Identifier
Created
Classification
Origin
07ASTANA2761
2007-10-03 09:35:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:  

KAZAKHSTAN: RISING BREAD PRICES PRESENT CHALLENGE

Tags:  PGOV ECON KZ 
pdf how-to read a cable
VZCZCXRO5146
RR RUEHDBU
DE RUEHTA #2761 2760935
ZNR UUUUU ZZH
R 030935Z OCT 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 0858
INFO RUEHAH/AMEMBASSY ASHGABAT 7244
RUEHEK/AMEMBASSY BISHKEK 8171
RUEHDBU/AMEMBASSY DUSHANBE 2266
RUEHNT/AMEMBASSY TASHKENT 8063
UNCLAS ASTANA 002761 

SIPDIS

SENSITIVE
SIPDIS

SCA/CEN FOR M. O'MARA

E.O. 12958: N/A
TAGS: PGOV ECON KZ
SUBJECT: KAZAKHSTAN: RISING BREAD PRICES PRESENT CHALLENGE
FOR GOVERNMENT


UNCLAS ASTANA 002761

SIPDIS

SENSITIVE
SIPDIS

SCA/CEN FOR M. O'MARA

E.O. 12958: N/A
TAGS: PGOV ECON KZ
SUBJECT: KAZAKHSTAN: RISING BREAD PRICES PRESENT CHALLENGE
FOR GOVERNMENT



1. (U) Summary: The price of bread has increased by thirty
percent in Kazakhstan over the last two months. The bread
crisis has galvanized opposition parties, who have been vocal
in their criticism of the government. The People's Communist
Party has started a petition campaign in protest against the
rise in costs, and other parties have expressed their support
for the campaign. The government has reacted by placing
bakeries on the list of enterprises subject to state
regulation. Prime Minister Masimov has also stated that he
has not ruled out introducing a state monopoly on bread
making. End Summary.


2. (U) On September 27. representatives from Almaty bakeries
announced that the price for a standard loaf of bread would
rise to 55 tenge from 36 tenge as of September 29 (The
average pension is 13,800 tenge, or just over $100 a month).
One FSN based in Almaty told Poloff that the price of a small
loaf of bread at his local store has increased from 30 tenge
to 82 tenge in less than two weeks. Similar sharp price hikes
were recorded in Shymkent, Taraz, Atyrau, and Astana.


3. (U) Rising bread costs have occurred despite projections
that Kazakhstan, the world's fifth largest grain exporter,
will harvest a record-setting 20 tons of wheat. Government
officials claim that conditions on the world market have led
to the surging prices. Kazakhstan has also announced that it
will soon begin to charge market rates for grain exports to
the other nations of Central Asia.


4. (U) On October 1, Prime Minister Masimov stated publicly
that he will consider introducing a state monopoly on
bread-making if prices do not stabilize. "If in a week we
fail to see certain measures and cooperation, I will make a
decision about introducing a state monopoly," he said. Prime
Minister Masimov said publicly "Prices are soaring everywhere
because of monopolization of markets and there are no other
explanations. In these circumstances, all akims have to
resort to administrative resources to provide for free access
to markets." As a result, Oblast and Almaty city akims were
instructed to speak with large producers of flour and bread
and to stabilize prices on the domestic market. All bakeries
have been placed on the list of enterprises whose products
will be subject to state regulation


5. (U) Opposition parties have criticized the government for
the recent price increases. The People's Communist Party has
started a petition campaign in protest of the increased bread
prices. On September 27, Ak Zhol, Auyl, and Rukhaniyat
political parties expressed their support for the petition
campaign. The National Social Democratic Party released a
statement blaming the government for not anticipating the
spike in bread prices. They called on the government to
allocate funds from the state budget in order to provide
assistance to those most affected by the increased cost of
bread.


6. (SBU) Comment: The price of bread was a potent political
symbol in the Soviet Union and remains so in Post-Soviet
states. As a result, the surging price of bread is a matter
of significant concern for the GOK and a first post-election
opportunity for the opposition. With the rising bread costs
tied to conditions on the world market, the question now is
whether the GOK can maintain its free-market principles and
resist the populist urge to introduce distortionary
mechanisms.
MILAS