Friday, October 29, 2010

Kazakhstan deepens relations with Europe

Kazakhstan deepens relations with Europe
By Robert M Cutler

MONTREAL - Kazakhstan's President Nursultan Nazarbaev has just completed a two-day official visit to Belgium, the present chairman-in-office of the European Union Council. Kazakhstan it itself president-in-office of the Organization for Security and Cooperation in Europe (OSCE), and has convinced OSCE leaders to permit it to host, in Astana at the beginning of December, the first top-level OSCE summit in 11 years.

Nazarbaev's visit to EU headquarters in Brussels early in the week also allowed for bilateral Kazakhstani-Belgian meetings on state-to-state relations, and it was followed by a visit to France for developing bilateral relations with France. Brussels is also where one finds the headquarters of the North Atlantic Treaty Organization (NATO), and Nazarbaev did not miss the opportunity for high-level meetings there either, where the organization's secretary general, Anders Fogh Rasmussen, accepted an invitation to attend the OSCE summit in Astana.

Nazarbaev's visit to Europe had another important dimension. The International Monetary
Fund expects Kazakhstan's economy, which grew only 1.2% in 2009, to expand by 5.4% in the current year and by 5.1% in 2011. Accordingly, one of the president's chief goals in visiting Brussels was to seek foreign direct investment, particularly in accord with the so-called "Path to Europe" government program in Kazakhstan that seeks to institutionalize legal and economic reforms that would dovetail with EU standards.

Kazakhstan signed a Partnership and Cooperation Agreement (PCA) with the EU in 1995 that entered into force in 1999 for an initial period of 10 years, so that it is therefore now up for renewal and revamping. Both sides look forward to enhancing this arrangement. As Nazarbaev told New Europe, changes over the past decade have necessitated "work on a new basic agreement [that] is now ongoing" so that "in the 21st century we will strengthen our strategic interaction on addressing modern problems."

On the EU side, these negotiations will be guided by the organization's "New Partnership" concept-strategy for Central
Asia, adopted in June 2007, which seeks to strengthen bilateral and regional relations in all areas of cooperation. This strategy posited that future European assistance to the region at large would focus on reform in the political, economic, and judicial spheres, social reform, infrastructure building, and energy cooperation.

Indeed, as early as in November 2006 the EU and Kazakhstan signed a memorandum of understanding (MoU) on cooperation in the energy sphere. This was followed in 2009 by an MoU on cooperation over transport issues. In April this year, Kazakhstan signed a cooperation agreement with the European
Investment Bank that was followed up during the current trip by a declaration of intent on a series of energy-related projects. (Two-thirds of EU investment in Kazakhstan already goes to the energy sector.) It is expected that a new "PCA Implementation Plan" will be submitted for approval to the Joint Cooperation Committee in Brussels in December.

Trade between the two sides reached 20 billion euros (US$27.6 billion) in 2009, and has reached nearly three-quarters that amount in just the first half of 2010. The EU's trade volume with Kazakhstan exceeds that with all other Central Asian countries put together.

That being so, in light of Kazakhstan's growing energy and commercial with China and traditional long-standing ties with Russia, former EU trade commissioner Peter Mandelson told the Wall Street Journal that a failure by the EU to engage Kazakhstan, "a resource-rich country with an economic base that's ripe for modernization and diversification", would mean "missing a very big opportunity to do a lot of business, to deepen trade and investment links".

European Commission president Jose Manuel Barroso stated after the conclusion of the two-day meetings that the EU would support Kazakhstan's application for membership of the World Trade Organization.

Numerous bilateral contracts were signed in Brussels, including one between the leading nuclear research centers of the two countries to cooperate on the study of peaceful applications of nuclear energy and its sustainable development.

Still larger trade agreements were reached with
France during Nazarbaev's visit there, in an amount exceeding 2 billion euros. The highest-profile of these includes the sale of locomotives and helicopters by the French industrial group Alstom to Kazakhstan's national railroads. Also Atrium, a subsidiary of the European space and defense group EADS, will participate in the construction of an aerospace center in Kazakhstan for the assembly, integration, and testing of space satellites. The French nuclear group Areva and the Kazakhstani state firm Kazatomprom signed an industrial cooperation agreement as well.

Specific energy cooperation agreements were also reached or discussed during Nazarbaev's sojourn in
Paris, even though nothing was specifically announced in this respect. The French energy major Total participates with a 16.8% share in the consortium exploring and developing of the offshore Kashagan deposit.

A year ago, a French consortium composed of Spie, Manesmann-France, Europipe, GTS, and Arcelor-Mittal signed an agreement to negotiate terms of construction of the Eskene-Atyrau pipeline that is planned as part of the Kazakhstan-Caspian Transport System to take Kashagan oil overland inside Kazakhstan to a place from where it can be either shipped or moved by pipeline across to Baku for insertion in the Baku-Tbilisi-Ceyhan oil export pipeline to world markets.

Whether any further agreements are announced will be of no little moment. Progress on the Eskene-Atyrau project in particular may need further attention. At a minimum, the two presidents, who attended the original signing ceremony together a year ago, would have reviewed developments and sought to provide an additional impetus to negotiations. Kazakhstan will need, indeed already needs, additional export routes for its oil production, the current level of which does not match its actual capability due to the shortage of such routes.

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