KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, MAY 27-

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SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, MAY 27-
JUNE 9, 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.

-- Latest Developments from Nurbank
-- Aliev's Case Has No Impact on Investment Climate
-- Steps towards Private-Public Partnership
-- New Appointments
-- Nazarbayev Favors China-Kazakhstan-Russia-Europe Corridor
-- Kazakhstan, Russia Finalize Orenburg Deal
-- Russia's Oil May Go to China through Kazakhstan in 2007
-- KMG Plans on Joint Ventures with European Countries
-- Oil & Gas Production in January-April 2007

Latest Developments from Nurbank
--------------


2. The Board of Directors of Nurbank will be led by the ex head of
the Austrian National Bank, Adolf Wala, Nurbank shareholders
announced on May 25. According to the bank's press statement, the
new chairman will concentrate on implementation of a five-year
strategic development plan. In addition to Wala, four independent
financial consultants from Western Europe were engaged by the bank.
Respublika newspaper interpreted this decision as an attempt to
protect Nurbank from possible pressure from Kazakhstani authorities
or preparation of the bank for sale in the wake of criminal charges
against majority stockholder Rakhat Aliyev. (Interfax - Kazakhstan,
May 28, Respublika newspaper, June 1)


3. TV Channel 31 reported that during four months of the Nurbank
conflict from February to May 2007, the bank lost 10% of its
clientele. (Television Channel 31, June 1)

Aliev's Case Has No Impact on Investment Climate
-------------- ---


4. The case of former Kazakhstani Ambassador to Austria and
presidential son-in-law Rakhat Aliyev will not affect Kazakhstan's
investment climate, according to Timur Nurashev, Chair of the
Ministry of Industry and Trade's Investment Committee. In
Nurashev's words, "Kazakhstan is a politically stable state and
guarantees given to investors are protected by the law. Any
speculations that Aliyev's case may deteriorate the investment
climate in the country are, to put it mildly, incorrect." Nurashev
pointed out that over the period from 1993 till 2006 Kazakhstan
received about $50 billion of foreign direct investment, including
$10.4 billion in the last year. (Interfax - Kazakhstan, June 1)

Steps toward Private-Public Partnership
--------------


5. National Business Associations and top executives of banks and
corporate giants such as Kazkommertsbank, TuranAlemBank, Kazakhmys
(Copper Company),Kazakhstan Oil Investment Company, and the
Eurasian Industrial Association, finalized a memorandum with the
Government of Kazakhstan (GoK) to join efforts in modernizing the
economy. According to the document, the GoK will prioritize
innovative projects, share risks with private sector, and create a
favorable legal environment. The business community, in turn, will
support the government initiatives, apply modern management systems,
use advanced technologies, and assist in implementing social
projects. (Interfax - Kazakhstan, May 31)

New Appointments
--------------


6. Zhaksybek Kulekeev was named President of the national railway
company Kazakhstan Temir Zholy (KTZ),replacing Erlan Atamkulov.
Kulekeev previously held the position of First Vice-President of
KazMunayGas. KazMunayGas and KTZ are both owned by state holding
company "Samruk." (Interfax - Kazakhstan, May 28).


7. Kozy-Korpesh Karbuzov was appointed Chairman of the Custom
Control Committee of the Finance Ministry. Previously, 48 year-old

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Karbuzov held the position of the Deputy Chairman of the National
Security Committee. (Interfax - Kazakhstan, June 6)

Nazarbayev Favors PRC-Kazakhstan-Russia-Europe Corridor
-------------- --------------


8. During an economic forum in St. Petersburg in early June,
President Nazarbayev indicated that it was necessary to continue
work on establishing a Western China-Kazakhstan-Russia-Western
Europe transport corridor. Nazarbayev remarked that alternative
transport routes are needed, and that choices should be based on
economic, and not political, criteria. (Information Agency Trend,
June 10)

Kazakhstan, Russia Finalize Orenburg Deal
--------------


9. On June 1, Gazprom CEO Aleksey Miller and KazMunayGas President
Uzakbai Karabalin signed an agreement on the creation of a joint
venture (JV) based on the Orenburg Gas Processing Plant.
Karachaganak Petroleum Operating and KazRosGaz (Gazprom - 50%, KMG -
50%) also signed a 15-year sales agreement for up to 16 billion
cubic meters of Karachaganak gas per year. The agreement also
establishes the price formula according to which KazRosGaz will buy
the Karachaganak gas. The Orenburg JV is to be approved by the
Kazakhstani Parliament by the end of the year, the Committee for
International Affairs, Defense and Security of the Mazhilis (the
lower house of Parliament) reported. (Interfax - Kazakhstan, June
4)

Russia's Oil May Go to China through Kazakhstan in 2007
-------------- --------------


10. Russian oil may start to flow through the Atasu-Alashankou
pipeline in Kazakhstan this year, Russian Industry and Energy
Minister Khristenko announced at an energy conference in Paris on
June 1. "We have an idea on the Russian companies that would like
to supply this oil. I think that technical issues have prevented
this so far," the Minister said. Atasu-Alashankou is the second leg
of a planned pipeline running from the Caspian to China. (Interfax -
Kazakhstan, June 4)

KMG Plans on Joint Ventures with European Countries
-------------- --------------


11. National oil company KazMunayGas (KMG) is considering proposals
from a number of European oil companies to set up joint ventures
based on European refineries, which Kazakhstani companies will
supply with crude, Kazakhstani Energy Vice-Minister Kiinov said at a
press briefing on May 31. According to Mr. Kiinov, Spain and
Ukraine have made proposals. KMG is also looking for assets in
Russia, Uzbekistan, China, Latin America and Arab countries, KMG
reports. (Russian Oil, June 1)

Oil & Gas Production in January-April 2007
--------------


12. According to the National Statistics Agency, production of oil
and gas condensate in Kazakhstan amounted to 22.3 million tons in
January-April 2007, up 9% from the same period of 2006. In
January-April, gas production totaled 9.8 billion cubic meters, up
16.6% versus 2006. (Interfax - Kazakhstan, May 21)

ORDWAY