KAZAKHSTAN - CODEL HASTINGS MEETS WITH PRESIDENT

C O N F I D E N T I A L ASTANA 001222 SIPDIS E.O. 12958: DECL: 07/08/2018 TAGS: PREL PGOV KDEM ECON EPET KZ SUBJECT: KAZAKHSTAN - CODEL HASTINGS MEETS WITH PRESIDENT NAZARBAYEV, PM MASIMOV REF: ASTANA 1194 Classified By: Pol-Econ Chief Steven Fagin, Reasons 1.4 (b) and (d) -------------- Summary -------------- ¶1. (C) President Nazarbayev told CODEL Hastings on June 29 that Kazakhstan is committed to deepening its cooperation with the U.S. He explained that Kazakhstan's crude production would increase significantly in the coming years, and that transport remains the big issue to resolve. Nazarbayev reminded the CODEL that Kazakhstanis had no prior history of democracy, but are trying to change their mentality. He promised follow through on democratic reforms, but explained that the country would implement reforms because it wanted to, not because of external pressure. Prime Minister Masimov separately told the CODEL on June 30 that Kazakhstan's development goal is to reach the standards of the developed world. The country has thus made investment in human capital a top priority. Masimov said that Kazakhstan's recent agreement with Chevron on a pipeline from the TengizChevrOil field to the Caspian had made the Russians take a more flexible position on expansion of the Caspian Pipeline Consortium (CPC) pipeline. End Summary. -------------- -------------- Nazarbayev: We Will Implement Reforms Because We Want To -------------- -------------- ¶2. (SBU) CODEL Hastings visited Astana from June 28 to July 2 to participate in the annual session of the OSCE Parliamentary Assembly (PA). The CODEL also conducted bilateral meetings with President Nazarbayev and Prime Minister Masimov. Both of these meetings were subsequent to Nazarbayev's address to the OSCE PA in which he publicly discussed for the first time Kazakhstan's Madrid commitments (see reftel). ¶3. (C) In a June 29 meeting with the CODEL, Nazarbayev acknowledged that the U.S. has supported Kazakhstan throughout its years of independence. Kazakhstan is committed to deepening its cooperation with the U.S. The U.S., he noted, is the largest source of foreign investment in Kazakhstan, and U.S. companies are helping to diversify Kazakhstan's economy. Nazarbayev reminded the CODEL that the U.S. and Kazakhstan had just launched the Public-Private Economic Partnership Initiative (PPEPI),which he understood as follow through on the December 2001 Houston Initiative. ¶4. (C) Turning to energy issues, Nazarbayev noted that 30 percent of the investment in Kazakhstan's oil and gas sector is from U.S. companies. He said that Kazakhstan expected to export 3 million b/d of crude by 2013, up from 1.5 million b/d at present. The long-term goal is for Kazakhstan to be among the world's top five or six crude exporters. The big issue, Nazarbayev explained, is transport. Kazakhstan is working with U.S. companies on transport options. ¶5. (C) Discussing the domestic situation, Nazarbayev reminded the CODEL that Kazakhstan has been independent for just 16 years. Following the fall of the USSR, the country had to re-establish itself economically, get runaway inflation under control, avoid ethnic strife, and overcome other difficulties -- all of which it managed to do. Kazakhstanis had no history of democracy, but have been trying to change their mentality. At present, there are over 5000 NGOs in Kazakhstan and there is freedom of the media, he explained. Regarding freedom of religion, Kazakhstan has proven to be very welcoming to its Jewish population. The political opposition, Nazarbayev stressed, should naturally focus their attention on problem areas; that is their job, but it must be remembered that they are not objective observers. ¶6. (C) Senator Ben Cardin expressed the hope that Kazakhstan would follow through on its Madrid commitments on democratic reform. Nazarbayev explained that it was difficult for Kazakhstan to get ahead of its neighbors on democratization, or else it risked undermining them. He nevertheless reassured the CODEL that Kazakhstan would implement further democratic reforms, as he had just made clear in his remarks to the OSCE PA. However, Kazakhstan would implement these reforms because it wanted to, not because of any external pressure. While the country would take into account outside advice, it would do things in its own way, Nazarbayev stressed. -------------- Masimov: Human Capital is a Top Priority -------------- ¶7. (C) In a separate June 30 meeting, Prime Minister Masimov told the CODEL that Nazarbayev's democratic reform remarks in his OSCE PA speech were essentially instructions to the ministries to move forward on implementing the Madrid commitments. ¶8. (C) Masimov explained that Kazakhstan's long-term development goal is to reach the standards of the developed world. Kazakhstan wants to diversify its economy, and has made investment in human capital, including in health and education, a top priority. Kazakhstan is currently engaged in negotiations with the U.S. and EU on its WTO accession. Ultimately, Kazakhstan hopes to be able to also join the OECD, Masimov explained. Kazakhstan had suffered from the effects of the global financial crisis. The country's economy and financial system nevertheless remained strong, and the most serious problems had been overcome. Masimov stressed to the CODEL that Kazakhstan would support its neighbors in trying to ensure their food security. ¶9. (C) Masimov noted that most of Kazakhstan's energy exports flow through Russia, though now some volumes are sent to China as well. The Kazakhstanis had just reached agreement with Chevron on a pipeline to bring crude from the TengizChevrOil field to the Caspian, from where it will be moved by tanker to Baku. The Kashagan consortium wants to join in as well. This pipeline agreement is a key reason that the Russians have become more flexible on expansion of the Caspian Pipeline Consortium (CPC) pipeline, Masimov contended. ¶10. (U) CODEL Hastings did not/not have an opportunity to clear this cable. ORDWAY