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Identifier
Created
Classification
Origin
05ALMATY428
2005-02-07 01:21:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
US Office Almaty
Cable title:  

KAZAKHSTAN: DAS KENNEDY'S MEETING WITH DPM AND

Tags:   ECON  EFIN  PGOV  KZ  ECONOMIC 
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This record is a partial extract of the original cable. The full text of the original cable is not available.

070121Z Feb 05
						UNCLAS  ALMATY 000428 

SIPDIS


DEPARTMENT FOR EUR/CACEN JMUDGE, EUR/ACE JMCKANE
TREASURY FOR CENTRAL ASIA DESK OFFICER MGAERTNER
COMMERCE FOR CENTRAL ASIA DESK OFFICER DSTARKS
DEPT PLEASE PASS TO USTR KKUHLMANN

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN PGOV KZ ECONOMIC
SUBJECT: KAZAKHSTAN: DAS KENNEDY'S MEETING WITH DPM AND
TRADE MINISTER MYNBAYEV

REFTEL: ALMATY 304



1. (SBU) This cable contains an action request for USTR,
para. 10.



2. (U) Summary: EUR DAS Laura Kennedy and Ambassador Ordway
called on Deputy Prime Minister and Minister of Industry and
Trade Sauat Mynbayev February 3 in Astana. They discussed
Jackson-Vanik, WTO accession, the Minister's prospective
attendance at the inaugural TIFA Council meeting, and his
trip to San Diego for the Kazakhstan Investment Conference.
Mynbayev expressed interest in combining his San Diego trip
with WTO consultations. DAS Kennedy and the Ambassador also
raised the issue of AIG's attempts to obtain payment of a
$10 million arbitral award originating in a 1998
expropriation. Deputy Minister of Foreign Affairs Aleksey
Volkov also attended. End summary.

Jackson-Vanik


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





3. (SBU) Mynbayev and DAS Kennedy briefly discussed
Kazakhstan's prospects for graduation from Jackson-Vanik
treatment. DAS Kennedy emphasized the Administration's
position that extraneous linkages and conditions should not
influence the application of the Jackson-Vanik law, but the
ultimate decision is for the Congress. She also told
Mynbayev that sustained progress on WTO accession would
bolster Kazakhstan's case for graduation.

WTO
---



4. (SBU) Mynbayev shared his views on the WTO accession
state of play. He expressed satisfaction that the last
Working Party meeting resulted in the transformation of
Kazakhstan's factual summary into draft a draft working
party report that would form the basis for discussion of
Kazakhstan's commitment. Regarding Kazakhstan's offer on
goods, he opined that Kazakhstan had liberalized enough.
Turning to agriculture, he acknowledged that the level of
support Kazakhstan would be allowed after accession was
still a contentious issue. He cited this as a major issue
in negotiations with the Europeans, but said that a basic
consensus existed within the CIS. (Note: Mynbayev did not
specify whether he was referring to CIS countries that are
already in WTO, other aspirant countries or both. End
note.) He also said that Kazakhstan was progressing toward
agreement with Europe on labor migration issues. However,
he also stated unequivocally that the U.S. is the key
partner in the accession negotiations.



5. (SBU) In response to DAS Kennedy's mention of
intellectual property rights (IPR), Mynbayev acknowledged
the urgency of the issue. He felt that Kazakhstan had made
sufficient improvements to its legislation. However, he
admitted that there are still problems with how the IPR laws
are applied, because practitioners and stakeholders do not

yet understand the changes.

San Diego Travel, TIFA


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





6. (U) DAS Kennedy also asked Mynbayev about his planned
trip to San Diego for the March 12 "Kazakhstan Investors'
Conference." Mynbayev said that the conference would be
similar to events the GOK has sponsored in other countries
to promote its Innovative-Industrial Strategy and encourage
investment outside of the oil sector, especially in
processing industries. Mynbayev told DAS Kennedy that he
hopes to schedule consultations on WTO accession while he is
in the United States. Separately, he confirmed that
Minister of Economy and Budget Planning Kairat Kelimbetov
(who has no role in the WTO accession negotiations) will
represent Kazakhstan at the upcoming World Bank meetings in
Washington.



7. (SBU) DAS Kennedy also expressed the hope that Mynbayev
would be able to attend the inaugural TIFA Council in April.


Mynbayev was noncommittal. Asked if Kazakhstan was
considering any specific proposals, Mynbayev responded that
Kazakhstan was concerned with "systematic" questions and
noted how different Kazakhstan's level of development is
from that of its neighbors. DAS Kennedy observed that
Kazakhstan's leading position among Central Asia's economies
causes the U.S. to value highly Kazakhstan's contributions
and leadership in the TIFA consultations.

AIG Arbitration


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





8. (SBU) Finally, DAS Kennedy raised the issue of AIG's
attempts to collect the $10 million it was awarded in
arbitration by the International Center for the Settlement
of Investment Disputes (ICSID). (Background: AIG received a
favorable ruling from ICSID in a case arising from the 1998
expropriation of an AIG subsidiary's interest in an Almaty
real estate project. Having made no progress in having the
ruling honored, AIG convinced a British court to issue a
third-party debt order on the assets of the GOK National
Fund in the UK. Kazakhstan will challenge the order in a
hearing in London in July. End Background.)



9. (SBU) Mynbayev did not seem familiar with the case. He
offered the opinion that if the issue was one of real
estate, then the Almaty city government (which has oblast
status) would actually be the liable party. DFM Volkov was
familiar with the original dispute, but indicated that he
was not familiar with the arbitration award. The Ambassador
told Mynbayev that the issue at hand is broader than the $10
million. He pointed out that if the GOK continues in the
British courts and loses, then the precedent that the
National Fund does not benefit from sovereign immunity would
be disastrous for Kazakhstan. However, if Kazakhstan paid
the arbitration award voluntarily, that question would be
moot. He further pointed out that if AIG's quest for
payment became a protracted, public struggle, it could
negatively affect the "investment-grade" sovereign credit
rating the GOK has worked assiduously to build. It would
also affect the overall investment climate negatively at a
time when the country is trying to attract foreign
investments to sectors other than oil.



10. (SBU) Mynbayev's response was noncommittal, although he
(and particularly DFM Volkov) clearly received the U.S.
message of concern. DAS Kennedy told them she would also
pursue the matter with the Minister of Justice and the
Foreign Minister.

Comment


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





11. (SBU) Mynbayev was far more talkative and animated in
this meeting than his previous one with the Ambassador
(reftel), and he went into considerably more detail on the
WTO state of play. We recommend that USTR try to
accommodate Mynbayev's travel to the U.S. and schedule
appropriate consultations. With respect to AIG, Mynbayev
seemed to take U.S. concerns on board, but offered little
response. However, his unfamiliarity with the case may be
understandable considering that he was not among the
officials AIG contacted in its attempts to settle the
dispute. We are hopeful that DAS Kennedy and Ambassador
Ordway's stark presentation of the stakes in this meeting
was a good start to bringing the GOK around to the
conclusion that ignoring AIG is simply not in the country's
long-term interest.



12. (U) DAS Kennedy did not have the opportunity to clear
this cable before departing post.



13. (U) Minimize for Dushanbe considered.

Ordway


NNNN