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Kazakhstan: Officials Embroiled In Friction With Foreign Firms

  • Michael Lelyveld

Foreign companies in Kazakhstan are facing a series of complaints about working conditions and economic benefits. But the demands follow growing resentment over criticism of Kazakhstan's record on corruption and human rights. Our correspondent Michael Lelyveld reports:

Boston, 10 April 2001 (RFE/RL) -- Kazakhstan seems to be toughening its stand on foreign investment with a series of demands for more jobs, better labor treatment, and bigger profits for the government.

Last week, Kazakh officials complained loudly about the conduct of foreign firms at the giant petroleum field called Karachaganak.

The government said that oil companies hire too few Kazakh workers for the project, pay them too little, and import too many goods instead of buying local supplies.

Prime Minister Qasymzhomart Tokaev reportedly told the developers, "This is a serious question, which offends the national feelings of the multinational people of Kazakhstan."

Tokaev had strong words for John Morrow, general director of the Karachaganak Integrated Organization, a foreign oil consortium. During a visit, Tokaev said, "Let me tell you straight, Mr. Morrow. We're not happy with the situation at Karachaganak." He added, "We have come a long way by air and by road, and we can dispense with diplomatic niceties."

The prime minister spoke after an estimated 5,000 Kazakh workers blocked his route to protest conditions at the oil field. Morrow responded by agreeing to raise the share of local contracting on the job from 21 to 40 percent. The Italian-led consortium, which includes British, U.S., and Russian firms, will spend nearly $2 billion on the project over the next two years.

But the conflict is only one of several with foreign investors in recent weeks.

In February, First Deputy Prime Minister Daniyal Akhmetov warned the U.S.-based Chevron oil company that Kazakhstan is preparing new laws to defend its interests in Caspian projects and to sell more local products and services.

In another incident, Almaty authorities opened a criminal case in March against a subsidiary of Canada's Hurricane Hydrocarbons, alleging that it failed to pay taxes, the Interfax news agency said.

Also last month, ambassadors from 12 countries wrote to Tokaev objecting to a new "unified routing system" for oil. According to the "Oil Daily," the system requires foreign companies exporting through Russia to channel all their shipments through the pipeline monopoly Kaztransoil. The company is headed by Timur Kulibaev, who is President Nursultan Nazarbaev's son-in-law.

Frictions with foreign firms have followed reports of a U.S. probe into alleged payments to Kazakh officials, including Nazarbaev. The investigation, which is said to involve the American oilman and Nazarbaev adviser James Giffen, was first reported last July by "Newsweek," a U.S. magazine.

Resentment over the affair deepened with the publication of a U.S. human rights report on Kazakhstan. Although the United States issues such reports on all countries, the criticism appears to have been seen in Kazakhstan as part of a coordinated campaign. Nazarbaev has rejected the assessments of the country's human rights record, insisting that it will develop democracy at its own pace.

It is unclear whether the events account for the rising discord with foreign companies, but the clashes have grown in number and intensity.

The trend may be a setback for Kazakhstan, which has attracted some $10 billion in foreign investment since independence a decade ago. The country's oil will keep foreign companies engaged, although confrontations with the government may continue to increase.

The disputes seem to be a sign that Kazakhstan has entered a new stage in which enthusiasm for Western investment has given way to fears about foreign influence and exploitation.

The emotions make it hard to judge the serious question of whether Kazakhstan's citizens are getting a fair share of oil profits. While workers protest their conditions, they may find it easier to blame foreign companies for deals that Kazakh leaders have signed.

It is just as important that Kazakhstan's government seems to be treating democratic ideas as another imported product that must be restricted to protect domestic interests. Foreign reports about corruption and human rights are now seen as equivalent risks.

By contrast, Kazakhstan remains heavily dependent for its oil exports on Russia, which has never been a source of criticism on corruption or concerns about rights. But it was Moscow's dominance that first caused Kazakhstan to seek Western involvement over a decade ago.

Kazakhstan can be expected to defend its workers' interests by standing up to foreign companies, but it is unclear whether it will be just as forceful in protecting their rights in dealing with their own government.