KAZAKHSTAN AND SAUDI ARABIA: POLITICAL AND ECONOMIC CONTACTS TODAY AND TOMORROW
Asylbek Izbairov, Research associate, Analysis and Forecasting Department, Suleymenov Institute of Oriental Studies, Ministry of Education and Science of Kazakhstan (Almaty, Kazakhstan)
Kazakhstan looks at its relations with the Muslim East as an important vector of its foreign policy. Its initiative to call a Conference on Cooperation and Confidence-building Measures in Asia (CCCBMA) was brought to life, first, by Astana’s desire to set up a continental security system, which requires stable partner relations with Kazakhstan’s eastern neighbors.
Second, mutually advantageous economic cooperation is also needed because eastern states have boosted their political and economic importance and because the geopolitical situation of the Central Asian and the Persian Gulf states is conducive to developing short communication networks and to a vast social basis in Asia.
Third, Kazakhstan regards its equal participation in world economy and politics as a task of top priority created by the necessity of joining the Asian structure of regional economic, political and cultural relations and of taking into account the need to balance the interests of all countries involved in the new configuration of the power poles that are taking shape on the continent.
Fourth, the religious factor plays an important role in the region. Being connected with religious extremism and international terrorism it creates a need to carefully analyze all problems of cooperation in this sphere. For example, the Cooperation Council for the Arab States of the Gulf (GCC) was one of the first to manifest its concern over the trend to identify Islam with extremism and terrorism. It touched upon the problem in several of its documents dated from the early 1990s and emphasized that extremism and terrorism are international phenomena and should not be associated with one particular nation or religion. The final communiqué of the 15th GCC conference (Manama, Qatar, December 1994) called on all Muslim theologians to explain to the world the principles and values of genuine Islam. This context has made the relations between Kazakhstan and the Kingdom of Saudi Arabia (KSA) one of the former’s foreign policy priorities in the Middle East.
The Kingdom’s special place on the international arena is explained by three factors: (1) its advantageous geopolitical and geographic location; (2) Islam’s special role on the Arabian Peninsula, the cradle of Islam, where two Muslim sanctuaries are found. This explains why the Saudi king has the title of the Guardian of the Two Holy Places. The Arabian Peninsula is the cradle of a classical, more orthodox religious trend that I shall call “saliafy” (a term different from that commonly used in the West). The religious norms and rules of this trend are still affecting to a great extent the state policies and the Saudi society. From the ethnical point of view Arabia is the genealogical seat of Arabism. Finally, the Kingdom has vast oil reserves.
In the first years of independence the real potential of bilateral relations between the two countries remained untapped because of several factors. The Gulf War of 1991 caused a serious crisis in Saudi Arabia: it had to concentrate on a reliable security system for the region and to act in closer contact with the GCC countries. For example, to resolve inter-regional contradictions of long standing Saudi Arabia formulated a “6 + 1 + 1” formula to describe cooperation among the six GCC countries, Iran and Iraq. The Middle East settlement figures prominently in Saudi Arabia’s foreign policy.
After the Gulf War the country had to act pragmatically and cut down its aid to other countries, which immediately affected the level of its interaction with Muslim states. One has also to bear in mind that at the earlier stages of contacts between Saudi Arabia and the Central Asian states there were certain misunderstanding: for example, the former heads of Kazakhstan’s Foreign Ministry and the Government twice (in February and March 1992) declined the requests of the Saudi Arabian Foreign Minister Al-Faisal for a visit to our country. Uzbekistan, being apprehensive of religious propaganda, limited access to its territory for the Saudi subjects of Uzbek extraction. To this day the relations between the two countries remain cool.
The relations between Saudi Arabia and Kazakhstan gradually improved. In 1993-1994 diplomatic contacts were actively developing especially in the period when an official visit of President Nazarbaev to Saudi Arabia was prepared. It took place in 1994 and served as a historic breakthrough in the bilateral relations. The foundations of a political dialog on the top level and of mutually advantageous cooperation in all spheres have been laid.
President Nazarbaev’s meetings and talks with King Fahd, Crown Prince Abdullah and Prince Sultan demonstrated that Saudi Arabia looked at Kazakhstan as one of the key post-Soviet and Muslim states. Prince Sultan, in particular, supported Kazakhstan’s plans to cooperate in the oil and trade spheres, to join efforts in dealing with ecological issues and to study the potentials in the military-technical sphere. It was also pointed out that Kazakhstan needed a favorable investment climate and a better legislation in this sphere.
The visit produced a vast general agreement on trade, economic, investment, and technical cooperation, on contacts in sport, culture, and youth policy. This was one of the first documents Saudi Arabia signed with a CIS country.
An official visit of Foreign Minister of Kazakhstan Saudabaev to Riyadh in April 1994 marked another important stage in bilateral relations. It was during this visit that a Protocol on Diplomatic Relations Between Kazakhstan and Saudi Arabia was signed.
The year 1996 marked the beginning of practical cooperation: in May a Kazakhstan governmental delegation headed by State Secretary A. Esimov came to Saudi Arabia. In the course of the visit it met Prime Minister, Minister of Defense and Aviation, and Inspector General of Saudi Arabia Prince Sultan bin Abdul Aziz Al Saud, the Governor of the Western province Prince Majid bin Abdul Aziz. The embassy of Kazakhstan was opened in Riyadh. In the same year Senate Chairman Omirbek Baygeldy visited Riyadh to meet King Fahd, Crown Prince Abdullah, Governor of the Riyadh Region Prince Salman and other top officials. These meetings produced an agreement on continued bilateral cooperation and on a grant of $15m for the purpose of constructing a new building for the parliament of Kazakhstan.
Later other officials from Kazakhstan visited Saudi Arabia, Minister of Education, Culture and Health K. Kusherbaev, Chairman of the Supreme Court M. Narikbaev, Minister of Ecology and Natural Resources S. Daukeev among them. These visits added intensity to bilateral cooperation.
In 1996-1998, the embassy of Kazakhstan in Riyadh established business contacts with all sorts of government funds and financial organizations of Saudi Arabia, consolidated its contacts with the Saudi Development Fund—the strongest financial institution specializing in rendering assistance to foreign countries. The Kazakhstani ambassador reached an agreement with the Fund’s Managing Director Muhammad bin Abdullah Al-Suqeir about funding certain national economic objects of Kazakhstan. The Fund has already extended an interest-free loan of $9m to modernize the Karaganda-Astana Highway (the project’s total cost amounted to $20m). The Islamic Development Bank and the Abu Dhabi Development Fund also contributed to the project.
A regional conference “Investments in the Republic of Kazakhstan” organized by the embassy and the Islamic Development Bank in Almaty late in September 1996 was another milestone on the road toward closer business contacts between the two countries. It attracted about 200 businessmen from Muslim countries, the majority coming from Saudi Arabia. Early in 1997 a Saudi Investment Company was set up in Kazakhstan with an aim of developing cooperation in the sphere of investments and encouraging Saudi businessmen to work in Kazakhstan. Its authorized capital amounted to $50m, of which $5m was donated by the Islamic Development Bank. There are about 100 Saudi businessmen in the company, and it intends to work in the light and medium industry and in construction. The sides have already agreed that the firm will build a shopping center and a hospital in Almaty.
In 1997 and 1998 representatives of Saudi Ojer Group, Saudconsult, and Abdullatif Group visited Kazakhstan while the Lariba and Taiba banks were accredited in Almaty. Sheikh Halid ibn Ibrahim, president of well-known Taamir company also displayed an interest in business relations with Kazakhstan. He dispatched a delegation of high-placed figures from his company to scrutinize specific projects. With the assistance of the Islamic Development Bank, the regional office of which had been opened in 1996, the firm extended interest-free loans of $9m to reconstruct the Syzganov Research Center and to supply latest medical equipment to it.1 The Zamil Group designed plants of skeleton-type buildings and of air conditioners. There is a Kazakhstani-Saudi JV working in the Sary-Agach District (South Kazakhstan Region) that bottles mineral water.
Constructive political cooperation started with several highly successful initiatives. In fact, Saudi Arabia opened its embassy in Kazakhstan earlier than in other Central Asian countries. Saudi Arabia invited Kazakhstan to participate in the Organization of Islamic Conference (OIC), it supported the resolution on a Conference on Cooperation and Confidence-building Measures in Asia put forward by Kazakhstan at the OIC Tehran summit and the resolution on aid to the Aral Sea and the Semipalatinsk Region. During the OIC Foreign Ministers Conference in Doha in March 1998 Foreign Minister of Kazakhstan K. Tokaev met his Saudi colleague Prince Saud Al-Faisal. They discussed several international issues of mutual importance and bilateral relations between the two countries. Recently, Riyadh has been displaying an intention to join the CCCBMA while the Council of Ministers of the Kingdom supported a joint initiative of its own Foreign Ministry and the embassy of Kazakhstan to appoint the Minister of Industry and Energy of Kazakhstan co-chairman of the joint Saudi-Kazakhstani commission.
It should be noted that both sides attach great importance to their geopolitical role in the regions. During the visit of President Nazarbaev to Saudi Arabia the king pointed out to the republic’s great contribution to establishing equal relationships between the West and the Muslim world.
Riyadh is closely following the regional developments while the country still limits itself to studying the progress in the relations with the Muslim CIS countries and tries to keep up with Turkey and Iran, two other giants of the Islamic world.
In the sphere of oil and gas reserves Saudi Arabia regards the Asian countries as its main sphere of “partnership in energy” while its policy in the energy sphere is designed to find stable export routes and set up JVs engaged in oil refining and sale.2 This is explained by the desire of the GCC members to match the processing capacities of potential partners with their domestic consumption. In other words, Saudi Arabia is interested in building oil refineries in the so far undeveloped Asian markets adjusted to the light Saudi oil.
The Saudi oil business is watching Kazakhstan with a great deal of interest: several companies are already functioning in the republic. In November 1996 the Nimir Petroleum obtained a license to extract hydrocarbon fuels in Severnye Buzachi in the Mangistau Region. The company assessed the total oil reserves at 1.5 billion barrels, 450 million of them being recoverable. Development will proceed in several stages with the use of latest technologies. It is expected that during the trial period of first three years the company will invest $30m, while in the first five years, $103m. On the whole, the project’s cost is estimated at $1 billion; 80 oil wells will be drilled. The company intends to contribute to laying pipelines in Kazakhstan. In 1998, the company renewed its license for oil extraction in Severnye Buzachi and ceded 4 percent to the American firm TEXACO. Nimir Petroleum and JV Dosbol joined forces to set up another JV called Delta-Dosbol-Kazakhstan Ltd to develop the gas fields in the republic’s south (the Amangeldy and Airakty gas fields in the Zhambyl Region). They have already sent their application to the Investment Agency of Kazakhstan. Another Saudi firm Delta is actively coming to the local investment and oil market. It has already made public its intention to buy 10 percent of Tengizchevronoil shares for $500m and is working on a gas pipeline project.
During his visit to Kazakhstan that took place on 24 September, 2001 Saudi Minister of Petroleum and Mineral Resources Ali bin Ibrahim Al-Naimi pointed out that the sides had been prepared to cooperate in the oil and gas sphere. According to CNA the minister said after his meeting with the republic’s president: “We found common points and confirmed that there were vast possibilities to cooperate on a wide scale in the oil and gas sphere both at the international and bilateral level.” According to the minister during this meeting they discussed further development of bilateral relations. When answering the question about the measures OPEC was prepared to take to maintain acceptable oil prices the minister said: “OPEC is not an agency that sets oil prices… It can only stabilize them—it is the world oil market that sets the price.” At the same time, the minister added: “The issue will be discussed on 26 September at the OPEC meeting in Vienna which Kazakhstan will attend as an observer.” According to his information, Saudi Arabia extracts about 7.5m barrels of oil a day being potentially able to extract 10.5m.
The shelf of the Caspian basin and the Central Asian markets can be reached by land only therefore all existing projects3 of oil routes look at the southern variant as the most promising one. Saudi firms are displaying an interest in it, too. The Dabbagh Group, for example, is studying an alternative of moving the oil from Kazakhstan across Iran (the project’s estimated cost is $2 billion). With this aim in view it is prepared to pool financial and technical resources of several Asian and West European firms. It has already set up a work group and is exploring a possibility of signing a contract to build an oil terminal in the Caspian Sea.
In May 1997, an official Saudi delegation headed by the Deputy Transport Minister Abdullah Muqbil visited the republic and participated in the international exhibition Tranzit’97 and the conference “The Transport and Transit Potential of the Republic of Kazakhstan: Problems and Prospects.” The delegation used this opportunity to meet officials of the Ministry for Transport and Communications and of several other ministries and departments of the Republic of Kazakhstan.
It should be said that the sides have not yet fully tapped the potentials of economic cooperation. Experts in Kazakhstan are actively discussing further cooperation, mainly in the processing industry that should use latest technologies. This and many other facts open new vistas for cooperation in the oil sphere.4
1 See: “Podderzhka dlia Kazakhstana,” Ar-jerde, No. 8 (8), October 2001.
2 See: Azia i Rossia: ekonomicheskie sviazi v 2000 godu, Moscow, 2000, p. 378.
3 For more detail, see: A. Dandygulova, “Analiz riskov, voznikaiushchikh pri operatsiakh s uglevodorodnym syriem,” Saiasat, January 2002, p. 69.
4 See: A. Ikonnikov, “Moment nestabil’nosti,” Kontinent, 2 April, 2002, pp. 21-22.