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The Trade between Kazakhstan and the EU

15.05.2017 | Comments | Economy | 27 Daniyar Nurbayev

Kazakhstan adheres to the multi-vector cooperation and partnership in foreign policy. The European Union, as one of the main global political economic actors, has a special place in the Kazakhstani multi-vector policy. In the beginning of 1993, the first diplomatic relations were established between the EU and Kazakhstan. Later at the end of 1993, Kazakhstan opened a representation office of the Republic of Kazakhstan to the EU in Brussels, while in 1994 the European Commission opened its representation office in Kazakhstan. In addition, in 1994, the EU and Kazakhstan signed the Partnership and Cooperation Agreement (PCA)[1], which came into force in 1999. The agreement defined the legal basis for expanding trade and economic ties between Kazakhstan and the EU member states. In 2011, the parties started negotiations on the Enhanced Partnership and Cooperation Agreement (EPCA)[2], and at the end of 2015, the enhanced agreement came into force. The EPCA comprises a cooperation in 29 spheres, including international and regional security, disarmament, trade and economy, investments, infrastructure development, as well as other areas such as cooperation in innovation, culture, sports, tourism and law enforcement.

Today, the EU is one of the main trade partners of Kazakhstan. The trade between the EU and Kazakhstan even exceeds the trade between Kazakhstan and the Commonwealth of Independent States (CIS).  The share of the EU in total trade of Kazakhstan was 40.9% in 2015 or $31.32 billion. Meanwhile, the share of trade between Kazakhstan and the CIS in total trade was 27.4% or $21.0 billion, while the share of trade with the Eurasian Economic Union (EEU) countries was 21.3% or $16.3 billion. The share of the EU has been high since 2003 when it reached 32.6% of the total trade of Kazakhstan. The trade between Kazakhstan and the EU reached its highest share in 2014 when it reached 44.2% of the country’s total trade.

Figure 1 shows that since 2009 the share of EU in the country’s export has been higher than 50%, and in 2014 it reached its highest point (56% in total export of the country). The figure also shows that total export of the country significantly decreased (by 42.2% in comparison with 2014 to $46.0 billion) in 2015, and the reason of it was low oil prices which have been low since the middle of 2014. However, we can see that despite the fact that the total export of the country decreased, the share of export to the EU decreased only by 3.04% points, from 56.23% in 2014 to 53.19% or $24.5 billion in 2015.

Figure 1 Exports from Kazakhstan to the EU

Source: https://comtrade.un.org/data/

 

Figure 2 Imports from the EU to Kazakhstan

 

Source: https://comtrade.un.org/data/

If we look at imports from the EU to Kazakhstan, we can observe that the share of the EU in the total Kazakhstani imports always was below 30% (see Figure 1). Furthermore, since 2010 the share of imports from the EU has been below 25%. In 2015, the share of the EU imports was 22.5% or $6.9 billion, while in 2014 the share was 22.5% or $8.9 billion. The fact that the EU has a high share of exports but has relatively low level of imports means that Kazakhstan has a trade surplus with the union.

In 2015, the trade surplus of the country was $15.4 billion ($38.2 billion in 2014), while trade surplus with the EU and with all countries of Europe were $17.6 billion ($40.4 billion in 2014) and $20.1 billion ($44.7 billion in 2014) respectively. Meanwhile, we have a trade deficit in trade with our closest allies from the CIS (-$5.2 billion in 2015 and -$6.5 billion in 2014) and the EEU (-$6.1 billion in 2015 and -$8.1 billion in 2014). Thus, the country has a trade surplus mainly because of its trade with the EU countries.

The main reason of this high trade surplus with the EU countries is that Kazakhstan exports most of its oil and gas to the EU countries. For instance, according to the UN Comtrade, in 2015, 88.8% ($21.1 billion) of total Kazakhstani exports to the EU were mineral fuels, lubricants and related materials, while in 2015 their share was 95.59% ($42.7 billion). Mineral fuels, lubricants and related materials were followed by manufactured goods which accounted for 7.18% ($1.8 billion) in 2015 and 1.8% (0.8 billion) in 2014. The commodities that have the third place according to its share are chemicals and related products, which accounted for only 2.34% ($0.57 billion) of total exports to the EU in 2015 and 1.05% ($0.47 billion) in 2014. Other commodities account for less than 1% of total export to the EU.

If we look at import structure from the EU to Kazakhstan, we can see that it is more diversified. The biggest share in imports from the EU is machinery and transport equipment, which accounts for 44.17% or $3.0 billion in 2015. Machinery and transport equipments are followed by chemicals and related products and manufactured goods with 20.1% ($1.38 billion) and 19.95% ($1.37 billion) share in total imports from the EU in 2015. Other commodities have less than 10% shares in total imports. A year before, the import structure was almost the same. Machinery and transport equipment accounted for the highest share in total import from the EU (49.35% or $4.3 billion), and were followed by chemicals and related products and manufactured goods with 20.04% and 13.06% shares respectively. It is important to note that in import structure of mineral fuels, lubricants and related materials accounts for very low share. For instance the share of mineral fuels, lubricants and related materials in total imports was 1.2% in 2015 and 1.5% in 2014.

If we look at the member countries of the EU separately, we can observe that Italy is the biggest trade partner of Kazakhstan with $9.3 billion trade between two countries in 2015 ($17.1 billion in 2014), which is 29.7% of total trade between Kazakhstan and the EU. It is also important to note that Italy is not only the biggest Kazakhstan’s trade partner in the EU, but it is also the biggest importer among all the counterparts of Kazakhstan. In 2015 and 2014, Kazakhstan exported commodities worth $8.1 billion and $16.1 billion. Italy is also the country with which Kazakhstan has highest trade surplus ($6.96 billion in 2015 and $15.1 billion in 2014). Italy is followed by the Netherlands and France, which have $5.3 billion and $3.4 billion respectively in 2015.

It is important to note that Kazakhstan does not have a trade surplus with all countries of the EU. With some countries, such as Germany, Belgium, Lithuania, the Czech Republic, Denmark, Hungary, Slovenia, Slovakia, Estonia, Ireland, Cyprus and Luxemburg Kazakhstan had a trade deficit in 2015. Most of these countries have less than 1% in Kazakhstani trade, except Germany, which accounts for 3% ($2.3 billion) of the total trade of Kazakhstan in 2015.

Overall, this analysis shows that the EU is a very important counterpart of Kazakhstan. Therefore, it is important to further develop the relationship between two parties. However, as it was noted above the main portions of our trade with the EU are mineral fuels, lubricants, and related materials, meaning that the trade relationship highly depends on the world oil prices. For instance, the trade between two parties decreased from $53.2 billion in 2014 to $32.2 billion in 2015 because of the drop of oil prices in the middle of 2014. Therefore, the Government of Kazakhstan should not look at the trade surplus with the EU as an advantage but should try to find ways to diversify its export goods to the EU.


References

https://eeas.europa.eu/sites/eeas/files/pca_kazakhstan_ru.pdf

https://eeas.europa.eu/sites/eeas/files/enhanced_partnership_and_cooperation_agreement_2.pdf

https://comtrade.un.org/data/


[2] https://eeas.europa.eu/sites/eeas/files/enhanced_partnership_and_coopera...


Note: The views expressed in this blog are the author's own and do not necessarily reflect the Institute's editorial policy.

Tags: Kazakhstan, EU, Trade, Economy

Author

  • Junior Research Fellow

    Daniyar Nurbayev

    Daniyar Nurbayev is a research fellow at the Eurasian Research Institute. Daniyar completed his bachelor’s degree in Finance in the Kazakh-British Technical University in 2013. In addition, he holds Masters degree in Finance from the Kazakh-British Technical University (2015).