November 12, 2014 / 6:37 PM / 4 years ago

Sharp fall in oil price poses concern for Kazakhstan

BRUSSELS (Reuters) - Kazakhstan is concerned about falls in the oil price, which have had a “tangible” impact on the Central Asian oil producer, the country’s foreign minister said on Wednesday.

Economic uncertainty, due to fallout from the Ukraine crisis and the drop in oil prices, led Kazakhstan’s President Nursultan Nazarbayev on Tuesday to tap some of the country’s $77 billion oil fund to bolster economic growth.

Oil prices have fallen about 30 percent since June, hitting countries like Kazakhstan, Central Asia’s largest economy and the second-largest former Soviet oil producer after Russia.

“The impact is quite tangible ... we watch with concern the fluctuations on the global energy market,” Foreign Minister Erlan Idrissov told Reuters in an interview.

The sharp drop in Russia’s rouble has led some fund managers to say there could be knock-on devaluations in neighboring ex-Soviet states such as Kazakhstan, which devalued its currency, the tenge, by 19 percent in February.

“Our national bank is very strong and firm that there are no economic reasons and imperatives for the Kazakh tenge ... to devalue further,” Idrissov said during a visit to Brussels.

“If the economic situation will change, that would be watched by the government and the central bank of Kazakhstan and prudent, well-thought and well-balanced decisions will be taken.”

Faced with instability in global politics and the economy, Kazakhstan was developing national stability plan, focusing on infrastructure development, Idrissov said.

“This will be a massive plan for public works. It is sort of a President Roosevelt’s ‘New Deal’ policy,” he said, referring to the former U.S. president’s plan to lift the U.S. economy out of the Depression in the 1930s.

Idrissov said there had been “indirect repercussions” for Kazakhstan from disruptions to Russia’s trade caused by Western sanctions over Ukraine.

Kazakhstan’s trade with Ukraine had also been hit. “Ukraine used to be a very sizeable trade partner for Kazakhstan, our trade exceeding $5 billion. Of course, today it’s very difficult to maintain that level,” he said.

Idrissov said it was not only possible, but “a reality”, for Kazakhstan to be on good terms with the West and Russia.

Kazakhstan, along with Belarus, signed a treaty in May with Russia to create a trading bloc called the Eurasian Economic Union, which comes into force on Jan. 1. In September, it wrapped up negotiations with the EU on a cooperation accord.

Editing by David Clarke

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