THE GREAT GERMAN poet Goethe once said: “There is no stupidity that cannot be corrected with the help of the mind, and there is no wisdom that cannot be spoiled with the help of stupidity.” Today, these words accurately describe what is happening in the Mangistau region with a private company, from which the state, represented by the Ministry of Transport of the Republic of Kazakhstan, takes away property in favor of the monopolist (national railway operator), hiding behind the policy announced by the President of the Republic of Kazakhstan Kassym-Jomart Tokayev... of demonopolization. And this is happening against the background of the recent Decree of the head of state on economic liberalization, the first point of which is the protection of private property. It would be fine if we were talking about “agashka” objects from “Old Kazakhstan”, such as the same central heating system - this would be fair. But then officials decided to expropriate the property created with the money of a foreign investor, who now, instead of increasing investments, will sue our country in all possible jurisdictions. Need I say that we are talking about a new “Stati case”, which could cost the treasury not only millions of dollars in damage, seizures of foreign property and expensive courts, but will also undermine all efforts to increase the investment attractiveness of Kazakhstan? Well, returning to Goethe’s words, I would like to note that all this could have been easily avoided if we had simply reached an agreement with the owners and resolved all issues through a compromise.

When in 2022 the head of state declared the demonopolization of the economy a national priority, it was said that the Kazakh economy needed a fresh start and getting rid of the “schemes” with which, like garlands on a New Year’s tree, representatives of what Tokayev defined as an “oligopoly” hung. Indeed, it was difficult to find an area where representatives of the old elites would not, through their influence on the state, create profitable, albeit primitive ways of earning huge amounts of money into their private pockets. However, in declaring all this, the president did not mean a total rejection of the market and the return of everything to the state, which he unambiguously said in his election program: “The economy will be demonopolized, and the state will noticeably reduce its presence in business. Bureaucratic pressure on honest business will decrease. All our efforts will be aimed at stimulating and protecting entrepreneurship. We are intensifying efforts to return illegally obtained and withdrawn assets to our country. They will work for the benefit of all the people."

That is, according to Tokayev’s idea, the state should not become the owner of everything, limiting itself to returning what was illegally taken and transferring it to a truly competitive environment. The result of all this was the law “On the return of illegally acquired assets to the state,” which became a logical continuation of the economic and political reforms of the President of the Republic of Kazakhstan. “Its rules will be applied to oligopoly entities that themselves had administrative and power resources or could use such support. At the same time, the interests of bona fide investors will be fully protected,” they explained to us from all the stands.

We can judge how this turns out in practice from a letter from a foreign investor received by the editors of DN. “I, Alexander Shestopalov, am a US citizen by birth, for a long time, I have been investing my own capital in countries such as the Russian Federation, Kazakhstan, as well as in a number of European countries. In 2018, I acquired a share in Kaskor-Transservice JSC. As part of the investment strategy, over the past 6 years, I have invested more than 15,000,000 (fifteen million) US dollars for the development of a transport logistics hub in Aktau. To date, agreements have been reached with the Direct Investment Funds of the UK and the USA, in the amount of 100,000,000 (one hundred million) US dollars, for the purchase of ferries, which until now, the Kazakhstan side did not have within the framework of the TMTM, and the ferries were rented from the Azerbaijani side. The purchase of ferries allows us to ensure container turnover of exported and transit products from the Asian region to Europe. In addition, we considered the issue of assistance in attracting an investment package for the development of the seaport of Aktau, with the aim of implementing the project announced in 2022, the creation and development of the International Maritime Hub of Port Aktau. The corresponding memorandums with partners have already been signed. However, in January of this year, I learned that, in accordance with the Order of the Demonopolization Commission created under the Government of the Republic of Kazakhstan, dated July 23, 2023, a decision was made to seize the railway tracks owned by the latter from Kaskor-Transservice JSC.” .

That is, at a time when, due to the war in Ukraine, our main trade transportation that goes through the territory of Russia is under attack, and the country is urgently looking for alternative trade routes, of which the most realistic option is through the Caspian Sea - to Europe. And our officials couldn’t come up with anything better than to take away the business from a foreign investor who had been investing in its infrastructure for years and had agreed to finance the development of this business into an international project. This does not seem to be a mistake or illiteracy of government officials, and rather resembles a deliberate seizure of private property, sabotaging state interests. “Kazakhstan has never been a maritime country and therefore has not fully exploited the capabilities of maritime transport. It’s a different time now. I set a strategic task for the Government - to transform our ports, turning them into one of the leading hubs of the Caspian Sea. Conceptually, I agree that it is necessary to strengthen the maritime fleet and create a container hub in the port of Aktau,” President Tokayev said on this occasion at a joint government meeting in July 2022, where he directly ordered the development of alternative routes for communication and cargo delivery, as well as diversification of supplies.

But does the state have extra money to drive out investors and invest the budget in the development of the port and the acquisition of sea vessels? But KTZ (which includes the Aktau seaport), on the contrary, has a huge debt of 2 trillion 900 billion (!). In February of this year, the chairman of the board of Kazakhstan Temir Zholy, Nurlan Sauranbayev, noted that the company was still looking for different ways to solve the problem: “2.9 trillion tenge is the company’s debt. This money can be returned, firstly, by raising tariffs, because this money was spent mainly on the construction of new railways, but their investment part was not included in the tariff. Secondly, the debt can be repaid by recapitalizing the company. For example, German railways were allocated $40 billion for additional capitalization.” You need to understand that the additional capitalization that the head of KTZ is talking about is most likely an injection from the budget or the National Fund. Maybe we don’t know something, but we don’t see other potential sources. Well, the rise in tariffs means an increase in prices for tickets for citizens and the transportation of goods. And if KTZ doesn’t have enough of its own money to fulfill the strategic task, then why expel that investor who, of his own free will, albeit indirectly, is already participating in the project?

Chinese companies are really interested in a convenient land route from the Middle Kingdom to Europe, but test shipments through Kazakhstan as part of China’s “One Belt, One Road” strategy showed that Aktau is one of the bottlenecks where cargo simply sits idle for weeks. There is not enough infrastructure, and most importantly, we do not have our own ferries, which we rent from Azerbaijan, as the American investor already noted above. Now the question is - what is better and, most importantly, faster: to abandon already developed investments, or to discuss this issue with Chinese companies, and from scratch? The answer would seem obvious. But not for our officials, who are stuck on one goal - to take away from a private company the railway tracks that belong to it, which were largely built with the funds of this investor.
The decision to seize (there is no other way to call it) was made completely opaquely and, in fact, behind the backs of those from whom the statesmen decided to expropriate their property. On April 18, 2022, at that time, the chairman of the Agency for the Protection and Development of Competition, Serik Zhumangarin, at a meeting with the president, announced that an audit was being carried out against Kaskor-Transservice JSC. As part of it, KTZ specialists concluded that “the cargo carrier’s access roads have signs of main roads, which only the national company has the right to own.” As a result, on July 14, 2023, at a meeting of the commission on demonopolization of the economy, chaired by then Prime Minister Alikhan Smailov, a recommendation was adopted to confiscate railway tracks built with money from a private investor in favor of KTZ. Why recommendation? Because according to the regulations on the commission for demonopolization of the economy, it is a consultative and advisory body under the government. However, the Ministry of Transport seized on it as if it were a direct order from the president, refusing to even discuss compromise solutions with the owner.  

Next, let me quote the investor again. “Since February 2023, my attorneys have held a number of meetings regarding the resolution of the situation related to the seizure of railway tracks, identification, reasons for making such a decision, and the consequences associated with the seizure of railway tracks from Kaskor-Transservice JSC. We have repeatedly met with the Ministry of Transport of the Republic of Kazakhstan. On May 10, 2024, a meeting was held with Minister M. Karabaev on the subject of opportunities to reach consensus and mutually beneficial cooperation, including, without excluding the possibility of public private partnership. However, the position of the industry department is the reluctance to conduct a constructive dialogue, indicating only one reason, that the decision to withdraw tracks is directive and not subject to any discussion, since it is an order of the Head of State. And, in the opinion of the Head of the department, M. Karabaev, even if it goes against the norms of the Constitution and the current legislation of the Republic of Kazakhstan, it must be executed in any way, so he issued an Order on March 6, 2024, on the connection of railways and access roads owned by JSC "Kaskor-Transservice", to the Main Railway Network." As mentioned above, such a decree is a prologue to the expropriation of property. 

Meanwhile, President Tokayev’s decree “On measures to liberalize the economy”, published just recently, clearly states the need to ensure the inviolability of private property, prevent illegal government interference in market relations and support the development and protection of competition. However, the protection of private property is also one of the obligations of our Constitution, as the investor rightly pointed out above. There is a whole article 47, where it is stated in black and white: “Private property is inviolable. No one can be deprived of his property except by a court decision. Requisition can only be used in exceptional cases expressly provided for by law. The Republic of Kazakhstan protects the ownership rights of its citizens and legal entities to their property located on the territory of other states.” This is followed by Article 48: “The State guarantees the freedom of private enterprise and ensures its protection and support. Monopolistic and any other activities aimed at limiting or eliminating legitimate competition, obtaining unjustified advantages, or infringing on the rights and legitimate interests of consumers are not permitted.”  

In our case, the order of the Minister of Transport itself, as follows from the investor’s letter, violates a number of procedures and rules governing legal relations in the field of railway transportation and related property. Let me quote the letter from the American investor again: “In addition, I would like to draw your attention to the fact that the Order of the Minister of Transport of the Republic of Kazakhstan M. Karabaev runs counter to Rules No. 319 and No. 82, which regulate the transfer to state ownership of railway tracks built by physical and legal entities. Namely, to include railway tracks in the list of main railway tracks, there must be a written consent of the owner of the property, i.e. voluntary expression of will. Further, in accordance with the above rules, a certain order and procedure has been established, in the case of the voluntary written consent of the owner, for considering the issue of including railway tracks in the list of the main railway network, namely the creation of a Commission that decides the issue of including private railway tracks in the main railway network, and transfer conditions. Which in our specific case was not done, and the response of the Minister of Transport of the Republic of Kazakhstan, M. Karabaev, to our arguments was as follows: “If the Ministry of Justice of the Republic of Kazakhstan approves my Order, then it is legitimate. I, as a Minister, am obliged to fulfill the instructions of the Government, regardless of any circumstances, you can sue.”

That is, instead of achieving full compliance with the rule of law at our own level (not to mention establishing a dialogue with investors and owners, searching for a compromise), we see that officials readily shift responsibility to the judicial system, overloading it, which is already overloaded beyond all norms. Well, further logic also raises the question - how will our court force a private company to voluntarily agree to expropriation? None of the officials, apparently, simply want to take responsibility and really discuss the issue of taking away property with the investor. In his letter, the investor complains about this: “At the same time, it is important to note that the Prime Minister of the Republic of Kazakhstan Olzhas Bektenov, in February of this year, gave a speech in which he said that the President of the Republic of Kazakhstan had vested him with powers regarding the support of foreign and domestic investors. And that the Government is ready to conduct a constructive dialogue with investors, provide them with support, and prevent administrative and forceful influence on business. However, as a foreign investor, I was faced with the exact opposite solution to the issue, which went against the guarantees declared to investors for carrying out business activities in the Republic of Kazakhstan. None of the officials considered the issue of the consequences associated with previously made private investments on my part, including the costs I incurred to attract foreign capital from international funds.”  

Thus, instead of talking with business, officials are stubbornly dragging the matter towards an illegal outcome, which will follow the official publication of the order of the Minister of Transport on the seizure of tracks from private business - in favor of the KTZ monopoly, which, by law, is also considered a private company. How can such things be explained? The investor gently hints that there may be a material interest here, and the possibility that the seizure of tracks in favor of the state monopolist is just a step for the “subsequent privatization of railway tracks owned by Kaskor-Transservice JSC to third parties.” In this case, our officials will be just a tool for raiding, as was the case in the notorious “Old Kazakhstan.” Has this disease already infected “New Kazakhstan”?

By the way, the company’s shareholder indicates that he also sent an official letter through the Kazakh Embassy in Washington addressed to the President, in which he directly states that he is ready to continue to invest additional funds in our country and provide any support in the implementation of the order of the head of state to develop the International Seaport Aktau, including the development of a transport logistics hub, the acquisition of ferries, about which there are agreements with the investment fund. According to him, agreements have also been reached with the Azerbaijani side on ferry transportation. “Together with the Ministry of Transport of the Republic of Kazakhstan, and NC KTZ JSC, [we can] realize the possibility of public private partnership, with the goal of mutually beneficial conditions for all parties, as well as responsibility for the execution of the instructions given by the president,” notes the investor, who is only then it is necessary that his property not be taken away from him so defiantly and demonstratively, in violation of all national and international rules.  

Having listened to similar requests from the company, on March 20, a group of Mazhilis deputies sent a parliamentary request to the government and the Prosecutor General, in which they spoke in favor of a constructive solution to the problem and ensuring the rights of business. But the position of the Ministry of Transport remained unchanged.

Well, what will happen if no one listens to business and the state machine nevertheless expropriates private property? Firstly, and the investor warns about this, in order to protect his property he will go to the courts, and not Kazakh ones, but American ones. And we know what it is when someone persistently sues our country abroad in the Stati case. And although it is unknown how much our country has already spent on defending its position on the Stati case, the fate of the Minister of Justice who oversaw it, Beketayev, who is now in a pre-trial detention center, eloquently demonstrates that such a story will not bring anything good to the country except losses and damage to its image. Secondly, as the history of the same Stati has shown, not even a decision, but the filing of claims in itself can lead to the seizure of Kazakh property abroad. Moreover, expropriation occurs by decision of a Kazakh government agency. As is known, the Stati sought to freeze the accounts of the Samruk-Kazyna Fund and even the National Fund, which representatives of Kazakhstan are still arguing with in foreign courts. Well, and thirdly, as a result of litigation (which drags on for years), we will get a delay in all reasonable deadlines for establishing the Trans-Caspian trade route. And there are also fourth, fifth, and so on. Because one wrong decision will immediately lead to an avalanche of problems like a snowball. And judging by the position of our officials, only one person is capable of stopping it - President Tokayev. Apparently, no one needs this anymore.