Economic Relations between Kazakhstan and Russia

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From the beginning of 1995, steadily increasing numbers of enterprises were turned over for administration. Toward the end of December 1995, external administration was introduced at some 20 major industrial enterprises in various sectors. The necessary legislative basis was created for the involvement of foreign capital in Kazakhstan.

Thus the implementation of economic policies in 1992-1995 in Kazakhstan resulted in the liberalization and openness of the economy and the expansion of private enterprise.

There were significant shifts in the market infrastructure. Trade and the banking sector developed rapidly, and other financial institutions were born - in other words, there was, progress in those spheres of the economy that had previously; been underdeveloped but that were vital for the functioning of the market economy.

The liberalization of foreign and domestic trade resulted in a slight reduction of export in 1994 and early 1995 compared to the decline in the volume of GDP. The export of commodities, mostly to CIS countries, amounted to $13 billion in 1994 and $4.97 billion in 1995. The greatest share of exports went to the Russian Federation 47 percent, or $1.4 billion's worth in 1994; in 1995, the exports amounted to $2.8 billion, including $2.1 billion to Russia.

Russia's share in Kazakhstan's imports from CIS countries at the beginning of 1995 was the largest - 70 percent; Turkmenistan's, 10 percent; and Uzbekistan's, 9 percent. Of considerable significance is the fact that more than 50 enterprises securing Russia's defense interests work on Kazakhstani territory. All principal roads of Russia leading east and southeast, Yuzhsib and Transsib railways included, pass through Kazakhstan. Major Russian high voltage power lines, communications lines, and pipelines are also connected with Kazakhstan.

As before, Kazakhstan's exports to Russia are raw materials, oil and petrochemical products, as well as products of ferrous and non-ferrous metallurgy.

Deliveries of ferrous metals (35.2 percent), copper and items made of copper (15.1 percent) make up a considerable share of exports. Russian enterprises are also the main consumers of Kazakhstan oil and petroleum products, which amount to 40 percent of the exports of mineral products.

In 1994, Kazakhstan's imports of industrial and technical goods and of consumer goods from the far and near abroad amounted to $3.4 billion; in 1995, the figure was $3.7 billion. The largest share of imports fell on Russia - $1.3 billion and $1.8 billion respectively. Imports from Russia covered 30 percent of the demand of households and the republic's enterprises for raw materials, 70 percent of the demand for industrial manufactured products (including 90 percent of the demand, for complex household appliances), and more than 70 percent of the * demand for products of the chemical and timber industries. Kazakhstan's imports from Russia are dominated by electric; machines, equipment, mechanisms, and, transport vehicles. Their share in over imports amounts to 70-percent. There are also imports of considerable amounts of raw materials for the foodstuffs industry and the foodstuffs themselves (10.2 percent), mineral products and metals (10.1 percent), and other consumer goods (7.8 percent). More than half of imported mineral products and non-ferrous metals come from Russia.

The share of deliveries against convertible currency in the export-import operations between Kazakhstan and Russia amounted to 6.5 percent of the total volume of exports; the share of baiter operations was 32.6 percent; and the share of clearing and similar operations, 60.9 percent. In this process, baiter deals did not as a rule result in a balanced and equivalent exchange. Analyses of export-import barter deals in 1993-1995 shows that total exports were twice as large as imports of commodities. As a result of these operations, considerable funds of Kazakhstan Commodity producers annually stay in Russia.

On the whole, the results of economic development show that the republic was close to achieving macroeconomic stabilization, that the impact of market incentives increased, and that a new system of reference points and motivations developed. The main problems of the critical period of development were partially solved, but new ones emerged.

Harsh monetary and credit policies, liberalization of the domestic and foreign markets promoted the formation in the republic of market mechanisms for the regulations of the economy and for ensuring equal possibilities and guarantees for all the agents of economic activity. In this situation the possibility appeared of creating a common economic space covering Kazakhstan and Russia, in which free circulation of commodities, capital, and labor would be made possible.

: 18/07/2008