KAZAKHSTAN KCTS IGA UPDATE: ONE MORE NEGOTIATING

C O N F I D E N T I A L ALMATY 004105

SIPDIS


DEPT FOR EB/ESC; EUR/SNEC (MANN); EUR/CACEN (MUDGE)

E.O. 12958: DECL: 11/16/2015
TAGS: ENRG EPET KZ
SUBJECT: KAZAKHSTAN KCTS IGA UPDATE: ONE MORE NEGOTIATING
ROUND?

REF: ALMATY 3449

Classified By: POEC CHIEF DEBORAH MENNUTI, REASONS 1.4(B) and (D)


1. (C) Summary: A GOK participant in the ongoing
Azeri-Kazakhstani KCTS IGA negotiations told Econoff on
November 15 that sufficient "edits" had accumulated during
the GOK's ministerial review of the initialled IGA draft
(reftel) to necessitate a "final" round of negotiations. The
GOK and GOA have already begun discussions on the timing of
such negotiations, the GOK source indicated, and will likely
settle on Baku in December. While signature of the IGA in
2005 is still a theoretical possibility, the GOK's tardy
review process, along with impending presidential elections,
make 2006 more likely. End Summary.


2. (C) Arman Darbayev, assistant to lead Kazakhstani KCTS
(Kazakhstan Caspian Transportation System) IGA negotiator
Kairgeldy Kabyldin, told Econoff on November 15 that, by
"urgent" instruction of Prime Minister Akhmetov, GOK
ministries would conclude their review of the draft IGA by
the end of the week. Akhmetov, in turn, would consolidate
and finalize the GOK response during the week of November
20-27. However, Darbayev noted, the ministerial review had
already produced sufficient editorial comments to necessitate
another, "final" Kazakhstani-Azeri negotiating round. The
GOA, he said, had already proposed a meeting in Baku in late
November; however, since the GOK was not yet ready, a meeting
"in December" was more likely.


3. (C) Darbayev attempted to minimize the significance of the
GOK edits, predicting that the December round would be
"short." Asked to describe GOK objections to the initialled
IGA, Darbayev mentioned that "several" ministries had
objections. He then singled out the GOK Tax Committee, in
particular, as "being difficult" in its review of IGA Article
5 (on taxation). Darbayev observed that the Tax Committee's
objections were "ironic," given that the Kazakhstanis had
"won" the September negotiations on Article 5. The tax
authorities' objections, he said, were focused on the one
sentence that the investors had succeeded in adding to the
GOK's version of the text.


4. (C) Regarding rectification of the GOK's flawed Law on
International Treaties, Darbayev told Econoff that a formal
letter from the Ministry of Foreign Affairs to the Azeris
"had been drafted," but was still being cleared within the
GOK.


5. (C) Darbayev also noted that it was not yet clear who on
the GOK side would sign the agreement, but that it "would not
be President Nazarbayev." Rather, the GOK would identify the
appropriate minister after the presidential elections -- and
an anticipated cabinet change -- had occurred.


6. (C) Comment. Without seeing the GOK's proposed edits to
the IGA, it is impossible to judge whether the next round of
negotiations will be as "short" as Darbayev predicts.
However, the fact that the GOK apparently wants to re-open
the only Article 5 point it conceded during the September
negotiations does not suggest that the GOK is governed by a
spirit of compromise. End Comment.
ORDWAY


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