Don’t Neglect Local Businesses: Subsoil Users Face Stricter Penalties in Kazakhstan

In order to ensure that domestic industries have sufficient raw materials, Kazakhstan has decided to increase penalties for subsoil users who disrupt supplies. The Ministry of Industry and Infrastructure Development (MIIR) identified three base metals that must be provided through tripartite agreements between the manufacturer, processor, and ministry. The MIIR also adopted the “low price formula”, which involves discounts of -5% of the copper price on the London Metal Exchange (LME), -5% of the aluminium price on the LME, -2% of the price lead on the LME, -4% of the price of the aluminium rod on the LME, and -5% of the price of the copper rod on the LME, plus the amount of processing. Enterprises receiving the raw materials must also adhere to certain rules, such as banning the resale of raw materials, their complete processing within the country, an increase in production volume, and the application of the Take or Pay Principle or other mechanisms. Last year, 45 out of 104 sites were completed in the state geological study of subsoil. If these obligations are not met, the MIIR will revoke licenses for subsoil use, terminate contracts, and impose a penalty in the amount of the total unfulfilled obligation to provide raw materials. A regulatory impact analysis is currently being developed to ensure coordination with accredited organizations and enterprises.