KAZAKHSTAN: SCENESETTER FOR FBI DIRECTOR ROBERT S.

UNCLAS SECTION 01 OF 05 ASTANA 002006

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, INL

E.O. 12958: N/A
TAGS: PGOV PREL PINS SOCI KZ
SUBJECT: KAZAKHSTAN: SCENESETTER FOR FBI DIRECTOR ROBERT S.
MUELLER

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


2. (SBU) SUMMARY: Embassy Astana warmly welcomes your November
17-18 visit to Kazakhstan. Kazakhstan has proven to be an
increasingly reliable security partner and a steady influence in a
potentially turbulent region. Although Kazakhstan is willing to
work together in criminal investigations, some efforts to increase
cooperation have stalled, which is causing them to fall behind other
countries in the region. During your visit, you can congratulate
Kazakhstan on its current cooperation in criminal investigations and
press to enhance future cooperation. END SUMMARY.

SECURITY COOPERATION


3. (SBU) Kazakhstan, on the crossroads of the ancient Silk Road,
also finds itself on the crossroads of transnational crime. The
United Nations Office of Drugs and Crime estimates that up to 20% of
Afghan opiates transit through Kazakhstan. In addition, Kazakhstan
is both a source and destination country for trafficking in persons.
It could have easily become a center for laundering transnational
criminal profits given that it has the most developed banking system
and most stable economy in the region. However, the government's
strong political will, legislation based on international standards,
and the creation of a financial intelligence unit is preventing such
a development.


4. (SBU) Kazakhstan willingly cooperates with the United States to
fight terrorism, stem the flow of illegal narcotics, and fight
trafficking in persons. Law enforcement agencies recognize their
limitations and continue to seek technical assistance from the
United States. The Department of State's Bureau for International
Narcotics and Law Enforcement (INL) and Office of Antiterrorism
Assistance (ATA) and the Department of Defense's Office of Military
Cooperation (OMC) provide equipment and technical assistance to law
enforcement and security services in Kazakhstan.


5. (SBU) Since 2008, Diplomatic Security's ATA has trained
Kazakhstani officials in travel documents, airport security, digital
evidence, and post-blast investigations, as well as conducted an
anti-terrorism instructor course. Since 2002, INL has provided
training courses, equipment, and technical assistance in the areas
of border security, counter-narcotics, anti-trafficking in persons,
anti-money laundering and terrorism financing, forensics, and crime
statistics. INL has worked closely with the FBI in many of these
areas and funded the travel of FBI trainers in money laundering and
forensics and the visit of Kazakhstani law enforcement officers to
the FBI Academy. In 2008, near the end of the INL crime statistics
program, the Department of Justice's Bureau of Justice Statistics
began to negotiate a direct memorandum of understanding with the
Prosecutor General's Office (PGO).


6. (SBU) The Office of Military Cooperation is responsible for
implementation of the U.S. Central Command's (USCENTCOM) Theater
Security Cooperation Plan (TSCP). A co-signed Memorandum of
Understanding between the U.S. DoD and the Kazakhstani Ministry of
Defense (MoD) -- called the five-Year Plan for Military Cooperation
-- supports CENTCOM's TSCP. The five-year plan outlines three main
objectives: 1) Establish a professional Army with rapid deployment
capability and NATO compatibility, 2) Establish military
capabilities in the Caspian Sea Region, and 3) General systemic
reform objectives in support of the first two goals. Within these
objectives, several goals relate to border, internal, and maritime
security, which the OMC-managed CENTCOM Counter-Narcotics programs
support. These goals include programs for regional
counter-narcotics security, such as equipment support to the Central
Asian Regional Information Coordination Center (CARICC),border
security, such as refurbishment and upgrade of three Mi-8
helicopters and ground surveillance radars for the Border Guards,
and assistance to Internal Affairs to stem the flow of narcotics

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transiting through the country. OMC works closely with the U.S.
Export Control and Border Security (EXBS),INL, and Defense Threat
Reduction Agency (DTRA) to ensure all Embassy border-control
programs complement one another.

7. (SBU) The Legal Attache (Legat) cooperates well with law
enforcement agencies in ongoing investigations. The Kazakhstani
government always positively receives and acts upon all
investigative requests generated from the Legat Office. Over the
past year, the Legat Office has trained Kazakhstani officials about
economic crimes and corruption, weapons of mass destruction (WMD)
investigative analysis, and WMD cyber crimes. It also conducted a
nuclear smuggling workshop and sent a Kazakhstani officer to the
FBI's National Academy for the first time.


8. (SBU) Despite good cooperation in many areas, Kazakhstan still
lags behind the region in biometric cooperation. That said,
Kazakhstan participated in the first-ever Central Asia Biometrics
Summit hosted by the FBI in the United States. The Kazakhstani
Border Service also has expressed interest in learning more about
employing biometric controls. CENTCOM and the U.S. Embassy are
exploring support options.


9. (SBU) Kazakhstan is deeply interested in being a regional leader
in law enforcement. The Central Asian Regional Information and
Coordination Center (CARICC),of which all countries in Central
Asia, Russia, and Azerbaijan are members, is based in Almaty.
Kazakhstan's law enforcement academies are also seeking to be
regional training hubs. The Ministry of Interior will open an
Interagency Counter-Narcotics Training Center in December. The
Center, co-funded by the United States, will train Afghan police and
will be open to all countries in the region.

NON-PROLIFERATION: A HALLMARK OF BILATERAL COOPERATION


10. (SBU) Non-proliferation cooperation has been a hallmark of our
bilateral relationship since Kazakhstan quickly agreed to give up
the nuclear weapons it inherited from the USSR after becoming
independent. The Kazakhstanis recently ratified a seven-year
extension to the umbrella agreement for our bilateral Cooperative
Threat Reduction (CTR) program, which remains the dominant component
of our assistance to Kazakhstan. Key ongoing CTR program activities
include our efforts to secure the radiological material at the
Soviet-era Semipalatinsk nuclear test site and to provide long-term
storage for the spent fuel (sufficient to fabricate 775 nuclear
weapons) from Kazakhstan's BN-350 plutonium fast breeder reactor.


11. (SBU) The government of Kazakhstan is responsible for funding
the transport of the BN-350 spent fuel from Aktau to Baikal-1. On
September 18, the Prime Minister signed two decrees authorizing
reserve funding and duty-free equipment transfer that will help
ensure continuation of spent fuel transport operations. While these
decrees are helpful and timely, we continue to urge the government
to take further steps, such as simplified procedures for customs
clearances and the adoption of legislation that would exempt
technical assistance recipients from property taxes.


12. (SBU) The Kazakhstanis are active participants in the Global
Initiative to Combat Nuclear Terrorism and are seeking additional
ways to help them burnish their non-proliferation credentials. We
have welcomed President Nazarbayev's April 6 announcement that
Kazakhstan is interested in hosting the Nuclear Threat Initiative's
IAEA-administered international nuclear fuel bank. During his
October 6-8 visit to Kazakhstan, Deputy Secretary of Energy Daniel
Poneman assured the Kazakhstani government that we will support
their proposal during the next IAEA Board of Governors meeting,
although we have been clear that the Kazakhstanis need to work out
the technical details directly with the IAEA. President Nazarbayev
also has called for the United Nations to designate August 29 as
annual World Non-Nuclear Testing Day, which we support.

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AFGHANISTAN: POISED TO DO EVEN MORE


13. (SBU) Kazakhstan has supported our stabilization and
reconstruction efforts in Afghanistan, and in recent months, has
expressed a willingness to do even more. We signed a bilateral
blanket over-flight agreement with Kazakhstan in 2001 that allows
U.S. military aircraft supporting Operation Enduring Freedom (OEF)
to transit Kazakhstani airspace cost-free. This was followed in
2002 with a bilateral divert agreement that permits our military
aircraft to make emergency landings in Kazakhstan when aircraft
emergencies or weather conditions do not permit landing at
Kyrgyzstan's Manas Air Base. There have been over 6500 over-flights
and over 60 diverts since these agreements went into effect. In
January, Kazakhstan agreed to participate in the Northern
Distribution Network -- which entails commercial shipment through
Kazakhstani territory of non-lethal supplies for U.S. troops in
Afghanistan. Kazakhstan is working on sending several staff
officers to the International Security Assistance Forces (ISAF)
headquarters in Kabul and, further down the road, might consider
providing small-scale non-combat military support, as it did for
five-plus years in Iraq.


14. (SBU) In 2008, the Kazakhstani government provided
approximately $3 million in assistance to Afghanistan for food and
seed aid and to construct a hospital, school, and road. The
Kazakhstanis are finalizing a proposal to provide free university
education in Kazakhstan to Afghan students. The government has also
offered to provide training to Afghan law enforcement officers at
law enforcement training institutes in Kazakhstan, and is working on
a 2009-2011 assistance program for Afghanistan that might include
free university education for up to 1,000 Afghan students.
Kazakhstan's Border Guard Service is ready to allow Afghan cadets to
attend its full four-year academy as soon as the appropriate
bilateral agreements are signed. The Kazakhstanis intend to make
Afghanistan one of their priority issues during their 2010 OSCE
chairmanship.

ECONOMY: AGGRESSIVE STEPS TO TACKLE ECONOMIC CRISIS


15. (SBU) Kazakhstan is Central Asia's economic powerhouse, with a
GDP larger than that of the region's other four countries combined.
Economic growth averaged over nine percent per year during 2005-07,
before dropping to three percent in 2008 with the onset of the
global financial crisis. The International Monetary Fund is
predicting negative two percent growth for Kazakhstan in 2009, with
a modest economic recovery poised to begin in 2010. Astute
macroeconomic policies and extensive economic reforms have played an
important role in Kazakhstan's post-independence economic success.
The government has taken significant steps to tackle the domestic
reverberations of the economic crisis. It has allocated around $20
billion to take equity stakes in private banks, propped up the
construction and real estate sectors, and supported small- and
medium-sized enterprises and agriculture.


16. (SBU) The banking sector continues to struggle, as Kazakhstan's
leading commercial banks have been unable to repay creditors and
seek to restructure their debt. In July, BTA Bank, the country's
largest commercial bank, declared a moratorium on interest and
principal payments. BTA's external debts are valued at $13 billion,
of which the bank said it will repay $3 billion this year. In 2008,
BTA's net losses were $7.9 billion, and total obligations exceeded
the value of its assets by $4.9 billion. Kazakhstani authorities
continue to investigate former BTA Chairman Mukhtar Ablyazov and
other former top managers of the bank. On July 14, the Prosecutor
General's office charged 12 members of BTA's credit committee with
embezzlement, and six were found guilty and sentenced to jail.

DEMOCRACY: SLOW GOING

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17. (SBU) While the Kazakhstani government articulates a strategic
vision of democracy, it has lagged on the implementation front.
President Nazarbayev's Nur Otan party officially received 88% of the
vote and won all the parliamentary seats in August 2007 elections
which OSCE observers concluded did not meet OSCE standards. The
next parliamentary and presidential elections are scheduled for 2012
although rumors of early parliamentary elections are intensifying.


18. (SBU) When Kazakhstan was selected to be 2010 OSCE
chairman-in-office at the November 2007 Madrid OSCE Ministerial
meeting, Foreign Minister Tazhin promised his government would amend
Kazakhstan's election, political party, and media laws in accordance
the recommendations of the OSCE and its Office of Democratic
Institutions and Human Rights (ODIHR). (NOTE: Then Foreign
Minister Tazhin also promised that as OSCE chairman, Kazakhstan
would support the OSCE's Human Dimension and preserve ODIHR's
mandate, including its critical role in election observation. END
NOTE.) President Nazarbayev signed the amendments into law in
February. While key civil society leaders were disappointed that
the new legislation did not go further, we considered it to be a
step in the right direction and continue to urge the government to
follow through with additional reforms.


19. (SBU) On September 3, the Balkash district court sentenced
Kazakhstan's leading human rights activist Yevgeniy Zhovtis to four
years imprisonment for vehicular manslaughter, and the appeals court
upheld this decision on October 20. The charge stemmed from a July
26 accident in which Zhovtis struck and killed a pedestrian with his
car. Local and international civil society representatives and
opposition activists heavily criticized the trial for numerous
procedural violations.
Some observers allege that the harsh sentence imposed on Zhovtis, a
strong critic of the regime, was politically motivated. The
Ambassador has publicly urged the Kazakhstani authorities to provide
Zhovtis access to fair legal proceedings, the Embassy issued a
statement on October 22 expressing concern about the process
following the appeal decision, and we continue to raise the case
with senior government officials in Astana and in Washington.


20. (SBU) While the Kazakhstanis pride themselves on their
religious tolerance, religious groups not traditional to Kazakhstan,
such as Evangelical Protestants, Jehovah's Witnesses, Hare Krishnas,
and Scientologists, have faced difficulties with the authorities.
Parliament passed legislation in late 2008 aimed at asserting more
government control over these "non-traditional" religious groups.
Following concerns raised by civil society and the international
community, President Nazarbayev chose not to sign the legislation,
but instead sent it for review to the Constitutional Council --
which ultimately declared it to be unconstitutional.


21. (SBU) Though Kazakhstan's diverse print media include many
newspapers sharply critical of the government and of President
Nazarbayev personally, the broadcast media are essentially
government-controlled. On July 10, President Nazarbayev signed into
law Internet legislation which provides a legal basis for the
government to shut down and block websites whose content allegedly
violates the country's laws. On October 22, a Kazakhstani appeals
court upheld the Editor-in-Chief of "Alma Ata Info" newspaper's
August 8 sentence to three years in prison for publishing
confidential internal documents of the Committee for National
Security (KNB). In addition, the courts have levied
disproportionately large fines for libel against two opposition
newspapers over the past year, forcing one paper to close while
another is still fighting the case through appeals. These appear to
be steps in the wrong direction at a time when Kazakhstan's record
on democracy and human rights is in the spotlight because of its
forthcoming OSCE chairmanship. We have expressed our disappointment
about the Internet legislation and libel regime, and have urged the

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government to implement the Internet law in a manner consistent with
Kazakhstan's OSCE commitments on freedom of speech and freedom of
the press.

OIL AND GAS PRODUCTION


22. (SBU) Kazakhstan produced 70.7 million tons of oil in 2008
(approximately 1.41 million barrels per day (bpd),and is expected
to become one of the world's top ten crude oil exporters soon after

2015. From January - August, Kazakhstan increased oil production by
8.8%, to 41.83 million tons, compared to the same period last year.
U.S. companies -- ExxonMobil, Chevron, and ConocoPhillips -- have
significant ownership stakes in each of Kazakhstan's three major
hydrocarbon projects: Tengiz, Kashagan, and Karachaganak.


23. (SBU) While Kazakhstan has significant gas reserves (2.0
trillion cubic meters is a low-end estimate),current gas exports
are less than 10 billion cubic meters (bcm),in part because gas is
being reinjected to maximize crude output, and in part because
Gazprom, which has a monopoly on the gas market in the region, pays
producers only a fraction of the going European price. The
country's 40 bcm gas pipeline to China will help to break that
monopoly, although the majority of the gas that will be exported via
this pipeline will come from Turkmenistan and Uzbekistan, not
Kazakhstan. The first line of the China gas pipeline was completed
in July, and the first shipments are planned in November.
Kazakhstani gas exports to China will be modest, 4-6 bcm annually.
The government of Kazakhstan has made several public statements
confirming that it has no objection to the Nabucco gas pipeline
project, but the government has emphasized that Kazakhstan does not
and will not produce enough gas to supply the pipeline.

OIL AND GAS TRANSPORTATION


24. (SBU) With significant oil production increases on the horizon,
Kazakhstan must develop additional transport routes to bring its
crude to market. Our policy is to encourage Kazakhstan to seek
diverse transport routes, which will ensure the country's
independence from transport monopolists. Currently, most of
Kazakhstan's crude is exported via Russia, although some exports
flow east to China, west across the Caspian through Azerbaijan, and
south across the Caspian to Iran. In July, for example, national
oil company KazMunaiGaz (KMG) announced the completion of the
Atasu-Alashankou segment, and it recently began pilot crude
shipments via the Kenkiyak-Kumkol segment of the 3,000 kilometer oil
pipeline to China, which will initially carry 200,000 bpd, with
expansion capacity of 400,000 bpd.


25. (SBU) We support the expansion of the Caspian Pipeline
Consortium (CPC) pipeline, which is the only oil pipeline crossing
Russian territory that is not entirely owned and controlled by the
Russian government. We also support implementation of the
Kazakhstan Caspian Transport System (KCTS),which envisions a
"virtual pipeline" of tankers transporting up to one million barrels
of crude per day from Kazakhstan's Caspian coast to Baku, from where
it will flow onward to market through Georgia, including through the
Baku-Tbilisi-Ceyhan (BTC) pipeline. Negotiations with international
oil companies to build the onshore pipeline and offshore marine
infrastructure for this $3 billion project have recently stalled,
although the government has expressed an interest in resuming
talks.

HOAGLAND