KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, AUGUST 3 - AUGUST

UNCLAS SECTION 01 OF 02 ASTANA 001609

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
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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KTDB KZ
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, AUGUST 3 - AUGUST
16, 2008

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

-- Banking Sector Updates
-- New Player in Local Capital Market
-- Competition Agency Announces Inspection Results
-- Ministry Presents Draft of New Subsoil Use Legislation
-- Arcelor Mittal Reduces Its 2008 Output
-- Petrocapital Resources To Buy Almas International
-- Rusal Plans To Build Aluminum Plant
-- Gasprom Neft Seeks To Buy Gas Stations in Kazakhstan

Banking Sector Updates
--------------


2. According to the Financial Supervision Agency, Kazakhstan's
commercial banks earned a net profit of 67.9 billion tenge
(approximately $565 million) during January-June 2008, which is down
41.4% in comparison with the same period in 2007. Commercial bank
revenues totaled 1.297 trillion tenge (approximately $10.8 billion),
a 68.7% increase over January-June 2007. However, expenses totaled
1.229 trillion tenge (approximately $10.2 billion),a 95.1% increase
over the same period in 2007.


3. Alnair Capital Holding has increased its stake in
KazKommertsBank (KKB) to 25.15%, officially making it a "bank
holding company," according to the definition used by the Financial
Supervision Agency. Alnair Capital Holding is controlled by Sheikh
Tahnoon Bin Zayed Al Nahyan of Abu Dhabi. Kazakhstani newspaper
Respublika speculates that the new shareholders are anxious for
radical changes in KKB's top management.


4. Kazakhstan's Alliance Bank has secured a $95 million loan from
Merrill Lynch International. According to an Alliance press
release, the 9.67% loan will mature on January 20, 2010. Alliance
Bank will in turn use the borrowed funds to provide credit to their
clients.


5. According to the Kazakhstan Stock Exchange (KASE),ABN AMRO
Kazakhstan was recently renamed RBS Kazakhstan. The change comes
following the purchase of Netherlands-based ABN AMRO by a consortium
of the Royal Bank of Scotland, Fortis, and Santander back in October

2007.

New Player in Local Capital Market
--------------


6. The Eastland Capital Group Ltd has announced plans to invest
between $10-15 billion in Kazakhstan, directed at projects in the
oil and gas, mining, metallurgy, transport-logistics, agro-industry,
and financial sectors. Eastland Capital manages large sovereign and
private funds from the Middle East, South-East Asia and Europe.

Competition Agency Announces Inspection Results
-------------- --


7. Competition Agency Chairman Mazhit Yesenbayev accused the
national oil and gas company KazMunayGas (KMG),PetroKazakhstan (a
subsidiary of China National Petroleum Corporation),and Helios (a
MangistauMunayGas subsidiary) of monopolizing 70% of the wholesale
market for oil products. The Competition Agency brought charges to
the financial police against a total of 64 companies suspected of
price collusion in the oil products market.

Ministry Presents Draft of New Subsoil Use Legislation
-------------- --------------


8. Energy Minister Sauat Mynbayev presented to the government a
draft for new legislation on subsoil use, which would mandate
separate contracts for exploration and production, favor bidders
that offer socio-economic assistance to local communities, and give
the government a first right of refusal over subsoil assets. From
January to June 2008, 20 subsoil use contracts were annulled,
compared to 84 during November-December 2007. According to
Mynbayev, 90 percent of companies are meeting their contractual

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obligations per their subsoil use contracts.

Arcelor Mittal Reduces Its 2008 Output
--------------


9. Arcelor Mittal Temirtau (AMT) plans to produce 3.8 million tons
of steel in 2008, down from 4.2 million in 2007. In 2008, AMT
intends to invest approximately $500 million to upgrade its
production facilities.

Petrocapital Resources To Buy Almas International
-------------- --------------


10. Petrocapital Resources Company, a U.S.-firm, reached an
agreement with Jurby Corporation to acquire a 50 percent stake in
Kazakhstan's Almas International Trading Company for $54 million by

2010. Almas exports crude and oil products to Poland, Ukraine, the
Netherlands, the UK, Estonia, Latvia, Mongolia, Afghanistan,
Kyrgyzstan, and Tajikistan. Almas's revenues exceed $1 billion a
year.

Rusal Plans To Build Aluminum Plant
--------------


11. The Rusal ("Russian Aluminum") company managing the Bogatyr
open coal mine in Ekibastuz announced plans to build an aluminum
plant in Ekibastuz with a designed capacity of 500,000 tons of
aluminum a year and a 2.5-year construction period.

Gasprom Neft Seeks To Buy Gas Stations in Kazakhstan
-------------- --------------


12. Russia's Gasprom Neft plans to purchase gas stations in
Kazakhstan to supply its fuel products, including from the Omsk
refinery, which is close to the Kazakhstan border.

ORDWAY
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