KAZAKHSTAN - GOVERNMENT TAKING FURTHER MEASURES

C O N F I D E N T I A L ASTANA 001375

SIPDIS

E.O. 12958: DECL: 07/31/2018
TAGS: PGOV PREL KCRM ECON KZ
SUBJECT: KAZAKHSTAN - GOVERNMENT TAKING FURTHER MEASURES
AGAINST RAKHAT ALIYEV IN WAKE OF WSJ ARTICLE

Classified By: Pol/Econ Chief Steven Fagin, Reasons 1.4 (b) and (d)

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SUMMARY
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1. (C) A Wall Street Journal article in which Rakhat Aliyev
made new charges of corruption against President Nazarbayev
and his family appears to have provoked the government to
strike back with an anti-Aliyev media campaign and a threat
of new charges against him. Some of Aliyev's allegations to
the Journal appear to be unsubstantiated. Prime Minister
Masimov called in the Ambassador to explain that one claim in
the article about his own business interests was true, but
had been listed on his public disclosure forms. End
Summary.

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ALIYEV PROVIDES "NEW DETAILS" ON CORRUPTION
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2. (C) A July 22 Wall Street Journal (WSJ) article bills
itself as providing "new details" on the corruption of
President Nazarbayev and his family. The article, which is
entitled "Kazakhstan Corruption: Exile Alleges New Details,"
relies heavily on an interview with and documents provided by
ex-Nazarbayev son-in-law Rakhat Aliyev, the sole named
source. Aliyev claimed to the Journal that Nazarbayev holds
vast hidden ownership stakes in various Kazakhstani
industries, takes illicit commissions from firms doing
large-scale business in Kazakhstan, controls a large network
of off-shore bank accounts, and hired a consulting firm to
burnish his image in the West and "spy" on his political
rivals and enemies abroad. In reality, Aliyev did not
substantiate with documentary evidence some of his most
significant "revelations" -- e.g., that Nazarbayev secretly
owns nuclear company Kazatomprom through offshore entities.
(Comment: We do not see how Nazarbayev could own a state
enterprise in which the government is the 100 percent
shareholder. End Comment.) It is also unclear whether the
activities of the consulting firm -- a main focus of the
article -- were in any way illegal.

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MASIMOV: BUSINESS INTEREST WAS FULLY DISCLOSED
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3. (C) Immediately after the article was published on July
22, Prime Minister Masimov called in the Ambassador for a
tete-a-tete to discuss it just prior to Masimov's scheduled
meeting with visiting Special Envoy for Eurasian Energy
Issues Boyden Gray. Masimov noted that the article claims
that he is a co-owner of a Singapore-based company together
with a Kazakhstani banker named Aigul Nuriyeva who, according
to the article, helps manage the Nazarbayev family finances.
Masimov explained to the Ambassador that his share in this
company is not a secret, as the asset is listed on his
financial disclosure forms.

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MEDIA CAMPAIGN AND NEW CHARGES AGAINST ALIYEV
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4. (C) The Journal article appears to have provoked a new
Kazakhstani government move against Aliyev. On July 29,
anti-Aliyev articles appeared simultaneously in three
Kazakhstani newspapers: government-owned Kazakhstanskaya
Pravda; privately-owned, centrist, populist Vremya; and
privately-owned, largely pro-government Litr. The
Kazakhstanskaya Pravda opinion piece explained that articles
sometimes appear in the foreign press based on "cock and bull
stories" from the "turncoat" Aliyev, who wraps himself in
democratic clothing, trying to use it to cover up his
unprecedented crimes. Quite unusual for Kazakhstanskaya
Pravda, the piece cited opposition leader Zharmakhan
Tuyakbay, who remarked that today one could easily form a
whole club of those aggrieved by Aliyev. The Vremya article
noted that the "Vienna recluse" continues to carry out his
war of kompromat, bombarding the Kazakhstani and
international media with his newest "revelations." It
contended that there is a danger that Aliyev will be turned
into some kind of Boris Berezovskiy, becoming the principal
Kazakhstani "democrat" in the eyes of western society. Most
significantly, the Litr article detailed the history of
Aliyev's "corporate raiding" -- i.e., his obtaining control
of businesses for free or at below market prices by
threatening and blackmailing the businesses' owners.


5. (U) The following day, July 30, the Interfax newswire
reported that according to a reliable source, the National

Security Committee (KNB) was investigating a new case against
Aliyev and his associates -- this time, on charges of
"corporate raiding." The source claimed that the money
generated from the "raiding" was used by Aliyev for his
preparations to overthrow the government -- a crime he was
convicted of in March.

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COMMENT
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6. (C) The Wall Street Journal piece raises a broader policy
question: what impact do such allegations of corruption
about Nazarbayev and his family (and the reality that may
stand behind them) have on Kazakhstan's political stability?
The fact of the matter is that in the wake of Aliyev's
demise, Nazarbayev took relatively quick action to ensure
that his family would be less of a source of political
friction. Daughter Dariga Nazabayeva essentially disappeared
from the political scene. (Note: She had been a member of
parliament and head of a separate political party, Asar.
After the forced merger of Asar with Nur Otan, she was a
deputy chair of the combined party. She was not elected to
the new parliament in August 2007 and is no longer in the Nur
Otan leadership. End Note.) Remaining son-in-law Timur
Kulibayev was removed from his position as deputy head of the
Samruk state holding company (which owns state oil and gas
company KazMunaiGas). At present, Kulibayev's only position
is as head of KazEnergy -- an industry association of oil and
gas companies -- though admittedly, he has been raising his
profile in recent months. At this juncture, no Nazarbayev
relative would appear to have an inside track, or even much
of a chance, to succeed him as president.


7. (C) Comment continued: Of additional note, despite the
first family's accumulation of assets, Nazarbayev has done
quite a good job ensuring that the country's burgeoning
wealth is shared with other elite clans and factions -- not
to mention the fact that there has been a very significant
reduction in the country's poverty rate over the past ten
years, from roughly 50 percent of the population to the
current level of 9 percent. It is even still possible --
though rare -- for the super rich to flirt with the
opposition camp, as in the case of Bank TuranAlem head
Mukhtar Ablyazov and Kazkommertsbank owner Nurzhan
Subkhanberdin. Finally, to nip public discontent in the bud,
the government has been more aggressively addressing the
issue of official corruption. Cynics, of course, might say
that recent anti-corruption campaigns have less been a move
forward toward the rule of law, and more a tool deployed to
promote specific political or economic interests. However,
the Presidential Administration's polling, like ours,
undoubtedly shows that corruption has emerged over the past
few years as a major public concern. End Comment.
ORDWAY