Identifier
Created
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09ASTANA295
2009-02-19 09:51:00
UNCLASSIFIED
Embassy Astana
Cable title:  

KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, FEBRUARY 1 -

Tags:  PGOV ECON EFIN EIND ENRG EPET SENV KZ 
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UNCLAS SECTION 01 OF 03 ASTANA 000295 

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E.O. 12958: N/A
TAGS: PGOV ECON EFIN EIND ENRG EPET SENV KZ
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, FEBRUARY 1 -
FEBRUARY 14

ASTANA 00000295 001.2 OF 003


UNCLAS SECTION 01 OF 03 ASTANA 000295

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STATE FOR SCA/CEN, EEB/ESCA
STATE PLEASE PASS TO USTDA FOR DAN STEIN

E.O. 12958: N/A
TAGS: PGOV ECON EFIN EIND ENRG EPET SENV KZ
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, FEBRUARY 1 -
FEBRUARY 14

ASTANA 00000295 001.2 OF 003



1. SUMMARY: This information is drawn primarily from the
Kazakhstani local press and has not been verified for accuracy.

-- Kazakhstan to Allow Islamic Banking
-- Salary Ceiling for Top Managers of State Companies
-- Ruling Party to Monitor National Fund
-- Economic Statistics
-- Environmental News
-- Kazatomprom News
-- Fitch Assesses Effect of Currency Devaluation
-- New Chairman of Kazakhstan Electricity Association
-- Energy Statistics
END SUMMARY.

KAZAKHSTAN TO ALLOW ISLAMIC BANKING


2. On February 12, President Nursultan Nazarbayev signed
legislation introducing amendments to the Civil Code, Tax Code, and
laws on banking, licensing, securities, and investment funds that
will allow for the introduction of Islamic financial instruments in
Kazakhstan. The amendments prohibit "usurious fees" according to
the principles of Islamic banking.

SALARY CEILING FOR TOP MANAGERS OF STATE COMPANIES


3. On February 10, Prime Minister Karim Masimov called on state
holding companies to set a salary ceiling for top managers, under
which their salaries would not exceed the Prime Minister's
(official) salary of 700,000 tenge (approximately $4,729) per month.
In mid-January, Kairat Aitekenov, a managing director of the
Samruk-Kazyna National Welfare Fund, reported that the monthly
salaries of Samruk-Kazyna's chairman and board members did not
exceed 1.3 million tenge (approximately $8,783).

RULING PARTY TO MONITOR NATIONAL FUND


4. On February 13, President Nazarbayev announced that a commission
will be established under the Nur Otan ruling party to monitor the
use of money taken from the National (Oil) Fund for the government's
program to mitigate the effects of the global financial crisis.
Approximately $8.1 billion will be withdrawn from the National Fund,
which, according to the National Bank, held approximately $27.96

billion on January 31.

ECONOMIC STATISTICS


5. In January, Kazakhstan's gold and currency reserves, including
the gross reserves of the National (Oil) Fund and the National Bank,
fell by 1.1% from the previous month, to $46.244 billion. According
to the National Bank, Kazakhstan enjoyed a balance of payments
surplus in 2008 of $8.9 billion, compared to a deficit of $7.3
billion in 2007. Exports totaled $72 billion for 2008, including
$43.5 billion of oil and gas condensate. Imports in 2008 totaled
$38.5 billion, resulting in a trade surplus of $33.5 billion.

ENVIRONMENTAL NEWS


6. On February 2, Minister of Environmental Protection Nurlan
Iskakov proudly announced that waste emissions in 2008 were 149,000
tons lower than the previous year. In response, Yerlan Nigmatullin,
Chairman of the Environmental Committee of the Mazhilis (the lower
house of parliament),maintained that the decrease in emissions
resulted not from the good work of the Environmental Ministry, but
from a reduction in industrial production due to the global
financial crisis. Minister Iskakov criticized regional governments
for failing to invest resources in order to address pressing
environmental issues. For example, according to Iskakov, in 2008,

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regional governments received 66 billion tenge (approximately $445
million) in ecological fees, of which only 30 percent has been used
to fund environmental projects. Nigmatullin suggested replacing
environmental fines with an environmental tax, which, in his
opinion, would enable the government to invest funds more
effectively. Prime Minister Masimov has also spoken out in favor of
this proposal. "It is time for Kazakhstan's environmental
legislation to meet world standards," Masimov stated. (NOTE:
Revenue from an environmental tax would go to the national budget,
while revenue collected from environmental fines stays at the
regional level. END NOTE.)


7. On February 5, the Tax Code was amended to accommodate
complaints from members of the Mazhilis that the tax rate for
industrial emissions, including gas flaring, had been set too low.
At the request of the Mazhilis, sulfur oxide, nitrogen oxide, soot,
hydrogen sulfide, and mercaptans -- which constitute 92% of all
atmospheric emissions in Kazakhstan -- were included in the list of
pollutants subject to taxation.


8. On February 11, a joint commission of the Ministry of
Environmental Protection and the Ministry of Agriculture released
the findings of their investigation into the death of 32 Caspian
seals in 2008. According to Murat Rakhimberghenov, Chairman of
Ecological Regulation and Control at the Ministry of Environment,
the seals died due to a lack of oxygen and the spread of a deadly
virus among the seal population. The commission found no evidence
that oil spills or emissions were responsible for the deaths of the
seals. In 2007, nearly 1,000 seals died off Kazakhstan's Caspian
Sea shore. The seal population in the Caspian currently numbers
between 350,000 and 400,000.


9. Rakhimberghenov also announced that the Ministry of Environment
has ordered the North Caspian Operating Company operating the
Kashagan oil field to build enclosed sulfur storage facilities.
This announcement came despite the fact that the company has already
completed construction on several new four-million ton sulfur
storage units, which were inspected and approved by the Ministry of
Environment.

KAZATOMPROM NEWS


10. At a press conference on February 3, Mukhtar Zhakishev,
president of national nuclear company Kazatomprom, announced that
his company would sign a contract to supply uranium to India within
one month. (NOTE: Kazatomprom and the Nuclear Power Corporation of
India Limited signed an MOU on cooperation during President
Nazarbayev's January trip to New Delhi. END NOTE.) Zhakishev also
announced a joint venture with China's Guangdong Nuclear Power
Group, which will assume 49% ownership of the Irkol and Semizbay
uranium mines. The two mines contain an estimated 1,250 tons of
uranium. Zhakishev reiterated Kazatomprom's plan to become the
world's leading uranium producer in 2009, and said uranium output
will reach 11,935 tons this year, if demand holds up.

FITCH ASSESSES EFFECT OF CURRENCY DEVALUATION


11. According to a February 6 statement by the Fitch rating agency,
KazMunayGas (KMG) is less vulnerable to exchange rate shocks than
other Kazakhstani companies, since 48% of its revenue is generated
in foreign currency. However, Fitch warns that if there is a
further devaluation of the tenge, the company's credit rating could
suffer.

NEW CHAIRMAN OF KAZAKHSTAN ELECTRICITY ASSOCIATION


12. On February 5, Shaimerden Urazalinov was named CEO of the

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Kazakhstan Electricity Association (KEA),a non-governmental
organization representing over 30 companies in the electrical power
industry. Urazalinov is reportedly highly respected by the citizens
of Karaganda oblast. From 1999 to 2007, Urazalinov was a member of
the Senate (upper house of parliament) representing Karaganda
oblast, where he developed a reputation as an honest man who
improved social services in Karaganda and refused to play favorites
or accept kickbacks.

ENERGY STATISTICS


13. According to the National Statistics Agency, in January,
Kazakhstan produced 6.426 million tons of crude oil and gas
condensate, an increase of 7.5% over the same period in 2007. The
Government of Kazakhstan also estimated that natural gas production
in January would be approximately 1.54 billion cubic meters, a
decrease of 2.9% year-on-year.

HOAGLAND