Publication: Eurasia Daily Monitor Volume: 3 Issue: 219

Given the tense international atmosphere surrounding Iran, Astana has prudently declined to publicize its expanding ties with Tehran and depicts bilateral relations almost exclusively in economic terms. For example, official sources in Kazakhstan made few comments about the Kazakh-Iranian business conference held in Almaty on November 15.

Economic statistics reveal growing trade volumes between the two countries despite the political controversies and U.S. pressure regarding Tehran’s nuclear program. The Iranian ambassador to Kazakhstan, Ramin Mehmanparast, hopes the trade turnover, which stood at about $700 million in 2004 and $900 million in 2005, will reach $1.5 billion this year. The Iranian ambassador’s optimism seems to be justified, given the accelerated rate of bilateral trade ties. The head of the directorate for coordinating investment activities under the Kazakh Industry and Trade Ministry, Nurlan Tokseitov, reports that the volume of bilateral trade reached $1.2 billion in the first eight months of this year. According to Tokseitov, Iran accounts for 2% of Kazakhstan’s total trade turnover and 11% of its trade turnover with Asian countries. Kazakhstan’s investment in the Iranian economy stands at $37.6 million (Interfax-Kazakhstan, November 15).

Addressing the business conference, Mehmanparast said that Iran regards Kazakhstan as an important trade and economic partner. Iran could export reasonably priced, high quality goods to Kazakhstan. The ambassador also announced his government’s plans to invest up to $5 billion into Kazakhstan’s economy. The governments of Iran and Kazakhstan have streamlined their legal systems to remove hurdles in bilateral trade and signed more than 60 interstate and intergovernmental agreements. The Iranian ambassador also called for the creation of an intergovernmental trade council to coordinate business activities (Channel 31, November 15).

Kazakh-Iranian ties, while slack over the last decade, received a boost when Kazakh Foreign Minister Kasymzhomart Tokayev visited Tehran in May 2006 to discuss energy and economic cooperation. Tokayev could not avoid the political aspects of relations with Tehran and clearly backed “Iran’s right to use its nuclear potential for peaceful purposes and to carry out research in this field, which should be transparent for international community.” In turn, the Iranian side confirmed its “readiness to discuss the legal status of the Caspian Sea at the negotiating table without resorting to confrontation with other littoral states” (Liter, June 10).

The prospect of closer relations between Kazakhstan and Iran is overshadowed by the economic and political uncertainties resulting from the smoldering conflict among the littoral states over the division of the Caspian Sea and the U.S.-Iranian standoff over nuclear issues. The director of the Central Asia and Caucasus Research Center at the Institute of Oriental Studies of Moscow University, Zhibek Syzdykova, told a conference on this problem held in Aktau, West Kazakhstan, in October that future instability in the Caspian region may stem from the U.S.-Iranian confrontation (Megapolis, October 23).

The escalating nuclear row between the United States and Iran bodes ill for Kazakhstan. Iran already imports Kazakh wheat and oil, and the country’s economic presence in Central Asia is growing. Already Kazakh oil is shipped from the Aktau seaport to northern Iran by tankers en route to the Gulf states. Last year, Kazakh grain exports based on swap deals reached $1 billion. Kazakhstan and Iran plan to build an oil refinery in Northern Iran that would boost Kazakh oil exports. Iranian Embassy sources forecast an increase of bilateral trade up to $5 billion over the next five years (Aikyn, August 29).

Expanding Iranian trade and the country’s increased economic presence in Kazakhstan are part of Tehran’s newly adopted strategy to compete with Western and U.S. companies in Central Asia. This summer Iran and Tajikistan reached an agreement to construct a four-kilometer long tunnel at Chormagzak Mountain, with a projected cost of $60 million in Tajikistan. The Iranian side also promised Dushanbe to finance construction of the Sanguduk-2 hydroelectric power plant. Turkmenistan’s President Saparmurat Niyazov has called for resumption of a suspended project to build a gas pipeline route linking Turkmenistan and India via Iran. The Iranian route would allow Turkmenistan to deliver its gas to Turkey instead of exporting it to an unpredictable Russia. The Iranian direction is also tempting for Kazakhstan. The Kazakh deputy minister of energy and mineral resources, Bolat Aksholakov, announced that Astana is considering a project to construct an oil pipeline to Iran passing through Turkmenistan (Express-K, October 7).

Kazakhstan cannot ignore the political components of its relations with Iran, as Tehran seeks to play greater role in Central Asia. Astana does not want Iran, a potential nuclear power, to become a member of the Shanghai Cooperation Organization. Tokayev made this position clear during a meeting of foreign ministers of SCO member-countries on May 15 of this year. Likewise, in Washington last July the Kazakh foreign minister made it clear that Kazakhstan does not seek a conflict with any of the sides. But with growing Iranian investments in Central Asia, it may be difficult for Astana to remain neutral.