Amid Growing Wealth, Nepotism and Nationalism in Kazakhstan

ALMATY, Kazakhstan - A few years ago, the youngest daughter of Kazakhstan's president visited the Luxor temples in Egypt. Like many tourists, she later told an interviewer, she left deeply impressed with the site.

Unlike other tourists, Aliya N. Nazarbayeva, the daughter, returned home and arranged to build her own Egyptian temple -- a spa complete with hieroglyphics on the walls and statues of sphinxes and gods -- on a hill overlooking Almaty, Kazakhstan's largest city.

"Our host, Aliya, wanted guests to feel the same admiration she felt for the temples," said Nadezhda S. Bezverkhova, a deputy manager here at the Luxor spa and club, running her hand over a plush leather couch in the lobby.

The building of the Luxor, which opened in March, tells a lot about how business is done these days in this former Soviet republic, a swath of arid steppe between Russia and China that is endowed with vast oil reserves. Fueled with growing wealth from energy exports, Kazakhstan's economy reflects an intermingling of politics and business, widespread corruption and -- perhaps more than in any oil state outside the Middle East -- a prominent role for members of the president's family.

"The president's family has a lot of clout," said Bryan D. Stirewalt, a former adviser to the National Bank. "Getting into any business, you had to have their permission."

President Nursultan A. Nazarbayev, who has ruled Kazakhstan since 1989, won another seven-year term with 91 percent of the vote earlier this month in elections that international observers called unfair.

The country may be remote, but the policies of Mr. Nazarbayev, who is currently in the good graces of Washington for having surrendered Soviet nuclear weapons immediately after gaining independence, are of mounting concern to a world parched for petroleum.

Kazakhstan holds two-thirds of the crude reserves in the Caspian Sea region. The country exports a million barrels of oil a day and plans to triple output within 10 years as the Kashagan field comes online. Exxon Mobil, Chevron and the oil services firm Halliburton are active in Kazakhstan.

Kazakhstan's blend of nepotism, nationalism and oil wealth follows in the tradition of many countries in their early years of petroleum wealth.

In the early decades of the 20th century, Juan Vicente Gómez, a dictator who ruled oil-rich Venezuela for 27 years, personally enriched himself with the help of his extended family. The government was so inbred and violent that his brother, the vice president, was killed by a member of his own family in a power struggle.

The Saudi royal family, now including about 7,000 princes, has had a lock on oil since production picked up there after World War II. And after the breakup of the Soviet Union, the ruling Aliyev family in Azerbaijan, across the Caspian Sea from Kazakhstan, has controlled the government and the flow of oil there.

Ilham Aliyev succeeded his father, Heydar Aliyev, as president in 2003.

But some Western oil executives worry that a creeping nationalization is under way in Kazakhstan -- similar to what is taking place in Russia, where the Kremlin in the past year has gained control of two large oil companies.

Asked about the family's business connections, Karim K. Massimov, an aide to the president, emphasized that no Kazakh laws had been broken and argued that the country's economy was evolving after decades of Communist rule.

Under Kazakh law, the state oil company, KazMunaiGaz, has a pre-emptive right to buy oil fields. That right was asserted during the sale this fall of PetroKazakhstan, a Canadian-owned company, to the China National Petroleum Corporation, the biggest oil deal in Kazakhstan this year.

The deal was only approved after the Chinese concern agreed to sell assets, including a refinery, to KazMunaiGaz, where the vice president was, until recently, Timur Kulibayev.

Mr. Kulibayev is married to Dinara N. Nazarbayeva, another of the president's daughters. Mr. Kulibayev resigned from KazMunaiGaz during the presidential campaign this fall.

Marriage has been a means to extend the empire. Aliya Nazarbayeva, a slender woman who sometimes dyes her black hair blond, married Aidar Akayev, the eldest son of the former president of neighboring Kyrgyzstan in 1998, when she was 18. Commentators called it the first dynastic marriage between Central Asia's ruling families.

They have since divorced, though, and Kyrgyzstan's president, Askar Akayev, was deposed in a popular uprising in March.

But Aliya still wields influence over the construction business through her company, Elitstroi, according to a report by Moscow's Aton brokerage house.

The nepotism extends even further. Aliya's eldest sister, Dariga N. Nazarbayeva, and brother-in-law, Rakhat Aliyev, Kazakhstan's deputy foreign minister, control a media empire, according to the Aton report. Dariga is said to have left active business when she became a member of Parliament in 2004; some analysts here say she is being groomed in politics as a successor to her father.

The true reach of the family's business interests are unclear, however, because ownership is often not transparent in Kazakhstan. "You'll rarely find the family on a share certificate," said Mr. Stirewalt, the former bank adviser.

In a society built around the traditions of a nomadic, herding culture of allegiance to clans and hordes, it is not surprising that personal relations and family ties play an outsize role in Kazakh business, said Nurbulat E. Masanov, a political commentator.

According to a filing in a court in the United States, Mr. Nazarbayev, the president, accepted millions of dollars from an intermediary, James H. Giffen, who worked on behalf of American oil majors during contract talks in the 1990's. Mr. Giffen faces Foreign Corrupt Practices Act charges; the trial is scheduled to open next year.

Mr. Nazarbayev paid $45,000 from these funds for private school tuition in Switzerland for one of his daughters, according to court papers.

Mr. Nazarbayev, meanwhile, has said he sees no problems with his relatives' business activities so long as no Kazakh laws are violated. A spokeswoman for the family declined to arrange interviews with any of the three daughters.

Under Mr. Nazarbayev, Kazakhstan's economy grew 9.4 percent in 2004 and 9.1 percent in the first six months of 2005, according to the Asian Development Bank, which estimates growth rates of 8 to 8.5 percent at least through 2007.

The political opposition remains weak, with little ability to get its message out because its access to the media is strictly controlled. It complains that the intermingling of business and politics is fostering a system of growing economic inequality. Zharmakhan Tuyakbai, who lost the presidential election here, predicted that eventually social unrest would increase sharply, perhaps leading to revolution.

Business executives on the losing side of disputes with the family are also critical.

Yuri I. Andriyenko, formerly the 51 percent owner of a natural gas distribution business, said he lost a court case against a company co-founded by Aliya Nazarbayeva. The case is under appeal.

In a telephone interview, Mr. Andriyenko sounded glum about his chances. "The family shouldn't be in business," he said. "It's obvious, there will never be a fair court decision against them."

Mr. Nazarbayev's victory appears to secure the position of major foreign oil companies, whose concessions were negotiated with the Nazarbayev government. The opposition had suggested renegotiating the contracts.

Anton Artemyev, director of Kazakhstan Revenue Watch, a nonprofit financed with money from George Soros, the investor, is pushing for oil companies and the Kazakh government to clean up their act.

The first step, Mr. Artemyev said, is public disclosure of the deals. The initiative is called Publish What You Pay.

In the fall, Kazakhstan signed a modified version of this agreement, which discloses aggregate payments from oil companies but not the details of individual deals.

"Society has a right to ask, 'Where is our money?' " Mr. Artemyev said.

Some of it has clearly been poured into the Luxor. Inside the club on a recent rainy evening, Ms. Bezverkhova, the deputy manager, proudly pointed out the antioxidant green tea and fruit juices on the bar menu.

The club offers stand-up tanning booths, an Olympic pool with underwater music, five saunas and exotic spa treatments, including a "Scottish Shower," where a client stands naked in a booth while an attendant sprays the customer alternately with hot and cold water.

A yearly family membership runs $7,950 -- more than twice the average per capita income in Kazakhstan.

In a 2003 magazine interview discussing her plans for the Luxor, Aliya Nazarbayeva explained that growing up in the presidential household came with plenty of perks -- but also left her feeling lonely because of long separations from her busy father.

As a young girl, she sometimes asked her driver to drop her off away from the school entrance, so she could walk like the other children, Aliya said in the interview. Later, she was sent to boarding school in Europe.

She was raised primarily by her mother, who insisted that the girls take daily cold showers for their health, she said, which accounts for her lifelong interest in healthy living.

Now that she is back home, she said, nothing is more important than her family.

"I know that at any moment, and under any circumstances," she said, "my sisters will rush to help me and I will rush to help them."