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Trouble in Kazakhstan: Energy-Price Hikes Have (Political) Consequences

Kazakh law enforcement officers are seen on a barricade during a protest triggered by fuel price increase in Almaty, Kazakhstan, January 5, 2022. (Pavel Mikheyev/Reuters)

Kazakhstan has not exactly been a beacon of freedom since the then Kazakh SSR declared its independence from the Soviet Union shortly before the USSR’s final collapse. For most of the time since then, its president — and, for most practical purposes, dictator — has been Nursultan Nazarbayev, who had already emerged as Kazahstan’s dominant political figure in the late Soviet era. In 2019, Nazarbayev stood down from the presidency, possibly as a response to widespread disturbances, but was succeeded by a close ally, and, up (it seems) until today, retained an immense amount of power.

Reuters:

Kazakhstan’s president stripped his powerful predecessor of a role as head of the country’s security council on Wednesday after demonstrators stormed and torched public buildings in the republic’s worst unrest for more than a decade.

The cabinet resigned, but that failed to quell days of demonstrations initially triggered by a New Year’s Day fuel price rise but quickly encompassing wider political demands.

As that report would suggest, the fuel-price hike was “merely” the proximate cause of this latest wave of protest, and there is only a limit to which political protests (and their consequences) in dictatorships can be compared to those in democracies, where elections remain the principal vehicle for affecting political change. Nevertheless, Reuters’ Dasha Afanasieva raises the suggestion of a Kazakh canary in the coal mine.

Kazakhstan has served up a timely warning to European leaders. The central Asian state’s government fell on Wednesday following protests sparked by the removal of a price cap on liquefied petroleum gas (LPG), a key fuel for cars. While the details of the implosion are peculiar to Kazakhstan, western politicians have cause to look on nervously.

At first sight, the unrest read more seems odd for a country that in 2020 boasted 1.8 million barrels of daily oil production and 32 billion cubic metres (bcm) of gas, way above consumption levels. Yet LPG has long been sold at a subsidised rate below its cost of production, which incentivised exports and led to shortages. Hence the government’s idea to spur supply at home by hiking the price was logical, but has left some Kazakhs facing energy costs double what they were.

The LPG outcry has been a literal fuel for wider grievances. Kazakhstan’s former president, Nursultan Nazarbayev, who ruled for three decades until his abrupt resignation in 2019, has dragged out a handover of power to nominated successor Kassym-Jomart Tokayev. Things may improve under Tokayev, who has ordered the LPG price cap to be restored as well as price controls on other “socially important goods”, but it was too late for the government led by Askar Mamin.

Europeans arguably have a bigger energy headache to Kazakhs. The 219 bcm of natural gas produced in Europe in 2020 was well under half the continent’s consumption, and European energy prices have surged to record highs amid tight supplies. Short-term wholesale electricity prices were last month almost 10 times their level the year before . . .

Energy bills represent a smaller proportion of household budgets in richer countries. But Spanish consumers have seen a doubling in the energy prices they pay since 2019, and UK bill payers will in the coming months be hit with a hike of over 50% in their annual bills.

Voters in Europe’s democracies are unlikely to take to the streets, at least on a wide scale, over the current price spike, although this certainly cannot entirely be ruled out (indeed there have already been protests by truckers in Dublin) given the way that the discontents of the pandemic era have played out. But it’s worth remembering that fuel-price hikes led to major protests in the U.K. in 2000 and were the trigger for the rise of the gilets jaunes in France in 2018. Nevertheless, what’s going on in Kazakhstan is a reminder that higher fuel costs can carry a high political price, too.

The current energy-price surge in Europe owes relatively little (except in the U.K. and, arguably, Germany) to climate policies, but the current direction of those policies will inevitably push energy prices to a generally — possibly significantly — higher level over time, even after the current price surge subsides. If voters come to see this as a self-inflicted energy crisis, which is what it will be, they are unlikely to be best pleased. The alternative, I suppose, may be a (somewhat self-defeating) subsidy regime, which would itself become both expensive and very hard to go back on, not something that will improve the already badly stretched balance sheets of many European nations.

Before too long, the politics of climate change may well be going through some . . . interesting times.

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