The linchpin of Eurasia: Kazakhstan and the Eurasian economic union between Russia’s defensive regionalism and China’s new Silk Roads

Abstract

This paper analyses the extent to which Kazakhstan’s agency in its interaction with China’s ‘Belt and Road’ initiative is shaped not only by Russia and China’s outward projection, but also de-centring practices at the regional and sub-national level. The Kazakhstani government has embraced China’s Silk Road economic belt (SREB—the land-based ‘belt’ of the BRI) and has aligned its ‘Nurly Zhol’ domestic stimulus programme with the SREB. At the same time, Kazakhstan’s membership in the Eurasian Economic Union increases Russian leverage over Kazakhstani trade and tariff policies. The advent of the BRI thus exacerbates, but has not caused, a partially competing logic behind Russia’s defensive regionalism and Kazakhstan’s professed multi-vector foreign policy. Contrasting the latter with Russian and Chinese geopolitical constraints imposed on the sociopolitical fabric of Kazakhstan, the paper examines how Kazakhstan is a microcosm for the dynamics of a new Eurasian order in the making.

Introduction

In September 2013, China’s President Xi Jinping came to Nazarbayev University in Astana to announce the creation of new economic corridors across Eurasia.¹ Here, he introduced the idea of the land-based ‘Silk Road Economic Belt’. This is the ‘belt’ of what later became labelled the ‘belt and road’ initiative (BRI). This initiative integrates economic, financial, intellectual and cultural resources to promote transnational politico-economic links between China and its wider Eurasian neighbourhood. Kazakhstan was quick to endorse China’s Belt and Road initiative, as it is seen as a way to break up the country’s landlocked status and promote the idea of Eurasian economic integration, of which the Kazakhstani government has always been a staunch supporter (Sultanov 2015; Mostafa 2013). The announcement of the BRI, in addition, was convenient timing, as the Kazakhstani government had embarked on its own government spending programme (‘Nurly Zhol’ or ‘Bright Path’) to kick-start the economy after the 2008-9 financial crisis and the depreciation of the Tenge, the national currency. Even though Nurly Zhol predates the BRI, observers and officials have quickly made out synergies between both frameworks. In December 2014, China and Kazakhstan signed a formal agreement on the ‘Joint Construction of the Silk Road Economic Belt’ (Blanchard and Flint 2017, p. 230), and in September 2015, on a state visit to Beijing, President Nazarbayev formally aligned Nurly Zhol with the SREB by signing a declaration on the coordination between the two (Lain 2018, p. 6). Kazakhstani–Chinese working groups have subsequently been set up to concretize the alignment of both initiatives (Kaukenov 2017, p. 145).

Different explanations have been offered as to why China ‘steps out’ into its wider Eurasian neighbourhood with its Silk Road Economic Belt. A strand of literature has emerged that couches China’s motivation behind the BRI as a geostrategic grand design to remake the Eurasian, and subsequently, global order, in China’s image (Callahan 2016; Fallon 2015; Miller 2017; Rolland 2017). Yet, as China’s new economic and diplomatic outreach is seen as a ‘restoration of fairness’ and a return to a perceived legitimate Great Power status, the question has been raised whether other nations in China’s Eurasian neighbourhood are set to lose sovereignty in a new China-centred model of transnational production. Against this backdrop, analysts have speculated that Kazakhstan could constitute a fighting ground for a new ‘Great Game’ in Central Asia, this time between Russia, with its historically determined perception of the ‘post-Soviet space’ in Central Asia and its own role within it on the one hand, and a China projecting its influence more visibly on the other (Kirisci and Le Corre 2015). The geostrategic location of the largest landlocked country in the world therefore is a pertinent case study to shed light on the interplay between Russia and China’s Eurasian mega-projects—the EAEU as the more institutionalized form of interstate cooperation, the BRI as a looser vision of cross-border connectivity. However, the Sino-Russian relationship is complex and eschews the simplifying attempt to view their interaction in Central Asia as part of a new ‘Great Game’ over exclusive domination of the region, as seducing as such a metaphor might be. The May 2015 agreement on a possible cooperation between the Russian-dominated Eurasian Economic Union (EAEU) and the SREB officially put an end to Chinese concerns that Russia could work against the BRI or aim to sabotage it. Recent scholarly contributions have advanced a ‘state transformation’ approach that helps to relax some of the unitary-actor assumptions prevalent within classic IR approaches (Hameiri et al. 2019). As much as power is relational, state agency has become fragmented and decentralized. Power shifts in Central Asia should likewise be analysed without preconceptions about Chinese and Russian state-led imposition of order conceptions.

A second branch of literature is steeped in a political economy approach. In many scholarly analyses of the impact of the BRI on Central Asia from this strand, China’s financing practices and the reproach of ‘debt trap diplomacy’ has received some attention. Firstly, findings from this body of scholarship emphasize that the Chinese state finances projects in cash-strapped economies which the recipient governments are unlikely to be able to repay, thus creating a debt spiral in which political dependency on China grows as a consequence (Jaborov 2018; Tian 2018). This dependency is expected to translate into sympathy with the ‘One China’ policy, an alignment on Chinese positions on the Uyghurs, Taiwan relations, or the status of Tibet (Tian 2018, pp. 24–25). The resulting economic and political consequences in ‘BRI’ partner countries debunk the persistent myth of Chinese aid as development assistance ‘with no strings attached’ (cf. also Reeves 2016).²

Secondly, China has a track record of financing ‘white elephants’, which in turn become opportunities for graft. Chinese banks have reportedly not paid much attention to questions of debt sustainability, and China Development Bank as well as Exim Bank (whose funding is crucial for BRI projects) has not cooperated with the OECD (Holslag 2019, p. 38). Against this background, one may be forgiven for wondering how Chinese economic planners will avoid perpetuating flawed economic practices abroad in the wake of the BRI. The future of the BRI then hinges on the extent to which contract partners can be convinced of the economic viability and debt sustainability of Chinese-sponsored projects (Peyrouse and Raballand 2015).

A branch of this literature emphasizes the role of private companies and elite preference formation—rather than state-driven policy designs (Heathershaw et al. 2019). This strand advances our conceptual understanding of ‘de-centring practices at the periphery’ and provides a useful corrective to some of the unitary-actor assumptions underlying many analyses of workings and effects of the BRI on Eurasia. Drawing on this emerging scholarship, the present article examines the extent to which Kazakhstan’s agency in its interaction with China’s ‘Belt and Road’ initiative is shaped by a mix of external factors (Russian policies on regional integration, Chinese financing practices) and de-centring practices at the regional and sub-national level. Whether regional orders end up being competitive or cooperative depends on the interests and responses not only of external powers, but also on the agency of the ‘in-betweens’. One strand of the literature on that interaction has formulated a communitarian perspective (Brown 1992; Bell 2016; Cooley 2012) according to which local actors are in the driver’s seat, another focuses on the agency of external stakeholders only (Goorha 2010; Paris 2010). This is juxtaposed by a hybrid approach that conceives of regional order as the outcome of internal and external stakeholders entering into a process of contestation (MacGinty 2010; Donais 2012). According to this view, local ownership forms a crucial part of the process leading to new orders.³ The latter ties into insights from the scholarship by Heathershaw et al. (2019) on ‘de-centred practice’ whereby power is ‘produced relationally in specific situations through the practices of ongoing interactions between locally situated actors’ (ibid., p. 1441). The present article likewise departs from the understanding that regional integration is not a process imposed by centrally organized external actors alone. Drawing on elite interviews with Kazakhstani, Chinese and Russian policy-makers and experts as well as qualitative document analysis of open source material and the scholarly literature, this article thus makes a contribution to the quickly growing literature on the interaction between the SREB and political agency in Central Asia by critically analysing the implications of China’s Silk Road Economic Belt on Kazakhstan’s sociopolitical fabric, and ultimately, Kazakhstan’s role in the emerging new Eurasian order.

The article is structured as follows. A first part looks at China’s growing presence in Kazakhstan in the wake of the BRI and aims to disentangle how Chinese financing practices impact investment conditions but also Chinese–Kazakhstani economic cooperation at large. A second part sheds light on local reactions to China’s presence in Kazakhstan and traces challenges of popular perception that come with China’s growing influence. A third part complements the analysis by analysing how Russia’s leverage within the EAEU constraints Kazakhstan’s agency in its interaction with the SREB. A final section rounds off the analysis by presenting additional variables explaining why Kazakhstani agency in the context of the SREB not only depends on Sino-Russian cooperation outside the economic realm, but also on Kazakhstani policy coordination with its regional neighbours.

The new Silk Road enters Kazakhstan

As the SREB brings investment opportunities, tensions can be observed between a state-led political economy and local elite preferences. This section therefore proceeds as follows. First, the interplay between state-led investments and local elite preference formation is portrayed. We then turn to domestic factors affecting the latter, as they function as an intervening variable in the shaping of Kazakhstan’s agency in this process.

From Kazakhstan, the SREB is supposed to spread out in three directions. A northern branch extends from Nur-Sultan via Petropavlovsk to Yekaterinburg, Russia and further to Europe. A central branch crosses the Kazakh port of Atyrau, the Caspian Sea, Azerbaijan, Georgia and Turkey, thus bypassing Russia, and a southern branch reaches Iran and Oman via Turkmenistan. Kazakhstan did not need to lobby for the use of any particular branch. Geography and logistics play in Kazakhstan’s favour because of the country’s central location in the heart of Eurasia. According to a joint plan issued in the summer of 2016, the three top priorities of Chinese–Kazakhstani economic cooperation which become fused with the overall strategic priorities of the BRI are investments in transport infrastructure, trade and the manufacturing industries. Infrastructure development in particular has become the most visible part of the Silk Road Economic Belt under the moniker of the ‘Iron Silk Road’.

However, not all of the big infrastructure projects associated with the creation of economic corridors are financed by China: The completion of the Kazakhstani section (from Almaty to Aktobe and from there to the Russian border) of a highway from Western China for onward travel to Europe in 2016 was primarily funded by the World Bank, a consortium led by the Asian Development Bank (ADB), and a contribution from the Kazakhstani authorities (Griffiths 2019, pp. 126–127).⁴ Kazakhstani companies, which do not directly receive money from China, but indirectly via their own government’s financial infrastructure such as the national fund Samruk-Kazyna, also have plans for a high-speed train connection between Astana and Almaty.⁵

There is a lack of clarity, in addition, over the financial ‘matching’ criteria.⁶ Once a project does involve Chinese financing, this financial involvement usually involves a loan given by one of the Chinese policy banks (Chinese Development Bank and Exim Bank in most cases), which requires that the recipient (and guarantor) of the loan reinvests the money in a project that involves a Chinese contract partner (Holslag 2019, p. 82). The Kazakhstani Samruk-Kazyna national fund then functions as the investor (Jochec and Kyzy 2018, p. 72). Large projects often stipulate a minimum of Chinese content (50%) as part of interest-bearing concessional loans (Griffiths 2017, p. 55). Especially when implementing projects in cash-strapped economies, Chinese loans are partly financial aid to the recipient with the expectation of ‘concessions’ in the form of project oversight, yet the involvement of Samruk-Kazyna points to a ‘de-centring practice’ in the financing of projects said to be linked to the BRI. This Chinese funding for the development of Kazakhstan’s infrastructure primarily goes into the railway and road connections. Key projects include the construction of a new railway line from Dostyk on the Kazakh–Chinese border to Aktau on the Caspian Sea, the expansion of the port of Aktau, the construction of a new port at Kuryk and of a logistics centre in Aktobe and in Shymkent. ‘Connectivity’ is seen as the means to transition from ‘land-lockedness’ to ‘land-linkedness’, as a Kazakhstani official puts it, and adds: ‘The Belt and Road initiative is good for Kazakhstan because it helps break our landlocked status. It shapes new geopolitical realities’.⁷

A crucial project here is the Khorgos dry port at the Chinese–Kazakhstani border. Khorgos already is the key border crossing for the Central Asia–China natural gas pipeline running from Turkmenistan to China. From Aktau, crude oil is shipped to the Russian port of Makhatshkala, the Azeri port of Baku and the Iranian port of Neka—a crucial connecting point for the ‘Silk Road Economic Belt’ stretching all the way to the Persian Gulf. Similar to the launch of Nurly Zhol which predated the BRI, the modernization of the border crossing at Khorgos had already been announced by presidential decree in November 2010. The announcement of the BRI by China three years later meant an additional boost for the Khorgos dry port, as it was now elevated to the key gateway for the ‘Silk Road Economic Belt’ with a potentially huge transit potential. More ‘de-centring practice’ is at work here: Chinese companies made moves to acquire ownership in the dry port which could translate into co-decision-making leverage. At the 2017 Belt and Road summit in Beijing, the state-owned Chinese shipping company COSCO announced its plans to acquire a 49% stake in the Khorgos dry port.⁸

The Kazakhstani company KTZ Express, in return, holds a 49% stake in a container handling terminal at the Chinese port of Lianyungang, which allows for a fast running of operations since the same company can load containers in China that unloads them again at Khorgos. Khorgos thus links China’s eastern port of Lianyungang with Kazakhstan’s railway system, and the creation of the Khorgos-Eastern Gates Special Economic Zone in the Panfilov district of Almaty region is now being labelled as a landmark project of the Silk Road Economic Belt, but its establishment already dates back to November 2011.⁹ The Gateway authorities began to build a Special Economic Zone next to the dry port—an idea inspired by the Dubai concept of merging a port with an economic zone. The Khorgos Gateway is ‘Where East meets West’, according to its website, but sceptics have speculated that the zone would serve primarily as a trading hub for Kazakhstani middlemen to re-export cheap Chinese products to domestic markets as well as nearby Uzbekistan—not far-away Europe (Lain 2018, p. 9; Kaukenov 2017, p. 140). This is not the ‘new Dubai’ that the Forbes magazine saw in the Khorgos complex (Shepard 2016).

Other projects under the ‘BRI banner’ include Chinese funding for transmission grids, power plants, manufacturing industries and the energy investments, most of which already predate the BRI.¹⁰ Kazakhstani experts refer to 48–51 investment projects worth 30 billion USD that are subsumed under the now-ubiquitous BRI banner (Kaukenov 2017, p. 143; Kassenova 2017, p. 112). Timur Suleimanov, Kazakhstan’s national minister for the economy, also restated the number of 51 projects ‘in all kinds of sectors’, adding that some of these are ‘Nurly Zhol, some are Chinese–Kazakhstani bilateral projects, others are BRI projects’.¹¹ During Xi’s visit to Astana in 2013, China deepened an already existing comprehensive partnership with Kazakhstan. Reliable information on which projects officially become ‘BRI projects’, and by which criteria, is hard to come by. Not all project and investment decisions are made public and are often the outcome of closed inter-governmental negotiations. For that purpose, a Kazakhstani–Chinese Coordination Committee on industrial and investment cooperation (CCIIC) was established in August 2015 as a bilateral coordination format, and a Kazakh–Chinese Business Council (KCBC) was set up under the Kazakh ministry for reform and development and is co-chaired by China’s National Development and Reform Commission (NDRC).

This flurry of investment activity overseen by new bilateral government bodies is hoped to stimulate economic growth domestically. Yet, Kazakhstan’s economic growth is in large parts due to the exploration and sale of fossil fuel. About 60 per cent of the state budget comes from revenues from oil sales. Conscious of its close historical and infrastructural links with Russia, the Kazakhstani government sought to balance the need for investments in its transport, retail and energy sector with its publicly declared ‘multi-vector’ foreign policy already in the 1990s. This presented itself as an inroad for Chinese contract partners. Already well before the advent of the BRI, China had been given hydrocarbon exploration and mining rights in Kazakhstan. Already in 1997, the China National Petroleum Corporation (CNPC) became a 60 per cent stakeholder in Kazakhstan’s AktobeMunayGas. In 2005, CNPC’s purchase of PetroKazakhstan marked China’s larger entry into the Kazakh energy market because through it, CNPC also gained a concession to explore oil on Kazakhstan’s Kumkol field (Rousseau 2013, p. 44). Further exploration rights for Chinese companies in the ensuing years followed. Since 2009, in addition, a China-Central Asia gas pipeline transports gas from Turkmenistan to Western China via Uzbekistan and Kazakhstan. The latter is therefore an important transit country for Chinese economic interests, and political and corporate elites become ‘gatekeepers to China’s BRI’ (Heathershaw et al. 2019, p. 1450).

This does not necessarily produce net positive results for Kazakhstan’s overall welfare. The country’s economy is hardly diversified, and it is doubtful that additional Chinese funds in infrastructure and energy will create value-added chains in other sectors. Even increased cross-border trade in manufactured goods is a boon, first and foremost, to China’s manufacturing industry rather than Kazakhstani domestic industries. While Kazakhstan’s exports to China are mainly raw materials, Kazakhstani imports from China are mainly manufactured goods (Kaukenov 2017, p. 139). The expected spillover effects from infrastructure investments mostly relate to higher returns from electricity, water supply and housing. In addition, there is a possibility, as with any infrastructure finance, that maintenance costs may eat up the resulting transit fees.¹²

Besides transport and infrastructure, the Kazakhstani central government therefore hopes to turn Nur-Sultan into a new ‘financial gateway of the new Silk Road’. To this end, the Astana International Finance Center has been inaugurated in July 2018, which is planned to serve as a clearance and settlement centre for Chinese renminbi, a prospect which is fully in line with the Chinese government’s declared intention to further internationalize its currency. The AIFC has signed a ‘memorandum of strategic understanding’ with the Silk Road Fund and entered into a partnership with Nasdaq and the Shanghai Stock Exchange. Kairat Kelimbetov, Governor of the AIFC, formulates his hopes during his remarks at the AIFC opening that this development would help turn Kazakhstan into a regional trading hub and would create ‘new global trading links between Astana, Moscow, Kazan, St. Petersburg, and Tashkent’.¹³

Domestic variables: economic dependencies and popular perceptions

This level of official national-level enthusiasm is juxtaposed by more sober perceptions at the sub-national level. The ‘embedded conditionality’ (Tian 2018, p. 26) in which China mixes aid, concessional loans, trade agreements and unilateral investment decisions with a less tangible, but implicit level of diplomatic conditionality can result in a level of unease which provides the background for local perceptions of what China is assumed to be doing on the ground. Local protests in Kazakhstan in 2016 over a land reform bill (and similar reactions to a perceived Chinese attempt to lease Kazakh agricultural land already in 2010 which led to the symbolic decapitation of a toy panda by a Kazakh activist) drove home the message that segments of civil society are unhappy about Chinese investments (Lillis 2018, pp. 172–174). The legislation would have extended the maximum lease on farming land for foreigners from 10 to 25 years. Any foreigners would have been eligible under the terms of the law, but the public outburst was directed at China. Popular protests quickly formed against the legislation, which was seen as paving the way for a Chinese land grab. In a rare retreat, the Kazakhstani government had to suspend the proposed legislation, the agriculture minister resigned, and Prime Minister Karim Masimov even issued a public apology for the government’s handling of the land reform bill (Dave 2018, p. 103).

This speaks to the findings in the literature that emphasize corporate processes in the development of the BRI on the ground over which the Chinese government has no full control (Jones and Zheng 2019). Other concerns raised relate to the economic implications of the greater presence of Chinese companies. The Chinese practice of giving out ‘concessional loans’ where funds are transferred on the condition that they be reinvesting in Chinese contractors has also been questioned by Kazakhstani experts such as Konstantin Syroezhkin on the grounds that they do not help address local unemployment (in: Lain 2018, p. 7). Upholding a ‘local content’ quota is a way for host governments to partially keep control of such developments. The Kazakhstani government has adopted strict labour laws imposing quotas for Chinese companies seeking to hire labour migrants, and stipulating that domestic companies need to hire a minimum percentage of Kazakhstani workers (Garibov 2018, p. 145).

Local content requirements in other sectors (e.g. construction, retail, railways) are a way for host countries to prevent foreign companies from mining local sources without having the national economy profit (Buranelli 2018, pp. 221–222). It is a policy, in other words, to de-link financing from contracting and to pre-empt economic dominance by technologically more capable and financially more endowed foreigners. Strict visa regimes are another instrument for Kazakhstan to regulate Chinese labour migration. Observers, however, have doubted whether blanket legislation setting local content quotas is always helpful in terms of staffing contracts. On a senior management level, there are limitations to how many local workers can be employed that have the required skillset.¹⁴ A practicable solution for Chinese companies operating in Central Asia is therefore to hire locals on a lower level (thus ticking boxes of local content quotas) and to import Chinese nationals for senior management tasks.¹⁵

Yet, the actual presence of Chinese labour in joint Chinese–Kazakh projects is much less than popularly assumed (Garibov 2018, p. 150). However, nuanced labour laws and actual hiring numbers do not always affect anti-Chinese popular perceptions, leading some analysts to argue that Sinophobia may be the single most important challenge for the realization of the Silk Road Economic Belt (Syroezhkin 2009; Burkhanov and Chen 2016; Peyrouse 2016). In this context, the Han-Sinification of Urumqi on the other side of the border is being watched with concern. The image of a Chinese police state and the presence of Chinese ‘re-education camps’ in Xinjiang does not play in China’s favour and only adds to what some Kazakhstani analysts describe as a ‘deep-rooted anti-China sentiment’.¹⁶ The anti-Chinese rhetoric at a popular level also partially projects home-grown corruption onto the broader canvas of Kazakhstan’s economic exposure to its big neighbour (Koch 2013, p. 127). In the Corruption Perception Index of Transparency International, Kazakhstan occupies the 131st place of 176. The association of corruption scandals with China’s increased visibility in the region in the wake of the BRI can further heighten anti-Chinese sentiments.

As Kemel Toktomushev notes, this is a phenomenon that can be observed in authoritarian societies where corrupt rent-seeking schemes become part of the policy cycle (Toktomushev 2018). Water disputes have added to these dynamics after Kazakhstan expressed concern about China’s diversion of water from the Illi and Irtysh Rivers (Duarte 2018, p. 18). The historical analogy of the Aral Sea, which is slowly drying up due to ecologically catastrophic Soviet planning in the 1960s, casts long shadows: China’s diversion of the Illi river water is said to contribute to the drying up of Lake Balkash in Kazakhstan, Central Asia’s second largest water reserve (Duarte 2018, p. 18), which adds to a simmering anti-Chinese sentiments in some segments of society in the countries concerned. Such regional and local sentiments often stand in stark contrast to the official level of governmental enthusiasm for Sino-Kazakh business cooperation as outlined above. An open letter by ethnic Kazakhs in Xinjiang, asking President Nazarbayev to address their fate, has been ignored by the Kazakhstani government (Pron and Szwajnoch 2019).

Cultural misunderstandings can also arise from different corporate and social norms in China that may be perceived as corrupt abroad. The notion of guanxi is a good example, which is considered a fundamental networking approach in China to make any business work, but which also easily translates into nepotism and endemic corruption (Toktomushev 2018, pp. 82–83). The Kazakhstani local ‘ownership’ of investments (understood in the above context of accounting for local employment opportunities and co-decision structures) as well as the consideration of Kazakhstani national interests thus becomes an important element that will impact how the idea of partner countries engaging with the SREB evolves in the future. China’s public diplomacy hurries to stress the co-managed nature of the BRI and seeks to rebut the sceptical perception that the initiative is a unilateral Chinese strategy (Kaczmarski 2017, p. 1364). China continues to repeat that the BRI is an inclusive ‘initiative’, not a ‘strategy’ or a ‘plan’ over which China claims ownership. Behind the narrative of ‘win–win’ connectivity, however, case studies have to shed more light on the dynamics of how political realities on the ground may run counter to China’s professed policy of non-interference in domestic affairs of neighbouring states. Control over land, economic dominance and the treatment of ethnic Kazakhs in Western China have become domestic-level factors that contribute to the shaping of Kazakhstani agency as it engages with the SREB.

The next section analyses how Kazakhstan’s membership in the Eurasian Economic Union creates a complex trading and investment environment with additional veto powers in this process for the EAEU’s most dominant member, Russia.

Kazakhstan’s engagement with the SREB in light of Russian leverage within the EAEU: a multiple-level playing field

A key transit hub for China, Kazakhstan is also a member of the Eurasian Economic Union (EAEU). The EAEU, as a regional integration project with supranational institutions, theoretically reduces customs duties and eliminates non-tariff barriers between member states. This opens Kazakhstan up to a bigger regional market while protecting domestic industries from the competitive prices of imported Chinese products. At the same time, Kazakhstan’s geographic location at the crossroads of other Central Asian markets, as a transit country for at least two of China’s economic corridors in the BRI framework (China-Central and West Asia, and the new Eurasian land bridge), and as a recipient of Chinese outward direct investments and increased cross-border commerce are all ostensible benefits for the Kazakhstani economy. In terms of tariff policies, the EAEU is an instrument to contain China’s economic influence in the region, as it ties recipient countries of Chinese imports and investments like Kazakhstan to the operating rules of a customs union. EAEU external tariffs will no longer be imposed unilaterally by Kazakhstan after the government committed to raise its external tariffs in order to converge towards the higher Russian tariff when it became a member of the Eurasian Customs Union (ECU).¹⁷ Trade, however, remains a member state competence, and there are EAEU tariff harmonization exemptions until 2024 that were agreed upon when Kazakhstan joined the WTO in November 2015 (Dragneva and Wolczuk 2017, pp. 21–22).

A 2015 Valdai report argued that cooperation between China’s SREB and the EAEU could mark the birth of the ‘Central Eurasian Moment’ (Valdai Discussion Club, 2015). Officially, both Russia and China have embraced a discourse of inter-regional economic cooperation. In May 2015, Russia and China signed two economic framework declarations (Kremlin 2015), and the prospect of greater convergence between the SREB and the EAEU was also on the agenda of the Shanghai Cooperation Organization (SCO) summit in July of the same year, but concrete projects have not yet gotten off the ground. Unofficially, Russia—the predominant actor within the EAEU—is not interested in the prospect of an FTA between the EAEU and China. A compromise was found for the declaration of May 2015, where paragraph II.4 speaks of an FTA between the EAEU and China as a ‘distant goal’ (Gabuev 2016, p. 71).

The Kazakhstani government does not support the idea of a Free Trade Area between China and the EAEU either. The trade agreement signed in Astana in May 2018 between China and the EAEU is non-preferential, meaning that tariffs remain in place. The government’s language on free trade between China and the EAEU therefore sounds rather non-committal. At the Belt and Road Forum in May 2017 in Beijing, President Nazarbayev vaguely applauded the idea of a common economic space as follows: ‘The Silk Road Economic Belt can advantageously link the platforms of the SCO, the EAEU and the European Union in a single regional territory of prosperity’ (Interfax 2017). Embracing the idea of enhanced cross-border trade in general, such language brushes over the partially incompatible complex regulatory frameworks of the different projects involved. Via its dominant position within the EAEU, Russia has gained veto powers over Kazakhstan’s agency formation in its engagement with the SREB. Macroeconomic issues affecting the relation between the SREB and EAEU have to be discussed between the Chinese government, the Eurasian Economic Commission and all EAEU members, but it is noteworthy that discussions about cross-border cooperation were limited to Russian–Chinese interaction initially. Where China would favour bilateral negotiations and investments with recipient countries like Kazakhstan, Russia is keen to force the Chinese government into a multilateral (EAEU) setting where Russia can influence policies, i.e. to pull the rug from under bilateral Chinese–Kazakhstani formats by enlarging the framework for discussions. A Joint Commission has been set up that negotiates with the Chinese government (on behalf of the Union). A BRI-EAEU working group exists that brings together Russian and Chinese officials before policy discussions are taken to an enlarged format that comprises all five EAEU members.

A ‘5 + 1’ format then adds the Chinese counterparts, ‘but always on the basis of the initial Russian–Chinese discussions’, as Russia’s ambassador for the Asia–Pacific stresses.¹⁸ Tatiana Valevaya, member of the EAEU board for integration and microeconomics, adds that there are parallel bilateral working groups, but the EAEU–China working group is a necessary instrument for overall coordination if planned infrastructure and tariffs concern the whole Union (without elaborating on the fact that Russia represents the whole EAEU in this case).¹⁹ The focus on multilateralism here becomes a policy to retain an institutional leverage over Chinese investments which would otherwise be considered Chinese outward direct investments as part of China’s external trade policy.

Russia’s approach to institution building at the regional level has been aptly categorized as an example of ‘defensive regionalism’, that is, as a way to preserve Russian political influence in its post-Soviet space (Kaczmarski 2017, p. 1372). Roy Allison similarly writes that regionalization in Central Asia often comes in the form of ‘protective integration’ that effectively retains Russian supremacy in its post-Soviet space as a bulwark against challenges to the political status quo (Allison 2008, p. 186). A publication by the Russian International Affairs Council even speculates that Russia’s Siberian and Far Eastern regions will be left out as Kazakhstan reaps all the benefits of Chinese infrastructure investments (Devyatkov 2018, p. 88). Another concern would be the creation of a Chinese ‘Trojan horse’ within the EAEU: The Chinese economic presence in Kazakhstan can give China an inroad into the EAEU because Kazakhstan could lobby on China’s behalf (with a view to adopting regulations on competition or technical standards, for example).²⁰

But disagreements have also surfaced between Kazakhstan and Russia about Russia’s behaviour within the EAEU: President Nazarbayev has criticized the ‘politicization’ of the Eurasian Economic Union, has refused to devolve trade policy competences to the EAEU’s Commission and has resisted Russian attempts to give the EAEU a bigger say in security and defence matters (Radio Azzatyq 2013; Lo 2015, p. 114). During a meeting of the Russian, Belarusian and Kazakhstani heads of state in Minsk in 2013, Nazarbayev did not mince his words. He took the opportunity to criticize openly the fact that Russian members of the collegium of the Eurasian Economic Commission were receiving direct instruction from the Russian government, even though board members are supposed to be unaccountable to any government (Radio Azattyq 2013).

EAEU membership has had ambivalent results for Kazakhstan. Middle-income traders experienced losses in income, wages and returns on capital, as Kazakhstan had to raise its external tariffs in order to approximate to the Russian ones (Carneiro 2013). In addition, business people have complained that Russian local authorities have found ways to block Kazakhstani goods by way of non-tariff barriers from entering the Russian market (Kassenova 2012, p. 20; Alekseenkova 2018, p. 18). Market access has not been reciprocal in practice. In 2014 and 2015, the economic spillover from geopolitical complications has entailed further negative consequences of Kazakhstan’s EAEU membership: Adding to a depreciating Russian rouble, the Russian government imposed sanctions on the transit of Ukrainian goods via Russia. As a result, the Kazakhstani–Ukrainian trade volume decreased by more than 50 per cent (Dodonov 2017, p. 121), leading to complaints by Kazakhstani businesses who called upon the Kazakhstani government to protect the Kazakhstani domestic markets more effectively (Dodonov 2017, p. 120). Kazakhstani officials emphasize cross-border impediments on the Russian side of the Kazakhstani–Russian border as an explanation for the unfulfilled promise of intra-Union free flow of goods, people, services and capital.²¹

Beyond EAEU membership: regional alliance networks and neighbourhood diplomacy as variables affecting Kazakhstan’s SREB engagement

The leverage Russia holds within the EAEU is not seen with enthusiasm among Kazakhstani elites and has had negative consequences for domestic businesses, as the previous section has concluded. This perception of Russia’s overly dominant position also extends beyond the institutionalized economic realm. Following Nazarbayev’s remark that his country could also leave the EAEU if Kazakhstani independence was deemed at threat, Putin reacted in August 2014 by emphasizing the territorial artificiality of Kazakhstan, which was interpreted as a not-so-subtle hint that Kazakhstan’s territorial integrity might be seen as contingent (and could thus be reshaped, like in Ukraine). After the annexation of Crimea, Russian nationalist opposition politician Vladimir Zhirinovsky has even called on the Kremlin to also annex parts of Northern Kazakhstan, reminiscent of earlier calls by Aleksandr Solzhenitsyn two decades before (Haqqin 2014). A perceived imperial legacy of that Soviet past, illustrated by a perpetuation of centre–periphery relations to the disadvantage of Kazakhstan, has not been without criticism in post-independent Kazakhstan (Kudaibergenova 2016).

As Laruelle et al. (2019) have shown, however, Russia’s ‘influence’ over Kazakhstan is often overstated to be a coherent, state-led factor, while it actually is shaped by a range of ‘active and passive vectors’, i.e. some of which the Russian government does not actively generate, as well as endogenous factors that are generated from within Kazakhstan itself, but which help to perpetuate societal and strategic conditions favourable to Russia. While there is still a level of popular Russophilia in Kazakhstan, however, Russia’s sway among the younger Kazakhstanis is losing hold. There are now five Confucius Institutes operating in Kazakhstan, and younger generations might not view Russian as a lingua franca anymore, as Kazakhstani society consists of more ethnic Kazakhs than Russians, and as Kazakh immigrants from China and Mongolia are enticed to move to Kazakhstan (Lillis 2018, pp. 189–190).

The security domain, however, is the one where Russia’s claim to regional predominance has thus far remained uncontested. ‘We consider these countries as our last fortress’, a Russian official formulates in an interview with the author in reference to former Soviet Union countries in Central Asia.²² Kazakhstan is no exception. Kazakhstan has responded positively to the introduction of the Russian-led rapid reaction force (RRF) under CSTO auspices and contributes an air assault brigade as well as a marine forces battalion (Lo 2015, p. 265). At a bilateral level, Russia supplied its S-300 surface-to-air missile defence system to Kazakhstan, whereby Kazakhstan and Russia began to set up a joint air defence network.²³ Russia remains present in Kazakhstan’s security sector through the supply of military equipment, military-to-military cooperation, CSTO exchanges as well as the presence of Russian troops.²⁴ While China’s diplomacy continues to stress its disinterest in security affairs, it remains an open question whether a more active security presence will need to accompany China’s economic influence. In March 2016, Fang Fenghu, the chief of the PLA’s General Staff paid a visit to Tajikistan and Afghanistan to discuss military-to-military ties. This came after China had adopted an anti-terrorism law in December 2015 that allows the PLA to operate abroad (Duarte 2018, p. 15). Kazakhstani officials, for their part, are well aware of the potentially allergic reaction in Russia that a stronger Chinese military presence would trigger and would therefore be very reluctant to invite Chinese soldiers into the country for the protection of Chinese-financed infrastructure projects of Chinese nationals.²⁵

Finally, shifts in regional dependencies and alliance networks are also the result of both intra- and inter-regional power dynamics. Kazakhstan’s foreign policy choices are not only developed in reaction to Chinese and Russian actors, but also to its Central Asian neighbours. Questions of border security, transportation, energy and water access all have to be resolved on a bilateral basis between Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan.²⁶ The extent to which the SREB can mould new realities of Eurasian ‘connectivity’ will therefore also depend on the reform of these countries’ border management and customs systems (Diener 2015). Thus far, administrative barriers and informal practices still continue to impede cross-country trade in Central Asia. Lorry drivers regularly pay bribes when crossing borders between Uzbekistan and Kazakhstan, trains sit at the border crossing for hours due to customs formalities (Schiek 2017).

Reports of widespread incidents of smuggling, large-scale bribery and overlapping competences of government agencies (a source for graft and corruption on its own) do not help to spread the image of greater cross-border connectivity (Peterson 2017, p. 140; Cooley and Heathershaw 2017). Alexander Cooley puts it succinctly: ‘Central Asia remains the most trade-unfriendly region in the world, and the potential for externally funded infrastructure to transform these entrenched practices is highly questionable’ (2015, p. 4). He questions the Chinese narrative that economic connectivity and cross-border infrastructure has a positive correlation with higher economic growth, and argues that this false assumption will only lead to the perpetuation of corruption out of a misguided policy of pouring even more funds into the coffers of kleptocratic local elites (ibid., p. 5).

Such practices have been acknowledged as a priority area requiring reforms by the new administration in Uzbekistan under President Mirziyoyev. The improvement of neighbourhood relations was identified as a key foreign policy priority in September 2016.²⁷ The President himself, as well as key ministers of his cabinet, embarked on a tour to visit all of Uzbekistan’s Central Asian neighbours. This charm initiative was meant to reopen channels of communication and put neighbourhood grievances behind. This is a marked departure from the past practice when regional leaders only met in the presence of foreign powers (Starr and Cornell 2018, p. 10). However, changes occur gradually, and time will tell whether a new state-led neighbourhood diplomacy can change informal economies on the ground.

Whether or not the BRI—as an external impetus separate from such domestic bottom-up reform processes—can incentivize governments and authorities at a sub-national level to work on border crossing facilitation remains to be seen. In the best-case scenario, the prospect of economic growth can trigger the diffusion of best practices among Central Asian states to compete for the passage of SREB-related transit goods (Schieck 2017, p. 23). The future development of the BRI does not only depend on the provision of ‘hard’ infrastructure, but also on the ability to integrate cross-border networks with a view to potentially cumbersome (soft) regulatory contexts. As the analysis above has shown, however, Kazakhstan is an actor that is more than a recipient of Chinese investments or of directives coming from Moscow. Both domestic critiques of the benefits and disadvantages of EAEU membership as well as popular protests against aspects of the government’s China policies illustrate that the outcome of the interaction between externally proposed initiatives and organizations also depends to no small part on the further use and development of Kazakhstan’s professed ‘multi-vector’ foreign policy. It will also depend on the extent to which domestic voices can inform and contribute to the shaping of future foreign policies. The latter will depend on the future trajectory of Kazakhstan’s political fabric under President Tokayev. The study of the effects of authoritarian domestic determinants on foreign policy under the state transformation paradigm can be the subject of fruitful future research blending regime typology and studies of regional integration.

Conclusion

This paper has argued that Kazakhstan’s policy options are not only determined by such external factors as Russia and China’s outward projections, but a range of domestic as well as regional processes as well. Kazakhstan sees itself as the linchpin of Eurasia, as the central hub of inter-regional trade flows. Always a staunch supporter of cross-border initiatives that would help alleviate the disadvantages of a landlocked country, Kazakhstan joined the Eurasian Economic Union after having been a staunch supporter of regional Eurasian integration since the 1990s, and has been credited by the Kremlin as an intellectual progenitor of the ‘Greater Eurasia’ idea that later made a comeback (if with a different meaning and purpose) in Russia’s official discourse.²⁸ Kazakhstan also was quick to endorse the BRI and its land-based variant Silk Road Economic Belt that was pitched as a geo-economic game changer in late 2013.

Seen from a Kazakhstani perspective, the country’s inclusion in the Eurasian Economic Union as well as its importance for China’s new connectivity projects in the framework of the BRI can have direct economic benefits. Its membership in the EAEU theoretically reduces customs duties and non-tariff barriers among member states and therefore opens Kazakhstan up to a bigger regional market, while protecting domestic industries from competitive prices of imported manufactured Chinese products. China’s BRI translates into new investments for the country’s infrastructure as well as energy networks. Kazakhstan makes money off the transit of goods from China into the EAEU and hopes for increased cross-border commerce, while new overland corridors in the energy domain in particular are a welcome avenue for increased energy exports to China.

This development has the potential to affect Kazakhstan’s professed ‘multi-vector’ foreign policy, as Kazakhstan’s location as a geostrategic ‘hub’ at the crossroads of the SREB and the EAEU ostensibly comes with frictions between the main sponsors of these two projects, Russia and China. On a geopolitical plane, the EAEU has become a mechanism for Russia to co-decide over Kazakhstani trade relations with China. For Kazakhstan, the economic benefits of the EAEU have been debated controversially as the political costs of accepting a Russian quasi-veto over tariff and trading policies were high.

Kazakhstan has critiqued the politicization of the EAEU on the part of Russia already before the official decision to align the governmental spending programme ‘Nurly Zhol’ with the SREB and felt ignored when Russia acted on behalf of the Union to sign declarations of continental importance with China and set up working groups without including other EAEU members. Russian officials, in turn, were equally irritated when the Kazakhstani government announced its own ‘sopriazhenie’ (‘docking’ or alignment) between the ‘Nurly Zhol’ programme and the SREB, which they saw as a move to undermine the EAEU. Kazakhstan deals with China through bilateral channels while also negotiating through the EAEU in a wider multilateral setting. The interaction between these different formats can result in a complex mix of competences and often diverging priorities, depending on the sub-institution and the policy domain at hand. At the same time, Russia’s dominance within the EAEU can help Kazakhstan to resist Chinese pressure (an observation being followed with interest in neighbouring Uzbekistan, where the implications of a possible EAEU membership are currently being studied), while Kazakhstan’s importance for the future trajectory of China’s BRI can help Kazakhstan develop more assertive positions vis-à-vis Moscow. Kazakhstan has emerged as a key partner for China’s BRI and is more than a conduit for Russian interests.

The economic benefits for Kazakhstan as a ‘Silk Road gateway’, however, have also been limited so far. Other than transit fees, Chinese ‘investments’ in the country do not significantly improve local employability, and thus far, cargo trains that are full when they go to Europe are coming back half empty.²⁹ Key to the further trajectory of China’s activism in Kazakhstan is also the reception of Chinese financing practice on the part of Kazakhstani business communities but also the local populace. Many of China’s ‘investments’ are schemes to lend money to local authorities which they have to reinvest to secure Chinese engineering contracts. If the money hardly leaves the Chinese system and the impression prevails that Chinese actors’ interest lies in building and owning assets, the already simmering anti-Chinese sentiment on a popular level can create a powerful factor that can affect Kazakhstan’s political agency in its foreign relations. China will have to convince its partners in Eurasia that its grand connectivity narrative does not translate into Chinese hegemony in the region. The future development of the SREB, however, can only partly be controlled by the Chinese government. Eventually, it also depends on cross-border neighbourhood relations in Central Asia. The BRI as an external factor might facilitate economic reforms affecting the latter, but it should not be conflated as a single causal factor changing the geopolitical landscape in the region. The presence of competing corporate and political actors, both within China and in Central Asia, underlines the finding that the creation of regional order is a hybrid process co-owned by local agency empowered by the logic of transnational economic corridors, while constrained by exogenous formal and informal factors at the same time.

Both Kazakhstan and China remain wary of Russian interests, although both for slightly different reasons. At the same time, both the Russian and Kazakhstani governments look at China’s economic power with a mix of awe and alarm, as do local communities in Kazakhstan. Both Nur-Sultan and Moscow attempt to engage with and contain Chinese business interests, aware that a tectonic geopolitical shift is underway which they hope to be able to co-manage in one way or another. These business interests more often than not are those of Chinese companies engaging with counterparts in partner countries rather than expressions of a coherent Chinese state-led plan. As this article has shown, however, the crafting of a Kazakhstani agency in interaction with the outward projection of actors like Russia and China is an iterative process affected by domestic voices as well as formal institutional constraints and informal alliance networks. As such, it has become a microcosm for a new Eurasian Order in the making.