America’s Strategic Focus on Kazakhstan

Автор: Жандос Темиргали
экономист

Nowadays it's evident that Kazakhstan introduces new opportunities to the leader of the global world

The U.S. Secretary of State Michael Pompeo’s recent visit to Nur-Sultan confirmed the steady trend towards strengthening the partnership between the United States of America and the Republic of Kazakhstan. In fact, the bilateral relations are experiencing rapid development, both in quantitative and qualitative dimensions. Nowadays it's evident that Kazakhstan introduces new opportunities to the leader of the global world

This landmark visit is regarded as a follow-up to the meeting between Secretary Michael Pompeo and the Kazakh Minister of Foreign Affairs Mukhtar Tleuberdi that took place in Washington DC last December. Generally, it has happened following the visit of the President of the Republic of Kazakhstan, Kassym-Jomart Tokayev, to the United States in September and the last December’s business trip of the Prime Minister Askar Mamin to the Midwest and San Francisco.

President’s New York Visit

During his working visit to the New York City in September 2019, the main purpose of which was to attend the 74th session of the UN General Assembly, Kazakhstan’s President Kassym-Jomart Tokayev conducted a meeting with the U.S. President Donald Trump and participated in the roundtable with American businessmen. In addition, bilateral meetings were held with Michael Bloomberg and the heads of Goldman Sachs (strategic partnership with AIFC), JPMorgan Chase & Co. (development of Kazakhstan's equity capital market), Tyson Foods (projects in agricultural sector), Valmont Industries (production of irrigation systems), Amazon (development of digital economy), as well as Plug'n Play and 500 Startups (development of startup technologies).

Michael Pompeo and Kassym-Jomart Tokayev
Photo: Akorda
Michael Pompeo and Kassym-Jomart Tokayev

Prime-Minister’s Investment Agenda

The key points of Prime Minister Askar Mamin’s visit to the U.S. in December 2019 were the inspection of production facilities and negotiations with heads of the large agricultural companies Tyson Foods and Valmont Industries.

As a result, the “Agreement on principles of participation in the development of the modern agro-multiprotein industry in the Republic of Kazakhstan” was signed between the government of Kazakhstan and Tyson Foods. The company together with Kusto Group plans to create a full-fledged meat cluster, which includes a wide range of enterprises from feed producers and feedlot farms to agricultural machinery and the construction of a full-scale meat processing complex with a capacity of 2000 heads per day. The chilled beef will be exported mainly to China contributing over $1 billion to Kazakhstan's annual agricultural profit.

Another agreement on the development of modern irrigation was signed with Valmont Industries. This project involves the construction of a production plant for irrigation systems and infrastructure. The use of advanced technologies by Valmont Industries will have a multiplier effect on crop production and the creation of a forage base for livestock production” – highlighted Mr. Mamin. Kazakhstan plans to increase the area of ​​irrigated land from 1.4 million to 2 million hectares by 2022 and to 3 million hectares by 2030.

The Prime Minister’s visit to San Francisco featured an intense agenda that included meetings with the leadership of global companies in innovative and digital development, venture financing and energy. Here we could note Askar Mamin’s visit to Fourth Industrial Revolution center and Tesla Factory as well as the meetings with such companies as BrightSphere Investment Group (cooperation with Kazakhstan Investment Development Fund), C3.ai (introduction of artificial intelligence), Cisco (digitalization projects), One Web (satellite communications), and Chevron (Future Growth Project).

Therefore, the frequency as well as the substantive agenda of senior Kazakh officials’ visits to the United States is a clear evidence of seriousness of the course. The current state of affairs was preceded by long years of mutual work in the political, economic and cultural areas. It should be noted that the interest is mutual. Moreover, a special high-level group on bilateral economic cooperation was created, which includes key government officials from both sides.

Historical Basis

The history of bilateral friendly relations begins with a significant event, when the United States became one of the first countries to officially recognize the independence of Kazakhstan, becoming the first country to open its Embassy in January 1992 in Almaty. The Agreement on promotion and mutual protection of investments was signed on May 19, 1992 and entered into force on January 12, 1994. The bilateral Treaty for the avoidance of double taxation has been in force since 1996, and the Agreement on the Improvement of |International Tax Discipline (FATCA) was signed in 2017. Today, two countries have a strong and diversified legal framework, which includes more than 70 documents on close cooperation in security, economy, social, cultural, and humanitarian spheres.

During the official visit of the First President of the Republic of Kazakhstan Nursultan Nazarbayev to Washington DC and his meeting with the U.S. President Donald Trump on January 16, 2018, the heads of states made a landmark joint statement "United States and Kazakhstan: An Enhanced Strategic Partnership for the XXI century", covering the entire spectrum of issues of bilateral cooperation. The leaders expressed their readiness to actively promote mutually beneficial economic partnership, in particular to increase trade and investment, as well as to create jobs and opportunities in both countries.

Security and Regional Cooperation

Since the closure of the Semipalatinsk nuclear test site in 1991 and the abandonment of the nuclear arsenal in 1992, Kazakhstan has remained an active conductor of the policy of nuclear disarmament and universal security. On December 13, 1993 The Supreme Council of the Republic of Kazakhstan ratified the Treaty on the Non-Proliferation of Nuclear Weapons followed by the multimillion American aid authorized by the U.S. Congress for the elimination of the nuclear weapons at this part of the former Soviet Union. 

The two countries closely cooperate to fight transnational terrorism. In addition, every year Kazakhstan together with the U.S. Army, within the framework of the NATO program "Partnership for Peace", conducts exercises "Steppe Eagle" aimed at strengthening cooperation in the military sphere. The last time these exercises were held in June 2019 with participation of the armies of the UK, India, Kyrgyzstan, Tajikistan and Turkey. Recently, the United States helped the Kazakh side with transportation in evacuation of its 600 citizens from Syria in the framework of “Zhusan” special operation. Also, the Kazakh people are grateful to the United States for actively protecting the rights of ethnic Kazakhs in Xinjiang.

The comprehensive approach of the United States to building relations with the Central Asian States was formed in the "C5+1" format, initiated in 2015 by the Administration of the former U.S. President Barack Obama shortly after the introduction of the Chinese "Belt and Road" initiative and supported by the current Administration of President Trump. Indeed, the importance of Central Asia is steadily increasing due to the large reserves of natural resources, unexplored transit potential and strategic location between Russia, China, India and the Middle East. The main directions within "C5+1" format: regional cooperation, economic development, security, environment, culture and education, human rights protection, and strengthening of civil society. Integration and modernization of energy and water systems in the region with the assistance of the United States also have significant potential. The USAID currently funds a five-year Smart Waters project implemented by the Central Asian Regional Environmental Center.

Our region also possesses a great importance for the United States in terms of stabilizing the situation in Afghanistan. In connection with America’s participation in the reconstruction of Afghanistan on September 21, 2017, a special Protocol was signed on amendments to Agreement between governments of Kazakhstan and the U.S. on ensuring commercial railway transit through the territory of Kazakhstan. At the same time, currently, the main tasks are not only to ensure the transit of American goods to this country, but in maintaining the long-term development of Afghanistan, based on the economies of Central Asia. Kazakhstan, being the largest regional economy and the largest donor of the Islamic Republic of Afghanistan in the region, has already provided assistance totaling over $75 million (training of Afghan students, delivery of food, clothing, essential goods, construction of infrastructure, etc.).

At the same time, for the Central Asian states there is a question of maintaining a strategic interest of the United States in "C5+1" format after the desired stabilization of situation in Afghanistan, taking into account the potential areas for cooperation and the growing interests of the regional powers. It is worth noting that after Kazakhstan, Secretary Pompeo headed to Tashkent for a minister-level meeting of the “C5+1”.

Trade and Finance

In 2018, the volume of bilateral trade exceeded $2.1 billion; the preliminary results of 2019 expect a substantial growth. The basis of imports comprises from machinery, equipment, and vehicles. Exports of Kazakh goods to the United States are traditionally represented by ferroalloys, uranium, yellow phosphorus, lead, silver, etc. It is worth noting that the Kazakh side is enthusiastic to increase exports. During the recent visit of the Minister of Trade and Integration of Kazakhstan Bakhyt Sultanov to Washington DC, 50 commodity items worth more than $800 million have been additionally offered to the American side. Mutual development of the rapidly expanding local E-Commerce market ($700 million in 2018, 50% annual growth) with 2.1 million active buyers represents a particular interest.

Since 1990s, the two countries have proposed and implemented various programs of bilateral cooperation in the trade and economic sphere, including the so-called Houston Initiative of 2002, aimed at improving the competitiveness of Kazakhstan's business through rapprochement with the private sector of the United States. Thus, more than 400 companies with the participation of American capital and brands, including Chevron, ExxonMobil, General Electric, Halliburton, Citibank, and Baker McKenzie operate in Kazakhstan today. A significant event was the acquisition by the Republic of Kazakhstan of WTO Membership on November 30, 2015, which allowed the U.S. Commercial Service to intensify support (consultations, market research, and business relations programs) to American enterprises wishing to enter the Kazakhstan market. During the recent years, American companies (including the global brands such as "Uber", "Netflix", "Starbucks", "McDonalds", etc.) have entered the Kazakh market. In addition, an independent, non-profit organization the U.S.-Kazakhstan Business Association has been actively operating for 20 years, bringing together the large American companies with the Kazakh counterparts.

Opening of the Astana International Financial Center in 2017 arouse a new wave of interest in Kazakhstan from the international financial community lead by the U.S. The locomotive here was New York’s NASDAQ and a 150-year-old investment bank Goldman Sachs that became shareholders of the AIFC Exchange (AIX). It is also worthwhile to mention Citibank with a quarter century history in Kazakhstan as a traditional partner of the corporate sector and an active player in attracting international financing and investment.

Investments

During the years of independence, the United States has been one of the major investors in the Kazakh economy (#2 after the Netherlands), having invested cumulatively around $45 billion ($31.23 billion according to the U.S. Department of State) to the country, one fifth of the total basket of Kazakhstan’s FDI. Of course, the predominant share of these injections, since 1993, has been directed towards the oil and gas sector. Global corporations Chevron (50% of shares of Tengizchevroil and 18% of Karachaganak Petroleum Operating B.V.) and ExxonMobil (25% of shares of Tengizchevroil and 16.8% of North Caspian Operating Company) are among the main players in the oil sector of Kazakhstan. Tengizchevroil, 75% controlled by the American side, has produced over 3 billion barrels of oil in 25 years at Tengiz and Korolev fields in Atyrau region. In 2001, Kazakhstan and the United States created the "U.S.-Kazakhstan Energy Partnership" organization, raising mutual interaction level to strategic energy dialogue, including such areas as renewable energy, nuclear energy and energy security, as well as diversification of export routes. The recent visit of Chevron’s Chairman of the Board and CEO Michael Wirth to Kazakhstan highlighted the importance of $36.8 billion Tengizchevroi’s Future Growth Project.

The current Administration of President Donald Trump also attaches great importance to the expansion of economic cooperation with Kazakhstan, as evidenced by the visit of the U.S. Secretary of Commerce Wilbur Ross to Nur-Sultan in October 2018. For the past three consecutive years, the Kazakh-American "Competitiveness Forum" hosted by the Ministry of Foreign Affairs has been held in the capital of Kazakhstan, gathering the heads of public sector of Kazakhstan and high-profile delegations of the U.S. companies from various industries.

It is gratifying that the administration of the current President of the United States Donald Trump continued the trend on strengthening economic cooperation with Kazakhstan, observed over the past 5 years, accompanied by a rapid growth of the American investments in Kazakhstan. According to the National Bank of Kazakhstan, the volume of gross inflow of foreign direct investments from the United States into the Kazakh economy in 2018 reached a record level of $5.34 billion, recording a 44.7% increase compared to 2017. Moreover, 2019 has every chance of exceeding this indicator with $4.2 billion of investments during January-September. An additional optimism gives the newly formed the United States International Development Finance Corporation (USDFC) with allocated budget of $60 billion for overseas investment projects.

In any part of the world…

"Over the years, we have made great strides in our bilateral relations, and I am confident that the spirit of our cooperation will be strengthened. It is gratifying that American business continues to open new opportunities for expanding economic cooperation with Kazakhstan. I look forward to working together to advance our in-depth strategic partnership to meet common challenges. The United States values a strong partnership with Kazakhstan and will continue to work with you and the people of Kazakhstan to advance our common interests in Central Asia and globally." – highlights the June 2019 telegram of the U.S. President Donald Trump to his Kazakh counterpart.

Meanwhile, the potential for development and expansion of cooperation, diversification of American investment and technology transfer is enormous: energy, transport, infrastructure, agriculture, pharmaceuticals, digitalization and other areas. Considering the newly signed Air Transport (Open Skies) Agreement, significant prospects unfold for American companies in implementing infrastructure projects, in particular in the construction of cargo facilities and aerotropolises around the largest cities of Kazakhstan, as a counterweight to the transcontinental land routes controlled mainly by China.

So, why is Kazakhstan important to America? Firstly, the natural resources factor. Secondly, the geopolitics factor, including strategic location, transport potential, and political positioning. In addition, the current situation on the world markets (Kazakhstan is in the middle of 65% of the world’s GDP) opens up completely new opportunities investment and exports due to the trade confrontation between the world powers. With America’s growing interests on a global scale the Kazakh factor at certain points can become indispensable. Therefore, as Mr. Tokayev mentioned, he is ready to meet with Mr. Trump “in any part of the world, preferably here in Kazakhstan”.

Zhandos Temirgali

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