Kazakhstan is now in the midst of a comprehensive re-evaluation of its export options. The strategies and choices open to Astana concerning international energy development must be seen in the perspective of the difficult political and economic problems facing the country's leadership. This week begins a multi-part article on Kazakhstan and international energy development. This four-part article begins here with a review of the political geography of Kazakhstan's economy and an assessment of why China cannot be the preferred export solution.
1. The Political Geography of The Economy: Kazakhstan's Three Macro-Regions
The country's political leadership has the hard task of holding together three key, far-flung regions. The oil-rich regions of the west look to export to Western markets and already draw Western capital. In the south, the ties with Uzbekistan and Kyrgyzstan and Tajikistan are strong. The provinces in the north-central region, meanwhile, are indissolubly linked to the region across the Russian frontier, southern Siberia.
Large areas of the western macro-region of Kazakhstan are desert or marsh. Over a third of the population resides in the provincial capitals, which in turn represent more than two-thirds of the total urban population. The general population density is roughly two per square mile. In these far-flung reaches, it is not difficult for local elites to pursue policies somewhat divergent from those the center might prefer. In particular, these regional governments have sought economic autonomy and a larger share of the oil revenue.
Clan structures in the west of the country seek greater political autonomy as well. They may threaten to destabilize Kazakhstan's delicate equilibrium and relations with Russia as well as co-opt any political prefects sent from Almaty.
The southern macro-region, meanwhile, has nearly two fifths of the entire country's population. Four-fifths of the region's 6.5 million inhabitants reside in its three central provinces (plus the city of Almaty). Huge tracts of all five of these provinces are desert, but there is also rich agricultural land and farming. Human settlement follows the main waterways (The Syr-Darya, Talas and Ili Rivers and the adjacent Lake Balkhash) and rail lines (which run parallel to the Syr-Darya, diverging eastward to Chimkent, Zhambul, Chu, and Taldy-Kurgan). Collective agricultural life was traditionally organized around the management of irrigation (in particular, near the Syr-Darya and Ili Rivers).
The 10 provinces in central and northern Kazakhstan that comprise the crucial northern macro-region present patterns that are more complex. The entire northern tier of Kazakhstan, above the 50th parallel, represents a distinct subregion: This is where Russian interest was historically directed from the tsarist period onward. The pattern of human settlement is nearly exclusively determined by three rivers and three rail lines. Moreover, the cities near the border always had and still have significant trade with nearby cities in Russia itself.
Yet even this "Russian" region has a differentiated history. In fact, there are two areas of historical Russian concentration in Kazakhstan, one greater than the other and including it. The smaller is a wide strip shadowing the border and principally including the industrial concentrations connected with natural resource exploitation and heavy industry. On this "shadow" of the border between Russia and Kazakhstan, a larger area is superimposed that includes those agricultural lands historically settled by Russians. These are not limited to the Virgin Lands of Khrushchevian fame; they stretch down almost to the central part of the country. This area in fact largely coincides with the area historically occupied by the northern Kazakh zhuz.
The other major subregion of north-central Kazakhstan is known as the "polygon." The "polygon" is the area exposed to radioactive fallout from the nuclear test range at Semei (Semipalatinsk). It formed the political base of the People's Congress Party, which President Nursultan Nazarbaev co-opted on his path to power in Almaty. It intersects with the region of the Virgin Lands campaign and the historical area of Russian agricultural and industrial settlement, mainly in the Pavlodar and Akmola provinces and in part of the Karaganda province.
That area of intersection is crucial to maintaining economic integration and political cohesion of northern Kazakhstan with the central part of the country. Maintaining the cohesion of north-central Kazakhstan is in turn necessary to assure the existence of a unified political and economic entity on the entire country's territory. These three provinces -- Pavlodar, Aqmola and Karaganda -- are a key for maintaining the demographic and economic unity of the north-central macro-region of the country. That north-central macro-region is the largest of the three geographic macro-regions in the country and represents the only "pole of attraction" that can hold the west and the south together. Karaganda province indeed represents both the southern and northern limits of the traditional northern zhuz habitation, and it serves as the geographic transition between the northern and central parts of contemporary Kazakhstan. It also includes the city of Temirtau, where President Nazarbaev begin his political career three decades ago, as well as the capital Astana.
2. China Is Not the Solution
The economy of the western region is based mainly on oil, that of the southern mainly on agriculture, and that of the north-central mainly on extractive industry with some agriculture. The hearts of these three macro-regions are respectively the two oil-rich provinces on the Caspian Sea, the three most heavily populated provinces in the south (plus the city of Almaty) and the three provinces representing the overlap between the "polygon" and the Virgin Lands region. These provinces comprise barely one-third of the land area of Kazakhstan but nearly two-thirds of the population as well as two-thirds of the country's economic output.
It is no exaggeration to say that the crux of Kazakhstan’s national-unity problem is to knit together these diverse regions while encouraging each of them to develop its own strengths and all the while developing the center of the country as a political and economic nexus uniting the diverse parts. What is needed above all to fulfill that goal is to get oil to market as soon as possible, in as great a quantity as possible.
This being so, one would think that the project with China to build a pipeline across the north-central part of the country to Xinjiang would be a natural choice. But this is far from the case. It is true that China needs large imports of energy in the new century as its domestic requirements, especially for transportation, begin to take off. However, the gigantic project faces extreme financial and logistical difficulty.
First, there is a lack of capital for investment in the pipeline and no clear place to go to find it. Second, the completion of the feasibility study has been delayed several times. Third, even at current oil prices, which have recovered from their recent nadir, the pipeline is not economically justifiable. Fourth, there are political impediments to the project, not least the inter-ethnic situation in Xinjiang, where the Turkic Uighurs face racial persecution worse than the Kosovars did from the Serbs. Fifth, the prospect of Chinese workers remaining in Kazakhstan is not appealing to young male Kazakhs who must compete for jobs, women and land. Sixth, the organizational design for realizing the project is unclear, just as organizational problems remain with the administration of the oil-producing properties now under Chinese ownership. And seventh, all this means that logistical issues are far from settled. Even the Asian Development Bank has become skeptical, if not pessimistic, about this project's chances for success.
Copyright © Robert M. Cutler unless otherwise noted.
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First published in FSU Oil & Gas Monitor, No. 48 (7 September 1999): 5 6;