Biden and the Risks for Akorda — 2

In our recent publication, «Biden and the Risks for Akorda», we have concluded that Kazakhstan will invariably end up under pressure from the new U.S. Democratic administration. We’ve argued that, while at first of a diplomatic nature, this pressure will later become political and then sanctional.

The main reason for that lies in the fact that the Republic of Kazakhstan has become an involuntary victim of the sharp escalation of the geopolitical confrontation between the United States on one hand and China and Russia on the other. Here is the forecast we make in the article.

«After a certain time, say, in half a year or a year, when it becomes clear that the diplomatic pressing bears no fruit, the U.S. State Department will start acting in a tougher manner. This stage is likely to start with inviting Kossym-Jomart Tokayev to pay a visit to Washington in order to hold negotiations with high-rank U.S. officials and to meet with Joe Biden. And since the Kazakh President is tied hand and foot by the contracts with Russia in all spheres, the negotiations are bound to fail. 

At this point, the White House will start looking for new instruments of pressurising the Kazakh authorities including those of not only the political-military and economic nature but the sanctional nature as well. Luckily, the reasons for that exist in abundance — it will be enough to reanimate Kazakhgate and begin new investigations against the First President of the Republic of Kazakhstan and his closest allies and relatives all of whom, with no rotten apple in the bunch, are dollar billionaires and multi-millionaires.

We have no doubt that the Library and Akorda understand it full well. However, amid the escalation of the geopolitical confrontation, there isn’t much they can do to remedy the situation. Therefore, the Elbasy and his allies are likely to choose the tactics of talking out of both sides of the mouth and try to get through between Scylla and Charybdis. And, if they fail to do so, they will do their best not to let the U.S. sanctions hurt the personal fortunes and interests of Nursultan Nazarbayev and his closest allies (even if the sactions do hurt Kazakhstan itself and its economic and trade interests)».

Now then, undoubtedly, the oil giants Chevron and ExxonMobil are to become one of the channels for Nursultan Nazarbayev to try and reach out to the White House and then to get the U.S. authorities to lessen the pressure or may be even to temper justice with mercy (not for nothing, of course, but say for certain trade-offs).

The thing is that both corporations are involved in Kazakhstan’s biggest investment project now called Tengizchevroil. Note that the information on the conditions of the companies’ participation are still unknown to the Kazakhs.

Usually, they use the commercial confidentiality of the agreement between Kazakhstan and Chevron to justify the secrecy. However, the high-profile Kazakhgate case (those who wish to learn more on the subject may find a number of the materials in the public domain) shows that both parties to the agreement have serious reasons to continue keeping the secrets associated with the project.  

Which, by the way, means that, even if their current management is not directly linked to the events happened almost thirty years ago, Chevron and ExxonMobil will have to navigate their way between the White House and Akorda/the Library. Simply because the revelation of the Kazakhgate mystery and of the other secrets related to the relationship with Kazakhstan’s de-facto ruling clan of Nursultan Nazarbayev threatens them with legal trials and multi-million fines for the involvement in the corruption schemes.

It is this circumstance that provides Nursultan Nazarbayev and his current allies with a certain means of influencing Chevron and ExxonMobile and, through them, of the U.S. authorities that are quite clearly-eyed about everything that is happening in the world including foreign dictators from among those whom Franklin Delano Roosevelt called «sons of bitches».

Of course, the Elbasy is unlikely to make the U.S. oil giants start and lobbying his interests in the White House at the first try. However, we have no doubt that Akorda and the Library will find ways to make them start moving in the desired direction.

This, by the way, is understood by everyone interested in the subject and informed about the events happening in this sector of the national economy. To confirm this, let us quote S& P Global Ratings’ action of February 2, 2021 (text in bold by

«Support from Chevron and ExxonMobil remains a supporting factor for the ratings.   We continue to factor in ongoing support from shareholders, notably through a cash-call mechanism requiring them to cover cash shortfalls due to cost overruns or lower oil prices until the company first extracts FGP/WPMP oil in mid-2023».

«Timely completion of its expansion project (FGP/WPMP) remains a risk area, but we expect no further delays or overspending at this point, despite COVID-19 effects.   We expect that FGP/WPMP, TCO’s major 45.2 $ billion expansion project, will deliver its first oil in mid-2023, according to the revised plan».

«Lower royalties and dividends create a problem for government finances, increasing the risk of a negative intervention.  Lower oil prices and volumes, combined with high capital spending, will result in much lower royalty and dividend payments by TCO in the coming years, compared with the original plan. Because TCO is the largest contributor to the state budget, at up to 20% of its revenue, this could lead the government to interfere in the project to compensate for lost revenue. Lower dividends to national oil champion KazMunayGas will create another problem for the government, since the company is counting on dividend flows to support its cash generation».

«High country risk in Kazakhstan, where most of TCO’s assets are located, continues to constrain the rating.  Evolving regulations, including environmental ones, and taxation practices could lead to additional cash outlays for TCO. For example, in 2010 the government imposed duties on TCO’s crude exports despite the company being free from them according to its incorporation agreement with the government. To avoid operational disruptions, TCO has been paying duties since then (although under protest), while reducing the royalty payments by similar amounts, as allowed by the terms of its concession. The overall financial effect on TCO has therefore been neutral but the case illustrates the volatility of regulation in Kazakhstan».

«A downgrade could also materialize if the Kazakh government were to impose large fines, change the rules of TCO’s license, or otherwise penalize the company for meaningful overspend on FGP/WPMP to compensate for the loss of tax revenue for the state budget, and TCO received lower dividends than we expect from state-owned shareholder KazMunayGas».

Since the Kazakh government, despite its being under the chain of command of acting President Kossym-Jomart Tokayev, nonetheless, sails under the flag of Nursultan Nazarbayev, the Elbasy will have no trouble creating problems for Tengizchevroil thus pushing Chevron and ExxonMobile to get involved in resolving his issues at the level of the U.S. President.

On the other hand, since, in this case, we are dealing with a geopolitical confrontation that may retain or change the status quo (not to the U.S.’ advantage), these efforts may not be enough to succeed in the matter.

Kossym-Jomart Tokayev meets Michael Wirth, Chevron’s Chairman of the Board and CEO. September, 2019


The main photo: Nursultan Nazarbayev meets Michael Wirth, Chevron’s Chairman of the Board and CEO. April 2018


Add comment

Your e-mail will not be published. Required fields are marked with *