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Key political risks to watch in Kazakhstan

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May 3, 2011, 1:39 p.m. | Russia and former Soviet Union — by Reuters

Ukrainian President Viktor Yanukovych, left, and Kazakh President Nursultan Nazarbayev shake hands during their meeting in Kiev, Ukraine, Tuesday, April 19, 2011. An international donors conference seeking 740 million euros (more than $1 billion) to clean up the Chernobyl nuclear disaster site has fallen well short of its goal. Yanukovych said that pledges from donor nations and organizations announced at the conference Tuesday totaled about 550 million euros, along with 29 million euros from the Ukrainian government. (AP Photo/Andriy Mosienko, Pool)

Reuters

ALMATY, May 3 (Reuters) - Kazakhstan's veteran leader secured five more years in power with an overwhelming election victory on April 3, buying time to groom a pliant successor to run the largest economy in Central Asia. President Nursultan Nazarbayev won 95.6 percent of the vote by pledging stability and economic growth in the mainly Muslim country of 16.4 million people, where the echo of popular revolts across the Arab world is almost inaudible.

Election monitors from the Organisation for Security and Cooperation in Europe (OSCE), chaired last year by Kazakhstan, found enough flaws with the vote to declare that democratic reforms still lag economic progress in the vast steppe nation. Foreign investors, who have poured more than $120 billion into Kazakhstan since independence in 1991, largely welcomed the extension of 70-year-old Nazarbayev's rule into a third decade.

Nazarbayev has ruled Kazakhstan since 1989, two years before independence from the Soviet Union. Many investors rate the absence of a clear successor as the biggest threat to stability in the vast, oil-rich nation, the world's 9th-largest by area. Kazakhstan, the world's largest uranium miner and home to the biggest oil discovery in more than 40 years, is seeking a further $100 billion in foreign investment over the next decade.

Below is a list of key political risks in Kazakhstan:


SUCCESSION

Nazarbayev, who can run for president an unlimited number of times, enjoys absolute power. Public criticism of the president is taboo and there are no opposition members of parliament.

Many credit Nazarbayev, a member of the last Soviet Communist Party Politburo, with annual economic growth averaging around 8 percent over the last decade. Per capita gross domestic product, at more than $9,000, is 12 times what it was in 1994.

In his annual state-of-the-nation speech on Jan. 28, Nazarbayev said he planned to remain president as long as his health and his people permitted. His aides say that he is likely to run again for election in 2016.

As long as he is in power, Nazarbayev will quell a behind-the-scenes struggle for influence. Analysts say he could use his next term in office to groom an eventual successor.

Nazarbayev, a former steelworker, has three daughters but no sons who might make obvious succession candidates.

What to watch:

-- Nazarbayev's health. He appears regularly in public around the country, but any prolonged absence, or less frequent appearances, might signal something is wrong.

-- The emergence of a possible successor. Increased responsibility for members of his inner circle might reveal his favourites. Analysts say possible successors include:

* Timur Kulibayev, his son-in-law, who was appointed head of sovereign wealth fund Samruk-Kazyna after the election. He also chairs several large state firms, including energy giant KazMunaiGas, uranium miner Kazatomprom and rail monopoly Kazakhstan Temir Zholy;

* Kasym-Zhomart Tokayev, former speaker of the Senate, who was appointed by the United Nations in March as director-general of the U.N. office in Geneva;

* Imangali Tasmagambetov, mayor of Astana, the futuristic capital that has grown under Nazarbayev's close supervision;

* Two aides to Nazarbayev have said the president might choose to wait for the "Bolashak generation" -- thousands of Kazakhs whom Nazarbayev has sponsored to study abroad -- to emerge as the next political elite; * Kairat Mami, formerly prosecutor-general, was appointed speaker of the Senate on April 15. He would automatically assume presidential powers for the remainder of an existing term in the event of Nazarbayev's death.


ELITE INFIGHTING

Some of the president's closest associates are in their 70s and younger associates are jostling for position.

Some, having appeared to overstep their mark, have fallen out with Nazarbayev, leading to periodic government reshuffles and the redistribution of assets.

Nazarbayev's former son-in-law, Rakhat Aliyev, fled Kazakhstan in 2007 and accused the president of usurping power. His departure led to a purge of security services and a government takeover of several media outlets.

Kazakhstan also wants Britain to extradite Mukhtar Ablyazov, the former head of BTA bank, who faces charges of fraud and embezzlement. He denies the charges and told Reuters in August that he wants to push for political change.

What to watch:

-- High-profile corruption cases, which have become a common tool of the domestic political struggle. Criminal cases or accusations could shed light on who in Nazarbayev's inner circle might be falling out of favour.


RESOURCE NATIONALISM

Kazakhstan has grown more assertive over its abundant natural resources, pushing to revise agreements signed with foreign energy majors in the immediate post-Soviet years, when it was more inclined to make concessions in return for cash.

State companies have bought into, or are looking to acquire, stakes in foreign consortiums. Such acquisitions have sometimes followed accusations of environmental violations, tax evasion or non-compliance with contracts.

Investors and diplomats have in private expressed concern over such tactics, saying they could scare off investment at a time when the economy needs fresh capital to start new projects.

Foreign shareholders in the promising Karachaganak gas venture are preparing to cut their stakes to allow the state to acquire 10 percent. Its owners, including Italy's Eni and Britain's BG Group, have been accused of tax evasion.

Participants in the Kashagan oilfield consortium have also come under state scrutiny. The world's biggest oil find since the 1960s, it is scheduled to begin production by the end of 2012, but its costly second phase has yet to win state approval.

What to watch:

-- How the Karachaganak episode unfolds, as well as the fate of the Kashagan oil field. Government approval of Kashagan's second phase, without any change of ownership or contract terms, would be a positive sign for foreign investors;

-- The growing influence of China. Kazakhstan borders China and has secured billions of dollars in investment from Beijing, making it less dependent on the West for capital.


RELATIVE PROSPERITY

Kazakhstan's wealth, relative to its poorer neighbours, is more evenly distributed among its population. An average monthly wage of $527 is more than six times the average in Tajikistan.

Unemployment, at 5.5 percent, is also low for the region. The jobless rate among the population aged between 15 and 24 was only 4.7 percent as of September 2010, official data shows.

Inflation ran at 7.8 percent in 2010 and the government forecasts it will stay between 6 percent and 8 percent annually in each of the next five years. Next-door Kyrgyzstan, ravaged by unrest and violence, saw inflation reach 19.2 percent in 2010.

The danger for Kazakhstan is that unrest in a neighbouring country, such as Uzbekistan or Kyrgyzstan, could provoke tensions in its adjacent southern regions.

What to watch: -- The situation in Kyrgyzstan, where a new government now leads the first parliamentary democracy in Central Asia.
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