KAZAKHSTAN: TRANSPORT AND COMMUNICATIONS MINISTER

UNCLAS SECTION 01 OF 02 ASTANA 002277 SENSITIVE SIPDIS STATE FOR SCA/CEN, EEB STATE PLEASE PASS TO USTDA DAN STEIN E.O. 12958: N/A TAGS: PGOV PREL EAIR ELTN EINV MARR AF KZ SUBJECT: KAZAKHSTAN: TRANSPORT AND COMMUNICATIONS MINISTER DISCUSSES TRANSPORT INFRASTRUCTURE PLANS ASTANA 00002277 001.2 OF 002 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: Minister of Transport and Communications Serik Akhmetov told the Ambassador on November 19 that Kazakhstan aims to improve its transport infrastructure and develop itself as a transit corridor. The capacity of the port of Aktau will be doubled by ¶2012. Modernization of the railway system is ongoing, and General Electric's locomotive factory in Astana will commence production in ¶2009. The Ambassador noted that the U.S. government is preparing Open Skies proposals for discussion with Kazakhstan, and suggested resuming negotiations on a bilateral agreement on state aircraft fees. Akhmetov said Kazakhstan welcomes public-private partnerships in highway construction and is preparing to announce several highway tenders in December. The Ambassador stressed the importance of finalizing a Kazakhstan-NATO agreement for a northern GLOC for Afghanistan. Akhmetov responded that Kazakhstan supports the idea in principle. END SUMMARY. AMBITIONS TO DEVELOP TRANSIT CORRIDORS ¶3. (SBU) During a November 19 meeting with the Ambassador, Minister of Transport and Communications Serik Akhmetov detailed Kazakhstan's efforts to improve its transport infrastructure and develop itself as a transit corridor for international trade. Kazakhstan's geographic location in the center of Eurasia and long borders with China (4,000 km) and Russia (7,000 km) provide the country with great transit potential, he maintained. China-Europe transit is particularly important and is growing rapidly. Akhmetov said that Kazakhstan has established several international transit routes -- both road and rail -- which it intends to bring up to international standards. He added that the TRACECA (Transport Corridor - Europe - Caucasus - Central Asia) initiative is also very important for Kazakhstan, and noted that there will be a TRACECA anniversary event in Baku on December 2. SEAPORTS: AKTAU'S CAPACITY TO DOUBLE ¶4. (SBU) Akhmetov also stressed the importance of transit across the Caspian -- which is the shortest route from Kazakhstan to Europe. He noted that the port of Aktau, which is the country's largest on the Caspian, currently handles the transit of approximately 10 million tons of crude and 1.5 million tons of dry goods annually. Work is ongoing to double Aktau's capacity by 2012 -- in time for it to handle crude from Kashagan, which is expected to begin production in 2013. RAILWAYS: MODERNIZATION UNDERWAY ¶5. (SBU) Kazakhstan is also modernizing its railroad system, Akhmetov explained, extending electrification and bringing it up to European standards. He told the Ambassador that General Electric's locomotive factory in Astana is expected to commence production in 2009 and will have a capacity of 100 locomotives per year. According to Akhmetov, Kazakhstan is also interested in the production of passenger wagons. AIR TRANSPORT: NAVIGATION SYSTEM REACHING WORLD STANDARDS ¶6. (SBU) Akhmetov explained that because of Kazakhstan's geographic location, it has many important air corridors. The government is very open to air transport and transit. FedEx, he noted, flies daily into Kazakhstan. The country began modernizing its air navigation system six years ago and has almost completely brought it up to world standards. Lockheed-Martin has been a key supplier in the modernization effort, Akhmetov said. ¶7. (SBU) The Ambassador thanked Akhmetov for permitting senior Kazakhstani civil aviation officials to attend the 14th annual American Association of Airline Executives Conference held in Athens in October. (NOTE: Their attendance was funded by USTDA, which ASTANA 00002277 002.2 OF 002 used the event to bring together South and Central Asian civil aviation officials and airline representatives in order to promote liberalization and regional integration of the aviation sector. END NOTE.) The Ambassador noted that in Athens, the Kazakhstanis had discussed with their U.S. counterparts the possibility of an Open Skies Agreement. He promised Akhmetov that the U.S. side is currently preparing specific Open Skies proposals for discussion with Kazakhstan. ¶8. (SBU) The Ambassador also said that the United States would like to resume negotiations on a bilateral agreement on state aircraft fees. The two countries have differences on definitions of state aircraft, but we hope that they can be bridged. Akhmetov noted that negotiations had been initiated in 2001 and ascribed the difficulty in finalizing an agreement to differences in U.S. and Kazakhstani legislation. (NOTE: Kazakhstani legislation defines a state aircraft very narrowly, as one carrying a head of state or head of government. END NOTE.) He said the two sides need to find a compromise, and explained that the latest text proposed by the United States remains under review by the Ministry of Foreign Affairs. ROADWAYS: PRIVATE SECTOR INVESTMENT WELCOMED ¶9. (SBU) The Ambassador asked Akhmetov about Kazakhstan's plans for the development of highway infrastructure and what role public-private partnerships (i.e., concessions) might play. Akhmetov explained that Kazakhstan has a network of 100,000 km of roadways, including 22,000 km of roads of national importance. The country's highway budget, however, is only $1 billion per year. The government's aim is to develop two modern road transit corridors that meet European standards. Next year, work will be completed on the Astana-Shchuchinsk autobahn -- a 224 km-long, six-lane highway, with construction costs of $4.5 million per kilometer. The transit corridors will require construction of a length of roadway five times as long. According to Akhmetov, since the highway budget can not cover those costs, the government is actively seeking public-private partnerships. A recent legislative change that permits toll roads should facilitate private-sector investment in roads. The government is willing to provide co-financing, as well as share the risks by promising to compensate investors if road usage does not meet expectations. ¶10. (SBU) Akhmetov said that the government will announce four tenders in December for reconstruction of the Astana-Karaganda, Almaty-Kapchagai, Almaty-Khargoz, Almaty ring roads. These four roads, he maintained, have excellent potential. Akhmetov admitted that since the onset of the global financial crisis, the interest of major lenders in such projects in Kazakhstan appears to have waned to an extent. He claimed, however, that the EBRD remains interested in the Almaty-Khargoz road. (NOTE: Khargoz is on Kazakhstan's border with China. END NOTE.) The Ambassador asked about the prospects for financing from the Asian Development Bank (ADB),which has an interest in transit corridors. Akhmetov said that the ADB is waiting to see what the World Bank does. NORTHERN GLOC: SUPPORTED IN PRINCIPAL ¶11. (SBU) The Ambassador stressed the importance to Afghan stabilization efforts of finalizing a Kazakhstan-NATO agreement for a northern GLOC. He added that TRANSCOM Commander General Duncan McNabb would be visiting Astana on November 21 to discuss transit of Afghanistan-bound supplies and hoped to meet with Akhmetov. Akhmetov responded that Kazakhstan supports the concept of ground transit of NATO supplies. He said he might be on a business trip on November 21, but would meet with General McNabb if he is in Astana. He appeared willing to have one of his deputies meet with McNabb if he could not do so himself. HOAGLAND