Following a difficult period of transformation to a market-based economy, Kazakhstan achieved impressive economic growth. This was largely due to expanding oil production and favorable commodity prices. However, this created a high dependence for the macroeconomic and financial stability of the country on the extraction of natural resources. The country s current economic, geopolitical, and trade features make it specifically vulnerable to external shocks such as volatility in commodity prices and economic slowdown in China and Russia. Though the government implemented numerous measures such as strategies of economic diversification and industrial development, the country faces numerous constraints. Considering this background and the current national and international policy discussion, this research analyzes trade and energy policies in Kazakhstan.Since independence Kazakhstan has pursued deeper regional trade integration and the most recent example is the creation of the customs union with Belarus and Russia. Kazakhstan s concentration of trade policies in the CIS region is publicly and economically a highly debated issue. Considering this background and the current debates, this thesis, using a computable general equilibrium approach, examined and quantified economy wide effects of Kazakhstan s customs union membership. The results show that Kazakhstan will have negative economic effects, including decreasing welfare and GDP, due to the introduction of the common external tariff largely adjusted to Russia s higher import tariffs. To examine alternative trade policies for the country, and considering the fact that the possibility of free trade between China and Kazakhstan has already been expressed by policy makers, a scenario with a potential free trade agreement between China and Kazakhstan is investigated. The results show that Kazakhstan experiences positive welfare effects. An abundance of natural resources, the Soviet legacy of control of energy price, and high energy intensity of the economy is still a present constraint, considering that the country significantly subsidizes domestic energy prices through price controls. This leads, among others, to an already outdated energy infrastructure and a lack of investments in the energy and renewable energy sector, inefficient and wasteful consumption, and decreased availability of energy exports. The findings of the energy subsidies removal scenario, conducted using the CGE model and a modified database, show that the welfare and GDP effects in Kazakhstan are positive. A decrease in output in more energy-intensive sectors and increase in output in less energy-intensive sectors such as farming and processed food are observed.
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