Caspian states will need to build independent policy based on their national interests – Kazakh economist (INTERVIEW)

  14 March 2022    Read: 886
 Caspian states will need to build independent policy based on their national interests – Kazakh economist  (INTERVIEW) presents an interview with Aidarkhan Kusainov, an economist and the former adviser to the chairman of Kazakhstan’s National Bank.

- Western countries have imposed unprecedented sanctions on Russia for unleashing a war with Ukraine. Russia is excluded from all economic and financial mechanisms of the West. It is currently unknown how long this situation will last. New sanctions are most likely to lead to drastic changes both in the directions and structure of Russia’s foreign economic relations. What risks does this situation create for the Caspian littoral states, Russia’s main regional partners? 

- In fact, I do not think that these sanctions pose any threats and risks and will affect the Russian economy. As far as I know, the Caspian littoral states have a pretty simple model - these are raw materials in exchange for food and consumer goods. From this point of view, no one refuses raw materials. First of all, they want raw materials, gas, oil, etc. 

Secondly, the West keeps imposing tough sanctions against Russia. It will "flirt" with the Caspian states in one way or another because this factor is also an element of politics or a share of weakening Russia’s influence. From an economic point of view, I believe there will be a certain flirting with the Caspian countries. From this standpoint, the sanctions pose no fundamental threats. But evidence has pointed out that economic sanctions imposed by western countries affected the psychological well-being of individual people.

Everyone is in a panic. Parties to contracts breach them. Logistical challenges are one of the main problems that we are facing now. There is a war going on, but nothing lasts forever, nor will this war. We all know that Moscow is a distribution center for large companies, including those of Kazakhstan. We also know that transnational corporations have different divisions, separated around the globe. Probably the EU countries were subordinate to the regional division in Moscow. There is a safe failure here, but it is purely organizational. Therefore, if we get out of these momentary difficulties, the sanctions will not significantly affect the economic situation in the Caspian countries. On the other hand, I agree that these sanctions have changed the economic landscape of Russia, and from that point of view, more opportunities open up for the Caspian states.

- Which ones exactly?

 - It is obvious that traffic through Iran will increase, for example, that is, the southern corridor through Iran and Azerbaijan, around the Caspian Sea. That is, in one form or another, this transit will increase. I think that trade from East to China and back is being activated, in principle, including through Kazakhstan and the Caucasus. Therefore, I believe that the cargo flow in the region will become more active. I don't know how much. There will be new opportunities because Russia will try to replace imports even more. In principle, Russia is self-sufficient, however, these processes will be intensified. It is quite likely that the investment activity of Russian companies in the Caspian region will also be activated. What's more, it may well be that Chinese creditors are becoming more active in terms of logistics and terms of some kind of long-term security.

Thirdly, it all depends on how ready the Caspian governments themselves are to take advantage of these opportunities. There is a significant risk that they will not be ready. If you look more broadly, the world is entering a serious economic crisis. It seems to me that conspiracy theories will be used to a certain extent - it is very convenient now to blame all the problems on Russia. That is, this story is about the wrong quantitative easing of inflation in the world, it was before all this happened.

The tightening of humanitarian policy will lead to an outflow of capital from developing countries. We witnessed this in 2015, it was a serious crisis, but for some reason, we didn’t feel it against the backdrop of the Crimean events. But there was a serious crisis in the world in 2014-2015. There was an outflow of capital from developing countries, there was a fall in stock markets, a slowdown in the world economy. It should be noted that in 2014-2015, all this was presented as a punishment for Russia it was part of a large curtailment of investment programs.

The ongoing rise in oil prices scares me. I think this is a dangerous joy for the oil-producing states, euphoria. Now the markets are in a frenzy, Russia has not yet imposed many sanctions, and the United States, which has imposed an embargo on Russian oil imports, is quite honestly saying that they want to replace it. The Americans turned to Venezuela, talked with Iran, this is an attempt at short-term solutions. They have long-term solutions. They also have heavy crude oil in Canada, which is quite profitable at such prices, they have sanctions rather quickly. Imagine that they will ensure their energy security in six months, and this, in principle, is real. This increase will take place against the backdrop of a slowdown in the global economy. There are risks of a slowdown in the global economy. Anti-Russian sanctions affect the global economy. Therefore, we are likely to witness an outflow of capital and an increase in US production.

The recent oil prices can be considered a purely speculative market. When prices go up, they have serious potential to go down. For the Caspian littoral states, this will be serious. I want to emphasize that this is not happening because of the sanctions. Biden says that prices are on the rise because of Putin. The EU says that the Russian president is to blame because we need to suffer for democracy. But everyone understands that prices are growing because there are problems with its quantity, this is a purely financial problem. Now it is more profitable to say that we are suffering for democracy, and not we ourselves "slammed".

The Caspian states should seriously think that they are entering a period when there will be many promises and flirtations from foreign investors. But the foreign investment will not come here, not for political reasons, I have already explained, but because it is big macroeconomics. By autumn, the oil-for-goods model will no longer work, and it will be necessary to think about how to earn. The Caspian states will need to build an independent policy based on their national interests, and discard what foreign consultants advise. This is a fundamental point. If the states find their line, they win. If they don’t find it, they will somehow survive, but if they try to act according to classical Western models, they will lose.

- What fundamental changes in the geopolitical and geo-economic structures of the modern world can occur after the Russian-Ukrainian war? What new economic order will give rise to this conflict?

- I do not know what geopolitical, geo-economic differences are, but in fact, this is not a "granulation" of the world. One can forget about investment flows. If states continue to blindly follow classical economics, they will be left with nothing. One can forget about the free market, it was already clear when the sanctions battles with China were going on. In principle, I think that Russia will play a much larger role for us, in this regard, we can forget about any serious interactions there. We will be more closed - Iran, Kazakhstan, Azerbaijan, Turkmenistan, and Russia. To my mind, these ties will develop more strongly and be more concentrated. 

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