OPINION: Strengthening ties between Kazakhstan’s reshaped leadership, headed by President Kasym-Zhomart Tokayev, and Russia, may jeopardise long-term investments in the country’s foreign-led oil and gas developments.
Russia has answered a call from Tokayev to send paratroopers to defend the country from what Kazakh authorities describe as an attack of “external terrorists”, ignoring the evidence that the unrest began as public outcry against the rising cost of living, corruption and cronyism.
The Russian support has probably helped Tokayev, previously loyal to country’s former president Nursultan Nazarbayev, to announce the dismantling of the influence of members of Nazarbayev’s inner circle and family, who are in control of major businesses in Kazakhstan.
Speaking earlier this week, Tokayev said that businesses leaders with close links to Nazarbayev, will have to consider making “annual contributions” to start returning some of their wealth to the working people of Kazakhstan.
Tokayev has also criticised state-run investment vehicle Samruk Kazyna, controller of the fourth-largest oil producer in the country, KazMunayGaz, hinting at corruption in its procurement and supply chains.
KazMunayGaz is a minority shareholder in three largest foreign-led oil and gas development projects in Kazakhstan – Tengiz, Karachaganak and Kashagan.
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These projects are moving into their next expansion phases, requiring billions of dollars of new investments.
In the short term, these developments look safe, as Kazakhstan depends heavily on them to generate much-needed budget revenues.
Authorities sent some military personnel to the Chevron-led Tengiz oilfield saying that they need to protect key facilities there because workers and builders on the site left their workshops to support mass protests.
Foreign investors in these large projects will recall that Nazarbayev played a pivotal role in bringing international companies into production sharing agreements with Kazakhstan.
Tokayev’s allegiances are likely to be to Moscow, where anti-Western sentiment is growing. Will he be tempted to force a revision of PSA terms to boost revenues, or perhaps seek to revise shareholdings? Time will tell.
(This is an Upstream opinion article.)