Germany and Kazakhstan ink $4 billion rare earths deal

A $4 billion rare earths deal signed this week between Germany and Kazakhstan is being criticized by human rights groups.

Commodities & Futures reports the agreement forged between the heads of the two nations appears to discount the December riot in a western Kazakh oil town that left more than a dozen people dead.

"A country that violates fundamental human rights is not a good environment for economic investment," Hugh Williamson, the director for Europe and Central Asia at Human Rights Watch, was quoted in The New York Times.

But Angela Merkel, the German president, responded to those concerns at a news conference in Berlin, saying she convinced Kazakh president Nursultan Nazarbayev to investigate the riot:

"German foreign policy is always value-based, and so when discussing economic interests we also talk about human rights, the adherence to democratic principles," said Merkel.

According to the German economic ministry, Reuters reported,  German companies signed 50 separate contracts worth 3 billion euros, under a cooperation deal reached Wednesday that gives German firms greater access to raw materials in exchange for German technology:

These include an agreement between Siemens and Kazakhstan's state railway company to modernise the rail network in the former Soviet state, as well as smaller deals involving German industrial gases group Linde, chemicals group Lanxess and steel firm thyssenkrupp.

The pact aims to give Germany better access to strategic materials not readily available on world markets, especially the rare earths that have been at the centre of a trade dispute with China.

The latter refers to an ongoing squabble between China, which exports 95% of the world's rare earths supply, and its customers — countries that import the 17 rare earth elements used in green technology applications, cellular telephones and guidance missiles, among others — which claim China violates export rules in order to manipulate supply and prices.

Kazakhstan is the world's #1 producer of uranium but the central Asian republic could soon make a mark in rare earths, according to a report last year by KPMG. The report notes that Japan in particular has expressed interest in Kazakhstan rare earths, with Sumitomo Corporation in 2009 setting up a joint venture with Kazatomprom to extract rare earths from uranium ore. The following year, Toshiba and Kazatomprom also signed a JV to develop rare earth metals.