Kazakhstan Nearing An End Of An Era

Disturbing the relative tranquility of the country, the people of Kazakhstan earlier this month watched a band of Islamist insurgents raid two hunting supply shops for weapons in north-western portion of the nation.

Following that the group said to number 26, attacked an army base. There was a night of clashes, which led to a checkpoint near the city of Aktobe to also come under fire the next day. When it was all over, 18 vigilantes, 4 civilians and 3 security men had been killed. International terrorism had now arrived in Kazakhstan.

The event highlights the changes that are occurring within this large landlocked, but resource rich country. A nation of near 18 million inhabit this former Soviet Republic which at over 1 million square miles (2.7 million kilometers), makes it by far the largest of the independent Stans established, following the breakup of the former Soviet Union.

In addition to Kazakhstan, the group consists of Azerbaijan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

Ethnic Russians make up nearly a quarter of the population. China is located to the southeast of the country and radical Islam lies to the south and west. The country has a high strategic importance to its neighbors.

The event in Aktobe has jolted the nation and government to accept, that a new era has arrived rather forcefully. Although the majority of the people are secular Muslims, these terrorists were homegrown, despite receiving instructions from abroad.

That is what the officials inside the country insist happened. However, there has been a series of protests in more than a dozen towns throughout the country this spring.

Since independence in 1991, Kazakhstan the 9^th largest nation in the world in geographic size, has been ruled by Nursultan Nazarbayev.

He was re-elected president last year in an early election by a 97.7% voting record. It was the 5^th electoral victory for him. The problem according to independent monitors, is that the ballots were once again rigged.

Although the now 75 year old leader probably won anyway, the margins of victory will now be getting slimmer and the next round in 2020, would likely lead to his electoral defeat. Term limits were already removed for President Nazarbayev back in 2007. According to the constitution, a president is only permitted to a total of 10 years, which is serving two consecutive terms in office.

The people of Kazakhstan have accepted the authoritarian rule of Nazarbayev in exchange for two things. These are rising living standards and security. The former was made possible by higher international oil prices.

As of 2014, the price of oil has taken a beating, dropping in price by over 60%. Although there has been a rebound in prices, since the lows reached earlier this year, at present it remains below $50.00 USD (United States Dollar).

The slump in oil prices has interrupted the rise in the average living standard for the populace. The violence in Aktobe is now wrenching away the security felt by the citizenry. As a result, the social contract with President Nazarbayev is eroding rapidly.

In April of this year, protests broke out against a number of land reform proposals including extending the length of leases for property, that would be available for foreign investors.

The fear is these proposals will permit large scale acquisitions coming from Chinese investment. The President in response issued a temporary moratorium, but the protests continued as the public debate escalated.

The following month thousands of citizens took to the streets in the capital and across the country demanding fundamental changes. Increasingly, the protests are becoming centered on Nazarbayev himself. On social media, the slogan Shal ket meaning (Old man out) has gone viral.

The government has taken definitive action against the protesters. It has released conspiracy theories upon the public, through the use of state run media. The individuals marching against the land reforms, are being identified as being financed by conspirators from abroad. Officials are insisting, that Western interests are attempting to foment revolution inside Kazakhstan.

Authorities later claimed that Tokhtar Tuleshov a businessman, was largely responsible. Since he is already facing corruption charges and is known to be pro-Russian, he is an ideal scapegoat. Mr. Tuleshov is now being accused of trying to overthrow the government of President Nazarbayev.

About 40 political activists were arrested ahead of the protests on May 21^st of this year. In the past, this kind of preventive procedures, were usually successful in shutting down demonstrations. This time the protests went forward around the nation, including Astana the capital and Almaty an important commercial city.

These civil disturbances also spread to a number of industrial towns in the north and to the economically vital oil based towns in the west.

A crack down by the police ensued with over 1,000 demonstrators arrested, mostly in the more urban areas. The majority of them were later released, but the leaders of the movement now face criminal charges, that could place them behind bars for many years.

Meanwhile security services in the northwest region, where the recent terrorist attack took place, claim they have already dismantled a total of 14 radical groups that were operating in the area within the past year alone. The state new agency further claims, that 36 people plotting violent attacks in the country and abroad have been arrested since 2015.

The government is claiming that Kazakhs are being radicalized through the internet. This allows officials to place the blame on outside groups and relieves the government of any responsibility, to discover potential domestic causes.

The problem is, radical Islam is making headway in Kazakhstan. This is partly attributable to the economic downturn, which is having a particular hard impact on the young and poor of the nation. As the government denies there are any internal causes for the growing disaffection and potential rebellion among the citizenry, it is likely that further instability will continue.

President Nazarbayev has a history of human right abuses and has repeatedly suppressed any political opposition. He severely limits freedom of assembly, speech and religion and has tight control over the press.

Kazakhstan has the largest and best performing economy in all of Central Asia. Rising oil output and corresponding higher prices, allowed an average of 8% growth up to 2013. It also permitted the country to repay all of its debt to the International Monetary Fund (IMF). It was accomplished a full 7 years ahead of schedule.

The economy slowed to a 4.6% expansion in 2014. As a result, the government devalued the currency by 19% that year and an additional 22% in August of 2015. GDP growth slowed further during 2015, to less than 2% and in the first quarter of 2016 dipped to -0.2%. If it remains there by mid year, the economy will be officially in recession.

The government continues to follow a rather conservative fiscal policy by controlling the budget, but public debt has been growing.

Foreign investors have poured the equivalent of some $200 billion USD into the country. It has been widely considered to have been one of the best investment climates in the region.

Early on, President Nazarbayev signed into law tax concessions to promote direct foreign investment. The package included a 10 year exemption from corporate taxation, an 8 year exemption from property tax, and a 10 year freeze on most other taxes. Other incentives included a refund on capital investments of up to 30%, once a facility starts production.

Much of the popularity of Kazakhstan among investors has been dependent on the political and social stability of the country. This construct is now under threat, both from within and without.

The Nazarbayev claim that foreign elements want to undermine the country, is in total denial of the fact that there are pressing domestic issues, that the President refuses to address. His assertion that there is a conspiracy to duplicate in Kazakhstan what occurred in Georgia, Kyrgyzstan and Ukraine rings somewhat hollow among the populace.

The real grievances are mostly economic. The lower international energy prices and currency depreciation have resulted in higher inflation and increased job insecurity. The proposed reforms do not go far enough, to help the vast majority. It is also feared that many of the economic incentives will benefit foreign investment far more, than help indigenous job growth and allowing  the economy to grow again.

Kazakhs have observed the political elite amass vast wealth, with their control of key resources and assets. This is true, even though per capita income in Kazakhstan, is now higher than that in Russia.

A further modernization of the economy will be difficult, without some proportionate political liberalization. This can easily undermine the authority and privilege of the elite class. It could also lead to a Russian intervention, if there is a possible collapse in government authority. Either way it may well usher in the end of the Nazarbayev Era.