Think Kazakhstan, think oil and gas – so goes the investment approach to the landlocked former Soviet republic in Central Asia. The country’s proven oil reserves are estimated to be in the region of 30 billion barrels.
The figure amounts to 1.7% of the world’s total hydrocarbon liquid reserves and places Kazakhstan among the top 15 crude oil producing nations. Unsurprisingly, a who’s-who of the global energy sector from leading oil majors to mammoth state-owned operators have investments and holdings in Kazakhstan.
However, cyclical volatility in oil market, mirrored in the current trading cycle, often spurs moves aimed at economic diversification. The events of 2024-25 and an era of relatively lower oil prices appears to be no different.
Projections for Kazakhstan’s economic growth this year range from the World Bank’s estimate of 4.5% to 4.9% according to the Asian Development Bank. The range, while commendable, points to a moderation in economic activity.
That’s because much of it is largely based on oil and gas revenues that account for over 30% of Kazakhstan’s GDP and over 75% of its exports. Policymakers in the country’s capital Astana appear determined to change this.
Three visible economic diversity pathways for the country happen to be incremental investment in agriculture, manufacturing and financial services. It has developed a range of policies to enhance and court foreign direct investment in all three.
Later this month, and at time of global trade tensions, the country will open its doors to world at the Astana International Forum for deliberations to shape its future and how it can be at the heart of Eurasian trade by capitalizing on its strategic location as a bridge between Europe and Asia.
Faced with Russia-Ukraine war in its near neighborhood and the ever-looming prospect of a global trade war in the wake of U.S. tariffs raised by President Donald Trump, the event is Kazakhstan’s attempt at furthering “energy security, climate action, geopolitical cooperation, international trade, technological innovation, and sustainable development.”
Investors may expect both candor and concessions in the dialogs from the heads of states, bankers, financiers, industry bosses and diplomats in attendance. This may in turn percolate through to support Kazakhstan’s efforts on economic diversity in the shape of international partnerships.
The pressing need for this is evident with its economic growth projected to cool further to 4.1% in 2026, according to the Asian Development Bank. That’s down to the potential for disruptions to oil export routes and lower demand for it in the event of wider global economic malaise.
An Unexpected Windfall?
Alongside Kazakhstan’s more visible – even if difficult – attempts at economic diversity through established pathways, could be an unexpected windfall from a medium to long-term growth avenue previously unknown to its policymakers – rare earths.
On April 2, a Reuters report citing Kazakhstan’s industry and construction ministry, said its geologists had discovered a rare earth metal deposit with estimated resources of more than 20 million metric tons at a depth of up to 300 metres.
The announcement, which came out of the blue, if proven to be conclusive after further research would put Kazakhstan behind only China and Brazil in terms of reserves.
According to the ministry, the find at the Zhana Kazakhstan site, 261 miles from Astana, contains neodymium, cerium, lanthanum and yttrium deposits and that its average rare earth metal content is 700 grams per ton.
However, it did not provide any further details on when, where or who would develop the site. The development itself would require millions of dollars in initial investment capital over a minimum development time frame of at least five years. Thereafter, viable extraction of the first ore would be at least be 10 years away.
But with Kazakhstan currently lacking the expertise and technologies needed for the extraction of rare earths, this development offers another pathway not just for international cooperation but to get closer to a rare earth craving Trump administration in the U.S. as well. And as such it could ultimately prove to be the real economic diversification spur that Kazakhstan craves.
