan dealingwith theBTC pipeline strengthens Kazakhstan’s links to the West. At thesame time, Nazarbayev is trying to appeaseboth Washington and Moscow,and does not want to lean towards oneside morethanthe other. Alreadyin two decades, Nazarbayev achievedastatus forKazakhstan, and favoringWestern deals with the BTC pipeline would illustrate himself as aprotégéof Washington.26

Current U.S.Policy Towards Kazakhstan

Recently, theglobal financial crisis has affected Eurasian energysecurity.United States policymakers arewell awarethat the transportation of energythroughout Eurasia and the Caucasus will be driven bythe market’s realities,and the increasingdemand of energy throughout Europeis surpassingCentral Asian states’ abilityto supplyit, dueto sub par infrastructure.27Outsideof financinganew energyproject, thepolitical, cultural, and security risks will need to be examined beforeaproposal.Multilateral tensions with Russia, the United States, and China, put nations like Kazakhstan at arisk for their ownenergysecurity.

Perhaps themostimportant thingforU.S. policymakers is to work with Central and Eastern European countries to foster moreinvestment and cooperation for infrastructure and transportation projects.28Byconstructing connectingpipelines andgas storagefacilities, European statescan lessen theirdependenceon Russiafor energy, therebyallowingKazakhstan to build a multitudeof political and economictieswith theEuropean Union. Basically, theUnited States is aimingto move awaytheKazakhenergyindustryfrom aRussian gridlock. At

26Goldman, Minton F.Rivalryin Eurasia: Russia, TheUnited States, and theWar on Terror. Santa Barbara: ABC-CLIO,LLC. 2009. 40