The country is rich in mineral resources, including chrome, coal, copper, gold, iron ore, wolfram, and zinc. The economy is still closely linked with the other economies of the former Soviet Union and especially with the Russian Federation. However, since independence in 1991, foreign trade has been redirected toward markets outside the former Soviet Union.
Prior to the breakup of the USSR, Kazakhstan's electrical grid was a single component within the unified Soviet electrical system. When independence came, Kazakhstan underwent a wrenching withdrawal from the physical infrastructure of the Soviet system. Dozens of independent power grids appeared, fragmenting energy markets. The reliability of energy supplies fell sharply. Cases of forced restrictions of power supplies and disconnections rose. Many small towns in northern Kazakhstan were forced to suffer the severe Siberian winters without gas and electricity supplies in the early years of the transition. During this period the Kazakh government sought to develop independent electrical and natural gas supply systems for the purposes of self-sufficiency. Ultimately, the country came to see the wisdom of reinte-grating regional Eurasian energy markets. In summer 2000 Kazakhstan began the steps to create a single power system stretching across the states of Russia, Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan.
In 1991 the Kazakh government began negotiating with international oil firms to develop Kazakhstan's Tengiz oil fields. The Kazakhstan government joined the large multinational oil firm Chevron to form a joint venture called Tengizchevroil. The agreement committed Chevron to spend about US$20 billion over 20 years to develop the Tengiz field's 6 billion barrels of proven reserves. The agreement anticipated that eventually Kazakhstan would be exporting as much as 700,000 barrels a day from the field. Other major international petroleum firms, including Birlesmis Muhendisler Burosu, British Gas, and Agip also committed investment in the country's oil fields.
Beginning in 1992, Kazakhstan's northern neighbor Russia restructured the management of its state-owned oil and gas companies. Large, powerful, and politically well-connected private oil companies emerged from the reorganization in Russia. These new firms and the Russian government cooperated to restrict the access of the Caspian states to the Russian pipeline system and its connections to western markets. Russia first imposed high taxes and surcharges on the movement of gas and oil and then, in order to block economic development that might run contrary to the interests of Russian energy firms, sought to blockade its southern neighbors by cutting off access to foreign markets entirely.
In response to the Russian measures, the Caspian oil and gas producing countries (principally Kazakhstan, Azerbaijan, and Turkmenistan) began seeking ways to bring energy supplies to market without having to pass through Russian territory. Russia lobbied for a continued reliance on the Soviet-era pipeline system, the so-called northern option. European and North American countries favored the idea of shipment across the Caucasus and on to world markets through the Bosporos, the narrow strait that leads from the Black Sea to the Mediterranean Sea. The Economic Cooperation Organization (ECO), based in the countries of the Middle East, urged pursuit of a southern option. Thus, 4 routes for the Caspian oil eventually gained attention. First was a pipeline from Baku (Azerbaijan) to Ceyhan (Turkey), the Baku-Ceyhan line. Another was a pipeline that originated in Kazakhstan, went through Turkmenistan and Afghanistan before going to Pakistan and the Indian Ocean. Yet another pipeline discussed would go from Turkmenistan through Iran, Turkey, and then onward toward Europe. Finally there was discussion of a pipeline that would supply Uzbek and Turkmen gas to Pakistan through Afghanistan.
In 1995 negotiations among the oil and gas producing countries resulted in the Caspian Littoral Agreement. The agreement, which included Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan, was designed to coordinate trade routes, regulate the access to natural and mineral resources, and unite efforts at environmental protection. The agreement also established a Caspian Council, consisting of a secretariat and 4 specialists' committees. The council was to be politically controlled by an intergovernmental council representing the Caspian states. The Caspian Pipeline Consortium (CPC) was founded by Russia, Kazakhstan, and Oman in 1995. The goal of the consortium was originally to deliver oil from the Tengiz field in Kazakhstan to a Russian port on the Black Sea for shipment to western markets. In the summer of 1997, Kazakhstan and China concluded an over US$10 billion agreement for the extraction and transportation of Kazakh oil. In 1998 the 2 countries began to develop and operate the Uzen oil field and the Aktyubinsk oil and gas field in northwestern Kazakhstan. The Chinese National Petroleum Corporation (CNPC) bought a 60 percent stake in Kazakhstan's large Aktobemunaigaz oil field for US$325 million and pledged to invest another US$4 billion in it over the next 20 years. Kazakhstan and China began exploring the possibility of jointly laying an oil pipeline from Western Kazakhstan to China. The project would cost an estimated at US$3 to US$3.5 billion and be the largest pipeline construction project in history. The pipeline, if constructed, would be about 3,000 kilometers long and its annual handling capacity would be at least 20 million tons.
In some categories of mining Kazakhstan is among world leaders. The country has about one-third of the world's chromium and manganese deposits. It has substantial tungsten, lead, zinc, copper, bauxite, silver, and phosphorus. Kazakhstan is also a major producer of beryllium, tantalum, barite, uranium, cadmium, and arsenic. Major iron mines are located in the north of the country. There are reserves of goethite and limonite, but these are generally considered to be low grade. The capacity of these mines has been listed as 25 million tons/year. Large reserves of coal are generally found in the central and northern parts of the country. Kazakhstan has large reserves of phosphorus ores in the Zhambyl region in the south. The government privatized state mining companies in 1994.
Kazakhstan has major aluminum, copper, steel, uranium, and zinc factories. The country's major steel producer, Karaganda Metals (or Karmet), was privatized in 1994 and sold to the international firm Ispat-Karmet. Production dropped for several years but in 2000 began to increase, reaching 300,000 tons. The major aluminum producer, Aluminum of Kazakhstan, is engaged in a major expansion of output. The country's chief zinc complex, Kazzinc, announced in 2000 that it would expand production to 250,000 tons. Kazakhstan also has a growing precious metals sector, with production increases in recent years in gold and silver in particular. The majority of gold and silver output comes as a by-product from base metal production, but there are also separate deposits. There are 23 gold-bearing regions in Kazakhstan. The Vasilkovskoye mine in north Kazakhstan is considered to be the fourth largest gold mine in the world.