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Identifier
Created
Classification
Origin
05ALMATY2308
2005-06-21 02:57:00
UNCLASSIFIED
US Office Almaty
Cable title:  

KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

Tags:   ECON  EIND  ENRG  EPET  EFIN  KZ  ECONOMIC 
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						UNCLAS  ALMATY 002308 

SIPDIS


DEPT PASS TO EUR/CACEN MUDGE
DEPT PASS TO OPIC - BALLINGER
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER
DEPT PASS TO AID - EE-PHILLIPS/RUSHING
TREASURY FOR OASIA/VELTRI
USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS
USDOC FOR 6110/ITA/TD/BI/RHALPERN
ANKARA FOR CFC

E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE
May 29 - June 11, 2005




1. Summary: This information is drawn primarily from the
Kazakhstani local press, and has not been checked for
accuracy. The opinions and policies expressed in this
report are those of the authors, not the U.S. Government.

-- New Joint Russian- Kazakh Space Venture
-- Senate Approves Law on Domestic Market Protection,
Customs Code
-- Special Board for Disputes with Foreign Investors
-- National Bank to Change Minimum Reserve Requirements
-- Economic Statistics
-- CPC Shareholders Raise Oil-Pumping Tariff
-- Ukraine and Kazakhstan Discuss Oil Cooperation
-- BG Karachaganak and Orensal Investigation Continues
-- Ban on Gas Flaring not to Influence Oil Volumes
-- President Signs Amendments to Commercial Navigation Law
-- Oil & Gas Statistics

New Joint Russian- Kazakh Space Venture


--------------------------





2. Air Force Major - General and Pilot - Cosmonaut, Talgat
Musabaev was appointed as a General Director of Russian-
Kazakh Space Joint-Venture "Baiterek". The Russian
participant in the venture is the Krunichev Research and
Production Center, the Kazakhstani participant is the
Committee of State Property and Privatization under the
Ministry of Finance. The enterprise was created for the
construction of the new space rocket complex "Baiterek" in
Baikonur. (Interfax-Kazakhstan, May 30)

Senate Approves Law on Domestic Market Protection, Customs
Code


--------------------------



--------------------------





3. The Senate approved amendments to the Law on Domestic
Market Protection Measures. According to the GoK's
explanatory note, the main goal of this draft is to adjust
the existing law of January 28, 1998 to conform to World
Trade Organization standards on protective measures.
Amendments include additional steps that must be taken
before introducing protective measures and specification of
the financial operations necessary during the term of
temporary protective measures. (Interfax-Kazakhstan, June
2)



4. The Senate approved amendments to the Customs Code. The
bill was drafted for the purpose of bringing the norms of
the Customs Code into compliance with the basic provisions
of Kyoto Convention on harmonization and simplification of
customs procedures, World Customs Organization agreements,
and the Tax Code of Kazakhstan. (Interfax-Kazakhstan, June
2)

Special Board for Disputes with Foreign Investors


--------------------------



--------------------------





5. "Taking into account that Almaty is developing as the

financial center of the Central Asian region, we should
consider the creation of a special board to solve investment
disputes with foreign companies, within the structure of
Almaty city's court," the President Nazarbayev stated at the
4th congress of Kazakhstani judges in Astana on June 3. He
noted that the offices of well known financial institutions
in Kazakhstan should work under the conditions prevailing in
the rest of the world. (Interfax-Kazakhstan, June 3)

National Bank to Change Minimum Reserve Requirements


--------------------------



--------------------------





6. Banks in Kazakhstan are bound to maintain their reserves
at six percent of their current liabilities in cash or in
money on correspondent accounts and deposits in National
Bank (NB). "The idea that the NB is considering now is to
include foreign liabilities of banks into the calculation of
minimum reserve requirements, thus tightening demands to
this standard," the NB Chairman Anvar Saidenov said at a
press conference on June 8 in Almaty. He thinks that this
measure will influence the liquidity position of the banking
system and the volumes of reserves borrowed from foreign
sources. (Interfax-Kazakhstan, June 9)


Economic Statistics


--------------------------





7. The volume of the money supply in Kazakhstan declined by
3.1% in April 2005, to reach KZT 1,671.8 billion
(approximately $12.6 billion). Cash in circulation rose by
4.1% during the reported period to KZT 379.9 billion (about
$2.9 billion); whereas deposits made with banks and credit
cooperatives fell by 5.1% to KZT 292 billion (about $9.7
billion). (Interfax-Kazakhstan, June 9)



8. Japan invested about $670 million in Kazakhstan's
economy from 1992-2004. According to the Ambassador of
Japan to Kazakhstan Toshio Tsunodzaki, Japanese investments
totaled $491 million from 1992 till 2003. In 2004, Japanese
investments totaled $179 million or 36% of investments made
during the previous years. The diplomat referred to
positive dynamics in trade and economic relations between
the two countries. (Interfax-Kazakhstan, June 9)

CPC Shareholders Raise Oil-Pumping Tariff


--------------------------





9. Caspian Pipeline Consortium (CPC) shareholders have
agreed on six of seven demands made by Russia, CPC director
General MacDonald stated on June 2 at CIS oil and gas summit
in Paris. Construction loans will be refinanced and tariffs
will be increased by $2.50 to $30.83 per ton. Management
secondees will be in proportion to equity holdings. The
shareholders also agreed that expansion volumes will be
subject to `pump or pay' principle; CPC will cancel its
claim on compensation of expenditures incurred as a result
of commissioning of assets transferred to CPC from the
state; all existing debt will be repaid on an equal basis;
finally and expansion project will be externally financed
[the project will cost around the.5 billion]. The sides have
not agreed on variable tariff for operating expenses.
(Interfax - Kazakhstan, June 6)

Ukraine and Kazakhstan Discuss Oil Cooperation


--------------------------

-



10. During President Yushenko's May visit, the GoK and
Ukraine agreed to establish a joint venture between
Ukrainian Neftegaz and Kazakhstani state producer
KazMunayGaz for construction of a 52-kilometer oil pipeline
from Odessa to Uzhni port (north-east from Odessa) and
terminal. President Nazarbayev stated interest in Odessa-
Brody pipeline expansion and its readiness to become
shareholder. Ukraine also agreed to purchase 2-4 million
tons of Caspian oil annually as a cheaper alternative to
Russian. (Interfax - Kazakhstan, June 6)

BG Karachaganak and Orensal Investigation Continues


--------------------------



--------------------------





11. Kazakhstan's Financial Police is continuing a criminal
investigation of BG Karachaganak (British Gas subsidiary)
and Orensal (BG Karachaganak subcontractor, Russia). In
July 2004, the two companies were accused of illegal
supplying of unstable gas condensate during 2001-2003 to
Russia. Initial claims were KZT 1.2 billion (approximately
$9 million). "These amounts are now increasing each day. .
If they admit their guilt and pay the penalty, a court case
is not necessary," Financial Police Head Kalmurzayev said.
(Kazakhstan Newswire, June 3)

Ban on Gas Flaring not to Influence Oil Volumes


--------------------------

--



12. A January 1, 2005 ban on flaring gas will not affect
oil and gas development, according to Energy Vice-Minister
Kiinov. Oil production decline might hit 1.5 million tons
per year. Production increase of 2-2.5 million tons a year
should easily make up the shortfall. (Interfax -
Kazakhstan, June 3)
President Signs Amendments to Commercial Navigation Law


--------------------------



--------------------------





13. The new law on Commercial Navigation brings the current
navigation legislation in compliance with international
standards. Most importantly, it also permits foreign
citizens to occupy officer positions in the crew under
Kazakhstan's state flag till 2010. (Interfax - Kazakhstan,
June 6)

Oil & Gas Statistics


--------------------------





14. In January-May oil and gas condensate production in
Kazakhstan was 26.1 million tons, 12.3% higher compared to
the same period in 2004, the GoK reported. It includes 2.9
million tons of gas condensate, 31% year-on-year. (Interfax
- Kazakhstan, June 7)

ORDWAY


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