Why are oil workers protesting in Kazakhstan?

The oil workers from Zhanaozen protesting in front of the Ministry of Energy in Astana. Photo by Zhanara Karimova. Used with permission.

This article was written by Dmitriy Mazorenko and Paolo Sorbello for Vlast.kz. An edited version is republished on Global Voices under a media partnership agreement.

On April 10 and 11, oil workers from Zhanaozen, a city in the Mangistau province in western Kazakhstan, carried out a protest in the capital Astana. Around 150 laid-off employees of the BerAli Mangistau Company spent a night outside the building of the Ministry of Energy. They demanded to be hired directly by Ozenmunaigas, the principal oil and gas producer in the region and subsidiary of the state-owned Kazmunaigas. On April 11, they were detained and dragged into police vans.

They were released the next day and sent back to Mangistau. Only 10 leaders remained in the capital for the negotiations, which reached a stalemate on April 14. Kazmunaigas rejected demands for permanent jobs at Ozenmunaigas, which would have given workers greater financial stability and social protection. The oil workers rejected the proposal to increase the terms of their contracts from one to five years, arguing it would not significantly improve their conditions.

Since Kazakhstan’s independence in 1991, the workers at oil and oil service companies have regularly organized mass protests and strikes. The largest was in 2011, when the security forces suppressed an eight-month workers’ strike at Kazmunaigas’ subsidiary companies in Zhanaozen, the largest oil town in Mangistau. Seventeen protesters died and over a hundred sustained injuries as law enforcement bodies fired at the crowds. The repression did not stop labor actions, which increased in frequency in the past five years.

Corporate PR and state propaganda argue that the workers are selfish and greedy. The workers are depicted as privileged, earning exponentially more than average citizens. The reasons for their dissatisfaction, however, are structural. Until a solution is found, their strikes and pickets are poised to repeat.

The era of outsourcing jobs and services

The three largest oil fields, Tengiz, Kashagan, and Karachaganak in the northwest of the country, account for around two-thirds of Kazakhstan’s oil production. Foreign participation in their operation is significant, with US corporation Chevron, UK’s Shell, and Italy’s Eni having played a major role since the mid-1990s.

They brought international standards, gave out above average salaries, and set strict safety conditions. At the same time, they split up the Soviet era vertically-integrated enterprises and contributed to the proliferation of the practice of subcontracting. Thus, these principal companies shed a lot of  responsibilities by outsourcing services to other companies, which were not strict in their observation of rules, standards, and safety measures. Through tenders, they pushed subcontractors to compete for a finite number of jobs. It prompted subcontractors to cut technology and labor related expenses. The length of subcontractor agreements also grew shorter, negatively affecting job stability.

In towns where the main economic activity is oil and gas extraction, such as Zhanaozen and Aksai, losing a tender is an existential matter for subcontractors. When they lose, such companies lay off workers and become idle until the next tender. Laid-off workers are sometimes rehired by companies that win tenders, often at comparatively lower salaries. Winning subcontractors can pick from a large number of workers from companies that lost.

The number of workers in oil and gas projects can inflate by thousands, especially during major renovations at oil fields and processing plants. To keep temporary contracts flexible, companies have implemented global standards of outsourcing labor. By hiring workers through manpower agencies, which have become widespread, the principal companies avoid inflating their own staff and delegate all responsibility for hiring and firing to third parties.

Through this practice, workers become pawns at the mercy of seasonal workflow. When  they are needed, they have work, sometimes even well-paid. But when work stops, a renovation is completed, or a company loses a tender, they are out of work. In turn, this makes their “well-paid salaries” not constant throughout the year.

In addition, their work cannot be compared to salaried office workers. Companies often criticize workers for “being greedy” and demanding salaries well above the average of KZT 300,000 per month (around USD 650). In fact, however, workers in the oilfields are generally paid by shift, not monthly. Unlike office or medical workers, they do not have paid time off. Only some of the largest oil companies pay salaries that, when spread out across the year, can afford oil workers a “good life.” But as outsourcing becomes increasingly widespread, these jobs are growing harder to find.

Because of these outsourcing practices, it is common to see workers from different companies doing the same job at the same oilfields. Their different employers subject them to different work conditions, safety standards, and salary levels. This creates inequality among workers, which they seldom can correct or fight against, because of the lack of independent trade unions.

Suppressing trade unions

For three decades, Kazakhstan’s government passed laws restricting workers’ rights to strike and formulate collective demands. These laws often mirrored the neoliberal standards set up with the aid of transnational companies in several other countries relying on the extractive sector.

The authorities constantly used violence against trade union activists: they were killed, beaten, intimidated, and prosecuted. This led to the disintegration of all independent workers’ associations and prevented the creation of new ones.

Furthermore, activities of trade unions were systematically discredited by state institutions, which claimed that the state itself was in charge of protecting workers’ rights. Government agencies and state-sponsored trade unions also sought to absorb independent labor organizations.

Workers’ actions are still perceived as a hostile element by the government. Since the workers have no other channels of communication, protests remain the only way to voice their concerns.

Witnessing the end of oil

Employees of oil enterprises in the Mangistau region are dependent on the subsidiaries of Kazmunaigas (Ozenmunaigas, Mangistaumunaigas, and Embamunaigas). These companies are the largest employers in the region and main customers for local oilfield service companies. Smaller, private companies only operate a few smaller oilfields. But their gradual depletion will lead to a decrease in purchases of local services.

By 2030, the so-called “big three” (Tengiz, Kashagan, and Karachaganak) will account for almost three-quarters of all oil production in Kazakhstan. The share of small and medium-sized oilfield production will continue to decline. Therefore, the market for oilfield services, which is already controlled by large companies (the top-10 companies commission 87 percent of the contracts), will turn less competitive.

Despite local legislation on “local content” demanding otherwise, the operators of large deposits give preference not to local, but to foreign contractors who have opened their own subsidiaries in Kazakhstan or participate in Kazakhstani legal entities. Therefore, they occupy a dominant position in the structure of the oilfield service market (56 percent of the total number of enterprises). The largest companies still lack trust in local entrepreneurs, because of corruption and potential administrative interference.

If the authorities fail to find a solution, Kazmunaigas will become the sole customer for Kazakhstani oilfield service companies. Some of them will eventually disappear, because production volumes at the main Kazmunaigas subsidiaries will also continue to decline and will not allow them to absorb the excess workforce. In the absence of other jobs, the number of unemployed oil workers will inevitably grow.

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