KAZAKHSTAN: OPPORTUNITY IN MANGYSTAU OBLAST

UNCLAS ASTANA 002350 SENSITIVE SIPDIS STATE FOR SCA/CEN, SCA/PPD, EEB, DRL E.O. 12958: N/A TAGS: PGOV PHUM PREL ECON EINV EPET KPAO KDEM AE AJ, IR, RS, TX, UZ, KZ SUBJECT: KAZAKHSTAN: OPPORTUNITY IN MANGYSTAU OBLAST REF: A. ASTANA 02298 ¶B. ASTANA 02317 ¶C. ASTANA 02321 ¶D. ASTANA 02345 ¶E. ASTANA 02349 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: Deputy Chief of Mission and poloff visited the port-city of Aktau, the capital of Mangystau oblast, during November 5-6. In addition to attending the construction completion ceremony of the U.S.-funded Sodium Processing Facility on the territory of the BN-350 fast breeder reactor (reftel A),DCM and poloff also attended the Mangystau Oil and Gas Exhibition and conducted a series of meetings with representatives of industry, educational institutions, and non-governmental organizations (reftels B-E). Mangystau oblast has already begun to develop several oil deposits, while also competing with neighboring Atyrau oblast to serve as the main base for oil and gas support services in Kazakhstan. Interlocutors looked forward to increased U.S. involvement in the region, especially in the oil services sector. Per capital income in Mangystau is significantly above the national average, and poloff,s interlocutors expressed satisfaction with local economic conditions. A local NGO representative described good recent cooperation with local authorities on ecological issues. The oblast shares a land-border with Turkmenistan, as well as Caspian Sea maritime borders with Russia, Azerbaijan, Turkmenistan and Iran. Trade with Russia and Azerbaijan was viewed positively by the local business community, although they acknowledged obstacles in trade with Turkmenistan and Iran, and there was no evidence of a significant Iranian or Turkmen presence in Aktau, Mangystau,s capital city. END SUMMARY. MANGYSTAU EAGER TO ESTABLISH ITSELF AS KAZAKHSTAN,S OIL SERVICE CENTER ¶3. (SBU) Mangystau oblast is located in Kazakhstan,s southwestern corner, more than 1,000 miles from Astana. The arid desert oblast, which shares a land-border with Turkmenistan, as well as Caspian Sea maritime borders with Russia, Azerbaijan, Turkmenistan and Iran, is Kazakhstan,s seventh largest in territory, but smallest in population. It is also Kazakhstan,s second least densely populated province. Next to its northern neighbor, Atyrau, Mangystau has Kazakhstan,s most significant hydrocarbon deposits and an excellent natural port. The mining sector (which includes oil) dominates the oblast,s economy, accounting for 8.14% of its GDP. ¶4. (SBU) As part of the region,s goal of establishing itself as a competitor to oil-rich Atyrau, Mangystau has created a tax-free special economic zone centered on Aktau port. The port, noted Mangystau Deputy Akim (governor) Nurgaliyev with pride, is already the largest on the Caspian and currently handles one third of all traffic across the Caspian. It is expected to grow to twice its size within the next few years, and the Development Bank of Kazakhstan has already committed to several port development projects. MANGYSTAU HOSTS OIL AND GAS EXHIBITION TO ATTRACT INVESTMENT ¶5. (SBU) To advance their goal of becoming the off-shore oil services center of Kazakhstan, regional administrators hosted the third annual Mangystau Oil and Gas Exhibition during November 4-7, 2008, at the Mangystau Exhibition Center, located next door to Mangystau Nur Otan Party Headquarters. (COMMENT: The proximity of the exhibition, Nur Otan Headquarters and the Mangystau Regional Administration,s offices are not coincidental. During the last Presidential election, Mangystau had the highest rate of votes for Nur Otan, despite the fact that one of the most prominent opposition politicians is originally from the region. END COMMENT.) During poloff,s visit to the exhibition, United States Commercial Service Representative Azhar Kadrzhanova stated that the event had grown dramatically to its current size of 46 participating companies. The exhibition, however, was dominated by Kazakhstani and Russian companies, with only one U.S. company, FMC Technologies, represented. The FMC representative, Material Supervisor Tanat Ishangali, stated that Aktau is FMC,s service base for the entire Commonwealth of Independent States. Ishangali noted with satisfaction that FMC,s business in Aktau exceeded its commerce in Atyrau this year. Ishangali also praised the Mangystau government for being &very cooperative,8 particularly noting that they have had no problems processing work permits for their foreign workers. AKTAU: THE NEW ORLEANS OF KAZAKHSTAN? ¶6. (SBU) Deputy Akim Nurgaliyev, who just returned from the October 29-November 1 World Cultural and Economic Forum in New Orleans, acknowledged that his goal is to turn Aktau into &the New Orleans of Kazakhstan.8 Nurgaliyev pointed out that Aktau is already the largest port on the Caspian and that the northern portion of the Caspian Sea, where its competitor, Atyrau, is located, is too shallow for a port. Nurgaliyev firmly stated that he &would welcome Aktau becoming the next Dubai, Aberdeen, or New Orleans, but not Las Vegas.8 (COMMENT: Nurgaliyev made clear that his vision for &the New Orleans of Kazakhstan8 was centered on attracting economic investments, especially oil services. Although Nurgaliyev himself mentioned the beauty of the French Quarter in New Orleans, he did not discuss any details of plans to develop tourist areas or ecological parks, despite press reports that Mangystau has attracted $2.3 billion in investments into the Kenderli resort zone. END COMMENT.) Nurgaliyev returned from his October visit to Louisiana with a signed agreement of cooperation between Mangystau oblast and the port of Louisiana, which he hopes will help Mangystau develop into a base for off-shore oil service providers. MANGYSTAU WELCOMES COOPERATION WITH THE UNITED STATES ¶7. (SBU) Deputy Akim Nurgaliyev strongly encouraged the United States to open an American Presence Post in Aktau, pointing out that the Mangystau region has the second highest population growth rate in Kazakhstan after Astana. Nurgaliyev called DCM and poloff,s attention to the fact that Aktau airport had recently been remodeled, and that Mangystau has been participating in an &earth-sea-sky8 development program. According to Nurgaliyev, Mangystau secured Kazakhstani central government funding to bring in UAE investors to develop the region,s infrastructure. Nurgaliyev expressed hope that such growth for Mangystau would also bring opportunities for U.S. businesses, and mentioned having met recently with McDermott and Schlumberger. Nurgaliyev also stated that an agreement has already been signed between with Conoco-Philips on the N block, which is located directly across from Mangystau,s new port of Kuryk. Finally, Nurgaliyev reminded DCM and poloff that it is very expensive and inconvenient for Aktau residents to travel to Astana or Almaty to secure U.S. visas, and expressed the hope that if the American business community continued to grow with the port and oil sectors, the United States might establish a branch office of the Embassy in Aktau. Deputy Rector of the Caspian State University of Technology and Engineering (CSUTE),Bekzhan Saurbayev, also noted that CSUTE signed an agreement with the Louisiana State,s university system on October 30, 2008. Saurbayev proudly highlighted the various exchanges taking place between his university and U.S. universities, and expressed his hope that such mutually beneficial cooperation would continue. TOO LATE FOR U.S. COMPANIES TO BID ON PORT PROJECTS ¶8. (SBU) Representatives from Caspiy Meruerty company, SEC Caspiy company, the Mangystau Akimat (regional administration) and Kazakhstan,s national shipping company, Kazmortransflot (KMTF),all discussed KazMunaiGaz,s proposal, approved by the government in 2005, to expand the small sea-port at Kuryk. (NOTE: Aktau port is operating at maximum capacity and due to its location, is not able to receive tankers with 60,000 ton displacements, whereas Kuryk provides a better natural shelter where uninterrupted operations can be carried out throughout the winter and during storms. END NOTE.) KMTF played a leading role in constructing and operating the Kuryk port, and plans to ship 7.5 million tons of crude from Kuryk in its first year of operations. Deputy Akim Nurgaliyev indicated that since port development is almost complete, it would be difficult for U.S. businesses to find opportunities to work on port projects at such a late stage. KMTF officials also indicated that shipbuilding contracts have already been awarded to Russian firms. STRONG OPTIMISM ABOUT ECONOMIC OPPORTUNITIES ¶9. (SBU) According to Kazakhstani government statistics, per capital GDP in Mangystau oblast is $15,451, significantly above the national average of $6,870 (although below Atyrau,s average of $21,640). Poloff,s various interlocutors in Aktau without exception expressed satisfaction with the current economic situation ) and confidence that the future was even brighter. Representatives from MAEK-Kazatomprom, FMC Technologies, Caspiy Meruerty, SEC Caspiy, and CSUTE all said they were optimistic about opportunities for economic development and employment in Mangystau (reftels B-E). ¶10. (SBU) Caspian State University of Technology and Engineering particularly seems poised to benefit from the region,s increasing prosperity. The university, which currently owns property throughout the city, including significant waterfront holdings, is planning to open its new campus near the airport on September 1, 2009. The university is also developing a beach-front restaurant and shopping complex less than 100 yards from the luxurious $200 per night Renaissance Marriott Hotel. LOCAL NGO REPORTS GOOD COOPERATION WITH LOCAL AUTHORITIES ¶11. (SBU) Kirill Osin, Director of a local NGO, Eco-Mangystau, explained to poloff that his organization recently established good cooperation with local authorities. Osin,s NGO runs an information resource center, organizes environmental clean-up campaigns and lobbies media and government on environmental issues. Currently Eco-Mangystau is working on a project called &Transparency in Local Administration,8 by creating a database of information about local leaders and their decisions. At the 2005 Extractive Industry Transparency Initiative (EITI) conference, the Akimat (regional administration) accepted Osin,s proposal to establish a four-party council, including representatives from the regional administration, NGOs, mass media and extractive industry companies. ENTHUSIASM ON AZERBAIJAN, CAUTIOUS ON IRAN AND TURKMENISTAN ¶12. (SBU) Deputy Akim Nurgaliyev told DCM and poloff that Mangystau hopes to be the center of several trade routes: 1) a revitalized &New Silk Road,8 2) a new north-south route, and 3) a regional Caspian route. Despite the fact that Mangystau oblast has maritime access to Azerbaijan, Turkmenistan, and Iran, poloff saw surprisingly few visible signs of their influence in Aktau. Nevertheless, Nurgaliyev emphasized that Azerbaijan already has a consulate in Aktau, and that the the Russian Federation, Iran and Uzbekistan plan to open consulates. If relations between the United States and Iran improve, noted Nurgaliyev, there would be many opportunities in the Mangystau region for both Kazakhstan and the United States, in particular, sending oil to the Iranian port of Neka. Nurgaliyev specifically mentioned opportunities for increased oil swaps with Iran. ¶13. (SBU) Kazakhstan,s national shipping company, Kazmortransflot (KMTF) has been working very closely with Azerbaijan, especially Kaspar (Azerbaijan,s National Shipping Company) and hopes to sign an agreement on principles with another leading Azerbaijani company. KMTF officials confirmed that the volume of trade with Russia and Azerbaijan is anticipated to remain significant, but downplayed the extent of their cooperation with Iran, pointing out that occasional shipments of oil south to Iran are complicated by political issues and infrastructure limitations. KMTF officials also mentioned unsuccessful Kazakhstani efforts at closer cooperation with Turkmenistan. Interlocutors from KMTF were interested in working with all Caspian states to simplify paperwork procedures and develop emergency response plans. ¶14. (SBU) Educational institutions are also actively pursuing cooperation in the Caspian region. CSUTE has students from all five Caspian republics. Deputy Rector Saurbayev told DCM and Poloff that authorities changed the name of the university in May to emphasize its role in preparing regional specialists. Saurbayev also noted that the university recently created special programs to help Turkmen and Iranian students. Saurbayev told the DCM and poloff that although the majority of CSUTE,s &foreign8 students come from former Soviet states, many former Kazakhstani citizens living in Iran have also sent their children to study at Caspian State University. AKTAU CITY: A CITY OF CONTRASTS ¶15. (SBU) COMMENT: The view from the two sides of the Marriott Renaissance Hotel, where standard single rooms without breakfast are $200 per night and business suites run $1000 per night, clearly demonstrates the contrast between Aktau,s past and future. On one side, a large television screen displays advertisements (above streets with very little traffic) showcasing the city,s modernity; on the other side is a Soviet MiG fighter jet. The beachfront near the hotel is lined with posh clubs, yet the beach is littered with debris and broken bottles. Nevertheless, as reftels A-E indicate, local interlocutors are optimistic that Mangystau and Aktau have tremendous potential for economic growth. Regional administrators are working hard to partner with NGOs, encourage international cooperation, and welcome private business. END COMMENT. HOAGLAND