KAZAKHSTAN: CZECH PRIME MINISTER PROMOTES SOUTHERN

UNCLAS SECTION 01 OF 02 ASTANA 000285 SENSITIVE SIPDIS STATE FOR SCA/CEN, EUR/ERA, EUR/SCE, EEB/ESC STATE PLEASE PASS TO USTDA FOR DAN STEIN E.O. 12958: N/A TAGS: PGOV PHUM PINR ECON EPET EINV KDEM KZ SUBJECT: KAZAKHSTAN: CZECH PRIME MINISTER PROMOTES SOUTHERN CORRIDOR TO ENHANCE EUROPEAN ENERGY SECURITY ASTANA 00000285 001.2 OF 002 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (U) SUMMARY: Representing the rotating presidency of the European Union (EU),Czech Prime Minister Mirek Topolanek visited Astana on February 12 to discuss European energy security, bilateral trade and investment, and other issues with senior government officials. Energy Officer spoke with a Czech embassy officer to discuss Topolanek's visit, the May 7 Eastern Partnership/Southern Corridor summit in Prague, and the investment and political climate in Kazakhstan. END SUMMARY. EUROPE EAGER TO REDUCE DEPENDENCY ON RUSSIAN GAS IMPORTS ¶3. (U) After meeting with Kazakhstan's Prime Minister Karim Masimov in Astana on February 12, Topolanek told the media, "In light of the recent gas conflict between Russia and Ukraine, it has become obvious that the EU is very vulnerable and dependent on gas shipments from Russia. We need to look for other solutions." According to Topolanek, "the EU is interested in the diversification of transport routes and gas supply sources and thus, will be encouraging the development of gas transportation projects from Norway, Iraq, Central Asia, and certainly Russia." He stressed that the gas transportation projects being considered by the EU are not in conflict with each other. "They are complimentary, rather than competitive. One does not have to choose either Nord Stream or Nabucco," he said. KAZAKHSTAN PRAISED AS A REGIONAL POWER ¶4. (U) During his visit, the Czech prime minister emphasized Kazakhstan's special role in the Central Asian region. "We see Kazakhstan as a regional power," he told the press, "with immense influence on the surrounding countries and the entire region." Topolanek also observed that, "the EU is very positive about Kazakhstan's upcoming presidency of the OSCE in 2010 and supports Kazakhstan's ambitions to join the WTO. We also very much welcome the role Kazakhstan is playing within the framework of the mission in Afghanistan and in the area of regional security." NAZARBAYEV DECLINES SUMMIT INVITATION ¶5. (SBU) On February 17, Energy Officer met with Michal Chabros, a Polish diplomat temporarily assigned to the Czech Embassy in Astana to assist with issues related to the EU presidency. Chabros attended Topolanek's meetings with Prime Minister Masimov and Foreign Minister Marat Tazhin, and was briefed on Topolanek's meeting with President Nazarbayev. He said Topolanek invited Nazarbayev to attend the launch of the Eastern Partnership in Prague on May 7, but Nazarbayev politely declined the invitation and instead suggested Energy Minister Sauat Mynbayev. Chabros said the Czechs will push to have Prime Minister Masimov attend instead. (NOTE: The Eastern Partnership is designed to increase financial and diplomatic support to Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. Chabros said the Czechs will host another summit the following day with countries involved in the southern corridor natural gas transportation route from the Caspian region, through Turkey, and into Europe. Georgia, Kazakhstan, Turkmenistan, and Turkey have been invited to attend the southern corridor summit. END NOTE). KAZAKHSTAN SUPPORTS EUROPEAN ENERGY SECURITY... ¶6. (U) After his meeting with Topolanek, Masimov told the press that Kazakhstan is prepared to help Europe meets its energy security needs. "The supply of energy resources from Kazakhstan to Europe has always been the fundamental basis for our bilateral relationship," he said. In a deft display of Kazakhstan's vaunted ASTANA 00000285 002.2 OF 002 multi-vector foreign policy, Masimov quickly added, "The EU and Kazakhstan have built strong relations through constructive dialogue, including with the Russian Federation as well." BUT IS UNLIKELY TO SUPPLY NABUCCO IN THE NEAR-TERM ¶7. (SBU) According to Chabros, Masimov said that Kazakhstan is an "interested observer" in the Nabucco gas pipeline project, but has no plans to become a significant gas exporter in the near future. (NOTE: On February 18, Giorgio Battistini, deputy country manager for BG Group, the largest producer of natural gas in Kazakhstan, told Energy Officer that Kazakhstan exports approximately ten billion cubic meters of gas to Russia annually and "will not be a big gas player in the short term." Battistini noted, however, that reinjected natural gas and gas condensate will remain in the ground after the main prize -- crude oil -- is extracted, and he said Kazakhstan could produce significant quantities of natural gas at some point in the next 15-20 years. "It will still be sitting there in the reservoir, like a big gas tank," he said. END NOTE). KAZAKHSTAN WILL NOT PULL OUT OF GEORGIA ¶8. (SBU) Chabros said he was surprised that one issue was mentioned repeatedly, without prompting, during each of Topolanek's three meetings in Astana: Kazakhstan's investments in Georgia. According to Chabros, Nazarbayev, Masimov, and Tazhin all emphasized Kazakhstan's intention to remain in Georgia. Masimov reportedly said, "We are strategic investors in Georgia and we plan to stay there for a long time. We are not pulling out." MILD CRITICISM OF INVESTMENT CLIMATE, POLITICAL REFORMS ¶9. (SBU) Over lunch in a Czech-owned restaurant in downtown Astana, Chabros was asked for his opinion of the investment climate in Kazakhstan. He said that large, wealthy multinational companies in the oil and gas sector had the patience and the capital to pay environmental fines and higher taxes, but small-scale foreign investors and entrepreneurs faced a tougher time due to petty corruption, onerous bureaucracy, and uneven enforcement of laws and regulations. Chabros also criticized the recent amendments to Kazakhstan's election law, calling the changes "superficial" ones that will not affect the exercise of political power in Kazakhstan. He said that although the amended law ensures that there will be more than one party in future parliaments, the ruling party can simply pick a "pocket party" that would offer only symbolic opposition. HOAGLAND