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Wednesday, 11 December 2013

SocioEconomic Situation in Kazakhstan's West Remains Unstable

Published in Field Reports
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By Georgiy Voloshin (the 11/12/2013 issue of the CACI Analyst)

After the violent riots of oil industry workers rocked in Kazakhstan’s Zhanaozen in December 2011, marring the celebration of the 20th anniversary of the country’s independence, Kazakhstani authorities have been at pains to stabilize the situation there. According to official figures presented this September, the government has since January 2012 allocated some US$ 90 million for socioeconomic needs in the Mangistau region, where riot police killed at least 14 people and wounded over 100 others during the Zhanaozen protests. Most of the funds have been directed to the creation of new jobs and the implementation of social support programs, for instance in establishing the necessary infrastructure.

However, the situation on the ground is still far from stable, making the Mangistau region a potential stage for more socioeconomic conflicts in the near future. As Kazakhstan’s Ministry of Labor recently reported, seven protests took place in the region between January and August 2013, more than in any other province across the country. Earlier in the summer, Nurlan Yerimbetov who currently heads the Center for social partnership under Kazakhstan’s sovereign welfare fund Samruk-Kazyna visited Zhanaozen. Speaking to the press, Yerimbetov noted at the time that shrinking employment opportunities and wage problems could trigger new labor strikes. Mangistau’s economy is still largely dominated by oil and gas production which provides thousands of jobs to local dwellers.

Another factor contributing to social instability in western Kazakhstan is related to changing demographics. According to the country’s National Statistics Agency, Zhanaozen’s population grew by a staggering 78 percent between 2003 and 2013, reaching over 100,000 people this year. Overall, the population of the entire region grew by 1.7 percent in January-June 2013, which makes it an absolute leader on the national scale. Thus, the Mangistau region is rapidly leaving behind the Southern Kazakhstan province traditionally considered as the most populous and fastest-growing of the country’s 14 regions.

Natural demographic growth is further spurred by the unending inflow of ethnic Kazakhs from neighboring Turkmenistan. Although the Kazakhstani government has recently decided to scale down funding for the repatriation of foreign-born Kazakhs under a special budgetary program, Mangistau still continues to receive more settlers from across the border.

While local authorities have become more proactive and nimble in responding to incipient socioeconomic threats by target measures, two labor disputes recently erupted in the Mangistau region in October-November 2013. On October 4, more than 50 employees of a local locomotive depot went on strike over salary cuts representing in some cases up to 45 percent of the previous wages. As the company’s representative explained, this change was enacted in response to the ongoing modernization of most locomotives that had presumably rendered redundant scores of locally employed maintenance workers. In order to relax tensions, the Kazakhstan Railways (KTZ), which owns a controlling stake in the company, has nonetheless decided to maintain average salaries and devise solutions for reemployment. Four days later, a two-hour strike took place within the ranks of oil and gas industry workers on a site operated by a major Russian company.

Later in mid-November, some 80 persons employed by Caspiy Asia Service Company Ltd denounced over US$ 180,000 worth of unpaid salaries and other benefits owed by the company’s management to several hundreds of engineers. As most other companies based in the Mangistau region, this one operates in the local petroleum industry which continues to suffer from lackluster growth and dim prospects for the future. Even though official statistics remain firmly on the upside, with Mangistau’s oil production said to have expanded by 1.8 percent in January-October 2013, Kazakhstan’s energy sector still counts many precarious and poorly remunerated jobs. Gaps in wages between Kazakhstani and foreign workers also remain high, even prompting President Nazarbayev’s personal involvement in this issue. However, little has changed so far, since Kazakhstan’s authorities have proved unable to change managerial practices in large oil and gas firms.

In the short term, more turmoil is likely in Kazakhstan’s hydrocarbon-rich west. In the Atyrau region, the failed launch of the supergiant Kashagan oil deposit will most probably entail negative consequences for hundreds of service companies working on this field. Meanwhile, the Kazakhstani government is already preparing new measures to tackle potential socioeconomic instability on the Caspian Sea. In early November, Nazarbayev slightly reshuffled his cabinet of ministers, appointing the experienced Bolat Zhamishev as head of the Regional Development Ministry. His predecessor, Bakytzhan Sagintayev, retained his first Deputy Prime Minister’s portfolio. Thus, the government will seek to avoid the eruption of any serious labor disputes similar to what happened in Zhanaozen two years ago.

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