KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, May 4-17, 2008

UNCLAS SECTION 01 OF 02 ASTANA 001073 DEPT FOR SCA/CEN (O'MARA) DEPT PASS TO OPIC - BALLINGER DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER DEPT PASS TO AID - EE-PHILLIPS/RUSHING TREASURY FOR OASIA/VELTRI USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS USDOC FOR 6110/ITA/TD/BI/RHALPERN ANKARA FOR CFC SIPDIS E.O. 12958: N/A TAGS: ECON EIND ENRG EPET EFIN KTDB KZ SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, May 4-17, 2008 ¶1. Summary: This information is drawn primarily from the Kazakhstani local press, and has not been verified for accuracy. -- Atameken Opposes Export Duties on Metals -- New Shareholders in Lariba Bank -- New Prospects for Economic Cooperation with Tajikistan -- Jordanian Investment on the Caspian Sea Coast -- Delegations from Lithuania and Japan Discuss Energy -- Eurasian Natural Resources Purchases Foreign Stakes -- Economic and Energy Statistics Atameken Opposes Export Duties on Metals -------------- ¶2. Kazakhstan's Atamaken chamber of commerce issued a statement in opposition to the government's plans to impose export duties on metals. Atamaken argues that export duties will in effect be a barrier to the promotion of Kazakhstani goods in foreign markets, as well as impact efforts both to form a regional customs union and to enter the WTO. The statement notes that such duties could seriously impede the development of so-called breakthrough projects in the metallurgical sector, which are largely export-oriented. (Interfax-Kazakhstan, May 15) New Shareholders in Lariba Bank -------------- ¶3. The son of Financial Police head Sarybay Kalmurzaev and the son of Tourism and Sport Minister Temirkhan Dosmukhambetov respectively acquired 39.82 percent and 10.18 percent stakes in Lariba Bank. Respublika newspaper estimates the two stakes cost at least $7 million. Lariba Bank began operations in Kazakhstan in 1994. (Respublika newspaper, May 2) New Prospects for Economic Cooperation with Tajikistan -------------- -------------- ¶4. Tajik President Rakhmon's recent visit to Astana resulted in plans for economic cooperation during 2008-10 which include a $100 million Kazakhstani commitment to create a joint investment fund for projects in various sectors of the Tajik economy, such as electricity, agriculture, and mining. (Interfax-Kazakhstan, May 13) Jordanian Investment on the Caspian Sea Coast -------------- ¶5. Development of the Kenderly resort zone on 1,700 hectares of land in Mangistau oblast will be primarily funded by Jordanian investors. In addition to hotel construction, the foreign investors will be responsible for building the necessary roads and water supply systems. The project's estimated cost is $2.3 billion, with about 330,000 tourists expected annually once the resort zone is completed. According to a representative of the Mangistau Investment Company, which is also a partner in the project, the Kenderly resort zone will be a pioneer project for the Caspian region. (Interfax-Kazakhstan, May 7) Delegations from Lithuania and Japan Discuss Energy -------------- -------------- ¶6. At a meeting in Astana with Lithuanian Prime Minister Kirkilas, President Nazarbayev said that Kazakhstani companies would supply fuel for a new nuclear power plant to be built in Lithuania. Kirkilas invited Kazakhstani companies to take part in building a liquefied natural gas terminal in Lithuania. (Kazakhstan Today, May 13) ¶7. Energy Minister Mynbaev and Japan's Parliamentary Secretary for Economy, Trade, and Industry Kanae Yamamoto signed a memorandum to enhance the strategic partnership of the two countries in the area of civil nuclear power. Yamamoto said that uranium mining at Western Mynkuduk, the first uranium deposit in Kazakhstan developed with investment from a Japanese company, will commence in June. A second joint project, the Kharasan deposit, will be inaugurated later. (Reuters, May 5) ASTANA 00001073 002 OF 002 Eurasian Natural Resources Purchases Foreign Stakes -------------- -------------- ¶8. Eurasian Natural Resources Corporation (ENRC) is buying a 50 percent stake in Xinjiang Tuoli Taihang Ferro-Alloy Co. Ltd, a major ferrochrome producer in China with annual production capacity of 120,000 tons, for $14.5 million. Approximately 70 percent of the chrome used by the Chinese company is supplied by ENRC. ENRC also announced the acquisition of a 50 percent interest in Brazil's Bahia Mineracao Limitada (BML),which is exploring iron ore deposits in Bahia State, for $300 million. By 2012, BML's field is expected to produce 20 million tons of ore per year. (Panorama newspaper, May 9) Economic and Energy Statistics -------------- ¶9. April-on-April inflation from 2007 to 2008 was 19.1 percent, which is the highest year-on-year inflation rate in recent years. The month-on-month inflation rate from March to April 2008 was 0.9 percent, as compared to 0.6 percent from February to March. The month-on-month price increase is attributed principally to increases in prices on food products (1.0 percent),non-food products (0.8 products),and paid services (0.7 percent). (Interfax-Kazakhstan, May 4) ¶10. According to the National Statistics Agency, Kazakhstan's industrial production rose 3.5 percent on a year-on-year basis for the January-April 2008 period. Year-on-year growth in mining was 6.3 percent, and in utilities (electricity, gas, and water) was 7.9 percent. (Interfax-Kazakhstan, May 13) ¶11. The National Statistics Agency also reported that crude oil production increased 6.6 percent year-on-year during January-April 2008, totaling 19.32 million tons for that period. Gas condensate production rose 4.7 percent to 4.34 million tons. Natural gas production grew 15.6 percent to 11.477 billion cubic meters. Kazakhstan extracted 37.76 million tons of coal during January-April, a 19.7 increase year-on-year. (Interfax-Kazakhstan, May 16) ORDWAY