Publication: Eurasia Daily Monitor Volume: 1 Issue: 128

During the last week of October, about 400 local workers employed by Punj Lloyd Kazakhstan to construct a $40 million sulfur and gas-separating facility for TengizChevroil went on strike to protest their miserable wages. Workers complained that the Indian executives of the company had cut their wages to 13,000 tenge a month and treated them like slaves. The workers also demanded compensation for transportation costs to cover the commute from the city to the construction site.

It appears that workers were duped into signing job contracts that allow Indian managers to virtually enslave them. A few days before the strike a furnace stoker, V. Baldin, was killed at the Indian-owned Ispat Karmet steel mill (Altyn Orda, October 29-November 4). Had any similar workplace incident happened in India, authorities there would have probably responded immediately and effectively. Kazakhstan, which still largely depends on foreign investment and technology for its economic growth, cannot afford to create a scandal with its overseas investors. But in this extreme case, prosecutors investigated workers’ claims, which prompted Punj Lloyd to partially pay up (khabar.kz, November 13).

Compared to other countries, India may seem to hold an insignificant place as an economic partner of Kazakhstan. In 2001 the trade turnover between Kazakhstan and India was put at $51 million, far behind the $1.5 billion Kazakh-Chinese trade figure for the same period. In 2002 bilateral trade remained flat at around $59 million. At the same time, India was watching the increasing Chinese forays into rich Kazakh hydrocarbon reserves with a mixture of alarm and envy. As a part of an effort to attract investors to develop the oil and gas infrastructure in West Kazakhstan, President Nursultan Nazarbayev used the opportunity provided by his February 2002 visit to Delhi to invite the Indian oil company ONGC to bid for the development of the Karazhanbas oil fields and Amangeldy gas fields. Kazakhstan is also ready to reach a multilateral agreement with Iran and Turkmenistan to lay a transport corridor from Central Asia to India to ensure a reliable trade route (Kazakhstanskaya pravda, July 4, 2002). But none of these schemes has borne out. In reality, Pakistan’s Gwadar seaport is considered to be more attractive for Kazakhstan to ship oil and gas to Arab countries than any Indian route.

The Indian steel company Ispat scored a significant victory by securing a foothold in Kazakhstan in November of 1995. The company acquired stakes in Karmet, the largest metallurgical plant in Temirtau, Karagandy region, which had been financially ruined under the strain of inflation, debts, and chronic non-payment. The deal for the newly renamed Ispat Karmet was concluded amid vociferous protest from the co-founder of the joint venture FEST Alpine, Bulat Abilov, who demanded the resignation of the then-deputy minister Vitaly Mette, who allegedly favored foreign companies (Kazakhstanskaya pravda, November 16, 1995).

But in economic terms, the Indian company turned out to be the right choice. Ispat Karmet, which currently employs 53,000 workers with average monthly wages of $250 (income sufficient to support a small Kazakh family), is the leading and probably the only success story of an Indian company in Kazakhstan. This year Ispat Karmet increased its steel output by 9.8% and cast iron production by 8.9% (Press Service, Ministry of Economy and Budget Planning, April 15). These figures are not so impressive, given the fact that there is very limited demand for Ispat Karmet’s steel products in Kazakhstan, and the plant is traditionally tied to Russian markets.

What really brought India and Kazakhstan closer seems to be not economic interests, but regional security issues. Both sides have emphasized this policy focus at all top-level talks since the establishment of diplomatic ties in 1992. Kazakhstan has earned a favorable international reputation for bringing together irreconcilable neighbors Pakistan and India at the summit of the Council of Mutual Confidence Building in Asia on June 4, 2002. The Almaty meeting produced a statement by Indian Prime Minister Atali Bihar Vajpayee that India would not strike first, and the Pakistani head of government, Pervez Musharraf, expressed a willingness to open a dialogue with India. The statements were largely considered to be a diplomatic success for Kazakhstan, which had made the purely symbolic gesture of urging Pakistan and India to use their nuclear arsenals for peaceful purposes.

In recent years bilateral relations are gradually shifting from regional security, fighting terrorism, and religious extremism to areas of military cooperation. A December 2002 memorandum paved the way for closer military ties through joint projects such as training military officers, developing joint military-industrial projects, and establishing a partnership between the defense industries of India and Kazakhstan as important areas of cooperation.

Speaking of trade relations between Kazakhstan and India, Kazakhstan’s Minister of Defense, Mukhtar Altynbatev, said, “What is of special interest for us is the military area” (Press Service of the Prime Minister of Kazakhstan, November 7, 2003).

India seems to be the most reliable partner for Kazakhstan in its drive to create a Caspian fleet, a project that faces strong Russian disapproval. Despite the grumblings from Moscow, Kazakhstan is pressing ahead with its naval project, with Indian assistance.