KAZAKHSTAN: PARLIAMENT DISCUSSES REVISIONS TO MARITIME

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SUBJECT: KAZAKHSTAN: PARLIAMENT DISCUSSES REVISIONS TO MARITIME
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1. (U) Sensitive but unclassified. Not for public Internet.


2. (U) SUMMARY: At a January 21 roundtable hosted by the
Association of Maritime Transportation Entrepreneurs,
parliamentarians and representatives of 10 ministries, international
shipping companies, and the diplomatic community discussed the need
for significant improvements in Kazakhstan's maritime transportation
legislation. National maritime shipping company KazMorTransFlot
(KMTF) highlighted its competitive disadvantage compared to other
national shipping companies, which receive direct operational
support from their governments. Chevron's maritime transportation
advisor called for the creation of a single maritime administration
and a marine academy to meet Kazakhstan's increasing demand for
clear, consistent regulations and well-trained naval crews that meet
international standards. As a result, the parliamentarians asked
the Ministry of Transportation and Communications to provide
recommendations on amendments to the 2002 Maritime Transportation
Law to ensure its full compliance with International Maritime
Organization (IMO) guidelines. END SUMMARY.

KMTF AT A COMPETITIVE DISADVANTAGE


3. (U) KMTF General Director Marat Ormanov compellingly argued his
company's distinct disadvantage compared to competitors from
Azerbaijan, Russia, and Iran. "The competition to ship oil via the
Caspian Sea is getting tougher," he said. "The maritime shipping
companies of Azerbaijan, Russia, and Iran are beefing up their trade
fleets with government support, and we are at a competitive
disadvantage." According to Ormanov, unlike all other Caspian
fleets, Kazakhstani maritime shipping companies do not receive
call-in port preferential rates in domestic ports. He highlighted
that a KMTF tanker is charged $8,600 more than an Azerbaijani vessel
of the same type for every call-in at the Baku sea port. "As a
result," he claimed, "we overpay $600,000 annually, and lose any
chance at competitiveness."

OIL TANKER SHIPMENTS EXPECTED TO INCREASE DRAMATICALLY


4. (U) Ormanov said that KMTF currently owns and operates four oil
tankers, with two additional 13,000-deadweight ton (dwt) tankers
expected by the end of the year. "Meanwhile," he asserted,
"Azerbaijan has built 10 tankers in the last four years, primarily
to ship Kazakhstan's oil. The lion's share of that investment came
directly from the Azeri government." Ormanov added that Russia's
Caspian fleet includes 27 oil tankers (including three new ships),
Iran has three 63,000 dwt supertankers at various stages of
construction, and Azerbaijan has a total of 45 vessels, including 10
new ones. Alexander Andrushenko, chairman of the Association of
Maritime Transportation Entrepreneurs, claimed that the percentage
of Kazakhstan's oil exports shipped by sea will increase from 15% to
40% by 2020 (NOTE: During this same period, Kazakhstani oil
production is expected to double. END NOTE).

CALL FOR A NEW MARITIME ADMINISTRATION


5. (U) Ormanov also highlighted the absence of a single, unified
Kazakhstani maritime administration with the authority and resources
to guide the development of its nascent maritime transportation
industry. Ormanov insisted that this administration must have
professional staff who can enforce navigation safety, define state
policy, establish a navigation registry, and manage the registration
of ships and ship owners. "Maritime transportation in Kazakhstan is
governed by many different agencies with many other interests," he
said, noting the Azerbaijani maritime administration's sole
authority over maritime transportation and direct line to President
Aliyev.

LACK OF QUALIFIED CREWS A MAJOR CONCERN


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6. (U) Chevron's former Regional Marine Manager, Kjell Landin, now
a private consultant, strongly agreed. He reiterated to the members
of parliament and ministry officials that Kazakhstan should
establish a single maritime administration with clear rules, a
strong mandate, skilled staff, and sufficient resources to carry out
its mission. Landin also proposed the establishment of a marine
academy, training center, and apprenticeship programs to provide
Kazakhstani mariners for the industry. He estimated that Kazakhstan
will need 4,000 qualified mariners, including 1,500 officers, and
20-40 tankers, including some large vessels (40,000-60,000 dwt) by

2020. "Out of 900 mariners presently engaged onboard
Kazakhstani-flagged vessels, only 19% are citizens of Kazakhstan,"
he highlighted, "while the number of senior officers who are
citizens is almost zero." According to Landin, it takes a minimum
of 15 years to train and certify a ship's captain. (NOTE: On
January 1, Article 25 of the Law on Maritime Shipping came into
effect, requiring that all crew members on Kazakhstani-flagged
vessels be Kazakhstani citizens (reftel). END NOTE).


7. (U) Visibly impressed, parliamentarian Zeinulla Alshymbayev, a
member of the transportation working group in the Mazhilis (lower
house),vowed to incorporate the experts' recommendations into
legislation currently under discussion. "I can see that there are
many things we did not take into account in our draft," he
acknowledged, such as the registration and flagging of vessels,
long-term training programs for crews, and establishment of a
single, unified maritime administration.


8. (SBU) COMMENT: If Kazakhstan's oil production increases as
expected over the next five years, the Kazakhstan Caspian
Transportation System (KCTS),which entails tanker shipments across
the Caspian, will play a critical role in bringing the crude to
market. The government and international oil companies thus far
have focused on the ownership of the infrastructure required to
transport the oil westward. This roundtable, however, underscored
the significant need for attention to and investment in the legal
framework, institutional authority, and human capacity in order for
Kazakhstan to develop its maritime transportation industry, meet
international standards, and compete with neighboring states. END
COMMENT.

HOAGLAND