Arman Bayganov: Azerbaijan is a suitable option for diversifying Kazakhstan's oil routes - INTERVIEW
Economic cooperation between two resource-rich Caspian states has taken on renewed relevance as both pursue diversified growth, more resilient trade links and greater stability amid shifting geopolitical dynamics. News.Az Analytical Portal spoke with Kazakh economist and R-Finance financial adviser Arman Bayganov to assess how shared structural features, complementary sectors and emerging logistics corridors are shaping bilateral engagement.
The interview also explores monetary developments, reserve-management strategies and medium-term growth expectations as one state navigates currency fluctuations, global uncertainty and an expanding digital economy. The discussion offers a wider perspective on how economic policy choices and regional connectivity initiatives may influence future cooperation and long-term development trajectories.
– How do you assess economic cooperation between Azerbaijan and Kazakhstan? In which areas, in your view, can the two countries cooperate most effectively?
Source: APA
– Overall, I view positively the fact that Kazakhstan and Azerbaijan share many common features. First, the structure of our state revenues is similar; our main growth driver is the oil sector. Kazakhstan, due to its vast territory, is generally more diversified. I mean that apart from oil, we also have a well-developed mining sector, agriculture, and several other industries.
Azerbaijan has strong potential. In 2023, our trade turnover amounted to around $500 million, and this figure is gradually increasing. Considering that Azerbaijan is the largest country in the South Caucasus both economically and demographically, and that we have convenient logistics across the Caspian Sea, we can develop active cooperation.
Kazakhstan supplies Azerbaijan with wheat, petroleum products, and rolled metal products. Azerbaijan, in turn, has a strong cluster in the processing industry and enjoys a favorable climate for agricultural development. In western Kazakhstan, the climate is arid – a desert and semi-desert zone – where food prices, especially for fruits and vegetables, are high. Azerbaijan could help our western region reduce these prices.
Another point is that by combining efforts and enhancing cooperation, we can strengthen the petrochemical sector. We can jointly develop oil refining as well as transportation through Azerbaijani territory.
Due to the Russia–Ukraine conflict, the Caspian Pipeline Consortium, which transports up to 90 percent of Kazakhstan’s oil to Europe, has faced operational risks. Therefore, we must gradually diversify oil deliveries to Europe, and Azerbaijan is a suitable option for doing so. With the implementation of the Zangezur corridor, the participation of many countries, including Kazakhstan, in China–Europe trade could expand significantly.
– Recently, the tenge has been strengthening. What is driving this trend, and how stable will the tenge be in 2026?
Source: Reuters
– There are several factors behind the tenge’s strengthening. The first is that over the past month, the Russian ruble appreciated by about 5 percent against the tenge. Given the close economic ties and the largest trade turnover between Kazakhstan and Russia, any strengthening of the ruble generally has a positive impact on the tenge.
If the ruble depreciates, this also affects the tenge accordingly. We must also consider that our countries are part of the EAEU and the Customs Union, which influences many of Kazakhstan’s economic indicators. Russia accounts for 93–94 percent of Kazakhstan’s EAEU trade. Therefore, fluctuations in the ruble inevitably affect the tenge.
The second factor is that the US dollar weakened by about 1 percent over the month. In addition, toward the end of the year, many exporters convert their foreign currency proceeds, as required by law within a certain timeframe, and this has also influenced the tenge’s exchange rate.
– The National Bank of Kazakhstan is purchasing gold in large quantities. What is the rationale behind this?
Source: TASS
– I do not believe the National Bank’s gold purchases pose a problem for our economy. First, gold is a popular diversification instrument. Not only Kazakhstan but many countries are acquiring gold while simultaneously reducing their dollar reserves. This trend reflects global geopolitical instability, particularly with Donald Trump returning to the White House. He escalated trade wars, imposed tariffs, and tightened trade conditions for many countries.
Given these factors, some states are reducing their holdings of American securities and diversifying into alternative instruments. Gold has always served as a hedge against risks.
Moreover, Kazakhstan plays a significant role in gold mining and produces a substantial amount of gold, which the state purchases to increase gold and foreign currency reserves. Globally, these reserves have grown by about 5–10 percent over the year – a very large increase for such a period.
– The government of Kazakhstan has released its GDP forecasts, projecting real GDP growth of 5.4 percent in 2026 under the baseline scenario, with an average annual growth of 5.3 percent over three years. Do you agree with these figures?
Source: Caspianpost
– I believe the government’s economic forecasts for next year are quite realistic. Several factors support this outlook. First, the taxable base is expected to expand from next year, including an increase in VAT.
Kazakhstan aims to reduce its budget deficit. In recent years, our public debt has grown, and tax revenues have not sufficiently covered it.
We must consider that the taxable base in the post-Soviet region, including Kazakhstan, is among the lowest, and this cannot continue indefinitely. Therefore, state policy is gradually expanding the tax base. These additional funds will be directed toward developing the agro-industrial sector and supporting small and medium-sized businesses.
Another point is that Kazakhstan is actively advancing its digitalization agenda. The country is developing various digital public services, and the digital tenge is gradually being introduced. Ultimately, this will reduce the shadow economy and expand the taxable base.
This will also contribute to GDP growth. In the future, the introduction of digital currency will reduce corruption at various levels. The more digitalization advances, the lower the corruption risks.
For any economy, corruption and the shadow sector are obstacles that hinder development. The state is now actively combating this by introducing digital systems and digital currency.
Even the first loans issued under a government program were provided in digital tenge, allowing authorities to track exactly how funds were spent. The entire process leaves a digital footprint, ensuring full control.
This is beneficial for businesses, the state, and fiscal authorities, ensuring transparency of financing and revenue flows into the budget.
By Asif Aydinly
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