Central Asia-Caucasus Institute
The Paul H. Nitze School of Advanced International Studies (SAIS)
Johns Hopkins University

"A New Kazakhstan"

H.E. Erlan A. Idrissov, Ambassador of Kazakhstan
Wednesday, September 12
The Rome Auditorium, Rome Building
1619 Massachusetts Avenue, N.W.
Washington, DC 20036

Summary of Presentation by Ambassador Idrissov:

“The New Kazakhstan”

• Although Kazakhstan is well-endowed with oil and gas resources, it has abundant supplies of other minerals as well, and it is intent on developing alternative energy sources.  For example, bio-fuels production is already underway.
• Kazakhstan’s top priority is to avoid the “oil curse” and make this endowment work to the benefit of the country.  For that reason, Kazakhstan has embarked on its long term Industrial Innovation Strategy to apply technology to diversify the economy.
• We are building institutions to make this energy wealth work for us:  The National (“Oil”) Fund now has reached $17 billion, and, despite Western media criticism to the contrary, this fund is being managed transparently.
• With the Kazakhstan Development Bank we created the first such institution in the CIS to promote infrastructure development that was beyond the capability of the private sector to do.
• We have created a wide array of funds and other institutions to provide credits for the development of our economy:  Samruk (“Phoenix” in Kazakh), with Sir Richard Evans, former CEO of BAE Systems, as co-chairman; Kazyna (“Treasury” in Kazakh) to provide funds for investment in technology; and the Almaty Regional Finance Center, aimed to exploit the Dubai/Hong Kong time gap.
• We are stressing principles of good governance, transparency, and accountability to the extent that now even school children can recite these terms.  But we recognize that we still have much work to do on implementation.
• We have many issues still to resolve; not everything is ideal.  We are ambitious, however, and want to do things in a quality way.  We need to develop our human resources, our planning processes, and our ability to deliver services and goods.
• We are cooperating with foreign entities in key areas to tap their experience:  Former World Bank head Wolfensohn, for example, has been an advisor for the Regional Finance Center.
• On the economic side, we have singled out the private sector to bring quality to it because it is the basis for a solid middle class and for the development of liberal political institutions.
• Some 90 percent of our economy is in private hands, but we need to raise the quality of our human resources, recognizing that this is our most delicate and sensitive asset.  For that reason, we are stressing educational development and are the only country with a program – The “Bolashak” (Kazakh for “Future”) – to send 3,000 university students abroad – some 500 a year to the U.S. – at government expense.
• On the political side, if you “Google” Kazakhstan, you see how controversial and filled with misconception the Western picture of our country is.  The West too readily forgets its own origins.  There is a Kazakhstani saying that a journey of 10,000 miles starts with a single step. 
• We want to stick to the rules and avoid the danger of going too fast and speeding off of our road.  We can’t let our Kazakhstan experiment fail, and thus are cautious in our steps.  The outside world sees this as slow progress, but overlooks how much we have accomplished in just 15 years.
• Kazakhstan faces the multiple challenges of being a multi-ethnic society, geographic location in a volatile region, maintaining political stability (itself a top priority that external observers under-appreciate), and the need to change the long set habits of its people.
• Democracy is not something that you achieve with the strike of a pen, the writing of a constitution, etc., but rather it is the creation of a whole new culture and sets of habits that need careful nurturing over time.
• In effect, Kazakhstan is proceeding down a two track road of political liberalization and economic interdependence.  To keep the vehicle stable, a certain amount of play must be given to each of the wheels traversing these different tracks. 
• In May, major constitutional reform was announced, but the Western media missed the real significance of this as a key turning point for Kazakhstan.  We are moving from a largely presidential system to a new parliamentary/presidential system based on political parties.
• Now the first baby of the new system, in the form of the August parliamentary elections, produced an unanticipated result – a one party parliament.  We are not happy about this outcome.
• Our opposition parties were too weak – our President can’t campaign for them to strengthen their position in elections!   They are in need of continuing maturation.
• Nonetheless, President Nazarbayev has made clear that all the constructive ideas of the opposition will be taken on board, so those who voted for the opposition will not be ignored.
• The new parliament has also given a new mandate to Prime Minister Massimov, who will be coming to the U.S. in October.  He has said that the new parliament has given him even more tasks to accomplish, but he is happy about that.

Regional Foreign Policy

• Initially after the breakup of the Soviet Union, Russia and China were the dominant players in Central Asia, but now the Central Asian region itself is starting to breathe and a collective vision is emerging to figure out priorities for Central Asia.
• The latest developments give us reason to hope for better things in the future.  For example, the change in leadership in Turkmenistan and its reengagement, particularly the growing relationship between its president and ours, is indicative of this trend.
• The West held a bias in the early post-independence years for viewing the region through the outdated optic of the 19th Century “Great Game,” which was a misconception, but perhaps understandable because during the Iron Curtain years, the West was not well-educated on the region.
• But now we have noted a change in tone; there is growing focus on regional cooperation and the development of stakeholder-type concepts.  Deputy Assistant Secretary of State Evan Feigenbaum’s recent remarks on the Shanghai Cooperative Organization are a welcome evolution from views held some five years ago.
• Indeed, Kazakhstan, I note, is now much better known in the U.S. than it was when I was posted to the UN in the 1990’s.  For our part, we consider criticism healthy, we want discussion and debate, and events like this help us to better understand each other.

Response to Specific Questions during the Discussion period:

Process for Changing Seven Percent Rule in Parliamentary Elections:

• Our law on elections is continually changing.  Drawing on our nomadic heritage, we took a look around the horizon at approaches in a wide range of other countries to limiting small party representation in parliaments.  We found rules ranging from three to ten percent thresholds, and chose seven percent.  Kazakhstan has vast geographic size with widely distributed population; some areas are sparsely inhabited and others are densely populated.  Ours is a new society with no developed habits of pluralistic political behavior; before the Soviets, we were a feudal society.  We want parties that are truly representative and are prepared to give them good encouragement.  In the recent election the opposition had some 16-20 percent of the vote in urban areas like Astana and Almaty, but only limited support in outskirts, so a nationwide interest was not being reflected in their program.

Kashagan Dispute:

• Kashagan, the consortium established under a 2001 Production Sharing Agreement, is one of the world’s biggest recent oil fields and the facts about it are being distorted in the media.  Kazakhstan intends to stick to the sanctity of contracts; the government now is just throwing back the charges of the operator.  There is no real dispute over Kashagan, but rather a discussion among the parties about the performance of the consortium in five areas: 1) delivery date of first oil, 2) environmental protection, 3) derivative natural gas use, 4) use of Kazakhstani services, and 5) bringing the Kazakhstan state oil company, KazMunaiGas (KMG), into the role of co-operator.  In 2007 there is still no oil, although it was promised in 2005.  Instead of 2008 or 2009, ENI, the operator, has now said oil won’t flow before 2010, and the project’s costs have grown from $56 billion to $120 billion.  Kazakhstan asks “Why?”  The operator in effect has violated the original contract, not explained the cost increase, which appears to have been hidden and not transparent.  The operator’s performance has been weak in all five areas, including insufficient use of Kazakhstani services, and now KMG has become mature enough to be a co-operator of the project and receive financial flows.  KMG currently gets an 8.33 percent share of Kashagan revenue; a bigger share will mean bigger responsibilities.  Kazakhstan, after all, is the eventual owner of this resource, and we are not happy that the targets have not been met.  There is a social aspect to the cost over-runs; our budget plans are very important.  We have been fighting a serious poverty problem in Kazakhstan, reducing it from 40 to about 15 percent from the 1990’s to now.  Our construction of needed infrastructure is being delayed and issues of long term political stability are involved.  In this regard, our government cannot take the same approach that a business does.  Thus, in short, the door is open for changes.  The delay in Italian Prime Minister Prodi’s visit to Kazakhstan is not related to Kashagan.

Investment Climate:

• A better investment climate is in our own interest.  Eighty percent of our on-shore oil and gas resources is in private hands.  We have therefore given advance notice that our national oil company would take a greater role in off-shore oil and gas activities, stipulating a 50 percent share.  But there is room for a deal.  Global oil markets have changed, so we want to strike a balance, invite dialogue, while at the same time protecting our own institutions.

China’s Role:

• China is a huge neighbor of Kazakhstan also with huge markets and potential.  Therefore China will naturally play a big role in Central Asia and in its relations with Kazakhstan.  This is already evident in infrastructure where pipelines are in advanced stages of completion.  Our trade with China has gone from $300 million to $8 billion, and is still growing.

Relations with Putin:

• We have excellent relations at the top with Russia; the number of high-level meetings between our two leaders could make the Guinness Book of Records.  They share advice with each other and their personal relations are excellent.  While our governments may diverge from time to time, we can’t afford bad relations!  The recent space launch failure, where debris landed not far from where our President was visiting, however, raises issues of environment, and the terms of the lease of the Baikonur Space Center.  Yet, with the longest land border in the world between our two countries you can understand why we have an “Eternal Friendship Agreement” with Russia.

“Multi-Vector” Foreign Policy:

• On the whole, we are continuing with this balanced approach to our foreign policy.  Of course, life is life; there are occasional zigzags and bright and dark spots.  The key is to keep the will to overcome what are at first emotional over-reactions.  There have been times of imbalance in the past and there will be in the future, but the principle will not change.

Public Input to Foreign Policy Formulation:

• We are seeking to engage our public in national politics; that is one of the purposes of the Seven-Percent Rule, to develop national thinking.  As Foreign Minister I promoted internal travel for our diplomats so that they could talk to people around the country and learn what they were thinking about international issues.  We created public councils when we negotiated border delimitation agreements with our neighboring countries so that we would be better informed about local views on border issues.  We also have numerous independent think-tanks providing policy ideas.

New Mentality Breakthrough:

The Central Asia-Caucasus Institute was founded in 1996 and has grown to be the primary institution in the Washington area for the study of the Caucasus, Central Asia and the Caspian Region. The Institute forms part of a Joint Center with the Silk Road Studies Program at the Institute for Security and Development, Stockholm. The Institute sponsors impartial research on the region, acts as a forum for policymakers both in Washington and abroad, shares information concerning the region and provides access for its sponsors in business to relevant expertise on the region. Additional information about the Institute is available at www.silkroadstudies.org.