Kazakhstan's supply of raw materials

Kazakhstan, with a modest population and relatively undiversified industrial sector, is an important contributor to global resources because of its supply of raw materials, not because it is an important market.

The Country

Kazakhstan, formerly a republic of the Soviet Union, is located in central Asia, positioned just south of Russia between the Caspian Sea and China. In 2023, Kazakhstan's gross domestic product (GDP) was $705.52 billion, making it one of the best economies in the world. Though Kazakhstan does not have a large population relative to its land size and is not considered a military or industrial power, it remained important to the world economy because of its impressive endowment of a diverse and abundant mix of raw-material natural resources. In fact, each of the naturally occurring elements in the periodic table can be found in Kazakhstan. The ninth largest country in the world in terms of area, Kazakhstan exhibits a wide climatic and physiographic variability. Its disparate climatic and landform regions include the Caspian Sea and surrounding deserts in the west; the vast arid and semiarid steppe, extending through central portions of the country; and the mountainous peaks and glaciers in the Alti Mountains of the northeast, the Tian Shan in the east, and the Ala Tau in the southeast. The enormous size of the country and the landform variation within conspire to improve potential, and Kazakhstan has become a world leader in production and of many important energy and resources. While most current press accounts focus on Kazakhstan’s substantial oil and deposits, the country ranks in the top ten among countries in the production or reserves of at least thirteen different mineral resources, including chromium, uranium, zinc, coal, magnesium, cadmium, lead, titanium, iron ore, molybdenum, sulfur, silicon, and bauxite.

Petroleum

The extraction of crude oil and the revenue generated by its exportation form the dominant sector of Kazakhstan’s economy. Revenue generated from the export of oil (combined with relatively successful privatization and economic reform efforts) contributed greatly to high rates of economic growth in the first decade of the twenty-first century, particularly during periods of high oil prices. In 2023, Kazakhstan produced approximately 1.96 million barrels of oil per day. Of this total, 1.425 million barrels per day were exported and 288,000 barrels per day were consumed. While current production and export totals are significant, Kazakhstan’s primary influence on the global economy may revolve around its expected production in the future. In terms of proved reserves (those deposits that can be recovered given current technological and market conditions) Kazakhstan was estimated to be home to 30 billion barrels of oil (2.2 percent of world total). Kazakhstan’s strategic importance in this regard (particularly for the United States) stems from its location outside the volatile Middle East.

Kazakhstan’s economy is influenced by oil in many areas other than GDP and high rates of economic growth. It is a stimulant for foreign direct investment, a major source of employment and income, a source of revenue for public services, and a reason for the visible boom in urban office and residential building construction. The National Oil Fund of Kazakhstan, created in 2000, was designed to insulate the economy from sharp drops in crude oil prices. While oil is an obvious asset to Kazakhstan’s economy, its impacts have not been entirely positive. Such drawbacks include high levels of perceived corruption, high rates of inflation (around 15 percent), and possible Dutch disease-style diversion of economic resources from the manufacturing sector. (Dutch disease is an economic concept designed to relate the exploitation of natural resources to a decline in the manufacturing sector combined with moral decay.)

Initial global exuberance over Kazakhstan’s oil reserves seems to have been tempered somewhat by unforeseen challenges, best exemplified by the experience with the large Kashagan oil field. When it was discovered, this oil field, located deep below the northern Caspian Sea, was the world’s largest oil field outside the Middle East and the fifth largest deposit in the world. Extraction of oil from the Kashagan field was first planned to begin in 2005, though production was delayed until production began in 2013. It was one of the most expensive energy projects in the world. Difficulties also included confronting the consortium of six foreign oil companies and Kazakhstan’s national oil company, the deposit’s high sulfur content and extreme geological pressure, heightened extraction challenges faced by the harsh physical environment, and the Kazakhstan government’s levying of high tax rates and insistence on renegotiating contracts with foreign firms. Despite such challenges, Kazakhstan continued to be a major player in the global oil market. Perhaps the crowning illustration of oil’s significance to the Kazakh economy is President Nursultan Nazarbayev’s ambitious “Kazakhstan 2030” campaign. This directive sought to vault Kazakhstan into the world’s fifty most economically developed counties. Perhaps not coincidentally, Kazakhstan’s oil production was expected to peak in 2030.

Natural Gas

While not nearly as significant to Kazakhstan’s global resources as its oil deposits, natural gas is also an important resource, particularly in satisfying local demand. Kazakhstan’s production of natural gas (more than 27 billion cubic meters in 2022) pales in comparison to neighboring Russia (618 billion cubic meters), Turkmenistan (86 billion cubic meters), and Uzbekistan (47 billion cubic meters). While much of the natural gas production fulfills domestic consumption, Kazakhstan does export nearly 8 trillion cubic meters. Kazakhstan’s importance to the global economy with respect to natural gas, however, stems from its substantial anticipated future production. Its natural gas reserves, in 2021, estimated to be 2.5 trillion cubic meters. Kazakhstan also imports 2.181 billion cubic meters from neighboring Uzbekistan. Kazakhstan’s large area and inadequate internal natural gas transport infrastructure necessitate this import from Uzbekistan to serve the southern industrial and urban centers of Shymkent and Alma-Ata. Plans have been introduced to construct a gas pipeline linking Kazakhstan’s gas fields with China’s western province of Xinjiang.

Coal

Kazakhstan is a major producer of coal and possesses large coal reserves. Kazakhstan ranks among the world’s largest coal producers. By 2023, it produced 118.195 million metric tons, consuming 84.852 metric tons and exporting 27.309 metric tons. Coal is an important energy source within Kazakhstan, as fossil fuels produced 89 percent of the country’s electricity. The country’s coalfields, located primarily in the central Qaraghandy region, are somewhat unique in the amount of coal-bed methane emitted. In fact, Kazakhstan is one of the only countries that actively harness this gas for energy purposes.

Uranium

Kazakhstan’s uranium-related history includes its primacy as a source of the mineral for the Soviet Union and as the home of the Soviet nuclear weapons testing ground at the Polygon site near the northeastern city of Semey. Given the global concern over the burning of fossil fuels, greenhouse-gas emissions, and contributions to change and global warming, uranium is poised to become an increasingly important energy source in future decades, particularly as global electricity consumption is expected to double. Furthermore, more than thirty nuclear reactors are being built around the world, with an additional several hundred in advanced planning stages. In the 2010s, Kazakhstan became the world's largest producer of uranium, accounting for 41 percent of world output, and was home to the world’s second largest uranium reserves, behind only Australia. By 2023, Kazakhstan produced 21,000 tons of raw uranium, which was 43 percent of the world's output. Kazakhstan’s proximate location to the world’s two most populous countries is also seen as an important aspect of its future uranium production and export. Increases in nuclear power in China and India are viewed as important markets for Kazakhstan’s uranium. Unique features of Kazakhstan’s uranium stocks include accessibility, high quality, and ease of extraction. By using the in situ leaching method, in which water and sulfuric acid free the mineral from surrounding rock, Kazakhstan is able to extract uranium at a relatively low cost. The arrest of Mukhtar Dzhakishev, former chief executive officer of the national uranium company Kazatomprom, is widely believed to be politically motivated. This arrest, and others like it, illustrates one aspect of the risky environment associated with foreign investment in Kazakhstan’s mining sector.

Chromium

Taking into account both current production and estimated reserves, Kazakhstan may be the global economy’s most important source of chromium. Alternatively referred to as chrome or chromite, the mineral has a unique blend of corrosion resistance, hardness, and bright finish, which make it an indispensable input for jet-engine turbine blades, fuel-efficient engine, and, most important for the global economy, stainless steel. Kazakhstan produced $146 million in chromium in 2022. Regarding future production, Kazakhstan has the largest reserves of chromium in the world (26 percent of the world total), far outpacing South Africa (15 percent of world total) and India (3 percent of world total). Global demand for chromium largely mirrors that for stainless steel, the most important end use of chromium. In fact, there is not a substitute for chromium in the production of stainless steel, a fact that solidifies Kazakhstan’s importance in the global chromium market. Kazkhrom, a chromium extraction company, nearly produces the vast majority of the country's chromium. About one-half of production is exported; the other half is used in Kazakhstan’s sizable steel industry. Quantifying chromium’s contribution to the Kazakhstan economy is difficult as the mineral is not an openly traded commodity and exchange details are not made public. China—the world’s largest steel producer and experiencing increases in construction, industrialization, and overall economic growth—is seen as an important current and future market for Kazakhstan’s chromium.

Other Resources

Kazakhstan has 600 million tons of manganese reserves, but the country has not been able to tap this potential effectively. As of 2022, it exported $7.07 million of manganese.

Kazakhstan also has significant lead reserves. Some estimates claim that global lead resources will be exhausted by 2050, so Kazakhstan may become a leading producer in coming decades. Much of the lead used now, however, is produced by recycled materials.

Kazakhstan also has copper reserves. Kazakhmys, the largest copper producer in Kazakhstan, exports 85 percent of its final product to China. Kazakhmys also produces silver, gold, and zinc.

Kazakhstan is the world’s eighth-largest producer of zinc. While zinc is an important input in the galvanization of steel and the production of brass, its prices have fallen steadily as global demand has dropped precipitously.

Kazakhstan's production of iron ore has been declining, however, and many of the country’s deposits are considered of low-grade quality.

Kazakhstan’s other resources include important animal and plant resources. The Caspian Sea, for example, is home to the endangered beluga sturgeon, noted for its production of world-class caviar. Apples appear to have originated in Kazakhstan, where forests of wild apples offer a vast genetic “library” for this valuable plant. Agricultural researchers have collected seeds from Kazakhstan’s apple forests in an attempt to conserve the of apples in case the varieties that dominate world markets should face catastrophic disease from pests, fungus, or viruses.

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