UK and Kazakhstan

Baroness Stuart of Edgbaston Excerpts

Tuesday 5th January 2016 Westminster Hall

[Bob Stewart (Beckenham) (Con)]

I beg to move,

That this House has considered the relationship between the UK and Kazakhstan.

Happy new year, everyone. It is particularly good to see staff from the embassy of Kazakhstan here. I declare my personal interest as treasurer of the all-party parliamentary group on Kazakhstan.

Kazakhstan is massive. The whole of western Europe would fit into the state. It is the world’s largest landlocked country, and it stretches from the Caspian sea to China. Some 16 million people live across its vast lands. Kazakhstan is so vast that, if those people were evenly spread out, there would be only six in every square kilometre. In 1991, Kazakhstan was the last former Soviet republic to break from the Soviet Union. The former Communist party leader, Nursultan Nazarbayev, has effectively ruled the country since its independence—he is now 75 years old. He was first elected as the secretary of the Communist party of Kazakhstan in 1989, but he was re-elected after the break with the Soviet Union in 1991. Practically unopposed, President Nazarbayev has won—

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

I declare my interest as chair of the all-party parliamentary group on Kazakhstan. Does the hon. Gentleman agree that one of Kazakhstan’s problems is that its wealth is very much in its oil and that it needs to import many products? One of the challenges that the political leadership will have is in governance and the country’s relationship with its neighbours.

[Bob Stewart]

I thank my good friend, despite her being in opposition, for that intervention. I entirely agree that that is one of the problems that Kazakhstan has to address.

The President is very popular with ordinary Kazakhs and is credited with presiding over successful political, economic and social changes through the 1990s and impressive economic growth since 2000. Corruption is undoubtedly a serious problem in the country, with perceptions of Kazakhstan in Transparency International’s annual index being almost as bad as the perceptions of Russia. However, I note that Kazakhstan is not listed as a country of concern in the 2014 Foreign and Commonwealth Office annual report on human rights, unlike its neighbours Uzbekistan and Turkmenistan.

Clearly, President Nazarbayev retains a tight rein on power. In fairness, he argues that real democracy will come one day but that change must be gradual so as not to destroy the country’s stability. That makes pragmatic sense, considering the situation in many surrounding countries. Kazakhstan is doing its very best in a region where good governance is hardly endemic. After all, Kazakhstan is no different from countless other states across the world, most of which the United Kingdom considers to be both friendly and a trading partner.

With that in mind, I support Kazakhstan’s bid for a non-permanent seat on the UN Security Council in 2017, and I hope the Minister will do so, too. Kazakhstan has a great record on non-proliferation and disarmament, and it gave invaluable help to our Government during the withdrawal of British forces from Afghanistan. Kazakhstan also hosted two rounds of negotiations on the Iranian nuclear programme, which was important. Kazakhstan has also mediated in talks on Syria and Ukraine. Finally, the country has initiated the establishment of a nuclear weapons-free zone in central Asia—that treaty was signed on 8 September 2006 in Kazakhstan. In 2009, it was Kazakhstan that initiated the adoption of the UN resolution declaring 29 August as the International Day against Nuclear Tests. Kazakhstan has also closed down a nuclear test site, which was a legacy of the Soviet Union. That is an impressive record.

Oil is dominant in Kazakhstan’s economy. It provides a very large source of foreign investment, Government revenues and employment. Kazakhstan is the 17th largest oil-producing country in the world and has the 12th largest proven reserves of oil, too. Booming oil prices sustained Kazakhstan’s strong growth from 2000 to 2007, when the global financial crisis hit. GDP per capita, a measure of living standards, rose by 89% in real terms over those years. Growth slowed in 2008 and 2009, but picked up again in 2010. The World Bank notes that those rising income levels have led to rapidly falling levels of poverty, which is excellent news.

Our Prime Minister visited the Kashagan oil district on the Caspian sea in June 2013, taking with him representatives from 30 British businesses. The visit was billed as the beginning of a new strategic partnership with the United Kingdom. More recently, President Nazarbayev visited the UK last November to hold talks with the Prime Minister in No. 10 Downing Street. The President and Prime Minister discussed Russia and Ukraine. On Syria, they considered the vital importance of finding a political solution to the conflict and, concerning Daesh, the Prime Minister and President agreed that violent Islamist extremism poses one of the most significant threats to our generation and that there must be comprehensive efforts to defeat it. On Afghanistan, the two leaders agreed that rebuilding the economy would be a key guarantor of the country’s future stability. In short, Kazakhstan is clearly playing a full and responsible part on the world stage.

After the meeting, the Prime Minister announced that the two leaders had secured 40 deals worth £3 billion. The biggest deal was a memorandum of understanding with Kazakh state firm KazTransGas on the construction of a 1,500 km gas pipeline and four power plants in Kazakhstan. Will the Minister tell us about President Nazarbayev’s reforms and our partnership deals with Kazakhstan? What further plans are there to enhance our relationship with the Kazakhs?

I am told that there is a bit of a problem doing business in Kazakhstan. Consultant advisers such as McKinsey & Company suggests that it stems from factors such as the taxation system, lack of transparency, corruption and possibly the revision of original contracts, which is awful for businesses. Mindful that the UK is one of the top 10 investors in Kazakhstan, what are the Government doing to help fix such problems for our businesses?

As a member of the Defence Committee, I am particularly interested in how we can foster and grow a bigger military relationship between Kazakhstan and the United Kingdom. I gather that a certain amount of defence co-operation has taken place already, particularly on the UK’s withdrawal of troops from neighbouring Afghanistan. Just over two years ago, in November 2013, a military co-operation plan was signed between our Ministry of Defence and Kazakhstan’s. Matters decided included support for English language training, career courses in the UK and peacekeeping courses with the British military advisory training team based in the Czech Republic, as well as for programmes to professionalise the Kazakh armed forces and participate in KADEX, the Kazakhstan defence exhibition. Although I appreciate that the Minister is not part of the defence ministerial team, when he replies to this debate, can he update us on the status of our defence relationship with Kazakhstan?

In conclusion, I believe that the United Kingdom’s current and future relationship with Kazakhstan is of huge importance and will be beneficial to both. Kazakhstan might not be a democracy in the way that we experience democracy, but it is one in its own manner. We should help the country to evolve its own version of democracy even further, which will take time. Political, economic, social and military links between the UK and Kazakhstan will help each not only to understand the other better but to prosper.

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[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

For the sake of belt and braces, I repeat my interest as chair of the all-party group on Kazakhstan. I am beginning to wonder whether, whenever we discuss a country, we should start by being given a map showing that country in the centre. It would give us a bit more understanding of the geographical constraints and some of the problems and historical developments. In the case of Kazakhstan, that is particularly important now that we are establishing more exchange and relationship.

I think of a poignant quote from the chief executive officer of the Kazakh central bank, Berik Otemurat; I am happy to take pronunciation lessons after this debate. As someone whose name is permanently mispronounced, I am sure that it must be irritating for people to listen to us mispronouncing their names. He said of Kazakhstan’s current problems in the context of falling oil prices that the country has massive cash reserves, and it is a question of how to invest those; what is its relationship with hedge funds and all the new financial vehicles? He went on:

“I have always thought about ourselves”—

Kazakhstan—

“as a newly-born giant kid standing on the shore of an ocean of opportunities for the country, being afraid to make our first steps without breaking a leg. Before you run you have to learn how to walk.”

What is imperative is reaching out both to the people and to the Government. As for our definition of democracy, we hope that this is not just the beginning, but that democracy will continue. The Government are the people, and the people should provide the Government. Therefore, it is not always helpful to draw those kinds of separations.

However, the best thing that we can do to help in terms of reaching out and allowing this process, which in many ways is one of learning to walk, is around governance, including governance of party political processes. We have fantastic organisations here, such as the Westminster Foundation for Democracy, where we work across parties. We must recognise that there is a real difficulty post-1989 for countries to establish political parties, including a process whereby loyal opposition parties that have different ways of thinking about how things should be done can be established.

At the same time, when there is an electoral result of 97% for one party we just know that something is wrong; not even someone’s own family would vote for them with a margin of 97%. That takes us to the processes of transition. One mistake that we sometimes make is that we think that just because someone has a ballot paper and because there are ballot boxes, that in itself means there is a democratic process; that may be one of my criticisms of the Organisation for Security and Co-operation in Europe when it carries out election monitoring. Kazakhstan has gone through the process, but to quote T.S. Eliot, “You had the experience but you may have missed the meaning”. For me, the meaning always is that the people actually change those in government in a peaceful process. So, it is not the first election or even the second election that matters; what matters for me is always the first peaceful transition from those who have been in power to the Opposition, which replaces them. In that sense, when we look at that whole part of the world post-1989, we see that most of the countries are, in some way or another, struggling with that process.

We need to do what we can to help with that process. There is a reason why I think Governments and bureaucracies are so important. I always say we need bureaucracy and such things as a civil service and all the other institutions because they are the organisations that stop things from going seriously wrong when there is a crisis. Therefore, we need those fall-back positions.

There are two areas that I plead to the Minister about regarding our relationship with Kazakhstan. One is financial governance. There are some serious problems if a country has huge cash reserves, is beginning to look at greater involvement with hedge funds and has a big national sovereign fund. We also read about the emergence of the Bitcoin market. If the financial markets are ungoverned spaces, we just know that something will go wrong.

The second area is about the times when a country experiences very high inflation while also experiencing falling oil prices. Those periods will have some economic problems, which—again—we can provide some significant help with, by supporting those structures that I have mentioned. What will hold us together is membership of the big international organisations, whether it is the World Trade Organisation, the International Monetary Fund or the United Nations. Those structures have rules which we all must comply with. Therefore, it is as much in the interests of the people of Kazakhstan as it is in our interests that such rules-based processes and a shared understanding of those rules are entrenched, so that the rules are not something that countries must learn to evade or avoid, but instead help people to govern their own country and to deal with other people.

Building that capacity—whether it is with the OSCE or the WFD, or through bilateral support of our businesses—is something that we must do more of, particularly in those parts of the world that will become increasingly important to us all. It is in relation to one of those countries—Kazakhstan—that I am glad that parliamentary colleagues, both in the Commons and in the Lords, have decided that an all-party group should be formed. Therefore, I hope that, in the end, we will learn from each other, and if we cannot do so I hope that we will at least understand each other better.

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[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr Tobias Ellwood)]

It is a pleasure to serve under your chairmanship, Mr Davies. I wish you and hon. Members a happy new year. It is a real pleasure to respond to this debate on our relationship with the important country of Kazakhstan. I congratulate my hon. and gallant Friend the Member for Beckenham (Bob Stewart) on securing the debate. I am pleased to see the right hon. Member for Birmingham, Edgbaston (Ms Stuart) in her place. She is co-chair of the all-party group on Kazakhstan with Lord Astor. That is formidable cross-party representation and a reflection not only of the interests of Parliament, but of the bond between the two countries.

I pay tribute to the Kazakh ambassador, His Excellency Erzhan Kazykhanov. His hair went a little bit greyer, as did all of ours, in preparing for the presidential visit to this country and the Prime Minister’s visit to Kazakhstan in 2013. Both visits were extremely successful and were examples of how our two countries are working together far more closely. I had the pleasure of visiting the country last September. As my hon. Friend the Member for Beckenham articulated, this landlocked country is the size of Australia—it is situated between Russia and China; it is where the apple is said to have originated and where horses are claimed to have first been domesticated; and it lived under the tsarist shadow and then the Soviet shadow—and there is no doubt that it is taking significant steps in becoming a regional and global power. The recent visit by the President is testament to the growing bond between our two countries. During my visit, the presidential visit here and the Prime Minister’s visit in 2013, the hand of friendship has been clearly extended to Britain, and we should embrace it.

For people who have not been to the country and are not familiar with the region, the chances are that when they think of Kazakhstan, their thoughts might be out of date. It is a proud, rich and extremely large country that has escaped the shackles of its Soviet past and is modernising. It is confident and willing to do business with traditional trading partners in Moscow and newer partners such as China, south-east Asia, the west and Britain. Commercially and politically, the Kazakhstan of today is on the verge of becoming a significant player on the regional and international stage. It boasts, as we have heard, an impressive range of mineral wealth, from oil and gas to ferrous and non-ferrous metals, and a space launch facility, which a Briton has taken advantage of to get up into the International Space Station—I pay tribute to Tim Peake, who I had the pleasure of serving with in the Royal Green Jackets, and I hope that Members will wish him well.

The country has changed hugely, and when I visited the capital I saw that its skyline was akin to that of Dubai, with many of the skyscrapers designed by British architects. Kazakhstan has also decided to fast-forward its integration into the international rules-based system on which the world’s security and prosperity depend, reducing the role of the state in its economy through a substantial privatisation programme. Furthermore, the introduction of English contract law as part of the development of the Astana international financial centre makes the country one to watch—or, for someone in business, a country to consider visiting before being beaten to it by competitors in other countries.

Kazakhstan is about to become a member of the World Trade Organisation, and it aspires to membership of the G30 and the OECD in coming years. As has been mentioned, an enhanced partnership and co-operation agreement with the EU will shortly be concluded, enabling a broader and closer partnership.

[Ms Gisela Stuart]

I am grateful in particular for the Minister’s comments about the WTO. Are contract law and WTO membership both things that will require anti-corruption measures to be addressed very seriously? We have a mutual interest in Kazakhstan meeting those requirements, which will also enable our companies to deal with the country.

[Mr Ellwood]

I absolutely concur that a strength of our relationship with Kazakhstan will be, with our experience, to encourage the country to sign those agreements and to engage with the international rules that will allow and encourage further commercial activity and the bond between our two countries. Only when businesses are confident that there is that positive and transparent environment will we be able to enhance the commercial relationship that the right hon. Lady is espousing.

I am grateful that the President was able to make his visit to the United Kingdom in November, which confirmed the UK as a partner of choice as he seeks to implement governance and rule of law reforms, in line with universal rights reforms as well. Another important element of our bilateral relationship, which I know is of particular interest to my hon. Friend the Member for Beckenham, is the military relationship, which he raised in relation to various matters. He articulated the need for political structures and mentioned President Nazarbayev’s reforms, the challenges in doing business and our commercial and military relationships. I will address those one by one.

First, the success of any country relies on good governance and reform. While acknowledging the continuing challenges faced, we should recognise that Kazakhstan has made great efforts to improve its governance structures and engage accordingly as the best way to promote reform. In May, President Nazarbayev launched a far-reaching programme of reforms. These included changes to the legal system, the civil service, the economy, and public accountability. These will be implemented through his 100 concrete steps—essentially, milestones for each of the five reform areas that hon. Members have mentioned today.

I recognise, as other hon. Members did in their contributions, that although Kazakhstan has made real progress on its human rights record, there is further work to be done, in particular to avoid the risk that progress in one area might be offset by retrograde developments in others. We rightly have high expectations for a country that is a leader in the region and seeks a greater international role.

During the President’s visit in November, the Prime Minister discussed Kazakhstan’s progress on political and societal reform, including creating a more permissive environment for non-governmental organisations. The President outlined some of his thinking on the reform agenda and spoke of the creation of new structures designed to tackle corruption. For our part, we plan to invite Kazakh Government representatives to our anti-corruption summit in May. Our embassy in Astana is one of a small number that contribute to regular meetings of the Kazakh Investment Council, where transparency issues are discussed. Hon. Members will be pleased to hear that, on taxation, Her Majesty’s Revenue and Customs is working hard on a revised double taxation agreement with the Kazakhs. Those discussions will be completed shortly.

On the commercial relationship, let me answer hon. Members’ questions about where we stand on the various partnership deals since President Nazarbayev’s visit to the UK last year. A wide variety of commercial memorandums of understanding were signed during the President’s visit, ranging from joint exploration studies to the forming of a task force to facilitate new partnerships between Kazakh and UK companies in the oil and gas sector. The target is to form 10 to 15 new partnerships in the sector by 2017. We are working hard across Government to follow up swiftly. For example, in the gas sector, UK Trade & Investment is offering in-country assistance to the British company, Independent Power Corporation, to help to take forward its programme.

To provide the maximum support to British businesses, my right hon. Friend the Prime Minister has appointed Lord Astor as trade envoy for Kazakhstan, so he is not just co-chair. I pay tribute to Charles Hendry for the work he has done. He will now work with the country as it hosts EXPO 17 and will act as the commissioner for the United Kingdom. Both will play an active role in the UK’s thriving bilateral relationship with Kazakhstan, and they are both planning to visit the country next month.

We will continue to support British businesses wanting to trade with Kazakhstan across sectors, from energy to infrastructure. The right hon. Member for Birmingham, Edgbaston commented on the falling oil prices. That underlines the need to not rely on hydrocarbons, but to diversify. As my hon. Friend the Member for Beckenham noted, the opportunities are many. For example, the two-way trade in the region is worth about £1 billion per annum. Over the next 10 years, expenditure on major new oil and gas developments in Kazakhstan is expected to exceed £60 billion. We want to be a part of this exciting investment. Indeed, the oil and gas programme is the highest grossing programme globally for UKTI, having already delivered £6.6 billion of business wins for the UK.

On military relations, the Ministry of Defence, through the defence attaché in Astana, has built an extensive network of contacts throughout the Kazakh armed forces. There have been reciprocal visits at the highest level of chiefs of defence staff, and a visit by the Kazakh Defence Minister in 2013. My hon. Friend the Member for Beckenham raised the issue of officer cadets from Kazakhstan being trained in the UK. Our MOD colleagues have been working hard on this. I am pleased to say that it is now making real progress and our embassy is currently following up with the Kazakhs.

The current focal point of defence engagement with Kazakhstan is the Steppe Eagle exercise, now in its 13th year, with the aim of developing the Kazakh forces’ capabilities to deploy on peacekeeping missions, which my hon. Friend mentioned. In July 2016, it will take place in the UK for the first time, and we look forward to Kazakhstan taking part in its first UN peacekeeping role in the near future. Exercise Steppe Eagle is clear evidence of Kazakhstan’s growing international ambitions and of the positive contribution it can make on the international stage.