Tuesday, September 26, 2006

On Friday, President Bush will welcome Nursultan Nazarbaev, the leader of Kazakhstan, to the White House. Kazakhstan is the pivotal country in the heart of Eurasia, due to its vast mineral resources, a solid track record of economic growth, and geopolitical location between China and Russia.

These days, Washington is short of friends, especially Islamic and oil-rich ones, so every such country counts. Kazakhstan has the largest oil and gas reserves in the Caspian Sea basin, and is producing 1.5 million barrels of oil a day today. It is projected to produce 2.5-3.5 million barrels of oil a day by 2015, surpassing today’s output by Qatar or Iraq.

Kazakhstan’s investment climate and production sharing agreements (PSAs) with Western companies are much more liberal than that of neighboring Russia, which cracked down on the Yukos oil company in 2003, and now is severely limiting the Sakhalin Island energy investment projects by Exxon, Shell and others.

Kazakhstan is light years ahead of the neighboring Uzbekistan and Turkmenistan in terms of economic reform and growth. It boasts a thriving non-energy sector, including small- and medium-size enterprises, and has a great potential in agriculture.

It has grown consistently at 9 percent a year since 2000, and has quickly reached a GDP per capita of $3,000, with further growth projected. The U.S.-Kazakhstan trade volume doubled since 2004.

Kazakhstan invests in brains, not just in oil. President Nazarbaev pioneered a competitive study-abroad program, which sends 3,000 of the best and the brightest youth to study in the U.S., Europe and Japan, all expenses paid. Some of the graduates of this program, including those with Harvard credentials, quickly rose to become deputy ministers and CEOs of Kazakh companies, which are now investing abroad and appearing in international capital markets. These days, the initial public offering (IPO) of the national Kazakh oil company, Kazmunaigaz, is attracting $2 billion in the London Stock Exchange.

Kazakhstan is a global player beyond oil and gas. For example, it is launching a joint venture with Russia to enrich uranium, which it plans to exports to Japan and Europe. It also has considerable supplies of coal and iron ore, having attracted the global player Mittal Steel. And its grain exports are increasingly important for China and Central Asia.

Recently, the outgoing Japanese Prime Minister Junichiro Koizumi visited the country, trying to compete with massive investment from Russia and China. This may prove too little, too late: China and Kazakhstan have inaugurated an oil pipeline in the beginning of 2006 and are planning to add a gas pipeline, which will bring to China gas from Uzbekistan and Turkmenistan as well. Russia is watching these developments with a weary eye, as it failed to prevent Chinese National Petroleum Company (CNPC) from acquiring Canadian registered Petrokazakhstan for $4.2 billion. Moscow wants all Kazakh gas to flow through its national monopolist Gazprom’s pipelines. Clearly, the competition over Kazakhstan among the great powers of the U.S., energy-starved China, and newly resurgent Russia, is on.

So far, the bilateral U.S.-Kazakh cooperation has been exemplary. But new challenges from the north and east loom, as the Shanghai Cooperation Organization of which China and Russia are key players, is strengthening. Moscow is also promoting its Unified Economic Space project, to include Russia, Belarus, Armenia and Kazakhstan, and the Commonwealth of Independent States Collective Security Treaty Organization (CSTO) — a Warsaw Pact-style military alliance.

The U.S. today considers Kazakhstan its principal friend and ally in the region, an anchor and a pivotal state. This year, Vice President Dick Cheney, Secretary of State Condoleezza Rice, and Energy Secretary Samuel Bodman all visited the Eurasian republic.

Kazakhstan is even more important in Washington’s eyes after the more populous Uzbekistan, with Russian encouragement, has kicked out the U.S. Air Force base last year. As the result of a harsh U.S. reaction to the suppression of a violent uprising in the city of Andijan, in which hundreds died, Uzbekistan’s relations with the West have deteriorated.

Kazakhstan, which gave up the Soviet-era nuclear weapons in 1994, masterfully maneuvers between Moscow, Beijing and Washington, while sending important messages to the neighboring Iran: adhere to non-proliferation, do not develop nuclear weapons, promote harmony in international relations and religious tolerance.

Kazakhstan under Mr. Nazarbaev has done exactly that. This month, the second interfaith conference on religious tolerance has taken place in the capital Astana, which brought to the heart of Eurasia top representatives of Catholicism, Orthodox Christianity, Islam, Judaism, Buddhism, Shinto and other faiths. The inter-faith dialogue resulted in calls to stop terrorism and religious hatred. Kazakhstan, in which Muslim Turkic Kazakhs live side by side with Slavic Russian speakers, Germans, Jews, Koreans and many others, is a unique example of religious harmony in a tough neighborhood, which has known many social, ethnic and religious upheavals.

Still, critics raised eyebrows when President Nazarbaev was elected last December with 91 percent of the vote. But it is equally true that every Western poll prior to the vote had given Nazarbaev a convincing victory, with over 70 percent of the vote. Even more worrisome were two recent murders of prominent politicians, but these were thoroughly investigated with the FBI’s participation, and perpetrators punished.

Kazakhstan’s vociferous opposition parties, open splits within the ruling elite, and numerous newspapers, Web sites and non-government organizations are creating a base for developing participatory democracy.

Fifteen years after independence, Kazakhstan is close to the “Asian tiger” political model. There was no prior democratic tradition to speak of. Its political development should be compared to South Korea and Taiwan, which developed democracy over first three decades of their existence.

President Bush is greeting President Nazarbaev as a friend of the U.S., while focusing on three pillars of U.S. policy in Eurasia: energy, security and democracy. The two countries need each other now more than ever.

Ariel Cohen is senior research fellow at the Heritage Foundation and the author of “Kazakhstan: Energy Cooperation with Russia Oil, Gas and Beyond” (BMG Publishers, London, 2006).

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