finance

Kazakhstan: violent clampdown highlights City of London’s lucrative role


Turmoil in Kazakhstan shows why its elite favours London as a location for assets, business dealings and second homes. The UK offers hard currency, offshore banking and the rule of law with few questions asked. The bloody suppression of civil disturbances will therefore renew British disquiet over the City’s lucrative links with the mineral-rich central Asian nation.

The security forces of the authoritarian regime of Kazakhstan have killed 164 people and arrested 6,000 in a clampdown on public protests, assisted by the Russian army. President Kassym-Jomart Tokayev runs Kazakhstan with the approval of his predecessor Nursultan Nazarbayev. The oligarchs who control Kazakhstan’s vast mineral wealth have typically done so with Nazarbayev’s blessing too.

Kazakhstan’s highest-profile paid UK adviser was Tony Blair Associates, a consultancy set up by the former prime minister that is no longer in operation. Banks such as Deutsche Bank, Credit Suisse and JPMorgan Chase for their part brought two big miners, ENRC and Kazakhmys, to the London market in the noughties.

ENRC delisted in 2013. ENRC Ltd is now a UK-based private holding company as part of the Luxembourg-registered Eurasian Resources Group. Kazakhstan’s richest man, Vladimir Kim, still controls Kazakhmys’s successor business. This delisted last year in a £4.1bn buyout advised by Citigroup. Nova Resources, which is based in the Netherlands, now owns the private UK company.

Kazakhstan maintains an indirect foothold in the FTSE 100 index via constituent Glencore. The Swiss-based miner and trader owns 70 per cent of Kazzinc, a mineral producer responsible for almost a fifth of its metals and minerals ebitda in 2020.

Kazakhstan fintech Kaspi floated depositary receipts in 2020. These fell 30 per cent last Wednesday, but the group is still capitalised at $19bn. Nazarbayev’s relative and former Kaspi shareholder Kairat Satybaldy reportedly transferred or sold his holding before the listing.

The extended Nazarbayev family has links to £330m of London property, two-thirds of UK real estate connected to Kazakhstan’s elites, according to a recent report from the Chatham House think-tank.

Violence in Kazakhstan highlights the difficult balancing act required from the City of London as an offshore business hub. Moral relativism is easier when life is superficially peaceful in the authoritarian nations whose moneyed elites you advise. When soldiers are crushing insurrections against them, reputational and regulatory risks expand for western bankers, accountants and lawyers.

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