Identifier
Created
Classification
Origin
08ASTANA1361
2008-07-28 09:58:00
UNCLASSIFIED
Embassy Astana
Cable title:  

KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, JULY 6 - JULY 19,

Tags:  ECON EIND ENRG EPET EFIN KTDB KZ 
pdf how-to read a cable
VZCZCXRO7531
RR RUEHLN RUEHVK RUEHYG
DE RUEHTA #1361/01 2100958
ZNR UUUUU ZZH
R 280958Z JUL 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 2852
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0584
RUEHAK/AMEMBASSY ANKARA 2173
RUEHBUL/AMEMBASSY KABUL 0406
RUEHNE/AMEMBASSY NEW DELHI 0509
RUEHAST/USOFFICE ALMATY 0617
UNCLAS SECTION 01 OF 02 ASTANA 001361 

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, JULY 6 - JULY 19,
2008

ASTANA 00001361 001.2 OF 002


UNCLAS SECTION 01 OF 02 ASTANA 001361

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, JULY 6 - JULY 19,
2008

ASTANA 00001361 001.2 OF 002



1. Summary: This information is drawn primarily from the
Kazakhstani local press, and has not been verified for accuracy.

- New Transfer Pricing Law Signed
- Kazakhstan-Russia Cooperation on Financial Supervision
- Kyrgyzstan to Receive Kazakhstani Wheat
- New Head of ABN AMRO Bank Kazakhstan
- Economic Statistics
- KazMunayGas Buys 51% of MangistauMunayGas
- KMG to Explore Myortviy Kultuk
- Karachaganak Consortium Paying Crude Export Duty
- Kazakhmys in Merger Talks with Metalloinvest
- New President of British Gas Kazakhstan
- Energy Statistics for January-June 2008

New Transfer Pricing Law Signed
--------------


2. President Nazarbaev signed a new transfer pricing law on July 5,
which, in the words of Finance Minister Zhamishev, is not designed
to collect as much tax as possible, but rather to ensure that taxes
are paid in the country where income is generated. The new law
specifies an "arm's length principle" and provides for preliminary
approval of transaction prices. Zhamishev believes the law will
allow fiscal authorities to more easily identify companies that
avoid paying taxes via offshore transactions.

Kazakhstan-Russia Cooperation on Financial Supervision
-------------- --------------


3. Kazakhstan's Financial Supervision Agency (FSA) and the Central
Bank of Russia signed a memorandum on matters of bank supervision
which promises an increased exchange of information between monetary
officials regarding banks and their subsidiaries operating in the
two countries. Specifically, details of banks' shareholders,
management structure, affiliates, activities, and financial status
are to be shared in an effort to assist monetary officials in taking
decisions on bank permits and licenses. The memorandum also

specifies cooperation on bank inspections and outlines plans to set
conditions for data protection in Kazakhstan and Russia.

Kyrgyzstan to Receive Kazakhstani Wheat
--------------


4. Despite a standing ban on wheat exports, Kazakhstan will fulfill
its pledged shipments of wheat to Kyrgyzstan. According to the
Kazakhstan Embassy in Bishkek, immediately following Kyrgyz
President Kurmanbek Bakiyev's recent visit to Kazakhstan, the two
countries reached an agreement on Kazakhstan's supplying 50,000 tons
of grain to Kyrgyzstan. Kyrgyzstan has already received 10,000 tons
of grain, and the remaining 40,000 tons will be shipped in the near
future.

New Head of ABN AMRO Bank Kazakhstan
--------------


5. Rudi Geerdink will replace Jurgen Rigterink as Chairman of the
Managing Board and Country Head of ABN AMRO Bank Kazakhstan,
according to a bank press release from July 16. Geerdink joined ABN
AMRO in 2000 after working on risk management at PriceWaterhouse.

Economic Statistics
--------------


6. According to the Ministry of Economy and Budget Planning, GDP
growth for the first six months of 2008 was 5.1% on an annualized
basis. Inflation for the month of June was 1.2%. On an annualized
basis, prices for food products grew by 29.3%, for paid services by
15%, and for non-food products by 11.6%. June-on-June inflation was
20%.


7. For the first five months of 2008, Kazakhstan's external trade
was $41.596 billion, an increase of 41.8% over the same period the
previous year. Exports grew by 60% to $28.012 billion and imports
increased 14.8% to $13.584 billion. The main destination countries

ASTANA 00001361 002.2 OF 002


for Kazakhstani exports were Italy (17.4% of total exports),
Switzerland (15.2%),China (9.2%),Russia (8.6%),France (8.2%),the
Netherlands (5.3%),Iran (3.4%),Israel (3.3%),Ukraine (3.3%) and
Turkey (2.6%). The list of the largest exporters to Kazakhstan
included Russia (39.1% of total imports),China (9.9%),Germany
(7%),the U.S. (5.3%),Ukraine (5.2%),Japan (3.2%),Italy (2.8%),
Turkey (2.6%),France (2.3%),and the UK (1.7%).

KazMunayGas Buys 51% of MangistauMunayGas
--------------


8. Kazakhstan's national oil and gas company, KazMunayGas (KMG),
signed an agreement to purchase a 51% stake in MangistauMunayGas
company (MMG),which had been majority owned by Indonesia's Central
Asia Petroleum Corp. Former KMG president Uzakbay Karabalin has
been appointed MMG director general. MMG owns 36 oil and gas fields
and a 58% stake in the Pavlodar Petrochemical Plant.

KMG to Explore Mertviy Kultuk
--------------


9. Kazakhstan's Ministry of Energy and Mineral Resources and KMG
signed a contract for the exploration and production of hydrocarbons
in the Mertviy Kultuk offshore section of the Caspian Sea. The
recoverable oil resources are estimated at 164 million tons. A 50%
stake in this project will be given to a legal entity which will be
established by a group of Kazakhstani investors.

Karachaganak Consortium Paying Crude Export Duty
-------------- ---


10. Karachaganak Petroleum Operating B.V. (KPO) paid $82.5 million
in crude export duties in June. On July 17, the Finance Ministry
published on its website an updated list of companies subject to
Kazakhstan's new crude export duty, with KPO the sole addition to
this latest version of the list.

Kazakhmys in Merger Talks with Metalloinvest
--------------


11. The largest copper producing company in Kazakhstan, Kazakhmys,
is holding preliminary negotiations with Russia's Metalloinvest
holding company regarding a potential merger. Metallinvest annually
produces 6 million tons of steel and 40 million tons of ore.

New President of British Gas Kazakhstan
--------------


12. Peter Dranfield replaced Lewis Affleck as president of British
Gas Kazakhstan. Dranfield has been in charge of BG operations in
Egypt, Trinidad and Tobago, and most recently Oman. He previously
worked in Kazakhstan during the 1990s.

Energy Statistics for January-June 2008
--------------


13. According to the National Statistics Agency, Kazakhstan's crude
production was 29.19 million tons during January-June 2008, a 7.8%
increase over the same period in 2007. Gas condensate production
rose 4% to 6.44 million tons. Kazakhstan extracted 53.95 million
tons of coal during January-June, a 19.8% increase.

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