Kashagan: Kazakh bold shift to nowhere?

04.22.2025

By: Valikhah Tuleshov

A significant legal and political dispute is currently unfolding at the Kashagan oil field in Kazakhstan between the government and international oil companies. The Kazakh authorities are seeking to revise the terms of the Production Sharing Agreement (PSA) signed in 1997 under the leadership of then-President Nursultan Nazarbayev, arguing that the current terms are highly unfavorable to the country. At present, approximately 98% of the revenues from oil production at Kashagan are allocated to foreign corporations within the NCOC consortium.

This standoff marks a turning point in Kazakhstan's approach to foreign investment, particularly in the context of its early post-independence strategy. At the time, the government pursued a multi-vector foreign policy aimed at reducing Russia's overwhelming influence in the post-Soviet space—especially in the economic sphere. To assert its autonomy and promote technological and social development, Kazakhstan actively sought foreign investment, particularly from American companies, offering highly advantageous terms to attract them.

While foreign investors have played a significant role in developing Kazakhstan’s economy—especially the oil and gas sector—they have also profited immensely under the existing agreements. Now, with the successful implementation of the multi-vector policy and Kazakhstan’s emergence as a regional power and an influential actor in international affairs, the government sees a need to recalibrate the terms of cooperation with foreign partners.

In March 2025, Kazakhstan initiated proceedings in international arbitration, seeking to revise the PSA and claiming approximately $160 billion in compensation for lost profits and tax deductions. However, by that time, oil companies had already secured several favorable rulings in arbitration, including a prohibition on tax audits without prior approval from the Ministry of Energy of Kazakhstan.

Additionally, in the same month, the state-owned company PSA filed a civil lawsuit in Switzerland, accusing intermediaries of corruption and embezzlement in connection with the Kashagan and Karachaganak fields between 2006 and 2011. Although the lawsuit does not explicitly name Eni or NCOC, it has further strained relations between Kazakhstan and its international partners.

Despite these tensions, Kazakhstan remains committed to resolving the dispute through civilized, mutually beneficial means in accordance with international arbitration procedures. As a staunch supporter of international legal norms and institutions such as the United Nations and the World Trade Organization, Kazakhstan aims to ensure that the interests of all parties are considered and that the final resolution is based on consensus and reciprocity. The possibility of compromises and legal precedents is not excluded, as Kazakhstan continues to strengthen its legal system and its integration with international legal frameworks.

The arbitration process is expected to continue until 2028. Throughout this period, Kazakh authorities will continue to advocate for a more equitable distribution of revenues from one of the country’s most important natural resources.

The opinion expressed in the article does not reflect the position of the Center for Global Civic and Political Strategies, however we would like to add a couple of thoughts:

1. Reasserting Sovereignty and Economic Nationalism

Kazakhstan, like many resource-rich countries, is likely aiming to regain greater control over its natural wealth. The original PSA from 1997 was made under conditions of economic vulnerability—newly independent, resource-hungry for capital, and eager to attract Western investors. But now, with more political stability and economic maturity, the government wants to reassert ownership over its strategic assets. This is part of a broader global trend where resource-rich countries are renegotiating legacy deals seen as too favorable to foreign investors.

2. Domestic Political Signaling

This may also be about consolidating domestic support. Revisiting deals made under Nazarbayev—especially those seen as giveaways—sends a clear message from the current leadership that it’s charting a new course, more focused on national interest and equity. This is especially important in a region where political legitimacy often comes from standing up to external actors and prioritizing national sovereignty.

3. Geopolitical Rebalancing

Kazakhstan has long walked a tightrope between major powers: Russia, China, the U.S., and the EU. The timing here—amid global shifts, Western disengagement in some regions, and Russia's current geopolitical isolation—offers Kazakhstan an opportunity to recalibrate its international partnerships. By challenging Western oil companies legally, Kazakhstan might also be creating space to deepen ties with other players, like China or Gulf states, potentially negotiating new energy deals under better terms.

4. Strategic Leverage

The $160 billion claim may also be a negotiation tactic. It's unlikely that Kazakhstan expects to win that full amount in arbitration, but such a massive claim creates pressure and opens room for compromise—perhaps leading to revisions of the PSA, greater tax revenues, or more favorable terms in future projects.

5. Institutional and Legal Evolution

There’s a subtle message here about legal modernization. By emphasizing adherence to international arbitration and not unilateral action, Kazakhstan is also trying to present itself as a mature, rules-based actor—potentially to attract more diversified and long-term investment from other sectors and jurisdictions.