KAZAKH PRESIDENT NAZARBAYEV BRINGS HOPE, CRITICISM

C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 000522

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/04/2017
TAGS: PGOV PREL KDEM KG
SUBJECT: KAZAKH PRESIDENT NAZARBAYEV BRINGS HOPE, CRITICISM
TO BISHKEK

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Classified By: Ambassador Marie L. Yovanovitch, Reason 1.4 (b) and (d)


1. (SBU) SUMMARY: The abbreviated April 26-27 visit of
Kazakh President Nursultan Nazarbayev was portrayed as a
success by the Kyrgyz government, with both governments
signing a number of bilateral agreements and discussing the
possibility of creating bilateral and multilateral unions.
However, Nazarbayev arrived late (due to the Yeltsin funeral)
and left early, a planned Kyrgyz-Kazakh business forum was
postponed, and his address to Parliament was cancelled.
Nazarbayev made critical remarks to the press regarding
Kyrgyzstan's instability and lack of investor-friendly
legislation. To some observers, Nazarbayev appeared more
interested in protecting Kazakh economic interests than in
establish the type of close political, economic union Kyrgyz
President Bakiyev may have been looking for. END SUMMARY.

AGREEMENTS SIGNED, TALK OF UNION PROPOSED . . .
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2. (SBU) During Kazakh President Nazarbayev's April 26-27
visit to Kyrgyzstan, a number of bilateral agreements were
signed and then quickly ratified following the visit,
including accords on establishing international centers for
border cooperation; recognizing tourist visas of third
country nationals traveling in the border areas of
Kazakhstan's Almaty and Jambyl Oblasts, and Kyrgyzstan's
Issykul, Talas, and Chui Oblasts; cultural cooperation; and
humanitarian assistance. The two presidents also agreed to
create two new bilateral structures -- the Supreme Interstate
Council and the Council of Foreign Ministers -- to further
develop cooperation between both countries. Nazarbayev also
floated a vague idea of forming a "Union of Central Asian
Countries," and suggested that Kazakhstan and Kyrgyzstan
might move forward with the creation of such a union before
agreements could be reached with other Central Asian
governments -- a notion President Bakiyev supported.


3. (SBU) During a May 3 briefing on the visit, Kazakh
Ambassador to Kyrgyzstan Umarzak Uzbekov said that both
presidents had also talked about holding a business forum by
the end of May -- a forum that was supposed to occur during
Nazarbayev's visit -- at which the Kyrgyz Government is
expected to present roughly 62 investment projects for joint
consideration. Uzbekov also mentioned that his country would
provide about $8 million to be used for technical research
for the projects discussed at the forum, but only if the
Kyrgyz reform their concessions law. He went on to say that
both countries would seek to improve customs regulations
usually affecting Kyrgyz truck drivers transiting through
Kazakh territory, and would address railroad tariff issues as
well. In addition, Uzbekov said that Kyrgyzstan would soon
be allowed to utilize Kazakh satellite services, and that
shares of Kyrgyztelecom could be bought by Kazakh interests
if offered for sale. Kyrgyz Deputy Foreign Minister Askar
Beshimov, who was also in attendance at the briefing, added
that the Kyrgyz Parliament would soon discuss issues
concerning demarcation of the Kyrgyz-Kazakh border,
development of the Issyk Kul region as a recreation zone, and
Kazakh investments in the Kambarata 1 and 2 hydroelectric dam
projects. Beshimov also said that the idea of forming a
union of Central Asian states had been discussed for several
years, but hoped that the creation of the supreme interstate
council would provide more of an impetus to build such a
union.

. . . BUT KYRGYZ STABILITY CRITICIZED
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4. (SBU) Before departing Bishkek, Nazarbayev made clear his
disappointment with Kyrgyzstan's political and economic

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instability. He provided critical remarks regarding the
Kyrgyz economy, and the need to implement the types of
legislative reforms that could attract foreign investment.
Nazarbayev said publicly that Kazakhstan had invested far
more -- approximately $1 billion -- in Georgia since 2005
than Kyrgyzstan, because Kyrgyzstan's political instability
and rampant corruption in the government generated greater
risks for Kazakh investors. Nazarbayev also criticized
Bakiyev's inability to resolve issues important to Kazakh
investors, including property rights and development around
Lake Issyk Kul. Kazakhstan is ready to invest billions of
dollars in Kyrgyzstan, said Nazarbayev, provided that
Kyrgyzstan demonstrates a greater degree of political
maturity. He added that if all factions did not negotiate
and respect one another in a democratic and lawful manner,
Kyrgyzstan would turn into an "enclave of instability."
Nazarbayev commented that, to attract further Kazakh
investment, Kyrgyzstan would have to establish a more stable
political environment, and the president and parliament would
need to cooperate on the adoption of legislation that
enhances investor rights.

COMMENT
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5. (C) Kazakhstan plays a large role in Kyrgyzstan. Up to a
half million Kyrgyz work seasonally in Kazakhstan. Kazakh
banks have invested heavily in the Kyrgyz financial sector.
A substantial part of Kyrgyzstan's foreign debt is owed to
Kazakhstan. Most commentators believe that Kazakhstan is
looking for a larger role, including investment in around
Lake Issyk Kul and in other Kyrgyz enterprises, although
Ambassador Uzbekov told the Ambassador that the visit was a
measure of support for Bakiyev. President Bakiyev may have
viewed President Nazarbayev's visit as a way to bolster his
political standing, through bilateral agreements and
increased investment. We are also reliably told that
Bakiyev's personal yardstick of success was met: The two
presidents stayed up drinking until 3 AM, putting Bakiyev in
the President's Club. Likewise, our official interlocutors,
state media and the numerous Bakiyev-Nazerbayev billboards
around Bishkek predictably trumpeted the visit as a great
success. Some commentators, however, saw the visit -- cut
short and with public criticism -- as a diplomatic snub.

YOVANOVITCH