Kazakh and Russian leaders engage in war of words over EEU

By bne IntelliNews September 3, 2014

Naubet Bisenov in Almaty -


Russian President Vladimir Putin and Kazakh President Nursultan Nazarbayev have long been sparring over the precise significance of membership of the Moscow-led Eurasian Economic Union (EEU), a coded war of words that has become more loaded following Moscow’s incursion into Ukraine.

Nazarbayev said on August 24 that Kazakhstan's membership of the EEU, which will be formed from the Customs Union (CU) of Russia, Kazakhstan and Belarus in January 2015, was the "right choice,” but that Astana would use a provision of the EEU treaty to leave the free-trade bloc if it felt it threatened the country's political independence.

Speaking in an interview broadcast by the state-run Khabar TV station, Nazarbayev said Kazakh businesses needed markets to sell their products, which is why Kazakhstan should develop closer economic relations with its immediate neighbours. "This is our opportunity and we don't have other choices. Thus forming not a political but economic union is the right choice," Nazarbayev said, speaking in Kazakh. "I have arrived at this wholeheartedly based on research and informed decision."

However, acknowledging fears that closer integration could eventually lead to political union with Russia, Nazarbayev said all members of the bloc had equal rights and could veto decisions that go against national interests. He said that if the EEU threatened the country's independence, Kazakhstan would leave the organisation. "Some fear that Russia will again invade us. But this is not true," he said. "The treaty has a provision that if we don't accept certain conditions, Kazakhstan reserves the right to leave [the organisation]. I've said this and I will repeat: if independence is threatened, Kazakhstan will never hold membership of such organisations." 

Nazarbayev's warning was slow to reach the Kremlin, as the Russian media only picked up the story after excerpts of the interview were translated into Russian. But then five days later, on August 29, when asked by a student at a youth forum whether Kazakhstan would see a repeat of the "Ukrainian scenario" should it diverge from its current pro-Russian policy, Putin showered Nazarbayev with praise as a "very wise" leader who knew perfectly well that a "vast majority of Kazakh citizens favour the development of relations with Russia.” 

However, at the same time, Putin made what appeared to be a veiled threat about the fragility of Kazakh nationhood. "He [Nazarbayev] made a unique thing. He has created a state on a territory where there had never been a state," Putin said. "Kazakhs didn't have  statehood." Modern-day Kazakhstan was established as an autonomous republic of the Russian Soviet Federative Socialist Republic in 1920 and was promoted to a Soviet republic in 1936, finally winning independence only on the dissolution of the Soviet Union in 1991. The Kazakhs need the Moscow-led CU and EEU, Putin continued, "because this is beneficial for them to develop the economy and to remain in the space of a great Russian [speaking] world.” 

Succession fears

Putin’s comments highlight the question of Kazakhstan’s future orientation following Nazarbayev's eventual departure. Nazarbayev, who has ruled Kazakhstan since the dying years of the USSR when he was appointed to head the Communist Party there, has not groomed a successor. Kazakhstan watchers see this as a serious threat to the country's stability in case of his sudden death or incapability to hold the office.

Nargis Kassenova, director of the Central Asian Studies Centre at Almaty’s KIMEP University, argues that Putin ducked the question about a potential “Ukraine scenario” in Kazakhstan to try to ease tensions between Moscow and Astana. “Putin wanted to calm Kazakhstan down that everything is alright and no Ukrainian scenario has yet been drafted for us," Kassenova tells bne.  

However, she adds that Putin's remarks on Kazakh statehood could be interpreted as a warning to Nazarbayev and his successors not to try to change their pro-Russian policy. "If Kazakhstan after Nazarbayev takes a different path, then the situation and Russia's attitudes can change."

Russian political analyst Arkady Dubnov also believes that Putin has signalled to Nazarbayev and the Kazakh elite that the country's security is guaranteed only if Moscow remains Astana's strategic partner. "Putin wants to see a secure successor whom he will consider as a reliable continuer of Nazarbayev's policy," Dubnov told the BBC’s Russian service.

In August’s interview, Nazarbayev also warned that Kazakhstan should be careful in promoting the Kazakh language and imposing it on ethnic minorities who still largely rely on Russian in day-to-day business. More than 90% of Kazakhstan's 17.3m citizens are able to speak Russian, but only around two-thirds claim to speak Kazakh. Kazakhstan's constitution designates Kazakh as a state language, while Russian serves as a lingua franca and is allowed in official use. "If we adopt laws to ban all languages but Kazakh, we will turn into a Ukraine," he said in reference to the Ukrainian parliament's revocation of the official status of Russian in eastern and southern regions following the ousting of former president Viktor Yanukovych. Russia has used the protection of Russian-speakers' rights in southern and eastern Ukraine as a pretext for its annexation of Crimea and continuing meddling in the eastern regions of Donetsk and Luhansk. 

Since Moscow's annexation of Crimea, Astana has revived a state programme to attract ethnic Kazakhs living abroad back to the country, offering citizenship after a year of residence and a generous package to those settling along the border with Russia. Ethnic Kazakhs do not constitute an absolute majority in northern Kazakhstan, and represent less than 40% of the population in the northern Kostanay and North Kazakhstan Regions. Overall, ethnic Kazakhs account for two-thirds of the population, with ethnic Russians making up slightly more than 21%. The government estimates that around 5m ethnic Kazakhs live abroad, mainly in China, Uzbekistan, Russia, Turkmenistan and Mongolia.

Economic repercussions

Kazakh authorities are trying hard to persuade the domestic public that the EEU is  purely an economic and not a political union. Nazarbayev and members of his government say that the EEU will open up a market of 170m people for Kazakh businesses which, in turn, should boost economic activity. However, Local opposition leaders believe that Kazakhstan has not benefited from deeper integration with Russia since the inception of the CU in 2010, while surrendering decision-making on economic issues to the supranational Eurasian Economic Commission. Moreover, Kazakh exports to Russia increased by only $1bn to $5.8bn between 2010 and 2013, whereas imports from Russia rocketed from $11bn to $17.7bn.  

Russia’s economic problems, exacerbated by Western sanctions because of the Ukraine crisis, are now hitting the country’s imports: Kazakh exports to Russia fell by more than 20% to $2.5bn in the first half of 2014. Russia is also the main conduit for Kazakh trade with the West, and a further cooling of economic relations between Russia and the West would damage the Kazakh economy, directly or indirectly, even though Nazarbayev has so far managed to evade Putin's pressure to join his tit-for-tat trade wars with the West. When in August Russia banned imports of certain foodstuffs from Europe, North America, Australia and Norway, Astana and Minsk managed to persuade Moscow not to involve them in the trade wars; in return, they promised not to re-export banned goods to Russia. 

Russia’s problems are also affecting Kazakhstan’s competitiveness. In response to the depreciation of the Russian ruble by about 10% between late October 2013 and early February 2014, Kazakhstan's National Bank devalued the tenge by 19%. Financial experts then said the tenge was devalued with a 10% cushion. Almaty, the country's financial capital, has since been abuzz with rumours about a "second wave" of devaluation. Under the weight of Western sanctions and capital flight, the Russian ruble has fallen by a further 6% since February to touch a low of RUB37.39 to the dollar on September 1. This means the falling value of the ruble is eroding the 10% advantage the February devaluation has given the tenge. With Russia already accounting for a third of Kazakh imports, the National Bank may find it hard to maintain the exchange rate of the tenge if cheap Russian products start flooding the Kazakh market.

On August 6, Nazarbayev reshuffled his government in order to "efficiently" adapt to the changing global economic conditions amid the ongoing crisis in Ukraine. National Economy Minister Yerbolat Dossayev then told the president that the government was working on a "separate package of measures" that would be implemented in case the situation in Ukraine worsened and further sanctions were implemented. Dossayev didn't give any details of the plan but said it would be presented in September.

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