The economic and political relations between the neighboring countries sharing a three thousand mile border, despite their constant protestations of friendship, are overstrained by a host of unsettled issues. The announcement of 2004 as the Year of Russia in Kazakhstan, which implies something more than a cultural achievement in both countries, was in this sense ill-timed. The trade turnover between Kazakhstan and Russia is still on the decline, although Russia remains the dominant trade partner of Kazakhstan. In its total trade turnover, imports from Russia make up 38%.

On the other hand, Russia’s share in Kazakhstan’s total export volume does not exceed 15%. Most of the 260 agreements signed between the neighbors since their independence actually remain only on paper. On a political level, border delimitation talks, held some time ago alternately in contiguous Russian and Kazakh cities, have come to a deadlock. “We have settled most of the border questions. But the remaining 2 or 3 percent of the border sector are the most disputed ones”, according to Vladimir Putin. Although Kazakhstan has never tired of confirming its allegiance to the Russian-favored Shanghai Cooperation Organization and Eurasian Economic Community, it has also to come to terms with Western organizations.

It is only natural, that Kazakhstan has in recent years adopted a more independent stance on political issues and moved closer to NATO. But there are too many economic issues which make Russia and Kazakhstan interdependent. The northern regions of Kazakhstan largely depend on relatively cheap Russian gas supply, while the Omsk and Kurgan oblasts of Russia are major importers of electricity from North Kazakhstan.

The most complicated problem is railway communication between Kazakhstan and Russia. More than 800 kilometers of Russian railway line passes through Kazakhstan. Since Russia has introduced its own tariffs and rules for transporting goods along these stretches of railway, which is much higher than that adopted in Kazakhstan, the railway has become an irritant for trade partners in both countries. During Putin’s two-day visit, an agreement was reached that the prime ministers of Russia and Kazakhstan would meet in January in Moscow to discuss railway transportation problems.

The agreements on revising railway tariff regulations would be important to landlocked Kazakhstan in order to get its oil to markets further afield. New transit opportunities were offered by the Russian side during the talks between Kazakh Prime Minister Danyal Akhmetov, a figure reputed to have close links to the business elite in Moscow, and deputy prime minister of Russia Viktor Khristenko. The long term transit project extending into the year 2020 envisages the shipment of Kazakh oil to European countries via Russia.

Among other things, the two sides discussed the possibility of processing Kazakh gas in Russia. This may sound paradoxical, since Kazakhstan, which has over 70 trillion cubic meters of natural gas, failed to create its own gas processing facilities.

Kazakhstan’s prime minister also initiated important talks between the Russian oil-giant “Lukoil”, the world’s second largest private company which accounts for the 20 of oil produced in Russia, and the Kazakh national oil company “Kazmunaygas’. After the talks with the president of “Lukoil” Vaghip Alikperov prime minister Akhmetov commented very briefly: “This was, I think, one of the first most significant Russian-Kazakh projects on Caspian”. According to the contracts signed between “Lukoil” and “Kazmunaygas”, both sides will jointly develop the Tyub Karagan and Atashskaya fields in the Kazakhstan sector of the Caspian shelf. But these fields are not sufficiently explored for their gas reserves.

Nevertheless, Russia intends to expand its presence in the oil and gas sector of Kazakhstan, and to work together with Kazakh companies at Kurmangazy, Khvalynskoye and Tsentralnoye fields this year. Apparently, Russia will spare neither money nor political effort to regain its weakening position in the economy of Kazakhstan. According to Viktor Khristenko, Russia is ready to invest a total of US$3 billion in Kazakhstan’s oil and gas sector.

Kazakh nationalists, on the other hand, are not at all enthusiastic over the intensifying Russian-Kazakh rapprochement. They suspect that the more than four million ethnic Russians of Kazakhstan are used by Russia as a means of leverage to gain additional concessions from Kazakhstan. They impetuously reacted to the handover of the Ognyeupornoye village in Kostanay border region to Russia, a fact which was made public not by government, but by opposition press. Another source of resentment for nationalists was the agreement to prolong the term of control over the Baikonur space center by Russia for 50 years for an annual rent of $150 million.

The year 2003 passed under the sign of the Year of Kazakhstan in Russia. Economic experts say it did not change much in the essence of relations between the two countries. So they cannot expect more from the year of Russia in Kazakhstan.