KAZAKHSTAN AND INDIA SEEK TO REVIVE BILATERAL TIES

C O N F I D E N T I A L SECTION 01 OF 03 ASTANA 000768

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/18/2018
TAGS: PREL ECON ETRD KZ IN
SUBJECT: KAZAKHSTAN AND INDIA SEEK TO REVIVE BILATERAL TIES

Classified By: Pol/Econ Chief Steven Fagin, Reasons 1.4 (b) and (d)

--------------
Summary
--------------


1. (C) Bilateral relations between Kazakhstan and India
started off strongly following Kazakhstani independence, but
the momentum has slowed since then. Both sides appear to be
interested in reviving ties, and President Nazarbayev is
expected to visit to India in November -- his first trip
there in six years. During the April 7-10 visit to
Kazakhstan of Indian Vice President Ansari, the two sides had
cordial discussions, but no agreements were signed.
Kazakhstan-India trade has increased significantly in recent
years, but from a very low level. Trade barriers include
the high cost of goods transportation due to a lack of viable
overland trade routes. Thus far, Kazakhstan and India have
not made headway in developing bilateral mil-mil cooperation.
On a more positive note, cultural and people-to-people
contacts are increasing. We believe that, especially in
comparison with Russia, the U.S., China, and the European
Union, India will remain of only limited importance in
Kazakhstan's strategic vision. End Summary.

-------------- --------------
Kazakhstan-India Relations: Quick Start, Lost Momentum
-------------- --------------


2. (C) Kazakhstan-India bilateral relations got off to a
quick start following Kazakhstan's December 1991 declaration
of independence, but the momentum appears to have slowed
since then -- with Kazakhstan emphasizing ties to the North
(Russia),West (Europe and the U.S.),and East (China),over
those to the South. India was, in fact, among the first
nations to recognize Kazakhstani independence, and President
Nazarbayev made a state visit to New Delhi in February 1992
to formally establish bilateral diplomatic relations.
Nazarbayev made two subsequent state visits to India, first
in December 1996 and again in February 2002, when he endorsed
India's bid to become a permanent member of the UN Security
Council. However, Nazarbayev has not been back to Delhi in
over six years.


3. (C) During a February 11 meeting in Astana, Foreign
Minister Tazhin told visiting Assistant Secretary Boucher
that India, with its vast population and burgeoning economic
growth, held real potential for Kazakhstan. The Kazakhstani
government, he explained, hoped to revitalize ties with New
Delhi in the coming year, including through a "state visit."
It was subsequently announced in April that Nazarbayev will
visit India in November.


4. (C) As a prelude, Indian Vice President Mohammad Ansari --
who also serves as Chairman of the upper house of India's
parliament -- visited Kazakhstan during April 7-10 together
with an Indian parliamentary delegation, at the invitation of
Kazakhstani Senate Chairman Tokayev. Ansari met with
President Nazarbayev, Prime Minister Masimov, and Foreign
Minister Tazhin, and addressed the Kazakhstani parliament.
According to the presidential press service, Nazarbayev and
Ansari discussed expanding cooperation in economics, trade,
and information technology, and strengthening
inter-parliamentary ties. They also touched on oil and gas
cooperation, including regarding the Satpayev oil block on
the Caspian shelf. Ansari thanked Nazarbayev for
Kazakhstan's role in assisting India in getting observer
status in the Shanghai Cooperation Organization (SCO). In
addition to his government meetings in Astana, Ansari also
visited Almaty, where he was awarded an honorary doctorate by
Al-Farabi University. In a speech at Al-Farabi, Ansari
stressed the inter-connections between Central and South
Asia. Indian Embassy diplomat George Raju told us that while
Ansari was received warmly by the Kazakhstani government,
there were no agreements signed, and no major projects were
discussed in any detail.

-------------- --
Commercial Ties Growing -- But From A Low Level
-------------- --


5. (SBU) During the Ansari visit, the sides agreed to set up
an experts working group to explore ways to increase trade
and commerce. Indian Embassy officials told us they see the
potential for significant trade expansion. In fact,
Kazakhstan-India trade turnover increased by 76 percent from
2005 to 2006, from $120 million to $210 million. However, to
put this into context, the $210 million figure represented
just 0.3 percent of Kazakhstan's overall 2006 trade turnover
of $62 billion. (Note: Looking at this from the Indian
perspective, Kazakhstan was not even among India's top 50

ASTANA 00000768 002 OF 003


trade partners. End Note.) By contrast, Russia, China, and
the EU accounted for approximately 80 percent of Kazakhstan's
trade. In addition, in 2006, Indian investment in Kazakhstan
was a miniscule $16 million.


6. (C) The Indian Embassy admitted to us that there are a
number of barriers to increased bilateral trade, including
insufficient information about each country's markets,
language barriers, and the high cost of goods transportation
due to a lack of viable overland trade routes. Commercial
relations are also hampered by lack of an Indian chamber of
commerce or similar organization in Kazakhstan that could
relay information about Indian companies and lobby for Indian
business interests. Indian companies, not surprisingly,
complain about unpredictable and "arbitrary" treatment by
Kazakhstani tax and customs authorities. For instance, in
2006, Larsen and Toubro, India's largest engineering and
construction conglomerate, ended their operations in
Kazakhstan, allegedly because of persistent problems
encountered with red tape and corruption.


7. (SBU) India is not a meaningful player in Kazakhstan's oil
and gas sector, though India's ONGC Videsh Ltd. has attempted
to secure investment deals on Caspian offshore blocks and has
held talks with KazMunayGaz (KMG) and Kazakhstani officials
on oil transportation issues. Indian Oil Corp., Turkey's
Calik Energy, and KMG are also negotiating to jointly build
an oil refinery in Ceyhan, Turkey. The Indian Ambassador to
Kazakhstan has repeatedly stated that India is interested in
expanding its ties with Kazakhstan in the civilian nuclear
power sector. Kazakhstan holds the world's second largest
reserves of uranium -- a resource of great interest to India.

--------------
Mil-Mil Ties: Lost Opportunities
--------------


8. (C) Though Nazarbayev and Ansari reportedly also discussed
"military-technical cooperation," Kazakhstan and India have
not managed to succeed in establishing meaningful mil-mil
ties. The Indian Embassy told us that Kazakhstani Defense
Minister Akhmetov, Defense Chief General Altynbayev, and Navy
Chief Rear Admiral Komratov had been invited to visit India
from February 15-18. (Note: This information has been
reported separately via DOD channels. End Note.) The visit
was to take place during a military equipment exposition,
which was attended by more than 50 national delegations. The
Indian Defense Ministry had made a special effort to get a
meeting between Akhmetov and Indian Defense Minister Antony.
However, two days before the scheduled visit, Kazakhstani
Defense Ministry officials informed the Indian side that
Akhmetov had decided to travel to Russia instead.
Altynbayev's staff separately informed the Indians that he
could also not attend. (Note: Once Akhmetov declined,
Altynbayev may have had to back out as well for Kazakhstani
protocol reasons. End Note.)


9. (C) The Indians feel snubbed since this is the second time
that a senior Kazakhstani defense delegation has cancelled a
visit recently. In August 2007, Deputy Defense Minister
Sembinov cancelled his trip to India with no explanation. At
this time, we believe there is little enthusiasm on either
side for pushing forward with a Kazakhstan-India bilateral
security program.

-------------- ---
Cultural, Educational, and People-to-People Ties
-------------- ---


10. (SBU) There is brighter news on other fronts. Cultural,
educational, and people-to-people ties between Kazakhstan and
India are modest, but appear to be increasing. Indian
Embassy officials estimate that there are currently 2500
Indian nationals in Almaty (including up to 1000 Indian
medical students),about 100 in Astana, and about 40-50 in
the Temirtau-Karaganda region working for the steel producer
ArcelorMittal. Astana's Eurasian National University and
Almaty's Al-Farabi University have started offering Hindi
classes in their oriental languages departments and have
established exchange programs with India. In March, the
first center for Kazakh language and studies opened at
Delhi's Jamia Milia Islamia University.


11. (SBU) In Kazakhstan's larger cities, we have noticed a
growing interest in Indian traditions, including vegetarian
cuisine, yoga, and dance. The Indian government established
an Indian Cultural Center (ICC) in 1992, which was moved from
Almaty to Astana in January 2008. The ICC offers regular
yoga classes, cooking demonstrations, Indian cinema, and
Hindi language classes.


ASTANA 00000768 003 OF 003



12. (SBU) Kazakhstan's principal airline, Air Astana, offers
twice a week service between Almaty to Delhi, though at
inconvenient hours. Talks are underway to increase service
to three times per week. We have observed that passengers on
this route are mainly Kazakhstani tourists, including
religious pilgrims (Hare Krishna and Sai Baba followers),and
yoga enthusiasts. There are also Kazakhstani vendors who buy
Indian goods to sell in Kazakhstan. Indians coming to
Kazakhstan on the flight appear to be either business people
or students.

--------------
Comment
--------------


13. (C) While there appears to be interest on both sides in
expanding bilateral relations across a number of fronts,
India will likely continue to play a limited role in
Kazakhstan's strategic vision. Lack of overland trade
routes puts India at a huge commercial disadvantage,
especially relatively to China. Geographic realties also
make it unlikely that meaningful quantities of Kazakhstani
oil and gas can be moved to the Indian market. The simple
fact of the matter is that geo-politics, history, mutual
commercial benefit, and the aspirations of the Kazakhstani
leadership portend a continued focus on Kazakhstani ties to
the North, West, and East, rather than South. End Comment.
ORDWAY