KAZAKHSTAN: "MONEY THROWN TO THE WIND"

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TAGS: PGOV PHUM ECON EPET SOCI KDEM KZ
SUBJECT: KAZAKHSTAN: "MONEY THROWN TO THE WIND"

REF: 08 ASTANA 2252

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


2. (SBU) SUMMARY: On January 28, the Soros Foundation of
Kazakhstan hosted a roundtable on the effectiveness of social
projects funded by oil companies operating in the country. The
roundtable featured the premier of a 30-minute documentary film
called "Money Thrown to the Wind," produced under the auspices of
the Soros Foundation's Kazakhstan Revenue Watch program. The film,
which accuses oil companies and local governments of wasting money
on unsuccessful, unnecessary projects, offended some and inspired
others in the audience, which included parliamentary deputies,
oblast officials, non-governmental organizations, and domestic and
international oil company representatives. With the exception of
Energy Officer, all other participants in the roundtable were
Kazakhstani, which perhaps explains why the ensuing discussion was
so candid. Indeed, the spirited discussion following the film
provided a striking look at the role civil society plays in
Kazakhstan to promote greater transparency and accountability in the
use of the country's oil revenue. It also offered a rare public
display of the underlying (yet necessary) tension between NGOs and
the government, and between the executive and legislative branches
of the government. END SUMMARY.

ASSESSING SOCIAL PROJECTS FUNDED BY OIL COMPANIES


3. (SBU) In 2008, the Soros Foundation of Kazakhstan started a
project called Revenue Watch to assess the efficiency and
effectiveness of social projects funded by oil companies operating
in Kazakhstan. According to Anton Artemiyev, Director of Kazakhstan
Revenue Watch, the project and the film it produced were designed to
hold all parties -- domestic and international oil companies, as
well as local and central government authorities -- more accountable
for investing Kazakhstan's oil revenue wisely, for the benefit of
the Kazakhstani people. He said the purpose of funding a
documentary film was to raise public awareness of existing and
planned social projects funded by oil companies and to launch a
dialogue among regional governments, oil companies, and NGOs to
increase the efficiency and transparency of these projects.


4. (SBU) Aitolkyn Kurmanova, author of the film's screenplay and
Executive Director of the Central Asian League of Strategic
Management, summarized a 2008 survey conducted in Kazakhstan's five
major oil producing regions (Atyrau, Mangistau, West Kazakhstan,
Aktubinsk, and Kyzylorda). According to Kuramnova, the survey
showed that local communities are not involved in deciding which
social projects should be funded; the selection and payment of
contractors by local governments are not transparent; and the social
projects managed or funded by oil companies are costly, inefficient,
and based on incorrect assumptions about the local community's needs
and priorities.

ONE-SIDED DOCUMENTARY


5. (SBU) "Money Thrown to the Wind" is billed as a documentary, but
the title belies the label. With slow, sweeping shots of the open,
unsettled steppe and iconic images of barefoot children staring out
from under ragged clothes, the director leaves the impression that
Kazakhstan is an impoverished country unable to provide basic care
to its people. At one point, the camera cuts away to focus on a
sparkling, $14 million sports center in Zhanaozen, a city outside
Aktau which we are told lacks a sufficient supply of potable water.
Several members of the audience later said the images of abject
poverty made them think of sub-Saharan Africa.


6. (SBU) On one of the rare occasions when the film cites
statistics, the narrator says that during the past ten years, oil
companies in Atyrau, Mangistau, and West Kazakhstan have spent more
than $500 million on social projects, or $35,000 per capita.
According to the film, in 2008, Agip KCO (Kashagan) spent $12
million, Tengizchevroil (TCO) $10 million, Karachaganak Petroleum

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Operating B.V. (KPO) $10 million, and KazMunaiGas (KMG) $9 million
on social projects. Yet local residents were apparently not
impressed. People interviewed -- apparently at random -- wonder why
their regional governors would spend millions of dollars on
unnecessary infrastructure like sports stadiums and swimming pools
when the basic health, safety, and education of their children are
at risk. One woman accused oil companies of not spending enough
money on essential projects, particularly given the "record profits"
they have earned in Kazakhstan. Although screenplay author
Kurmanova claims she did not attempt to single out any company or
country, only one oil company executive was shown on camera: Todd
Levy, General Director of TCO, said simply that he was proud of the
social programs carried out by TCO in partnership with the Atyrau
oblast government.


7. (SBU) COMMENT: The film jumps without warning from one region
to another, and from one project to another, without identifying the
time, place, or company under review, making it extremely difficult
to form an objective opinion about the claims of the authors. The
movie is unabashedly one-sided and cites few facts or figures to
support its argument. In November 2008, the Ambassador visited a
vocational school that receives financial assistance from TCO and
the school director was effusive in her praise for TCO (reftel).
There are undoubtedly other successful social projects supported by
oil companies in Kazakhstan, yet the filmmakers chose not to present
or profile a single success story. END COMMENT.

SPIRITED DISCUSSION


8. (SBU) Once the movie ended, the fireworks began. Rauan
Kenzhekhanov, a young, articulate advisor to the Governor (Akim) of
Mangistau Oblast and himself a former employee of the Soros
Foundation, walked purposefully to the podium and began to read in a
monotonous voice a long list of social projects funded by the
Mangistau Oblast in the past one year, three years, etc.
Fortunately, he was interrupted by Aigul Soloviyeva, a member of the
Committee for Economic Reform and Regional Development in the lower
house of parliament (Mazhilis). Soloviyeva scolded Kenzhekhanov,
saying the purpose of the roundtable was not to listen to boring
public relations reports from government officials, "which everyone
reads all the time," but to assess the efficiency of
critically-important social projects. Kenzhekhanov appeared
offended by the interruption and attempted to dismiss Soloviyeva and
return to his prepared remarks, but she pressed on: "There's no
need to get defensive and build barricades," she said. "We are all
here to participate in an open and honest discussion." Ultimately,
Soloviyeva said she had to return to the Mazhilis to attend to
important matters and Kenzhekhanov was left in peace to conclude his
remarks.


9. (SBU) Kenzhekhanov said that he was very upset by the movie,
particularly since he and his colleagues from the Mangistau Oblast
government met with the filmmakers in good faith and provided them
with data and statistics they requested, none of which, he said, was
included in the film. Kenzhekhanov asked the filmmakers not to show
the movie to the public, for it would surely embarrass the Akim and
increase social tensions in the oblast. "If you decide to release
the film," he warned, "it would damage our relationship and affect
our ability to work together in the future."


10. (SBU) An NGO representative from West Kazakhstan, Svetlana
Anosova, director of "Zhasyl Dala" (Green Steps),spoke out in
support of the film, saying she witnessed a failed social project in
the village of Beryozovka near Karachaganak. She said KPO spent
tens of millions of dollars on a water supply project which never
delivered potable water because the equipment was installed at a dry
well, over the objections of the local community.


11. (SBU) Murat Abenov, also a member of the Mazhilis Committee for
Economic Reform and Regional Development, was surprisingly blunt in
his criticism of decisions made by regional governments. He called
for greater accountability and insisted on a larger oversight role

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for the local Maslikhats, or regional parliamentary representatives.
Ever the politician, he boldly proclaimed, "If we do not change,
then we ourselves will be changed."

TCO REPRESENATIVE CRITICIZES FILM


12. (SBU) Although in one sense the stars of the show, no Western
oil company heads attended the roundtable, although TCO's Director
for Government Affairs and Public Relations, Rzabek Artygaliyev,
participated, as did Oral Idyrysov, Director of the Social Policy
Department at KMG. When granted an opportunity to speak, TCO's
Artygaliyev took immediate exception to the film's premise,
criticized its lack of supporting evidence, and said, rather
defensively, that the social projects funded by TCO do in fact meet
the needs of local communities. He argued that regional oblast
governors, not the oil companies, make the final decisions about
investments in social infrastructure. "We are also citizens of this
country," he said passionately, noting that he himself is a former
mayor from Atyrau oblast. "We are just as interested in
transparency, accountability, and the social development of our
nation as you are. But this film, which is filled with inaccuracies
and unsubstantiated accusations, is not the way to go about it."


13. (SBU) COMMENT: The roundtable was particularly notable for the
diversity of its audience and for the candid discussion it inspired.
The event suggested that members of Kazakhstan's civil society do
have an opportunity to confront local government officials and
members of parliament directly on matters of social importance.
Furthermore, the fact that such a diverse group could agree quickly
on the importance of working with local populations to improve the
effectiveness, transparency, and accountability of social investment
decisions bodes well for greater openness in monitoring and
reporting on the use of Kazakhstan's oil revenue. END COMMENT.

HOAGLAND