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Kazakh State Tightens Grip Over Critical Minerals Miner ERG

Developments at the giant miner suggest Astana will be the main factor in company strategy going forward.

On August 23, Kazakhstan will hold elections to its newly established unicameral parliament, the Kurultai, marking the latest phase of the political elite’s consolidation under President Kassym-Jomart Tokayev.

Last month, the Constitutional Court determined that Tokayev can legally stand for the presidency again under the new basic law that entered force on July 1, leaving his earlier pledge not to seek office again – his current term ends in 2029 – firmly in the balance.

Whether Tokayev decides to exercise that privilege or not, Kazakhstan’s business elite is being recast in his image, right in time for a new electoral cycle.  

Despite his criticisms of the “oligopolies” formed under predecessor Nursultan Nazarbayev, some of the country’s most powerful companies outside of the oil sector are now concentrated in even fewer hands, thanks to a series of megadeals first reported in the second half of last year.

At the same time there has been a subtle shift, with the new captains of industry visibly more tethered to officialdom writ large than the Nazarbayev-loyal oligarchs who preceded them.

One of the clearest examples of this trend is Luxembourg-domiciled Eurasian Resources Group (ERG), a mining group whose critical minerals output is globally significant, and whose contribution to the Kazakh economy is estimated between 2 and 4 percent of GDP.

Integra, ERG, and Business ‘China-style’

In a series of clips posted to his official Instagram, Kudrat Shamiyev discusses Integra Construction KZ, “the biggest construction company in Kazakhstan,” with another delegate at an international Taekwondo event.

“We do exchange… I own mining company. So, we take resources, we give enough,” begins Integra’s 36-year-old chairman, who is also Kazakhstan’s Taekwondo federation chief, speaking in English. The clip is backed by Drake’s 2023 track, featuring J. Cole, “First Person Shooter.

“Similar to China-style?” interjects the man seen in the clip. “It’s a good idea.”

“Yes,” replies Shamiyev. “It is easier for us, easier for now.”

The full context of the pair’s exchange is unclear, as is the delegate’s identity and the identity of the mining company that Shamiyev is referring to. The clips are spliced with footage of Integra projects.

At one point the delegate offers to introduce Shamiyev to his government to discuss a proposal to build a railway, Integra’s stock and trade.

But the “similar to China-style” remark is on the nose.

With its large, integrated business groups in strategic industries subject to strong political oversight, Kazakhstan’s giant next-door neighbor rewrote the book on state capitalism.

And for all Tokayev’s lip-service to liberalization and privatization, Astana is embracing the state capitalism model wholeheartedly, especially in the mining sector. 

By the time the third of three clips was posted in June, Shamiyev had added another title to his list: CEO of Eurasian Group LLP, the Kazakh division of Eurasian Resources Group (ERG).

Entities that the 36-year-old now oversees as part of that role produce giant quantities of iron ore, bauxite, alumina, and ferrochrome, the kind of industrial inputs at the heart of geostrategic competition between Beijing and the West.

ERG is additionally a major producer of cobalt – vital for battery production – although these assets are based in the Democratic Republic of Congo. 

Shamiyev’s appointment at ERG came after Integra’s owner, Shakhmurat Mutalip, dubbed Kazakhstan’s “youngest oligarch,” secured 39.3 percent of the group in May.

As The Diplomat reported in an investigation in April, Shamiyev is not just an employee of Mutalip’s, but his childhood friend, having attended the same school in a village outside Almaty.

Questions around the financing for Mutalip’s buy-in, its implications for ERG’s large outstanding loans to Russian banks sanctioned by Western governments, and the potential impact on supply chains have combined to see the company formerly known as Eurasian Natural Resources Corporation (ENRC) reignite Western press interest.

But it is also striking how a company once inextricably associated with its three founding members — post-Soviet oligarchs Aleksander Machkevitch, Alijan Ibragimov and Patokh Chodiev – appears to be edging further and further toward government control.

The Diplomat contacted Kudrat Shamiyev, Nature energy solutions Ltd., ERG and the Kazakh presidential administration prior to the publication of this article. They declined to comment.

“Semi-nationalization”?

The Kazakh state’s stake in ERG grew from less than 12 percent to 40 percent after the company delisted from the London Stock Exchange in 2013, where it was being pursued by the UK’s Serious Fraud Office (SFO) at the dawn of an investigation that would last a decade and end with the expensive case being dropped with no charges brought.

That increased heft gave Astana the right to send two representatives to the group’s five-member board.

According to financial analysts, the government had........

© The Diplomat