KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS SECTION 01 OF 02 ALMATY 000557 SIPDIS DEPT PASS TO EUR/CACEN MUDGE DEPT PASS TO OPIC - BALLINGER DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER DEPT PASS TO AID - EE-PHILLIPS/RUSHING TREASURY FOR OASIA/VELTRI USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS USDOC FOR 6110/ITA/TD/BI/RHALPERN ANKARA FOR CFC E.O. 12958: N/A TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE January 22 - February 4, 2006 ¶1. Summary: This information is drawn primarily from the Kazakhstani local press, and has not been checked for accuracy. The opinions and policies expressed in this report are those of the authors, not the U.S. Government. -- Law on Private Entrepreneurship Signed -- Kazakhstan to Invest in Adzharia -- Samruk is a New National Holding Company -- ATF Bank to Buy Valut-Tranzit Bank -- Special State Agency For Almaty Financial Center -- Protocol on North-Caspian Sea Border Amended -- KMG First Vice-President Appointed -- KMG Takes $800-Million Loan for North-Caspian Project -- Oil Production January 2006 Law on Private Entrepreneurship Signed -------------- ¶2. The presidential press service reported that President Nazarbayev signed the law "On Private Entrepreneurship" on January 31. This law regulates relations between physical and various legal entities; prescribes such categories of government activity as state administration, state control and state support; introduces mandatory accreditation of entrepreneurs' associations and unions; and determines functions of expert councils under central and regional government bodies. (Kazakhstan Today, January 31) Kazakhstan to Invest in Adzharia -------------- ¶3. Chairman of the Adzharia's Government Levan Varshalomidze announced that Kazakhstan's investors intend, in the next three years, to pour at least $100 million into tourism infrastructure in Adzharia; the investments would flow into the renovation of 21 hotels, health resorts and holiday camps. The Kazakhstan Investors Consortium, with Bank TuranAlem as the operator, is managing this investment project. According to the investors' plan, in 2007 three Batumi hotels will be put into operation, with renovation of health resorts and holiday camps to be launched simultaneously. (Interfax, January 26) Samruk is a New National Holding Company -------------- ¶4. President Nazarbayev signed a decree on the establishment of the Samruk National Holding Company JSC, which is intended to manage the state's shares in national companies and state-owned enterprises. Sauat Mynbayev, who has been appointed acting executive director of Samruk Holdings, confirmed that the charter capital of the new company would include state shares in Kazakhtelecom, Kazpost, and KEGOC, the national electrical grid operator. Mynbayev said the holding company "will approve budgets and investments for national companies, monitor their activity, consult the government on the companies' corporate finance issues, and play an active role in their long-term strategy." (Interfax-Kazakhstan, February 1) ATF Bank to Buy Valut-Tranzit Bank -------------- ¶5. "The management of ATF Bank held successful talks with the shareholders of Valut-Tranzit Bank on the acquisition of a controlling stake. The parties agreed on plans for future development of Valut-Tranzit Bank and for its further capitalization," an ATF Bank press release reads. ATF Bank is Kazakhstan's fourth largest bank in terms of assets; Valut-Tranzit Bank is a mid-sized bank with headquarters in Karaganda. (Interfax-Kazakhstan, February 3) Special State Agency for Almaty Financial Center -------------- --- ¶6. According to the President's Decree, the Agency for Regulation of the Regional Financial Center in Almaty (RFCA) was established as a central executive body outside of the Government of Kazakhstan. The RFCA is expected to facilitate the development of the Regional Financial Center in Almaty. RFCA will be delegated functions from a number of ministries, including tasks on state registration of legal entities, taxation, labor control, and visa support. (Interfax-Kazakhstan, February 6) Protocol on North-Caspian Sea Border Amended -------------- ¶7. On January 25 in St. Petersburg, Kazakhstan's President Nazarbayev and Russia's President Putin signed amendments to a protocol of the Agreement on the Delineation of the North Caspian Seabed. According to both governments, the final protocol will facilitate joint development of the Kurmangazy, Tsentralnoe and Khvalynskoe oil fields, all located near the delineation line. The agreement on the Caspian division (1998) and protocol to the agreement (2002) defined geographical coordinates for division of the Caspian seabed and established Kazakhstan's jurisdiction over the Kurmangazy structure and Russia's jurisdiction over the Tsentralnoe and Khvalynskoe fields. (Kazakhstan Today - SIPDIS Kazakhstan, January 26). KazMunayGaz First Vice-President Appointed -------------- ¶8. On January 31 Zhaksybek Kulekeyev was appointed as First Vice-President of the national oil and gas company KazMunayGaz (KMG). Kulekeyev, 48 years old, worked most recently as Head of the State Management Academy under the President. Before that appointment, he was the Minister of Education and Science. KMG's previous First Vice-President, Timur Kulibayev, resigned in late October 2005, reportedly to head "KazEnergy," a new association created to represent the interests of energy and power companies before the government. KMG also established a new position - Managing Director for Oil Refining and Petrochemistry. Saduokhas Meraliev, who previously worked as Managing Director of the KMG Technical Development Department, was appointed to this position. (Interfax - Kazakhstan, February 1) KMG Takes $800 mn Million Loan for North-Caspian Project -------------- -------------- ¶9. On January 29 KazMunayGaz obtained an unsecured loan of $800 million from western banks to fund the North-Caspian Project (Kashagan). The period of the loan is 15 months (with a possibility to extend it to 18 months). The leading organizers of the loan were Citigroup, BNP Paribas, and Societe Generale. At the moment Kashagan project participants are Eni, Total, ExxonMobil, and Shell (18.52% ownership each),ConocoPhillips (9.26%),and Inpex and KMG (8.33% each). (Interfax - Kazakhstan, February 3) Oil Production January 2006 -------------- ¶10. According to preliminary GOK data, Kazakhstan produced 5.0 million tons of oil and gas condensate in January, 5.8% lower than during the same period of 2005. The figure includes 0.5 million tons of condensate, up 12.3% year-on- year. (Interfax - Kazakhstan, February 7) ORDWAY