KAZAKHSTAN: THE STRATEGIC IMPORTANCE OF AKTAU SEA PORT

UNCLAS SECTION 01 OF 02 ASTANA 001303

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EUR/CARC, NEA/IR, EEB/ESC
STATE PLEASE PASS TO USTDA

E.O. 12958: N/A
TAGS: PGOV PREL ECON EPET EINV MARR RS IR KZ
SUBJECT: KAZAKHSTAN: THE STRATEGIC IMPORTANCE OF AKTAU SEA PORT

REF: (A) ASTANA 1201
(B) ASTANA 1196
(C) ASTANA 1105
(D) ASTANA 0748
(E) ASTANA 0675

ASTANA 00001303 001.2 OF 002



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


2. (SBU) SUMMARY: Post has been informed that the U.S. Trade and
Development Agency has decided not to approve two proposed projects
to develop Kazakhstan's maritime and port capabilities because
Kazakhstan conducts trade with Iran through Aktau, its principal
Caspian port, and thus the two projects might indirectly benefit the
Iranians. We urge immediate reconsideration of this decision.
Enhancing Kazakhstan's maritime and port capabilities and promoting
the development of Aktau, Kazakhstan's sole Caspian deepwater sea
port, support our strategic interests of promoting global energy
security and stabilizing Afghanistan. Aktau provides an alternative
export route for Kazakhstan's increasing crude oil production, which
allows crude to be shipped westward through Azerbaijan and Georgia.
Aktau is also a key transportation hub for the Northern Distribution
Network, which provides for transit of non-lethal supplies in
support of U.S. troops in Afghanistan. Iran was responsible for
just 1.9% of Kazakhstan's overall trade turnover in 2008. Much of
this trade is conducted through Aktau port; however, Kazakhstani
crude exports through Aktau to Iran have declined by half since

2005. END SUMMARY.


3. (SBU) Post has been informed that the U.S. Trade and Development
Agency (USTDA) has decided not to approve two proposed projects to
develop Kazakhstan's maritime and port capabilities because
Kazakhstan conducts trade with Iran through Aktau, its principal
Caspian port, and thus the two projects might indirectly benefit the
government in Tehran. The first project would help Kazakhstan
establish Electronic Documentation Procedures (EDP) to reduce tank
vessel port call time associated with vessel clearance requirements.
EDP would increase efficiency at existing Kazakhstani ports,
reducing the cost of transportation while at the same time paving
the way for greater transparency and better monitoring by national
maritime authorities. The second project would entail a review of
Kazakhstan's maritime practices, regulations, and legislation to
ensure that they meet international standards. Implementation and
compliance with international maritime treaties, laws, and
regulations will have a significant impact on the technical
infrastructure, capital investment, and operating costs of
trans-Caspian crude transportation.


4. (SBU) We urge immediate reconsideration of the decision not to
fund the two projects. Enhancing Kazakhstan's maritime and port
capabilities and promoting the development of Aktau, Kazakhstan's
sole deepwater sea port, supports our strategic interests of
promoting global energy security and stabilizing Afghanistan.


5. (SBU) Aktau provides an alternative export route for Kazakhstan's
increasing oil production, enabling crude to be shipped westward
through Azerbaijan and Georgia and thus reducing Kazakhstan's
reliance on Russia as a transit country. The Tengizchevroil (TCO)
consortium, owned 50 percent by Chevron and 25 percent by
ExxonMobil, already ships approximately 100,000 barrels per day
(bpd) of crude from Aktau to Baku, for onward transit to world
markets via the Baku-Tbilisi-Ceyhan pipeline. Once the Kashagan
consortium -- in which ExxonMobil and ConocoPhilips have significant
ownership stakes -- commences production in 2014, it too will need
initially to use Aktau for any crude transit which does not go
through Russia. Over the longer run, international oil companies
support the development of the Kazakhstan-Caspian Transportation
System -- which entails constructing a pipeline from the oil fields
to the new Caspian port at Kuryk -- but they will not commit crude
volumes to the system unless they have confidence in its safety and
reliability. Both USTDA projects would help in providing that
confidence.

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6. (SBU) Aktau port also plays a critical role in the Northern
Distribution Network (NDN),facilitating the transit of non-lethal
military cargo to U.S. troops in Afghanistan. As reported in reftel
A, Aktau Port's Novikov told the Ambassador on July 16 that Aktau
fully supports the NDN and is prepared to increase its capacity to
process vessels and unload containers. USTDA's EDP project in
particular would help to increase Aktau's capacity and efficiency.


7. (SBU) Despite the close geographic proximity of Kazakhstan and
Iran, Iran is a relatively small trading partner for Kazakhstan. In
2008, Kazakhstan exported just $2.040 billion of goods (mostly crude
oil, wheat, and steel) to Iran, and imported a miniscule $60
million. The total $2.1 billion in two-way trade accounted for just
1.9% of Kazakhstan's overall $109.1 billion in trade turnover for

2008. Much of Kazakhstan-Iran bilateral trade is conducted through
Aktau, which in 2008 shipped 1.5 million metric tons of goods to
Iran, and received 45,000 metric tons of goods from Iran. However,
KazMorTransFlot officials told the Ambassador that oil exports from
Kazakhstan to Iran have declined to about 50,000 barrels per day
(bpd),or half of the volume exported in 2005. As far as we know,
most of Aktau's trade is conducted with Azerbaijan and Russia,
not/not Iran.


8. (SBU) COMMENT: We are unclear if there is any legal reason why
USTDA cannot move forward with the two projects it has developed in
conjunction with its Kazakhstani partners. We believe that our
strategic interests in enhancing Kazakhstan's maritime and port
capabilities and developing Aktau port trump any indirect and
incidental benefits to the Iranians from the proposed projects. We
thus strongly recommend that USTDA reconsider its decision not to
fund the projects. The government of Kazakhstan is well aware of
U.S. policy toward -- and sanctions against -- Iran, and has been a
responsible partner in that regard. In fact, in recognition of U.S.
policy, Kazakhstan's oil exports to Iran continue to decline, even
as Kazakhstan's overall trade volume increases. Our failure to move
forward on the USTDA projects would send the government a mixed
signal, calling into question the sincerity and seriousness of our
support for Kazakhstan's multi-vector crude export policy, and the
importance of Kazakhstan to the Northern Distribution Network. END
COMMENT.

HOAGLAND