Kazakhstan: Investment, Trade, and Resource Challenges

Tashkent, Uzbekistan (UzDaily.com) — In 2026, Kazakhstan continues to play a pivotal role in Central Asia’s economic and geopolitical landscape. The country remains strategically dependent on external partners, primarily China and Russia, balancing investment inflows, logistical integration, and export flows with growing challenges in water management, energy, and infrastructure. This is highlighted in the Forvis Mazars report “Central Asia Overview 2026: Geopolitics, Markets, and Strategic Risks.”

China is the primary source of capital and technology, establishing significant positions in the mining, metallurgical, and oil and gas sectors, as well as in educational and logistics projects. Russia remains a critical transit corridor and market, but tighter regulatory oversight and sanctions impose new operational and compliance risks for Kazakh companies.

Beyond external economic factors, Kazakhstan faces domestic challenges including rising inflation, fiscal pressures, water scarcity, and demographic imbalances. At the same time, digitalization and the development of the IT ecosystem open new avenues to reduce raw material dependence and diversify economic growth, forming the foundation for long-term resilience and competitiveness.

Below is the Forvis Mazars overview on Kazakhstan.

China: Investment Driver and Structural Dependence

China remains a key external economic factor for Kazakhstan, combining investment, infrastructure, trade, and educational engagement. In 2025, Kazakhstan became the largest recipient of investments in Central Asia under the Belt and Road Initiative, totaling $25.8 billion. A significant portion of these funds was directed toward strategic sectors: approximately $12 billion to aluminum production and $7.5 billion to copper mining and processing.

Beyond direct investment, China’s presence in Kazakhstan is reinforced through access to strategic assets and long-term resource positions—via direct ownership, equity stakes in deposits, and long-term licensing rights. In the oil and gas sector, a prime example is CNPC’s participation in Mangistaumunaigas and joint extraction projects, along with expanding supply contracts to China. Industrial cooperation is deepening in the uranium sector, with Kazatomprom and Chinese partners developing joint production chains, including fuel supply and raw material processing. In non-ferrous metallurgy and copper, Chinese investors have strengthened their presence through mining and processing projects. In critical minerals (lithium, rare earth elements), 2023–2025 saw new exploration licenses and joint development agreements.

Logistical integration under the Belt and Road framework is advancing on multiple fronts. The Kazakhstan-China logistics center in Lianyungang is operational, the Khorgos – Eastern Gate dry port is expanding, and the Western Europe – Western China highway plays a key role. Kazakhstan is also a central participant in the Trans-Caspian International Transport Route (TITR), linking China with Europe via the Caspian Sea, Azerbaijan, and Georgia.

In addition to infrastructure, Kazakhstan is actively involved in educational and human capital programs under Belt & Road, becoming one of the largest recipients of scholarships from the Hong Kong government. This builds long-term human capital and institutional connections that extend beyond a purely transit-based model.

Alongside investment and infrastructure, Kazakhstan’s trade dependence on China is increasing. China is among the country’s key export destinations ($12 billion, 19% of total exports over the first ten months of 2025) and simultaneously the main source of imports ($15 billion, 29% of total imports), spanning consumer goods, industrial equipment, and technology products.

Summary

China is a crucial source of capital, infrastructure development, and supply chain access. At the same time, the concentration of trade, investment, and logistical flows in one direction creates structural dependence, increasing the economy’s sensitivity to external decisions.

Russia: Transit Dependence and a New Reality of Oversight

Russia remains one of Kazakhstan’s key trading partners, not only due to one of the world’s longest land borders but also as an important destination for Kazakh non-oil exports ($6.5 billion, 10% of total exports over the first ten months of 2025). Russia is also a major supplier of consumer goods and industrial products ($15 billion, 29% of total imports). Additionally, it serves as a transit partner for Chinese goods heading to Europe. Despite alternative routes, medium-term dependence on Russian logistical infrastructure remains high.

Enhanced control by Russian customs authorities—aimed at curbing “grey” imports, dual-use goods, and sanction-restricted products—is complicating operational realities for businesses.

Border congestion, rising transactional costs, and stricter compliance requirements indicate structural changes in trade regulations rather than temporary disruptions. For Kazakh companies, this necessitates higher standards of supply chain transparency, certification, and logistical planning.

Summary

Russia retains its status as a critically important trade and transit partner for Kazakhstan, especially for non-raw material exports and consumer imports. Economic resilience will increasingly depend on the ability of companies to adapt to new regulatory and logistical realities.

Water Resources and Afghanistan: A Risk for Southern Kazakhstan

Water resources in Central Asia are becoming one of the region’s key factors for sustainable development. For Kazakhstan, managing rivers such as the Syr Darya is critical for agriculture, energy, and environmental stability. Large-scale irrigation projects in Afghanistan—on the Kunduz, Kokcha, Balkh rivers, and particularly the Qosh Tepa Canal—are increasing pressure on the region’s water balance.

The canal, approximately 285 km long, is designed to irrigate over 500,000 hectares and involves significant water withdrawal from the Amu Darya. Analysts estimate that, even with compensation from Uzbekistan through increased Syr Darya withdrawals, Kazakhstan could lose up to 30–40% of its water share. This poses direct risks to agricultural production in the southern regions and heightens ecological stress.

Another key factor in Kazakhstan’s water security is its dependence on Kyrgyzstan, where a substantial portion of the water resources feeding the country’s southern regions originates. Kyrgyzstan is facing shrinking glaciers, reservoir replenishment challenges, and growing pressure on the energy sector due to intensive hydropower use. In response, Kazakhstan and Uzbekistan have agreed to supply Kyrgyzstan with electricity during the autumn-winter period, allowing reservoirs to store more water. In spring and summer, this volume is returned as stable water supplies for irrigating agricultural lands in southern Kazakhstan and Uzbekistan.

Summary

Water is shifting from being purely an environmental issue to a major economic risk. Dependence on transboundary sources and changes in water balance increase the vulnerability of the agricultural sector and the regional economy in southern Kazakhstan. Without long-term coordination with neighboring countries and investment in water-saving technologies, water shortages could become a constraint on economic growth.

Oil: The Budget Backbone and a Source of Vulnerabilities

The oil sector remains a cornerstone of Kazakhstan’s economy. A significant portion of the state budget is generated from oil revenues, while hydrocarbon exports provide foreign currency inflows, helping to cushion macroeconomic shocks. Oil effectively serves as a financial anchor for economic stability.

Approximately 40–50% of budget revenues come from oil production and exports. Foreign currency earnings from raw material exports replenish the country’s gold and foreign exchange reserves and the National Fund, supporting the tenge’s exchange rate and funding anti-crisis measures during periods of external turbulence.

At the beginning of 2026, global oil price dynamics have created a more volatile external environment for Kazakhstan than previously expected. Against the backdrop of escalating Middle East tensions and shipping risks through the Strait of Hormuz, Brent crude prices surged, reaching around $82 per barrel in early March 2026, with prices of approximately $82.2–83 per barrel on March 3–4, reflecting a short-term geopolitical spike.

Thus, the current market situation is characterized by a significant gap between short-term price dynamics, driven by geopolitical risks, and medium-term fundamental expectations related to a potential supply surplus. Even with current prices above $80 per barrel, the annual average in 2026 could be substantially lower if the market later returns to levels dictated by fundamental demand, supply, and inventory factors.

A key risk remains Kazakhstan’s heavy dependence on Russian infrastructure: approximately 80% of Kazakh oil is exported via the Caspian Pipeline Consortium. Italy formally serves as the main point of shipment registration. Oil is transported by tanker to the port of Trieste, then flows through the TAL pipeline and is subsequently distributed to Austria, Germany, and the Czech Republic.

Pipeline incidents and geopolitical instability further heighten the vulnerability of export logistics. In response, Kazakhstan is intensifying efforts to explore alternative routes—via the Caspian Sea southward, as well as toward China—but in the medium term, fully replacing the Russian corridor remains challenging.

Summary

The oil sector continues to serve as the financial foundation of Kazakhstan’s economy, ensuring budgetary stability. At the same time, high dependence on global prices and export infrastructure located outside the country increases risks. In the medium term, oil is increasingly not only a source of revenue but also a factor of structural constraints.

Currency, Inflation, and “Hot Money”

The most tense period for Kazakhstan’s currency market occurred in the summer of 2025, when the tenge weakened to around 550 per US dollar. The situation was driven by liquidity shortages, speculative demand, and heightened market nervousness. The National Bank was forced to carry out direct currency interventions, which helped stabilize the exchange rate and reduce volatility.

In the following months, the tenge strengthened, supported by stable oil prices, relative weakness of the US dollar on global markets, and capital inflows into emerging market instruments. However, regulators and analysts note the vulnerability of this appreciation, given the risk of rapid outflows of “hot money.”

Inflation in Kazakhstan reached 12.3% by the end of 2025, remaining in double digits. The National Bank maintained its base rate at 18%, emphasizing that a sustainable disinflationary trend has yet to form. Price increases affected all major categories—food, services, and non-food goods—while inflationary expectations among businesses and households continue to intensify price pressures.

Summary

Kazakhstan’s macroeconomic stability remains fragile and largely dependent on external factors such as commodity prices, global financial flows, and exchange rate expectations. Even with tight monetary policy, risks of inflationary pressure and tenge volatility persist, underscoring the importance of predictable policy and managing inflation expectations among businesses and households.

Tax Reform: Pressure on Small and Medium-Sized Enterprises

By the end of 2025, Kazakhstan’s budget deficit increased, putting additional pressure on the fiscal system and prompting a review of tax policy.

The new Tax Code maintains the corporate income tax rate at 20% while introducing differentiated rates, raises the value-added tax to 16%, and lowers the mandatory registration threshold. It also introduces a progressive personal income tax scale and limits certain deductions under the simplified tax regime.

The changes are felt most acutely by small and medium-sized enterprises (SMEs): administrative burdens are rising, costs are increasing, and tax administration is becoming more complex. This creates a risk that some entrepreneurs may exit the market or move into the informal sector.

Summary

The fiscal reform aims to reduce the budget deficit and expand the tax base, but in the short term, it increases the burden on SMEs. Higher administrative and financial costs raise the risk of slowed business activity and partial market withdrawal. The economic impact of the reform will depend on its implementation quality and the government’s ability to mitigate transitional challenges.

Iran: Southern Transit and Sanctions Constraints

Kazakhstan is strengthening economic and logistical ties with Iran, leveraging its geographic position to diversify trade routes. In 2025, bilateral trade reached $396.1 million, up 33.6%. The launch of a container train along the Kazakhstan–Turkmenistan–Iran–Turkey route and the creation of a joint chamber of commerce have simplified logistics and accelerated cargo turnover.

Kazakhstan and Iran are developing the southern branch of the “North–South” corridor, linking Central Asia with the Persian Gulf and the Indian Ocean. Transport volumes along this route increased nearly 53% in 2025. Trade volumes remain relatively modest, with U.S. sanctions—such as 25% tariffs for countries trading with Iran—being the key limiting factor.

Airstrikes within Iran and the death of senior leadership could significantly affect trade flows. Political destabilization may disrupt transport infrastructure and increase insurance and logistics costs. In the short term, this raises uncertainty and risks for foreign trade, while in the medium term, it may encourage Kazakhstan to further diversify routes through the Caspian and South Caucasus.

An additional systemic risk comes from a potential Iranian blockade of the Strait of Hormuz—a critical artery for global oil shipments. Restricted navigation could create global shortages and sharp price spikes, which would particularly affect China as the largest energy importer. For Kazakhstan, higher oil prices could temporarily boost export revenues and budget receipts. However, rising energy costs would increase production costs in China, raising the price of Chinese goods—the main source of imports for Kazakhstan. Given already high inflation, this adds further pressure on the domestic market and real incomes, producing a dual macroeconomic effect from energy volatility.

Summary

The Iran route expands Kazakhstan’s options for diversifying logistics and accessing southern markets, reducing dependence on traditional transit corridors. At the same time, sanctions risks, political instability, and limited trade scale constrain rapid growth potential.

Demographic Balance: A Growth Resource Amid Regional Asymmetry

Amid global population aging, Kazakhstan maintains relatively favorable demographic dynamics, but its structure is uneven. The fertility rate (2.95 births per woman) remains above the replacement threshold (2.1 births), supporting natural population growth. However, growth is gradually slowing due to urbanization and shifts in age structure. With a population exceeding 20 million, Kazakhstan possesses a sizable domestic market and substantial labor potential.

Population growth is accompanied by increasing regional imbalances: southern regions exhibit higher fertility and pressure on social infrastructure, while northern regions face aging populations and out-migration. This creates labor market asymmetry. Demographic dynamics are further influenced by migration—both internal flows to major urban centers and external movement. Urban population growth increases demand for infrastructure, housing, and services, while concentrating human capital in major economic hubs. Meanwhile, regional disparities and differences in employment levels generate risks of structural unemployment and pressure on social systems, particularly in peripheral areas.

Summary

Demography remains a source of relative stability for Kazakhstan, but its potential depends directly on structural reforms in education, employment, and regional policy. Quantitative growth must be accompanied by qualitative economic modernization.

Digitalization: A Mechanism for a New Economy

The year 2025 was a milestone for Kazakhstan’s digital agenda: the Ministry of Artificial Intelligence and Digital Development was established, and Astana hosted the PGL (Professional Gamers League) Astana 2025 international CS2 tournament with a record prize pool, reinforcing the country’s positioning as a regional digital hub.

Astana Hub brings together around 2,000 companies, including a significant share of foreign participants, generating IT exports of approximately $1 billion. The emergence of Kazakh tech unicorns and the success of startups on international markets reflect the ecosystem’s rapid growth.

Summary

The digital economy and artificial intelligence technologies represent the most promising direction for Kazakhstan’s structural transformation. Developing the IT ecosystem and exporting digital services offer potential to reduce raw material dependence and create new growth sources. In the long term, digitalization could become a key driver of increased economic competitiveness.

Forvis Mazars is an international, independent, and integrated professional services firm providing audit, accounting, tax, and consulting services. The company possesses deep expertise in analyzing economic and geopolitical developments across Central Asian nations, including Kazakhstan, Uzbekistan, and Kyrgyzstan.

This report and analysis have been prepared by the Forvis Mazars Central Asia team based on comprehensive research of macroeconomic trends, investment flows, trade patterns, and geopolitical factors shaping regional development.

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