Wednesday, 21 February 2007


Published in Analytical Articles

By Saulesh Yessenova (2/21/2007 issue of the CACI Analyst)

BACKGROUND: The riot is said to have begun as a personal incident that enthused a massive fight, where Turkish nationals incurred most casualties. Reports and expert assessments have recognized socio-economic disparities that caused the violence. Still, ethnic animosities and the wild rush on the part of Kazakh workers have been captured more intensely than the situation regarding business and labor at Tengiz.
BACKGROUND: The riot is said to have begun as a personal incident that enthused a massive fight, where Turkish nationals incurred most casualties. Reports and expert assessments have recognized socio-economic disparities that caused the violence. Still, ethnic animosities and the wild rush on the part of Kazakh workers have been captured more intensely than the situation regarding business and labor at Tengiz. This riot is the second serious disturbance at Tengiz, following the one in April 2005. Both centered on the Senimdi Kurylis (SK), a lead contractor of PFD UK and a major player in the construction of the Second Generation Project (SGP) for TengizChevroil (TCO). Both riots have grown out of the increased pressure generated by unresolved labor issues, indicating the absence of mechanisms of labor regulation and conflict resolution at Tengiz. The state and TCO have been aware of systematic corruption and labor discrimination and abuse at the Tengiz Rotation Village, an industrial base patronized by the oil company that hosts its subcontractors and their workers. Yet, no sensible effort has been made to create a more just and transparent environment at Tengiz in response to the earlier labor protests, which made the latest riot so predictable. As such, it appears to be a calculated choice on the part of corporate business and the state both interested in sustaining upward resource redistribution around the oilfield. Industry sources declare TCO to be one of the most dynamic hydrocarbon enterprises in the world. Its steady expansion over the past decade, and especially the launch of the Second Generation Project in 2004 with an estimated cost of $4 billion, boosted business activities around Tengiz. At present, TCO sustains the operations of nearly 100 companies; 14,000 employees are engaged in Tengiz worksites daily. Oddly enough, the economic boom that significantly increased business market and labor demand has been accompanied by recurrent labor conflicts at Tengiz. They began in the mid-1990s with TCO workers calling for more equitable labor arrangements and representation. None of their demands were met by any measure; however, a TCO union, which enjoyed strong support at a grassroots level, enabled peaceful negotiations. Anti-union corporate measures and the ambivalent position of the state subsequently curtailed organized labor. The decline of unionism meant the end of wage expansion at TCO and the beginning of a downward spiral of wages and work conditions among its subcontractors that eventually backfired with violent labor protests. Tengiz employees work 11-12 hours every day, carrying out extended shifts. Even local residents are required to be in camp residence despite their homes’ physical proximity to the worksite. Foreign employers have come to appreciate the situation when all employees engaged in the work process stay at the company premises day and night, since it provides the administration with the most direct means of control. This system, however, increases operational costs. Senimdi Kurylis, claiming 2,500 workers, is the second largest employer after TCO and a sponsor company to 60 other subcontractors. The company responded with transfer of the burden of the non-standard work pattern to its employees: it stripped domestic workers from paid time off, compensation for room and board and transportation to the worksite, as well as accident insurance. In 2005, the amounts SK retained in the form of unpaid benefits nearly doubled the amounts actually paid to workers. This illegal practice of benefit retention has widened the economic and social gap between domestic and foreign workforces, a prime motivation behind the riots. SK also disenfranchised Kazakhstan’s nationals by disregarding professional qualification, experience, and task complexity as the basis for calculating wages, which boosted corruption: human resource officers are said to routinely retain first- and even second-month salaries earned by those whose paperwork they process. In 2005, the average wage of a domestic worker, based on a 28-day shift and overtime work was below 30,000 tenge ($230), i.e., less than $1/hour. In terms of a standard work schedule, based on 40 hours of labor per a week, this pay is located below the legally enforced minimal wage in Kazakhstan. IMPLICATIONS: In 2004-2005, Tengiz witnessed a series of localized labor protests that were contained by means of company security. The dispute in April 2005 began in a similar way; however, it spread out, igniting a massive strike that involved 3,000 domestic laborers demanding fair compensation and respectful treatment. The protest spilled over the gender divide: hundreds of female workers, employees of canteens and maintenance companies, joined the male-driven protest, embarking on a strike against labor discrimination as well. The state was appalled when learning about the magnitude of legal abuse at Tengiz; its subsequent actions, however, were inconsequential, producing inept initiatives that did not help to improve the situation and severely circumscribed its authority around Tengiz. In the aftermath of the 2005 riot, local authorities expressed their unease with poor conditions at the Tengiz Rotation Village, hosting subcontractors and their workers. TCO has claimed no responsibility, pointing out that it is located outside the corporate property. At the same time, the oil company declined a proposed plan to increase the state’s control at the Village, which was feared to threaten the autonomy and integrity of TCO’s economic activities, protected by its contract with the state. A core crude producer in the country, TCO generates $200 million of annual revenues for the national budget, and the completion of SGP construction is expected to significantly increase oil profits. The state settled the case with a small office in charge of labor-management relations and workplace regulation that focused on the grievances of individual workers. State authorities came to think that should they reinforce the law, it would “hurt” business, pushing many subcontractors out of the Tengiz market, and might even cause highly undesirable work delays just like the riot did by paralyzing the entire construction process. SK has never been charged or even properly inspected. Along with the other companies, it has been allowed to harbor corrupted practices and systematic labor discrimination and abuse that brought another wave of violence in October 2007. CONCLUSIONS: The situation created at Tengiz points to a dysfunctional relationship between business, labor, and the state, placing the oil project at odds with the ideas of economic and human development. The economic growth trend observed around Tengiz in the past few years has brought no sensible advantages to the domestic labor force that can be translated into long-term gain. This is a direct outcome of an earlier corporate effort to dissolve organized labor at TCO and its continuous strategy to insulate Tengiz from outside interference, while the state has appeared to play along, seemingly prioritizing oil profits over labor development and justice. In June 2007 – the anticipated date of SGP completion, leaving behind thousands of workers beyond company gates without any mechanism that would help to mediate their situation. Other hydrocarbon projects in Kazakhstan, for example, those in Aktobe and Uralsk, have been recently rationalized in a fashion similar to Tengiz. The problems that Tengiz workers have faced therefore are not limited to a single project site; instead, they have direct relevance to other oil enterprises across the Caspian Basin and, perhaps, elsewhere in the world. AUTHOR’S BIO: Saulesh Yessenova received her Ph.D. at McGill University in 2003. At present she is a fellow at Max Planck Institute for Social Anthropology in Germany. She conducts her research in Kazakhstan’s Caspian Sea Basin.
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