Since 1989 the Republic of Kazakhstan, the most developed economy in Central Asia, has been ruled by First President of the Republic Nursultan Nazarbayev. In April 2015 Nazarbayev was re-elected for the fifth time, with 97.7% of the vote. The election monitoring mission of the Organization for Security and Co-operation in Europe (OSCE) commented that “reforms for holding genuine democratic elections” in the country “still have to materialize” and that there were “serious procedural deficiencies and irregularities” in the election.
A decade or so earlier, the President had been personally implicated in “Kazakhgate”, the largest bribery case ever tried in the USA. The same year, Imangali Tasmagambetov, then Kazakhstan Prime Minister, told the Kazakh Parliament that Nazarbayev had hidden $1 billion of state oil revenues in a Swiss account.
In 1996, the year Nazarbayev diverted money to the secret fund, the Gross Domestic Product of Kazakhstan was $21 billion. Nazarbayev’s “special reserve account” amounted to almost 5% of the country’s GDP—more than ten times public spending on Health in the same year.
Nazarbayev is not the only Kazakh official to have featured in an international scandal in recent years. “Kazakhstan strikes me as a typical kleptocracy”, Roman Borisovich, a campaigner who starred in the Channel 4 documentary From Russia With Cash and organised the Kleptocracy Tours in London, told KYC360.
With its vast and mostly inhabited territory—it is the ninth-largest country in the world by area—Kazakhstan has abundant energy and mineral reserves. Its top exports are oil and gas, followed by minerals and metals such as coal, copper, gold and uranium. But despite this huge mineral wealth, the country remains widely undeveloped, with high levels of poverty and significant disparities in prosperity between regions. Poverty rates in Southern rural regions are almost twice as high as resource-rich urban zones in the North. “Surprisingly, poverty rates are highest in oil-rich regions”, an USAID report outlined. Nearly half of the Kazakh population (47%) live on a monthly salary of $70 or less.
In January 2016, the European Union and Kazakhstan signed an Enhanced Partnership and Cooperation Agreement. The new partnership provides a legal basis for improved political and economic relations between Kazakhstan and the EU, ensuring “a better regulatory environment in areas such as trade in services, the establishment and operation of companies, capital movements, raw materials and energy, government procurement and intellectual property rights”. Italy, France, Germany and the UK are among the country’s top importers and investors.
But the most prosperous of the former Soviet Republics is also “a corruption hotspot” according to the World Bank. Transparency International’s Corruption Perceptions Index 2015, which lists countries “by their perceived levels of corruption” in the public sector, ranked Kazakhstan 123 out of 168, with a score of 28 (“corrupted”) over 100.
Kazakhstan is a member of the Eurasian Group (EAG) on combating money laundering and the financing of terrorism. Yet the “legalisation of funds obtained as a result of fictitious payments effected among pseudo businesses and shadow companies” is “widespread”, according to the EAG evaluation report.
Tax evasion, fraud, appropriation and embezzlement of property are the most common financial crimes in the country. The EAG report warned that “bank employees are often engaged (…) and facilitate receipt of multi-million cash amounts”. The use of companies “established for laundering dirty money and their follow-on appropriation” is also rampant.