No Escape From Crisis in Kazakhstan

ReutersA Kazakh shepherd near the village of Ashibulak. The crisis has affected everyone from shepherds to big-city elite.
ASHIBULAK, Kazakhstan -- From a lone shepherd in the great silence of the empty steppes to the champagne-sipping socialites of the big cities, no one in Kazakhstan can escape a looming shadow.

Life may already be tough enough for Danaibek Saidenov, who like generations of nomadic ancestors lives in austere, fog-filled pastures protecting his sheep from wolves.

Now with a global financial crisis, he faces an enemy far more pervasive than anything the steppes have seen.

"Life's much harder now," said Saidenov, as he let the reins fall loosely on his horse's neck. "There is simply no money. When bankers have no money, that means we don't have it either."

With demand for sheep products falling and shearing costs still high, Saidenov says he is struggling. In this remote corner of the world near Kazakhstan's border with China, Saidenov's concern shows the spread of damage from the world's worst financial crisis in 80 years.

In Kazakhstan, a resource-rich nation where traditional herder communities exist alongside a complex oil-fueled economy, the consequences may be stark.

Long the darling of emerging market investors, the land-locked ex-Soviet state five times the size of France is suffering badly after years of unlimited access to economic expansion funded by cheap credit.

As the gloom seeps through society, the crisis is a worry to veteran leader Nursultan Nazarbayev, who knows how much stability in a volatile region depends on economic fundamentals. So worried are senior figures about eroding confidence that a top official suggested this month that Nazarbayev stop using the very word "crisis" altogether.

Just an hour's drive from the steppes where Saidenov grazes his sheep lies Kazakhstan's financial capital, Almaty. The sight of dozens of cranes, towering motionless over Almaty's hazy skyline, is testament to how the crisis has frozen the highly leveraged real estate industry.

At a fashion show this month, the crisis was the talk of the day for celebrities, socialites and fashion gurus as they savored champagne beneath lavish chandeliers.

"In the precrisis days, girls would come over and buy five or more garments at a time, but now it's just two on average," lamented prominent designer Sayat Dosybayev. "It's a global problem, so what can we do?"

Demand for luxury goods, foreign travel, fashion items and cars is falling fast. Sales of Porsche and Mercedes cars have halved year on year so far in 2008.

"People who have done well are just going to have to get used to buying fewer Louis Vuitton bags," said Doris Bradbury, a seasoned Kazakhstan-watcher at the American Chamber of Commerce.

Average wages fell 1.1 percent in Kazakhstan in the first nine months of the year, while in some sectors like tourism they shed as much as 25 percent.

But in an old village of mud-brick huts -- itself curiously called Kazakhstan -- people are still going about their daily tasks of tending their flocks and passing on skills.

"Everyone is talking about the crisis," said Yerbol, the 55-year-old head of a big family, his face brick-red from years spent in the steppe. "Of course, life is tougher now. But when has it not been tough?"

Additional reporting by Olzhas Auyezov and Carolyn Cohn.