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Diplomacy in Action

Kazakhstan (10/01)


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For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Republic of Kazakhstan

Geography
Area: 2.7 million sq. ki.; ninth-largest nation in the world; the size of Western Europe.
Major cities: Capital--Astana (June 1998); Almaty (former capital), Karaganda, Chimkent.
Terrain: Extends east to west from the Caspian Sea to the Altay Mountains and north to south from the plains of Western Siberia to the oasis and desert of Central Asia.
Climate: Continental, cold winters and hot summers; arid and semiarid Border lengths: Russia 6,846 km, Uzbekistan 2,203 km, China 1,533 km, Kyrgyzstan 1,051 km, and Turmenistan 379 km.

People
Nationality: Kazakhstani.
Population (July 2001 est.): 16.7 million.
Population growth rate (2001 est.): 0.03%.
Population Density: 16 people per sq. mi.; or slightly above Idaho (12.2) or New Mexico (12.5). U.S. density (1990)--70.3 people per sq. mi. Ethnic groups (2001): 53.4% Kazakh, 30% Russian, 3.7% Ukrainian, 2.5% Uzbek, 2.4% German, 1.4% Uyghur, 6.6% other.
Religion: 47% Sunni Muslim, 44% Russian Orthodox, 2%, Protestant, 7% other.
Language: Approximately 40% Kazakh and 60% Russian. Although the 1995 Constitution recognizes both as the state language, Russian is the language often used in commerce and government.
Health (2001 est.): Infant mortality rate--59.17 deaths/1,000 live births. Life expectancy--63.29 years.
Work force (8.8 million (1997 est.): Industry and construction--27%; agriculture and forestry--23%; services, 1996 est.--50%.

Government
Type: Republic.
Independence: 16 December, 1991 (from the Soviet Union).
Declaration of Sovereignty: October 25, 1990.
Constitution: August 30, 1995. Constitution adopted by referendum replaced a 1993 Constitution.
Branches: Executive--president, prime minister, council of ministers. Legislative--Senate and Majilis. Judicial--Supreme Court. Administrative subdivisions: 17; 14 oblasts plus 3 cities--Almaty (the former capital), Astana (the current capital) and the territory of Bayqongyr, which contains the space launch center that the Russians built and now lease for 20 years.
Political parties: Party of People's Unity, The Democratic Party, The People's Cooperative Party, Socialist and communist parties, and People's Congress Party.
Suffrage: 18 years of age; universal.

Flag: flag of Kazakhstan

Economy
GDP (2000 est.): $85.6 billion.
GDP growth rate (2000 est.): 10.5%.
GDP per capita (2000 est.): Purchasing power parity --$5,000.
Inflation rate (2000): 13.4% (consumer prices).
Total foreign trade (2000 est.): $15.5 billion. Major partners--Russia, EU, U.S., China. Major exports--Total exports worth $8.8 billion and mainly consisted of petroleum (40%), ferrous and nonferrous metals, machinery, chemicals, grain, wool, meat, coal. Major imports--Total imports worth $6.9 billion and mainly consisted of machinery and parts, industrial materials, oil and gas, and vehicles.
Exchange rate (Oct. 2001): 148 tenges=U.S.$1.

GOVERNMENT AND POLITICAL CONDITIONS  
Kazakhstan is a constitutional republic with a strong presidency. The president is the head of state. He also is the commander in chief of the armed forces and may veto legislation that has been passed by the Parliament. President Nursultan Nazarbayev, who has been in office since Kazakhstan became independent, won a new 7-year term in the 1999 election that the Organization for Security and Cooperation in Europe said fell short of international standards. The prime minister, who serves at the pleasure of the president, chairs the Cabinet of Ministers and serves as Kazakhstan's head of government. There are four deputy prime ministers, 14 ministers, and 11 chairmen of state agencies. Kasimzhomart Tokayev, the former Minister of Foreign Affairs, has been Prime Minister since 1999.

Kazakhstan has a bicameral parliament, comprised of a Lower House (the Mazhilis) and upper house (the Senate). The 77-seat Mazhilis is popularly elected by single mandate districts, with 10 members elected by party-list vote. The Senate has 39 members. Two senators are selected by each of the elected assemblies (Maslikhats) of Kazakhstan's 16 principal administrative divisions (14 regions, or Oblasts, plus the cities of Astana and Almaty). The president appoints the remaining seven senators. Mazhilis deputies and the government both have the right of legislative initiative, though most legislation considered by the Parliament is proposed by the government.

Political parties have traditionally played little role in local politics, where personal and family ties are more important. Several new parties formed and were registered in 1999 following passage of a constitutional amendment that created 10 new seats in the Mazhilis attributed by party-list voting. Three parties that support President Nazarbayev--Otan (Fatherland), the Civic Party, and the Agrarian Party--won 8 of the 10 seats; the communists won the other two. Two opposition parties, the Republican People's Party of Kazakhstan (RNPK) and Azamat, were registered for the election. One member of RNPK, but no Azamat candidate, was elected, from a single-mandate district.

Kazakhstan is divided into 14 Oblasts and the two municipal districts of Almaty and Astana. Each is headed by an Akim (provincial governor) appointed by the president. Municipal Akims are appointed by Oblast Akims. The Government of Kazakhstan transferred its capital from Almaty to Astana on June 10, 1998.

PEOPLE
The population of 14.9 million consists of about 53% ethnic Kazakhs and 30% ethnic Russians, with many other groups represented, including Ukrainians, Uzbeks, Koreans, Germans, Chechens, and Uyghurs. Given the relatively small population in an area the size of Western Europe, the population density is very low (5.5 persons per sq. km.). Most of the population speaks Russian; only half of ethnic Kazakhs speak Kazakh fluently, although it is enjoying a renaissance. Both Kazakh and Russian languages have official status.

ECONOMY
In 2000, Kazakhstan's economy grew sharply, aided by increased prices on world markets for Kazakhstan's leading exports--oil, metals and grain). GDP grew 9.6% in 2000, up from 1.7% in 1999. The government is predicting GDP growth of about 10% in 2001, as well. The increased economic growth also led to a turn-around in government finances, with the budget moving from a cash deficit of 3.7% of GDP in 1999 to 0.1% surplus in 2000.

Kazakhstan's monetary policy has been well-managed. Its principal challenges in 2001 are to manage strong foreign currency inflows without sparking inflation. Inflation has, in fact, stayed under control, registering 9.8% in 2000, and appears likely to be under 10% in 2001. Because of its strong economic performance and financial health, Kazakhstan became the first former Soviet republic to repay all of its debt to the IMF by paying back $400 million in 2000; 7 years ahead of schedule. Overall foreign debt is about $12.5 billion, $4 billion of which is owed by the government. This amounts to 69% of GDP, well within manageable levels.

The upturn in economic growth, combined with the results of earlier tax and financial sector reforms, dramatically improved government finances from the 1998 budget deficit level of 4.2% of GDP to a slight surplus in 2000. Government tax revenues grew from 16.4% of GDP in 1999 to 20.6% of GDP in 2000. In 2000, Kazakhstan adopted a new Tax Code in an effort to consolidate these gains. Its strong financial position also allowed the government to reduce the value-added tax (VAT) from 20% to 16% and reduce social (payroll) taxes as of July 2001. Kazakhstan's stronger budget position and strong export earnings earned it credit ratings upgrades from Moody's, S&P, and Fitch IBCA during 2001.

Oil and gas is the leading economic sector. In 2000, Kazakhstan produced 35.252 million metric tons of oil (700,000 barrels/day), a 17.4% increase over 1999's 30.025 million tons. It exported 28.883 million tons of oil in 2000, up 38.8% from 20.813 million tons in 1999. Production in 2001 has been growing at roughly 20%, on target to meet the government's forecast of 40.1 million tons of oil (800,000 barrels/day). In 2000, production reached 11.5 billion cubic meters of natural gas, up from 8.2 billion cubic meters in 1999.

Kazakhstan has the potential to be a world-class oil exporter in the medium term. The landmark foreign investment in Kazakhstan is the TengizChevroil joint venture, owned 50% by ChevronTexaco, 25% by ExxonMobil, 20% by the Government of Kazakhstan, and 5% by Lukarco of Russia. The Karachaganak gas and gas condensate field is being developed by BG, Agip, ChevronTexaco,and Lukoil. The Agip-led Offshore Kazakhstan Consortium has discovered a potentially huge oil field, Kashagan, in the northern Caspian. Kazakhstan's economic future is linked to oil and gas development. GDP growth will depend on the price of oil, as well as the ability to develop new deposits.

Kazakhstan instituted an ambitious pension reform program in 1998. By July 2001, Kazakhstanis had contributed more than $1 billion to their own personal pension accounts, most of which is managed by the private sector. The National Bank oversees and regulates the pension funds. The pension funds' growing demand for quality investment outlets triggered rapid development of the debt securities market. Pension fund capital is being invested almost exclusively in corporate and government bonds, including Government of Kazakhstan Eurobonds. The Kazakhstani banking system is developing rapidly. Banking systems capitalization now exceeds $1 billion. The National Bank has introduced deposit insurance in its campaign to strengthen the banking sector. Several major foreign banks have branches in Kazakhstan, including ABN-AMRO, Citibank, and HSBC.

FOREIGN RELATIONS
Kazakhstan has good relations with all of its neighbors. Kazakhstan is a member of the United Nations, Organization on Security and Cooperation in Europe, and North Atlantic Cooperation Council. It also is an active participant in NATO's Partnership for Peace program. Kazakhstan is also a member of the Commonwealth of Independent States and the Shanghai Cooperation Organization along with Russia, China, Kyrgyzstan, Tajikistan, and Uzbekistan. Kazakhstan, Russia, Belarus, Kyrgyzstan, and Tajikistan established the Eurasian Economic Community in 2000 to reenergize earlier efforts at harmonizing trade tariffs and the creation of a free trade zone under a Customs Union.

U.S.-KAZAKHSTAN RELATIONS
The United States was the first country to recognize Kazakhstan, on December 25, 1991, and opened its embassy in Almaty in January 1992. In the 10 years since Kazakhstan's independence, the two countries have developed a wideranging bilateral relationship. The current ambassador is Larry C. Napper, who assumed his post in September 2001.

U.S.-Kazakhstani cooperation in security and nonproliferation has been a cornerstone of the relationship. Kazakhstan showed leadership when it renounced nuclear weapons in 1993. The U.S. has assisted Kazakhstan in the removal of nuclear warheads, weapons-grade materials, and their supporting infrastructure. In 1994, Kazakhstan transferred over a half ton of weapons-grade uranium to the U.S., and in 1995 Kazakhstan removed its last nuclear warheads. Over the past 5 years Kazakhstan, with U.S. assistance, completed the sealing of 181 nuclear test tunnels. Kazakhstan has signed the Conventional Armed Forces in Europe Treaty (1992), the START Treaty (1992), and the nuclear Non-Proliferation Treaty (1993). Under the Cooperative Threat Reduction program, the U.S. spent $78 million to assist Kazakhstan in eliminating START related systems such as ICBM silo launchers, strategic heavy bombers, and liquid rocket fuel storage facilities.

U.S.-Kazakhstani Economic Relations
American companies have invested more than $5 billion in Kazakhstan since 1993. These companies are concentrated particularly in the oil and gas, business services, telecommunications, and electrical energy sectors. Kazakhstan has made progress in creating a favorable investment climate although concerns, such as vague and contradictory laws, remain. A U.S.-Kazakhstan Bilateral Investment Treaty and a Treaty on the Avoidance of Dual Taxation have been in place since 1994 and 1996, respectively. Kazakhstan has been determined to be in full compliance with the Jackson-Vanik amendment to the 1974 Trade Act and does not need an annual waiver in order to receive MFN treatment. Bilateral trade was worth $488 million in 2000.

U.S. Assistance
The U.S. supports Kazakhstan's transition to a market economy, fully integrated into the world trade system. Since 1993, the U. S. Agency for International Development (USAID) has administered more than $273 million in technical assistance programs in Kazakhstan. These programs include cooperation in privatization, fiscal and financial policy, commercial law, energy, health care, and environmental protection. The U.S. Commercial Service provides U.S. business internships for Kazakhstanis, supports Kazakhstani businesses through a matchmaker program, and disseminates information on U.S. goods and services. The Peace Corps has more than 150 Volunteers working throughout Kazakhstan in business education, English teaching, and the development of environmental nongovernmental organizations (NGOs).

The U.S. supports increased citizen participation in the public arena through support for NGOs. Dozens of grants have been provided to support NGOs that promote an independent media, legal reform, women's rights, civic education, and legislative oversight. USAID also has provided training courses for leaders and professionals.

Military Cooperation
Kazakhstan's military participates in the U.S.'s International Military Education and Training program, Foreign Military Financing, as well as NATO's Partnership for Peace program. The U.S. Central Command conducts 30 military-to-military engagement events every year in Kazakhstan. These events range from information exchanges to military exercises.

ENVIRONMENTAL ISSUES
Kazakhstan has identified two major ecological disasters within its borders-- the shrinking of the Aral Sea and radioactive contamination at the Semipalatinsk nuclear testing facility. The Central Asian Regional Environmental Center is located in Kazakhstan, which fosters regional cooperation on environmental issues. Kazakhstan is a signatory to the Convention on International Trade in Endangered Species.



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