It’s not too hard to imagine Russia getting completely shut out of Kazakhstan’s move into nuclear energy and China taking the whole pie.

As things stand, Beijing, Moscow’s main geopolitical competitor in Central Asia, has already won two-thirds of what’s available, having been tapped to build two of three planned nuclear power plants.

Not long ago Russia’s state nuclear corporation Rosatom seemed a shoo-in for big nuclear engineering contracts in Kazakhstan, which last year confirmed its decision to introduce atomic power into its energy mix with a referendum. Nobody was surprised when earlier this year Astana announced that Rosatom was the pick as main contractor for the building of the country’s first nuclear power plant, or NPP. But there was some surprise when the Tokayev administration announced that the project to construct the second plant would be awarded to China National Nuclear Corporation (CNNC). The surprise grew when, on July 31, Kazakhstan’s First Deputy Prime Minister Roman Sklyar announced that CNNC would also build a third NPP for the country. And suddenly all bets were off. Could Rosatom’s difficulties in financing and delivering NPPs as a company hindered and harassed in Russia’s heavily sanctioned business environment—check out the mess Rosatom presently finds itself in when it comes to progressing the severely delayed project to build Turkey’s first NPP, Akkuyu—mean that even that first contract could eventually be switched to China?

The award of the second plant to CNNC was announced one day before Chinese President Xi Jinping visited Astana for the China-Central Asia summit. Those Kazakh diplomats who believe Kazakhstan needs to largely concentrate on looking east, rather than north or west, to secure its economic future must have been thrilled.

The planned Rosatom plant, costed at an estimated $14bn, is not expected to be completed before 2035. It is to rely heavily on Russian export financing, and therein lies the rub. Such funding from Moscow remains uncertain amid the western sanctions response to the war in Ukraine and the uncertain course of that conflict.

The construction of the first NPP was launched on August 8 in Almaty region, near the village of Ulken on the shores of Lake Balkhash, around 400 kilometres (249 miles) from commercial capital Almaty. On August 13, it was announced that Russian preferential export financing for the plant would be used for long-cycle equipment and major construction works, including the reactor, steam generators and main circulation pumps.

In contrast to Rosatom, CNNC is backed by the heft of China’s industrial capacity and financing, as well as insulation from Western sanctions, RFE/RL lately cited Almasadam Satkaliyev, chairman of Kazakhstan’s Atomic Energy Agency, as pointing out.

Lawmaker Ermurat Bapi, meanwhile, told the news service that China would be likely to finish the “second” and “third” projects before Rosatom completes the “first”, an eventuality that would make Beijing the de facto builder of Kazakhstan’s first nuclear plant.

Obstacles to Rosatom financing

According to Eurasianet, a senior Rosatom official observed last year that the nuclear corporation was facing limited financing options for its floating NPP programme due to international sanctions. Yet the programme, he said, would require state-subsidised low-interest loans to maintain its position as an industry leader. 

The remarks underscored the growing financial pressures on Russia’s energy sector, with the Kremlin’s war in Ukraine continuing to strain the federal budget and the Russian economy teetering on the edge of a possible recession.

Despite the strategic importance of nuclear exports to Moscow, the Russian government has so far resisted calls from state energy companies to back them with additional financial support. And Rosatom officials have admitted that the lack of assistance has hampered efforts to develop new thermal and nuclear units, including the Shelf-M and Elena-AM models.

Political analyst Dosym Satpayev told RFE/RL that Russia’s ability to fund large infrastructure projects was weakening. He pointed to the cancellation of a $2bn plan to build three thermal power stations in Kazakhstan and labour disputes that have added to the troubles afflicting Rosatom’s Akkuyu nuclear plant project in Turkey.

"Russia simply cannot finance major infrastructure right now," Satpayev told RFE/RL. 

"Sklyar's announcement about the decision to choose China to build the third plant came just as Russia declared that it will no longer build three thermal power stations in Kazakhstan, a $2 billion project promised in 2024," Satpayev reflected.

Sklyar earlier announced that, given the Russian failure to produce advantageous finance, namely preferential export funding, for the thermal plants, Kazakhstan would not wait, but instead go it alone and construct three coal-fired power plants without Russian financing.

Sklyar confirmed that Russia’s Inter RAO had been slated to build the plants in Kokshetau, Semey and Ust-Kamenogorsk, but was unable to secure the financing package. Kazakhstan has already started work at the Kokshetau site and will also move ahead with the other two locations independently. Officials said Russian participation could be reconsidered if the financing conditions improved.

Fate of the contract

Kazakhstan’s decision to achieve diversification in terms of the countries and contractors asked to construct the NPPs to boost the prospects of its economy, the largest in Central Asia, can be seen mainly as a political move. Thus, asking Rosatom to hand over the reins of its NPP contract to China would almost certainly not be an ideal scenario for the Kazakh government, politically speaking. Especially when Moscow must have had hopes of winning all three contracts. As things stand, it can at least itself console itself with one.

Whatever the financial obstacles to Rosatom proceeding with the build, the smart bet is perhaps that Astana will bend over backwards to ensure that the invitation to the company to construct an NPP for Kazakhstan is not withdrawn. Like all the Central Asian states, Kazakhstan is for ever trying to pull off a delicate geopolitical balancing act. Allowing China to monopolise its nuclear energy sector, whatever the financial imperatives, would, as things stand, be bad international politics and not a wise move in terms of security.

Kazakhstan maintains a multi-vector foreign policy, seeking amicable relations at all points of the compass. One can’t, of course, keep all of the major capitals happy all of the time, but the Kazakhs won’t be found wanting when it comes to trying.