Business Corruption

Companies report that bribery is not uncommon when dealing with environmental inspections in Kazakhstan. For instance, Global Integrity 2010 reports that business inspections by government officials to ensure public environmental standards are often carried out in an arbitrary and ad-hoc manner, and bribes are sometimes extracted from companies in return for favourable treatment or expedited processing.

In addition to concerns about tax stability, contract sanctity, and tender transparency, companies in the oil and gas industry have reported difficulty doing business for a number of other reasons, including alleged environmental violations followed by large fines. According to the OECD Securing Resources for Environmental Regulation and Enforcement in Kazakhstan 2009, environmental authorities in Kazakhstan should not be authorised to use fines as a source of funding since this could create incentives to maximise revenue instead of compliance. This approach could also facilitate corruption, particularly if the flow of public payments is exempt from regular budget control, according to the report.

Political Corruption

As Kazakhstan has vast oil-resources, the scope for corruption in extractive industries is enormous. According to the former Finance Minister of Kazakhstan, Zeynulla Kakimzhanov, 80% of all oil companies are operating in offshore zones. In general, contracts between the oil sector and the Kazakhstani government lack transparency, as reported by the executive director of Transparency Kazakhstan, Sergei Zlotnikov. The most well-known and widely publicised instance of corruption in this sector is the 'Kazakhgate' case, in which US businessman James Giffen was accused of funnelling more than USD 78 million to high-ranking officials in the Kazakhstani government during the 1990s. Oil companies paid conditional deposits into a Swiss account under Giffen's control, and these funds, along with success commissions from Kazakhstan paid to Giffen's company for securing contracts with foreign oil companies, were used to pay-off two of the most senior officials in Kazakhstan - allegedly former Prime Minister Nurlan Balgimbaev and President Nazarbayev himself. In 2003, Giffen was arrested by the US Department of Justice on foreign bribery charges, but his trial was still ongoing as of 2010 due to procedural technicalities. In November 2010, Giffen was acquitted of all charges, according to a 2010 article by Main Justice.

In a more recent case, a Texas-based oil company, Baker Hughes, agreed to pay a fine of USD 44 million in April 2007 after being found guilty in the US of violating US anti-bribery laws. Part of the fine is related to the complaint that the officials of the company paid USD 4.1 million in bribes to a high level Kazakhstani executive of Kazakh Oil, the state-owned company.

In June 2009, former Environment Minister Nurlan Iskakov and two of his deputies went on trial, charged with financial manipulation and embezzling more than USD 6 million from the state budget, as indicated in a July 2009 article by BBC News. In October, Iskakov was sentenced to four years of imprisonment, while the two deputy ministers avoided imprisonment with conditional sentences of 2 to 3 years, according to a 2009 article by APA.

In 2009, the authorities arrested the chairman of the state uranium company on charges of abuse of office. He was subsequently convicted and sentenced to 14 years in prison, according to the US Department of State 2010.