Growing Activity of Russia and the EU in Kazakhstan Could Lead to Economic Conflict by 2030 

Russia and the European Union are ready to enter a race for influence in Kazakhstan due to the strategic importance of the state. 

Since the beginning of the war in Ukraine, Russia and the European Union have shown great interest in Kazakhstan. This is noticeable by the number of visits from Russian governors, top public officials, and Putin, as well as by the number of visits from Europe, most notably from the Presidents of Germany and France. Russia and the EU are demonstrating to each other that they are ready to engage in long-term competition in Central Asia, particularly in Kazakhstan. Russia possesses significant military-political influence with growing economic engagement in the region, while the EU has economic advantages over Russia, especially in the areas of trade and investments in Kazakhstan. In striving to maximize their economic presence, the parties may come to an economic conflict with possible political consequences for Kazakhstan. 

It is commonly believed that China and Russia are the most influential states in Kazakhstan, but if one uses the Foreign Bilateral Influence Capacity Index from the Frederick S. Pardee Center for International Futures, the picture looks quite different. This index uses data covering economic, political, and power aspects of bilateral influence from 1960 to 2020. According to this index, Russia and the European Union are the most influential actors in Kazakhstan. While in 2020, according to this index China is around half as influential as the EU, and three times less influential than Russia in Kazakhstan. Russia’s influence is based on Kazakhstan’s membership in the EAEU and CSTO, as well as Russia’s dominance in Kazakhstan’s military imports. The EU’s influence is based on trade relations (the EU is Kazakhstan’s main trading partner) and assistance provided for state development goals. If one tries to build a statistical forecast for 2030 based on these data, taking into account the dynamics of development from 1994 to 2020, it turns out that the share of the European Union’s influence among such influential actors in Kazakhstan as Russia, Türkiye, and China will be 38% (in 2020 it was 36%), the share of Russia will be 40% (in 2020 it was 45%). Russia’s share will be decreasing, specifically in the economic sector due to the growth of the positions of the European Union and China, with the latter’s share rising to 15% compared to 12% in 2020. 

Are Russia and the European Union ready for competition in Kazakhstan? Clearly, yes. Russia has long considered the Central Asian countries within its sphere of influence and therefore has not been as active in this region as it is now. Analogously the European Union adopted a strategy for Central Asia in 2019.  As far back as 2016, the Council of the European Union identified five guiding principles that should apply in EU relations with Russia, which included strengthening relations with Central Asian countries. Despite this, Josep Borrell stated after the beginning of the war in Ukraine that the EU had not paid enough attention to the region. In this context, the visit of the President of France to Kazakhstan and his phrase about “Kazakhstan’s refusal to be a vassal of any power” is significant. The Russian side reacted by saying that the European Union is trying to oust Russia from Central Asia but stated that they shall not succeed. The news from Politico about a confidential EU briefing detailing several plans to prevent the loss of its influence over four key ‘priority countries,’ one of which is Kazakhstan, is quite striking. Given the European Union’s restricted ability to exert political or military influence on Kazakhstan, the initial contours of the impending economic competition are becoming evident. Economic diplomacy, as a result, is emerging as a key arena for the EU in its engagement with Kazakhstan. 

Economic cooperation with Kazakhstan is now very important for the European Union and for Russia. For the European Union, Kazakhstan is important as a supplier of raw materials and as a state through which alternative transport routes will pass, in order to bypass Russia. But it is also important to understand that Kazakhstan and Central Asia in general are important consumers of goods from Europe. Given that access to the consumer market in Russia and Belarus has become complicated for the EU, as well as in Ukraine due to the deteriorating economic situation in the country, Europe needs new markets for goods delivery. There is data indicating that the export of the European Union in 2023 compared to 2022 is decreasing. In the third quarter of 2023, EU exports of goods decreased by 1.2% from the second quarter of 2023. It is also interesting that lately the overall export of Germany has been significantly decreasing. A potential market for increasing exports is the 80 million people of Central Asia, where China and Russia lead in goods supply.  

Given that access to European markets is now also closed for Russia, Russia has been increasingly reorienting towards the countries of Central Asia. Consequently, Russia may now be more focused on the fight for the consumer market in Central Asia, particularly in Kazakhstan. Thus, in Kazakhstan, the number of companies with Russian capital increased by 70% over the year in 2023; in fact, every third company with foreign capital in Kazakhstan is Russian. In 2022, it was known about the start of 16 Russian private investment projects in Kazakhstan, which were projected to create 6,860 jobs. Meanwhile, the number of Russian projects increased significantly compared to the previous year, even though the EU remains the main foreign investor in Kazakhstan. In contrast, China announced the start of 12 projects with 4,347 jobs, and the EU countries about 9 projects. On the other hand, Russia was the main exporter of goods to Kazakhstan, but imports from Russia to Kazakhstan for the nine months of 2022 decreased due to a reduction in consumer (food and non-food) and intermediate (used for production) goods. The report of the National Bank of Kazakhstan states that there was a reduction in the physical volumes of imports from Russia of tractors, freight transport, trailers and semi-trailers, and an increase in imports from other suppliers from China and EU countries. But at the same time, Russia will be focused on increasing its exports to its near abroad through its national project “International Cooperation and Export,” which aims to increase the supply of non-raw goods from Russia abroad by 70% by 2030

Kazakhstan is now effectively a gateway for Russia to the markets of other Asian countries, as Putin also emphasized during his address to the Federal Assembly in February of this year. This increases the country’s significance for Russia even more, whilst for the European Union, the importance of Kazakhstan is growing as an exporter of raw materials and as part of alternative transport routes bypassing Russia.  

Given both sides’ economic interests in Kazakhstan, the parties may begin to strengthen their presence in the country to consolidate influence. This will primarily involve expanding the export of their goods and increasing investments. Considering this, the parties already are competing for markets as they increase economic interaction with Kazakhstan. Each side may start using different tools to reduce the capabilities of the other and thereby expand their own economic presence. This economic conflict could move to the political plane, where the sides will politically present themselves as a more favourable partner to convince Kazakhstan to take certain measures to expand economic cooperation with Russia or the EU. For this, both sides may start actively using soft power tools to shape a positive image of their own states and a negative one of their opponent among the population of Kazakhstan, dividing the population into pro-Russian and pro-European. Such a scenario is quite likely to occur in Kazakhstan, given that studies register growing negative attitude towards Russia in Kazakhstan in comparison to other Central Asian countries.