Kaza­kh­stan stands as one of the strongest examples of a mod­ern klepto­cracy, because for the last thirty years the polit­ic­al eco­nomy of Kaza­kh­stan has been dom­in­ated by an elite coter­ie of state offi­cials who have used their power to cap­ture the country’s resources. Much of this wealth has been trans­ferred out of the coun­try: the Tax Justice Net­work has estim­ated cap­it­al flight since Kaza­kh­stan gained its inde­pend­ence in 1991 at approx­im­ately $140 bil­lion. Such out­flows caused Glob­al Fin­an­cial Integ­rity, a Wash­ing­ton, DC based think tank, to rank Kaza­kh­stan 18th in the world for illi­cit fin­an­cial flows, with trad­ing part­ners most respons­ible for vul­ner­ab­il­ity to these flows being Neth­er­lands, United King­dom and Russia.

Over the last sev­er­al dec­ades, numer­ous reput­able inter­na­tion­al non-gov­ern­ment organ­isa­tions and media out­lets have repor­ted on the act­ive par­ti­cip­a­tion of seni­or gov­ern­ment offi­cials and politi­cians in cor­rupt activ­it­ies in Kaza­kh­stan. These reports run the gamut of pred­at­ory eco­nom­ic activ­it­ies, includ­ing bribery, mis­ap­pro­pri­ation of state assets, asset expro­pri­ation, and fraud. The whole klepto­crat­ic sys­tem could even be described to resemble a mafia organ­isa­tion, where money is gen­er­ated by the lower rungs of the lad­der and passed upward to the con­sigliere – the gov­ern­ment min­is­ters – and onward to the Don him­self, the president.

This report takes a look at just one frac­tion of the coun­try’s eco­nomy: the tele­com­mu­nic­a­tion sec­tor. Kaza­khtele­com JSC, which is major­ity owned by the Kaza­kh state, is the key play­er in the Kaza­kh tele­coms industry and thus plays an import­ant role in gen­er­at­ing rev­en­ue for the Kaza­kh eco­nomy. The com­pany – which made a $170 mil­lion profit in 2019 – holds a mono­poly on land­line con­tracts in Kaza­kh­stan, and owns a stake in the largest of the country’s three main mobile phone oper­at­ors, Kcell, and all of the third largest, Tele2, leav­ing Beeline as the only gov­ern­ment-inde­pend­ent mobile phone pro­vider. Until recently, Kaza­khtele­com JSC had dif­fer­ent Scand­inavi­an part­ners in both Kcell (the Telia Com­pany AB) and Tele2 (Tele2 AB).

The report delves into the his­tory of both of these part­ner­ships in Kaza­kh­stan and exam­ines alleg­a­tions of cor­rup­tion and cronyism. In recent years, much atten­tion has been focused on Telia’s activ­it­ies in Uzbek­istan, where it was demon­strated by inter­na­tion­al law enforce­ment bod­ies that the com­pany paid bribes to the daugh­ter of the then Uzbek pres­id­ent, res­ult­ing in crim­in­al invest­ig­a­tions and glob­al set­tle­ments totalling nearly a bil­lion dol­lars. Less atten­tion has been paid to the company’s oper­a­tions in Kaza­kh­stan, and the deals it struck, which bear sim­il­ar hall­marks to its cor­rupt deal­ings in Uzbek­istan. This report attempts to redress the bal­ance, and throw some light on the entit­ies in Kaza­kh­stan that benefited from the deals struck by Telia, and the people who stand behind these deals. The Telia Com­pany and Tele2 AB’s responses to our find­ings can be found on pages 50 and 31 respectively.

Back­ground

The fact that both European com­pan­ies have since exited the coun­try does not mean that this report’s find­ings are of no con­cern to the inter­na­tion­al com­munity: it poses import­ant ques­tions for those for­eign com­pan­ies still act­ive in Kaza­kh­stan, and those seek­ing to do busi­ness there, regard­ing the involve­ment of polit­ic­ally-exposed people through anonym­ous com­pany struc­tures. Fur­ther­more, many of the entit­ies that are used to hide the ulti­mate own­er­ship of shares in Kaza­khtele­com JSC and tele­com oper­at­or KazTransCom are registered in places such as Lux­em­bourg, the Neth­er­lands or the Brit­ish Vir­gin Islands, high­light­ing how such jur­is­dic­tions can be used in shad­owy deal­ings in author­it­ari­an regimes. For Kaza­kh­stan, the report raises ser­i­ous ques­tions over the trans­par­ency of Kaza­khtele­com JSC, the con­trol of this com­pany and its part-private own­er­ship, and the pro­cess through which the state alloc­ates fre­quen­cies and oth­er con­tracts regard­ing mobile phone telephony.

Part 1 of this report deals mainly with Kaza­khtele­com JSC and its own­ers, where­as Part 2 exam­ines the joint ven­tures struck by Telia and how they were often obscured by a com­plex net­work of layered shell com­pan­ies that kept the deals’ bene­fi­ciar­ies hid­den. How­ever, the inform­a­tion that is avail­able on their dir­ect­ors and share­hold­ers sug­gests that the trans­ac­tions bene­fit­ted mem­bers of the Kaza­kh polit­ic­al elite, who received mil­lions of dol­lars in dubi­ous funds. One of the main act­ors iden­ti­fied by this report is the cur­rent Chair­man of the Nation­al Secur­ity Com­mit­tee of the Repub­lic of Kazakhstan,Karim Masimov.

This is not the first time Masimov has been iden­ti­fied as a pos­sible recip­i­ent of cor­rupt funds. As such, Masimov is one of the key offi­cials in Kaza­kh­stan who sup­ports and bene­fits from the country’s klepto­crat­ic sys­tem, a sys­tem built on human rights’ abuses, and a lack of polit­ic­al free­dom and civil liber­ties, where the state appar­at­us harshly sup­presses any cri­ti­cism or dissent.

The trans­fer of illi­cit cap­it­al from klepto­cra­cies such as Kaza­kh­stan into the West not only deprives their cit­izens of much-needed rev­en­ue, but it also has a cor­ros­ive effect on the jur­is­dic­tions where the money ends up: law­makers’ opin­ions are swayed by lob­by­ists, demo­cracy is under­mined, house prices are dis­tor­ted by the influx of dubi­ous cap­it­al, and paid-for art­icles in West­ern media paint rosy pic­tures of these nations as flour­ish­ing demo­cra­cies, cre­at­ing a smoke screen that obscures the truth.

As U.S. Sen­at­or Shel­don White­house and Gen­er­al Dav­id Pet­raeus wrote in 2019 that the fight against cor­rup­tion is more than a leg­al and mor­al issue; it has become a stra­tegic one — and a battle­ground in a great power competition.

This poses a test for the inter­na­tion­al community’s read­i­ness to address grand cor­rup­tion. For too long the West has acted as a safe haven for the wealth acquired by cor­rupt for­eign offi­cials, and their cronies.

It is time for the glob­al com­munity to take a stand and advoc­ate for the ini­ti­ation of invest­ig­a­tions in rel­ev­ant jur­is­dic­tions into the sources of wealth of the Kaza­kh polit­ic­al elite which must ulti­mately lead to seizure and respons­ible return of illeg­ally acquired assets to the people of Kazakhstan.