In the 1990s, major Western oil companies poured billions of dollars of investment into the Kazakh oil industry, leading Kazakhstan to become one of the world’s largest oil producers. While these investments provided a massive boost to the economy, their terms were less than favourable for the country. Western oil investors retain as much as 98% of the revenue from certain Kazakh fields and get tax breaks, long payback periods, and other confidential commercial terms. In recent years, the government has been trying to renegotiate some of these unfavourable contracts.
Saulet Tanirbergen.
Now, Kazakhstan seeks new investments from abroad into its mining industry, which has been cited as a “pillar of economic growth.” The International Energy Agency (IEA) predicts that demand for critical minerals is set to triple by 2030 and quadruple by 2040. Moreover, growing tensions with China, which produces 60% of all critical minerals and processes 85% of them, has led Western countries to turn to Central Asia to diversify their supply. Astana is trying to meet this demand by attracting more foreign investors, which is necessary due to the huge upfront costs of new exploration and extraction. But, how can Kazakhstan ensure that it can negotiate favourable terms with investors, as interests in the country’s minerals and metals surge? One only needs to turn to the mining giants of the East.
Indonesia, too, once faced the problem of depleting oil and gas reserves. Through factors such as the maturation of its fields, insufficient investment in infrastructure, and rising domestic consumption, Indonesia has become a net importer of oil and gas.
It was also, however, home to the world’s largest nickel reserves, a crucial element in clean technologies such as electric vehicle (EV) batteries. Wary of repeating its history with oil and gas, in 2019, the government introduced a ban on the export of all unprocessed nickel. This move forced foreign investors to set up refinery plants domestically and dramatically increased Indonesia’s foreign direct investment (FDI). Customs data indicates that nickel exports skyrocketed from just $1.4 billion in 2014 to nearly $22 billion in 2022. It also led to the construction of a ‘mega refinery’ of nickel — Indonesia Morowali Industrial Park (IMIP) — a joint venture between China’s Tsingshan Group and Indonesia’s Bintangdelapan Group. This was crucial in the establishment of a domestic EV supply chain, creating thousands of jobs and leading to a steady rise in GDP per capita.
But we must also remember that mining can have severe environmental consequences for local communities. China learned this lesson the hard way. Currently, China accounts for about 60% of global rare earth production but handles nearly 90% of the processing. However, lax regulation and unchecked extraction left their mark on the country. The mining sector harms the environment by driving carbon emissions, polluting water, and causing deforestation. Producing a single ton of rare earth elements generates around 13 kilograms of dust and 75 cubic meters of wastewater. The famously toxic artificial lake in Bautou has been seeping into the groundwater, poisoning livestock and residents, with fears now that it will make its way to the Yellow River, which supplies drinking water to much of Northern China.
Environmental experts now warn against similar mistakes being done in other parts of the world where critical minerals and rare earths will be extracted. They now advocate for the cost of the cleanup to be covered — at least partially — by the multinational corporations that benefited from the extraction of these rare earths and critical minerals.
The cases of Indonesia and China highlight key lessons for Kazakhstan’s mining industry: foreign investment should be strategically used to develop domestic processing capabilities and build a full supply chain, rather than focusing solely on exploration. Strong environmental standards must be implemented and consistently enforced to minimize ecological harm, especially in managing mining byproducts. Additionally, given Kazakhstan’s water stress, robust water governance is essential, as mining is a highly water-intensive industry with significant implications for long-term sustainability.
The author is Saulet Tanirbergen, an independent policy researcher. She graduated from the University College London and The London School of Economics and Political Science (LSE).
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of The Astana Times.
