How Kazakhstan is Using Trade to Hedge between Global Superpowers

Sidhaant Bisani, Bsc Economics

Introduction

The past decade has brought about fascinating changes across the 5 Central Asian countries —Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. These countries, huddled in the shadow of shifting geopolitical dynamics between the juggernauts that are China, Russia, and broadly ‘The West’, are often discounted as players on the world stage. However, with Russia’s 2022 invasion of Ukraine, the balance of power in the region has come into question. Central Asia finds itself under the spotlight, with ever-growing interest from China, Europe and the United States, coupled with a growing distrust of Russian authority (Financial Times). This interest is prevalent to the extent that Xi Jinping’s first post-COVID international trip focused on Kazakhstan and Uzbekistan for the Shanghai Cooperation Organisation summit (Foreign Policy Research Institute). United States President Donald Trump is scheduled to host leaders of all 5 countries in Washington D.C., in November 2025, with the State Department’s stated objective being to “advance regional solutions to global challenges” through “fair and reciprocal economic partnerships, increased energy security, and promoting peace through strength” (Al Jazeera).

Principal amongst these countries is the Republic of Kazakhstan. Kazakhstan’s location has enabled it to position itself as an alternative transport hub in the region through the development of the Trans-Caspian International Trade Route. Its wealth of natural resources, political stability and nuanced foreign policy have set the stage for substantial increases in trade flows and the creation of strategic partnerships with several global powers(Lowy Institute). This article will delve into Kazakhstan’s deliberate, multi-vector hedging strategy that seeks to leverage the needs of four major power blocs to preserve autonomy and promote its own economic interests. It will analyse the shifting nuances of the Euro-Kazakh trade relationship, explore future opportunities for the Kazakh economy, with a special focus on highly sought-after rare-earth minerals, and define Kazakhstan’s role amid China’s economic push to gain control in the region.

Section I: What is the Multi-Vector Hedging strategy?

Kazakhstan’s ‘multi-vector foreign policy’ is a crucial part of the country's future goals. In his inauguration address, President Kassym-Jomart Tokayev specifies that “Kazakhstan has earned great international prestige and established itself as a peace-loving, open country, as well as a reliable and responsible partner in global affairs.” They “will continue on our path of a constructive, balanced, multi-vector foreign policy,” and “firmly promote and defend our national interests on the global stage (Office of the President of Kazakhstan).”

Under Tokayev, Kazakhstan has made a noticeable push to sharpen its diplomatic strategy and adopt a newfound neutrality. Top leadership has made a concerted effort to demonstrate this new era of Central Asian diplomacy. In June 2022, President Tokayev refused to recognise Russian territories in Ukraine during an engagement with Russian officials (Jamestown Foundation). He has reinforced the vision of Kazakhstan as a new ‘middle power’ with obvious natural and geographical advantages that it hopes to leverage to achieve economic dynamism and global cooperation. During the 46^th Singapore Lectures in 2024, President Tokayev underpinned the country’s “commitment to a multilateral approach” and inspired confidence in Kazakhstan’s growth opportunities, predicated on “a young and energetic population, a growing middle class, rich natural and agricultural resources, and transit potential (Government of Kazakhstan).”

Section II: China – Critical trade partner and Investor

The past decade has seen a dramatic reshaping of Kazakhstan’s economic landscape. The Kazakh-Chinese partnership has been at the forefront of this shift. China’s Belt and Road Initiative (BRI) has been crucial in generating trade, investment and infrastructure in Central Asia. It has propelled China into a dominant regional economic force. The BRI was introduced in Astana in 2013. This marked the flagship entry point for the Chinese Communist Party’s continental ambitions. From 2005 to 2023, China has invested a total of $70 billion in Central Asia, with Kazakhstan receiving the lion’s share - $37.4 billion (Foreign Policy Research Institute).

A major aim of the BRI has been to transform the connectivity framework between Europe and Asia. Kazakhstan’s central position allows it to serve as a modern East-West corridor. The development of this new ‘Middle Corridor’ includes significant railway terminals and pipelines that provide alternatives to Russian-controlled routes. The Kazakhstan government has strategically leveraged Chinese capital to facilitate value-added projects, such as food processing and renewable energy initiatives. Notably, the Hopeful Grain Oil Group’s $1.5 billion investment in grain processing aims to help Kazakhstan export higher-value agricultural products to Europe and China (Clingendael Report, 2025). The BRI and China support Kazakhstan’s multi-vector diplomacy by bolstering autonomy and enabling the use of alternative trade routes to reduce vulnerability to a single bloc.

Section III: Russia’s lasting influence

Despite the potential for a detachment between the two countries, Russia remains an integral trade partner for the Kazakhs. In 2024, total trade turnover between the two partners stood at $28 billion, making Russia Kazakhstan’s biggest trade partner in Central Asia. These economic ties are seemingly deepening, with Russian exports increasing by 5% in 2024 (BRICS Report). Another key area of interest is Investment. Russia stands amongst the top investors in Kazakhstan’s economy, having injected a total of $26 billion and $4 billion in 2024 alone. This marks a 33% year-on-year increase in Russian investment. According to President Tokayev, rail transit from Russia to Central Asian countries via Kazakhstan has increased by 26% over the last three years. Transit has grown by nearly 30% in the opposite direction (News Central Asia).

Central frameworks when discerning the relationship between Kazakhstan and Russia are the CSTO (Collective Security Treaty Organisation) and the EAEU (Eurasian Economic Union). Formed in 2015, the EAEU was heralded by Russia as Eurasia’s answer to the European Union. It sought to create a single market among its members – Kazakhstan, Armenia, Kyrgyzstan, Belarus and Russia. However, Russia accounts for 80% of the bloc's combined GDP (The Moscow Times). The Kazakh involvement in the EAEU has been riddled with challenges. Kazakhstani businessmen and farmers have repeatedly complained about the flooding of local markets with cheap Russian goods. Due to international sanctions, Russian dairy farmers are redirecting exports through Kazakhstan and have started dumping prices (Times of Central Asia). Public activists in the country have also criticised Russia’s use of non-tariff barriers, notably the ban on sugar exports in 2024 that caused heavy strain on Kazakhstan’s weak sugar industry. Despite these challenges, Kazakhstan is heavily dependent on Russian industries. In 2022, Russia accounted for 34.7% of total imports into Kazakhstan. According to Economist Arman Beisembaev, leaving the EAEU could have catastrophic impacts on the Kazakh economy. As he says, “The flow of goods from Russia and via Russia will return to zero at first. It means that shelves in our stores will become empty as nothing could replace Russian imports (Central Asian Bureau for Analytical Reporting).”

Russia’s security guarantees provide it a unique sphere of influence that is yet to be contested in the region. Although China has overtaken Russia as the biggest trade partner to Central Asia, Russia maintains significant military infrastructure in three of the five states. It is the principal security guarantor and plays a vital role in preserving internal stability in the Central Asian regimes. In January 2022, the newly installed President Tokayev relied on CSTO support to tackle the protests and unrest rampant in Kazakh cities. In response to the protests, 3,000 Russian, 500 Belarusian, 200 Tajik, 150 Kyrgyz and 70 Armenian "peacekeepers" were reportedly sent by the CSTO to Kazakhstan. Despite these instances, Kazakh society is growing increasingly wary of Russia’s motives, fueled by the war in Ukraine and a decline in Russian ‘soft power’. Kazakhstan’s elites see China as a necessary counterbalance, while public trust in Russia continues to erode (Clingendael Report, 2025).

Section IV: European Union

Europe has emerged as the country’s largest and most strategic trade partner. According to official EU data, total trade in goods between the EU and Kazakhstan reached an estimated €45 billion in 2024. On 7^th November 2022, European Commission President Ursula von der Leyen and Kazakh Prime Minister Alikhan Smailov signed a Memorandum of Understanding (MoU) underlining strategic partnerships on Sustainable Raw Materials, Batteries and Renewable Hydrogen Value Chains. The MoU is part of the EU’s strategy to ensure diversified, affordable and sustainable access to critical raw materials (European Commission).

Amidst the global shift away from Russian-supplied raw materials, Kazakhstan has been a beneficiary of increased EU demand for oil, gas and minerals. October 2025 saw Germany receive 225,000 tons of Kazakh oil through the Druzhba pipeline, a 25% increase from September. In 2024, Germany imported 1.5 million tonnes of oil from Kazakhstan, and Berlin expects to import 1.7 million tonnes by the end of 2025 (Times of Central Asia). In a phone call, European Council President Antonio Costa praised Kazakhstan as “an important partner of the EU” and promised to “strengthen trade and connectivity links.” This sentiment was echoed by President Tokayev (Euro News). The stated partnership between the two has manifested in several recent agreements and trade deals.

In 2025, the European Investment Bank signed a €200 million loan agreement with the Development Bank of Kazakhstan to support investment in transport infrastructure and renewable energy development (European Investment Bank). The dual memoranda signed with the European Investment Bank and the European Bank for Reconstruction and Development seek to mobilise European capital to pursue strategic regional projects, including the Kambrata 1 Hydropower plant and various other renewable energy projects across Central Asia. During the announcement of the deal, Kazakhstan’s Ambassador to the EU, Roman Vassilenko, emphasised the importance of the Trans-Caspian International Corridor, stating that “The importance of the Middle Corridor has multiplied, as have the volumes of transportation along this route. The European Union views Kazakhstan as a serious and reliable partner (The Astana Times).”

Agriculture has risen as an area of particular significance in the Europe and Kazakhstan partnership. In the year ending 31^st August 2025, Kazakhstan exported 13.4 million tons of grain, a 47% year-on-year increase. In the first half of 2025, mutual agricultural trade between the EU and Kazakhstan has totalled $662 million, an 11% increase from the same period in 2024 (Kazakh Grain Union). With European tariffs on Russian and Belarusian grain and a pressing need to diversify its breadbasket, Kazakhstan offers Europe a cushion against climate impact and supply chain shocks. The presence of the Trans-Caspian corridor and Kazakhstan’s stable agricultural output (particularly of durum wheat) presents a rare opportunity for Kazakhstan to increase its market share in the sector (Tridge).

Section V: The US — Strategic but Limited Economic Presence

While current trade between the United States and Kazakhstan remains modest, this relationship is especially intriguing when considering Kazakhstan’s future as an independent economic power. In 2024, Kazakhstan accounted for 96.7% of Central Asian exports to the United States. Kazakhstan imported $1.1 billion of goods from the U.S.A in 2024, with U.S exports consisting primarily of vehicles, aircrafts, telecommunication equipment, agricultural machinery, medical devices and computers. This technology-driven trade complements rather than competes with Chinese infrastructure investment and Russian energy (Times of Central Asia).

The most interesting dimension of this bilateral relationship is investment. As of 2025, 600 companies with U.S. capital are operating in Kazakhstan. These companies are involved in a range of sectors, including IT, manufacturing, education, consulting and trade (Times of Central Asia). As a consequence of the fraying U.S.–China relationship, the United States has been looking to diversify its supply of critical minerals. On the 8^th of November 2025, it was announced that Kazakhstan had agreed to join the Abraham Accords, a series of U.S.-brokered agreements aimed at normalising relations between Israel and Arab nations. This announcement was accompanied by a $1.1 billion agreement between the two parties to develop the world’s largest untapped tungsten deposits, with a U.S. company holding a majority stake in the venture. Additionally, $17.2 billion in new agreements were signed between Kazakhstan and various U.S. companies. These deals centred on mineral resources, digital technologies and aviation(Euro News).

This rapidly growing collaboration with the United States is a monumental step toward diversifying Kazakhstan's hydrocarbon-reliant economy. This reliance on oil and gas has resulted in vulnerability to global commodity prices. Sharp declines in oil prices directly translate to budget deficits, currency shocks and reduced public spending (Forbes). The 2020 fall in oil prices led to a 17% depreciation in the tenge and a 3% decline in growth for the year. Kazakhstan suffered its largest economic contraction in two decades (Central Asia-Caucasus Institute). In his 2023 State of the Nation Address, President Tokayev stressed Kazakhstan’s commitment to the “development of a green economy”. He emphasised the need to “accelerate the pace of economic diversification” and set forth the goal to transform Kazakhstan into “a fully digital nation within three years (Office of the President of Kazakhstan).”

Conclusion

Kazakhstan finds itself at a turning point. It has an opportunity to leverage its geography, abundance of resources, and thoughtful diplomacy to reshape its role in the world. Its multi-vector foreign policy has allowed it to cultivate and balance deep ties with Europe, Russia, China and the United States while remaining adaptable in the face of regional and global disturbances.

The country has undertaken a deliberate and measured effort to diversify its trade patterns. It is no longer content to serve as a supplier of hydrocarbons and agricultural produce to a narrow set of its neighbours. Instead, it has positioned itself as a transport hub between Europe and Asia. Kazakhstan is exploiting the Trans-Caspian International Trade Route to expand its trade of various commodities and high-value-added goods. As explored through this article, Kazakhstan has showcased effectiveness and reliability in its pursuit to broaden its customer base for grain, critical minerals, and hydrocarbons. It has been successful in reaching new markets while simultaneously developing value-added infrastructure through Chinese and Western capital.

A critical driver of Kazakhstan’s future is its rare earth minerals. The discovery of massive deposits, including the Zhana Kazakhstan site, is allowing the country to compete as a non-Chinese supplier of these critical raw materials. With programs such as the Bank for Development of Kazakhstan’s $1 billion rare earths initiative and over $6 billion in mining expansion, Kazakhstan is directly targeting new global demand from the EU and the U.S. in their bid to reduce Chinese dependency. These resources are central not only to modern industry and defence but also to the green and digital transformations, dominant in the global economy (Times of Central Asia).

Kazakhstan’s movement towards economic diversification and sustainability is an explicit goal set forth by the Government. The country’s vision of a green, diversified and technology-driven economy is no longer just rhetoric. Kazakhstani leadership had pursued these objectives through transformative trade deals, foreign partnerships and purposeful investments in renewable energy, digital technologies and critical minerals. Despite the numerous positives, the path to transformation is fraught with challenges. Continued reliance on Russian infrastructure for energy exports, global commodity price volatility, and lasting geopolitical tensions pose serious threats to the country’s ambitious strategy. It remains to be seen whether Kazakhstan can realise a future where it is not merely a pawn but a pivotal player in Eurasian and global affairs.