It will be a long, hard winter in Kazakhstan. Despite huge natural reserves of oil and gas, this former Soviet satellite, now the world's ninth largest country, is on the brink of disaster. Unemployment has rocketed and, outside the wealthy Westernised elite, hunger and disease are endemic. By Phil Reeves. Photographs by Anthony Suau

he mountains to the south of Kazakhstan's biggest city, Almaty, are illuminated by the early morning sun to reveal a fresh coating of snow. Along Seifullina Street, a knot of grubbily dressed men has gathered under the shade of the unusually large oaks that arch over many of the boulevards here, as if the place had been built in a forest. Scores assemble every morning, hoping to be hired for the day.

Among them, clad in a tatty brown coat, is Alexander Zhivagin, a 52-year- old Russian. In Soviet times, he worked as a welding engineer, and did well enough, but Kazakhstan's economic collapse of the early Nineties - a meltdown that at one point saw almost 2000 per cent inflation - brought an end to that.

He takes anything he can get. Sometimes four days pass before anyone picks him up for an odd-job; sometimes he works all day, only to find that his employer refuses to pay. Even when times are good, he can only hope to make $100 a month at most, two-thirds of which goes on rent for his three-roomed flat.

He is unshakably pessimistic: "There is too much corruption here. The same guys run the country as they did before, but now they take everything away. We will never see any benefit." His friends on the street, other out-of-work men, nod in agreement and draw on their cigarettes. The Soviet era, with its cheap travel, low prices and free sanatoria, is an increasingly coveted memory.

Nearly seven years have elapsed since Kazakhstan, the world's ninth largest country, acquired its independence following the implosion of the Soviet Union. There were predictions at the time that, with its mighty reserves of oil and gas, it would swiftly transform itself into a flourishing capitalist state. Some called it the next Kuwait. But these voices have faded, muffled by disappointing reality.

Here, as in other ex-Soviet republics, a handful of people became extraordinarily rich almost overnight. But the boom has yet to happen, nor is it imminent. In the past few years, the gap between the rich and the poor has widened dramatically: according to the Red Cross, three-quarters of Kazakhstan's 15.7 million population lives below the poverty line.

Fate has long dealt Kazakhstan an extraordinarily uneven hand. During seven decades of Soviet rule, Moscow used the place as a giant quarry, penal colony, grain basket, and test-bed for its atomic weaponry. Remarkably, the Kazakhs (originally nomads) peacefully coexist with the large ethnic Russian population, despite the repression and murder they suffered at the hands of Stalin and his secret police.

Khrushchev gave the republic its Baikonur space centre, the USSR's answer to Cape Canaveral, and the "Virgin Lands" policy in which swathes of the north were put to the plough, with mixed results. And - the worst Soviet legacy, along with the murder by pollution of the Aral Sea - there were hundreds of Cold War nuclear tests in Kazakhstan's north-east, turning the region around Semipalatinsk into a deadly poisonous radioactive desert. The contamination continues to be reflected in the number of children born with defects, and high levels of cancer.

Counterbalancing this ghastly history is the heritage of natural resources - coal, metals, bauxite, phosphorus, fertile land, gas and oil. Few dispute that if the government plays its cards right, and - the big "if" - gets rid of its endemic corruption, a glowing future awaits, albeit in several decades' time.

The man in charge of this momentous undertaking is the politically deft, enigmatic president, Nursultan Nazarbayev, 56, who used to be the First Secretary of the Kazakhstan Communist Party - the top official in the Soviet-run republic. Elected just after independence, his years in the president's office have earned him global respect as a player of the Great Game - the geopolitical art of securing independence and investment for his landlocked state by balancing off the competing interests of bigger predatory powers, US, China, Iran, Russia and Turkey.

The chief cards in his hand are the hydrocarbon reserves of Tengiz, Karachaganak, Uzen and, the least developed, the North Caspian. Extraction rights have been parcelled off in almost all directions. Tengiz is being developed by a consortium dominated by the US giant Chevron; British Gas and Agip lead the group at Karachaganak, and - to the astonishment of its US competitors - Kazakhstan awarded Uzen to China's state oil company, which is talking about building a 1,700-mile pipe-line back to China. The Russians are cut in - its oil giant Lukoil is in the same consortium as British Gas. If all goes to plan, 67 million tonnes of oil a year will eventually be flowing across Russian territory to the Black Sea port of Novorossisk.

Some of the heat has been drawn out of the rush to exploit Kazakhstan's riches by the low world oil price, and possible global recession. But the international deal-makers are still in the game. Chisel-jawed American oilmen sweep through Almaty, from restaurant to nightclub to hotel. Banners advertising trade shows and banks - including "The Bank of Texas and Kazakhstan" - are draped across the streets. Britons and Germans, Swedes and Finns, haunt the hotel bars, playing snooker, drinking copiously, and eyeing the young prostitutes who sit at nearby tables, hoping to snag some dollars.

There is an eccentric, frontier spirit. Dining in the restaurant of the Astana International Hotel this week, I watched a German-speaking businessman spend an evening plying a potential client, an Uzbek, with vodka. At one point, he leapt from his chair, waltzed around the table, and enveloped his puzzled-looking prey in a bear hug. "Uzbekistan - good! good! good!" he cried, in broken Russian.

International investors and Western policy-makers care little that the President Nazarbayev has - like most of the cunning old party apparatchiks running ex-Soviet republics - no great record as a defender of meaningful democracy or human rights, and little apparent interest in acquiring one. The constitution gives him sweeping powers - throughout 1995, he ruled by decree, without a parliament. The main levers of power remain tightly under his control. "We like a strong leader, someone who can give us at least some stability,"one source in the energy business told me recently. Democracy is the least of their worries.

At his disposal the president has an elite force of guards, the security services (the KNB) and the media. The country's biggest selling paper, Karavan - once a surprisingly daring voice, which ran raunchy pictures on the front page - has been quietly taken over by a powerful presidential ally. Although people seem remarkably open in airing their views on the street, the independent press has been struggling to maintain a free voice. Several small publications have been forced to print in neighbouring republics, or to go underground altogether. Last month the office of a newspaper editor was firebombed. "Generally, there is one rule in the press," said a well-placed Western contact, "Never criticise the president."

This unwritten law appears to be as much a matter of ego, as an attempt to suppress opposition. Mr Nazarbayev cannot be compared with his egomaniacal neighbour, Saparmurad Niyazov of Turkmenistan, who has commissioned a 130ft tower in the heart of his capital, topped with a revolving bronze statue of himself, his hands beneficently outstretched. But Nazarbayev, the son of a shepherd, is not without vain and dynastic impulses.

His 35-year-old step-daughter, Dariga, runs Khabar, one of the two TV channels; his son-in-law, Timur Kulibayev, is vice-president of the vastly powerful state oil company, Kazakhoil. In July the youngest of his three daughters, 18-year-old Aliya, married Aidar Akayev, 23, the son of Kyrgyzstan's president, at a lakeside ceremony which was seen in Central Asia as the social event of the decade, laying the foundation stone of regional royalty.

The president himself is the subject of at least two coffee-table books whose pages are stuffed with photographs showing him in action, meeting John Major, Margaret Thatcher, the Pope. A short, compact man, he is shown revelling in being the boss, glad-handing voters, performing sporting feats - despite his age, he is a keen tennis player, a skier, and an occasional mountaineer. Last year, helped by a team of aides and a helicopter, he proved his credentials as a myzhik - a real man - by climbing one of Kazakhstan's peaks.

When he met Boris Yeltsin a couple of weeks ago in the gilded halls of his glass and marble presidential palace, the contrast between the two men was quite staggering. Yeltsin was tottering, distant, waxen-featured. Nazarbayev appeared as glossy as a billiard ball, and utterly in control. As his visitor - from what was once Kazakhstan's imperial overlord - struggled to sign his name on a small pile of bilateral agreements, Nazarbayev watched on with beady- eyed alertness, muttering supportively in his visitor's ear, and guiding him out, when the job was finally done.

Nor does Nazarbayev show any sign of losing his appetite for power. He has struck deals with parliament which extend his term of office from five to seven years, and brings forward the date of the presidential election by two years, to January. As he is sure to win, his tenure will be secure to 2006. The president's early sortie to the polls is almost certainly born of the belief that Kazakhstan's problems, deepened by the economic crisis in neighbouring Russia and the side-effects of Asian 'flu, will get worse before they ease. He wants to secure his job, before any serious opposition can evolve.

His reasoning is sound. You only have to drive out of Almaty for an hour to enter a world which still depends on the horse and cart. Poverty is rife across the country - an area four times the size of France. Easily preventable diseases are on the rise, fuelled by the breakdown of the inadequate Soviet health- care system, economic depression and the dire state of the environment. Children under five are dying from diarrhoea - needlessly, given how easy it is to prevent and cure.

There has been a resurgence in cases of typhoid, tuberculosis, hepatitis and, in pockets, cholera. "The government has no resources, from clean bed sheets to medicine, and hospital heating systems," says Sirpa Miettinen, the Red Cross's regional health delegate. In much of the country, water supplies are polluted by sewage. In the words of one aid worker, some people are literally "drinking shit".

To this list of calamities should be added those conditions that come hand in hand with economic decline: alcoholism (despite its attachment to secular Islam, Kazakhstan both makes and devours large quantities of vodka), sexually transmitted diseases and drug abuse. Last year a United Nations survey of Temirtau, a broken-down Soviet industrial city which sits on the Central Asian drugs route, found that a quarter of the youths from the age of 15 to 20 were registered drug users. Even the cops were in on the racket.

Amid this dire picture, the president took the baffling decision to move Kazakhstan's capital from Almaty to Astana, on the dead flat, mosquito-plagued windswept steppe, 620 miles to the north, where temperatures reach 40C in the summer and -40C in winter. The move cost at least $500m, and - with a shortage of power and drinking water - will eventually run up a still larger tab.

Western interests have been puzzling over what Nazarbayev is up to. Some argue that the move was born of concern that the Russian-dominated north - where most of the big industry and agriculture is based - was in danger of trying to secede, although this seems increasingly implausible, given the current weakness and chaos in Moscow. However, fear of Russian resurgence will long be deeply ingrained.

Others saw the move of the capital as a response to a fear of expansionism from an oil-hungry, over-populated China - Almaty is only 200 miles from China's north-western border. But no one can explain why he chose to do it at this point, given the other demands on the government purse. "It is the timing we object to," said one Western diplomatic source. "Why now?"

To be fair, some economic headway has been made, enough to please the IMF: inflation was down to 11.2 per cent last year, and GDP is set to grow this year, albeit modestly, at under 2 per cent. President Nazarbayev has installed a team of bright young Kazakhs in key government positions: the head of KazTransOil, the national pipeline company, is only 28 years old; the president of Kazakhoil is 29; the energy minister is 34. The chairman of the National Bank is 35.

The appetite of these people for bringing business to Almaty has meshed with a strong desire to turn the city into the cultural and entertainment hub of Central Asia. "The place is like Acapulco. There is nowhere else like it," says Aidar Kaipov, owner of a bar-restaurant called, appropriately, Stetsons. At 27, Mr Kaipov is already a rich man, the owner of a nightclub, a catering business, several houses and a fleet of cars, including two Mercedes. He has, he concedes, "nothing to complain about".

Last week, Almaty took another step towards Big Apple-hood by hosting the EuroAsia Film Festival, to which it lured the British actor Michael York. The ceremony had an Oscar-like flavour, as the industry's glitterati awarded one another with statuettes, amid gushing speeches. "Ya lublu Kazakhstan - I love Kazakhstan," a beaming Mr York told the applauding crowd. The world's oilmen and policy-makers love it, too. The only question is this: can Kazakhstan weather even deeper social despair, and stay ahead in the Great Game, to allow that love affair one day to flourish painlessly?