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