KAZAKHSTAN: PRESIDENT NAZARBAYEV,S "NEW" CABINET

C O N F I D E N T I A L SECTION 01 OF 03 ALMATY 000333

SIPDIS

SIPDIS

DEPT FOR EUR/CACEN (J. MUDGE, M. O'MARA)

E.O. 12958: DECL: 01/30/2016
TAGS: PGOV PREL KZ
SUBJECT: KAZAKHSTAN: PRESIDENT NAZARBAYEV,S "NEW" CABINET


Classified By: DCM Mark Asquino, reasons 1.4 (B) and (D).


1. (SBU) Summary/Introduction: President Nazarbayev has
completed naming his government, following his January 11
inauguration, and held his first cabinet meeting on January

25. While technically "new," most of the 16 ministers
retained their posts or made lateral moves to other
ministries. Nazarbayev has publicly emphasized the
importance of continuity in his team to maintain the pace of
Kazakhstan's economic growth. Recently-released opposition
leader Galymzhan Zhakiyanov commented a little less
charitably in a press interview on January 25 that the
appointments merely amounted to "turning an old coat inside
out." Below are highlights of who is new, who has moved, who
has stayed, and who is out along with some restructuring
trends that have emerged in the government re-shuffle. End
Summary/Introduction.

The "New" Cabinet Line Up
--------------


2. (C) Following are cabinet appointments:

-- Prime Minister Daniyal Akhmetov (re-appointed January 18).
Although frequently rumored to have been on his way out,
Akhmetov appears to have been retained as a part of
Nazarbayev's "continuity" theme. Some local observers
believe that Akhmetov could still go if low inflation rates
are not maintained. Akhmetov has been tasked with oversight
of the government's day-to-day operations.

-- Deputy Prime Minister Karim Masimov (appointed January
18). Masimov, as Advisor to the President, was an
influential member of Nazarbayev's circle with a high degree
of access to the President. As Deputy PM, his portfolio will
primarily focus on responsibility for strategic development.
(Note: Masimov was a co-author of a national program
intended to vault Kazakhstan into joining the "50 most
competitive countries. End note.) The other two deputy PM
slots have been abolished. While the Prime Ministry and
Presidential Administration offices are both located in the
presidential palace, the impact on Masimov's degree of access
to Nazarbayev remains unclear. No one, however, has yet been
named to fill the Advisor position formally vacated by
Masimov.

-- Minister of Foreign Affairs Kasymzhomart Tokayev
(re-appointed January 18). Despite talk for nearly two years
of Tokayev's interest in moving on from MFA and the arrival
of Nazarbayev's son-in-law Rakhat Aliyev in August as First
Deputy Foreign Minister, Tokayev remains in place as the
country's senior diplomat. Fluent in English and Chinese, a
former Soviet diplomat deeply familiar with CIS politics, and
a China hand, Tokayev's value lies in his broad expertise,
versatility, and low-key manner.

-- Minister of Defense Mukhtar Altynbayev (re-appointed
January 18). A strong advocate of defense reform, Altynbayev
has worked under five prime ministers and has been Defense
Minister since 1996 (except for 1999-2001 when he was demoted
to command of the country's air forces after a scandal over
an illegal aircraft sale to North Korea). More recently he
was seen as having gone publicly off message from Nazarbayev
when he called for the return of Kazakhstan's ordnance
disposal contingent from Iraq. Despite these missteps, local
observers attribute Altynbayev's longevity in office to his
close ties to Senate Chairman Nurtay Abykayev and the support
of a number of other senior officials who hail from his
hometown of Karaganda. (Note: Parliament changed the
mandatory age of retirement so that Altynbayev, who is 60,
could continue on in office. End note.)

-- Minister of Industry and Trade (I&T) Vladimir Shkolnik
(appointed January 19). Shkolnik moves over from his
position as Minister of Energy and Mineral Resources (MEMR)
where he had overseen both oil/gas and non-proliferation
issues since 1999. Despite Nazarbayev's rather harsh words
at the January 24 cabinet meeting regarding the
non-transparency of recent energy tenders, Shkolnik's
transfer is not viewed by economic observers as a demotion,
but rather as a sign of the President's confidence that
Shkolnik brings the right background for managing the I&T
portfolio. Nazarbayev had reportedly offered the position to
Deputy Minister Zhanar Aitzhanova, the Government's point
person on WTO accession. However, Aitzhanova reportedly
declined in the interest of maintaining focus on WTO
accession priorities. Former Deputy Minister and Minister of
Industry and Trade Sauat Mynbayev has not been named to a new
post, but there is speculation that Nazarbayev may be holding

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him in reserve to head up a new mega-holdin
g company to which all other state-owned companies will
reportedly be transferred. Shkolnik may be able to help
unstick the strain transfer issue in his new position, as I&T
had been blocking the necessary export licenses.

-- Minister of Energy and Mineral Resources Bakhtykozha
Izmukhambetov (appointed January 19). A Deputy Minister at
MEMR under Shkolnik, Izmukhambetov is seen as experienced oil
manager who will primarily devote his attention to the
development of the oil/gas economic cluster initiative, in
particular the creation of new petrochemical complexes. The
new MEMR Minister is reportedly close to the "Western
Kazakhstan oil clan," including former PM Balgimbayev, who
was listed as one of two unindicted co-conspirators in the
James Giffen corruption case. Another of our oil contacts
described him as "dependent on Timur Kulibayev for every
decision." Non-proliferation contacts have told us that
responsibility for implementation of CTR programs will remain
with MEMR under Izmukhambetov, despite the fact that in the
past the programs have moved with Shkolnik from ministry to
ministry.

-- Minister of Interior Baurzhan Mukhamedzhanov (re-appointed
January 18). Formerly a Deputy in the Presidential
Administration, Mukhamedzhanov is widely seen as a
no-nonsense official who could project a sense of resolution
and determination in advance of the presidential elections
and would maintain order on the streets.

-- Minister of Economy and Budget (E&B) Kayrat Kelimbetov
(re-appointed January 18). This is Kelimbetov's third
appointment to head up E&B. Budget reform will be a primary
area of responsibility for E&B, inasmuch as it is linked to
restructuring the National Fund. Kelimbetov is viewed as a
fairly secure player because of his father-in-law,
Tokmukhamed Sadykov, the Rector of Almaty State University
and a Nazarbayev confidante.

-- Minister of Culture, Information, and Sports Yermukhamet
Yertysbayev (appointed January 19). Formerly a Deputy in the
Presidential Administration, Yertysbayev has worked closely
with Nazarbayev since 1995 and has served as a domestic
political advisor for the past four years.

-- Minister of Justice Zagipa Baliyeva (re-appointed January
18). Baliyeva appears to be more comfortable with the
Justice portfolio than the Central Election Commission Chair,
which she held during the flawed parliamentary elections in
September 2004. In her tenure at Justice since first being
appointed in April 2005, Baliyeva has showcased penal reform
as a Kazakhstani human rights success story. Her interest in
pushing other issues in the Justice portfolio, such as
trafficking, is less well-defined.

-- Minister of Transportation and Communication Askar Mamin
(re-appointed January 18). Nazarbayev publicly praised Mamin
for re-invigorating the work of his ministry. Mamin
presented on January 25 a draft program to Parliament that
will transform transportation infrastructure over the next
nine years. He is generally seen as a positive force in
negotiations to work out arrangements for international
flights into both Almaty and Astana. Mamin is reportedly
close to Presidential Administration Head Dzhaksybekov.

-- Minister of Finance Natalya Korzhova (appointed January
18). Local observers describe Korzhova as a good selection
for bringing experience from Labor and Social Protection (she
served as Minister from 1996-1999) at a time when social
welfare is expected to make up nearly 40% of the 2006 budget.
Korzhova, an ethnic Russian, will be only the second
non-Kazakh in the President's cabinet; Minister Shkolnik is
Jewish.

-- Minister of Labor and Social Protection Gulzhan Karagusova
(re-appointed January 18). With a high percentage of the
2006 budget devoted to issues falling under her ministry's
areas of responsibility, Karagusova is seen as a reliable
implementer of Nazarbayev's increasing emphasis on protection
of vulnerable populations and support for economic
development policy.

-- Minister of Environmental Protection Kamaltin
Mukhamedzhanov (appointed January 19). Transferred up to
Astana from Karaganda where he was regional governor in one
of the most industrialized regions of the country,
Mukhamedzhanov has been touted as an able administrator with
experience on environmental issues posed by industrial
development. Nazarbayev has credited him with being an

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official capable not merely of seeking to punish companies
but also finding creative solutions to reducing pollution.

-- Minister of Health Yerbolat Dosayev (re-appointed January
18). The youngest minister in the cabinet (born 1970),
Dosayev has been a helpful partner on the BWPP/TADR program.
His reappointment will provide welcome continuity.

-- Minister of Education and Science Berganym Aitimova
(re-appointed January 18). Aitimova, a former Kazakhstani
ambassador to Israel and Italy, is a relatively young and
very energetic interlocutor. Nazarbayev's decision to keep
her in place as the ministry's budget grows by 45% in 2006 is
a sign of his confidence in her abilities.

-- Minister of Agriculture Akhmetzhan Yesimov (appointed
January 19). Yesimov previously served as Minister of
Agriculture (2001-2002) and Deputy PM-Minister of Agriculture
(2002-2004),before his portfolio was cut back to Deputy PM
in May 2004.

-- Minister of Emergency Situations Shalbai Kulmukhanov
(re-appointed January 18). Kulmukhanov has been a relatively
low-profile player in the cabinet, but has indicated interest
in expanding ties and engagement with the United States. His
ministry, however, is somewhat hobbled by competing against
other ministries such as Defense and Interior for resources
and personnel.


Heads of Government Agencies
--------------


3. (SBU) There were few changes among heads of government
agencies that report directly to the President. Head of
Presidential Administration Dzhaksybekov retains his post, as
do KNB Chairman Nartay Dutbayev, Civil Service Agency
Chairman Zautbek Turisbekov, and Financial Police Head
Sarybay Kalmurzayev. (Note: Procurator General Rashid
Tusupbekov and Supreme Court Chief Justice Kairat Mamy are
appointed by Parliament and were not required to resign as
was the cabinet. End note.)


4. (C) Two new appointments were Arman Dunayev, former
Finance Minister, as Chairman of the Financial Supervision
Agency (FSA),and Nurlan Yermekbayev who adds domestic
political advisor (vice Yertsybayev) to his duties as
Presidential Administration's Foreign Policy Center Chief.
With Dunayev's appointment at FSA, economic observers expect
that FSA and the National Bank will more closely follow PM
Akhmetov's lead on monetary policy.

Regional Governors (Akims)
--------------


5. (SBU) Fourteen of the sixteen regional governors (akims)
have been retained. Presidential Administration Deputy
Nurlan Nigmatullin was named as governor of the Karaganda
region. Nigmatullin has served in several senior posts since
1995, including Deputy Minister of Transportation and
Communication (2002-2004) and Deputy Akim of Astana
(1999-2002). Krymbek Kusherbayev, former ambassador to
Russia was appointed as governor of the Mangistau region.
Kusherbayev served as Governor of Western Kazakhstan region
(2000-2003) and Minister of Education (1997-2000).


Re-Structuring Trends
--------------


6. (SBU) In accordance with Nazarbayev's recommendation to
streamline the top layers of ministries, there will be only
one Deputy Prime Minister and each ministry is to have no
more than two deputy ministers. The President has also asked
that one of those deputies have "Western experience." The
MFA has created a Department of Asian Cooperation to
coordinate multilateral affairs with regard to Asia; the new
office parallels the existing Department of European
Cooperation, which coordinates policy regarding NATO, OSCE,
the EU, etc. The MFA is also expected to name an
Ambassador-at-Large to coordinate with other ministries that
set economic policy.


7. (SBU) PM Akhmetov has also determined that the 90
inter-Ministerial Commissions supervised by the cabinet will
be reduced by at least half. Akhmetov's ultimate goal is to
whittle down the commissions to ten, which will then each be
chaired by a Minister.
ORDWAY