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Black blood: a history of Kazakhstan’s oil sector

This new book provides a comprehensive overview of Kazakhstan’s oil business, but skips over the uncomfortable truth of privatisation deals.

June 2013: Workers from the Bolashak oil plant near Atyrau in Kazakhstan await the arrival of British Prime Minister David Cameron and Kazakhstani President Nursultan Nazarbayev. Photo: Leon Neal/PA Archive/PA Images. All rights reserved.

A review of Oleg Chervinsky’s The Black Blood of Kazakhstan: The Oil History of Independence (Chornaya Krov’ Kazakhstana: Neftyanaya Istoriya Nezavisizmosti) Soz & DS, Almaty, 2017.

When speaking about Kazakhstan, you have to mention oil. This is the sector that has shaped the country’s political economy since independence. And oil is precisely where this book, the first and only overview of the evolution of Kazakhstan’s oil industry to date, begins. As the author explains: the book’s title symbolises oil as the blood that flows through Kazakhstan’s financial veins. Indeed, with his 325-page summary of the main milestones in Kazakhstan’s oil history, Oleg Chervinsky, a veteran oil journalist, delivers a comprehensive overview of the sector to date.

Published by a private foundation owned by political analyst Kazakh Dosym Satpayev, in cooperation with local media outlets Ratel and Petroleum, the book is an interesting and easy read. Despite being targeted to a local audience, it also clearly aims to be accessible for people outside the oil sector. Even for Russophone foreigners, the book is a light read: the stories are well told, dotted with humour and interesting facts. But the book disappoints if the reader expects to find controversial revelations in its pages.

Having covered the oil industry as a journalist for over two decades, Chervinsky shares some of the best gems he has collected through the years. Indeed, the book contains a large number of thought provoking quotes and stories, some of which cannot be found elsewhere.

One of these quirky stories describes a French delegation’s visit to Kazakhstan in the early 1990s to discuss some important deals with government representatives. While the French arrived for an informal meeting in business casual attire, local officials showed up in tracksuits and slippers. “The Frenchmen said we would meet at the dacha!” a local government official utters in disbelief. Through Chervinskii’s skilful writing, the reader can feel the French businessmen’s likely shock at the scene. Such tales, which are frequent in the book, provide a glimpse into Kazakhstan’s business environment, showing how foreign investors had to adjust to the specific dynamics of doing business in the country.

“In Kazakhstan, we have tens of multimillionaires. We started the legalisation of private property and assets, and I hope that (the multimillionaires) will disclose their income…”

Another example is the exchange between Kazakhstan's President Nursultan Nazarbayev and his Russian counterpart Boris Yeltsin in a meeting in Moscow in the early 1990s. The exchange perfectly depicts the complicated relationship between the two neighbouring countries during the first years following the fall of the Soviet Union. In his memoirs, Chervinsky reports, Nazarbayev wrote about Yeltsin’s proposal that Kazakhstan “give Tengiz (oilfield) to Russia. I looked at him, and realised he was not joking. I answered: ‘Well, if Russia gives us the Orenburg region, as Orenburg was formerly the capital of Kazakhstan,’ ‘Does Kazakhstan have territorial claims to Russia?’ Yeltsin asked. I answered: ‘No.’ He laughed, and so did I.”

The book is divided into 25 chapters, each covering a single year from 1991 to 2016. At the end of each chapter, the author provides a useful table showing the rate of the Kazakh tenge to the US dollar and the average yearly price of a barrel of oil. This financial overview provides a practical, quantifiable background for understanding the economic obstacles the country faced in the period following independence, and how much the price of oil affected the sustainability of Kazakhstan’s budget.

The book maintains an apologetic narrative regarding the privatisation of Kazakhstan’s oil sector. The main argument is that oil assets had to be sold to any eager investor, as the authorities had no alternative but to accept whatever offer they could get. Thus, the author misses a chance to delve deeper into the kleptocratic privatisation schemes of the 1990s, which forever marred people’s trust in the country’s leadership and created a class of unaccountable oligarchs. The “Kazakhgate” scandal involving James Giffen, a former advisor to Nazarbayev accused of funnelling over $80m in bribes on behalf of four US oil companies into secret Swiss bank accounts allegedly owned by the president’s family, receives only a brief mention despite its world-wide resonance.

In another quote by Nazarbayev, the shadowy world of the privatisation process comes to light: “In Kazakhstan, we have tens of multimillionaires. We started the legalisation of private property and assets, and I hope that (the multimillionaires) will disclose their income... But at the beginning of the privatisation there were violations.” Yet these alleged violations remain largely untouched in the book.

Chervinsky succeeds in his quest to describe the main historical nodes of the Kazakh oil boom and inform the reader on the background of some high-level decisions, coloured with informative and sometimes even amusing details. But one crucial aspect of the country’s oil sector is conspicuous by its absence: the oil workers. If oil is the blood that flows through Kazakhstan's veins, the oil workers (neftyaniki) must be the heart that pumps it through its body.

The book does mention, although sporadically, labour disputes, but dedicates only a few paragraphs to the Zhanaozen events of 2011, with nine lines on the 16 December shootings, when security forces opened fire on unarmed striking workers who had led a rally on the oil town’s central square. Despite the controversy surrounding these tragic events, a book on Kazakhstan’s oil history should not overlook their magnitude and meaning for both the sector and the country's political developments. The author’s silence seems in line with a country-wide custom of self-censorship on sensitive political topics.

The potholes are gone, a middle class has emerged, and yet, the story is radically different in the suburbs and nearby villages

In the end, the reader is left with a historical inventory of who sold what to whom at what price, spiced up with some political side-deals. But Chervinsky says little on how these deals have affected Kazakhstan as a country, or its people, or how the authorities sold off the country’s natural resources while lining their pockets with billions of dollars.

The book does, however, remind the reader of the distance that Kazakhstan has covered since independence. The oil boom has definitely changed the country, fuelling budget expenditure and social transformations. When I first arrived in Almaty in late 2000, there were potholed streets crowded with rusty Ladas and Volgas from a bygone era. Today, traffic in the southern capital – as Almaty is known colloquially – is dominated by brand-new Mercedes, Lexus and Audi. The potholes are gone, a middle class has emerged, and yet, the story is radically different in the suburbs and nearby villages, where homes with outdoor toilets can only be accessed by dirt roads. Further out in the countryside, many people still live without running water.

Black Blood’s pervasive self-censorship would warrant a complete rewrite, particularly if translated for an international audience, to include the shady privatisation deals at the heart of social inequality in today’s Kazakhstan, as well as to account for the oil workers’ plight and agency. But as a first in its genre, it is a welcome contribution that may spark an important debate within Kazakhstan about the country’s wealth, and who benefitted from it.

 

About the author

Mia Tarp Hansen is a Danish political analyst and NGO-professional working on Kazakhstan, Kyrgyzstan and Tajikistan. She tweets @AlmatinkaMia.

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