The widespread practice of illicit acquisition of a business or part of a business in the former Soviet states, known as ‘reiderstvo’ or asset-grabbing, is a major risk that disincentivises investment in the region.

It is distinct from the way corporate raiding occurs in the West and enabled by factors such as corruption and weak protection of property rights.

This roundtable will assess the practice of corporate raiding in Russia, Ukraine and Kazakhstan: its evolution over time, knock-on effects and potential solutions. The speakers will also address the implications for the UK legal system and possible policy responses.

Kazakhstan is at a turning point in its history. At face value, at least, Central Asia’s wealthiest state has embarked on a bold experiment following the March 2019 decision by its founding father and long-standing ruler, Nursultan Nazarbayev, to resign from the presidency and initiate a managed political succession. A generational transition of this nature, untried in other former Soviet republics, brings with it high stakes. As well as looking to secure his own legacy, having dominated the country since before independence in 1991, Nazarbayev seeks to ensure Kazakhstan does not depart from the course he has set, while safeguarding regime stability in the context of multiple and evolving domestic and international challenges. This is easier said than done.

The uncertainty around this project is substantial, especially considering a ‘rowback’ decree just seven months after Nazarbayev’s resignation, limiting the powers of his anointed successor, Kassym-Jomart Tokayev. How long can Tokayev credibly remain president considering such a transparent undermining of his authority? Is Nazarbayev, in fact, grooming his daughter, Dariga Nazarbayeva, another relative or a power player from outside the family for the leadership in the longer term? Will the ‘Kazakh tandem’ of Nazarbayev and Tokayev function effectively, or will tensions and conflicts arise between them as many claim is happening already? How will the leadership cope with the protest mood now manifest on the streets of Kazakhstan, and address the political and socio-economic grievances fuelling this discontent? How might the political transition play out if Nazarbayev were to suddenly exit the political scene altogether?And what is the long-term transition plan for the time when Nazarbayev has departed, and how effective will it be?

As Kazakhstan enters uncharted territory, the purpose of this report is twofold. First, to make the case for the West to devote more attention to Kazakhstan. The country’s relative importance in Central Asia, and as the constant focus of intense attention from China and Russia, suggests that the West is wrong to direct so little time and diplomatic effort and so few resources towards it. This is not so much a miscalculation (that would be to assume there had been a calculation in the first place) as a misstep through neglect, presupposing that the future will resemble the present – with Kazakhstan remaining stable internally, relatively inconsequential geopolitically but nevertheless a friendly ally to the West. In fact, the country’s trajectory over the next few years is of potentially strategic import. This is because even its political semi-transition presents the West with a rare opportunity to push back against the global rise of authoritarianism, in a state that is open to rational argument and economic logic.

The second function of the report is to serve as a well-intentioned message to the leadership of Kazakhstan. The research undertaken by the report’s eight authors shows that Kazakhstan is at risk of failing to achieve the goals its leadership has set for the country. As significant as it has been, the partial stepping aside of Nazarbayev by no means guarantees the modernization and renewal that he and his successor have promised. Far deeper political, economic and social reforms will be needed if Kazakhstan is to meet the growing challenges to its stability, prosperity and development. Street protests since Nazarbayev’s resignation have demonstrated a level of popular disaffection far higher than the authorities acknowledge. The leadership needs to bridge the disconnect between the rulers and the ruled and start listening to its people.

To avoid slipping into decline, and to resist external pressures and geopolitical overtures that could diminish the sovereignty that its leadership is so determined to safeguard, Kazakhstan needs new faces – innovators and reformers – throughout every level of the administration, as well as new ideas. This report is intended to help with the ‘ideas’ part of that proposition. It also includes a series of recommendations for Western governments and institutions and for the Kazakhstan government. 

Leaders of the resource-rich Central Asian region have the propensity to remain in power until mortality dictates otherwise. Much like the UK and Brexit, however, few wanted to see Central Asia’s longest reigning ruler, Kazakhstan’s septuagenarian president Nursultan Nazarbayev, crash out without a deal.

The sudden departure of the country’s official leader of the nation with no clear succession plan could have led to investment chaos, intra-elite fighting and the unravelling in a matter of months of a system he had built over decades, à la Uzbekistan following the death of long-serving autocrat Islam Karimov in 2016.

In order to avoid just such a ‘no-deal’ scenario and ensure the continuity of his policies, in March Nazarbayev carefully choreographed his own resignation and the election of a hand-picked successor, President Kassym-Jomart Tokayev, while retaining plum positions and powers for himself.

Tokayev’s assumption of the presidency was accompanied by protesters in the streets, increasing wealth inequality, rising Sinophobia among rank-and-file Kazakhstanis, a hard-to-kick economic dependence on oil revenues and a lack of clarity as to which leader—the old or the new president—would actually be calling the shots. But, amidst this plethora of concerns, as argued in a recent Chatham House report, Kazakhstan: Tested by Transition, one bright spot has been the tangible growth of intra-Central Asian cooperation, with the Nazarbayev-Tokayev ruling duo appearing eager to improve the regional dialogue.

Kazakhstan has long shaped its identity as a Eurasian state that has acted as more of an intermediary between Russia and Central Asia than as an integral part of the Central Asian region. But since 2017, in particular, Kazakhstan has been increasingly looking for opportunities to boost hitherto weak cooperation with its Central Asian neighbours. While this is first and foremost owing to the liberalization of Uzbekistan’s large market, there are other factors at work that get less airplay.

One such factor is a perceptible disentangling from the Kremlin’s policy directions as Kazakhstan has come to view Russia’s foreign policy as increasingly neo-colonial. The example of the Russia-led Eurasian Economic Union is in many respects more off-putting than inspiring, and Nur-Sultan does not want to be locked tightly into the union’s economic orbit. And in distancing itself slightly from Moscow in order to limit Russian leverage in its affairs, Nur-Sultan has shown itself to be more open to Central Asian regional initiatives.

As part of the leadership’s plan to offset oil dependence, Kazakhstan aspires to become the transport, telecommunications and investment hub for Eurasian integration. The intense focus on connectivity and the development of logistical arteries and infrastructure could have the knock-on effect of boosting trade within the Central Asian region and reducing transit times, which are currently greater than in most other parts of the globe.

In addition, demographic trends and educational shifts that favour ethnic Kazakhs, together with a growing ethno-nationalist narrative, have allowed the state’s leadership to identify more closely with Kazakhstan’s common Central Asian heritage and, by extension, a common Central Asian region—although Kazakhstan’s leadership still remains eager to demonstrate that the country is not just another ‘stan’. The coming to power of President Mirziyoyev in Uzbekistan appears to have made Kazakhstan more aware of the interconnectedness of the two countries in terms of geographical location and potential economic complementarities, as well as culture and history.

Not least, there is a growing recognition among the Central Asian states themselves—including isolationist Turkmenistan to a degree—that deepening regional trade is mutually beneficial, especially given the constraints associated with Russia’s economic problems. The strengthening of Kazakhstan’s ties with Uzbekistan has slowly kick-started regional cooperation as a whole: trade turnover between the Central Asian states in 2018 grew by 35 per cent on the previous year.

But both Kazakhstan and Uzbekistan are keen to stress that there is no discussion of integration or institutionalization, not least because previous attempts at integration have been overtaken by Russia, leaving Central Asia without its own coordinating body.

The official consensus in Kazakhstan is that Uzbekistan’s economic reforms after years of isolation will spur ‘a healthy rivalry’ and ultimately boost Kazakhstan’s own economy, in so far as the competition for foreign investment will require both countries to work harder to improve their respective business and regulatory environments.

At the unofficial level, however, some Kazakhstani analysts view Uzbekistan’s rise as potentially unprofitable, given the possible diversion of some investments and market activity from Kazakhstan to Uzbekistan. Moreover, Uzbekistan has the advantage of having undergone a clear change of executive, while it remains unclear which developments await Kazakhstan once First President Nazarbayev leaves the scene for good.

It can certainly be argued that Uzbekistan does pose a potential threat in the long-term to Kazakhstan’s entrenched position as Central Asia’s economic powerhouse: Uzbekistan’s population is one-and-a-half times bigger, even if its nominal GDP is three times smaller. Uzbekistan has a bigger market and a well-developed industrial sector, and is already the regional leader in terms of security. But it is not as though the world’s interest is moving from Kazakhstan to Uzbekistan; rather, Uzbekistan is in the process of trying to catch up.

Despite this relatively upbeat picture, Kazakhstan’s combined trade with the other Central Asian states accounts for less than 5 per cent of its total volume of foreign trade—a figure that cannot begin to equal its trade with Russia, China, and Europe. As a result, Kazakhstan will continue to give greater importance to positioning itself as a global player than as a regional leader.

This article was originally published in The Diplomat.

The widespread practice of illicit acquisition of a business or part of a business in the former Soviet states, known as ‘reiderstvo’ or asset-grabbing, is a major risk that disincentivises investment in the region.

It is distinct from the way corporate raiding occurs in the West and enabled by factors such as corruption and weak protection of property rights.

This roundtable will assess the practice of corporate raiding in Russia, Ukraine and Kazakhstan: its evolution over time, knock-on effects and potential solutions. The speakers will also address the implications for the UK legal system and possible policy responses.

Kazakhstan is at a turning point in its history. At face value, at least, Central Asia’s wealthiest state has embarked on a bold experiment following the March 2019 decision by its founding father and long-standing ruler, Nursultan Nazarbayev, to resign from the presidency and initiate a managed political succession. A generational transition of this nature, untried in other former Soviet republics, brings with it high stakes. As well as looking to secure his own legacy, having dominated the country since before independence in 1991, Nazarbayev seeks to ensure Kazakhstan does not depart from the course he has set, while safeguarding regime stability in the context of multiple and evolving domestic and international challenges. This is easier said than done.

The uncertainty around this project is substantial, especially considering a ‘rowback’ decree just seven months after Nazarbayev’s resignation, limiting the powers of his anointed successor, Kassym-Jomart Tokayev. How long can Tokayev credibly remain president considering such a transparent undermining of his authority? Is Nazarbayev, in fact, grooming his daughter, Dariga Nazarbayeva, another relative or a power player from outside the family for the leadership in the longer term? Will the ‘Kazakh tandem’ of Nazarbayev and Tokayev function effectively, or will tensions and conflicts arise between them as many claim is happening already? How will the leadership cope with the protest mood now manifest on the streets of Kazakhstan, and address the political and socio-economic grievances fuelling this discontent? How might the political transition play out if Nazarbayev were to suddenly exit the political scene altogether?And what is the long-term transition plan for the time when Nazarbayev has departed, and how effective will it be?

As Kazakhstan enters uncharted territory, the purpose of this report is twofold. First, to make the case for the West to devote more attention to Kazakhstan. The country’s relative importance in Central Asia, and as the constant focus of intense attention from China and Russia, suggests that the West is wrong to direct so little time and diplomatic effort and so few resources towards it. This is not so much a miscalculation (that would be to assume there had been a calculation in the first place) as a misstep through neglect, presupposing that the future will resemble the present – with Kazakhstan remaining stable internally, relatively inconsequential geopolitically but nevertheless a friendly ally to the West. In fact, the country’s trajectory over the next few years is of potentially strategic import. This is because even its political semi-transition presents the West with a rare opportunity to push back against the global rise of authoritarianism, in a state that is open to rational argument and economic logic.

The second function of the report is to serve as a well-intentioned message to the leadership of Kazakhstan. The research undertaken by the report’s eight authors shows that Kazakhstan is at risk of failing to achieve the goals its leadership has set for the country. As significant as it has been, the partial stepping aside of Nazarbayev by no means guarantees the modernization and renewal that he and his successor have promised. Far deeper political, economic and social reforms will be needed if Kazakhstan is to meet the growing challenges to its stability, prosperity and development. Street protests since Nazarbayev’s resignation have demonstrated a level of popular disaffection far higher than the authorities acknowledge. The leadership needs to bridge the disconnect between the rulers and the ruled and start listening to its people.

To avoid slipping into decline, and to resist external pressures and geopolitical overtures that could diminish the sovereignty that its leadership is so determined to safeguard, Kazakhstan needs new faces – innovators and reformers – throughout every level of the administration, as well as new ideas. This report is intended to help with the ‘ideas’ part of that proposition. It also includes a series of recommendations for Western governments and institutions and for the Kazakhstan government. 

Leaders of the resource-rich Central Asian region have the propensity to remain in power until mortality dictates otherwise. Much like the UK and Brexit, however, few wanted to see Central Asia’s longest reigning ruler, Kazakhstan’s septuagenarian president Nursultan Nazarbayev, crash out without a deal.

The sudden departure of the country’s official leader of the nation with no clear succession plan could have led to investment chaos, intra-elite fighting and the unravelling in a matter of months of a system he had built over decades, à la Uzbekistan following the death of long-serving autocrat Islam Karimov in 2016.

In order to avoid just such a ‘no-deal’ scenario and ensure the continuity of his policies, in March Nazarbayev carefully choreographed his own resignation and the election of a hand-picked successor, President Kassym-Jomart Tokayev, while retaining plum positions and powers for himself.

Tokayev’s assumption of the presidency was accompanied by protesters in the streets, increasing wealth inequality, rising Sinophobia among rank-and-file Kazakhstanis, a hard-to-kick economic dependence on oil revenues and a lack of clarity as to which leader—the old or the new president—would actually be calling the shots. But, amidst this plethora of concerns, as argued in a recent Chatham House report, Kazakhstan: Tested by Transition, one bright spot has been the tangible growth of intra-Central Asian cooperation, with the Nazarbayev-Tokayev ruling duo appearing eager to improve the regional dialogue.

Kazakhstan has long shaped its identity as a Eurasian state that has acted as more of an intermediary between Russia and Central Asia than as an integral part of the Central Asian region. But since 2017, in particular, Kazakhstan has been increasingly looking for opportunities to boost hitherto weak cooperation with its Central Asian neighbours. While this is first and foremost owing to the liberalization of Uzbekistan’s large market, there are other factors at work that get less airplay.

One such factor is a perceptible disentangling from the Kremlin’s policy directions as Kazakhstan has come to view Russia’s foreign policy as increasingly neo-colonial. The example of the Russia-led Eurasian Economic Union is in many respects more off-putting than inspiring, and Nur-Sultan does not want to be locked tightly into the union’s economic orbit. And in distancing itself slightly from Moscow in order to limit Russian leverage in its affairs, Nur-Sultan has shown itself to be more open to Central Asian regional initiatives.

As part of the leadership’s plan to offset oil dependence, Kazakhstan aspires to become the transport, telecommunications and investment hub for Eurasian integration. The intense focus on connectivity and the development of logistical arteries and infrastructure could have the knock-on effect of boosting trade within the Central Asian region and reducing transit times, which are currently greater than in most other parts of the globe.

In addition, demographic trends and educational shifts that favour ethnic Kazakhs, together with a growing ethno-nationalist narrative, have allowed the state’s leadership to identify more closely with Kazakhstan’s common Central Asian heritage and, by extension, a common Central Asian region—although Kazakhstan’s leadership still remains eager to demonstrate that the country is not just another ‘stan’. The coming to power of President Mirziyoyev in Uzbekistan appears to have made Kazakhstan more aware of the interconnectedness of the two countries in terms of geographical location and potential economic complementarities, as well as culture and history.

Not least, there is a growing recognition among the Central Asian states themselves—including isolationist Turkmenistan to a degree—that deepening regional trade is mutually beneficial, especially given the constraints associated with Russia’s economic problems. The strengthening of Kazakhstan’s ties with Uzbekistan has slowly kick-started regional cooperation as a whole: trade turnover between the Central Asian states in 2018 grew by 35 per cent on the previous year.

But both Kazakhstan and Uzbekistan are keen to stress that there is no discussion of integration or institutionalization, not least because previous attempts at integration have been overtaken by Russia, leaving Central Asia without its own coordinating body.

The official consensus in Kazakhstan is that Uzbekistan’s economic reforms after years of isolation will spur ‘a healthy rivalry’ and ultimately boost Kazakhstan’s own economy, in so far as the competition for foreign investment will require both countries to work harder to improve their respective business and regulatory environments.

At the unofficial level, however, some Kazakhstani analysts view Uzbekistan’s rise as potentially unprofitable, given the possible diversion of some investments and market activity from Kazakhstan to Uzbekistan. Moreover, Uzbekistan has the advantage of having undergone a clear change of executive, while it remains unclear which developments await Kazakhstan once First President Nazarbayev leaves the scene for good.

It can certainly be argued that Uzbekistan does pose a potential threat in the long-term to Kazakhstan’s entrenched position as Central Asia’s economic powerhouse: Uzbekistan’s population is one-and-a-half times bigger, even if its nominal GDP is three times smaller. Uzbekistan has a bigger market and a well-developed industrial sector, and is already the regional leader in terms of security. But it is not as though the world’s interest is moving from Kazakhstan to Uzbekistan; rather, Uzbekistan is in the process of trying to catch up.

Despite this relatively upbeat picture, Kazakhstan’s combined trade with the other Central Asian states accounts for less than 5 per cent of its total volume of foreign trade—a figure that cannot begin to equal its trade with Russia, China, and Europe. As a result, Kazakhstan will continue to give greater importance to positioning itself as a global player than as a regional leader.

This article was originally published in The Diplomat.