KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 15 - 28,

UNCLAS SECTION 01 OF 02 ASTANA 001234 SIPDIS DEPT FOR SCA/CEN (O'MARA) 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 SIPDIS E.O. 12958: N/A TAGS: ECON EIND ENRG EPET EFIN KZ SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 15 - 28, 2007 ASTANA 00001234 001.2 OF 002 ¶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. -- WTO Accession Process Underway -- Pakistan Extends Cooperation with Kazakhstan -- Former Head of Valut Transit Bank in Detention -- Economic Statistics: Output and Inflation -- PM Addresses GOK's Right to Revise Oil Contracts -- GOK to React to Kashagan Delay when Officially Notified -- PM Says There is No Politics in Trans-Caspian Pipeline -- TCO to Supply Gas to Petrochemical Plant -- KMG Onshore Subsidiary Sells Non-core Assets WTO Accession Process Underway -------------- ¶2. The GOK press service reported that bilateral talks on the WTO accession were held in Washington on April 18-20. The state's role in the economy, observance of trade rights, intellectual property rights protection, as well as regulations on the import of dairy products to Kazakhstan were discussed. In addition, the USTR conducted a seminar on international veterinary and phytosanitary control regulations. The U.S. side, the press release states, intends to complete the negotiation process by the end of the year. (GOK's Press-Service, April 25) ¶3. A bilateral protocol on market access for goods and services was signed with Brazil on April 25. Import duties for meat, dairy, sugar, coffee and tobacco products, as well as issues of contracting of foreign specialists and managers were discussed during the preceding negotiations. According to an official statement released by the GOK, "the terms of the Protocol meet the long-term priorities of the development of Kazakhstani agriculture." In 2006, trade turnover with Brazil was $196.9 million. (Interfax - Kazakhstan, April 26) Pakistan Extends Cooperation with Kazakhstan -------------- ¶4. The 6th Session of the Pakistan-Kazakhstan Joint Ministerial Commission (JMC) was held in Astana. The two governments' representatives signed a protocol calling for enhanced cooperation between the two countries in the areas of trade, economy, science and technology, education, communications, environment, tourism, and water and power sectors. The two sides also agreed to hold an exhibition of Pakistani products in Almaty in September and a Kazakhstani products exhibition in Pakistan in October. (Organization of Asia-Pacific News Agencies, 23 April) Former Head of Valut Transit Bank in Detention -------------- - ¶5. The Karaganda Oblast Prosecutor's Office has moved Ex-President of Valut Transit Bank Andrey Beliayev from home arrest to detention at a pre-trial center. Beliayev is accused of fraud, abuse of power, embezzlement, and production and sale of falsified documents. The Valut Transit Bank has been undergoing forced liquidation since March 1 of this year. (Interfax - Kazakhstan, April 13) Economic Statistics: Output and Inflation -------------- ¶6. In the words of Prime Minister Masimov, "social and economic development indices demonstrate a positive trend in all sectors of the national economy." Masimov cited the first quarter GDP growth rate of 10.3% (annualized) as well as year-on-year increases of 9.6% in industrial output and 3.7% in farming production. (Interfax-Kazakhstan, April 24) ¶7. According to the Statistics Agency, inflation in Kazakhstan in the first quarter of 2007 was 2.6% (vs. 3.2% in January-March 2006), or 8.1% annualized. Chairman of the National Bank of Kazakhstan (NBK) Anvar Saidenov has attributed current inflationary pressures ASTANA 00001234 002.2 OF 002 to rising prices charged by natural monopolies and increasing budget spending. According to Saidenov, "in the first quarter, government spending rose 30%, a substantial contribution to the aggregate demand." The GOK's official inflation forecast for 2007 is the range of 5%-7%. (Interfax - Kazakhstan, April 23) PM Addresses GOK's Right to Revise Oil Contracts -------------- --- ¶8. The GOK has the right to revise the contracts of those subsoil users who fail to comply with them, Prime Minister Masimov said during his press-briefing on April 24. "The president has always clearly stated that contracts are stable. Should a contract be signed and should both parties, including the state and subsoil users, be clearly fulfilling it, the contract will not be revised," Masimov stated. At present, Kazakhstan's Energy Ministry is monitoring how subsoil users fulfill their contractual terms, and the audit results will be published in the media. (Interfax - Kazakhstan, April 24) GOK to React to Kashagan Delay when Officially Notified -------------- -------------- ¶9. The GOK will react to Kashagan production delays only after receiving official notification of the delay from Agip KCO, Prime Minister Masimov announced on April 24, adding that any GOK actions would be in conformity with the Kashagan Production Sharing Agreement. According to Energy Minister Izmukhambetov, Agip KCO is to announce the delay in late June or early July 2007. (Interfax - Kazakhstan, April 24) PM Says There is No Politics in Trans-Caspian Pipeline -------------- -------------- ¶10. Kazakhstan's approach to potential Trans-Caspian oil and gas pipelines is governed entirely by calculations of economic benefit, and has nothing to do with politics, Prime Minister Masimov reported on April 24. "The position of the previous and current governments on the Trans-Caspian pipeline is as follows: any transportation of energy must benefit the nation. The GOK will move in the direction that will benefit the country and where it is reasonable to export hydrocarbons," the Prime Minister said. (Interfax - Kazakhstan, April 24) TCO to Supply Gas to Petrochemical Plant -------------- ¶11. Kazakhstan's Energy Ministry and TengizChevrOil (TCO) have reached agreement on the supply of associated gas to Kazakhstan's first petrochemical plant, Minister Izmukhambetov announced on April ¶17. According to KazMunayGas President Karabalin, TCO will provide 6 billion cubic meters of gas per year; by 2017 the quantity could increase to 7.6 billion cubic meters. Kazakhstan Petrochemical Industries has announced its plans to construct a petrochemical plant in Atyrau region. The plant's construction is to start in the 3rd quarter of 2007. (Interfax - Kazakhstan, April 23) KMG Onshore Subsidiary Sells Non-core Assets -------------- ¶12. KazMunayGas Exploration & Production (KMG E&P, a subsidiary of Kazakhstan's national oil and gas company KazMunayGas) announced the sale of its wholly-owned "Burgulau" subsidiary, which provides exploration and drilling services (Western Kazakhstan). A bidding process will take place in Astana on May 10. The guarantee fee to be paid by the bidders is KZT 1.25 billion (about $10.25 million). (Interfax - Kazakhstan, April 23) ¶13. KMG E&P will also sell its wholly-owned "TsBKO" subsidiary (a machine-assembly yard) located in Atyrau. (Interfax - Kazakhstan, April 26) MILAS