KAZAKHSTAN: SHKOLNIK ASSURES AMBASSADOR ON BTC

UNCLAS ALMATY 003479

SIPDIS


DEPT FOR EUR/SNEC AMBASSADOR MANN, EUR/CACEN JMUDGE, ALSO
FOR EB/IPC/IEC/EPC
BAKU FOR ENERGY OFFICER
ENERGY FOR CWASHINGTON
COMMERCE FOR CENTRAL ASIA DESK OFFICER DSTARKS
TREASURY FOR CENTRAL ASIA DESK OFFICER MGAERTNER
DEPARTMENT PLEASE PASS TO OPIC BALLINGER, EVERHART
DEPARTMENT PLEASE PASS TO TDA STEIN, GREENIP

SENSITIVE

E.O. 12958: NA
TAGS: ECON ENRG EPET PREL PGOV KZ ECONOMIC
SUBJECT: KAZAKHSTAN: SHKOLNIK ASSURES AMBASSADOR ON BTC
IGA/HGA RATIFICATION


1. (SBU) Summary: Ambassador Ordway, accompanied by OPIC
Chief Economist Steven Everhart, met with Minister of
Energy and Mineral Resources Vladimir Shkolnik on September
27 in Astana. Shkolnik assured the Ambassador and Everhart
that Kazakhstan would sign off on the recently initialed
Baku-Tbilisi-Ceyhan IGA and further stated that the
stability of the IGA and HGA would be solidified by their
explicit ratification in Parliament. End Summary.

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BTC Agreements Will Be Ratified
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2. (SBU) Shkolnik was quick to assure the Ambassador that
Kazakhstan indeed plans to sign the BTC IGA that was
initialed September 24. He cautioned, however, that the
internal GOK process of collecting approvals from all
involved ministries would take time. He did not predict a
timeframe, but noted that President Nazarbayev had
instructed him to conclude the agreement quickly. Shkolnik
attributed the non-signature of the IGA in Baku last May to
his having only two days to circulate the initialed text to
the ministries before the planned signing.


3. (SBU) Shkolnik also told the Ambassador and Everhart that
Kazakhstan planned to follow "the same" procedure for the
tax scheme as Azerbaijan had in its Host Government
Agreement (HGA) with investors. Most importantly, he said
unequivocally that the IGA and HGA will be submitted as a
package for ratification in Parliament, thereby assuring
their immutability. (Note: Shkolnik referred to the
agreements as a "paket," but it would be excessive to
conclude that this means Parliament could not, if it chose,
act on them individually. End Note.) Everhart told
Shkolnik that OPIC would view ratification as a strong
indicator of a stable investment climate that would argue in
favor of OPIC expanding its activities in Kazakhstan.

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Domestic Law Questions
--------------


4. (SBU) Ambassador followed up on Shkolnik's assurances
about ratification of the BTC agreements by raising U.S.
concerns about the apparent technical error in Article 20.2
of the recently enacted Law on International Agreements.
(NOTE: Article 20.2 appears to state that Kazakhstan's
domestic legislation has priority over all international
agreements, even those that are ratified. The MFA
representative at the BTC negotiations recently admitted
that the law was only intended to reach non-ratified
agreements. The Constitution of Kazakhstan establishes the
principle of the primacy of treaty law. End Note.)


5. (SBU) Shkolnik again assured the Ambassador that the
Constitution clearly guarantees that ratified agreements are
not subject to interference from domestic legislation.
However, he did not appear to be immediately familiar with
the technical error in Article 20.2, so it is not clear if
he is personally involved in any effort to get Parliament to
correct the law. (Note: In a conversation later that day,
Foreign Minister Tokayev categorically assured the
Ambassador that this "mistake" would be corrected, he hoped
by the end of the year.)

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TDA Grant Falls Through
--------------


6. (U) The Ambassador also raised the issue of the proposed
TDA Grant Agreement to Shkolnik. Shkolnik declined to sign
the grant because he believed that the terms of reference no
longer described what the grant would do. While he
regretted the loss of the funds due to the end of the fiscal
year, he was not prepared to sign a document that called for
activities that duplicated work already done.

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Comment
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7. (SBU) As usual, Shkolnik was voluble and open, despite
having only been on the job for a day after a serious bout
of the flu. His statement that both the IGA and the HGA
will be submitted to Parliament for ratification is
undoubtedly a positive development. This meeting also
included discussion of some non-proliferation topics, which
are addressed Septel.

Ordway


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