Economic relations between Russia and Kazakhstan are marked by intensity and dynamism, as well as a high degree of comprehensive cooperation.

Trade Relations

Kazakhstan remains one of Russia’s main partners in foreign trade.  According to the Russian Federal Customs Service, the volume of mutual trade for 2012 increased by 8.5% compared to 2011, and reached 22.4 billion USD. Russian supplies increased by 3.3% (up to 14.6 billion USD), whilst imports from Kazakhstan grew by 19.6% (up to 7.9 billion USD).

Within the period of January-July 2013 the volume of mutual trade increased by 18.8% as compared to the corresponding period of 2012, reaching the figure of 13.1 billion USD. Russian supplies increased by 12.6% (up to 7.9 billion USD), along with imports from Kazakhstan increasing by 29.7% (up to 5.2 billion USD).

According to the Russian Federal Customs Service statistics of 2012 January-July 2013, the majority of Russia’s supply structure to Kazakhstan consisted of mineral products 38.6% / 37.0%; machines and equipment, vehicles, instruments and devices – 19.6%/ 21.0%; metals and metal articles – 16.1% / 15.3%; products of chemical industry and related industrial branches – 9.7% / 10.2%; phytogenic and zoogenic products, food products – 8.0% / 8.2%. These groups of goods made up 90.6% of the total supply volume from Russia to Kazakhstan in 2012.

According to the Russian Federal Customs Service statistics of 2012/January-July2013, Kazakhstan’s export structure to Russia consisted of mineral products 26.3% / 26.0%; machines and equipment, vehicles, instruments and devices – 32.1% / 31.6%; metals and metal articles – 14.0% / 14.5%; products of chemical industry and related industrial branches – 8.7% / 8.8%; textiles, textile articles and shoes – 11.8% / 12%. These groups of goods made up 97.6% of the total import volume from Kazakhstan to Russia in 2012.

Economic Cooperation

The highest focus area of economic co-operation is the fuel and energy sector. Export transit of the major volume of Kazakhstani oil to foreign markets is being carried out through Russian territory.

The oil transit is based on the long-term intergovernmental Agreement of June 7, 2002. About 15.5 mln. tons of oil per year is transported through the Atyrau-Samara crude oil pipeline, whilst up to 5.5 mln. tons of oil a year is transported through the Makhachkala-Tikhoretsk-Novorossiysk pipeline system.

The transit of Kazakhstani oil through Russian territory is being carried out within the framework of the Caspian Pipeline Consortium (CPC). The governments of Russia and Kazakhstan possess 50% of CPC, with the remaining 50% belonging to the crude producers that sponsored the commission of the project’s first phase.

Cooperation in gas industry is being carried out within the framework of the long-term intergovernmental Agreement of November 28, 2001. Since 2002 the delivery of crude gas from the Karachaganack gas deposit has been transported to the Orenburg Natural Gas processing plant by CJSC “KazRosGAz” (the joint venture of “Gazprom” and the Kazakhstani “KazMunaiGaz”).

Cooperation in the sphere of electric power industry

Since 2000 the power systems of Russia and Kazakhstan have been operating in a parallel mode. Mutual deliveries of electric power and natural coal are being carried out.

In July 2005 the parties agreed on creating a joint Russian-Kazakhstani venture on the basis of JSC “Ekybastuz State Disctrict Power Plant”, as well as on the development of the Russian-Kazakhstani Common Electricity Market.

Cooperation on the sphere of peaceful use of nuclear energy

Since 2002 the project on cooperation in integrated uranium exploitation has been carried out at Kazakhstani uranium deposits. CJSC “Zarechnoye” – the joint Kazakhstani-Russian-Kirgiz venture is in operation (estimated capacity – 500 tons of uranium per year, cost – around 36 mln. USD).

In accordance with the Joint Declaration on Cooperation in the Peaceful Use of Nuclear Energy, signed by the Presidents of Russia and Kazakhstan in St. Petersburg in January, 2006, the parties devised a schedule for integrating nuclear-powered enterprises of both countries. A complex program for cooperation in the peaceful use of nuclear energy is being carried on the basis of the above declaration.

Based on the arrangement between the Presidents of the Russian Federation and Kazakhstan of October 3, 2006 in Uralsk concerning the involvement of Kazakhstan in the Russian initiative on organizing the International Center for Uranium recovery (ICUR) on Russian territory, a corresponding Agreement was signed on May 10, 2007.

Trans-regional relations are being sustained as well.

Out of the 89 constituent territories of the Russian Federation, 76 territories sustain trade and economic relations with Kazakhstan. The constituent territories immediately bordering on Kazakhstan are characterized by increasingly active cooperation with their neighbor country. One of the ways of promoting this cooperation is trans-border economic schemes: supplies of Kazakhstani coal from Ekybastuz to the power stations of the Urals and Siberia in exchange for supplies of electricity to Kazakhstan; the supplies of Kazakhstani mineral raw materials to ore mining and smelting plants in the South Ural district in exchange for their finished products; Kazakhstani supplies of oil and liquid gas to processing plants in Samara, Orenburg Oblast and Bashkiria in exchange for supplies of oil products and natural gas.

Trans-regional and trans-border trade constitutes about 70% of the bilateral trade turnover.

Cooperation in investments

Several major Russian companies have their investments in Kazakhstan: JSC oil company “Lukoil” (5 billion USD), JSC “Gazprom” (1 billion USD), JSC “Inter RAO UES of Russia” (0,2 billion USD), JSC “Rusal” (0,4 billion USD). Other companies actively invest in the Republic of Kazakhstan as well: the state corporation “Rosatom”, JSC “Rosneft”, JSC “VTB Bank”, Vneshekonombank (Russian Foreign Trade Bank), JSC “Mechel”, JSC “Severstal” and many others. The total Russian investment amount in Kazakhstan is over 7 billion USD.

About 400 businesses involving Russian capital are operating in Kazakhstan.

The development of Russian-Kazakhstani trade and economic relations is hindered by a number of unresolved issues. There are no reliable schemes for mutual settlements or for resolution of economic disputes. Transportation rates are remaining quite high. A great number of economic entities lack sufficient solvency.  Legal and regulatory framework for setting up, and for the operation of, joint ventures and FIG (financial industrial groups) needs improvement. The latter especially concerns machine building, metallurgical engineering and defense complexes.

The Eurasian Development Bank serves to ease financial restrictions and expand investment cooperation. The Agreement on the initiation of the Eurasian Development Bank was signed by Russia and Kazakhstan in January 2006 in Astana. The bank’s authorized capital is 1,5 billion USD, whereby Russia contributed 1 billion USD, and Kazakhstan – 0,5 billion USD. The bank headquarter is located in Almaty.

At the present time the federal executive bodies and parties concerned have embarked on the 2012-2014 action plan for realization of the Long-term Economic Cooperation Program between the Russian Federation and the Republic of Kazakhstan (till 2020), signed on November 25, 2011 in Astana.

According to the Action plan, the coming years will see the completion of the Russian-Kazakhstani nanotech fund, cooperation in organizing a common electricity market for Russia and Kazakhstan, in setting up a joint coach-building works in Kazakhstan, the initiation of a joint Ka-226T helicopter assembly plant and construction of a complete production cycle plant in the automotive industry. Alongside this, possible steps will be considered in initiation of joint ventures, fund raising and the attraction of technologies with a prospect of joint access to the markets of third countries in metallurgy, mining, chemical, light, medical, pharmaceutical, timber manufacturing and engineering industries.

The Russia-Kazakhstan Intergovernmental Cooperation Committee (ICC) has been in action since 1997. The 16th conference of the ICC was held in Moscow on December 17-18, 2012.

Sub-committees for the Baikonur Space Ground, trans-frontier cooperation, interbank and investments cooperation, military-technical cooperation, transport, Fuel and Energy Complex and science and technology cooperation have been in action within a framework of the ICC.