KAZAKHSTAN: WHAT'S BEHIND THE CURRENT

C O N F I D E N T I A L ASTANA 001464 SIPDIS STATE FOR SCA/CEN, INR, EEB PLEASE PASS TO USTR AND USTDA E.O. 12958: DECL: 09/04/2019 TAGS: PGOV PINR ECON KCOR KZ SUBJECT: KAZAKHSTAN: WHAT'S BEHIND THE CURRENT ANTI-CORRUPTION CAMPAIGN? Classified By: Ambassador Richard E. Hoagland: 1.4 (B),(D) ¶1. (C) SUMMARY: The well-connected Israeli Ambassador analyzes that the current anti-corruption campaign in Kazakhstan is not a political-economic clan struggle to succeed President Nazarbayev. Rather, it is Nazarbayev himself cracking down to preserve his generally positive economic legacy and to improve Kazakhstan's international image. END SUMMARY. ¶2. (C) During a one-on-one lunch that the Ambassador hosted for Israeli Ambassador Israel Mei-Ami on September 2, Mei-Ami gave a more nuanced analysis of the high-level corruption prosecutions in Kazakhstan currently dominating domestic and international headlines than we have heard before. Mei-Ami is a credible source because he was born in Soviet Kazakhstan, is a native Russian speaker, and has a broader and deeper range of contacts, both in the public and private sectors than any other foreign ambassador in Kazakhstan, with the possible exception of Russian Ambassador Mikhail Bocharnikov. Bocharnikov, however, is an Africanist who has "returned home" to the Former Soviet Union, and tends sometimes to be dismissive about Kazakhstan. NOT A SUCCESSION STRUGGLE? ¶3. (C) According to Mei-Ami, the current anti-corruption campaign and supposed political struggle are not a political-economic clan show-down to jostle for position to succeed 69-year-old President Nursultan Nazarbayev, who is in fine physical and mental health. Rather, it stems from Nazarbayev's instinctive and carefully calculated response to the current global economic crisis that has hit heretofore economically successful Kazakhstan hard, in part because Nazarbayev's economic and financial policies of the last two decades have embedded Kazakhstan in the global economy. Nazarbayev sees Kazakhstan's global economic standing as endangered. In Mei-Ami's view, Nazarbayev is alarmed that his legacy itself is threatened, and is, thus, acting to rein in some of the worst corruption. ¶4. (C) COMMENT: If true, this might explain why, after years of inaction, Kazakhstan's parliament passed, and Nazarbayev just signed, anti-money-laundering legislation. It would also suggest why, after years of progressive economic policy, Nazarbayev is now sometimes leaning backward instinctively toward "homo sovieticus" solutions like his ill-considered decision, at least provisionally, to dump World Trade Organization accession in favor of the Russia-Belarus-Kazakhstan Customs Union. END COMMENT. ECONOMIC CRISIS THREATENS NAZARBAYEV'S LEGACY ¶5. (C) Mei-Ami cited a source who has direct, first-hand access to one of the principals who took part in a meeting earlier this year (date unknown) when Nazarbayev convoked Prime Minister Karim Masimov and the several economic ministers, as well as Chairman of the Central Bank Grigoriy Marchenko, and thundered, "Stop lying to me like you do to the media and tell me the truth. Where do we stand economically?" Reportedly, they laid out in honest detail the "real reality" for the President -- that the usually-tolerated, mind-boggling corruption in Kazakhstan (including in the President's family) threatened to bring the banking and financial sectors down like a house of cards. First, second, third, and even fourth-tier banking executives had been embezzling like crazy during the fat years when international lenders jostled each other with sharp elbows while standing in line to dump ever more money into Kazakhstan. According to Mei-Ami's sources, Nazarbayev was both appalled and shaken, and roared to his assembled advisers the equivalent of "off with their heads!" BUT THERE'S STILL A CLAN TO WATCH ¶6. (C) Mei-Ami said that his mostly high-level business sources have explained to him that the current situation is not really a "clan war," but that, nevertheless, one clan is the "deer in the headlights" -- the Masimov-Kulibayev-Nigmatullin (MKN) clan (Prime minister Masimov, Nazarbayev's billionaire son-in-law Timur Kulibayev, and Karaganda Oblast Governor Nurlan Nigmatullin). ¶7. (C) In Mei-Ami's view, Nazarbayev does not necessarily feel politically threatened by this clan -- thus Mei-Ami's analysis that the current situation is not a power struggle for succession -- but is making it clear that they must "shape up or ship out," to put it mildly. And so Nazarbayev has instructed his close ally, Chairman of the Committee for National Security (KNB, ex-KGB) Amangeldy Shabdarbayev to go after some of the MKN clan's closest associates. If, in the meantime, the KNB can identify some of the more flagrantly corrupt officials not necessarily part of the MKN clan, then more power to them. However, in a paranoid political culture that is common to the post-Soviet world, this has opened the door to petty -- and sometimes not so petty -- political vendettas. As a result, Mei-Ami said -- and we have heard this from other sources -- the bureaucracy is paralyzed because ministers and deputy ministers are desperately hunkered down and averse to making any decision at all, unless they are forced to do so, for fear that the kind of decision-making they are used to -- greased palms -- will drag them into the current shake-out. ¶8. (C) In Mei-Ami's view, Nazarbayev's ultimate goal is not only to preserve his own image, but also to "bucket-out" the cesspool of business-as-usual Kazakhstan. Mei-Ami judges that Nazarbayev not only cares deeply about his own legacy, but also sincerely wants the country he has struggled cannily for two decades to build to be successful in its own right and, thus, internationally respected. Therefore, according to Mei-Ami, Nazarbayev's anti-corruption campaign, including hits against some high-level officials, is generally legitimate. HOAGLAND