KAZAKHSTAN: SCENESETTER FOR FOREIGN MINISTER

S E C R E T ASTANA 000674

SIPDIS

STATE FOR SCA/CEN

E.O. 12958: DECL: 04/21/2034
TAGS: PREL PGOV PHUM ECON EPET KNNP AF RS KZ
SUBJECT: KAZAKHSTAN: SCENESETTER FOR FOREIGN MINISTER
TAZHIN'S MAY 4-5 VISIT TO WASHINGTON

Classified By: Ambassador Richard E. Hoagland: Reasons 1.4 (b) and (d)


1. (C) SUMMARY: Kazakhstani Foreign Minister Marat Tazhin's
May 4-5 visit to Washington is the Obama Administration's
first opportunity for face-to-face engagement with the
leadership of our most important partner in Central Asia. We
have a robust bilateral relationship with Kazakhstan, with
close cooperation on such critical issues as Afghan
reconstruction, nuclear non-proliferation, and developing
Kazakhstan's vast energy resources to support global energy
security. With its upcoming 2010 OSCE chairmanship,
Kazakhstan is poised for its most important international
leadership role to date -- and Tazhin's visit will be a
chance to discuss Kazakhstan's priorities for its
chairmanship year. We should also ask Tazhin about
additional ways Kazakhstan can assist Afghanistan; stress the
need for further democratic reforms; and reiterate our
commitment to Kazakhstan's WTO accession. END SUMMARY.

RAISING BILATERAL RELATIONS TO A NEW LEVEL


2. (C) Foreign Minister Tazhin's May 4-5 visit to Washington
comes at a time when the Kazakhstani leadership sees the new
Obama administration as an opportunity to enhance our already
good bilateral relations. President Nazarbayev welcomed then
President-elect Obama's early phone call last November, and
recently invited him to visit Astana -- an invitation passed
directly to President Obama by Senate Chairman Kasym-Zhomart
Tokayev at an Alliance of Civilizations reception in Istanbul
on April 7. Nazarbayev has told us he would also welcome
visits from the Secretary and other senior Administration
officials, including Secretary of Defense Gates. Tazhin is
likely to emphasize Kazakhstan's strong desire for regular
high-level visits both ways. He will almost certainly be
prepared to consult on Kazakhstan's agenda for its 2010 OSCE
chairmanship, and is also likely to raise Kazakhstan's
perennial desire to be graduated from the Jackson-Vanik
Amendment and to be exempt from annual human-rights
certification, both of which the government views as
"incompatible" with a mature relationship between strategic
partners.


3. (C) President Nazarbayev carefully balances Kazakhstan's
relations with Russia, China, the United States, and the EU
-- what he terms a "multi-vector" foreign policy. The
Kazakhstanis consider Russia their most important
international partner, and Russian's influence is
unparalleled in Kazakhstan due to long historical ties,
Kazakhstan's large ethnic Russian population, and the
predominance here of the Russian language -- which means most
Kazakhstanis obtain their news from Russia's broadcast and
print media. Kazakhstan's close relationship with the United
States serves as an essential counterweight -- reinforcing
the country's sovereignty and independence and helping it
stave off pressure from both its giant neighbors, i.e., China
as well as Russia. For the Kazakhstanis, high-level
interactions with the United States, such as Tazhin's visit,
are thus not only important for their substance, but also for
their symbolism -- sending a signal to Moscow that we remain
closely engaged with them, despite Moscow's assertion of a
"privileged sphere of influence."

AFGHANISTAN: POISED TO DO EVEN MORE


4. (C) Kazakhstan has provided critical support for Coalition
efforts in Afghanistan -- and is looking for ways to do even
more. Bilateral agreements from 2001 and 2002 allow U.S.
military aircraft supporting Operation Enduring Freedom to
transit Kazakhstani air space cost-free and to make emergency
landings in Kazakhstan when conditions do not permit landing
at Kyrgyzstan's Manas Air Base. 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 considering sending several
officers to ISAF headquarters and deploying a military
medical unit to Afghanistan. As a later step, the
Kazakhstanis may also consider deploying a military
engineering unit to teach at the military engineering school
at Mazar-i-Sharif or to assist in unexploded ordnance
disposal, a mission they carried out in Iraq for over five
years. The Kazakhstani government provided Afghanistan $3
million in humanitarian assistance in 2008 and is developing
a program to provide Afghan students with free university
education in Kazakhstan. The Kazakhstanis also hope to make
Afghanistan a focus of their 2010 OSCE chairmanship.

DEMOCRACY: SLOW GOING


5. (C) While the Kazakhstani government articulates a
strategic vision of democracy, it has lagged on the
implementation front. The leadership remains resistant to
competitive political processes -- and the situation is
complicated by the fact that Nazarbayev is extraordinarily
popular (with a 90 percent approval rating in our own
polling),while the opposition is weak, fractured, and
comprised mostly of ex-Nazarbayev loyalists who fell out of
favor. Nazarbayev's Nur Otan party officially received 88%
of the vote and won all the parliamentary seats in the August
2007 elections, which OSCE observers concluded did not meet
OSCE standards. The next elections, both parliamentary and
presidential, are scheduled for 2012. Should Nazarbayev run
again -- and at this juncture it appears likely he will -- he
would almost certainly win, even with fully free and fair
balloting. (NOTE: Nazarbayev is not yet grooming a
successor. END NOTE.)


6. (C) On a positive note, Nazarbayev has taken steps that
could facilitate a transition to a more democratic system
over the long run. His Bolashak program provides
scholarships for several thousand Kazakhstanis to receive
higher education abroad, mostly in the West, where they
absorb Western ideas and values. He has also brought into
government a new generation of young, ambitious bureaucrats
-- many of whom studied in the West through Bolashak or our
own programs.


7. (C) When Kazakhstan was selected to be 2010 OSCE chairman
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 with OSCE and ODIHR recommendations. (NOTE:
Tazhin also promised that as OSCE chairman, Kazakhstan would
support the OSCE's Human Dimension and preserve ODIHR's
mandate. END NOTE.) The amendments were finally signed into
law in February. While key civil society leaders were
disappointed that the new legislation did not go further, we
consider them to be steps in the right direction, and will
continue pressing for further reforms, including complete
decriminalization of libel and the establishment of fully
independent electoral commissions with representatives from
all political parties. While Kazakhstan prides itself on its
religious tolerance, parliament passed legislation in late
2008 which would have restricted the religious freedom of
minority religious groups. Rather than signing the
legislation, President Nazarbayev sent it for review to the
Constitutional Council (Court) -- which ultimately declared
it to be unconstitutional.

ENERGY: DIVERSIFYING TRANSPORT ROUTES


8. (C) U.S. and Kazakhstani strategic interests are largely
aligned on the development of Kazakhstan's vast energy
resources. Both sides agree that U.S. and other Western

companies must continue playing a lead role in Kazakhstan's
energy exploration and production projects and that
diversifying transport routes will bolster Kazakhstan's
sovereignty and enable it to capture the maximum benefits of
its energy wealth. Kazakhstan produced 70.7 million tons of
oil in 2008 (approximately 1.41 million barrels per day),and
is expected to become one of the world's top ten crude
exporters soon after 2015. While the country also has
significant gas reserves (1.5 trillion cubic meters is a
low-end estimate),current gas exports are very limited for
now, in part because gas is being reinjected to maximize
crude output. U.S. companies -- ExxonMobil, Chevron, and
ConocoPhilips -- have significant ownership stakes in
Kazakhstan's three major hydrocarbon projects, including
Kashagan, the world's largest oil field discovery since
Alaska's North Slope.


9. (C) With major crude production increases on the horizon,
Kazakhstan must develop additional transport routes to bring
its crude to market. Currently, most of Kazakhstan's crude
is exported via Russia, though some exports flow east to
China, west across the Caspian through Azerbaijan, and south
across the Caspian to Iran. We are focused on helping the
Kazakhstanis implement the Kazakhstan-Caspian Transportation
System (KCTS),which envisions a "virtual pipeline" of
tankers transporting large volumes of crude 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. While a trans-Caspian
crude pipeline would be a cheaper long-term transport option,
the Kazakhstanis maintain that an agreement on Caspian
delimitation among the five Caspian littoral states is a
prerequisite -- politically, if not legally -- for moving
forward on such a pipeline's construction.

ECONOMY: AGGRESSIVE STEPS TO TACKLE ECONOMIC CRISIS


10. (C) 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 9% per
year during 2005-07, before dropping to 3% in 2008 with the
onset of the global financial crisis. While the country's
economic success is partly due to its fortuitous natural
resource deposits, astute macroeconomic policies and
extensive economic reforms have also played an important
role. Kazakhstan has a modern banking and financial system,
a well-endowed pension fund, and a transparent sovereign
wealth fund with $22 billion in assets. The government has
taken aggressive steps to tackle the domestic reverberations
of the world economic crisis, allocating $21 billion to take
equity stakes in private banks, prop up the construction and
real-estate sectors, and support small- and medium-sized
enterprises and agriculture.


11. (C) Kazakhstan's long-run economic challenge is to
diversify its economy away from reliance on the energy
sector. In 2008, we launched a bilateral Public-Private
Economic Partnership Initiative (PPEPI),which is bringing
together the U.S. and Kazakhstani public and private sectors
to make policy recommendations on improving the country's
business climate and reducing other barriers to non-energy
investments. Kazakhstan is currently negotiating WTO
accession agreements with the United States, several other
countries, and the EU. The Kazakhstanis maintain that we are
demanding greater concessions from them than we have
requested from other WTO candidates, including Russia. Some
in the Kazakhstani government would prefer to first finalize
a Russia-Belarus-Kazakhstan Customs Union and deal with the
WTO later -- though this might give Russia significant
leverage over Kazakhstan's WTO accession. A high-level
message from us that we remain committed to Kazakhstan's WTO
membership (and actions to back up our rhetoric) would help

the Kazakhstanis keep their focus on WTO accession.

NON-PROLIFERATION: A HALLMARK OF BILATERAL COOPERATION


12. (S) Non-proliferation cooperation has been a hallmark of
our bilateral relationship since Kazakhstan became
independent and agreed to give up the nuclear arsenal it
inherited from the USSR. The Nunn-Lugar Cooperative Threat
Reduction (CTR) program remains the dominant component of our
assistance to Kazakhstan. Key ongoing CTR activities include
our efforts to secure the radiological material at the former
Soviet nuclear test site near Semipalatinsk and to
decommission and store the spent fuel from Kazakhstan's
plutonium breeder reactor. We are pressing the Kazakhstanis
to allow us to speed up work at Semipalatinsk -- consistent
with President Obama's effort, announced in Prague, to secure
all vulnerable nuclear materials worldwide by the end of his
first term. The Kazakhstanis are seeking additional ways to
burnish their non-proliferation credentials. On April 6,
President Nazarbayev announced publicly that Kazakhstan is
interested in hosting the Nuclear Threat Initiative's
IAEA-administered international nuclear fuel bank -- an offer
we welcomed. The Kazakhstanis are also considering running
this year for a seat on the IAEA Board of Governors (a
position we initially pressed them to take in 2008),and
continue to press us to support their joining the Missile
Technology Control Regime (MTCR).
HOAGLAND