Kazakhstan simmers as striking oil workers sacked

By bne IntelliNews September 9, 2011

Clare Nuttall in Almaty -

Angry protestors gather every day in the main square in the Kazakh town of Zhanaozen in a rare display of popular dissent. Many were workers at Uzen, one of Kazakhstan's largest oilfields, but more than 1,000 staff were fired in August by the London-listed subsidiary of state-owned KazMunaiGas in an attempt to stop the four-month strike and they want their jobs back.

Labour disputes are not uncommon in this oil-rich Central Asian republic, but this one has got both political and ugly. Efforts to silence the strikers has led to journalists being blocked from reporting the story, Sting cancelling a concert in Astana, and the daughter of one of the strike leaders and a young trade union member were killed by unidentified assailants. While it's unlikely any of these incidents on their own could spark another so-called "coloured revolution" in Kazakhstan, the protest is symptomatic of an emerging middle class starting to flex its political muscles.

KazMunaiGas Exploration Production (KMG EP) announced on August 26 that it had sacked around 900 striking workers, and that production at Uzen had stabilised. Most of the workers have now been replaced with new recruits from Zhanaozen and nearby settlements. Karazhanbasmunai, a joint venture between KMG EP and China's Citic, also sacked around 500 workers. Most of the 120,000 people in Zhanaozen are directly or indirectly dependent on the Uzen field for their livelihoods, so tempers in the remote desert town are running high. What started as a dispute over pay quickly became politicised, with a mixture of clan rivalries and the personal ambitions of regional politicians. Further, KMG EP's London-listing has also given the dispute an international dimension, as international shareholders wonder how the strike will affect production and are watching the events closely - far more closely than if the fracas had involved a purely domestically owned company.

Fear of contagion

Oil and gas are the backbone of Kazakhstan's economy, and account for the lion's share of the country's exports, so the production losses at Uzen are bad news for the government. KMG EP, which is 58% owned by the state-owned oil and gas firm KazMunaiGas, said it had experienced production losses of around 600,000 tonnes of oil, while Karazhanbasmunai's losses amounted to 17,578 tonnes between May 17 and July 31. So far, the disruptions aren't impacting too hard on the bottom line. On September 5, KMG EP said its first-half net profits rose by 14% year on year to KZT114bn ($783m) as high oil prices offset production losses "due to the illegal strike, increase in operating taxes, production costs and selling, general and administrative expenses," it said.

A bigger fear than the industry's losses within ruling circles, however, is that the strike could spark wider anti-government action.

While relatively small run-ins have led to revolutions in places like Georgia, Kyrgyzstan and Ukraine, experts don't believe social tensions are high enough in Kazakhstan to spark a major popular uprising. Even so, it's certain the leadership is watching the events closely.

Large-scale political action is still rare in Kazakhstan, and at the few demonstrations that have been allowed to take place in recent years protesters are sometimes outnumberd by police. Reasons for the lack of political activism in Kazakhstan include government actions to stifle media freedom and political debate, and a fear of civil unrest. But behind this has been the government's success at improving the general standard of living - especially in comparison to the other 'Stans - which has tempered politics and subdued the people who are largely happy with their leaders. Economically, Kazakhstan has drawn far ahead of its Central Asian neighbours, and at the same time the Kazakh government has cleverly played on the population's fear of political instability.

This has helped to ensure that President Nursultan Nazarbayev's 20-year rule has continued uninterrupted. The 2011 presidential election, when Nazarbayev was re-elected with an unbelievable 95.5% of the vote in a poll that international observers including the Organisation for Security and Cooperation in Europe (OSCE) said was rigged and fraudulent, failed to result in any popular protest.

Still, the strike is significant, as it highlights the awakening of the country's growing middle class, whose lives have improved to the point where they are demanding their share of the country's wealth - as has been apparent in other countries in Emerging Europe. With Kazakhstan's average per-capita income approaching the middle-income bracket, this may happen more often, as governments across North Africa found to their cost this year.

So far, some wealth is trickling down from Kazakhstan's fabulously wealthy oligarchy to the middle classes, but the process is slow. Salaries for an operator at the Uzen field average KZT240,000-290,000 a month ($1,600-$2,000), according to KMG EP, which is above the Kazakhstan average. However, conditions at the field, where temperatures soar to to 60° Celsius in summer, are tough, and the costs of living in Zhanaozen are high due to its isolated location. Workers have been angered by attempts to adjust their pay, and this was exacerbated by the disparity between pay for local workers and expatriates, especially Chinese workers.

The authorities have cracked down hard on the strikers. On August 8, Natalya Sokolova, the lawyer representing the striking oil workers, was sentenced to six years in prison on charges of inciting social discord, which has outraged human rights groups. "It is clear that the kind of things Sokolova was accused of doing are no grounds for criminal charges. It is 100% clear that she was simply doing her job," Rachel Denber, deputy director of Human Rights Watch's Europe and Central Asia division, tells bne.

Local and international NGOs are supporting the preparations for Sokolova's appeal against the sentence, which is likely to take place in mid-September, and are prepared to take the case to Kazakhstan's High Court if necessary.

Kazakh journalists also say they have been pressured into staying away from the oilfield. "Only a small group of journalists from the opposition media has been covering the situation at Uzen," says Vyacheslav Abramov, deputy director of Freedom House in Kazakhstan. "It's really tough for journalists, as they have come under a lot of pressure, and are not able to get a clear and objective picture of the situation in Mangystau."

As a result, the strikes and civil unrest in Mangystau have been relatively under-reported within Kazakhstan. Fears that the unrest could gain momentum and spread across the country haven't been realised, but there have been some small demonstrations outside the Almaty offices of the ruling Nur Otan party.

In a more sinister development, there have been several violent attacks on the strikers and people connected to them. On August 24, Zhansaule Karabalayeva, the 18-year-old daughter of one of the strike leaders, was found dead with multiple injuries in the countryside outside Zhanaozen. The cause of her death has not yet been determined. On August 2, Zhaksylyk Turbaev, a trade union member working for an oilfield service company in Zhanaozen, was also killed. The previous day, two members of the opposition Popular Front movement said they were attacked in Aktau; both received head injuries, RFE/RL reported.

This has become sufficiently serious to attract international attention. Not only did Sting pull out of a gig due to be held in July, but now a string of international politicians are weighing in to condemn the heavy-handed tactics being employed. Irish Socialist MEP Paul Murphy tells bne that he plans to bring up the issue at the next sitting of the European parliament. "I visited Kazakhstan this summer and talked with many of the strikers and workers. I understand the intimidation is severe," he said. "I promised to raise the issue in the parliament."

Swedish trade unions have raised around €15,000 for the workers at KMG EP and its JV partner Karazhanbasmunai; trade unions from Ireland, the UK and other European countries are also showing their support. Protests are planned at Esso petrol stations (the Esso brand is owned by ExxonMobil, one of the partners of KMG EP's parent firm, KazMunaiGas, in the TengizChevroil joint venture) across the UK later in September.

The decision by the Kazakh authorities and KMG EP to go on the attack - sacking hundreds of workers and attempting to stifle the protests - rather than persevering with early efforts to find a compromise, could have longer-term consequences, warn analysts.

Kazakhstan remains a low-income country, but will join the ranks of middle-income countries soon; Nazarbayev's stated aim is to raise average per-capita income to $15,000 by 2016. While the current protest shows little sign of achieving revolutionary momentum, memories of the state's refusal to listen will remain and resentment will fester. In a few years time, the final outcome could be very different.

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