More Trouble in Kazakh Oil Country: Foreign Investment and Foreign Laborers being Re-thought?

Kazakh workers striking at an Agip construction site late last week


Some of the increasing workforce of Chinese oil companies active in Kazakhstan

Those who have been working for foreign oil companies in western Kazakhstan for some time are well aware of the fact that there will come a time when Kazakhstan wants to take total control over its own resources. While there have long been waves of dissatisfaction in Kazakhstan with regards to foreign investment in the oil sector, the role of foreigners in the oil extraction business of western Kazakhstan is coming under particularly close scrutiny as of late.

One of the big issues in the last year has related to the role of foreign sub-contractors in western Kazakhstan. In October, Kazakh workers attacked Turkish supervisory contractors on a construction site at the Tengiz oil field. While the conflict eventually was resolved, continual comments to my website suggest that there is still animosity towards Turkish and other foreign workers among local employees. This past week, for example, a similar issue flared up on an Agip construction site also run by Turkish contractors at Karabatan. Unhappy with their wages and their treatment at the hands of Turkish supervisors, some 200 Kazakh workers went on strike, but Agip moved to quickly mitigate the dispute by raising wages. While these conflicts were mitigated, there are still lingering problems between Kazakh workers and foreign supervisors in the region, especially when the supervisors are from sub-contracting companies and from developing countries. After fifteen years of independence, the workers of Kazakhstan are becoming increasingly disgruntled at the higher wages and alleged arrogance of foreigners working in the oil sector, especially when those workers are from developing countries.

This issue, however, is obviously of more concern to Kazakh workers in western Kazakhstan than it is to the Kazakh government. The government remains most concerned about the bigger question of asset ownership. As indication of that concern, the new government in Astana has just amended the law “On Mineral Wealth” so as to institute a two-year moratorium on the re-sale of licenses to develop oil deposits. This move is meant to send a clear sign that Astana wants to keep their natural resource assets in check and curb quick sell-outs that have been rampant in recent years. As Reuters suggests, this move may be especially focused on controlling the rapid increase of Chinese oil companies’ assets in the region. Still, it is an issue that will affect other foreign companies as well.

Overall, it would be wrong to suggest that these various events add up to the imminent demise of foreign oil companies in Kazakhstan. That would be highly unlikely before Kazakhstan sees the long-awaited returns on the Kashagan oil field scheduled to begin pumping oil in 2009. But, they do suggest that foreign oil companies will need to be watching developments in Astana more closely. Furthermore, while the tension between Kazakh workers and foreign sub-contractors in the region has yet to be exploited by the nascent political class in Kazakhstan, it is a populist issue that could benefit various political forces in the country, especially in the context of the country’s quiet intra-elite competition for the right to take over the reigns once President Nazarbayev steps down. If such political forces begin to look to workers in western Kazakhstan for support, that could spell even more troubles for the various foreign oil companies active in the west of the country.