Kazakh Leader Seeks to Secure Legacy Amid Havoc of Cheap Oil Era

by Bloomberg News
  • It’s not a good time to be an energy autocrat contemplating your political mortality. Amid the worst oil-price slump...
Kazakh Leader Seeks to Secure Legacy Amid Havoc of Cheap Oil Era
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It’s not a good time to be an energy autocrat contemplating your political mortality. Amid the worst oil-price slump in his nearly 27-year rule, Kazakh President Nursultan Nazarbayev is organizing what may be his last election as he seeks to secure his legacy with sweeping economic changes.

While his Nur Otan party is assured of retaining its overwhelming majority in early parliamentary elections due March 20, the longest-serving post-Soviet leader faces the dual challenge of reviving the economy and arranging a possible transfer of power. He’s warned that Kazakhstan faces a “real crisis” because of the slump in oil prices.

There’ll be no “serious changes” in parliament because the ruling party faces no competition, said Dosym Satpayev, director of the Almaty-based Risk Assessment Group. “Many people are eager to keep the status quo, without understanding” the risks of unrest, he said.

Flush with cash when crude was $100 a barrel, Central Asia’s largest energy producer is reeling from economic storms that have swept oil-dependent nations from Azerbaijan to Venezuela as prices tumbled to a 13-year low. The tenge has fallen about 45 percent against the dollar since the central bank switched to a free float in August to defend reserves amid devaluations in Russia and China. The currency’s decline has hurt living standards and sent inflation spiking to 15.2 percent in February, the fastest since 2008.

Nazarbayev, 75, called elections after lawmakers said the crisis required “social consolidation.” Nur Otan won 83 of 98 elected seats at 2012 elections to the parliament, which also has nine appointed deputies. It’s competing against five other parties including Ak Zhol and the Communists, the only ones to win seats last time.

The election campaign has been “low-key” and “parties’ campaign platforms differ little in tone and substance,” the Organization for Security and Cooperation in Europe said in a March 11 report.

The end of high oil prices “has brutally exposed the lack of structural reform, corruption and poor governance,” making Kazakhstan “much more vulnerable to instability,” Kate Mallinson, a partner at London-based political risk advisory firm GPW & Co., said by e-mail. Nazarbayev urged a “strengthening of the fight against corruption” under an institutional-improvements program published last year.

Succession Question

The Kazakh ruler has demanded extensive reforms, including plans to privatize all state-run companies, to attract foreign investment and spur economic recovery. He must avert popular discontent over the crisis, while also fulfilling pledges to devolve greater power to parliament as part of a transition promised after he won a fifth term in snap presidential elections last April.

“Recession seems more likely” than official forecasts of 0.5 percent growth this year, Tim Ash, head of emerging-market strategy at Nomura International Plc in London, said by e-mail. The top political issue “remains the question of the succession,” and “no clear successor has been unveiled or indeed a succession process planned out.”

Kazakhstan must adjust to an “era of cheap oil” that may last five to seven years, Prime Minister Karim Massimov, a contender to take over the reins of power, said in a Jan. 22 interview.

Family Jobs

While Nazarbayev hasn’t said when he may step down, he named his eldest daughter Dariga as deputy prime minister in September. She’s among Nur Otan’s election candidates. The regime may be “appointing family members to key posts” so that Nazarbayev can keep control “from behind the scenes” if he leaves, Mallinson said.

Russia, which formed the Eurasian Economic Union with Kazakhstan and Belarus last year, is watching closely. President Vladimir Putin jangled Kazakh nerves during the Ukraine conflict in 2014 by telling students that Nazarbayev had created a state “where there’s never been a state.”

For now, Kazakhstan faces “possibly the most complicated time” and “everything will depend on how we work,” Nazarbayev said at a Feb. 16 meeting with the mayor of Almaty, the largest city.

“Oil won’t be going up, there won’t be any money,” Kazakh construction company chief Aidyn Rakhimbayev told workers at his BI Group in the capital, Astana, in January. “Those who can reorganize themselves will live. Those who can’t, won’t.”

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net. To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Tony Halpin, Andrew Langley

By: Nariman Gizitdinov

©2016 Bloomberg News

It’s not a good time to be an energy autocrat contemplating your political mortality. Amid the worst oil-price slump in his nearly 27-year rule, Kazakh President Nursultan Nazarbayev is organizing what may be his last election as he seeks to secure his legacy with sweeping economic changes.

While his Nur Otan party is assured of retaining its overwhelming majority in early parliamentary elections due March 20, the longest-serving post-Soviet leader faces the dual challenge of reviving the economy and arranging a possible transfer of power. He’s warned that Kazakhstan faces a “real crisis” because of the slump in oil prices.

There’ll be no “serious changes” in parliament because the ruling party faces no competition, said Dosym Satpayev, director of the Almaty-based Risk Assessment Group. “Many people are eager to keep the status quo, without understanding” the risks of unrest, he said.

Flush with cash when crude was $100 a barrel, Central Asia’s largest energy producer is reeling from economic storms that have swept oil-dependent nations from Azerbaijan to Venezuela as prices tumbled to a 13-year low. The tenge has fallen about 45 percent against the dollar since the central bank switched to a free float in August to defend reserves amid devaluations in Russia and China. The currency’s decline has hurt living standards and sent inflation spiking to 15.2 percent in February, the fastest since 2008.

Nazarbayev, 75, called elections after lawmakers said the crisis required “social consolidation.” Nur Otan won 83 of 98 elected seats at 2012 elections to the parliament, which also has nine appointed deputies. It’s competing against five other parties including Ak Zhol and the Communists, the only ones to win seats last time.

The election campaign has been “low-key” and “parties’ campaign platforms differ little in tone and substance,” the Organization for Security and Cooperation in Europe said in a March 11 report.

The end of high oil prices “has brutally exposed the lack of structural reform, corruption and poor governance,” making Kazakhstan “much more vulnerable to instability,” Kate Mallinson, a partner at London-based political risk advisory firm GPW & Co., said by e-mail. Nazarbayev urged a “strengthening of the fight against corruption” under an institutional-improvements program published last year.

Succession Question

The Kazakh ruler has demanded extensive reforms, including plans to privatize all state-run companies, to attract foreign investment and spur economic recovery. He must avert popular discontent over the crisis, while also fulfilling pledges to devolve greater power to parliament as part of a transition promised after he won a fifth term in snap presidential elections last April.

“Recession seems more likely” than official forecasts of 0.5 percent growth this year, Tim Ash, head of emerging-market strategy at Nomura International Plc in London, said by e-mail. The top political issue “remains the question of the succession,” and “no clear successor has been unveiled or indeed a succession process planned out.”

Kazakhstan must adjust to an “era of cheap oil” that may last five to seven years, Prime Minister Karim Massimov, a contender to take over the reins of power, said in a Jan. 22 interview.

Family Jobs

While Nazarbayev hasn’t said when he may step down, he named his eldest daughter Dariga as deputy prime minister in September. She’s among Nur Otan’s election candidates. The regime may be “appointing family members to key posts” so that Nazarbayev can keep control “from behind the scenes” if he leaves, Mallinson said.

Russia, which formed the Eurasian Economic Union with Kazakhstan and Belarus last year, is watching closely. President Vladimir Putin jangled Kazakh nerves during the Ukraine conflict in 2014 by telling students that Nazarbayev had created a state “where there’s never been a state.”

For now, Kazakhstan faces “possibly the most complicated time” and “everything will depend on how we work,” Nazarbayev said at a Feb. 16 meeting with the mayor of Almaty, the largest city.

“Oil won’t be going up, there won’t be any money,” Kazakh construction company chief Aidyn Rakhimbayev told workers at his BI Group in the capital, Astana, in January. “Those who can reorganize themselves will live. Those who can’t, won’t.”

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net. To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Tony Halpin, Andrew Langley

By: Nariman Gizitdinov

©2016 Bloomberg News

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