Identifier
Created
Classification
Origin
08ASTANA2345
2008-11-25 10:58:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:  

KAZAKHSTAN'S MAEC-KAZATOMPROM FACES FUNDING

Tags:  PGOV PREL ECON EINV ENRG KNNP TX KZ 
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RUEHSR RUEHVK RUEHYG
DE RUEHTA #2345/01 3301058
ZNR UUUUU ZZH
R 251058Z NOV 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 3951
INFO RUCNCIS/CIS COLLECTIVE 0852
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0251
RUEHKO/AMEMBASSY TOKYO 0961
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RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 0334
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RHEFAAA/DIA WASHDC
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 ASTANA 002345 

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV ENRG KNNP TX KZ
SUBJECT: KAZAKHSTAN'S MAEC-KAZATOMPROM FACES FUNDING
CHALLENGES AND POTENTIAL OWNERSHIP CHANGES

REF: ASTANA 02086

UNCLAS SECTION 01 OF 02 ASTANA 002345

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV ENRG KNNP TX KZ
SUBJECT: KAZAKHSTAN'S MAEC-KAZATOMPROM FACES FUNDING
CHALLENGES AND POTENTIAL OWNERSHIP CHANGES

REF: ASTANA 02086


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: On November 5, DCM and poloff visited
Mangystau Atomic Energy Complex (MAEC),a subsidiary of
Kazatomprom, to attend the construction completion ceremony
of the U.S.-funded Sodium Processing Facility on the
territory of the BN-350 fast breeder reactor. The BN-350
facility was well-maintained and ready for spent fuel cask
transport operations. Morale among MAEC employees was high,
but senior company officials admitted the company is
operating under intense financial pressure due to high oil
prices and that possible ownership changes could
significantly affect MAEC,s structure. Senior officials at
MAEC and within the Akimat (regional administration) expect a
nuclear power plant to be built on MAEC territory within the
next few years. END SUMMARY.

FORMER CROWN JEWEL OF THE NUCLEAR EMPIRE SAFELY SHUT-DOWN


3. (SBU) The once top-secret BN-350 fast-breeder nuclear
reactor provided electricity and heating for Aktau city and
the surrounding region. The BN-350 reactor also formerly
operated a desalinization plant, critical for the desert
Mangystau region, which has no potable water supplies. After
the Soviet Union,s collapse, MAEC rapidly lost prestige and
influence. U.S. scientists recall that 15 years ago the
doors of the BN-350 facility were &hanging off the hinges.8
During a November 5 tour of reactor premises, however, DCM
and poloff observed that plant facilities, which included an
administrative complex featuring a large museum and a
billboard of &employees of the year,8 were well-maintained.
MAEC security workers were using an electronic badge system
to admit authorized employees through several checkpoints,
and those working or visiting the reactor were garbed in
protective gear before they were allowed to visit the cesium
traps and spent fuel reservoir. Embassy officials viewed the
480 small fuel casks awaiting placement into 60 TUK-123 casks

for the BN-350 spent fuel transport operation, funded jointly
by the U.S. Department of Energy and the government of
Kazakhstan. The control room, which used to operate at the
highest levels of security and maintain a four
person-security shift, now has only one person on duty, in
case of fire or emergency. The control room contained old
manual controls and rotary dial telephones, but MAEC
officials pointed out the computer-monitoring system that was
installed under the Nunn-Lugar program.

WAITING FOR A GREEN LIGHT ON TRANSPORT OPERATIONS


4. (SBU) U.S. officials also toured the specialized crane
and loading area designed for lifting the large spent fuel
cement casks onto trains for transfer to long-term storage at
Baikal-1. According to Yuriy Shirobokov, MAEC,s Head of the
BN-350 Decommissioning Department, the crane was completed
ahead of schedule by a crew of 14 Chinese laborers who worked
around the clock, and &everything at MAEC,s BN-350 site is
prepared. We are only waiting for authorization from
headquarters.8

MORALE REMAINS HIGH AT MAEC


5. (SBU) Morale among the 250 MAEC employees at BN-350
seemed high, since many expect a nuclear power plant will be
built onsite. Many workers have been employed at BN-350 for
15 to 30 years. Alexander Kim, Deputy Director of the
Kazakhstan Atomic Energy Commission, confirmed that during
the inspection he completed on November 5-6, he found no
safety violations, noting that workers at BN-350 were &very
experienced professionals in nuclear security.8

MAEC REMAINS UNDER INTENSE FINANCIAL PRESSURE


ASTANA 00002345 002 OF 002



6. (SBU) After the decommissioning of the BN-350 nuclear
reactor, MAEC,s generators and boilers were converted to run
on oil instead of nuclear power. However, Acting Deputy
Director Andrey Kozelkov explained that MAEC, which remains
the sole electrical and heating provider for the entire
Mangystau and Atyrau regions, faces serious maintenance and
funding challenges. MAEC currently sells its excess power to
neighboring oblasts. Aktau,s electricity consumption is
only 20% of what MAEC exports to Atyrau, for example, and
demand for energy in both regions is rising. Seventy to
eighty percent of the company,s electricity costs are for
purchasing imported oil, keeping profit margins narrow. MAEC
cannot freely increase prices because of the five-year
moratorium on residential electricity price increases,
declared in 2006, and an annual price-hike limit on
commercial customers. (NOTE: This complaint rings true when
compared with the experience of AES, the U.S. power company
active in northern and eastern Kazakhstan (reftel). END
NOTE.) Meanwhile, inflation is also rising rapidly and MAEC
must continue to raise salaries to retain qualified staff.
Despite support from local antimonopoly committee officials,
MAEC faces financial constraints. Kozelkov commented that if
Kazakhstan could buy natural gas from Turkmenistan and sell
electricity in exchange, both sides could realize tremendous
profits, but money to construct the necessary electricity,
gas and rail lines is lacking. The company is considering
laying off up to one-third of its 4,000 workers, if it can
contract with an outside company to provide maintenance
activities and automate services. In Kozelkov,s view, a
smaller, more efficient MAEC is likely to emerge if ownership
of the company is transferred from Kazatomprom to
KazMunaiGas, an idea currently under serious consideration.

CONSTRUCTION OF A NUCLEAR POWER PLANT AT BN-350 LIKELY


7. (SBU) Kozelkov also informed DCM and poloff that he was
&98 percent certain8 that a nuclear power plant would be
built at BN-350. Deputy Akim Nuragliyev also mentioned the
idea as &almost certain,& attributing the plan to Vladimir
Shkolnik, Minister of Trade and Industry, whom Nurgaliyev
described as &a very charming person with a big following
who has great authority and interest in the nuclear sector.8
(COMMENT: Shkolnik worked at the BN-350 reactor for
approximately 20 years, eventually becoming the plant,s
Deputy Director before becoming Minister of Science and
playing a key role in Kazakhstan,s counter-proliferation
efforts, including decommissioning of the BN-350 nuclear
reactor. Shkolnik is an avid proponent of the advantages of
nuclear power, and is likely to support Kazakhstan,s rumored
plans to build four nuclear power plants. Given Shkolnik,s
connections to BN-350, it would not be surprising that he
would be encouraging its selection as one of the four future
nuclear power plant sites. END COMMENT.) Nuragliyev also
stated that since Kazakhstan has the second largest uranium
resources in the world and is determined to become the top
uranium producer in the world, Kazakhstan should develop its
nuclear resources for the safe production of energy.
HOAGLAND