Bridging the Gulf: Why Kazakhstan’s relations with the Middle East matter

In central Astana, the Abu Dhabi Plaza's shiny glass and metal facades tower above the Kazakh capital’s other feats of engineering, including the gold-domed Bayterek Tower and the wide sweep of Soviet-era squares. Alongside apartments and a five-star Sheraton hotel, shoppers flit between Turkish high-street brand shops and a sushi joint.

The complex is probably the most conspicuous example of Gulf influence in Kazakhstan. But beyond the glossy buildings, senior officials in the landlocked Central Asian country believe the Gulf is increasingly attractive as a trade and investment partner. As Astana seeks to broaden its foreign relations, long dominated by neighbours China and Russia, Gulf nations’ capital and willingness to do business appeal.

“We’re trying not to be related to a pool of only a few trading partners,” Asset Nussupov, Kazakhstan’s Vice Minister of Trade and Integration, told The National at a recent conference in Astana. “So we're trying to diversify. It's just business – I mean, you see some alternative routes, some perspectives, and we're trying to make new connections.”

The country takes an overtly neutral stance in foreign policy – officials refuse to be drawn into criticising other nations and Astana has remained neutral in the Russia-Ukraine war. Nor has it taken sides in other conflicts such as that in Gaza. Kazakhstani officials often refer to a “multi-vector” foreign policy. That translates as working with everyone and attempting to offend nobody. It also means Kazakhstan is open to new trade partnerships where it can forge them.

Unlikely alliances

Lying thousands of kilometres apart, the Gulf and Kazakhstan may not appear logical partners at first glance. Yet a confluence of factors have strengthened the allure of mutual relationships between them. The full-scale Russian invasion of Ukraine in February 2022 pushed Astana to look beyond its traditional partnerships with Moscow, as sanctions complicated trade.

The coronavirus pandemic refocused global attention on securing supply chains. Located on major trade arteries that have been used for millennia, Kazakhstan is well-positioned geographically to contribute.

It also has abundant mineral and hydrocarbon resources, a growing economy and a well-educated, multilingual population. Most Kazakhstanis speak fluent Russian as well as Kazakh, and English is increasingly common among younger generations.

Investor confidence in some western nations, previously lured by the prospects of the Central Asian country’s hydrocarbon wealth, has been dented by a $160 billion arbitration case taken out by Kazakhstan's government against a group of international oil companies, some observers say. That has opened the way for other investors, including from the Middle East.

“We see this throughout Central Asia – the Gulf is seen as apolitical and more neutral than the West. So it's an easier partner,” Kate Mallinson, an associate fellow for the Russia and Eurasia Programme at Chatham House, told The National.

In some senses, Central Asian nations look to the Gulf as a model, in terms of governing style, use of energy resources and stability. “That's something that they see as really attractive,” said Ms Mallinson, who is also a partner at Prism, a business advisory company.

Business ties

Trade volume between Kazakhstan and the Gulf countries is currently about $600 million, said Mr Nussupov, with the Central Asian country exporting barley, silver and mutton to its Middle Eastern partners.

The overall figure is small compared to the billions of dollars' worth of goods traded with China, Russia and Turkey every year. But food products, metals and services are key areas where Kazakhstan hopes to export more to the Gulf.

“Now we see very strong potential for increase in export of services to these countries, especially in oilfield services and IT solutions,” Mr Nussupov added.

More significant than trade volume is the value of investment by Gulf firms in Kazakhstan. Gulf countries have invested more than $5 billion in the country, including $4.3 billion from the UAE, Deputy Foreign Ninister Roman Vassilenko told The National in an interview on the sidelines of the Astana International Forum, held last month.

“Kazakhstan has a diplomatic presence in all Gulf states,” Mr Vassinlenko said. “In recent years, there has also been this concerted push by both the Gulf states and Central Asian states to develop inter-regional co-operation."

With foreign relations driven by commerce, the UAE and Kazakhstan signed agreements worth another $4 four billion when Sheikh Khaled bin Mohamed, Crown Prince of Abu Dhabi and Chairman of Abu Dhabi Executive Council, visited Astana last month, Mr Vassilenko said, in sectors such as artificial intelligence, health care, renewable energy and infrastructure.

Emirati firms have completed four investment projects in Kazakhstan, including a $15 million warehouse project and a $30 million project on the Caspian Sea by the Abu Dhabi-based AD Ports Group, another senior Kazakh investment official said at a press briefing at the Astana forum. Seven more projects are in the pipeline and an additional five are under discussion, he added.

Abu Dhabi's Masdar, a renewables specialist, signed an investment agreement with Kazakhstan last year for the development of a 1GW wind farm in the south-eastern Jambyl region. Construction is planned to start this year, the investment official said.

Kazakhstan has offered attractive terms including government guarantees to Gulf-based renewable energy companies to develop infrastructure, observers and officials say.

“We make sure that, basically, we guarantee the purchase of the power for a certain period of time with certain instruments,” Zulfiya Suleymanova, an adviser on the environment to Kazakhstan’s President Kassym-Jomart Tokayev, told The National. “So in that sense, we, as Kazakhstan, de-risk the investments.”

Securing a foothold at nodes in trade routes that stretch across Kazakhstan is also attractive for Gulf firms. Trade volumes on the so-called Middle Corridor trade route, which links China with Europe via the Caspian Sea, Caucasus and Turkey, increased from 560,000 tonnes in 2021 to 4.5 million tonnes last year, Mr Vassilenko said. The route avoids land corridors through heavily sanctioned Russia and Iran.

“We were traditionally in the heart of the Silk Roads,” Mr Vassilenko told The National. “Now we are trying to recreate this Silk Road in steel and concrete, and we have some success, and we think that the future holds even more promise.”

In January, Noatum Maritime, AD Ports Group's maritime and shipping arm, signed an agreement with Kazakhstan’s national shipping company to expand Caspian operations by building two container vessels. Dubai-based ports operator DP World also has operations at Khorgos, a vital transit hub on Kazakhstan’s border with China.

Trade with all

While there is a cultural affinity with other Muslim-majority nations in the Middle East, Kazakhstani officials often talk of pragmatism. They also have healthy relations with Israel.

“No war” and “no casualties” are the “best options” in solving the crisis in Gaza, another Deputy Foreign Minister, Alibek Kuantyrov, said in response to a question from The National.

“Of course, we are concerned with what's happening in Gaza, and it is our position to solve the issue in a peaceful way,” Mr Kuantyrov said. He declined to say if Kazakhstan was reconsidering trade deals with Israel, after a recent announcement by the UK and the European Union that they are reviewing commercial ties with the country over the crisis in Gaza.

Perhaps a sign of Kazakhstan’s willingness to deal with everyone is that while it has robust ties with Israel, it also trades what it can with Iran - mostly sanctions-exempt foodstuffs, officials say. The US and Tehran are holding talks attempting to reach an agreement over restrictions on Iran’s nuclear programme in exchange for sanctions relief - which Astana would welcome, officials said.

“Iran is a big market," Mr Kuantyrov said. "Any pragmatic solution would be good for us.”

Geographical and historical realities

China and Russia are still Kazakhstan’s largest trading partners, with the EU in third position. Historical connections and a colossal 7,500km land border with Russia mean that business continues, despite international sanctions imposed on Moscow over the war in Ukraine.

“We still have ties and we have trade ongoing – people are always buying and selling something,” Mr Nussupov, Vice Minister for Trade and Integration, said of the relationship with Russia.

Despite the attempts to diversify, Russia still has huge influence in Kazakhstan’s economy, said Kate Mallinson of Chatham House. Moscow controls the pipeline route through which Kazakhstan sends about 80 per cent of its crude oil exports and owns stakes in development licences for the country's abundant uranium supplies. Cultural similarities in deal-making forged in the Soviet era do not disappear overnight. It also remains to be seen if the attractive terms for previously-signed renewable energy deals will be offered to future investors, potentially complicating further agreements.

Kazakhstan has “to constantly try to navigate this sort of tightrope walk with the Russians, and also that's just culturally how they do business”, Ms Mallinson said. “A lot of the leadership were educated in Russia. I think it's going to take a whole generation before those ties lessen.”

As for China, instability caused by US President Donald Trump’s mercurial behaviour over tariffs may push Beijing to strengthen other trade ties, perhaps with those closer to home such as Kazakhstan. Astana is already looking at forming closer partnerships with specific regions in China to home in on business development in a vast country.

“I think that these trade tensions are pushing China to diversify trade partners,” Mr Nussupov said. “But anyway, we have always been seen, and continue to be seen, as a key strategic neighbour to China.”

• Remittance charges will be tackled by blockchain

• UAE's monumental and risky Mars Mission to inspire future generations, says minister

• Could the UAE drive India's economy?

• News has a bright future and the UAE is at the heart of it

• Architecture is over - here's cybertecture

• The National announces Future of News journalism competition

• Round up: Experts share their visions of the world to come