Since 2002, the EU has grown to become Kazakhstan's largest trading partner, being the destination of 40% of its exports. Those exports were primarily, 80%, oil and gas in 2007. In 2007 EU imports of goods from Kazakhstan amounted to €13.35 billion and services amounted to €1.52 billion. EU exports to Kazakhstan were
€6.04 billion in goods and €1.92 billion in services. Half of Kazakhstan's $7.3 billion of foreign direct investment in 2006 came from the EU. As a major energy supplier to the EU, the EU supports its accession to the World Trade Organization.
The Partnership and Cooperation Agreement (PCA) with Kazakhstan has been the legal framework for EU– Kazakhstan bilateral relations since it entered into force in 1999. In November 2006 a Memorandum of Understanding on cooperation in the field of energy between the EU and Kazakhstan has been signed establishing the basis for enhanced cooperation.
The future European Commission assistance will focus on the following priority areas: promotion of the ongoing reform process at political, economic, judiciary and social level, infrastructure building, and cooperation in the energy sector.
The overall EU co-operation objectives, policy responses and priority fields for Central Asia can be found in the EC Regional Strategy Paper for Central Asia 2007–2013. In addition to the assistance under the Development Cooperation Instrument (DCI), Kazakhstan participates in several ongoing regional programs.
The leaders of Russia, Kazakhstan and Belarus signed in Astana Treaty establishing the Eurasian Economic Union. Three post-Soviet countries, so want to reach a higher level of integration. Union, according to plan, will earn from 1 January 2015.
The European Union (EU) and Kazakhstan have become important partners over the past decade. The EU is Kazakhstan‘s leading trade partner, accounting for 40 per cent of its exports. At the same time, Kazakhstan contributes to meeting the EU‘s oil and uranium demand and Europe is increasingly interested in the country‘s extensive natural resources. Growing economic and political ties have brought EU-Kazakhstan relations to a new level that seems to surpass the current bilateral agreement and the overarching (regional) engagement through the EU Strategy for Central Asia. In 2011, negotiations began over a new and enhanced agreement to replace the current Agreement on Partnership and Cooperation (APC). Despite substantial initial progress, recently talks have slowed down. Kazakhstan‘s interest seems to be declining and differences are mounting over two key issues: technical and regulatory aspects related to trade and investment, and a clearer commitment and results by Astana towards democratic reform.
Whereas Kazakhstan has managed to boost its image abroad, concerns abound over the country‘s performance in terms of democracy, human rights, rule of law and good governance at home. The Kazakh government‘s commitments in the run-up to the 2010 chairmanship of the Organization for Security and Cooperation in Europe (OSCE) seemed to indicate willingness to reform and modernize existing institutional structures, but few results have been recorded to date. The launch of a National Human Rights Action Plan in 2009 has not brought about change; in fact, over the last few years Kazakhstan has introduced restrictive policies regarding national security, religious freedom and the Internet.
As European Commission President José Manuel Barros mentioned during his visit to Astana in June 2013, Europe is looking for a politically stable partner in Central Asia. While Kazakhstan has advanced economically and is considered more stable than some of its neighbors, its stability is based on a ‗strong man‘ rather than on democratic governance, rule of law and respect for human rights. As a normative actor, the EU promotes these principles in its relations with partner countries. However, in dealings with resource-rich states the Union tends to shy away from its normative agenda. This does not have to be the case with Kazakhstan. The Central Asian state presents trade and investment opportunities for Europe, but the Union is also a vital market and source of technology for the country. Kazakhstan‘s economic and political success will largely depend on the country securing an alternative to trade and ties with Russia and China. A clear EU stance on Kazakhstan‘s democratic and human rights commitments would be mutually-beneficial: political stability rooted in democratic principles would strengthen the country‘s profile on the global stage, while the EU would gain a more reliable partner.
The EU-Kazakhstan Agreement on Partnership and Cooperation (APC) has been in force since 1999. It has ten-year tenure and is automatically renewable. In the mid and late 1990s, the EU signed similar agreements with most post-Soviet states. These accords provide a legal framework1 for economic cooperation between these countries and the EU and its member states, covering issues such as trade, business and investment, and legislative and financial cooperation. Under a APC, the parties grant each other most-favored-nation status, 2 which guarantees favorable customs duties and charges on imports and exports. Since almost half of Kazakhstan‘s exports go to the EU, the most-favored-nation clause is essential for Astana.
Political dialogue is a small but integral part of the APC. Annual meetings are held in Brussels within the framework of the high-level Cooperation Council. The Council‘s last gathering in July 2013 stressed political reform, trade, and regional security and cooperation but did not bring about ground-breaking decisions or initiatives. While the existing APC also includes standard commitments by the parties towards the rule of law and human rights, it does not include specific issues, actions or a timeline. For example, the annual Human Rights Dialogues between the EU and Kazakhstan were established only after the 2007 EU-Central Asia Strategy for a New Partnership came into effect and are not part of the current APC.
After several requests from the Kazakh government to launch negotiations on a new agreement, the 2009 Cooperation Council concluded that the existing APC did not reflect the extent of the cooperation between the parties and agreed on the need to reach a new agreement. In 2011, the European External Action Service (EEAS) began negotiations with Kazakhstan on an Enhanced Agreement on the third round of talks took place in July 2012 in Astana, and the fourth round is scheduled for October 2013.
A new APC is not legally required. Negotiations have been launched on the basis that both partners have changed and that the relationship has reached a new level. The EU‘s relations with the other Central Asian states continue to be regulated through the initial agreements. This emphasizes Kazakhstan‘s special status and fits with Astana‘s aspirations to play a greater international role and build strong ties with key global players. For the EU, negotiations will only make a positive difference if stronger prescriptions for reform are envisaged and progress is made on Kazakhstan‘s accession to the World Trade Organization (WTO). The latter would bring Kazakhstan closer to the EU in terms of trade and investment-related regulations and standards. The EU‘s and its member states‘ economic and trade interests are already largely accommodated in the current APC. Thus, a new agreement has to go further, notably paving the way for progress towards democratic reform, which would help increase Kazakhstan‘s stability and thus protect European investment in the long-term. But talks are taking place behind closed doors and it is still not clear how a new APC would differ from the current one.
Regardless of China and Russia‘s vicinity, the EU is Kazakhstan‘s leading trade partner and offers a market of over 500 million people. In recent years, Europe has accounted for almost half of Kazakhstan‘s foreign direct investment (FDI). Next to providing a continuous cash-flow, Europe is also an important partner when it comes to sharing know-how, expertise and technology. According to data from the European Commission, in 2012 EU exports to Kazakhstan were worth €7.1 billion, while the country‘s exports to the EU amounted to €20.1 billion.
Fuels and mining products represent over 90 per cent of Kazakhstan‘s exports to the EU. Over the last seven years, Kazakhstan‘s share of EU oil imports stood at around 5 per cent, 4 whereas the EU absorbed over 70 per cent of Kazakhstan‘s oil exports. While oil imports from Kazakhstan are substantial, the EU‘s dependence on Kazakh oil overall remains limited. EU member states such as Germany and France have struck deals with Kazakhstan with a view to exploiting and importing rare earths. Kazakhstan has important reserves of fossil fuels and rare earths but needs to attract technology and investment to exploit them and markets for its exports. Above all, it will need to modernize and diversify its economy away from a reliance on the export of a few commodities. The rule of law, upholding rights and fighting corruption are important conditions to encourage investment and entrepreneurship. This provides the EU with some leverage and an opportunity to promote reform while building on economic interdependence.
The EU should use its leverage in two ways. First, including commitments to democratic reform in the negotiations over an enhanced APC; and second, expanding cooperation on democratic reform as part of the new agreement, sustaining change over the long-term.
So far it has been foremost the European Parliament (EP) that has actively supported a values-oriented agenda in the negotiations. In October 2012, the EP adopted recommendations for the EEAS, the European Commission and the Council in which it sets standards for the negotiations, conclusion and implementation of the agreement. The EP report stresses ‗that progress in the negotiation of the new APC must be linked to the progress of political reform‘ in Kazakhstan and insists on the possibility of suspension of the agreement in case of gross human rights breaches.
The EP‘s proposals are rooted in the EU‘s 2012 Strategic Framework and Action Plan on Human Rights and Democracy, 7 which places values at the centre of the EU‘s relations with third countries and connect democracy and human rights with other policy fields, such as trade and investment. Whether the EU lives up to such standards in its relations with Kazakhstan will largely depend on the formulation of the democracy and human rights clause in the new APC and the inclusion of an actual suspension clause. Rhetorical reference to values in the current agreement has left many human rights violations overlooked and the country‘s backsliding on democracy rather unattended. The closing of media outlets, an unfair electoral environment and elections marred with violations of basic international standards, slow and poor implementation of judicial reform and a lack of separation of powers have marked Kazakhstan‘s backsliding on democratic reform. In order to make the best use of the EU Strategic Framework for Human Rights and democracy, the new APC should specify what constitutes a severe human rights breach thus providing a viable ground for the potential suspension of the APC, and include clearer democratic reform indicators. Introducing more precise language is challenging but not impossible, as long as the political will matches trade and investment interests.
While the European Parliament is not directly involved in the negotiations, it will vote on the agreement when talks are concluded, as well as monitor negotiations and the agreement‘s implementation, as guaranteed by the Lisbon Treaty. To ensure that its recommendations are implemented, the Parliament has requested the establishment of a comprehensive monitoring mechanism that would include regular reports to the EP during the course of the negotiations and after the APC is signed. But at the moment, no details have emerged about the format of these reports or the EP‘s options for acting on them. The functions, mandate and structure of the comprehensive monitoring mechanism should be made transparent from the outset, including a clear modus operandi between the EP‘s Foreign Affairs Committee and the EEAS. As the most outspoken actor in EU democracy and human rights promotion, the EP should be able to react effectively to developments in the negotiation process and remain proactive thereafter through a monitoring mechanism that serves as a tool of concrete influence.
Trade and economic relations between the EU and Kazakhstan are governed by the Agreement on Partnership and Cooperation signed in 1995 and entered into force in 1999.
The EU Strategy for Central Asia is also an important framework for relations between the EU and Kazakhstan.
EU-Kazakhstan bilateral trade and economic relations have been growing strongly since 2002.
Trade and economic relations between the EU and Kazakhstan are governed by the Agreement on Partnership and Cooperation (APC) signed in 1999. The agreement provides for a non-preferential trade agreement under which the parties grant each other 'most favored nation' (MFN) treatment with respect to tariffs whilst quantitative restrictions are prohibited in bilateral trade. The agreement also foresees progressive regulatory harmonization of national legislation and practices with EU trade-related standards, including technical regulations and sanitary requirements, protection of intellectual property rights, and customs issues.
The European Union and Central Asia: Strategy for a New Partnership is also an important framework for relations, as cooperation in trade and investment is one of the strategy's key targets.
Kazakhstan being classified as an Upper Middle Income country by the World Bank is in the main country categories which will no longer benefit from the EU's Generalized System of Preferences (GSP) scheme. The current GSP scheme will remain valid until 1 January 2014, thus giving economic operators time to adapt to the revised regime.
The EU has progressively become Kazakhstan's first trade partner, with about 49% shares in its total external trade (in 2011). EU trade with Kazakhstan is increasing rapidly, as is Kazakhstan's trade with the rest of the world. In 2011 EU exports to Kazakhstan were worth EUR 6.0 billion, while the imports from Kazakhstan amounted to EUR 22.7 billion, resulting in a deficit of EUR 16.7 billion. EU imports continue to be dominated by energy products (over 90% in 2011). The main EU exports are machinery, vehicles, and chemicals. Many of the exports are supplies for European oil and gas companies.
The EU is also an important partner in Kazakhstan's economic development, with assistance projects at the regional and national level.
The European Union also remains largest investor in Kazakhstan. During the period of 2000- 2010 the gross EU investment was about USD 56 billion. The major investments are in the energy sector. According to the National Bank of Kazakhstan in 2011 the total (foreign direct investment) FDI inflow was USD 19.850 billion. The EU had a 60% share with USD 11.869 billion.
The European Union encourages and supports Kazakhstan's accession to the WTO, as WTO accession can open Kazakhstan's way to integrating into the world economy by accepting and applying international trade rules and norms, which are likely to result in more intensive trade and investment relations.
EU trade with Kazakhstan is increasing rapidly; as is Kazakhstan's trade with the rest of the world. In 2008, Kazakhstan was the EU's 29th largest trading partner, and the 19th largest import market. The EU is Kazakhstan's largest trading partner, with 44.6% of its total exports and 24.6% of its imports in 2007.
- According to statistics agency of Republic of Kazakhstan (electronic resource) http://www.stat.kz
- Council of the European Union, ‘11th Cooperation Council, EU-Kazakhstan, 17 November 2009, Joint Statement’, (electronic resource) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/er/111290.pdf 15-19
- Official website of the Delegation of the European Union to Kazakhstan (electronic resource) http://eeas.europa.eu/delegations/kazakhstan/eu_kazakhstan/chronology/index_en.htm
- According to National bank of Republic of Kazakhstan (electronic resource) http://www.nationalbank.kz
- According to the Customs Committee of the Ministry of Finance of the Republic of Kazakhstan (electronic resource) http://www.customs.kz