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Environment and Security
30
The World Bank estimates that oil and
gas-related financial flows in Kazakhstan
could reach up to US$7 billion a year in
two decades (World Bank, 2005). Turk-
menistan has also benefited from high
world prices for oil (reaching US$136 a
barrel in June 2008), boosting its foreign
currency reserves and cutting external
debt. Turkmenistan also gained from the
improvement in the terms of payment
26
for its natural gas exports to Russia and
Ukraine, two key commercial partners for
the country. Furthermore, the long-term
agreements with Russia and China for nat-
ural gas exports will guarantee the influx of
foreign exchange into Turkmenistan for the
next three decades.
Though oil-related revenue helps reduce cash
constraints for the state budget, there are sev-
eral risks associated with rising oil revenue.
The Kazakh government is aware of these
challenges and a large share of oil revenue
is allocated to the National Oil Fund of the
Republic of Kazakhstan. The National Fund
was established in 2001 with the main ob-
jectives of reducing the impact of volatile
world prices and smoothing the distribution
of oil-wealth over generations. The fund’s
capital comes from a share of government
income from the oil sector, royalties, bo-
nuses and revenues from Production Shar-
ing Agreement (PSA). The fund is invested
in foreign equities. By the end of 2007 the
fund had accumulated over US$21 billion
27
.
At the same time the oil and state-owned
sectors of the economy still attract the larg-
est investments in Kazakhstan, while ag-
riculture, tourism and other sectors of the
economy show signs of disinvestment
28
. Oil
remains the main driving force and a strong
factor in the vulnerability of the economy.
In Kazakhstan, as in most oil exporting coun-
tries, oil is produced in only a few regions of
the country: five out of fourteen oblasts, with
21 oil-producing districts out of a total of 158
districts (not including cities). The Atyrau
and Mangystau provinces play an important
role in the country’s economy: in 2006–7
two-thirds of Kazakhstan’s crude oil
29
and a
third of natural gas
30
were produced in the
Caspian region. Their combined output ac-
counted for 16.5% of Kazakhstan’s Gross
Domestic Product in 2006 (Agency of the
Republic of Kazakhstan on statistics). Indus-
try, mainly the oil and gas sector, contributes
70–90% of Gross Regional Product followed
by transport
31
and services.
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Natural capital, energy resources,
and wealth distribution
Changing livelihoods in the eastern Caspian region