When Russia banned many Western agricultural products last week in response to Western sanctions, it created a $9.5 billion hole for other countries to fill. Immediately, officials across Central Asia optimistically announced plans to help plug the gap.
But sudden shortages created by the ban have all but guaranteed to increase inflation in Russia, a major food importer. And Central Asians will suffer likewise because their expected jump in exports will leave fewer products available to local consumers, thus driving up prices at home.
All this highlights a paradoxical mix of opportunities and risks for Kazakhstan, a member of the Moscow-led Customs Union whose economy often feels ripple effects from Russia. Aside from the immediate pros and cons of the food ban, Kazakhstan is clearly spooked by Russia’s deepening confrontation with the West over its support for rebels in Ukraine, concerned about the fallout from a slowing Russian economy.
Kazakhstan’s response to the food ban paints a picture of a junior partner struggling to navigate the shoals between an increasingly isolationist Kremlin and its own ambitions of greater global integration.
As soon as Russia introduced the ban, President Nursultan Nazarbayev announced that Kazakhstan would not take part. Then the Kazakh customs service said it would not obstruct deliveries of the banned goods to Russia (such as a shipment of American chicken that Russian border guards intercepted last week). On August 12, Nazarbayev said Russia’s escalating tit-for-tat sanction war with the West is “a road to nowhere” and hailed Kazakhstan’s openness.
Kazakh officials are trying to put on a brave face. Leila Muzaparova, deputy director of the state-run Kazakhstan Institute for Strategic Studies, downplayed concerns in a talk yesterday in Astana, insisting that Kazakhstan will only feel any global slowdown related to the sanctions war, not the effect of Western sanctions on Russia’s growth.
Others stress that Kazakhstan stands to gain from the food ban. An official from the Agriculture Ministry told EurasiaNet.org this week that “Kazakhstan sees an opportunity to increase the supply of … beef, lamb, pork, vegetables and melons to Russia.”
Yet close ties mean Kazakhs feel Russian pain. Russia’s slowing economy has slashed demand for Kazakh imports. Astana was forced to let the tenge slide by 19 percent in February as the ruble tumbled during Russia’s Crimea adventure. In late July, as the West stepped up sanctions on Russia, rumors of another devaluation forced Kazakhstan’s Central Bank to intervene to shore up the tenge, which is partially pegged to the ruble.
“Despite cheerful ideas about indescribable opportunities for Kazakhstan, there is nothing good for us,” Bloomberg quoted Aidan Karibzhanov, co-owner of Visor Capital, an Almaty brokerage, as writing on Facebook. “It’s easier to export inflation than yogurt.”
Already in Uzbekistan, where an official met news of the food ban with a pledge to double exports of fruit and vegetables to Russia, prices are reportedly rising in local markets.
Kazakh agriculture is heavily subsidized, leading at least one producer to point out how unfair it would be to suddenly shift local goods to Russian markets. "Kazakhstan created us and the government gives us benefits. I think it would be unfair to use the subsidies provided by Kazakhstan to supply the Russian market," Gennadiy Zenchenko, a major dairy producer in North Kazakhstan Region, told Tengri News on August 14.
In the long run, Kazakh consumers might hope other Kazakh producers feel the same way.