GAUGING INFLUENCE IN THE KYRGYZ CENTRAL BANK

C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 000949

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (GEHRENBECK)

E.O. 12958: DECL: 07/23/2017
TAGS: EFIN PGOV PREL ECON PINR KG
SUBJECT: GAUGING INFLUENCE IN THE KYRGYZ CENTRAL BANK


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Classified By: Charge d'Affaires Lee Litzenberger for Reasons 1.4 (b) a
nd (d)


1. (C) Summary: While Kyrgyz Central Bank Chairman Marat
Alapayev maintains a low profile, Parliament Speaker (and
former Central Bank chief) Marat Sultanov has recently backed
three allies for positions on the Central Bank's nine-member
Board of Governors. Four other Central Bank governors,
responsible for more technocratic portfolios, have avoided
the reshuffles affecting their colleagues. Meanwhile, the
governor in charge of banking sector supervision, a key post
in a country where allegations of money laundering and tax
evasion have previously challenged the sector, returned to
the banking sector after a four-year hiatus only last year.
Contacts at the International Financial Institutions give the
bank generally good marks, and there have been no recent
public disclosures of banking sector improprieties. However,
Sultanov's influence, Alapayev's political weakness, and
concerns about banking supervision merit continued scrutiny.
End summary.

Treading Carefully at the Top
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2. (C) Marat Alapayev assumed the post of Kyrgyz Central
Bank chairman after the 2006 ouster of his predecessor, Ulan
Sarbanov. Sarbanov, a well-respected and outspoken appointee
of former President Akayev, was forced out following
questionable embezzlement charges. (Note: Sarbanov, current
presidential chief of staff Medet Sadyrkulov, and three other
defendants were acquitted of all charges in April 2006. End
note.) Alapayev, a "compromise" candidate deemed acceptable
by the banking sector and senior government officials, lacks
an independent power base. He left the chairmanship of a
small Kyrgyz commercial bank to fill the top Central Bank
post. While maintaining a "clean" reputation that includes a
separate billable phone for his personal calls, Alapayev
avoids the headlines. His discreet complaints of "threats"
against his family and bribery allegations associated with
his support for the failed Heavily Indebted Poor Countries
initiative never reached the media.

Sultanov Stuffs the Board
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3. (C) While Alapayev treads softly, his authority over the
Central Bank has been clipped by former Central Bank chairman
(and current Parliament Speaker) Marat Sultanov's influence
over the Central Bank's nine-member Board of Governors.
(Note: Sultanov chaired the Central Bank from 1994-1998. End
note.) According to a Central Bank advisor, Sultanov
supported the March appointment of Suerkul Abdibali Tegin to
replace Maksatbek Ishebaev as Deputy Chairman responsible for
Reserves and Monetary Transactions. (Note: Ishebaev cited
pressure from (former) First Deputy Prime Minister Usenov in
his resignation letter. End note.) Abdibali Tegin, who
hails from Sultanov's home town of Osh, had a stint at the
Central Bank before moving to the commercial banking world
and subsequently spending two years at the World Bank.


4. (C) Sultanov also lobbied for the appointment last
October of his former parliamentary assistant, Samat
Konokbaev, to the Board of Governors. Konokbaev is
responsible for the Project Implementation Unit and contacts
with international financial institutions. Described within
the Central Bank as "Sultanov's man," Konokbaev's resume

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includes prior studies in Japan and English-language skills.


5. (C) Sultanov also interceded to aid another fellow
southerner, Abdujapar Tagaev, who previously worked as
Minister of Communications and as Osh mayor. Tagaev, who
covers information technology, reportedly accepts gifts, such
as a trip to Venice, from contractors. Alapayev's
predecessor, Ulan Sarbanov, had placed Tagaev "on leave" for
attempting to influence contracting decisions at the Central
Bank. However, after Sarbanov's ouster, Alapayev reinstated
Tagaev reportedly at Sultanov's request. Tagaev is accused
of meddling in the affairs of other Central Bank governors.

Banking Supervision in Uncertain Hands
--------------


6. (C) A late 2006 reshuffle of the Board of Governors
shifted banking supervision, one of the most critical Central
Bank functions, to deputy chairman Kubanychbek Bokontayev.
Although employed briefly by the Central Bank in 1992 and
having four years' experience in the commercial banking
sector, Bokontayev worked from 2002-06 as a journalist,
public relations manager, Soros Fund employee, and United
Nations project expert. His recent career path, when
juxtaposed with the expertise required for banking
supervision, raises eyebrows among observers concerned with
previous allegations of money laundering and tax evasion in
the Kyrgyz banking sector. Former Central Bank chairman
Sarbanov told emboff that fellow bankers claim "we can do
whatever we want" under Bokontayev's supervision.

Technocrats Remain in the Background
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7. (C) Amidst these changes, four members of the Board --
all female -- have remained seemingly removed from the fray.
Munara Mirzabaeva, who is one of three deputy chairs, handles
personnel issues. Larisa Tsiplakova, the only ethnic Russian
on the Board, is in charge of accounting. Chinara
Imankulova, who previously handled bookkeeping for the Bank,
now is responsible for payment systems. Sadat Djanibekova
covers non-bank financial institutions such as credit unions,
pawn shops and exchange offices. (Note: Supervision for the
booming casino industry, which will be discussed septel,
rests in the prime minister's office. End note.)

Comment
--------------


8. (C) Despite concerns about external influence on the
Central Bank as well as its power to govern the sector, there
have been no questions raised publicly about the Central
Bank's operations. The local International Monetary Fund
office is located at the Central Bank, and has generally
spoken favorably of the Bank's governance. However, the
changes in the Central Bank Board's composition underscore
the amount of influence Parliament Speaker Sultanov exerts
beyond his parliamentary base. Sultanov's influence,
Alapayev's political weakness and concerns about banking
supervision merit continued observation of the Central Bank
to ensure Kyrgyzstan's financial health.

LITZENBERGER