Identifier
Created
Classification
Origin
06ALMATY3026
2006-08-28 02:53:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
US Office Almaty
Cable title:  

KAZAKHSTAN: DAS FEIGENBAUM'S MEETINGS IN ALMATY

Tags:  PREL PGOV KDEM PHUM KZ 
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VZCZCXRO2213
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #3026/01 2400253
ZNR UUUUU ZZH
P 280253Z AUG 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC PRIORITY 6681
INFO RUCNCIS/CIS COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 0243
RUEHNE/AMEMBASSY NEW DELHI 0373
RUEHAST/USOFFICE ASTANA
RUEHVEN/USMISSION USOSCE 1623
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


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