By Sergey Sukhankin

The recent negotiations between Kassym-Jomart Tokayev and Olaf Scholz in Astana have underscored the increasing interest of Western economies in Kazakhstan’s abundant natural resources. The country is richly endowed with strategic minerals, which could provide a substantial counterbalance to the dominance of China and Russia in the global supply chain, a situation that presents various economic and geopolitical challenges for Western nations. Nonetheless, in spite of its wealth in natural resources, Kazakhstan’s significant dependency on China and Russia complicates its potential role in meeting the West’s growing demand for strategic minerals. It is imperative that Western countries develop a concrete strategy that delineates specific steps to assist Kazakhstan in its transition from an overwhelming reliance on hydrocarbons to a more diversified export profile that includes strategic minerals. Absent such initiatives, it will be exceedingly difficult for Kazakhstan to position itself as a viable alternative to both China and Russia.

BACKGROUND:  Leading Western economies, including the U.S., France, Germany, and the United Kingdom, have expressed a pronounced interest in collaborating with Central Asian nations to explore their extensive yet underdeveloped reserves of strategic natural resources. Of particular significance are rare earth elements (REEs) and rare metals (RMs) such as uranium, lithium, tantalum, niobium, indium, scandium, vanadium, thallium, and gallium. This burgeoning interest is driven by two primary factors.  First, the objective of achieving net zero emissions necessitates a substantial increase in the utilization of critical metals. As projected by the International Energy Agency, the rising adoption of clean energy technologies is expected to quadruple the demand for REEs and RMs by 2040. Second, the recent policies enacted by Russia and China to restrict exports of critical metals have compelled Western nations to seek alternative sources for these essential materials. Given the geopolitical challenges in Sub-Saharan Africa – another significant producer of critical metals – Central Asia emerges as the only viable alternative, with Kazakhstan playing a pivotal role. In addition to its vast resource base, the Kazakhstani government has demonstrated a strong commitment to developing its considerable potential in the strategic minerals sector. President Tokayev has asserted that these minerals could serve as the “new oil” for the nation and its economy. Kazakhstan has not only entered into multiple international agreements to facilitate the entry of Western companies into its strategic minerals sector but also plans to declassify information regarding its REE and RM deposits, a move that underscores its dedication to becoming a global leader in this industry. Furthermore, the country intends to collaborate with neighboring Tajikistan in the search for and extraction of critical metals.

IMPLICATIONS:  If Kazakhstan successfully attracts foreign financial capital and expertise in its strategic minerals sector, the country has the potential to emerge as one of the world’s leading players in this industry. Furthermore, partnerships and collaborative initiatives between Kazakhstan and other regionally resource-rich countries, such as Tajikistan and potentially Uzbekistan, could positively influence the global critical metals industry while simultaneously reducing the West’s strategic and precarious dependence on China and Russia. Engaging in partnerships with Kazakhstan to fulfill its demand for strategic minerals presents a mutually beneficial opportunity for Western nations; unlike other suppliers, Kazakhstan is not facing comparable political destabilization (as seen in Sub-Saharan Africa), nor is it encumbered by geopolitical ambitions (like China) or neo-imperialist aspirations (like Russia), both of which could threaten regional stability and deter potential investors. However, Western efforts to leverage Kazakhstan’s extensive resource base may be impeded by three external factors. The first issue pertains to economic sustainability. If Kazakhstan, along with other Central Asian nations, successfully attracts foreign direct investment (FDI) in its critical metals sector, the commencement of large-scale production may lead to a significant decline in global prices for these commodities. Under such circumstances, the exploration and extraction of critical metals – processes that are hazardous, costly, and ecologically unsustainable – could become less economically viable for the country, while also posing potential harm to its ecosystem. Despite President Tokayev’s assertions, from a purely economic perspective, critical metals do not currently appear capable of serving as the “new oil” for the Kazakhstani economy. This situation could be exacerbated in the event of a surplus of critical metals in the global market. The second issue is the “China factor.” Currently, China dominates the global critical metals industry, possessing 35 percent of proven resources, 68.5 percent of extraction and mining capacity, and 80 percent of output. With the European Union’s dependency on Chinese REEs and RMs approaching 98 percent, coupled with China’s growing interest in Central Asian natural resources – driven by the rapid development of its domestic microchip and green energy sectors – Central Asia emerges as a region of strategic significance for China. Given China’s substantial influence in the macro-region, reinforced through soft power, investments, trade relationships, and the indebtedness of local actors, it poses a significant challenge for the EU and the U.S. to compete effectively with Beijing. Additionally, the Chinese approach to business, which emphasizes non-interference in domestic affairs and eschews democracy promotion, is likely to align more closely with the cultural values and traditions of many Central Asian countries, which are not fully democratic. The third issue concerns the “Russia factor.” Russia’s interest in Kazakhstan’s critical metals sector is motivated by factors distinct from those of China. Strategically, Russia aims to maintain its significant role in Kazakhstan’s uranium sector, as Kazakhstan produces over 40 percent of the world’s uranium and serves as a key supplier for Russia. Russia not only partially owns uranium mines in Kazakhstan but also plays a crucial role in the country’s export framework, with the port of Saint Petersburg serving as a vital transportation hub for these exports. From a logistical perspective, identifying alternative routes to Russia – such as the Middle Corridor – would necessitate legislative changes related to uranium transportation and require additional investments to enhance the capacity of these routes.  Even if these conditions are met, the possibility of Russia adopting a more assertive stance should not be overlooked. Historically, disputes have arisen between Russia and Kazakhstan over oil-related matters in the resource-rich Caspian Sea. Following Russia’s aggression against Ukraine in 2022, Kazakhstan has sought to position itself as an alternative supplier of hydrocarbons to the EU, which was marked by a “mysterious” explosion that resulted in the deaths of two workers at Tengiz, Kazakhstan’s largest oil field. The increasing anti-Kazakhstan rhetoric in Russian propaganda channels – reminiscent of narratives used against Ukraine prior to 2022 – often focuses on uranium-related issues. Therefore, one should not discount the possibility of provocations from Russia should circumstances develop in a manner deemed unacceptable to it. These three factors pose significant obstacles for Kazakhstan’s potential to play a significant role in the West's shift away from reliance on China (and, to a lesser extent, Russia) for critical metals. Importantly, neither China nor Russia is likely to relinquish their dominant positions as suppliers of REEs and RMs without resistance, in the face of Kazakhstan’s emerging presence in the market.

CONCLUSIONS:  Kazakhstan, with its abundant natural resources and commitment to a peaceful foreign policy, presents an ideal trade partner for Western countries seeking to meet their demand for REEs and RMs while diversifying their supply chains away from China and Russia. However, achieving this goal poses significant challenges due to Kazakhstan's vulnerabilities in relation to both countries. Without a concrete strategy from the West – a detailed plan that extends beyond simple import-export arrangements, resource exploitation, and vague commitments – Kazakhstan will struggle to fulfill Western demands on its own. Geopolitically insecure and lacking sufficient funding, technology, and expertise, Kazakhstan risks remaining a land of unfulfilled opportunities without comprehensive Western assistance. To avert this scenario, the U.S. should collaborate with the European Union to help Kazakhstan reshape its economic model, transitioning from an economy primarily reliant on oil exports to one that focuses on the export of strategic metals. This transition will likely require coordinated efforts to adjust infrastructure for specific objectives, significant investments, and innovative strategies to navigate the complex geopolitical landscape of the macro-region, which also includes influential regional players such as Turkey and Iran.

AUTHOR'S BIO: Dr. Sergey Sukhankin is a Senior Fellow at the Jamestown Foundation (Washington DC) and a Fellow at the North American and Arctic Defence and Security Network (Canada).