KAZAKHSTAN: CTR VAT COMMISSION MOVES TOWARD A

UNCLAS ASTANA 000950 SIPDIS SENSITIVE SIPDIS STATE FOR SCA/CEN (M. O'MARA),SCA/RA (A. CUMMINGS) SECDEF FOR ATSD/NCB/CT/TR AND ASD/ISP/TSP/CP/CTR E.O. 12958: N/A TAGS: PARM PREL KNNP KZ SUBJECT: KAZAKHSTAN: CTR VAT COMMISSION MOVES TOWARD A DECISION REF: A. ASTANA 927 B. ASTANA 906 C. ASTANA 860 ¶1. (SBU) The interagency commission established to review the Cooperative Threat Reduction (CTR) value-added tax exemption claims for subcontractors met twice on April 12 and 13. The Commission has not yet issued a written decision but several commission members told Pol/Econ Chief and DTRA Chief that they have reached agreement in principle on a technical approach to approve the Biological Threat Reduction (BTR) contracts. They are awaiting a written decision from the Ministry of Justice and Ministry of Defense before issuing the document certifying the subcontracts under consideration. They promised to work into the night and weekend to finalize the agreement. DTRA Chief and Pol/Econ Chief both saw a draft of a protocol exempting five subcontractor packages, although it was unsigned. ¶2. (SBU) There has been disagreement among the Ministries involved in the review process. On April 12, Minister of Finance Korzhova told the Ambassador and several commission members informed DTRA Chief that the relevant implementing agreements may need to be ratified, because the CTR Umbrella agreement only references strategic offensive weapons. The next day, however, MFA Section for International Security Advisor Sergey Savelyev, a commission participant, told Pol-Econ Chief that the MFA believes that no ratification is necessary. He added that the MFA is preparing a position paper for the Ministries of Justice and Finance in support of this argument. Savelyev said that he is optimistic of a positive result, although he noted that all will depend on Minister of Finance Korzhova. 3.(SBU) Comment: The CTR VAT commission appears close to a decision on the package of subcontracts submitted by the Embassy. Whatever the outcome, the Kazakhstanis have at least demonstrated that they understand the importance of the issue and have created a review mechanism that seems to be working. End comment ORDWAY