Monopoly Games in Kazakstan

The demotion of Kazakstan’s anti-monopoly chief after a row with a powerful businessman has underlined the way that political connections carry more weight than the need for fair regulation.

On June 11, President Nursultan Nazarbaev issued a decree announcing that the State Agency for Regulation of Natural Monopolies and Protection of Competition, no longer formed part of the government. This means that the agency’s head Oraz Zhandosov – a respected technocrat – has lost his effective ministerial status and no longer has a vote at cabinet meetings.

The decision came a week after Zhandosov was publicly attacked by leading oligarch Alexander Mashkevich, who is close to the president.

The stand-off took place at a June 4 meeting of the council of foreign investors in Kazakstan – Mashkevich is a foreign national although he was born in the Soviet Union. The businessman used the meeting, chaired by Nazarbaev, to attack Zhandosov’s policies, calling them “unilateral and uncoordinated”, and demanded that his powers be curbed.

Instead of supporting his senior government official in the argument that broke out, President Nazarbaev reprimanded him on the spot and cancelled a proposed set of changes to Kazakstan’s anti-monopoly legislation.

Zhandosov, 42, was appointed head of the anti-monopoly agency a year ago, and has won a reputation for taking a stand against big businesses which hold effective monopolies over large areas of the economy. The Eurasian Industrial Association, EIA – a conglomerate owned by Mashkevich which includes major firms in the mining, metals, energy and coal industries – is clearly one of the business groups the reformer has in his sights.

He has been pushing for laws restricting the rights of monopoly-holders to further extend their businesses, for example to gain access to supply and distribution if they already control the production side.

EIA, with 60,000 employees and gross income put at 1.3 billion US dollars last year, is unlikely to welcome any curbs on its activity. The group fired a warning shot two days before the investors’ meeting, when the Express-K newspaper it controls said that Zhandosov had embarked on “a revolutionary redistribution of property”.

Political analyst Viktor Verk, who works for the Vremya newspaper which is supportive of Zhandosov’s views, says the technocrat and the oligarch have been at loggerheads since the former’s appointment.

Analysts are concerned at the summary manner in which President Nazarbaev acted against his anti-monopoly chief in favour of a private-sector ally.

“Mashkevich’s behaviour and the way President Nazarbaev treated Zhandosov leads one to believe that Mashkevich and his group exert influence on the head of state,” said Aigul Omarova, a journalist with the internet newspaper Navigator. “When the president is influenced by a non-citizen denouncing a Kazak citizen who’s in charge of a government agency, it could be damaging for the country’s image as a sovereign state. It will also have an impact on the president’s personal image as an independent politician.”

Omarova can understand why oligarchs are so opposed to Zhandosov, saying, “It’s because his agency can actually stand up to the outflow of capital abroad and to further monopolisation in the area of metals extraction and, as it turns now out, the rail freight industry.”

Ermurat Bapi, formerly chief editor of the opposition newspaper SolDAT, told IWPR that the reason why Mashkevich is on such good terms with the president is that he is one of the biggest sponsors of the regime. He sponsors events during elections and other political campaigns, as well as helping charities led by members of the president’s family, Bapi said.

Mashkevich may have political as well as commercial reasons for seeking to limit Zhandosov’s powers.

The latter leads Ak Jol, a political party mildly opposed to Nazarbaev which plans to field candidates for the first time in a general election expected in September. Ak Jol’s moderate profile and the business background of many of its leading members makes it a possible threat of the Civic Party, with which Mashkevich has links. The Civic Party is not only decidedly pro-Nazarbaev, but is regarded by many as representing EIA’s interests in parliament, where it is second only to Otan, another party loyal to the president.

Analysts interviewed by IWPR were divided on whether Ak Jol will really be able to steal votes from the Civic Party in the election, but its economic reform agenda will certainly provoke hostility from Mashkevich and other powerful business figures.

“The oligarchs have quite a few people in the president’s administration, in the government and in parliament,” said Andrey Chebotarev of the Institute for National Research. “So by applying pressure on the official [Zhandosov], the party itself [Ak Jol] is indirectly pressured.”

In another country, the public dressing down of a key economic official widely seen as a competent and reputable figure might have sent ripples through the foreign business community. While it is still early days, one analyst at least believes there will be no significant effect on investor confidence.

“Foreign investors have long ago grown accustomed to constant turbulence in the government,” said Dosym Satpaev who heads the Risk Assessment Group. “The specifics of Kazakstan are such that investors are more concerned about the position taken by the president himself on any given issue, because they understand that in a tightly centralised system… everything depends on the president. Our government is not an independent body.”