KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 5 - APRIL 18,

UNCLAS SECTION 01 OF 02 ASTANA 000782

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DEPT FOR SCA/CEN (O'MARA)
DEPT PASS TO OPIC - BALLINGER
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER
DEPT PASS TO AID - EE-PHILLIPS/RUSHING
TREASURY FOR OASIA/VELTRI
USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS
USDOC FOR 6110/ITA/TD/BI/RHALPERN
ANKARA FOR CFC

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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KTDB KZ
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 5 - APRIL 18,
2008


ASTANA 00000782 001.2 OF 002



1. Summary: This information is drawn primarily from the
Kazakhstani local press, and has not been verified for accuracy.

-- Temporary Ban on Wheat Exports
-- First Hearings on New Competition Law
-- Social Security of Bazaar Workers to Be Ensured
-- Economic Statistics for January-March 2008
-- Crude Export Duty Introduced
-- Metals Export Duty Proposed
-- National Sulphur Storage to Be Built
-- Caspian Energy Hub to Be Built
-- Energy Statistics for January-March 2008

Temporary Ban on Wheat Exports
--------------


2. To better ensure the country's food security, the Government of
Kazakhstan has banned wheat exports until September 1, 2008. Flour
exports are not affected. In 2007, Kazakhstan harvested over 20.1
million tons of wheat. Of the 10 million tons of wheat intended for
export this year, 7 million tons have already been exported.
(Interfax-Kazakhstan, April 15)

First Hearings on New Competition Law
--------------


3. The recently formed Competition Agency presented the government
with the first draft of a new competition law, which will be
submitted to parliament in November 2008. According to Competition
Agency chairman Mazhit Yessenbayev, the new law stipulates the
agency's statutory independence, a general reduction of state
interference in market competition, and the substitution of regular
inspections with market analysis to determine whether company
practices can be considered fair. (Kazakhstanskaya Pravda
newspaper, April 14)

Social Security of Bazaar Workers to Be Ensured
-------------- --


4. Minister of Industry and Trade, Vladimir Shkolnik suggested
amending the Law on Trade Regulation to add provisions imposing
social taxes and pension payments on bazaar vendors. According to
official statistics, as of January 1, 2008, more than 1 million
people, or approximately 15 percent of the Kazakhstani labor pool,
are employed in bazaars. Shkolnik, however, also made reference to
TASIS survey results indicating that as many as 27 percent of the
Kazakhstani labor force works in bazaars. (TV Channel 31, April 8)

Economic Statistics for January-March 2008
--------------


5. According to Economy and Budget Planning Minister Bakhyt
Sultanov, Kazakhstan's GDP grew at an annual rate of 5.3% during
January-March 2008. The unemployment rate dropped to 6.9%.
(Interfax-Kazakhstan, April 15)


6. According to the Financial Supervision Agency, Kazakhstan's 35
commercial banks earned a net profit of 27.6 billion tenge ($229.1
million) during January-March, a decrease of 46.8% year-on-year.
Meanwhile, deposits grew 2.3% and loans dropped 0.1%. (Press Release
of the Financial Supervision Agency, April 15)

Crude Export Duty Introduced
--------------


7. Kazakhstan will introduce a $109.91 per ton crude export duty on
May 17. However, companies that pay rent tax will be charged just
$27.43 per ton. The new duty does not apply at all to projects
enjoying a fixed tax regime under their subsoil use contracts (this
includes TengizChevrOil, Kashagan, and Karachaganak). Minister of
Industry and Trade Vladimir Shkolnik said that he does not rule out
the possibility of repealing the crude export duty in the new tax
code that is expected to go into effect January 1, 2009. In view of
the new crude export duty, KazMunayGas Exploration & Production, a
KMG subsidiary, will revise its production, finance, and investment

ASTANA 00000782 002.2 OF 002


plans. (Interfax-Kazakhstan, April 17; Liter newspaper, April 9;
Press Release of EP KMG, April 8)

Metals Export Duty Proposed
--------------


8. Vice Minister of Finance Daulet Yergozhin announced that the
Government of Kazakhstan will establish a new metals export duty by
the end of April. It will be lower than that of the new crude
export duty. (Interfax-Kazakhstan, April 18)

National Sulphur Storage to Be Built
--------------


9. In 2008, the Caspi Social Entrepreneurial Corporation, the
Kazakhstan Oil and Gas Institute (KOGI),and TengizChevrOil (TCO)
plan to launch a national sulphur storage project in Atyrau province
(West Kazakhstan). TCO and Caspi will provide technical support,
and KOGI will design an economic model. TCO, the largest producer
of sulphur in the country, is currently maintaining approximately 9
million tons of sulphur in open storage. (Panorama newspaper, April
11)

Caspian Energy Hub to Be Built
--------------


10. The Gulf Finance House (a Bahrain-based Islamic investment
bank),PFC Energy International, Dunie Stock Energy, the Samruk
State Asset Management Company, the Kazyna Sustainable Development
Fund, and the Mangistau Investment Company signed a memorandum to
build in Aktau a center for training technical personnel for oil
companies. The center will include a science and technology park, a
geophysical laboratory, a renewable energy center, and facilities
for information technology development and environmental research.
(Interfax-Kazakhstan, April 10)


Energy Statistics for January-March 2008
--------------


11. According to the National Statistics Agency, Kazakhstan
produced 29.45 million tons of coal during January-March 2008, an
increase of 19% year-on-year. Electricity generation grew 7.6% to
22.85 billion kilowatt-hours. (Interfax-Kazakhstan, April 17)

ORDWAY