"It's time to discuss Kazakhstan's withdrawal from the EAEU"
Caliber.Az interview with Sharip Ishmuhamedov

INTERVIEWS  03 February 2023 - 10:31

High economic headwinds prove stronger for the whole world, including the CIS countries, which have to face especially hard times because strong ties were instantly destroyed, markets changed, and cooperation with long-standing partners collapsed. One of these countries at a crossroads is Kazakhstan, which, in the context of the new geopolitical reality, due to its close interaction with a sanctioned Russia, has faced a difficult choice of new business partners and a reorientation of its foreign economic contacts. Against this background, the recent decision of the Kazakhstani government to close its trade mission in Russia has raised many questions among politicians and international experts.

So, what's happening? What are the motives behind Kazakhstan's new economic policy and what awaits it in the new reality of cooperation with the South Caucasus, and more specifically, with Azerbaijan? Kazakh political scientist and candidate of political sciences Sharip Ishmuhamedov tried to answer these and other questions in conversation with Caliber.Az.

- What do you think is the reason for the decision of the Government of Kazakhstan to close its trade mission in Russia and should this be taken as a sign that Astana is seriously reviewing its cooperation with Moscow?

- The Kazakh Ministry of Trade's proposal to close the country's trade mission in Russia is quite unexpected, although it is an understandable initiative. It is interesting that this topic is in the limelight of Russian media at the moment; they are looking for some kind of background in it, the fact of "Kazakhstan's betrayal". However, I would not say that it can be considered as a kind of political sign of alienation of Kazakhstan from Russia, or as a sign of deterioration of the relationship between our countries. If we are already looking at this issue, for example, the real sign of cooling of relations could be something else - for example, the purchase of even more Turkish drones by Kazakhstan, rather than Russian weapons. You can't just run away from Russia... What can we say if the sky in Kazakhstan is still controlled by Russia and our country does not even have its own air defence system?

In economic terms, the closure of the trade mission is not a sign of cooling or alienation, but rather of Kazakhstan's rational approach to relations with the neighbouring country. First of all, because the export of our goods to Russia is very far from what we hoped for when we joined the EAEU. The trade mission in the Russian Federation has existed since 2012, and since then, according to my observations, it has hardly shown any positive statistics on the results of the Customs Union. The website of the trade mission triumphantly showed export and import figures, which had nothing to do with Kazakhstan's achievements within the EAEU. As an expert on the subject, I saw that nothing, in principle, has changed, and the main products of Kazakhstan's exports remain raw materials - ore, metals, and chemicals. And before joining the EAEU, Kazakhstan was exporting to Russia not only raw materials but also finished industrial goods, products with high added value, and now there is no such thing. These were transformers, batteries, food and beverages, and Kazakhstani wines, vodka, and cognacs were sold very well in Russian regions. Now there is a barrier to these types of goods on the border with the Russian Federation. At the same time, there are constant problems with letting our agricultural products into the neighbouring country, and they often stand idle, spoiling, at the border.

And with the outbreak of war in Ukraine, Kazakhstani exports to Russia fell altogether: the realities here are different since it has become much more profitable for the neighbours to sell not their own, but re-sell goods from the Emirates, China, Türkiye, and other countries. After all, the ways for direct exports from many countries are blocked for sanctioned Russia.

It is indicative that the same Prime Minister A. Smailov, when taking such a decision, simultaneously discussed the opening of trade missions in China, Emirates, Türkiye, India, and other countries. So, everything is extremely rational, and of course, there is a share of both political and psychological effects in such a choice, indicating that the Kazakh government has finally decided to get its act together and make it clear that export relations with Russia do not satisfy Astana at all, that we would like to trade in finished industrial goods, the foodstuffs, rather than raw materials.

- Does Kazakhstan see itself in the future as a country oriented towards Europe or prefer cooperation in the Asian direction due to the proximity of its markets? And what will the state's political agenda look like in both cases?

- If we're talking about something very serious, in my opinion, Kazakhstan simply doesn't have today an agenda or strategy calculated for the long-term perspective. The plans which were made 5-10 years ago, now don't work in any way. Everything should be assessed and built from scratch, based not on political factors, but rather on economic factors and solely from the perspective of the interests of the country.

Now there are huge gaps in the state budget of Kazakhstan, which are covered every year at the expense of the National Fund, which was created back in the nineties of the last century. So the fund is being emptied in recent years much faster than it is being filled. This means that Kazakhstan's new strategy should be based on only one thing - effectiveness. Because if to continue acting at such speed and simply emptying that safety cushion, in five-six years our state will appear fully bankrupt, and the same oil resources, by forecasts, can be exhausted in some twenty years.

At that, the total national debt of Kazakhstan is very high - 45 billion dollars, and from this amount, it is necessary to pay five percent per annum. You can imagine how grandiose the irretrievably lost funds are. And if we count together with the debt of the private domestic sector, it is about $ 160 billion. That's lots of money.

So everything is obvious: when we build relations with the outside world, with the West, with Asia, then whoever is ready to buy Kazakhstani goods should be our closest friend and partner, and whoever interferes is the enemy. If China is buying - then China is our friend and partner, if Russia is interfering - then Russia is a threat factor to us. This, of course, is my point of view. The time when vast sums of money were spent on global "crucial" projects must finally come to an end and a harsh pragmatic reality sets in. And that is why I believe that the closure of the trade mission in the Russian Federation means a shift to realities. I do hope that after that step the Kazakhstani government will finally start seriously discussing the process of Kazakhstan's exit from the EAEU since at this point in time it is totally counterproductive for the country to cooperate with it. Proceeding at least from the fact that now the national currency – tenge - is still economically very dependent on the ruble exchange rate, and if the ruble suddenly collapses, then many plans for many large projects will collapse with it. So we need to break away from the former hegemon. And it seems to me that these plans are already being discussed in Astana.

- How do you see Astana's cooperation with Baku, for instance, in the implementation of the New Silk Road and the Middle Corridor projects, where the South Caucasus is seen as a key link between Asia and Europe?

- Azerbaijan is important for Kazakhstan as a transit country. Astana does not have a second one for a reliable connection to the EU. Therefore, the development of all areas of cooperation between our countries is very necessary and will bring benefits. And unity and cohesion of Baku and Ankara will help Tokayev to decide on the Middle Corridor, the whole logistics bypassing Russia, i.e. to be faster and more confident. The launch of the Zangazur corridor is very important for Astana, and not only with its transit capacity. The thing is that Kazakhstan needs it as an alternative route for trade. We see how Russia constantly plays this card with Kazakhstan, from time to time blocking the road of our oil to Europe, and in this sense, the Kremlin plays stop-and-go. Therefore, cooperation with Azerbaijan and Türkiye is a great opportunity for Kazakhstan to strengthen its position both in the West and in the East.

Caliber.Az