Index trend
Previous quarterly editions
Expropriation risk: 54 53 54 54 ► Political violence risk:48 48 48 39 ▼Terrorism risk:34 32 32 32 ►Exchange transfer and trade sanction risk: 55 55 55 55 ►Sovereign default risk:56 56 56 47 ▼
Overall Risk Temperature: 48 (Medium -5) TREND ▼
Special topic: Gray zone aggression
Degree to which the country relies on outbound gray zone action to achieve its strategic objectives1 = Not at all5 = Gray zone action is a core tactic
1
Impact of inbound gray zone attacks on the country1 = Negligible impact5 = Significant impact on economic growth and/or political stability
2
Kazakhstan has traditionally sought to maintain friendly and constructive relations with its neighbors and more distant partners, in keeping with its multi-vector foreign policy orientation inaugurated in the 1990s. The country is an active participant in international and regional organizations as well as in various trade and economic integration initiatives. Following the death of Uzbek President Islam Karimov in 2016, Kazakhstan has managed to improve significantly its bilateral relationship with Uzbekistan, which has historically viewed itself as a regional powerhouse, given its large population and strong armed forces. In 2018, Astana hosted the first-ever summit of Central Asian heads of state, since held annually, in testimony to the changed regional environment marked by a common desire for greater cooperation in diverse areas.
Home to a large Russian minority, Kazakhstan is occasionally targeted by Russia’s disinformation and anti-Western propaganda. In 2020, a Russian parliamentarian said that Kazakhstan’s northern regions had been a gift from Russia and the former Soviet Union. The following year, a group of Russian members of parliament publicly criticized a Kazakh draft law proposing to do away with parallel Russian-language advertising. Both statements drew rebukes from within Kazakhstan.
In the autumn of 2023, the Kazakh defense ministry had to issue a formal rebuttal to news reports in Russian media suggesting that the former capital Almaty was going to host a “NATO Center,” whereas in reality it was just a conference room outfitted with U.S. financial support. More recently, in June 2024, several residents of East Kazakhstan Oblast were sentenced to jail in a Kazakh court for calls to secede and join Russia.
TREND ►
The unrest of January 2022 saw President Kassym-Jomart Tokayev seize the reins of power from his predecessor, Nursultan Nazarbayev, who, in a mostly ceremonial role, continued to control large chunks of the Kazakh economy. In the aftermath of the unrest, the government seized extensive assets from figures linked to the Nazarbayev family, including the former president’s nephew, and forced members of the elite to contribute large sums of money to an ostensibly charitable fund. Contrary to initial expectations among the population and local experts, such expropriations of assets from Nazarbayev allies have been few and far between.
The government continues to maintain that foreign investors will not be affected by these internal developments — and the president has made several visits to Europe to court new investors, most recently to Italy in January. This public discourse notwithstanding, Kazakhstan is currently suing international oil companies developing the giant Kashagan offshore oil field in arbitration for cost overruns and alleged lost profits. In April, the amount of outstanding claims increased to $150 billion. According to media reports, this had risen further to $160 billion by mid-August, after the Kazakh side alleged that foreign investors had engaged in deals tainted by corruption. The case is pending.
TREND ▼
With high inflation and income inequality having a serious impact on socioeconomic stability, the government remains extremely concerned about the possibility of further popular unrest.
To preempt the risk of destabilization, the authorities are providing extensive support to the economy and households, and the security services are actively pursuing the most outspoken opposition figures. While the suppression of civil society may mitigate some risk of unrest, it also makes the incidence and nature of popular anger far more unpredictable and chaotic. As a result, any local grievance or political scandal has the potential to trigger mass protests.
The low turnout in the last legislative elections, in March 2023, seemed to suggest that the overwhelming mood among the population was one of apathy. However, given the events of January 2022, the government cannot depend on apathy to protect it from unrest.
Following the January 2022 unrest, the government claimed that “foreign terrorists” were involved in stoking the violence seen in Almaty. While there is a strong chance that foreign nationals were recruited to participate in those events, there is no evidence to suggest that these figures were members of radical extremist groups, such as Islamic State or Al-Qaeda, nor that their intervention in January was motivated by Islamist ideology.
While the Kazakh security services will remain vigilant to any threat of Islamic extremism, any incidents of radicalization are likely to be rare and isolated. According to a midyear press release, the National Security Committee (known as KNB) prevented two planned terrorist attacks during the first half of 2024.
The Kazakh tenge is ostensibly in free float and typically moves with the price of oil and other key currencies, particularly the U.S. dollar and the Russian ruble. Following a period of relative strengthening on the back of rising oil prices, the tenge began to weaken again in the middle of 2024, amid growing inflation, a reduction in foreign currency sales by the central bank and an expanding budget deficit.
In August 2023, the government suspended the mandatory sale of 30% of foreign currency earnings by exporters through 2024. Despite the tenge’s deteriorating exchange rate, this measure has not been reinstated yet.
With the onset of Russia’s invasion of Ukraine in February 2022, Kazakhstan and other neighbors of Russia have been subject to greater scrutiny from Western governments seeking evidence of sanctions violations. With Kazakhstan’s deep economic ties and long land border with Russia, individual Kazakh companies have been involved in sanctions-busting, and some of them have even been sanctioned by the West.
The government continues to insist that it will not allow Russia to circumvent sanctions via Kazakh territory or using Kazakh-based intermediaries. At the same time, a deputy prime minister said in August that Kazakhstan would not follow Western sanctions blindly if its own economic interests were at risk.
The Kazakh economy has gone through several dislocations in recent years, including the end of a commodity super cycle (2014 – 2015), a banking crisis (2015 – 2017), the COVID-19 pandemic (2020 – 2021) and the still-ongoing dislocation around the Russian war in Ukraine.
Kazakhstan’s gross international reserves have increased from $36.7 billion in January to $42.7 billion in August. They consist of gold (55%) and a basket of freely convertible foreign currencies (45%). Following a decline from as much as 68% in early 2022, gold’s share remains largely stable, with the central bank maintaining equilibrium through ongoing purchases on the domestic market and offsetting foreign sales, respectively at 33 tonnes and 30 tonnes of refined gold in the first half of 2024.
Kazakhstan also has access to ample foreign currency reserves accumulated in its National Fund, which is financed by taxes paid by the oil and gas industry. In August, these reserves stood at nearly $63 billion, up from $60 billion one year earlier. The fund is regularly tapped to cover budget deficits, with allocations for the whole of 2024 scheduled to reach $7.5 billion.
Despite continued macroeconomic headwinds, the risk of sovereign default remains low. In September 2024, Moody’s upgraded Kazakhstan’s sovereign credit rating from Baa2 to Baa1 with a “stable” outlook. Earlier, in May 2024, Fitch Ratings affirmed the country’s credit rating at BBB with a “stable” outlook, citing “significant external reserves” and “fiscal stability” as strong buffers against external shocks.
