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After Vladimir Putin’s invasion of Ukraine, global outrage prompted American investors and companies of all sizes to leave Russia. As companies continue to divest from the Russian market, some countries neighboring Russia have rushed to attract Western investors. Kazakhstan, a strategically important Central Asian country, has lobbied hard to attract foreign funds, but the behavior of its kleptocratic officials and government corruption have raised alarm bells for many investors.


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Located between China and Russia, Kazakhstan has been recognized since the Soviet era for its unique power position and its wealth of natural resources. Not only does the country produce more than 40% of the world’s uranium, but it is also the largest oil exporter in Central Asia. For years, these resources and associated investments have served as a lifeline for Kazakhstan.

Despite its war resources, greedy oligarchs notorious for siphoning off stolen assets have prevented Kazakhstan from fully integrating into the global market. However, in recent years, Kazakh leaders have worked overtime to rehabilitate the nation’s image on the world stage. Kazakh President Kassym Jomart-Tokayev has vowed to stamp out systemic corruption and quickly modernize the Central Asian country. To support this effort, his administration established Kazakh Invest, an organization dedicated to promoting business opportunities for foreigners. More recently, the Kazakh government urged members of Congress to support a bill that would grant them Permanent Standard Trade Relations (PNTR), a preferential trade status that would encourage U.S. investment in Kazakhstan.

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Despite the Kazakh government’s public campaign to attract foreign investors, some commentators and analysts still doubt that the country’s leaders are serious about instituting real reform. Manfred Stamer, senior economist at Euler Hermes, a trade credit insurer, highlighted how security issues continue to pose serious risks for foreign companies working in Kazakhstan. Following political unrest that sparked violent protests across the country, Stamer said The Wall Street Journal that “such an event reminds investors of the risks of doing business there. You should expect that this is not a unique case. Similarly, Ed Chow, a former Chevron executive, noted, “if you’re a western oil company, your risk profile may have just changed”.

Other experts have expressed serious concerns about persistent government and judicial corruption that has proven difficult to eradicate. The United States Department of State has warned that “despite institutional and legal reforms, concerns remain about corruption, bureaucracy, and arbitrary law enforcement.” IntegrityRisk, a financial advice watchdog, has warned that Kazakhstan’s compromised legal system and corrupt bureaucratic gatekeepers make doing business in Kazakhstan risky. And there are countless examples to give credence to these concerns.

In 2013, for example, a Swedish arbitration panel ruled that the Kazakh government had illegally seized assets from Tristan Oil, a company backed in part by US investment fund Argentem Creek Partners. It granted $500 million to the owners of Tristan Oil, but Kazakhstan continued to fight tooth and nail, by all possible means, to prevent the funds from being disbursed. In February 2022, a decision by Italy’s Supreme Court re-recognized the award, paving the way for further enforcement efforts. The fight will likely continue until Kazakhstan decides to recognize its obligations – with the new regime yet to comment on whether it intends to settle.

Also in 2013, World Wide Minerals Ltd (WWM), a Canadian company, alleged that Kazakhstan had wrongfully confiscated and forcibly sold its local assets. After a tumultuous court battle, WWM finally won $40 million in damages in 2020. Kazakhstan had refused to pay for seven years.

The American investor, Devincci Sarah Hourani, founder of the Caratube International Oil Company, suffered a similar ordeal in 2017. After a long legal battle with the Kazakh authorities, Hourani obtained more than 39 million dollars “for the illegal expropriation of its petroleum contractual rights by Kazakhstan”. .” The Washington, D.C.-based International Center for Settlement of Investment Disputes (ICSID) found that Hourani’s oil business had its contract illegally terminated by the Kazakh Ministry of Energy and Mineral Resources and Consolidated Contractors (CCC).

If the government of Kazakhstan is serious about attracting long-term investment from the West, it will have to implement fundamental changes, and that starts with taking the fight against corruption seriously and honoring agreements with foreign investors. Until then, US investors should rethink the risk of doing business in Kazakhstan.

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