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Balancing wealth and fairness: The EU’s strategic alliance with Kazakhstan on raw materials

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The Memorandum of Understanding (MoU) signed on November 7, 2022, between the European Union (EU) and Kazakhstan marks a strategic partnership aimed at strengthening ties in the areas of sustainable raw materials, batteries and renewable hydrogen value chains. This collaboration highlights the EU’s keen interest in tapping into Kazakhstan’s vast reserves of critical raw materials, which are crucial for the EU’s transition to a more sustainable and resilient economy.

Kazakhstan’s rich resource base

Kazakhstan’s significance as a strategic partner in the realm of critical raw materials cannot be understated. The country is abundantly endowed with a variety of mineral resources, ranking highly in global reserves for several essential commodities:

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  • Oil and gas: Kazakhstan holds the ninth-largest proven oil reserves and the sixteenth-largest gas reserves globally.
  • Minerals: It leads the world in explored reserves of zinc, tungsten, and barite, and holds significant positions for silver, lead, chromites, copper, fluorite, molybdenum and gold.
  • Uranium and coal: Kazakhstan possesses the second-largest uranium reserves and the eighth-largest coal deposits worldwide.

EU’s role in Kazakhstan’s extractive sector

Historically, the EU has been a pivotal player in Kazakhstan’s extractive sector. Since Kazakhstan gained independence in 1991, the country has attracted approximately USD 420 billion in foreign direct investment (FDI), with about half directed towards the extractive industries, particularly oil, gas, and metal ores. The EU remains the largest foreign investor and Kazakhstan’s most significant trade partner, accounting for 48% of total FDI and 40% of Kazakhstan’s external trade in 2018.

Challenges of the resource curse

Despite these vast natural resources and substantial foreign investment, Kazakhstan struggles with what economists term the “resource curse.” This phenomenon suggests that countries rich in natural resources often experience slower economic development due to factors like corruption, inefficiency, and over-reliance on the extractive sector . In Kazakhstan, foreign investors, including multinational corporations like Chevron, Exxon Mobil, Shell, Eni, and Total, have reaped significant profits from the country’s oil and gas fields under terms often criticized for being unfavorable to the Kazakhstani government and people.

Corruption and transparency issues

The resource curse in Kazakhstan is compounded by issues of corruption and lack of transparency in the extractive sector. The country ranks poorly on both the Human Freedom Index and the Transparency International Corruption Perception Index, reflecting systemic corruption and limited civil freedoms . Efforts to disclose contracts and ensure transparency in resource management have been slow and met with resistance, leaving the public largely uninformed about the actual benefits derived from their natural resources .

Implications for future EU-Kazakhstan partnerships

Given this context, the EU’s future engagements with Kazakhstan in the critical raw materials sector must prioritize transparency, fairness, and the equitable distribution of benefits. This involves not only advancing technological and clean energy initiatives but also ensuring that local communities and the broader population of Kazakhstan benefit from these developments. The aim should be to break the cycle of the resource curse by fostering sustainable development that includes robust governance and accountability measures .

In conclusion, while the partnership between the EU and Kazakhstan offers substantial potential for economic and technological advancement, it is crucial that such collaborations are built on principles of transparency and equity to ensure that the benefits of Kazakhstan’s rich natural resources are shared broadly and contribute to sustainable development.

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