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New Vectors

As part of its multi-vector diplomatic strategy, Kazakhstan is looking to promote its economic interests and relationships with members of the world’s 1.5 billion strong Muslim community.

With a population of approximately 1.5 billion, the Muslim world represents a significant sphere for Kazakhstani foreign relations. Moreover, intensifying trade relations with the Muslim world presents Kazakhstan with significant new opportunities to increase its FDI inflows. As the chair of the Organization of the Islamic Conference (OIC) in 2011, and with a budding sharia-compliant banking sector, Kazakhstan is showcasing its growing political and economic ties across the Muslim world, especially with nations such as Turkey, Iran, Malaysia, and the UAE.

In June 2011 Kazakhstan assumed the chairmanship of the OIC, an international club of 57 states, formed over 40 years ago, with a population of more than 1.5 billion. The conference is the largest and the most influential intergovernmental Muslim organization, and Kazakhstan has been a member since 1995. In a first for the organization, the Central Asian state is leading the OIC, which seeks to bridge the East and West and establish close-knit relations among Muslim countries. Given Kazakhstan’s recent successful leadership during its OSCE chairmanship, it is expected that the country’s strategic input will focus on closer cooperation between East and West—two geographies the country has access to due to its strategic location as well as its open and constructive foreign agenda. Among the initiatives Kazakhstan will undertake include strengthening mechanisms for conflict forecasting, and the prevention and fostering of inter-faith dialogue and tolerance. As the OIC chair, Kazakhstan is also willing to play a leading role in the socio-economic rehabilitation of countries and territories torn by interethnic and inter-religious conflicts.

The OIC has already shown support for Kazakhstan’s initiatives, such as the establishment of the Conference on Interaction and Confidence Building Measures in Asia (CICA) and the Congress of Leaders of World and Traditional Religions, which clearly demonstrates the success of the country’s proactive stance in the Muslim world.

Kazakhstan has established strong and progressive relations over the course of its 20-year history. Approached by major powers, including the US, Russia, and China from the early days of its independence, close bilateral cooperation with Muslim countries provided Kazakhstan with new vectors to explore the diversification of its foreign policy agenda. One of the first countries to recognize independent Kazakhstan—Turkey—shares extensive historical, cultural, and linguistic ties through a common Turkic heritage with the Central Asian state. Furthermore, the two nations enjoy close political cooperation and strong economic ties. In 2010, the total volume of bilateral trade exceeded $3.2 billion. Enjoying similar trade volumes as Turkey, Iran presents Kazakhstan with an important alternative oil export route to the global marketplace. The two countries are willing to carry their bilateral relations further and reach bilateral trade volumes of $10 billion in the near future should conditions allow. In June 2010, at the Istanbul session of the CICA, President Nazarbayev echoed Iranian president Mahmoud Ahmadinejad’s will to foster bilateral cooperation and stated that the two countries have ample potential to increase the level of their bilateral relations and mutual cooperation.

The Arab world, on the other hand, with the extra liquidity created by its extractive industries, is a potential source of foreign investment for Kazakhstan when competition for Western FDI is tough. The Gulf region has been interested in the development of real estate and urban infrastructure in the country, yet financial flows in the manufacturing sector, including energy, are also increasing. Moreover, with the rapid adoption of sharia-compliant finance models, the first Islamic bank, Al Hilal Bank of the UAE, opened in the country in 2010. It is expected that the expansion of sharia-compliant finance will contribute to the strengthening of Arab-Kazakhstani relations, where there is plenty of room for expansion.

The entry of sharia-compliant banking has also opened new doors for the creation of firmer ties with the Muslim world in Southeast Asia. Malaysia is the leading country in this regard, and the second Islamic bank to enter the Kazakhstani market—AmanahRaya—will begin operations in 2012 in cooperation with the Kazakhstan Development Bank and Fattah Finance to fund projects for small and medium-size businesses. Another equally important cooperation area is agriculture. The majority of the total crop area in Malaysia is taken up by industrial crops, and the country exports approximately 70% of its meat supplies. In this regard, Malaysia presents a lucrative export market for
Kazakhstani livestock products that comply with halal standards.

With its vast natural resources, Kazakhstan will always be on the investment agenda of global powers. Yet in a globalizing world, with higher levels of integration and increasing foreign investment flows, the Muslim world with its 1.5 billion population and more than $7.7 trillion in GDP will continue to have a growing role in Kazakhstan’s foreign political and economic agenda.