KAZAKHSTAN: DAS FEIGENBAUM'S MEETINGS IN ALMATY

UNCLAS SECTION 01 OF 04 ALMATY 003026 SIPDIS SENSITIVE SIPDIS DEPARTMENT FOR SCA/CEN (J. MUDGE),DRL/PHD (C. KUCHTA- HELBLING) E.O. 12958: N/A TAGS: PREL PGOV KDEM PHUM KZ SUBJECT: KAZAKHSTAN: DAS FEIGENBAUM'S MEETINGS IN ALMATY ALMATY 00003026 001.2 OF 004 ¶1. (SBU) Summary: During an August 22-24 visit to Almaty, SCA DAS Evan Feigenbaum met with a wide range of civil society, political, and business representatives who painted a vivid picture of the political and economic challenges facing Kazakhstan. His interlocutors expressed concern about restrictions on the development of civil society, pressure on young people to stay out of politics, and limitations on freedom of the media. Opposition leaders described a deteriorating political situation, where government rhetoric about political reform results only in window-dressing. They accused the U.S. of not placing enough emphasis on democracy in its relations with Kazakhstan, and called for the creation of regional Russian- language satellite television. Business representatives described an uncertain regulatory environment where audits and inspections are frequently used to pressure foreign investors. End summary. -------------- Civil Society Roundtable -------------- ¶2. (SBU) DAS Feigenbaum opened an August 23 roundtable in Almaty with representatives of Kazakhstani civil society by underscoring the U.S. government's continued commitment to support for civil society. We believe that openness is necessary not only for the political health and stability of a country, but also for economic growth. In response to Feigenbaum's question about the overall trajectory of civil society in Kazakhstan, Internews director Oleg Katsiyev explained that many obstacles exist to further civil society development, primarily the permission-based nature of the Kazakhstani system where Ministry of Justice registration is necessary for almost any activity. In his assessment, the overall trend is negative, despite the recent defeat of problematic NGO legislation. ¶3. (SBU) Ninel Fokina of the Almaty Helsinki Committee said that the GOK's "Concept on the Development of Civil Society" illustrated the official attitude that civil society is "undesirable but unavoidable." The authorities see it as a potential threat to national security and therefore believe it requires strict regulation and control. Following a recent series of controversial laws on the media, extremism, and national security, the government had changed its tactics, Fokina explained. The authorities now use the amendment process to limit civil liberties further, in order to minimize transparency and avoid attracting attention. Recent amendments to the electoral law and law on mass media were prime examples. ¶4. (SBU) Taskyn Rakhimbetova, head of the Republic Network of Independent Monitors, told Feigenbaum that her organization had come under increasing pressure during the 2005 presidential election campaign. About half of RNIM's volunteers, the majority of whom are students, dropped out due to pressure from the authorities. Katsiyev echoed Rakhimbetova's comments, noting that the security services are now paying very close attention to young people and pressuring those who try to create independent organizations. ¶5. (SBU) At the same time, Katsiyev noted, the Kazakhstani government is conducting a "propaganda campaign" to create pro-government NGOs and distribute grants to existing NGOs in order to exert control over them. The kinds of organizations now being created, he said, are not what the ~Q|~O_|?~_t}}_y?Q~7Q|~YQ?~Wpz~L`Oy4N9]OyO_Qs5 "Dm}&PiQJDQQof government officials, rather than to actual grassroots organizations. ¶6. (SBU) The pressure is also rising on the independent media, according to Tamara Kaleyeva from the media freedom organization Adil Soz. Authorities use the threat of prosecution to limit criticism; three journalists are on trial at the moment. Many media outlets are dependent on the state for funding. Katsiyev pointed out that some privately-owned media are financially healthy due to the strong advertising market in Kazakhstan, the third in the FSU. There is a disturbing trend, however, of those close ALMATY 00003026 002.2 OF 004 to power taking control of media outlets. Almost all of the Almaty media is now controlled by the Nazarbayev family or their associates, Katsiyev said. -------------- Opposition Party Roundtable -------------- ¶7. (SBU) During an August 22 roundtable with representatives of the political opposition, For a Just Kazakhstan leader Zharmakhan Tuyakbay told DAS Feigenbaum that the political situation was worsening. Despite the government's rhetoric about political reform, the Democratization Commission was a charade, pressure was growing on the opposition, and the authorities were trying to conceal the truth in the Sarsenbaiuly murder case. Tuyakbay claimed that the U.S., despite its own rhetoric, focused on security and economic issues in its relationship with Kazakhstan, rather than democracy. He cautioned that President Nazarbayev's upcoming visit to Washington could result in more "empty promises," and urged that democracy issues be highlighted in the discussions. Serikbolsyn Abdildin of the Communist Party echoed Tuyakbay's comments about U.S. policy, alleging that the U.S. provides "constant support" for the Nazarbayev regime and ignores human rights violations. ¶8. (SBU) Galymzhan Zhakiyanov expressed the belief that the U.S. government works to promote democracy, but cautioned that the issue is not high enough on the U.S. agenda in Kazakhstan. He claimed that deteriorating relations between the U.S. and Uzbekistan were the result of a similar failure to emphasize democratic principles. Zhakiyanov claimed that Vice President Cheney's May statement in Astana praising the reform process in Kazakhstan had created a lack of public trust in U.S. policy. He also called on the U.S. to hold Kazakhstan to commitments such as the 2001 U.S.-Kazakhstan joint statement, which called for democratic political reform, inter alia. ¶9. (SBU) True Ak Zhol co-chair Bulat Abilov asked how the U.S. initiative to combat kleptocracy could be reconciled with the decision to invite Nazarbayev, involved in the Kazakhgate scandal, to Washington. He described Kazakhstan as the classic case of a country rich in natural resources sliding into authoritarianism, citing oppression of the opposition, recent murders, and travel bans. The government always argues that Kazakhstan must find its own path toward reform rather than following a Western model, Abilov said, but then does not propose alternative principles. Instead, he claimed, the small group of people in charge create the appearance of progress through things like the OSCE chairmanship bid and the Democratization Commission. ¶10. (SBU) There has been no progress toward democracy in Kazakhstan for five years, True Ak Zhol co-chair Oraz Zhandosov asserted. He described the State Department's decision to move Kazakhstan to the Bureau of South and Central Asian Affairs as a mistake, given the importance of Russia's influence in the region, and called for the decision to be reversed. DAS Feigenbaum explained that, with the move, the State Department was able to put the countries of Central Asia at the center of our regional policy, rather than allowing U.S. policy in the area simply to be derived from our policy toward Russia. We seek to help the countries of Central Asia develop a broader range of international linkages by focusing omni-directionally. Ties to the south may now be the weakest but are very promising. ¶11. (SBU) Zhandosov stated that the most effective way for the U.S. to promote political reform in Kazakhstan and the rest of Central Asia would be to support independent, Russian-language satellite television. He claimed that this would be a much more effective use of assistance funding than the current menu of smaller programs, because it would provide the public for the first time with objective information. Zhandosov also said that it would improve the image of the U.S. in the region by countering the misinformation conveyed by Russian television. Abilov urged the U.S. to think long term, arguing that if such a channel had existed in the Middle East ten years ago the U.S. might not be spending billions to rebuild Iraq now. He cited the example of Al Jazeera, which began with support from the ALMATY 00003026 003.2 OF 004 government of Qatar but is now a commercial operation, as a model for the creation of a Central Asian station. ¶12. (SBU) Muratbek Ketebayev, of the Alga movement, said the U.S. should not pressure the GOK for democratization. "Democracy must be decided within Kazakhstan, not outside it," he said. The U.S. should instead focus its efforts on supporting the development of civil society, supporting independent media (such as through the creation of television networks or the establishment of a network of independent printing presses),and pushing for the transparency of oil revenues, e.g., through the Extractive Industries Transparency Initiative. He claimed that Nazarbayev spent $500 million on the 2005 presidential elections, which would not have been possible if there were proper control over oil revenues. Maksim Kopylov, representing Ak Zhol chairman Alikhan Baymenov, agreed that limits on the media and civil society hindered Kazakhstan's development. He added that corruption has reached huge proportions and constituted a serious threat to the country. ¶13. (SBU) Responding to the concerns voiced by several participants about the U.S. government's priorities in its relationship with Kazakhstan, DAS Feigenbaum explained that U.S. foreign policy is always multi-dimensional. While striking the correct balance between democracy and other issues has been the subject of debate throughout the history of American foreign policy, democracy has been a constant element of our policy. Feigenbaum rejected the assertion that the U.S. focused only on security and economic issues in the region, noting that we had paid a price in Uzbekistan for our adherence to principles. U.S. support for democracy around the world does not always yield the results we seek, he added, pointing to the electoral victories of anti-U.S. governments around the world but adding that this had not deterred the U.S. from principle. He reminded the participants that President Bush's second inaugural address had called for democracy to be an organizing principle of international relations. He also reiterated the work that U.S. assistance partners do in Kazakhstan, including to support the development of the very political parties the group represented. The U.S. worked to promote civil society, free media, and the rule of law. -------------- U.S Business Roundtable -------------- ¶14. (SBU) Participants in an August 24 discussion described the challenges facing U.S. business in Kazakhstan, primarily in the form of government pressure. ConocoPhillips country manager Nick Olds called attention to the negative impact of constant tax inspections and audits. Courtney Fowler of PriceWaterhouseCoopers explained that the Kazakhstani tax system prioritizes form over substance; while U.S. businesses generally have excellent internal controls and records, Kazakhstani tax inspectors will often not accept electronic records or approvals. She added that an ongoing dispute between the Ministry of Finance and Procuracy General was exacerbating the situation, as foreign firms were caught up in the struggle. ¶15. (SBU) Ken Mack, president of the American Chamber of Commerce, commented that some in Kazakhstan still clung to the Soviet notion that it was bad to make a profit. He noted that corruption among tax officials contributed to the frequency of tax inspections. Joel Benjamin of the law firm Denton Wilde Sapte explained that tax inspections arise for different reasons, including as pressure on a company by powerful individuals or the state, and due to the corruption of tax officials. Fowler cited a third factor, namely the need for regional leaders to collect enough revenue to send to Astana. ¶16. (SBU) Ted Etchison of Chevron noted that other types of regulations, such as environmental protection provisions, are also used to pressure foreign firms and extract fines. He cited the example of the Tengiz field, where the Ministry of Energy and Mineral Resources has contested the Ministry of Environment's claims that there have been violations. Benjamin cited the example of the law on gas flaring, which went into effect immediately upon passage with no phase-in period. Inspectors appeared at some fields the following ALMATY 00003026 004.2 OF 004 day, expecting to assess fines for non-compliance. Many were shocked when foreign firms such as PetroKazakhstan shut down production rather than violate the law. ¶17. (SBU) Participants noted that while most laws governing the business sector were well drafted, some legislation designed to deal with emerging issues has been rushed through without proper consultation and is harmful. Benjamin cited the Article 71 pre-emptive sale clause as an example; it impacts every energy transaction, and specifies no defined procedure for obtaining the GOK's decision on a sale. It contains no exceptions, not even for publicly traded shares. When the GOK fails to respond to a waiver application, the seller is placed in an ambiguous situation. Benjamin also criticized the lack of opportunity for public comment on draft legislation. The parliament is required to consult accredited business associations on legislation affecting their sectors, but generally does not accept input from other sources. ¶18. (SBU) Fowler commented that Kazakhstani firms are increasingly seeking to use IPOs to legitimize assets obtained under uncertain circumstances. She expressed skepticism that the steps firms are taking to improve corporate governance in order to launch an IPO would result in fundamental change. Many firms, she claimed, did not understand that the measures could not be superficial, but rather must impact the way the business operates. Benjamin disagreed, stating that the firms he had worked with had made great progress toward assuring accountability and sustainability. ORDWAY