Tokayev Tightens Grip in Kazakh Election Victory

Copyright © 2022 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.

The re-election of President Kassym-Zhomart Tokayev, with more than 81% of the vote in Kazakhstan's snap elections, will ensure the continuity that Western oil companies crave. It could also lead to the privatization of more state companies following the launch last month of the initial public offering (IPO) for national oil and gas champion, Kazmunaigas (KMG).

Tokayev’s predictable triumph also draws a definitive line under the long era of his predecessor, Nursultan Nazarbayev, and is likely to accelerate the dismantling of the vast business network, known as Nazarbayev Inc., controlled by family members and close associates. Analysts warn, however, that Tokayev will need to tread with caution and protect his power base from well-heeled opponents. “He may need to keep his friends close and his enemies closer,” says Annette Bohr, a Central Asian expert at UK think tank, Chatham House.

Tokayev, who took over the helm after Nazarbayev stepped down in March 2019, had called the elections three years early in a move to tighten his grip on power and push through much-needed political and economic reforms. Three months earlier, parliament had pushed through changes to the constitution that lengthened the presidential term from five to seven years, but ban the incumbent from being re-elected. This means the 69-year-old former diplomat who did two stints as foreign minister and one as prime minister, is set to remain in power until 2029.

War Shock Waves

The elections took place against the backdrop of the war between Russia and Ukraine, which has sent shock waves across Russia’s borders and prompted Kazakhstan to loosen its ties with its neighbor and move closer to China, Turkey and Europe. Just days before the vote, Tokayev met in Astana with the EU’s foreign affairs chief, Josep Borrell, and stressed his support for Ukraine’s territorial integrity.

Tokayev has also taken steps to reduce his country’s dependence on Russia as a transit route for its oil and gas, especially via the 1.4 million barrel per day Caspian Pipeline Consortium (CPC) pipeline that transports most of Kazakhstan’s oil to a terminal near the Russian Black Sea port of Novorossiysk.

In July, just days after a Russian court ordered the one-month closure of the CPC terminal due to multiple “irregularities,” Tokayev ordered his government and KMG to speed up plans to expand the existing pipeline running east to China, and to flesh out plans to build a new transportation network across the Caspian Sea. Next year, as a start, Kazakhstan will ship 1.5 million metric tons (30,000 b/d) of oil to Baku and into the Baku-Tbilisi-Ceyhan pipeline that is operated by BP.

Privatization Drive

Tokayev’s re-election also dovetails with the KMG IPO, which will conclude in early December and allow mostly Kazakh retail investors to buy up to 5% of the company’s share on the Astana and Almaty exchanges. KMG, which saw its net profit during the first half of the year increase 5% year on year to $1.5 billion, is Kazakhstan’s largest and most strategic company. Its former gas transportation arm, Kaztransgas — now renamed Qazaqgas — is due to go for IPO in the next year or two.

Earlier this year, in the aftermath of the wave of unrest that engulfed parts of the country and caused 238 deaths, KMG and Qazaqgas were purged of senior managers deemed to be close to the Nazarbayev clan. This included his sons-in-law, Kairat Sharipbayev and Dimash Dossanov, who were sacked as heads of Qazaqgas and KMG’s oil transportation arm, Kaztransoil, respectively.

A third son-in-law, billionaire tycoon Timur Kulibayev, remains a powerful force in Kazakhstan. He co-owns the country’s largest bank, Halyk, together with Nazarbayev’s daughter, Dinara, but has kept a very low profile in recent months. One of his closest business associates, Kairat Boranbayev, who was previously head of KMG’s KazRosGas gas marketing joint venture with Gazprom and also holds the McDonald’s franchise in Kazakhstan, was arrested in March by the financial police after being accused of large-scale embezzlement.

Analysts expect Tokayev and his associates to target some of the assets of Nazarbayev Inc. held in offshore accounts and get money repatriated to Kazakhstan. This is much easier said than done, however. “The problem is that no one knows how much money has been squirreled away, and where it is,” a longtime Kazakhstan observer says. “And I don’t think they will ever find out.”

Wanda Ad #2 (article footer)
Speculation is rising over the future of the CPC oil pipeline.
Tue, Nov 22, 2022
Move by European Parliament to leave industry-friendly treaty reflects continued push away from oil and gas despite the energy crisis.
Fri, Nov 25, 2022
Newly elected President Kassym-Zhomart Tokayev is moving his country closer to Europe and China but still can't do without Russia.
Wed, Nov 23, 2022