Identifier
Created
Classification
Origin
07ASTANA1430
2007-05-28 10:47:00
UNCLASSIFIED
Embassy Astana
Cable title:  

KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 29 - MAY 12,

Tags:  ECON EIND ENRG EPET EFIN KZ 
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DE RUEHTA #1430/01 1481047
ZNR UUUUU ZZH
R 281047Z MAY 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9552
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
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UNCLAS SECTION 01 OF 02 ASTANA 001430 

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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

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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KZ
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 29 - MAY 12,
2007

ASTANA 00001430 001.2 OF 002


UNCLAS SECTION 01 OF 02 ASTANA 001430

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 29 - MAY 12,
2007

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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.

-- "Kazakhgate" Funds to Go to Charity
-- Kazakhstan's External Debt on the Rise
-- EBRD to Increase Exposure to Kazakhstan
-- Labor Minister Comments on Unemployment
-- Kazakhstan Considering Trans-Caspian LNG Shipments
-- Kazakhstan Views Russia as Main Oil Transit Route
-- GazProm CEO Announces Progress in Orenburg Negotiations
-- Nazarbayev Links CPC Expansion to Bosporus Bypass
"Kazakhgate" Funds to Go to Charity
--------------


2. On May 4, a trilateral agreement was reported between the
governments of the U.S., Kazakhstan, and Switzerland on $84 million
frozen in Swiss bank accounts. The Swiss Foreign Ministry said the
cash had been frozen in Switzerland as the result of a corruption
case involving an (unspecified) American businessman (widely assumed
to be James Giffen) and oil concessions in Kazakhstan. The money
will be used to establish a children's foundation named "Bota"
(young camel) to provide support to children from low-income
families. The World Bank will develop the concept of the foundation
with management transparency and efficiency in mind. The Panorama
newspaper commented, "most likely the Kazakhstani Government decided
to accept this arrangement because a return of this money back to
the national budget appeared unfeasible." Television Channel 31
cited the reaction of Ak Zhol's Oraz Zhandosov: "Frankly, I do not
like the idea of a non-governmental foundation that will spend the
government's money in Kazakhstan. It resembles practices used in
the early and mid-1990's, which we stopped in 1998." ("Panorama"

newspaper; Television Channel 31, May 11)

Kazakhstan's External Debt on the Rise
--------------


3. According to Deputy Chairman of the National Bank, Gulbanu
Aimanbetova, as of the end of 2006, Kazakhstan's total external debt
reached $73.8 billion or 95.6% of GDP, compared to $42.6 billion a
year earlier. The increase was mostly due to banking sector
borrowing, which grew by $18 billion to reach $33.3 billion by the
end of the year. As a result, the banking sector's share of
Kazakhstan's external debt rose in 2006 from 35% to 45%, while the
share of intracorporate debt fell from 44% to 34%. At the end of
the year, the non-financial sector's (intercorporate) debt stood at
16% of the total, and the government's at 4%. (Interfax-Kazakhstan,
May 8)

EBRD to Increase Exposure to Kazakhstan
--------------


4. The European Bank for Reconstruction and Development (EBRD)
released information on its planned deals with two Kazakhstani
banks. EBRD will arrange a syndicated loan for Kazkommertsbank
(KKB) worth $300 million. The loan will consist of two parts, with
five- and seven-year terms of maturity. KKB plans to use the raised
funds for mortgage lending, as well as diversification of its
holdings away from real estate and the energy sector. EBRD also
plans to purchase 20% of common shares of KazInvestbank. (Note:
KazInvestbank is a commercial bank with a reported capital of $199
million. End note.) This investment aims to facilitate
KazInvestbank's expansion in the Central Asian region, development
of retail crediting, and financing of small- and medium-sized
enterprises. (Interfax-Kazakhstan, May 8)

Labor Minister Comments on Unemployment
--------------


5. Speaking to the Kazakhstani Parliament on May 7, Labor Minister
Gulzhana Karagusova noted the emergence of "chronic" unemployment.
She stated that 118,000 unemployed Kazakhstanis have not worked for
a decade, 15.9% of the unemployed have not worked for at least three
years, and 27% have no skills. She also expressed concern over

ASTANA 00001430 002.2 OF 002


"so-called self-employed" people who teeter on the brink of poverty.
Last year, the Minister noted, the unemployment rate stood at 7.8%.
She added that the government intends to fine-tune its approaches
to social protection. (BBC Monitoring Central Asia, May 7)

Kazakhstan Considering Trans-Caspian LNG Shipments
-------------- --------------


6. On March 4, Deputy Energy Minister Bolat Akchulakov told a
visiting European Parliament delegation that Kazakhstan was "very
seriously considering gas (LNG) deliveries across the Caspian
Sea...rather than building an undersea gas pipeline, as this is the
safest means of gas transportation." Akchulakov also noted that the
construction of a Trans-Caspian gas pipeline was a "very difficult
proposition," given the varying interests of the five littoral
states. (Interfax - Kazakhstan, May 7)

Kazakhstan Views Russia as Main Oil Transit Route
-------------- --------------


7. "Kazakhstan is absolutely committed to shipping most of its oil,
if not all of it, through Russian territory," President Nazarbayev
announced during a May 10 press conference following a meeting with
Russian President Putin. Nazarbayev pointed out of 52.3 million
tons of oil Kazakhstan exported "this year," 42 million transited
Russia. Nazarbayev suggested that there were clear advantages to
transporting Kazakhstani oil and gas through Russia. "The issue," he
concluded, is that there be fair and mutually beneficial access."
(Kazakhstan - Interfax, May 10)

GazProm CEO Announces Progress in Orenburg Negotiations
-------------- --------------


8. GazProm CEO Alexei Miller announced on May 10 that GazProm had
reached "a very important agreement on the terms of buying
Kazakhstan's gas from the Karachaganak field. This is vital for
setting up a joint venture on the basis of the Orenburg gas
processing plant." Kazakhstan's Energy Minister Izmukhambetov
revealed the same day that the agreed price "is higher than 145
dollars per thousand cubic meters." (Interfax - Kazakhstan, May
10)

Nazarbayev Links CPC Expansion to Bosporus Bypass
-------------- --------------


9. On May 10, following meetings with Russian President Putin,
President Nazarbayev announced that the expansion of the Caspian
Pipeline Consortium (CPC) pipeline, from 23 to 40 million tons,
would be linked with the planned Burgas-Alexandroupolis Bosporus
bypass pipeline. "We have agreed to a joint action plan whereby the
construction of Burgas-Alexandroupolis and CPC expansion will be
concurrent," Nazarbayev said. Putin noted that Kazakhstani oil
could comprise "a significant part" of the oil shipped through the
Burgas-Alexandroupolis bypass.

ORDWAY