Economic Relations between Kazakhstan and Russia

The origins of Kazakhstani-Russian relations lie in hoary antiquity, when
Kazakhs and Russians lived on the vast Eurasian territory and, being neighbors, developed good-neighborly relations in all the spheres of human activity.

In analyzing the relations between Rus and the Great Steppe, one cannot fail to mention the work of the greatest specialist in this field,
Lev N. Gumilyov. In his preface to Gumilyov's book, Ancient Rus and the
Great Steppe, Academician Dmitry S. Likhachev wrote this: Rightly taking into account the links between subsistence economy and the level of prosperity of ancient societies, and thus their military power, the author also compares historical events and climactic fluctuations of the steppe zone of Eurasia. In this way he arrived at a series of clarifications, which enabled him to describe in detail the historical-geographic backdrop against which various cultural influences came in conflict with the local forms of the original culture of Eastern Europe.

It must be noted in any analysis of the emergence of the 15 new, post-
Soviet states on the map of Eurasia that certain specific features marked the genesis of each of them. The present study focuses on the processes of sovereignty of Kazakhstan, and the specificity of these processes lies in that from the very beginning the republic's political leadership did not initiate centrifugal tendencies, regarding reasonable integration an imperative of the times and endeavoring to ease as much as possible the destructive consequences at every stage in the disintegration of the Soviet
Union. Kazakhstan was the last former Soviet republic to declare its independence - not out of any strong gravitation toward the past or peripheral political development let us recall that Kazakhstan was one of the first to experience, in December 1986, the repressive power of totalitarianism then already withering away but because it understood that artificial acceleration of this process is fraught with the danger of serious upheavals. The history of numerous bloody ethnic, social, and even interstate conflicts in the post-Soviet space bears striking evidence of that.

The immediate subject matter of the present study is not just the isolated process of the sovereignty of one of the post-Soviet countries but the emergence and development against this background of new interstate relations of two major republics of the Soviet Union, Kazakhstan and
Russia. In our view, it is relations between precisely these two countries that can be seen as a model for the establishment of equal and mutually advantageous between newly independent states. This view is borne out by a sufficiently smooth and planned, though far from problem-free, development of bilateral Kazakhstani-Russian relations, a meaningful historical tradition of mutual relations, and an absence of sharp turns or wavering due to subjective or external causes.

Another unifying factor is time—the many centuries of the history of mutual relations between the peoples of the two countries that have been neighbors in these great open spaces since the beginning of time. This far from simple history, full of drama and heroism, these strata of time bound together by the unremitting toil of numerous generations, unite the two peoples.

The Soviet period in the relations between the two states let us recall that, according to the 1977 Constitution of the USSR, the constituent republics of the Soviet Union were declared to be "sovereign Soviet socialist states" united in the Union of Soviet Socialist Republics and having the right to enter into relations with foreign states, conclude treaties and exchange diplomatic representatives, and - theoretically
-secede from the USSR was marked by the prevalence of the so-called converted forms. The ubiquitous and all-round dominance of All-Union structures made meaningless all talk of real interstate relations between
Kazakhstan and Russia. Both sides were in this case the objects of a grandiose social experiment. Although positive achievements of tills period cannot be discarded either.

The emergence and further development of relations of equal partnership between new independent states, the Republic of Kazakhstan and the Russian
Federation, became a sort of synthesis of the entire centuries-old history of Kazakh-Russian relations. Only now can the relations between the two countries be justifiably described as subject-subject ones. At this stage, both states solved such problems as defining their status in the system of world politics, establishing relations with leading world nations, and entering the field of international law.

The dominant role of Kazakhstani problems has determined the chronological framework of the investigation.

The overall time frame covers the period from December 1991 the setting up of the Commonwealth of Independent States, which finally marked the disintegration of the USSR to the end of 1995.

In the four years, bilateral Kazakhstani - Russian relations went through a series of significant stages the study of which can adequately determine the level of mutual relations between the two countries, the scope and range of integration. We single out three stages in the development of Kazakhstani-Russian relations:

— Defining the legal interstate relations of the two countries December
1991 - May 1920

— Searching for a model of economic and political cooperation between the states May 1992 - March 1994
— Expanding and deepening integration between Kazakhstan and Russia in the economic and other spheres March 1994 - 1995.

Although some elements of legal contractual relations between
Kazakhstan and Russia may be discovered before December 1991, when attempts to preserve the Soviet Union were made, it will be more chronologically correct, in our view, to choose the moment at which the CIS was legally formed and the activity of the Union structures of authority was discontinued as the starting point of the study.

We propose that the signing in May 1992 of the treaty of friendship, cooperation, and mutual assistance between the two countries be singled out as the concluding moment of the first stage in the relations between
Kazakhstan and Russia and at the same time as the beginning of the new stage. That document became the foundation for qualitatively new relations in the history of the two states, opening the first page in the official interstate relations in the new history of Kazakhstan and Russia. It determined the principles of bilateral relations in the political, economic, military-strategic, cultural, and spiritual spheres, lending a colossal impulse to the entire subsequent negotiation process.

During the search for a model of interstate economic and political cooperation between Kazakhstan and Russia, the principles were developed for bilateral relations, which were later recorded in the treaty of friendship, cooperation, and mutual assistance. The first official visit of
President Nazarbayev of Kazakhstan to the Russian Federation in March 1994 marked the beginning of the third stage in the development of Kazakhstani-
Russian relations - that of expanding and deepening integration between
Kazakhstan and Russia.

This division of the time frame of bilateral Kazakhstani-Russian relations into periods shows that one of the goals of the present work is to demonstrate continuous development between Kazakhstan and Russia in the post-Soviet period.

As the period of political history analyzed here is extremely close to the present, it cannot be regarded as worked out in detail in Russian and foreign scientific literature. However, the problems of development of the new statehood of post-Soviet countries of Kazakhstan in this case, of the birth and evolution of interstate relations, of their entry into the international community, are being studied ever more actively.

The crucial period of the disintegration of the USSR and the emergence on the map of the world of new, independent states was primarily reflected in scientific periodicals. Special mention should be made of the collective work The New Treaty of Union: The Search for Solutions.
Problems of mutual relations between newly independent states have also become the subjects of attention of Russian experts and political scientists. The period of disintegration of the USSR and of the development of Kazakhstan as a sovereign independent state are at present actively studied by Kazakhstan scientists. Works have been written on the problem of the emergence of the new statehood, development of the system of separation of powers, democratization of society, evolution of party structures and institutions of democracy, and the construction of a new legal and judicial system. Present State and Works on the subject of bilateral Kazakhstani-
Russian relations from the moment the two states achieved independence can be divided into several groups. The first and the most numerous one deal with relations between Kazakhstan and Russia within the framework of the
Commonwealth of Independent States.

In recent years the development of market relations has considerably boosted interest for economic and trade cooperation between the two independent states. Mention must be made of a joint work by the staff of the Russian Institute for Strategic Studies under the title Kazakhstan:
Realities and Perspectives of Independent Development, It should be noted, though, that this work suffers from an obviously incomplete documentary and factual basis and a certain superficiality in the analysis of the problem.

The study is based on such sources as legal acts and interstate
Kazakhstani-Russian treaties, agreements, declarations, joint protocols, and other documents and materials, as well as decrees, decisions, and resolutions of the organs of state power in Kazakhstan and Russia.

Extremely important sources for the study of the last five years in the history of Kazakhstan and of Kazakhstani-Russian relations are the works of President Nursultan Nazarbayev of Kazakhstan: Without the Right or the Left, The Strategy of the Formation and Development of Kazakhstan as a
Sovereign State, The Strategy of Resource Saving and the Transition to the
Market, The Market and Socioeconomic Development, and especially his new book, On the Doorstep of the 21st Century, as well as his speeches at various forums.' Just as important as sources for the present study are the books by President Yeltsin of Russia: Confessions on a Given Theme, Memoirs of a President as well as his official speeches, and also the works of other Russian politicians and public figures, which afford a deeper grasp of the essence of events happening in the post-Soviet space in the 1990s.

The process of market reform in the republic and the tendencies and prospects for further reform in the socioeconomic sphere are reflected in several books by Kazakhstan's Prime Minister A.M.Kazhegeldin: The
Socioeconomic Problems of Development of the Republic of Kazakhstan in
Times of Reform, Kazakhstan in Times of Reform, Problems of State
Regulation Under the Conditions of Socioeconomic Transformation.

The formation of the republic's diplomatic service and problems of its civilized entry in the world community are studied in the works of
K.K.Tokayev, Kazakhstan's foreign minister.
Intense legislative processes at all levels in the given period necessitated close attention to the legal basis of the newly independent states. As far as Kazakhstan is concerned, that legal basis includes above all the Constitutions of 1993 and 1995, of which the content and the sociopolitical background may be seen as the quintessence of the given period in the country's history.

The main distinctive feature of the source base of the study is the fact that most documents of the given period of political history have not yet been moved to the archives; it was therefore necessary to turn on many occasions to various central and departmental current archives. The identification and systematization of many sources, their publication in a collection of materials devoted to the development of Kazakhstani-Russian relations was in themselves an important task.
It may thus be said that extensive sources have been used in the analysis of the above-mentioned problems; their study made it possible to paint a comprehensive picture of the development of Kazakhstani-Russian relations against the background of the sovereignty of Kazakhstan in 1991-1995.

1.THE RUSSIAN-KAZAKHSTAN RATIOES AT THE PRESENT STAGE

In a context of events, which have taken place in region after
September 11, the role of Russia in Central Asia a little has varied, as well as all has varied geopolitical formulated in region last years.

In these conditions of one of important external policies of tasks of
Kazakhstan is the adjusting of tactics and strategy in ratios with Russia, which would correspond by modern geopolitical realities and long-term interests of our country.

Central Asia and Caspian Sea, so-called recently Caspian – Central
Asia region, go into an region of traditional interests of Russia.

In this region it always had the important national interests, which, however, in different periods were defined by different circumstances and factors.

The key interests of Russia in this region at the present stage can be reduced to the following.
Central Asia has the important value in of a safety of Russia.

The importance of this region for Russia is stipulated not oil by the factor implying from desire to save influence on Caspian Sea;

Our region is of interest for Russia territorial, where its compatriots live. Are those, on our sight three dominating interest of
Russian Federation, dominating, Caspian – Central Asia region at the present stage. It in this region has also other interests trade, cosmotron of “Baikonur”, industrial communications etc. but they now in basic carry not so priority character.

Until recently Russia ensured above-mentioned interests without the special efforts. All countries of region in the majority were that or are otherwise dependent on Russian Federation.But the events, which have occurred after September of the last year, have brought in serious enough variations to a geopolitical situation in Central Asia and have affected on common position of forces in region.

One of the occurred key variations consists that the break in sphere of traditional vital interests of Russia is watched which today faces to necessity Central Asia of policy.

As a whole by 2001 in Central Asia the private tripartite balance between interests of Russia, China, USA was folded.

The given balance can figuratively be presented as a triangle, in which upper corner Russia, in one lower corner - USA, in the friend - China settled down. These countries have occupied three strategic niches in
Caspian – Central Asia region: military-political, oil and gas, commodity- raw.

The Russian presence at region last years was ensured, first of all, with strategic military-political component. A peaking of a problem extremism and the terrorisms in Central Asia, activation Islamic of driving of Uzbekistan, irreconcilable part of Integrated Tadjik opposition at immediate support Talib have established in 1999 - 2001 real threat for the countries of region.

In these conditions only Russia was considered by the states of region as the real factor and safety. It is enough to recollect, that these years the contacts through link DKNB, intensive two-sided ratios in military and military-engineering sphere were especially made active.

Thus, USA has occupied oil and gases a niche in our region, and Russia and China by virtue of economic circumstances could not with it compete in this direction.

In this geopolitical triangle Russia all the same occupied a little bit dominating positions. This majoring in many respects was determined strategic military-political component, which role in the international ratios is traditionally high.

In a context of a common global situation Russia forced to be reconciled with a determination of military basses of USA in region of its traditional interests.

Taking into account all these circumstances, Russia faces to necessity of the policy in Central Asia. The further prolongation above-mentioned of the tendencies will have for it painful enough consequences.

Despite of some variation of a role of Russia in Central Asia, for
Kazakhstan the strategic interests in a ratio of Russia continue to be saved.

The necessity of activation of ratios with Russia and holding of constructive cooperating on much important for Kazakhstan to directions is dictated as well by that in case of essential weakening of Russia in
Central Asia it will be fraught with negative consequences. The situation in region can become unstable and badly forecast.

In the whole traditional interests of Kazakhstan in a ratio of Russia are founded on four factors having long-time character and diminuendos by such eternal categories, as geography and history.

First, the maintenance partner of ratios with Russia is necessary valid intercontinental of an arrangement of Kazakhstan, for which the exit on the world market is vital for an economic development. Russia in this respect occupies the strategically important position; being by the state, on which region pass vital for us strategy of transport and communication.

Secondly, Russia is one of the important subjects of the international system, having significant political weight and rather large military- engineering opportunities. The Russian factor in many respects determines external policy a situation around of Kazakhstan, both on regional, and at the international level.

Thirdly, Russia is the major economic partner Republic of Kazakhstan.
It not only imports different production and techniques to Kazakhstan, but also is the market of selling of Kazakhstan production. About 70 % of
Kazakhstan industrial potential is involved on economy.

In - fourth, both states are combined with a historical generality, spiritual and cultural links. In region of Russia the man is Kazakh
Diasporas including 740 thousand. In Kazakhstan Russian are second on number ethnic group, making about 30 percents of the population of the country.

In this context the Russian direction of exterior policy of Kazakhstan remains to one of priority and strategic.

As a whole at the present stage in the Russian-Kazakhstan ratios the following most priority and perspective directions of cooperating are meant:
• Mutual trade.
• Interaction in oil and gas and power sphere.
• Cooperating in sphere of transport and communications.
• Cooperating in sphere of safety.

1.1 Mutual Trade.

The interests of both countries are answered with magnifying of mutual trade. Russian Federation traditionally occupies the first place among the basic trade partners of Kazakhstan both on export, and on import. Trade turn over in 2001 from Russian Federation has made 4 639,3 million of US dollars (Diagrama1,2).

It is necessary to mark, that last years the growth of a share of
Russian Federation in import and reduction in export is watched. The specific gravity of Russia in total amount of the Kazakhstan export is sequentially reduced (from 44,5 % in 1994 up to 20,2 % in 2001) and is augmented in import (from 36,3 % per 1994 up to 45,4 % per 2001). Within several last years of Kazakhstan has negative trade balance with Russian
Federation.

Basic trade partners, in import, 1994-2001 (%)

[pic]
|1994 |1996 |1997 |1998 |1999 |2000 |2001 |
|•Russian | 36,3 | 54,8 | 45,8 | 39,4 | 36,7 | 48,7 |45,4 |
|Federatio| | | | | | | |
|n | | | | | | | |
|• China | 2 | 0,8 |1,1 | 1,2 |2,2 | 3 | 2,8 |
|Poland | 0,7 | 1 |1 | 1,1 | 1,7 | 1,2 | 0,9 |
|•Uzbekist|7,8 | 2,1 |1,5 | 2,2 | 2,4 | 1,5 | 1,3 |
|an | | | | | | | |
|•Kyrgysta| 2,9 | 2,1 |1,5 | 1,2 | 0,7 | 0.6 |0,4 |
|n | | | | | | | |
|• | 0,5 |0,4 | 0,1 | 0,1 |0,1 | 0,1 | 0 |
|Tajikista| | | | | | | |
|n | | | | | | | |

The Diagrama1

Basic trade partners, in export, 1994-2001 (%)

[pic]
|1994 |1996 |1997 |1998 |1999 |2000 |2001 |
|•Russian | 44.5 | 42 | 35,2 | 29.6 | 19,8 | 19,5 | 20,2 |
|Federatio| | | | | | | |
|n | | | | | | | |
|• China | 4,6 | 7,8 | 6,8 | 7 | 8,5 | 7,3 | 7,1 |
|Poland | 1,7 | 0,4 | 0,4 | 0,8 | 1,4 | 0,8 | 1.5 |
|•Uzbekist| 4 | 3,4 | 2,3 | 2,2 | 1,2 | 1,5 | 1.4 |
|an | | | | | | | |
|•Kyrgysta| 1,9 | 1,9 | 1 | 1,2 | 1,1 | 0.6 | 1 |
|n | | | | | | | |
|• | 03 | 1 | 0.8 | 0.8 | 08 | 0.6 | 0,6 |
|Tajikista| | | | | | | |
|n | | | | | | | |

The Diagrama2

Considering structure of export and import on groups of the commodity spectrum, it is possible to select the following characteristic features.

Export. Structure of export Republic of Kazakhstan in Russian
Federation for the last few years has varied the separate commodity groups have occupied a leading position.
Now on four commodity groups (glow iris3) (fuel mineral, oil and petroleum; products of inorganic chemistry; grain bread and ores) are necessary about 80 % of the Kazakhstan export in Russia, whereas in 1994 on the pointed groups it was necessary 53,3 %. In 2001 as contrasted to
2000 the separate outbound delivering tended to lowering, so, for example, the specific gravity of export of a grain was reduced from 12 % up to 6 %; the export of products of inorganic chemistry was reduced from 14 % up to
13 %. Certainly, on lowering of export in Russia renders influence a variance between the in-house prices and prices of outbound delivering.

At the same time it is necessary to mark, that the reduction of export has taken place not on all basic groups of the commodity spectrum. The specific gravity of export of ore has increased from 8 % up to 10 % and export of fuel from 46 % up to 47 %.

Import of republic of Kazakhstan goes into first five of the countries of the basic trade partners of Russia in import. The specific gravity of import of Russia has increased in total amount of the Kazakhstan import from 36,7 % per 1999 up to 45,4 % per 2001. There were insignificant variations in groups of imported commodity production. So, the volumes of import were reduced
[pic]

Diagram 3
[pic]

Diagram 4

Transport, accordingly, from 15 % in 2000 up to 11 % in 2001, alongside with it the magnifying of import on such commodity groups is marked: fuel mineral (from 17 % up to 21 %), chemical production (from 14 % up to 16 %), black metals and work pieces from them (from 11 % up to 13 %)
(Diagrama4).

The analysis of export and import displays, that in structure of import as against export there is no predominance of separate commodity groups, it more diversification, at the same time grows a specific gravity of articles of food, products of processing ready articles.

From 89 regions of Russian Federation 72 have trade - economic links with Republic of Kazakhstan. Depending on volume trade turn over with
Kazakhstan these regions Russia can divide into a series of groups. The active participants of the foreign trade activity with Kazakhstan are first three groups of regions of Russia (table 1).

As a whole on 16 regions of Russian Federation from 72 it is necessary
80 % exterior trade turn over of Russia with Kazakhstan. The high activity pointed 16 regions is stipulated by more developed structure of their industrial manufacture with predominance of fuel-raw, petrochemical and machine-building specializations.

Feature of transport -geographical interregional links of regions of
Russia with Kazakhstan is the directedness mutual goods traffic primarily with Ural, Western and East Siberia, and also with Moscow and Moscow region.

Basic groups of the trade partners of Kazakhstan in Russia

The important place in the Russia -Kazakhstan links occupies frontier cooperating, on which share it is necessary 71,5 % from common commodity circulation. Most actively explicate trade -economic links with frontier regions of Kazakhstan Omsk, Orenburg, Astrakhan, Chelyabinsk, Novosibirsk region and Altay region. From regions of Russia the ready roll stock of black metals, pipe steel, petroleum, electric motors, automobiles, forest products, coal, footwear, fabrics and other goods is taken out. In export of many frontier subjects of Federation significant volume is necessary on production of a petrochemical industry (Volgograd, Omsk, Samara region,
Altay region - more than 70 %).

In the Russia -Kazakhstan frontier region more 300 share enterprises, among which such large interstate join, as “Kazroshim”, “Koksohim”, automobile complex on basis Ural - for and Kustanay diesel factory operate.

The essential propagation in trade with Kazakhstan was received with barter operations (57 %). So, Orsk meat factory the combine sends in
Kazakhstan in basic production of the manufacture and receives in exchange raw material for manufacture of this production - living cattle and meat.
The joint-stock company “Nosta” receives from Kazakhstan immovable coal and delivers metals.

The significant experience of mutual economic cooperating with frontier regions of Kazakhstan accumulated in the Orenburg region, and also Pavlodar region of Kazakhstan with frontier regions of Russia. Now 18 % of the
Orenburg export and more than 40 % of import have on Kazakhstan.
By the largest foreign trade partner of Republic Bashkortostan, Altay and
Krasnoyarsk edges, Kemerovo, Irkutsk, Omsk, Orenburg, Sverdlovsk and
Chelyabinsk regions is the Pavlodar region.

As a whole before Kazakhstan in mutual trade with Russia there is a series of perspective tasks, which decision will influence definitely a common economic situation in the country.

One of the important tasks is the variation trade balance of Kazakhstan from Russian Federation from negative in positive. Besides the gradual variation of structure commodity circulation in favorable for Republic of
Kazakhstan a direction is desirable.

Radiating from interests of two states, it is expedient in the nearest perspective to consider a complex of measures on hardening links of frontier regions. The necessity of creation of legal fundamentals of a development of frontier regions does not call doubts. On our sight, it is necessary to speed up development of the defining laws. Among them Laws
About state support of a socio economic development of frontier territories
Republic of Kazakhstan, About free economic regions, About frontier trade.
It is necessary also to speed up ratification four sided of the Agreement on basic principles of frontier cooperating of the states - the participants of the Contract about a deepening of integration in economic and humanitarian regions from March 29, 1996.

Obvious presence of potential and mutually advantageous opportunities of Russia and Kazakhstan also is by way of use of the optimum shapes of specialization, density of the industrial and financial capital, use of effective financial instruments, architecture of optimum commodity, financial and transport streams. In this connection special urgency in a development Kazakhstan – Russia of links was got with problems of a synchronization of legislative and normative basis of the countries. It would be expedient to realize step-by-step transition to collection of the
VAT on destination in Kazakhstan – Russia to trade, having begun it(him) from machines, equipment, vehicles.

Not less important the coordinated marketing strategy of Kazakhstan and
Russia in the international markets is represented, where the saving and hardening of common positions is quite possible. The priority direction represents perfecting the organizational shapes of activity Kazakhstan and
Russian suppliers in the world markets. Them can become cartel of the agreement.

One of the important instruments of hardening of two-way communications could become creation of conditions for expansion of contacts between the enterprises, creation of the share enterprises. On official dates (2000) in republic 220 share Russia -Kazakhstan enterprises and 88 enterprises with the 100--percent Russian capital actively work. The majority JV in republic, including Russia-Kazakhstan JV, has trade –intermediary directedness. However as against other states Russia- Kazakhstan JV of an industrial directedness envelop considerably wider spectrum of spheres of activity - from production and processing of natural operational life up to production of a high scale of processing that in a defined measure confirms an overall performance Russia- Kazakhstan JV. At the same time Russia
–Kazakhstan JV for the present do not play that role, which they could play in a development of trade -economic cooperating. Therefore in this direction the active support is expedient on the part of state structures.

1.2 Cooperating in oil gas and power sphere.

The given direction of cooperating between two countries by us is one of perspective. The structure of the Kazakhstan export of oil on the countries in 2001 is characterized by lowering of a share of delivering in the countries of CIS (17 %) and expansion of geography of export of oil in the countries of foreign countries (83 %) (Diagrama5).

The indexes of export of petroleum in 2001 essentially have varied as contrasted to 2000. Alongside with export of Kazakhstan realizes import of petroleum. And 98 % of all imported volumes of petroleum are necessary on
Russian Federation.

The lowering of the excise rates on imported petrol with 80 up to 31
EURO per ton in 2001 and falling recently of world prices per oil promoted magnifying of delivering of the Russian oil for in-house processing. The export of petroleum to the countries of CIS became more attractive for
Russia, than the delivering of oil on the world market, as, for example, in
Kazakhstan of the price on the same aspects of petroleum is much higher
Russian.

Kazakhstan more than on 50 % depends on Russia in a ratio of delivering of crude oil on refinery factory in Shimkentand Pavlodar receive west
Siberian oil on the algorithm manifold from Omsk. Pavlodar refinery factory on 100 % depends from west Siberian of oil. Shimkent usually works on 75 % on west Siberian and on 25 % on raw material Kumkol of a deposit. Today dependence from of west Siberian oil “Orgsintez” is reduced half at the expense of use of the Aktyubinsk oil, transport by a railway transportation from west of Kazakhstan. Because of lowering production of oil on west
Siberian deposits, fadeout of payments and mutual debts the question of security by oil Pavlodar and Shimkent refinery factory more than once acquired critical character, and the capacity factor of powers of these enterprises frequently lowered below 0,5.

Its technological dependence on Russia falls into basic problems
Pavlodar refinery factory: the production cycle of the enterprise is calculated for consumption west Siberian of oil with the low contents of sulfur and paraffin. The perspectives flagship of the Kazakhstan oil processing is complicated with its neighborhood with the Russian factories
- competitors:

Omsk, Ufa, Volgograd refinery factory by the enterprises being vertically - integrated, they have stable access to crude oil, besides on reduced prices, which the necessities of northern Kazakhstan in petroleum could at desire completely satisfy.

Structure of export of the Kazakhstan oil, 2001

[pic]

Diagram 5

In oil and gas of branch the cooperating explicates also through link of share development of the Kazakhstan deposits. Russia in the projects on natural resources users in region of Republic of Kazakhstan, as it is possible to see from the Diagrama6, occupies the fourth place and makes 6
%. The Russian investments in a mineral-raw complex (MSK) of Kazakhstan have made in 2000 32,2 million of dollars, including in investigation hydrocarbon of raw material (UVS) 3,5 mln of dollars, in production of hard minerals (TPI) - 28,7 mln of dollars.

Two Russian investors “Bashnevt” and OJSC “Lukoil” submit the investments in UVS. In oil branch of Kazakhstan the company “Lukoil” is submitted in such large projects, Tengiz and Karachiganak Besides “Lukoil” is ready to expand the presence at Kazakhstan, messages not only development of ready deposits, but also prospecting operations.

The large interest in relation to Kazakhstan is expressed with the large oil Russian company “Yokus” which has received a section for developments in Russia and region of Kazakhstan.

Structure of the direct foreign investments in Kazakhstan,2000[pic]

Diagram 6

In sphere TPI of Kazakhstan the Russian investors are submitted by such large companies, as the Russian Academy of Science of European
Economic Community (83,9 %), OJSC “Magnitogorsk” metallurgical combine
(10,6 %) and NPK “Investor” (3,8 %).

The Kazakhstan enterprises also show interest to the Russian projects.
So, “Kazakhoil” (“Kazmunaigas”) negotiates for share developments in Tomsk region, on a deposit “Komsomolsk” in the Astrakhan region. At Kazakhstan oilman there are intentions to develop deposits in the Arkhangelsk region.

Since 2000 the electric power system of Kazakhstan works in a parallel condition from European Economic Community of Russia and grid system of the countries of Central Asia.

The parallel operation of electric power systems considerably has boosted quality of electrical power and reliability of electro supply of consumers of Kazakhstan, Central Asia and Russian Federation, and also has allowed operatively to realize surplus of electricity both transit of electrical power and powers, it is more rational to use power powers of electrical stations. The electric power system of Kazakhstan and Russian
Academy of Science European Economic Comminity of Russia is called secure each other in case of crashes.

In the whole cooperating of Kazakhstan and Russia in fuel and energy sphere has noticeable perspectives.

Rather perspective the project of transfer of a direct current
Ekibastuz - Tambov by voltage 1 500 sq is. This project opens an opportunity of transport of the electric power of the Siberian power stations and Ekibastuz heater in central regions of Russia and in the countries of Europe.

With the purposes of security of a mutually acceptable uniform tax condition of trade in the electric power, utilities equipment it is expedient to realize transition of the countries at collection of indirect taxes on a principle the countries of assignment. In this connection for a heightening of efficiency of a parallel operation of electric power systems the simplification of customs procedures is important at migration of electrical power through the customs boundary.

The major factor of a development of the power market is the deepening of cooperating in the field of scientific researches and developments of advanced techniques in manufacture of power, electro technical equipment.
Now all aspects of equipment are made for power stations in Russia,
(Leningrad metal factory, Belenergomash, Uralenergomash, Siberenergomash).
With disintegration of Union economic links between the manufacturers and consumers of a utilities equipment considerably have worsened, that is negatively reflected in availability index of product of power complexes of the country. On this question it is expedient except of concrete measures at a level of Government.

1.3 Cooperating in sphere of transport and communications.

Cooperating in sphere of transport and communications one of the most perspective regions of a development of two-sided ratios between Kazakhstan and Russia. Both states in a context of a development of transport cooperating have the friend for the friend a strategic value, as, apart from a wide national transport web, occupy defining a geographical position.

Kazakhstan and Russia are closely coupled by the transport communications. In this connection of Kazakhstan is sensitive reacts to any variations under the tariffs for freight traffic on region of Russia.

One of key here of questions - transportation of oil and gas through region of Russia. In aggregate transportation of the Caspian oil and in the whole oil is one of the major sides of the Russia -Kazakhstan cooperating.
First of all this magnifying of a channel capacity of an oil pipeline
Atyrau – Samara up to 15 millions tons of oil per one year. The intimation into service CPC ensures export of the Kazakhstan oil on a long-term perspective.

In a period with 1995 and till 1999 Russia gave Kazakhstan such quota, which did not allow the Kazakhstan exporters to involve the algorithm manifold Atyrau – Samara on an apparent watts its annual channel capacity in 10,5 mln of tons of oil. And only in 1999 the algorithm manifold was loaded almost on 100 %. The agreement on magnifying of a quota at transit of oil in long-distance foreign countries at first up to 5 mln of tons
(December 23, 1998) was signed, and then (February 25, 1999) up to 7,5 mln of tons (the quota in short-range foreign countries has remained former -
3,5 mln of tons). This decision initiated occurrence of the project of reconstruction and modernizing of the algorithm manifold Atyrau – Samara for magnifying of a channel capacity at first up to 12 mln of tons, then - up to 15 mln of tons.

This project, designed transport companies of both countries - Russian
“Transoil” and Kazakhstan “Kazakhoil”, is favorable to both sides. For
“Transoil” the transportation of the Kazakhstan oil on the algorithm manifolds that for complete use of their powers does not suffice 20 mln tons, brings additional profit.

The first stage of reconstruction of the algorithm manifold Atyrau -
Samara- its channel capacity now is realized is lifted up to 12 mln of tons. Due to this the arrangement with Russia about magnifying of a transit quota in 2000 also was reached.

For Kazakhstan the magnifying of a channel capacity of the algorithm manifold Atyrau – Samara and export of oil through Russia opens the perspective market of selling, what Europe is. On a system of oil pipelines
"«Friendship" the Kazakhstan oil can act in Germanium, Poland, Hungary,
Slovenia, Czechia and Slovakia, where there is a stable demand for oil.
Under the forecasts of the experts, by 2010 Central and East Europe will import about 80 mln of tons of oil to one year. Now more than half of volumes of imported oil in this region make delivering of the countries of
CIS, primarily - from Russia (51 %). Having expanded outbound opportunities in this direction, Kazakhstan can become one of the largest suppliers of raw material in the European countries.

By share efforts of Kazakhstan and Russia is put into operation
Caspian Pipeline Consortium (CPC). The common extent of the algorithm manifold makes 1 580 km, primal channel capacity 28 mln ton / year. Thus for reaching a maximum channel capacity 67 mln of tons of oil per one year
(from them 45 mln ton - for Kazakhstan oil supplier) it is necessary only to augment opportunities of pump stations, that is recognized schedule to carry out in four stages. There is a construction of the algorithm manifold up to Atyrau, which will connect Karachiganak with CPC and will allow originally pumping up to 7 mln of tons of oil, and in future - up to 11 mln of tons.

During nearest of forty years CPC will be a stable source of the incomes for the shareholders, and also Russia and Kazakhstan. According to accounts, for a period of maintenance of the algorithm manifold in federal and regional budgets of Russia will arrive approximately 23,3 billion of US dollars as deductions and profit, of Kazakhstan will receive approximately
8,2 billion of dollars.

The development of transport cooperating with Russian Federation is most actual for Kazakhstan’s for today within the framework of architecture of regional and transcontinental transit.

Regional transit. Russian Federation is one of the basic countries of shaping and assignment of transit weights; on its share it is necessary about 26 % of shaping and 20 % of assignment of weights from total amount of all transit transportations.

Transcontinental transit. In the whole transit streams in directions
Southeast and East Asia Europe are evaluated approximately in 330 - 400 billion of dollars. Thus up to 20 % of these streams can pass through region of Russia and Kazakhstan.
Taking into account in the whole size commodity circulation, iron roads of the Eurasian continent and primarily Kazakhstan and Russia have real potential for partial stylus orientations transcontinental good traffic with sea on railway routes.

For Kazakhstan in this direction of activity has a primary value a development of transportations on Northern corridor Trans Asian of a railway turnpike on a route “China - Kazakhstan - Russia – Byelorussia
Poland - Germany. Now Kazakhstan together with Russia Europe - Asia and back carries on active operation on shaping this terrestrial transport corridor by the message.

As a whole in transport-communication sphere before Kazakhstan the following tasks stand:
• Saving conditions for transit of the Kazakhstan power resources through region of Russia, maintenance at a necessary level of quotas on transit of oil for Kazakhstan.
• Scheduled magnifying of a channel capacity CPC.
• Decision of accumulating questions between the Ministry of means of communication of Russian Federation and CJSC of “Kazakhstan Temir Joli” on railroad rates and other questions.
• Creation of the share enterprises in transport branch.
• Realization share transport - communication of the projects on active use of transit potential of Kazakhstan and Russia.

2. ABOUT A CONDITION OF FOREIGN TRADE BOTH DEV’T OF THE JOINT /

ENTERPRISES KAZAKHSAN AND RUSSIA

Indexes of foreign trade of RK with RF, 1995-2001
| |1995 |1996 |1997 |1998 |1999 |2000 |2001 |
|Commodity | 4 | 4 | 4 | 3 | 2489,2 | 4227,6 | 4 639,3|
|circulation |265,5 |809,0 |257.2 |323.2 | | | |
|mln of US | | | | | | | |
|dollars | | | | | | | |
|In % to the | | 112,7 | 88,5 | 78,1 | 74,8 | 169,8 | 109,7 |
|appropriate | | | | | | | |
|period of the| | | | | | | |
|previous year| | | | | | | |
|Export, mln | 2 | 2484,4| 2 | 1 | 1 138,6| 1 769,1| 1 748,4|
|of US dollars|365,8 | |287,8 |611,4 | | | |
|In % to the | | 105 | 92,1 | 70,4 | 70,7 | 155,4 | 98,8 |
|appropriate | | | | | | | |
|period of the| | | | | | | |
|previous year| | | | | | | |
|Import, mln | 1 | 2 | 1 | 1 | 1 350,6| 2458,5 | 2 890,9|
|of US dollars|899.7 |324,6 |969,4 |711,8 | | | |
|In % to the | | 122,4 | 84,7 | 86,9 | 78,9 | 182 | 117,6 i|
|appropriate | | | | | | | |
|period of the| | | | | | | |
|previous year| | | | | | | |
|Balance, mln | 466,1| 159,8 | 318,4 | -100,4| -212 | -689,4 | -1 |
|of US dollars| | | | | | |142,5 |
|Specific | 45,1 | 42 | 35,2 | 29,6 | 19,8 | 19,4 | 20,2 |
|gravity of | | | | | | | |
|Russia in | | | | | | | |
|total amount | | | | | | | |
|of export | | | | | | | |
|from | | | | | | | |
|Kazakhstan, | | | | | | | |
|in % | | | | | | | |
|Specific | 49,9 | 54,8 | 45,8 | 39,4 | 36,7 | 48,7 | 45,4 |
|gravity of | | | | | | | |
|Russia in | | | | | | | |
|total amount | | | | | | | |
|of import in | | | | | | | |
|Kazakhstan, | | | | | | | |
|in % | | | | | | | |

Russian Federation of the valid historically folded processes of an economic development is the basic trade partner of Kazakhstan and basic consumer of Kazakhstan production. The specific gravity of Russian
Federation in volume of export in the countries of CIS annually makes not less than 91-93 %.

In 1997 the reorientation on a development of the foreign trade links with the countries of long-distance foreign countries began. In this connection a -percent ratio in volumes of export between the countries of
Commonwealth essentially has varied. In 1997 there was cutting volumes of foreign trade between Russia and Kazakhstan, per consequent years this tendency continued to be magnified. On many goods occupying a powerful share in export of Kazakhstan production in Russia, there was a significant lowering of standard items.

In 2000 there was an essential heightening of volumes of export with all countries - basic trade partners from among Commonwealth. The foreign trade turnover of Kazakhstan with Russia in 2000 has approximated to a level of 1997. The export has increased as contrasted to 1999 in 1,5 times, the import has increased by 82 %. In 2001 as contrasted to 2000 of delivering in Russian Federation practically have remained at a former level (reduction by 1 %).

The share of Russia in total amount of export in 2001 has made 20,2 %
(in 2000 -19,4 %).
The greatest specific gravity in structure of export in Russian Federation occupy:

Mineral products - 47,1 of % in 2001 (46,8 % in 2000): coal - 91 % of export coal from Kazakhstan, oil and gaseous condensate - 12 %, ores and concentrates iron, chrome, zinc -10,3 % (7,9 %); products of inorganic chemistry junction, inorganic and organic precious and rarely of metals of radioactive elements and isotopes 13 % (13,5 %): an oxide and hydracids of aluminum - 90 % of all outbound delivering; ferrous metals - 8,2 % (6,3 %).

In import from Russian Federation predominate: mineral products, machines and equipment.
In 2001 basic paper of import was: purchase of mineral fuel, oil and petroleum - 21,4 % (more than 77 % from common import of fuel, from them coke, diesel fuel, lubricant oils, electric power;the machines and equipment - 16,3 %, metallurgical production -14,5 %, vehicles -13 %, production chemical and industries, coupled to it,-12 %, plastic and work piece from it -4 % were imported.

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