The Qatar Investment Authority (QIA) has indicated it is seeking to pump investment into Central Asia’s biggest economy Kazakhstan just months after Emirati fund Mubadala forged deals in the country’s renewable energy sector. Gulf funds are not simply looking for business ventures that generate yield to fulfil their mandate, but also to support economic diplomacy and "soft power" of their governments.
This week, a high profile Kazakh delegation to Qatar led by First Deputy Prime Minister of Kazakhstan Alikhan Smailov and including Kazakhstan’s US$64 billion SWF Samruk-Kaznya met with government and business leaders, including the QIA, as the two countries look to boost bilateral cooperation in trade, economic and investment. Samruk-Kaznya is seeking QIA’s capital in energy, infrastructure, agriculture, commercial real estates and privatization.
Kazakhstan offers Arab states a market to sell goods and possesses a strong natural resource base as well as a offering a good basis for the development and launch of telecommunications satellites. Samruk-Kaznya is also looking to divest under the government’s privatization program for 2021-25. According to the fund, the timeline for privatization is: Kazpost and Samruk Energo in 2021; oil and gas producer KazMunayGas, Air Astana, mining company Tau-Ken Samruk and Qazaq Air in 2022; and railway company Kazakhstan Temir Zholy in 2023. SWFs like QIA and Mubadala will be looking at these entities with interest with a view to buying equity. The sale of assets will provide Samruk-Kazyna with capital for future strategic developments projects, which are set to involve close relationships with foreign state-owned investors.
For its part, Kazakhstan is eager to diversify its economy away from hydrocarbons – a goal it shares with GCC states – and is looking for Arab capital to boost non-oil sectors. Renewables is an area where Kazakhstan and Middle Eastern oil exporting nations, looking to a post-fossil fuel world, have a convergence of interests – and a sector where SWFs are playing an important role in providing capital for growth.
Oil-rich Kazakhstan aims to raise the share of renewables in electricity generation from 1% in 2020 to 10% by 2030 and 50% by 2050 and is looking for foreign state-owned investors to co-invest with the domestic SWF and Kazakhstan’s private sector.
Mubadala’s green investment arm, Masdar, signed a strategic agreement with Samruk-Kaznya in February to explore joint initiatives in renewables. At the time, Akhmetzhan Yessimov, CEO of Samruk-Kazyna, said: “Samruk-Kazyna JSC is going through the process of transformation into an investment holding. We are striving towards Mubadala’s operational model. This also applies to international investments.”
Kazakhstan is mindful of its significant geopolitical role in Eurasia and has sought to balance its relations between Russia, the West and China, albeit tilted towards Moscow. However, the advent of China’s Belt and Road Initiative has moved it closer to Beijing, potentially placing it in the center of new “Great Power” rivalry in Eurasia. Such rivalry gives the Kazakhstan government significant agency, as well as generating the interest of Gulf funds eager to assert their own strategic interests.
Qatar and UAE have tended to use soft power to gain geopolitical influence via economic and cultural relations and Kazakhstan is no exception. The cold war within the GCC has subsided with a deal between Doha and a Saudi-led alliance including UAE over Qatar’s closeness to the Muslim Brotherhood. Yet, rivalries are still heated and they are vying for leverage within Central Asia’s biggest state, with its Muslim majority, regional influence and internal stability at a time when the Taliban take-over in Afghanistan poses new risks within the Muslim world.
Economic involvement goes hand-in-hand with cultural influence over the religious narrative. Indeed, one area cited this week for strategic partnership between Doha and Nur-Sultan is “cooperation on socially relevant issues” including culture and education, which extends bilateral relations beyond the economic sphere – Qatar has already inserted itself into cultural and social projects in Kazakhstan and the Kazakh government is eager for this to continue and expand. Of all Middle Eastern states, the UAE is one of the most hostile to Qatar’s soft power and will be looking to use the wealth of its state-owned investors as well as cultural investments to beat back Qatari influence.
For its part, though, Kazakhstan will play its usual pragmatic role of balancing competing interests, ensuring it gets the best out of this rivalry without compromising its sovereign agency – a game Kazakhstan has played successfully since independence.