Monthly Archives: June 2007

07ASTANA1762, KAZAKHSTAN: ANTI-MONEY LAUNDERING AND COUNTER-NARCOTICS

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Reference ID Created Released Classification Origin
07ASTANA1762 2007-06-27 08:57 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO6958
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHTA #1762/01 1780857
ZNR UUUUU ZZH
R 270857Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9923
INFO RUEHAST/USOFFICE ALMATY
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEATRS/DEPT OF TREASURY WASH DC//IET//

UNCLAS SECTION 01 OF 02 ASTANA 001762 
 
SIPDIS 
 
STATE FOR INL/AAE (ALTON), INL/C, SCA/CEN (O'MARA) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SNAR PREL PGOV KCOR KCRM KZ
SUBJECT: KAZAKHSTAN: ANTI-MONEY LAUNDERING AND COUNTER-NARCOTICS 
ASSISTANCE DONOR COORDINATION MEETING 
 
ASTANA 00001762  001.2 OF 002 
 
 
1. Summary:  On June 18, the Embassy of the United Kingdom in Astana 
hosted a coordination meeting on anti-money laundering, adding an 
hour for discussing counter-narcotics assistance.  Representatives 
of the World Bank, OSCE, UNODC, BOMCA/CADAP, and the Embassies of 
France and Germany provided briefings on the recent Eurasia Group 
Plenary Session and bilateral assistance programs.  Representatives 
of the Procurator General's Office provided information on recent 
anti-money laundering developments.  The officers expressing strong 
belief that Kazakhstan's financial intelligence unit will be 
established soon after the passage of the basic anti-money 
laundering law later this year and it will be placed under the 
authority of the Procurator General's Office.  End summary. 
 
------------------------------ 
EURASIA GROUP PLENARY IN SOCHI 
------------------------------ 
 
2.  Cari Votava, Senior Financial Specialist of the World Bank, 
reported about the Sixth Eurasia Group Plenary Meeting held in 
Sochi, Russia on June 11-15, highlighting that the EAG evaluation of 
Kazakhstan was postponed until November 2009, after expected passage 
of the basic AML law and establishment of the FIU. 
 
3.  Votava said that one of the central issues at the Plenary 
Meeting was the evaluation report on Kyrgyzstan prepared by the EAG 
Mandate Working Group on Mutual Evaluations and Legal Issues.  She 
noted that Kyrgyzstan successfully passed the evaluation.  The 
mutual evaluation of China is currently in process and the next 
countries to be evaluated are Tajikistan and Russia.  EAG member 
states Belarus, China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan 
and Uzbekistan attended the plenary.  (Note: The U.S. has observer 
status at the Eurasian Group.  End note.) 
 
--------------------------------------------- -------- 
AML LAW - FIU in KAZAKHSTAN? LATER RATHER THAN SOONER 
--------------------------------------------- -------- 
 
4.  Andrey Kravchenko, Head of the Department of Legal Oversight of 
State Agencies of the Procurator General's Office (PGO), reported 
that the PGO had submitted a request to Prime Minister Masimov to 
facilitate the establishment of the Financial Intelligence Unit 
(FIU), but the request was tabled pending passage of the AML law. 
 
5.  Notwithstanding the tabled motion, Kravchenko pointed out that 
at a recent meeting in the Presidential Administration, heads of law 
enforcement agencies, representatives of the central bank, and the 
regulators of the financial markets responded positively to the 
Procurator General's written proposal to establish the FIU under the 
Procuracy.  He said that during the week of June 25 the Procuracy 
will draft the text of a Presidential decree on establishment of the 
FIU.  The Procurator's Office expects to establish FIU very soon 
after passing the AML law which is expected in late 2007 or early 
2008. 
 
 
---------------------------------------- 
PREPPING PRIVATE BUSINESS ON AML AND FIU 
---------------------------------------- 
 
6. Kravchenko further reported that on March 30 officers of the PGO 
met with business representatives at the Forum of Entrepreneurs and 
addressed many of private sector concerns related to enactment of 
the AML law and establishment of FIU under Procurator's Office.  He 
pointed that as soon as the Mazhilis (lower house of parliament) 
begins consideration of the draft AML law, interagency consultations 
by state agencies for private sector representatives will begin as 
well. 
 
7.  Regarding technical assistance, recently the PGO in cooperation 
with World Bank began conducting one day anti-money laundering 
seminars for officers from different law enforcement agencies.  The 
next seminar will take place on July 5.  (Note: Within its ongoing 
AML program, INL will sponsor additional training for future FIU 
analysts and investigators.  End note.)  With the assistance of the 
World Bank, several Kazakhstani law enforcement officers took 
courses in Syracuse, Italy on international experience in combating 
money laundering. 
 
----------------- 
COUNTER-NARCOTICS 
----------------- 
 
8. Tofik Murshudlu, UNODC Coordinator, provided a status report on 
the establishment of the Central Asia Regional Information 
Coordination Center (CARICC) in Almaty.  To date, the presidents of 
five participating countries have signed the agreement on CARICC 
establishment.  As soon as the presidents of Russia and Turkmenistan 
sign the agreement the document will be sent for ratification to the 
 
ASTANA 00001762  002.2 OF 002 
 
 
parliaments of the signatory countries.  To avoid for a long delay 
while parlia
ments take action, UNODC proposes to launch a pilot 
phase of CARICC.  Murshudlu assured participants that there is 
sufficient legal basis to start some functions of CARICC during the 
pilot phase.  One benefit of the pilot project is that several 
ongoing counter-narcotics operations in Central Asia could be 
continued more easily from a central location and coordinated more 
effectively across national borders.  Furthermore, the pilot phase 
would permit "test driving" the CARICC operational system (technical 
and managerial), allowing for modification before the official 
opening.  Murshudlu called for financial support and active 
participation of key CARICC partners to ensure the proper launch of 
the center. 
 
9. Catherine Inglehearn, British DCM, described the projects on 
transparency of budgets that the UK Embassy is implementing in 
Kazakhstan.  She also mentioned that the UK and GOK have signed a 
memorandum of understanding on mutual assistance and exchange of 
intelligence information on money laundering crimes. 
 
10. Jean Frangois of the Embassy of France reported that he has 
invited French experts to conduct a drug intelligence seminar in 
Kyrgyzstan in September 2007.  In October 2007 he plans to provide 
training on financial terrorism for officers of the National 
Security Committee (KNB).  He is also working on developing training 
on detecting forgery of identification documents.  All training is 
to be provided at the academies of the MVD and KNB.  He is also 
arranging a visit of eight Kazakhstani KNB officers to France to 
meet counterparts and study experience of combating financial 
crimes.  Francois underlined that KNB has a budget to contribute to 
all joint events. 
 
11. Comment:  In the eyes of the PGO, the thrice delayed AML law now 
appears to be gathering momentum.  The PGO looks forward to the 
election of the new Mazhilis (lower house of parliament) in August 
2007 and support from Presidential Administration to facilitate the 
adoption of the AML law.  According to the current information, 
analysis of the law is to conclude on November 11, 2007 and 
consideration of the law in the Mazhilis is expected soon after. 
End comment. 
 
ORDWAY

Wikileaks

07ASTANA1732, KAZAKHSTAN: POST ENDORSES FY 2007 SECTION 1206

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Reference ID Created Released Classification Origin
07ASTANA1732 2007-06-22 07:09 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXYZ0383
PP RUEHWEB

DE RUEHTA #1732 1730709
ZNR UUUUU ZZH
P 220709Z JUN 07
FM AMEMBASSY ASTANA
TO SECSTATE WASHDC PRIORITY 9893

UNCLAS ASTANA 001732 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR PM/PPA, SCA/CEN (M. O'MARA, J. HILLMEYER) 
 
E.O. 12958: N/A 
TAGS: MARR MOPS LPREL KZ
SUBJECT: KAZAKHSTAN: POST ENDORSES FY 2007 SECTION 1206 
PROPOSAL 
 
REF: STATE 84596 
 
1. (SBU) Post fully supports the FY 2007 proposal for Section 
1206 funding for Kazakhstan submitted by CENTCOM. 
The funding is intended to increase the ability of the 
KAZBRIG to support allied and partner operations in support 
of counterterrorm and peace support operations. 
 
2. (SBU) Post's Security Assistance Working Group (SAWG) met 
on June 21 to review the Section 1206 proposal in detail. 
The SAWG concluded that the proposal addresses priority needs 
and meshes well with other ongoingf assistance and security 
efforts. 
ORDWAY

Wikileaks

07ASTANA1730, KAZAKHSTAN REQUESTS IMPLEMENTING ARRANGEMENT ON ALL ALATAU

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Reference ID Created Released Classification Origin
07ASTANA1730 2007-06-22 03:51 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO2707
PP RUEHAST
DE RUEHTA #1730/01 1730351
ZNR UUUUU ZZH
P 220351Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9891
RUEBAAA/DEPT OF ENERGY WASHDC
INFO RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 001730 
 
SIPDIS 
 
DEPARTMENT FOR ISN, SCA/CEN (M. O'MARA), SCA/RA (A. CUMMINGS) 
 
DOE/NNSA FOR BIENIAWSKI/CUMMINS/KENNEDY 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PTER KGIC MCAP PTER KNNP KZ
SUBJECT: KAZAKHSTAN REQUESTS IMPLEMENTING ARRANGEMENT ON ALL ALATAU 
ACTIVITIES 
 
REF:  ASTANA 219 
 
1. (SBU) Summary:  In a June 12 meeting in Astana, Vice Minister of 
Energy and Mineral Resources Satkaliyev told Assistant Secretary 
Rood and Deputy Administrator Tobey that Kazakhstan preferred to 
sign an Implementing Arrangement covering all Department of Energy 
activities at the Institute of Nuclear Physics, rather than handling 
the various projects (downblending of fresh fuel, spent fuel return, 
and reactor conversion) in different ways.  Satkaliyev also reported 
that the Kazakhstani side was not yet ready to sign the communique 
on discussion of permanent disposition of the BN-350 spent fuel. 
End summary. 
 
2.  (U) On the margins of the third meeting of the Global Initiative 
to Combat Nuclear Terrorism in Astana, Assistant Secretary for 
International Security and Nonproliferation John Rood and DOE Deputy 
Administrator for Defense Nuclear Nonproliferation William Tobey met 
with Vice Minister of Energy and Mineral Resources Almasadam 
Satkaliyev on June 12 to discuss pending non-proliferation issues. 
Satkaliyev was joined by Timur Zhantikin, Chairman of the 
Kazakhstani Atomic Energy Committee; Kairat Kadyrzhanov, Director of 
the National Nuclear Center; and Almaz Tulebayev and Bakhyt 
Shaikhislamova from MEMR.  Andrew Bieniawski and Pol-Econ Chief 
(notetaker) also participated. 
 
------------------------------------------ 
Communique on BN-350 Permanent Disposition 
------------------------------------------ 
 
3. (SBU) Satkaliyev told A/S Rood and Deputy Administrator Tobey 
that the communique negotiated during the January discussions on 
permanent disposition of BN-350 spent fuel (reftel) was undergoing 
required interagency clearance, but MEMR was doing everything 
possible to move it forward and was optimistic that it would soon be 
approved.  He asked for clarification of the impact of the 
communique on the existing bilateral agreement on the disposition of 
BN-350 fuel, signed in 1997. 
 
4. (SBU) Tobey explained that the communique would not change the 
existing agreement in any way.  The U.S. remains fully committed to 
the fuel move, and anticipates full FY08 funding.  The communique 
would guide only the efforts of a working group examining permanent 
disposition options after the fuel move.  Tobey offered to send a 
letter reiterating that signing the BN-350 Communique would in no 
way undermine or impact the U.S. commitment to move the BN-350 spent 
fuel to Baikal-1 by 2010.  Satkaliyev expressed appreciation for the 
clarification, commenting that it would help him resolve certain 
interagency concerns. 
 
------------------------------------- 
Downblending of Fresh HEU from Alatau 
------------------------------------- 
 
5. (SBU) Tobey noted that despite President Nazarbayev's agreement 
during his September 2006 visit to Washington on the downblending of 
fresh HEU from the Alatau research reactor at the Institute of 
Nuclear Physics, the project has not moved forward. 
 
6. (SBU) Satkaliyev noted that negotiations between DOE and the 
Institute of Nuclear Physics on converting the reactor from HEU to 
LEU use were proceeding well.  He stressed that the reactor was very 
important to Kazakhstan's economy, as it produced isotopes and other 
medical products.  Kazakhstan is nevertheless ready to hear more 
about the U.S. proposal and financing.  Tobey responded that the 
Kazakhstani side's concerns were justified, and the U.S. is prepared 
to address them.  The conversion itself would have a minimal impact 
on reactor operations. The Nuclear Threat Initiative was prepared to 
cover $1.3 million of the cost, and DOE was prepared to contribute 
$2 million for technical support (including $1.3 million for a 
laboratory and $700,000 for two separate projects) and to purchase a 
new supply of LEU, at a cost of approximately $3-4 million. 
Kazakhstan will also be able to keep the LEU resulting from the 
blenddown, Tobey added. 
 
7. (SBU) Satkaliyev indicated that the proposal was very good.  He 
promised to discuss the proposal with his colleagues at MEMR and the 
Institute of Nuclear Physics.  A written agreement spelling out the 
parties involved, the financing, the timeline, and technical 
questions was needed, he added.  Tobey replied that the U.S. 
believed that the 1993 CTR Umbrella Agreement and the Materials 
Protection, Control, and Accounting (MPC&A) agreement, together with 
DOE's contract with the Ulba Metallurgical Factory to perform the 
downblending, provided sufficient legal basis for the project. 
 
8. (SBU) Satkaliyev agreed that the CTR Agreement and MPC&A were 
 
ASTANA 00001730  002 OF 002 
 
 
relevant, but pushed back that, as with other DOE projects, a 
separate Implementing Arrangement was needed for the work at A
latau. 
 Although the Kazakhstani interagency clearance process for such an 
agreement would be lengthy, Satkaliyev said, it would take no longer 
than obtaining approval to move forward with the project in the 
absence of an agreement.  He promised to push the interagency 
process to move as quickly as possible; after he received a draft it 
would take his experts approximately two months to review the text 
and predict a timeline for signature.  Tobey thanked Satkaliyev for 
his openness and agreed to submit a new draft Implementing 
Arrangement covering all the work at the Institute of Nuclear 
Physics. 
 
ORDWAY

Wikileaks

07ASTANA1722, CORRECTED COPY: KAZAKHSTAN: LOCAL GOVERNMENT DEMOLISHES

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Reference ID Created Released Classification Origin
07ASTANA1722 2007-06-21 08:50 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO1704
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1722/01 1720850
ZNR UUUUU ZZH
P 210850Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9882
INFO RUEHAST/USOFFICE ALMATY
RUCNCIS/CIS COLLECTIVE 0217
RUEHNE/AMEMBASSY NEW DELHI 0464
RUEHLO/AMEMBASSY LONDON 0482
RUEHVEN/USMISSION USOSCE 1768

UNCLAS SECTION 01 OF 02 ASTANA 001722 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/CEN (M. O'MARA) 
 
E.O. 12958: N/A 
TAGS: PHUM PGOV PREL KDEM KZ
SUBJECT: CORRECTED COPY: KAZAKHSTAN: LOCAL GOVERNMENT DEMOLISHES 
HARE KRISHNA HOMES DESPITE ONGOING NEGOTIATIONS 
 
REF: A. 06 ASTANA 651, B. 06 ASTANA 668, C. 06 ASTANA 903 
 D. ASTANA 232, E. ASTANA 1371 
 
ASTANA 00001722  001.2 OF 002 
 
 
1. (SBU) Summary: Early on June 15, Karasai district officials 
demolished an additional 12 homes at the Hare Krishna commune 
outside of Almaty.  As they did during the November 2006 
demolitions, the police forced residents out of their homes while 
crews threw their possessions outside and demolished the houses with 
hand tools and excavators.  There were no arrests or incidents of 
violence.  Karasai district officials carried out the 
long-threatened evictions despite Government of Kazakhstan 
assurances that the dispute would be resolved peacefully, through 
negotiations.  End summary. 
 
------------------------------------------ 
LOCAL OFFICIALS DEMOLISH 12 MORE HOUSES... 
------------------------------------------ 
 
 
 
 
2. (SBU) Late on June 14, Hare Krishna representatives reported that 
they received a tip that Karasai district officials were organizing 
a demolition crew to come to the Hare Krishna commune the following 
morning.  Unlike previous false warnings (Ref E), the tip proved 
accurate.  On June 15, Karasai district officials led a team of 
local hired laborers to demolish 12 additional homes at the commune 
outside of Almaty.  Local officials acted pursuant to a court order 
calling for the eviction of the residents. According to Hare Krishna 
representatives and Andrey Grishin, a reporter for the Kazakhstan 
International Human Rights Bureau, the demolition crew arrived at 5 
a.m. with approximately 100 police officers. Karasai district 
officials, aided by their police escorts, forced residents from 
their homes, and the demolition crews began throwing possessions 
outside and tearing the structures apart with hand tools. The 
demolition crews then used excavators to knock down the walls, in 
the process damaging some adjacent buildings not slated for 
demolition. 
 
3.  (SBU) Hare Krishna representatives said that the demolition 
crews ignored the pleas of residents to spare their houses.  In 
contrast to the previous demolitions on November 21, 2006 (Ref A), 
the Hare Krishnas reported no arrests or violence arising out of the 
demolitions.  The demolition crews did not destroy the large house 
that the Krishnas use as their temple, located on a separate plot of 
land, though they fear this destruction could come at any time given 
the May 8 Supreme Court ruling clearing the way for authorities to 
confiscate that land (Ref E). According to the Hare Krishnas, they 
have about a dozen cottages remaining, plus the large house and a 
cowshed. 
 
4. (SBU) The Hare Krishnas said that a reporter from Vremya 
newspaper witnessed the demolitions, along with Grishin. Grishin 
said that local authorities were less aggressive with the 
journalists this time around, though village akim Bagdad Akhmetayev 
tried to confiscate the camera phone of one resident when the 
resident filmed him holding a sledgehammer and participating in the 
demolition. Akhmetayev relented when journalists approached. 
 
-------------------------------------- 
...DESPITE ASTANA'S PLEDGE TO NEGOTIATE 
-------------------------------------- 
 
5. (SBU) Karasai district officials proceeded with the demolitions 
despite public and private assurances by Government of Kazakhstan 
officials that the long-running dispute would be resolved through 
negotiations.  As reported in Ref E, Vice Chairman of the Religious 
Issues Committee Amanbek Mukhashov, Human Rights Ombudsman Bolat 
Baykadamov, deputy head of the Presidential Administration Maulen 
Ashimbayev, and chairman of the Religious Issues Committee in the 
Ministry of Justice Yeraly Tugzhanov previously stated both 
privately and publicly that Kazakhstan would resolve the conflict 
through negotiations and that the Government of Kazakhstan was ready 
to provide another piece of land in Almaty for construction of a new 
Hare Krishna temple. 
 
6. (SBU) Tugzhanov previously told Hare Krishna representatives that 
he was working with Almaty city officials to find a new piece of 
land for the Hare Krishnas. However, Krishna representatives 
questioned the sincerity of the government's interest in finding an 
acceptable solution. On May 25 and 30, Hare Krishna representatives 
said they visited plots of land offered by local officials in the 
Ilisky and Talgar districts in Almaty oblast, but the land plots 
were very small, were located over 100 km away from the city, did 
not have electricity or water, and were not suitable for 
 
ASTANA 00001722  002.2 OF 002 
 
 
agricultural uses.  The Hare Krishnas rejected the land plots, and 
stated in a May 30 press release that this solution "amounts only to 
rubbing the proposed salty ear
th into the wounds of a hard-hit 
religious minority." 
 
-------------------------------- 
GOVERNMENT BEGINS DAMAGE CONTROL 
-------------------------------- 
 
7. (SBU)  The Hare Krishnas continue to wage a public relations 
campaign to bring attention to the latest round of demolitions, 
issuing press releases and posting photographs of the destruction on 
their website (http://www.kazakhkrishna.com/ru-fotoarchive/ ). The 
Kazakhstan International Bureau of Human Rights, Almaty Helsinki 
Committee, and the Institute on Religion and Public Policy have 
already condemned the government's actions. 
 
8. (SBU) On June 16, Tugzhanov stated during a news conference in 
Astana that the demolitions were legal and were based on court 
rulings that the Hare Krishnas did not have valid ownership of the 
land. He said that the Hare Krishnas had been notified many times of 
the pending court executions, and could have prevented this 
"scandalous" situation if they had obeyed earlier court orders. 
Tugzhanov also stated that no political or religious meaning should 
be attached to the demolitions, as the issue was purely an economic 
dispute between citizens of Kazakhstan and the local government. 
 
9. (SBU) OSCE Human Dimension Officer Eugenia Benigni told us that 
Tugzhanov stated to her on June 18 that the government has tried to 
resolve the situation by offering new plots of land but the Hare 
Krishnas have refused several offers.  He defended the quality of 
the land plots that were offered to the Hare Krishnas, and said the 
Hare Krishnas were being unreasonable.  He stated that it was 
possible there would be more offers, but said that relations between 
the parties were very tense. 
 
------- 
COMMENT 
------- 
 
10. (SBU) Comment:  Once again, aggressive local authorities have 
acted in contradiction to the stated intentions of officials in 
Astana, signaling a lack of real political will in Astana to reach 
an acceptable negotiated settlement for the Hare Krishnas.  We 
expect that Kazakhstani officials will adhere to Tugzhanov's line 
that the demolitions were legal and were justified by the Hare 
Krishnas' refusal to accept "reasonable" offers of new land. The 
government's conduct demonstrates that the Hare Krishnas have very 
little hope for a fair resolution to their dispute.  End comment. 
 
ORDWAY

Wikileaks

07ASTANA1716, KAZAKHSTAN: PRESIDENT DISSOLVES MAZHILIS, CALLS ELECTIONS

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Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #07ASTANA1716.
Reference ID Created Released Classification Origin
07ASTANA1716 2007-06-21 00:04 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO1260
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1716/01 1720004
ZNR UUUUU ZZH
P 210004Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9872
INFO RUCNCIS/CIS COLLECTIVE 0215
RUEHC/SECSTATE WASHDC//SCA COLLECTIVE/ 9873
RUEHVEN/USMISSION USOSCE 1766
RUEHNO/USMISSION USNATO 2222
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 001716 
 
SIPDIS 
 
DEPARTMENT FOR SCA/CEN (M. O'MARA) 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM KDEM PREL KZ
SUBJECT: KAZAKHSTAN: PRESIDENT DISSOLVES MAZHILIS, CALLS ELECTIONS 
UNDER NEWLY PASSED REFORM LEGISLATION 
 
REF: A. Astana 515, B. USOSCE 195, C. Astana 1304, 
      D. Astana 1323, E. Astana 1528, F. Astana 1558, 
      G. Astana 1668 
 
ASTANA 00001716  001.2 OF 002 
 
 
1. (U) Summary:  On June 18, the parliament passed a number of 
legislative amendments to implement the recent changes to 
Kazakhstan's constitution.  Most of the legislative changes are 
identical to the recent constitutional changes, though the new law 
on elections sets forth the election process in greater detail. 
President Nazarbayev signed all of the legislative changes on June 
19.  On June 20, he announced the early dissolution of the Mazhilis, 
and called elections for August 18. End summary. 
 
--------------------------------------------- --------- 
PRESIDENT DISSOLVES MAZHILIS, CALLS EARLY ELECTIONS... 
--------------------------------------------- --------- 
 
2. (U) On June 18, during a joint session, the parliament passed 
amendments implementing recent changes to Kazakhstan's constitution 
in four major laws: the Laws on the President, the Cabinet, the 
Parliament and the Status of Its Members, and Elections.  President 
Nazarbayev signed all of the legislation on June 19. 
 
3. (U) On June 20, President Nazarbayev announced the early 
dissolution of the Mazhilis; the Mazhilis term would normally expire 
in September 2009.   He scheduled new Mazhilis elections for August 
18.  Under this timetable, political parties must begin nominating 
candidates on June 22, and complete the nominations by July 11. 
Nazarbayev announced that the Assembly of Peoples of Kazakhstan, 
which is now entitled to choose nine Mazhilis members, will select 
its members on August 20.  Pursuant to the new constitutional and 
legislative changes, the Senate is empowered to act in the absence 
of the Mazhilis. 
 
--------------------------------------------- --- 
... AFTER PARLIAMENT FINISHES REFORM LEGISLATION 
--------------------------------------------- --- 
 
4. (U) Although the texts of the amendments have not yet been 
published, there have been detailed press reports on the contents of 
the legislation signed June 19.  The revisions to the Law on the 
President track closely with the recent constitutional amendments 
(Ref D), confirming, for example, that the president's term in 
office will be reduced from seven to five years beginning in 2012, 
and that the president is no longer required to suspend his 
participation in a political party while serving as president.  The 
legislation confirms that the president can choose to dissolve only 
the Mazhilis; previously, the president was required to dissolve 
both the Senate and the Mazhilis. (Note: Under the new 
constitutional reforms, the Senate is empowered to assume all of the 
functions of parliament in the event of a temporary absence of the 
Mazhilis.  Senators are not directly elected; fifteen of the 47 
senators are to be appointed directly by the president; the 
remainder will be chosen by the presidentially-appointed regional 
akims.  End note.) 
 
5. (U) The revisions to the Law on the Cabinet are likewise nearly 
substantively identical to the recent constitutional amendments. 
The constitutional amendments opened the door for exceptions to the 
ban on Cabinet members holding other paid positions or engaging in 
entrepreneurial activities.  The revised Law on the Cabinet creates 
such an exception, allowing Cabinet members to be members of the 
managing or steering boards of commercial organizations. 
 
6. (U) The revisions to the Law on the Parliament and the Status of 
Its Members set forth in greater detail the role of political party 
factions in the Mazhilis, in addition to confirming the recent 
constitutional changes impacting the legislature.  Political party 
factions are permitted only in the Mazhilis, and will be led by 
members of the Mazhilis leadership.  The law also establishes 
procedures for parliament to express its consent to the appointment 
or dismissal of government officials, and sets forth operational 
procedures for the Senate to act in the absence of the Mazhilis. 
 
7. (U) The revisions to the Law on Elections set forth the election 
procedure in detail; the recent constitutional amendments removed 
these procedures from the Constitution.  As specified in the revised 
constitution, 98 of the 107 Mazhilis members will be elected under a 
party list system, while the remaining nine members will be chosen 
by the Assembly of Peoples of Kazakhstan.  The new law states that 
each party may nominate no more than 127 candidates.  The threshold 
to be represented in the Mazhilis is 7%.  Parties that pass that 
threshold will decide after the election
 which of their candidates 
will take seats in the Mazhilis; this decision may be made at a 
 
ASTANA 00001716  002.2 OF 002 
 
 
party congress or by the party's administration. 
 
8. (U) Political parties must file their list of candidates no more 
than two months and no less than 40 days before the election. 
Nomination of candidates by the Assembly of Peoples of Kazakhstan 
begins 15 days before and closes 10 days before the elections.  The 
law states that parties may not form electoral blocs to compete in 
elections.  (Note: Opposition party leaders claimed that this 
provision was added after True Ak Zhol and the National Social 
Democratic Party announced their intention to form an electoral bloc 
several weeks ago, Ref F.  Other observers say that electoral blocs 
should be avoided because they lead to instability in 
proportionally-elected legislatures.  End note.) 
 
9. (U) In addition, the revised Law on Elections states that a 
political party that won 7% or more of the vote in the previous 
election is exempt from the election fee; a party that won 5-7% of 
the votes in the previous election pays 50% of the election fee; and 
a party that won 3-5% of the vote pay 70% of the election fee. 
(Note: The election fee is 15 times the official minimum salary per 
candidate nominated; this year, the fee will be approximately $1200 
per candidate nominated.  End note.)  The law also states that the 
Central Election Commission will now issue absentee voting 
certificates; previously, this was the task of local election 
commissions.  The law also bans the participation of incumbent 
members of parliament, maslikhats, other local self-government 
authorities, presidential candidates, presidential candidate 
representatives, judges, or government officials from serving on 
election commissions. 
 
10. (U) Furthermore, the revised election law provides that parties 
that have no representatives on local election commissions may send 
representatives to participate with a right of "consultative vote"; 
such representatives may speak at meetings, initiate proposals, and 
protest election commission actions by filing a complaint to a 
higher level election commission or a court.  (Note: Opposition 
party leaders have been highly critical of the process for selecting 
election commission members, and are not satisfied with the above 
measure.  Refs E, G. End note.) 
 
11. (U) Finally, the revised Law on Elections specifies the status 
and powers of local and international election observers, reporters, 
and candidate representatives, though details on these provisions 
were not reported today. 
 
------- 
COMMENT 
------- 
 
12. (SBU) The dissolution of the Mazhilis and the announcement of 
early elections came as no surprise, given the buzz around the 
capital in the last few weeks and the fact that new elections are 
necessary to implement the recent reforms and move toward a greater 
role for political parties.  Post will continue to monitor the 
situation closely as more details about the legislation signed June 
19 are published. 
 
ORDWAY

Wikileaks

07ASTANA1709, KAZAKHSTAN: SCO HAS NO PLANS TO USE THE BISHKEK

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Reference ID Created Released Classification Origin
07ASTANA1709 2007-06-20 00:14 2011-08-30 01:44 SECRET Embassy Astana

VZCZCXRO0119
PP RUEHDBU
DE RUEHTA #1709 1710014
ZNY SSSSS ZZH
P 200014Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9863
INFO RUEHBJ/AMEMBASSY BEIJING 0005
RUEHEK/AMEMBASSY BISHKEK 8037
RUEHDBU/AMEMBASSY DUSHANBE 2159
RUEHIL/AMEMBASSY ISLAMABAD 2121
RUEHBUL/AMEMBASSY KABUL 0337
RUEHMO/AMEMBASSY MOSCOW 1417
RUEHNE/AMEMBASSY NEW DELHI 0463
RUEHNT/AMEMBASSY TASHKENT 7935
RUEHUM/AMEMBASSY ULANBATAAR 0123

S E C R E T ASTANA 001709 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA AND EAP/CM 
 
E.O. 12958: DECL: 06/19/2017 
TAGS: PGOV PREL MARR MOPS KZ
SUBJECT: KAZAKHSTAN:  SCO HAS NO PLANS TO USE THE BISHKEK 
SUMMIT TO CALL FOR WESTERN TROOP WITHDRAWALS 
 
REF: A. STATE 77753 
     B. ASTANA 1668 
 
Classified By: Pol-Econ Chief Deborah Mennuti, reasons 1.4(B) and (D). 
 
1. (S)  On June 15, Poloff delivered Ref A demarche on the 
Shanghai Cooperation Organization (SCO) to Yerlan Shamishev, 
Chief of the SCO Security Section in the Asian Cooperation 
Department of the Kazakhstani Ministry of Foreign Affairs. 
Shamishev assured Poloff that as of the present time, the SCO 
had no plans to repeat any statement similar to that made 
during the 2005 summit critical of U.S. and Western forces 
and would not ask to expel troops from the Manas Air Base. 
Shamishev said that Kazakhstan's position was to minimize 
calls to dismantle or pull out international coalition forces 
from Central Asia and explained that Kazakhstan does not 
believe it is in their best interest to aggravate the current 
balance.  Although there is no U.S. military presence in 
Kazakhstan, he reminded Poloff that Kazakhstani air space is 
open to coalition needs.  He hopes Kyrgyzstan will avoid 
tensions with the West by avoiding any pressure to call for a 
withdrawal of U.S. forces. 
 
2. (C) During his June 5-6 meetings with GOK officials (Ref 
B), Assistant Secretary Boucher urged that the Manas airbase 
not be discussed officially during SCO summit.  State 
Secretary Saudabayev promised to discuss the issue with 
 
SIPDIS 
President Nazarbayev and try to keep it off the summit agenda. 
ORDWAY

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07ASTANA1705, KAZAKHSTAN: LOCAL GOVERNMENT DEMOLISHES HARE KRISHNA HOMES

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Reference ID Created Released Classification Origin
07ASTANA1705 2007-06-19 09:51 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO9332
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1705/01 1700951
ZNR UUUUU ZZH
P 190951Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9856
INFO RUEHAST/USOFFICE ALMATY
RUCNCIS/CIS COLLECTIVE 0213
RUEHNE/AMEMBASSY NEW DELHI 0461
RUEHLO/AMEMBASSY LONDON 0480
RUEHVEN/USMISSION USOSCE 1763

UNCLAS SECTION 01 OF 02 ASTANA 001705 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/CEN (M. O'MARA) 
 
E.O. 12958: N/A 
TAGS: PHUM PGOV PREL KDEM KZ
SUBJECT: KAZAKHSTAN: LOCAL GOVERNMENT DEMOLISHES HARE KRISHNA HOMES 
DESPITE ONGOING NEGOTIATIONS 
 
REF: A. 06 ASTANA 651, B. 06 ASTANA 668, C. 06 ASTANA 903 
 D. ASTANA 232, E. ASTANA 1371 
 
ASTANA 00001705  001.2 OF 002 
 
 
1. (SBU) Summary: Early on May 15, Karasai district officials 
demolished an additional 12 homes at the Hare Krishna commune 
outside of Almaty.  As they did during the November 2006 
demolitions, the police forced residents out of their homes while 
crews threw their possessions outside and demolished the houses with 
hand tools and excavators.  There were no arrests or incidents of 
violence.  Karasai district officials carried out the 
long-threatened evictions despite Government of Kazakhstan 
assurances that the dispute would be resolved peacefully, through 
negotiations.  End summary. 
 
------------------------------------------ 
LOCAL OFFICIALS DEMOLISH 12 MORE HOUSES... 
------------------------------------------ 
 
 
 
 
2. (SBU) Late on May 14, Hare Krishna representatives reported that 
they received a tip that Karasai district officials were organizing 
a demolition crew to come to the Hare Krishna commune the following 
morning.  Unlike previous false warnings (Ref E), the tip proved 
accurate.  On May 15, Karasai district officials led a team of local 
hired laborers to demolish 12 additional homes at the commune 
outside of Almaty.  Local officials acted pursuant to a court order 
calling for the eviction of the residents. According to Hare Krishna 
representatives and Andrey Grishin, a reporter for the Kazakhstan 
International Human Rights Bureau, the demolition crew arrived at 5 
a.m. with approximately 100 police officers. Karasai district 
officials, aided by their police escorts, forced residents from 
their homes, and the demolition crews began throwing possessions 
outside and tearing the structures apart with hand tools. The 
demolition crews then used excavators to knock down the walls, in 
the process damaging some adjacent buildings not slated for 
demolition. 
 
3.  (SBU) Hare Krishna representatives said that the demolition 
crews ignored the pleas of residents to spare their houses.  In 
contrast to the previous demolitions on November 21, 2006 (Ref A), 
the Hare Krishnas reported no arrests or violence arising out of the 
demolitions.  The demolition crews did not destroy the large house 
that the Krishnas use as their temple, located on a separate plot of 
land, though they fear this destruction could come at any time given 
the May 8 Supreme Court ruling clearing the way for authorities to 
confiscate that land (Ref E). According to the Hare Krishnas, they 
have about a dozen cottages remaining, plus the large house and a 
cowshed. 
 
4. (SBU) The Hare Krishnas said that a reporter from Vremya 
newspaper witnessed the demolitions, along with Grishin. Grishin 
said that local authorities were less aggressive with the 
journalists this time around, though village akim Bagdad Akhmetayev 
tried to confiscate the camera phone of one resident when the 
resident filmed him holding a sledgehammer and participating in the 
demolition. Akhmetayev relented when journalists approached. 
 
-------------------------------------- 
...DESPITE ASTANA'S PLEDGE TO NEGOTIATE 
-------------------------------------- 
 
5. (SBU) Karasai district officials proceeded with the demolitions 
despite public and private assurances by Government of Kazakhstan 
officials that the long-running dispute would be resolved through 
negotiations.  As reported in Ref E, Vice Chairman of the Religious 
Issues Committee Amanbek Mukhashov, Human Rights Ombudsman Bolat 
Baykadamov, deputy head of the Presidential Administration Maulen 
Ashimbayev, and chairman of the Religious Issues Committee in the 
Ministry of Justice Yeraly Tugzhanov previously stated both 
privately and publicly that Kazakhstan would resolve the conflict 
through negotiations and that the Government of Kazakhstan was ready 
to provide another piece of land in Almaty for construction of a new 
Hare Krishna temple. 
 
6. (SBU) Tugzhanov previously told Hare Krishna representatives that 
he was working with Almaty city officials to find a new piece of 
land for the Hare Krishnas. However, Krishna representatives 
questioned the sincerity of the government's interest in finding an 
acceptable solution. On May 25 and 30, Hare Krishna representatives 
said they visited plots of land offered by local officials in the 
Ilisky and Talgar districts in Almaty oblast, but the land plots 
were very small, were located over 100 km away from the city, did 
not have electricity or water, and were not suitable for 
 
ASTANA 00001705  002.2 OF 002 
 
 
agricultural uses.  The Hare Krishnas rejected the land plots, and 
stated in a May 30 press release that this solution "amounts only to 
rubbing the proposed salty earth into the wounds
of a hard-hit 
religious minority." 
 
-------------------------------- 
GOVERNMENT BEGINS DAMAGE CONTROL 
-------------------------------- 
 
7. (SBU)  The Hare Krishnas continue to wage a public relations 
campaign to bring attention to the latest round of demolitions, 
issuing press releases and posting photographs of the destruction on 
their website (http://www.kazakhkrishna.com/ru-fotoarchive/ ). The 
Kazakhstan International Bureau of Human Rights, Almaty Helsinki 
Committee, and the Institute on Religion and Public Policy have 
already condemned the government's actions. 
 
8. (SBU) On June 16, Tugzhanov stated during a news conference in 
Astana that the demolitions were legal and were based on court 
rulings that the Hare Krishnas did not have valid ownership of the 
land. He said that the Hare Krishnas had been notified many times of 
the pending court executions, and could have prevented this 
"scandalous" situation if they had obeyed earlier court orders. 
Tugzhanov also stated that no political or religious meaning should 
be attached to the demolitions, as the issue was purely an economic 
dispute between citizens of Kazakhstan and the local government. 
 
9. (SBU) OSCE Human Dimension Officer Eugenia Benigni told us that 
Tugzhanov stated to her on June 18 that the government has tried to 
resolve the situation by offering new plots of land but the Hare 
Krishnas have refused several offers.  He defended the quality of 
the land plots that were offered to the Hare Krishnas, and said the 
Hare Krishnas were being unreasonable.  He stated that it was 
possible there would be more offers, but said that relations between 
the parties were very tense. 
 
------- 
COMMENT 
------- 
 
10. (SBU) Comment:  Once again, aggressive local authorities have 
acted in contradiction to the stated intentions of officials in 
Astana, signaling a lack of real political will in Astana to reach 
an acceptable negotiated settlement for the Hare Krishnas.  We 
expect that Kazakhstani officials will adhere to Tugzhanov's line 
that the demolitions were legal and were justified by the Hare 
Krishnas' refusal to accept "reasonable" offers of new land. The 
government's conduct demonstrates that the Hare Krishnas have very 
little hope for a fair resolution to their dispute.  End comment. 
 
ORDWAY

Wikileaks

07ASTANA1668, CORRECTED COPY: KAZAKHSTAN: BOUCHER PRESSES

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Reference ID Created Released Classification Origin
07ASTANA1668 2007-06-18 09:41 2011-08-30 01:44 CONFIDENTIAL//NOFORN Embassy Astana

VZCZCXRO8169
PP RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHTA #1668/01 1690941
ZNY CCCCC ZZH
P 180941Z JUN 07 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9826
INFO RUCNCIS/CIS COLLECTIVE 0209
RUEAIIA/CIA WASHDC
RUEBAAA/DEPT OF ENERGY WASHDC
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 04 ASTANA 001668 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
DEPT FOR EB/ESC; SCA/CEN (O'MARA) 
DEPT PLEASE PASS USTR. 
 
E.O. 12958: DECL: 06/17/2017 
TAGS: PGOV PREL KZ ECON ENRG
SUBJECT: CORRECTED COPY: KAZAKHSTAN: BOUCHER PRESSES 
POLITICAL REFORM WITH GOVERNMENT, OPPOSITION 
 
REF: A. ASTANA 1357 
     B. ASTANA 1033 
     C. ASTANA 1243 
     D. ASTANA 1454 
     E. ASTANA 986 
     F. ASTANA 1110 
     G. ASTANA 1415 
 
Classified By: DCM Kevin Milas; reasons 1.4 (b) and (d). 
 
1. (C) Summary:  In June 5-6 meetings with Assistant 
Secretary Boucher, Kazakhstani government officials defended 
 
SIPDIS 
recent constitutional amendments as far-reaching, while 
acknowledging the need for further reform.  Opposition 
leaders, by contrast, called the reform package a "step 
backward," arguing that even if the changes would have little 
immediate effect, on balance they strengthened presidential 
power.  Both the government and opposition are anticipating 
that parliamentary elections will be held in the near-term, 
and agreed with Boucher's assessment that the quality of the 
elections would be a good indicator of the government's will 
to undertake real reform.  The opposition identified the 
formation of representative electoral commissions as a key to 
assuring fair elections, and warned that the ongoing process 
of choosing commission members was heavily biased in favor of 
the ruling "Nur Otan" party. 
 
2. (C) Summary (continued).  On the economic front, Prime 
Minister Masimov highlighted the "thirty corporate leaders" 
program as the centerpiece of the government's 
diversification program. Masimov indicated a desire to 
finalize bilateral World Trade Organization accession 
negotiations during his planned visit to the U.S. in 
September; lead  negotiator Aitzhanova asked that the U.S. 
defer the "state trading enterprises" issue for multilateral 
negotiations.  While Foreign Minister Tazhin reiterated that 
Kazakhstan's only role in the gas pipeline projects announced 
last month in Turkmenistan was as a "transit country," 
neither he nor Masimov signaled strong support for a 
Trans-Caspian gas pipeline; both men indicated a preference 
for compressed natural gas shipments across the Caspian. 
Government officials downplayed any disruption caused by the 
Rakhat Aliyev case, while casting it as an exercise in the 
"rule of law"; opposition and civil society leaders suggested 
that Aliyev's abuses had alienated important factions of 
Kazakhstan's economic / political elite, forcing Nazarbayev's 
hand.  End summary. 
 
3. (SBU) During a June 5-6 visit to Kazakhstan, Assistant 
Secretary of State for Central and South Asian Affairs 
 
SIPDIS 
Richard Boucher, accompanied by Senior Advisor Caitlin Hayden 
and Charge d'Affaires a.i., met with the following government 
officials: Prime Minister Karim Masimov, Foreign Minister 
Marat Tazhin, State Secretary Kanat Saudabayev, Presidential 
Administration Head Adilbek Dzhaksybekov, Senate Speaker 
Kasymzhomart Tokayev, and Security Council Secretary Berik 
Imashev.  Boucher also met with opposition politicians Bulat 
Abilov, Tulegen Zhukeyev, Oraz Zhandosov, Galymzham 
Zhakiyanov, and Zharmakhan Tuyakbay; as well as 
representatives of U.S. businesses; editors and political 
scientists associated with "Mysl," a prominent political 
science journal; and a group of U.S. exchange program alumni. 
Assistant Secretary Boucher also toured the future site of 
the Central Asian Regional Information and Coordination 
Center. 
 
Government Defends Amendments; Acknowledges Need for More 
Reform 
--------------------------------------------- ------------- 
 
4. (C) Dzhaksybekov mounted the most vigorous defense of the 
constitutional reforms, describing them as far reaching. 
Dzhaksybekov highlighted in particular the new role of 
maslikhats (regional and local legislatures) to approve akims 
(executive branch leaders); the transfer of sanction of 
arrest from the procuracy to the judiciary; state financing 
for political parties and non-governmental organizations; and 
Mazhilis approval of the Prime Minister and cabinet. 
Kazakhstan is establishing a system of political checks and 
balances that maintains strong vertical controls to ensure 
stability, he said.  While "we don't think there will be much 
change," Dzhaksybekov acknowledged, "we have laid the 
foundation for the opposition to expand in the future." 
 
5. (C) Dzhaksybekov explained that four pieces of legislation 
 
ASTANA 00001668  002 OF 004 
 
 
must be passed immediately in order to implement 
constitutional changes:  amendments to the laws on 
parliament, the government, the president, and elections. 
Dzhaksybekov indicated that, while a new media law was not 
required to implement the changes, one proposed by the 
Congress of Journalists was pending and would eventually be 
approved. &#
x000A; 
6. (C) Dzhaksybekov bridled at Boucher's observation that, in 
the West, the decision to lift term limits on President 
Nazarbayev had overshadowed the rest of the reform package in 
the public eye.  Dzhaksybekov termed the focus on the term 
limits "offensive," while Tazhin pointed out that the term 
limit amendment represented "a legal framework, not a 
political decision," adding that Nazarbayev's decision 
whether to run again would depend both on the political 
situation and on Nazarbayev's health.  The fundamental reason 
for the term limit change, Tazhin said, was to dampen 
political competition among aspirants to the presidency. 
Tazhin also spoke frankly about the origins of the amendments 
during a one-on-one meeting: "It was proposed in parliament," 
he told Boucher privately, "but we all know where it came 
from." 
 
7. (C) Both Dzhaksybekov and Tazhin reiterated the 
government's unwavering commitment to its bid to chair the 
Organization for Security and Cooperation, reviewing familiar 
arguments for Kazakhstan's candidacy, including the 
importance of setting an example for others in the region. 
"It is our decision and we won't give up," Dzhaksybekov 
declared, adding that Kazakhstan would do anything the U.S. 
wanted on reform "as long as it does not interfere with out 
strategic interests."  Tokayev also assured Boucher that the 
reform package was just the beginning: "the process will go 
on," he said. "The window has been opened by the amendments." 
 
8. (C) Dzhaksybekov and Saudabayev sounded Boucher out on the 
idea of holding parliamentary elections in the short-term, 
suggesting that elections would be a logical follow-on to the 
reforms, while being clear that no decision had yet been 
taken.  Dzhaksybekov indicated that the decision would depend 
"on the law and on the President's negotiations with the 
Mazhilis and the Senate," as Nazarbayev would have to 
dissolve the parliament for there to be elections.  Over 
dinner, Saudabayev told Boucher that President Nazarbayev 
will make sure that expectations for early parliamentary 
elections, resulting from the constitutional reforms, will be 
met, and commented later that elections held before the 
Madrid ministerial of the Organization for Security and 
Cooperation in Europe would "give Kazakhstan's candidacy a 
boost."  In reply, Boucher indicated that good elections 
would have a major impact on U.S. thinking; at the same time, 
both sides had agreed that more reform was also needed. 
 
Opposition: Changes a "Clear Step Backward" 
------------------------------------------- 
 
9. (C) While the consensus among the assembled political 
scientists seemed to be that, on the whole, the reform 
package was a positive development, the opposition leaders 
told Boucher that they viewed the reform package as a "clear 
step backwards," and voiced disappointment in the U.S. 
government's public assessment of the changes.  "I'm not sure 
how you managed to find one grain of democratic change in 
that huge pile of sand," Tuyakbay said.  Zhandosov claimed 
that, of 19 changes envisioned by the reform package, 16 
increased presidential authority.  The changes which appeared 
to rankle the opposition the most were the elimination of 
term limits for Nazarbayev (Abilov:  "Kazakhstan cannot be 
considered democratic with an eternal president.") and the 
expansion of presidential authority to dissolve the 
parliament.  Abilov warned that an additional amendment 
currently before parliament would prohibit the formation of 
electoral blocs, such as the one which Ak Zhol and the Social 
Democratic Party had just announced in anticipation of 
elections. 
 
10. (C) Their criticisms registered, Zhukeyev and Zhandosov 
then conceded that, in the near-term, the practical effect of 
the (negative) changes would be minimal.  However, Zhukeyev 
said, the danger lay in the fact that the changes created a 
legislative framework for a future "tightening" -- one which 
might come, for example, on the heels of a failed bid to 
chair the Organization for Security and Cooperation in 
Europe. 
 
ASTANA 00001668  003 OF 004 
 
 
 
11. (C) The opposition readily agreed with Boucher's 
assessment that the key next step was to ensure that the 
coming elections would be fair.  The politicians told Boucher 
that they were gearing up for a campaign:  "everything speaks 
to simultaneous local and parliamentary elections," Tuyakbay 
said, "and local elections must be held this year."  In this 
light, both the opposition and the political scientists 
identified the formation of representative electoral 
commissions as a key to the conduct of fair elections -- and 
as something that was already going wrong (Ref B).  Tuyakbay 
explained that the composition of Kazakhstan's 10,000 
electoral commissions would be determined by the end of July, 
and already opposition nominees were being rejected in favor 
of Nur Otan representatives.  (Tuyakbay indicated that, of 
6,000 nominees from his party, only 400 had been accepted. 
Abilov complained that only two Ak Zhol representatives had 
been accepted on to the estimated 500 electoral commissions 
in Almaty.)  What ultimately needed to happen, Tuyakbay 
suggested, was to change the way the commissions were formed: 
 currently they were elected by the Nur Otan-dominated 
maslikhats, but better that they be appointed by the 
independent Central Election Committee. 
 
Economic Priorities: Diversification, Infrastructure, WTO 
--------------------------------------------- ------------ 
 
12. (C) Prime Minister Masimov briefed Boucher on government 
efforts to attract investment into the non-extractive 
sectors, and thus further diversification, by means of a 
public/private "corporate champions" program (Ref C).  The 
idea, Masimov explained, was to prepare the environment so 
that companies could compete in the export market.  Toward 
that end, the government was planning to raise electricity 
tariffs and gas prices to encourage needed investment in 
generation capacity (Ref D), as well as encouraging investors 
to enter into road and railway projects.  Masimov explained 
that he had recently agreed with the Prime Ministers of 
Azerbaijan and Georgia to cooperate in building a continuous 
railroad line (including a Caspian shipping link) which would 
eventually run "from Hong Kong to Hamburg" (Ref E). 
 
13. (C) Masimov asked Boucher if it would be possible to 
target the second-half of September, when he would be in the 
U.S. for World Bank meetings, for finalizing U.S.- Kazakhstan 
bilateral World Trade Organization accession negotiations. 
Lead negotiator Zhanar Aitzhanova then lobbied for the U.S. 
to defer the issue of "state trading enterprises" to 
multilateral negotiations, "as you did for Russia."  Boucher 
agreed to pass both ideas to the U.S. Trade Representative. 
 
14. (C) Asked about Kazakhstan's plans fo
r transporting gas, 
Masimov began by commenting that "we don't have much (gas) 
yet."  Masimov noted that Kazakhstan was encouraging the 
Turkmenistan-China gas pipeline project as a way to supply 
gas to Southern Kazakhstan.  Characterizing the Trans-Caspian 
gas pipeline as "something that's been talked about for a 
long time," Masimov told Boucher that he personally preferred 
the idea of shipping compressed natural gas across the 
Caspian, telling Boucher that it was "simpler than a 
pipeline."  (Tazhin indicated the same preference in an 
earlier meeting.) Masimov informed Boucher that the deal to 
ship increased volumes of Karachaganak gas to the Orenburg 
refinery in Russia (Ref F) was "more or less finalized."  The 
government was interested in increasing the overall volume of 
salable gas, Masimov said, and to that end was opening 
negotiations with oil producing companies to encourage them 
to re-inject less, and sell more, associated gas. 
 
Afghanistan and Kyrgyzstan 
------------------------- 
 
15. (C) Tazhin told Boucher that he had recommended that the 
government take a closer look at what it could do in 
Afghanistan beyond investment or humanitarian aid; to that 
end, he had asked for a study on a project, costing around 
$50 million, to build roads connecting Afghanistan and 
Tajikistan.  Masimov later confirmed that the government was 
"ready to invest" and was "very close" to a decision on road 
and infrastructure opportunities.  Imashev indicated that the 
Afghanistan "economic program" would also include training 
for Afghan army and security forces in Kazakhstani defense 
institutes. 
 
16. (C) Tokayev informed Boucher that Kazakhstan had agreed 
 
ASTANA 00001668  004 OF 004 
 
 
to provide $100 million in loans to Kyrgyzstan during 
President Nazarbayev's recent visit there; humanitarian 
assistance had also been disbursed.  Masimov indicated that 
Kazakhstan was still interested in pursuing energy projects 
in Kyrgyzstan but to date "we haven't been able to find 
anyone in Kyrgyzstan who can make deals stick."  Masimov 
added that he would lead a delegation of investors to 
Kyrgyzstan during the second half of June.  Imashev told 
Boucher that the Kyrgyz government's "weak control" was of 
increasing concern, as it had led to a "concentration" of 
Hizbut Tahrir in the country.  Imashev then claimed to have 
"records" from criminal cases which confirmed that Hizbut 
Tahrir members in Kyrgyzstan had been "trained in terrorism." 
 
17. (C) Boucher raised the topic of the upcoming Shanghai 
Cooperation Organization summit with several of his 
government interlocutors, telling them that the U.S. strongly 
preferred that the issue of the Manas airbase not be 
discussed officially during the meeting.  Saudabayev promised 
to talk with Nazarbayev about the issue and try to keep it 
off the agenda. 
 
Assessing Rakhat Aliyev's Arrest 
------------------------------- 
 
18. (C) Interpretations of the Rakhat Aliyev case (Ref G) by 
Boucher's interlocutors fell into two camps:  government 
officials, when asked, tended to minimize the importance of 
the case, and explain it as an example of the "rule of law" 
which would play out in the court system.  The opposition 
representatives and political scientists, by contrast, 
largely spurned the "rule of law" argument in favor of the 
view that Nazarbayev's hand had been forced by Aliyev's 
abuses and a resulting groundswell of complaint by important 
elements of Kazakhstan's business / political elite, many of 
whom were familiar with Aliyev's "predatory" seizure of 
business interests, and were keen to eliminate any 
possibility of Aliyev succeeding Nazarbayev. 
 
19. (U) Assistant Secretary Boucher has cleared this cable. 
ORDWAY

Wikileaks

07ASTANA1666, KAZAKHSTAN: TIP REPORT GARNERS LITTLE ATTENTION BUT

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Reference ID Created Released Classification Origin
07ASTANA1666 2007-06-18 08:16 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO8056
OO RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHTA #1666 1690816
ZNR UUUUU ZZH
O 180816Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9825
INFO RUEHAST/USOFFICE ALMATY
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE

UNCLAS ASTANA 001666 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
SCA/CEN FOR O'MARA, G/TIP FOR HALL, INL/AAE FOR ALTON 
 
E.O. 12958: N/A 
TAGS: PHUM PGOV KCRIM KZ
SUBJECT: KAZAKHSTAN: TIP REPORT GARNERS LITTLE ATTENTION BUT 
STIMULATES NEW THINKING 
 
REF: STATE 78797 
 
1.  (SBU) Summary: On June 12, drawing on points provided in reftel, 
Charge delivered the TIP report demarche announcing Kazakhstan's 
Tier II Watch List ranking to Ministry of Justice Office Director 
Azimova, receiving a muted response in return.  Charge provided a 
copy of the Kazakhstan TIP report and handed over a copy of the 
points as a non-paper.  The release of the TIP report generated no 
notice in local press nor a public government response.  Azimova 
said the new Deputy Minister of Justice would be focusing more 
attention on victim assistance and not rely solely on law 
enforcement as the solution. End summary. 
 
2.  (SBU) On June 12, Charge delivered reftel demarche to Ms. Elvira 
Abilkhasimovna Azimova, Director of the Department of International 
Law of the Ministry of Justic, highlighting that Kazakhstan should 
not only detect and investigate trafficking crimes but also protect 
citizens by ensuring courts and judges convict and imprison guilty 
traffickers.  Furthermore, Charge stressed the necessity of 
Kazakhstan improving provision of assistance to victims of 
trafficking. 
 
3.  (SBU) Charge informed Azimova that the embassy was prepared to 
redouble its efforts to collaborate with the government of 
Kazakhstan in order improve the efficiency and effectiveness of 
legal proceedings.  He said that the embassy identified $200,000 to 
devote to additional training for judges and prosecutors with the 
goal of improving the conviction and sentencing to prison of 
traffickers.  Finally Charge said that cooperation and coordination 
on improving Kazakhstan's provision of assistance to TIP victims 
would remain an embassy priority. (Note: The funds in question are 
INL funds that were to be used for the initial year of a 
computer-base training program for police, now a lower priority. 
End note.) 
 
4. (SBU) Although not pleased with the news of the downgrade of 
Kazakhstan to Tier II Watchlist, Azimova responded neutrally and 
focused on the future.  She said that the GOK intended to move 
beyond the previous law enforcement-centered approach to combating 
TIP and wanted to improve the government's provision of assistance 
to TIP victims with a focus on social rehabilitation.  She noted 
that the Vice Minister of Justice, Dulat Kustavletov had been in his 
current position less than half a year and was interested in new 
thinking and new directions in how to solve the TIP problem. 
 
5.  (SBU) Azimova expressed thanks for grants the U.S. had provided 
for law enforcement training and said she looked forward to future 
cooperation with the embassy on victim assistance.  She remarked 
that it was important to study the experience of other countries in 
order to more effectively provide victim assistance in Kazakhstan. 
Finally, Azimova expressed interest in information that the U.S. 
might provide on how Kazakhstan could improve its TIP ranking. 
 
6.  (SBU) Azimova reported that having analyzed Kazakhstani 
legislation and internal policies and in order to complete the GOK 
anti-TIP legislation improvement plan, the government decided to 
ratify the UN Convention on Organized Crime and two additional 
protocols to this Convention: Protocol 2 on trafficking in persons 
and Protocol 3 on illegal migration.  The government had also 
decided to ratify the additional Convention on Slavery and 
Discrimination.  Azimova said the draft law to ratify these 
documents was in the GOK interagency approval process.  Beyond this, 
she reported that the next document that the government will 
consider for possible ratification is the International Convention 
for the Protection of All Persons from Enforced Disappearance. 
 
7.  (SBU) Responding to a request for specific steps that 
U.S.-Kazakhstani cooperation could take to improve convictions or 
victim assistance, Azimova responded that understanding how other 
countries in Central Asia or elsewhere reported TIP statistical data 
and how it was analyzed to prepare TIP reports would be very useful. 
 Post suggested that Azimova and others involved in TIP in the 
government read the TIP reports for relevant countries when they are 
released in Washington on June 12 and then discuss any specific 
questions with relevant officers in the embassy.  Azimova noted that 
changes in several articles of the criminal code resulting from the 
2006 amendments make it difficult to compare statistics about TIP 
year-on-year. 
 
ORDWAY

Wikileaks

07ASTANA1659, KAZAKHSTAN: BOUCHER PRESSES POLITICAL REFORM WITH

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If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #07ASTANA1659.
Reference ID Created Released Classification Origin
07ASTANA1659 2007-06-18 01:35 2011-08-30 01:44 CONFIDENTIAL//NOFORN Embassy Astana

VZCZCXRO8142
PP RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHTA #1659/01 1690135
ZNY CCCCC ZZH
P 180135Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9815
INFO RUCNCIS/CIS COLLECTIVE 0203
RUEAIIA/CIA WASHDC
RUEBAAA/DEPT OF ENERGY WASHDC
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 04 ASTANA 001659 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
DEPT FOR EB/ESC; SCA/CEN (O'MARA) 
 
E.O. 12958: DECL: 06/17/2017 
TAGS: PGOV PREL KZ ECON ENRG
SUBJECT: KAZAKHSTAN: BOUCHER PRESSES POLITICAL REFORM WITH 
GOVERNMENT, OPPOSITION 
 
REF: A. ASTANA 1357 
     B. ASTANA 1033 
     C. ASTANA 1243 
     D. ASTANA 1454 
     E. ASTANA 986 
     F. ASTANA 1110 
     G. ASTANA 1415 
 
ASTANA 00001659  001.2 OF 004 
 
 
Classified By: Charge d'Affaires a.i. Kevin Milas; reasons 1.4 (b) and 
(d). 
 
ZFR ZFR ZFR ZFR ZFR 
 
CANCEL ALL COPIES OF ASTANA 001659 
WILL BE RESENT UNDER NEW MRN 
CANCEL ALL COPIES OF ASTANA 001659 
ZFR ZFR ZFR ZFR ZFR 
 
ordway 
 
ASTANA 00001659  002.2 OF 004 
 
 
ZFR ZFR ZFR ZFR ZFR 
CANCEL ALL COPIES OF ASTANA 001659 
WILL BE RETRANSMITTED UNDER NEW MRN 
CANCEL ALL COPIES OF ASTANA 001659 
 
 
ASTANA 00001659  003.2 OF 004 
 
 
ZFR ZFR ZFR ZFR ZFR 
CANCEL ALL COPIES OF ASTANA 001659 
WILL BE RETRANSMITTED UNDER NEW MRN 
CANCEL ALL COPIES OF ASTANA 001659 
 
 
ASTANA 00001659  004.2 OF 004 
 
 
ZFR ZFR ZFR ZFR ZFR 
CANCEL ALL COPIES OF ASTANA 001659 
WILL BE RETRANSMITTED UNDER NEW MCNS 
ZFR ZFR ZFR ZFR ZFR 
 
ORDWAY

Wikileaks

07ASTANA1650, KAZAKHSTAN: 2007 INVESTMENT DISPUTES REPORT UPDATE

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Reference ID Created Released Classification Origin
07ASTANA1650 2007-06-15 10:27 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO6499
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHTA #1650 1661027
ZNR UUUUU ZZH
R 151027Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9813
INFO RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE

UNCLAS ASTANA 001650 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/CEN - O'MARA; 
 
E.O. 12958: N/A 
TAGS: EINV ECON ETRD ENRG KIDE KZ
SUBJECT: KAZAKHSTAN: 2007 INVESTMENT DISPUTES REPORT UPDATE 
 
REF: State 55422 
 
 
1. (SBU) This cable responds to reftel.  The United States 
Government is aware of two (2) claims by United States persons that 
are outstanding against the Government of Kazakhstan (GOK). 
 
2. (SBU) a. Claimant A 
 
b. 1996 
 
c. Although it has faced a number of regulatory issues, Claimant A 
is currently dealing with two disputes that may rise to the level of 
expropriation. 
 
Claimant A's dispute on electricity deliveries with the state-owned 
power transmission monopoly (now known as KEGOC) and the Government 
of Kazakhstan (GOK) dates back to 1996.  Claimant A ultimately 
signed two memoranda of understanding (MOUs) with KEGOC and the GOK, 
outlining how the dispute would be resolved.  However, the claimant 
states, as of early June 2007, KEGOC continues to be in breach of 
some of the contracts arising from the MOUs.  According to Claimant 
A, this contractual breach by KEGOC amounts to contract repudiation. 
 Although KEGOC and the GOK have submitted to international 
arbitration (which is currently ongoing), Claimant A is concerned 
that KEGOC may not comply with the arbitration decisions. 
Furthermore, Claimant A states that KEGOC has, on numerous 
occasions, used underhanded methods to pressure the Claimant.  Such 
actions often involve making it difficult for third parties to 
conduct business with Claimant A. 
 
Claimant A states that discriminatory regulatory actions by regional 
authorities also amount to expropriation.  According to the 
Claimant, a regional government - with the support of some officials 
in the central government - has forced the Claimant to choose 
between lowering its rates (which would be politically expedient to 
the local authorities) or facing severe regulatory actions. 
Claimant A maintains that this is an example of tactics, which 
sometimes include threats of criminal prosecution, to extract 
financial benefits from the Claimant. 
 
 
3. (SBU) a. Claimant B 
 
b. 2001 
 
c. In July 2001, the Kazakhstan Ministry of State Revenue (MSR) 
performed an audit and determined that Claimant B, a subsidiary of a 
U.S. parent company, owed $29 million in taxes.   The assessment was 
based on MSR's finding that $100 million received by the Claimant 
from a customer as reimbursement for capital expenditures incurred 
by claimant in modifying a barge rig, was taxable income.   (The 
customer was the operating consortium of the offshore Kashagan oil 
field.)  Claimant B challenged the decision in Astana City Court, 
which ruled in the claimant's favor, holding that the reimbursements 
were not, in fact, taxable income.  Following an appeal by the MSR, 
Kazakhstan's Supreme Court ruled in favor of claimant in March 2002. 
 
 
The Kazakhstani tax authorities have persisted in appealing the case 
in subsequent years, bringing the case to the Supreme Court a total 
of four times.  In May 2006, the Supreme Court ruled in favor of the 
Kazakhstani tax authorities.  Claimant B subsequently contacted the 
USG.  In early June 2006, the Claimant's attorneys had successfully 
filed a stay of the collection process triggered by the Supreme 
Court decision, and were planning an appeal.  In April 2007, the 
Kazakhstani Supreme Court granted to Claimant B a Supervisory Panel 
Appeal.  As of early June 2007, Claimant B is awaiting the 
consideration of its appeal by the court. 
 
4. (SBU) Claimant A:  AES Corp. 
 
Claimant B:  Parker Drilling, Inc. 
 
ORDWAY

Wikileaks

07ASTANA1644, KAZAKHSTAN: TREATMENT OF RETURNED GUANTANAMO

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Reference ID Created Released Classification Origin
07ASTANA1644 2007-06-15 09:02 2011-08-30 01:44 SECRET Embassy Astana

VZCZCXYZ0003
PP RUEHWEB

DE RUEHTA #1644 1660902
ZNY SSSSS ZZH
P 150902Z JUN 07
FM AMEMBASSY ASTANA
TO SECSTATE WASHDC PRIORITY 9805

S E C R E T ASTANA 001644 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR S/WCI (M. STAMILIO), S/WCI (A. MORRISON), L/PM 
(AHAINES), SCA/CEN (M. O'MARA), L/HRR, DRL/MLGA (K. 
MCGREENEY), DRL/NESCA 
 
E.O. 12958: DECL: 06/14/2017 
TAGS: PTER KAWC PHUM PREL PINR KZ
SUBJECT: KAZAKHSTAN: TREATMENT OF RETURNED GUANTANAMO 
DETAINEES TO KAZAKHSTAN 
 
REF: A. STATE 63758 
     B. 06 ASTANA 814 
 
Classified By: Amb. John Ordway, reasons 1.4 (B) 
and (D). 
 
1. (S)  Post has no reason to believe that the three 
Kazakhstanis returned from Guantanamo Bay have been 
mistreated by Kazakhstani authorities.  Based on the GOK's 
overall record of excellent counterterrorism cooperation, we 
judge that the GOK is capable of receiving the final detainee 
if he is approved for release.  Whether or not the GOK agrees 
to accept the return of the final detainee may depend on if 
they receive the additional information they have requested 
on the four Kazakhstanis that were/are detained. 
 
2.  (S)  The Kazakhstanis have stated that they have no plans 
to prosecute the three returned detainees absent additional 
information of their "guilt" from the U.S.  The only 
additional information Post currently has on the three 
returned detainees is derived from open press reports.  The 
Kazakhstani press has reported interviews with the three 
repatriated detainees or members of their immediate family. 
From the press reports, it appears that all three returned 
detainees are living and working freely in Kazakhstan.  The 
press has not reported any indication of mistreatment by the 
Kazakhstani authorities and there is no report of any of the 
detainees being investigated or prosecuted locally or having 
been detained in Kazakhstan.  Post is not aware of the steps 
that have been taken by the Government of Kazakhstan to 
reduce any threat these individuals pose. 
 
3.  (S)  Post is unable to discuss this matter with 
international NGOs in Kazakhstan without creating tension in 
the bilateral relationship.  Kazakhstani authorities closely 
watch NGOs and would most certainly be aware of any embassy 
query into the matter.  If post were to unilaterally 
investigate the issue without officially approaching the 
Government of Kazakhstan, the Kazakhstanis would likely be 
see this as an effort by the U.S. to go "behind their backs" 
to gather such information in order to acquire derogatory 
information on the Government of Kazakhstan.  The only way 
for post to actively gather information about the returned 
detainees is by officially requesting the information first 
from the Kazakhstani government. 
 
4.  (S)  Comment:  The Kazakhstanis have informed post on 
numerous occasions that in order to justify monitoring the 
detainees, they request  additional incriminating details on 
the transferred detainees (Ref B).  Post believes that 
sharing additional details would not only facilitate positive 
control of the detainees by local authorities, but would also 
make it easier to reach agreement if and when the final 
detainee is approved for release and transfer.  End comment. 
ORDWAY

Wikileaks

07ASTANA1642, KAZAKHSTAN: MONEY LAUNDERING ACCUSATIONS COMPLICATE EFFORTS

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Reference ID Created Released Classification Origin
07ASTANA1642 2007-06-15 08:01 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO6305
RR RUEHAST
DE RUEHTA #1642/01 1660801
ZNR UUUUU ZZH
R 150801Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9800
INFO RUEHAST/USOFFICE ALMATY
RUEHC/SECSTATE WASHDC//SCA COLLECTIVE/ 9801
RUEATRS/DEPT OF TREASURY WASH DC//IET//

UNCLAS SECTION 01 OF 02 ASTANA 001642 
 
SIPDIS 
 
STATE FOR INL/AAE (ALTON), INL/C, SCA/CEN (O'MARA) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SNAR ASEC PREL KCOR KCRM PREL KZ
SUBJECT: KAZAKHSTAN: MONEY LAUNDERING ACCUSATIONS COMPLICATE EFFORTS 
TO TAKE EURASIA GROUP PUBLIC 
 
1. Summary:  The Eurasian Natural Resources Corporation (ENRC), an 
enormous Kazakhstani metals conglomerate, has been preparing since 
2006 to list on the London Stock Exchange.  A criminal investigation 
by Belgian authorities of alleged money laundering by the three 
billionaires who control 54.6% of ENRC has become an obstacle to the 
initial public offering (IPO), however.  PricewaterhouseCoopers 
advised the three primary shareholders to quit the company board in 
light of the allegations.  According to press reports, the company's 
management has postponed the IPO until the second half of 2007 to 
address the auditing firm's recommendations.  End summary. 
 
---------- 
BACKGROUND 
---------- 
 
2. The Eurasian Natural Resources Corporation (ENRC) is controlled 
by majority shareholders Patokh Shodiev, Alidjan Ibragimov, and 
Aleksandr Mashkevich. ENRC is a holding company incorporating large 
Kazakhstani metallurgical and mining operations, which were formerly 
part of the Eurasian Industrial Association.  The company reports 
that its activities account for 5% of Kazakhstan's GDP.  ENRC 
produces a range of commodities including coal, iron ore, manganese 
and bauxite.  According to a press release issued by ENRC, it is the 
world's third-largest producer of ferroalloys, with control over a 
quarter of global chromium reserves. 
 
3. In spring 2006, the trio appeared on Forbes magazine's "richest 
people" list with a net worth of $2 billion each.  The three 
billionaires together hold a 56.4% stake in ENRC; the Kazakhstani 
government owns 24.8%, with 18.8% held by Vladimir Kim, chairman of 
Kazakhmys, another Kazakhstani mining company. 
 
4.  Shodiev, known as the "Metallurgical King" of Kazakhstan, has an 
ambitious plan to prepare ENRC for an IPO and join the ranks of 
three largest metallurgical companies listed on the London Stock 
Exchange (LSE).  In 2001 he invited Johannes Sittard, a former 
manager at Mittal Steel, and Dutch lawyers to put ENRC's accounting 
in order.  Under Sittard's management, ENRC is expanding into nickel 
deposits in the Balkans and cobalt in Zambia. 
 
5. ENRC, with a sales volume of $2.9 billion, is currently valued at 
$1.5-2 billion.  The Kazakhstani press has speculated that if ENRC 
sold shares on Kazakhstani Stock Exchange, the company's value might 
increase to $3 billion.  According to international experts, a 
listing on the LSE may increase the valuation to $5 billion or more. 
 
 
------------------------------------------ 
METAL MAGNATES ACCUSED OF MONEY-LAUNDERING 
------------------------------------------ 
 
6. The "Megapolis" newspaper reported that Shodiev, Ibragimov and 
Mashkevich are being investigated related to "dirty" funds used in 
some property transactions in Belgium.  The paper reported that the 
Belgian law enforcement began an investigation in 1996, and in July 
2001 a judge authorized a freeze of several Jersey bank accounts. 
In an April 2007 hearing at the Brussels Court of First Instance, 
the judge adjourned the case until June 21. 
 
7. The trio also appears in other investigations in Belgium.  One of 
the investigations regards a dispute with a Geneva industrial group 
"Trans-World" run by billionaire brothers David and Simon Reuben, 
but has not resulted in any prosecutions.  In 1997, the three were 
also investigated for money laundering and were witnesses in a 
government audit of Belgian industrial group Tractabel. 
 
----------------------------------------- 
BILLIONAIRES TO BE BOOTED FROM THE BOARD? 
----------------------------------------- 
 
8. As a result of a pre-IPO audit of ENRC requested by the 
government of Kazakhstan in its capacity as a minority shareholder, 
PricewaterhouseCooper (PwC) advised Shodiev, Ibragimov, and 
Mashkevich to quit the company's board because of the outstanding 
money laundering allegations against them.  The confidential 16-page 
draft document obtained by the Financial Times highlighted areas 
that the company needs to address ahead of an initial public 
offering later this year.  The three principal shareholders deny the 
allegations.  According to the Financial Times and Kazakhstani 
press, the main shareholders have not yet decided whether to accept 
PwC's recommendation that they should not quit the board and 
therefore board membership for the IPO has not been finalized. 
 
9. Comment:  Although the current ENRC shareholders reportedly do 
not see the Belgian investigation as an obstacle to a London IPO, 
the publicizing of the money laundering charges and of 
PricewaterhouseCooper recommendations will likely force them to take 
at least some steps to improve corporate governance before taking 
 
ASTANA 00001642  002 OF 002 &#x
000A; 
 
the firm public.  End comment. 
 
ORDWAY

Wikileaks

07ASTANA1639, KAZAKHSTAN REACTION TO EITI VALIDATION DEADLINE

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Reference ID Created Released Classification Origin
07ASTANA1639 2007-06-15 06:58 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO6232
RR RUEHAST
DE RUEHTA #1639/01 1660658
ZNR UUUUU ZZH
R 150658Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9794
INFO RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 001639 
 
SIPDIS 
 
DEPT FOR SCA/CEN (O'MARA) 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAID ENRG EPET KZ
SUBJECT:  KAZAKHSTAN REACTION TO EITI VALIDATION DEADLINE 
 
REF: A) State 75118, B) 06 Astana 492 
 
1. (SBU) Summary: Per Ref A action request, Kazakhstan appears well 
on its way to meeting the September 2007 deadline for completing the 
four Extractive Industry Transparency Initiative (EITI) "sign-up" 
indicators, with the last criteria -- publication of a work plan -- 
likely to be fulfilled later this month.  Overall, Kazakhstan's EITI 
implementation efforts received a big boost in late May, when Prime 
Minister Masimov agreed to create a three-person office within the 
Energy Ministry dedicated to EITI implementation.  The Government of 
Kazakhstan (GOK) has made additional progress on EITI issues in 
recent months - notably, passing legislation in January 2007 that 
obliges future subsoil users to join EITI - and appears to have won 
the respect of the NGO and business representatives on the National 
Stakeholder's Council for its efforts. The one EITI issue that 
appears to trouble all three EITI participant sectors - government, 
business, and NGOs - is the non-participation to date of 
Kazakhstan's largest oil producer, TengizChevrOil.  End summary. 
 
 
GOK Reaction to September Deadline 
---------------------------------- 
 
2. (SBU) On June 8, the head of Kazakhstan's EITI Secretariat, Vice 
Minister of Energy and Mineral Resources Bolat Akchulakov, 
acknowledged receiving the EITI letter from Board Chairman Peter 
Eigen, and informed Energy Officer that Kazakhstan would soon 
complete its fourth, and final, "sign-up" step by publishing an 
approved Work Plan on Kazakhstan's EITI website.  Akchulakov noted 
that the GOK might decide to take publication of the work plan one 
step further, by listing it in the government's official newspaper, 
but in either case the work plan had been finalized, and thus 
Kazakhstan was on the verge of completing the fourth, and final, 
"sign-up" EITI step.  (Note: Technically, the National Stakeholders' 
Council has only approved the plan "in principle"; however, the 
Council is expected to formally adopt the plan during its scheduled 
June 20 meeting.  World Bank Country Manager Sergey Shatalov echoed 
Akchulakov's timing forecast on June 13, telling Energy Officer that 
the work plan "should be" published on www.eiti.kz by the end of 
June.  The website itself is being redesigned, but will be fully 
operational by mid-July. End note.) 
 
GOK Making Steady EITI Progress 
------------------------------- 
 
3. (SBU) Currently, Kazakhstan's EITI Secretariat is based in the 
Ministry of Energy and Mineral Resources (MEMR), and is staffed on 
the government side by Akchulakov, Vice Minister of Finance 
Yergozhin, and Beksultan Zhaliyev, a mid-level MEMR employee. 
Akchulakov pointed out the limitation of this arrangement to Energy 
Officer: "We all have full-time jobs other than EITI," he said, 
noting with satisfaction that the Prime Minister had recently agreed 
to establish a separate, three-person EITI office within the Energy 
Ministry.  Two additional Stakeholder Council representatives -- 
Anton Artemyev of the NGO "Kazakhstan Revenue Watch Program" and 
Patty Graham of ExxonMobil --  also greeted this news with 
enthusiasm, telling Energy Officer that, while Akchulakov had been 
accessible and engaged on EITI issues, he was clearly overworked and 
the EITI process would be well-served by the creation of a dedicated 
EITI office. 
 
4. (SBU) In January 2007 Kazakhstan passed an amendment to its 
"Subsoil Law" which obliges future tender applicants to accede to 
EITI.  Meanwhile, in January, a new EITI working group was formed 
with the task of recruiting more existing companies to join EITI.  A 
month-long recruitment drive in January netted 20 additional 
companies, bringing total membership to 92 (51 oil and gas companies 
and 41 mining companies), out of approximately 250 extractive 
companies operating in the country. 
 
 
Biggest Oil Producer Still to Join 
---------------------------------- 
 
5. (SBU) All of our EITI interlocutors have indicated that 
TengizChevrOil's (TCO) participation is essential for the 
credibility of the process. (TCO is Kazakhstan's largest oil 
producer, at 280,000 barrels a day, a number due to double over the 
next 18 months.)  Graham of ExxonMobil (itself a 25% participant in 
TCO) told Energy Officer that she was not aware of any particular 
reason why TCO had not joined, and added that ExxonMobil, for one, 
would "put pressure" on the joint venture to do so.  Shatalov cast 
TCO's absence in a more negative light, telling Energy Officer that 
Prime Minister Masimov had told him that TCO had failed to reply to 
several letters sent by his office encouraging it to join the 
initiative. "If they keep silence," Shatalov quoted Masimov as 
saying, "it means they are hiding something."  Shatalov indicated to 
Energy Officer that, in his opinion, there was little point in 
compiling a formal EITI report until TCO had joined the initiative. 
(Note: The Council has had difficulty engaging an international 
 
ASTANA 00001639  002 OF 002 
 
 
audit firm to perform the first audit reco
nciling the revenues 
reported paid by companies and received the by the government.  Of 
the "big four" international accounting firm, only KPMG bid on the 
initial tender - and then withdrew from the process.  While Graham 
told Energy Officer that she was hopeful that a new firm would be 
selected in time to publish the first audited report - of 2005 
revenues - by year-end 2007, she admitted that it would be an uphill 
battle.  End note.) 
 
NGO Role 
-------- 
 
6. (SBU) The government, World Bank, and private sector have all 
spoken highly of NGO participation in the EITI process thus far. 
Early in the process of forming the Stakeholder's Council, a battle 
for influence occurred between "pro-GOK" and "independent" NGOs, 
but, according to the World Bank's full-time EITI consultant Yerlan 
Akishev, the pro-GOK NGOs have gradually lost interest in the 
process and have been replaced by their more demanding, active NGO 
colleagues.  To a certain extent, the participating NGOs have 
focused on two "marginal" issues -- lobbying for the reporting of 
disaggregated revenue data and for the publication of extractive 
companies' "social payments" -- but (in both Akchulakov and Graham's 
view) not to the extent that they have impeded the mainstream EITI 
process. 
 
Additional Points 
----------------- 
 
7. (SBU) Per Ref A points: (1) Kazakhstan, as a major producer not 
only of hydrocarbons, but of minerals as well, has a large and 
well-organized extractive sector; (2) while the GOK has undertaken 
other initiatives to manage oil industry revenues in a transparent 
way (i.e., establishment of a National Fund - Ref B), Post is not 
aware of any existing GOK effort to report these revenues; (3) Post 
is not aware of additional industry-driven transparency initiatives; 
(4) Post's impression is that, while there are not a large number of 
NGOs engaged on this issue, there are a few, highly-capable ones 
which do influence the process; (5) the USG does not offer 
assistance to EITI in Kazakhstan, nor are we aware of any other 
country which does.  The World Bank provides technical assistance to 
the GOK on EITI issues, based on an MOU signed in December 2006. 
 
ORDWAY

Wikileaks

07ASTANA1625, KAZAKHSTAN SUPPORTIVE OF US INITIATIVE FOR GREATER UNDP

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Reference ID Created Released Classification Origin
07ASTANA1625 2007-06-14 00:10 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO4568
RR RUEHAST
DE RUEHTA #1625 1650010
ZNR UUUUU ZZH
R 140010Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9778
INFO RUCNDT/USMISSION USUN NEW YORK 1879
RUEHGV/USMISSION GENEVA 0957
RUEHAST/USOFFICE ALMATY

UNCLAS ASTANA 001625 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL UNDP PREL EFIN EAID KZ
SUBJECT: KAZAKHSTAN SUPPORTIVE OF US INITIATIVE FOR GREATER UNDP 
TRANSPARENCY 
 
REF: State 80349 
 
(SBU) Poloff delivered reftel demarche to the MFA Department of 
International Organizations and Security Issues on June 13.  Almabek 
Demessinov, the head of the United Nations section, said that 
Kazakhstan was aware of the problems with the UNDP program in North 
Korea and shared USG concerns. Demessinov said that Kazakhstan has 
supported past USG initiatives on improving the transparency of the 
UNDP, and was likely to support the USG proposals currently under 
discussion at the UNDP Board meeting. 
 
ORDWAY

Wikileaks

07ASTANA1614, KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, MAY 27-

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Reference ID Created Released Classification Origin
07ASTANA1614 2007-06-13 05:11 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO3544
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1614/01 1640511
ZNR UUUUU ZZH
R 130511Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9766
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0201
RUEHAK/AMEMBASSY ANKARA 2058
RUEHBUL/AMEMBASSY KABUL 0335
RUEHNE/AMEMBASSY NEW DELHI 0457
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 001614 
 
SIPDIS 
 
DEPT FOR SCA/CEN (O'MARA) 
DEPT PASS TO OPIC - BALLINGER 
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER 
DEPT PASS TO AID - EE-PHILLIPS/RUSHING 
TREASURY FOR OASIA/VELTRI 
USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS 
USDOC FOR 6110/ITA/TD/BI/RHALPERN 
ANKARA FOR CFC 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EIND ENRG EPET EFIN KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, MAY 27- 
JUNE 9, 2007 
 
 
ASTANA 00001614  001.2 OF 002 
 
 
1.  Summary: This information is drawn primarily from the 
Kazakhstani local press, and has not been checked for accuracy.  The 
opinions and policies expressed in this report are those of the 
authors, not the U.S. Government. 
 
-- Latest Developments from Nurbank 
-- Aliev's Case Has No Impact on Investment Climate 
-- Steps towards Private-Public Partnership 
-- New Appointments 
-- Nazarbayev Favors China-Kazakhstan-Russia-Europe Corridor 
-- Kazakhstan, Russia Finalize Orenburg Deal 
-- Russia's Oil May Go to China through Kazakhstan in 2007 
-- KMG Plans on Joint Ventures with European Countries 
-- Oil & Gas Production in January-April 2007 
 
Latest Developments from Nurbank 
-------------------------------- 
 
2.  The Board of Directors of Nurbank will be led by the ex head of 
the Austrian National Bank, Adolf Wala, Nurbank shareholders 
announced on May 25.  According to the bank's press statement, the 
new chairman will concentrate on implementation of a five-year 
strategic development plan.  In addition to Wala, four independent 
financial consultants from Western Europe were engaged by the bank. 
Respublika newspaper interpreted this decision as an attempt to 
protect Nurbank from possible pressure from Kazakhstani authorities 
or preparation of the bank for sale in the wake of criminal charges 
against majority stockholder Rakhat Aliyev.  (Interfax - Kazakhstan, 
May 28, Respublika newspaper, June 1) 
 
3.  TV Channel 31 reported that during four months of the Nurbank 
conflict from February to May 2007, the bank lost 10% of its 
clientele.  (Television Channel 31, June 1) 
 
Aliev's Case Has No Impact on Investment Climate 
--------------------------------------------- --- 
 
4.  The case of former Kazakhstani Ambassador to Austria and 
presidential son-in-law Rakhat Aliyev will not affect Kazakhstan's 
investment climate, according to Timur Nurashev, Chair of the 
Ministry of Industry and Trade's Investment Committee.  In 
Nurashev's words, "Kazakhstan is a politically stable state and 
guarantees given to investors are protected by the law.  Any 
speculations that Aliyev's case may deteriorate the investment 
climate in the country are, to put it mildly, incorrect."  Nurashev 
pointed out that over the period from 1993 till 2006 Kazakhstan 
received about $50 billion of foreign direct investment, including 
$10.4 billion in the last year.  (Interfax - Kazakhstan, June 1) 
 
Steps toward Private-Public Partnership 
--------------------------------------- 
 
5.  National Business Associations and top executives of banks and 
corporate giants such as Kazkommertsbank, TuranAlemBank, Kazakhmys 
(Copper Company), Kazakhstan Oil Investment Company, and the 
Eurasian Industrial Association, finalized a memorandum with the 
Government of Kazakhstan (GoK) to join efforts in modernizing the 
economy.  According to the document, the GoK will prioritize 
innovative projects, share risks with private sector, and create a 
favorable legal environment.  The business community, in turn, will 
support the government initiatives, apply modern management systems, 
use advanced technologies, and assist in implementing social 
projects.  (Interfax - Kazakhstan, May 31) 
 
New Appointments 
---------------- 
 
6.  Zhaksybek Kulekeev was named President of the national railway 
company Kazakhstan Temir Zholy (KTZ), replacing Erlan Atamkulov. 
Kulekeev previously held the position of First Vice-President of 
KazMunayGas.  KazMunayGas and KTZ are both owned by state holding 
company "Samruk."  (Interfax - Kazakhstan, May 28). 
 
7.  Kozy-Korpesh Karbuzov was appointed Chairman of the Custom 
Control Committee of the Finance Ministry.  Previously, 48 year-old 
 
ASTANA 00001614  002.2 OF 002 
 
 
Karbuzov held the position of the Deputy Chairman of the National 
Security Committee.  (Interfax - Kazakhstan, June 6) 
 
Nazarbayev Favors PRC-Kazakhstan-Russia-Europe Corridor 
--------------------------------------------- ---------- 
 
8.  During an economic forum in St. Petersburg in early June, 
President Nazarbayev indicated that it was necessary to continue 
work on establishing a Western China-Kazakhstan-Russia-Western 
Europe transport corridor.  Nazarbayev remarked that alternative 
transport routes are needed, and that choices should be based on 
economic, and not politi
cal, criteria.  (Information Agency Trend, 
June 10) 
 
Kazakhstan, Russia Finalize Orenburg Deal 
----------------------------------------- 
 
9.  On June 1, Gazprom CEO Aleksey Miller and KazMunayGas President 
Uzakbai Karabalin signed an agreement on the creation of a joint 
venture (JV) based on the Orenburg Gas Processing Plant. 
Karachaganak Petroleum Operating and KazRosGaz (Gazprom - 50%, KMG - 
50%) also signed a 15-year sales agreement for up to 16 billion 
cubic meters of Karachaganak gas per year.  The agreement also 
establishes the price formula according to which KazRosGaz will buy 
the Karachaganak gas.  The Orenburg JV is to be approved by the 
Kazakhstani Parliament by the end of the year, the Committee for 
International Affairs, Defense and Security of the Mazhilis (the 
lower house of Parliament) reported.  (Interfax - Kazakhstan, June 
4) 
 
Russia's Oil May Go to China through Kazakhstan in 2007 
--------------------------------------------- ---------- 
 
10.  Russian oil may start to flow through the Atasu-Alashankou 
pipeline in Kazakhstan this year, Russian Industry and Energy 
Minister Khristenko announced at an energy conference in Paris on 
June 1.  "We have an idea on the Russian companies that would like 
to supply this oil. I think that technical issues have prevented 
this so far," the Minister said.  Atasu-Alashankou is the second leg 
of a planned pipeline running from the Caspian to China. (Interfax - 
Kazakhstan, June 4) 
 
KMG Plans on Joint Ventures with European Countries 
--------------------------------------------- ------ 
 
11. National oil company KazMunayGas (KMG) is considering proposals 
from a number of European oil companies to set up joint ventures 
based on European refineries, which Kazakhstani companies will 
supply with crude, Kazakhstani Energy Vice-Minister Kiinov said at a 
press briefing on May 31.  According to Mr. Kiinov, Spain and 
Ukraine have made proposals.  KMG is also looking for assets in 
Russia, Uzbekistan, China, Latin America and Arab countries, KMG 
reports.  (Russian Oil, June 1) 
 
Oil & Gas Production in January-April 2007 
------------------------------------------ 
 
12.  According to the National Statistics Agency, production of oil 
and gas condensate in Kazakhstan amounted to 22.3 million tons in 
January-April 2007, up 9% from the same period of 2006.  In 
January-April, gas production totaled 9.8 billion cubic meters, up 
16.6% versus 2006.  (Interfax - Kazakhstan, May 21) 
 
ORDWAY

Wikileaks

07ASTANA1584, KAZAKHSTAN: INTEREST IN UPCOMING TIFA EVENTS

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Reference ID Created Released Classification Origin
07ASTANA1584 2007-06-11 07:18 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXYZ0000
RR RUEHWEB

DE RUEHTA #1584 1620718
ZNR UUUUU ZZH
R 110718Z JUN 07
FM AMEMBASSY ASTANA
TO SECSTATE WASHDC//SCA COLLECTIVE/ 9736

UNCLAS ASTANA 001584 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/CEN - O'MARA; USTR - HAFNER, ERRION 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD PREL KZ
SUBJECT: KAZAKHSTAN: INTEREST IN UPCOMING TIFA EVENTS 
 
REF: State 78616 
 
1. (U) Econoff delivered reftel points on June 8 to Damigul 
Kabiyeva, Head of the WTO accession Department, and Saltanat 
Mukasheva, Head of the Section for Trade and Economic Cooperation at 
the Ministry of Industry and Trade.  Kabiyeva expressed a strong 
interest in the details of the program and welcomed the advancement 
of the TIFA framework.  She added that Kazakhstan hopes to continue 
its WTO accession talks on the sidelines of the TIFA meetings. 
Kabiyeva floated the idea of two-day bilateral discussions with 
USTR, starting on July 19. 
 
2. (SBU) Kabiyeva requested guidance on whether a Kazakhstani 
delegation headed by Vice Minister Zhanar Aitzhanova would be 
acceptable and appropriate in view of the U.S. invitation calling 
for delegations headed by a Cabinet-level minister.  While 
mentioning the possibility that Minister of Industry and Trade Galym 
Orazbakov may head the Kazakhstani delegation, Kabiyeva noted that 
Aitzhanova has the status of a "special representative."  Kabiyeva 
also asked whether USAID would be represented at the TIFA meetings, 
given its planned work in fostering regional integration.  Finally, 
she inquired whether U.S. hosts would be providing any logistical 
support to visiting delegations. 
 
MILAS

Wikileaks

07ASTANA1558, KAZAKHSTANI OPPOSITION SHARPLY CRITICAL OF POLITICAL REFORM

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Reference ID Created Released Classification Origin
07ASTANA1558 2007-06-06 07:51 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO6807
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1558/01 1570751
ZNR UUUUU ZZH
P 060751Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9700
INFO RUCNCIS/CIS COLLECTIVE 0198
RUEHC/SECSTATE WASHDC//SCA COLLECTIVE/ 9701
RUEHVEN/USMISSION USOSCE 1760
RUEHNO/USMISSION USNATO 2219
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 03 ASTANA 001558 
 
SIPDIS 
 
DEPARTMENT FOR SCA/CEN (M. O'MARA) 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM KDEM PREL KZ
SUBJECT: KAZAKHSTANI OPPOSITION SHARPLY CRITICAL OF POLITICAL REFORM 
EFFORTS 
 
REF: A. Astana 1323, B. Astana 1357, C. Astana 1469, D. Astana 1466 
 
ASTANA 00001558  001.2 OF 003 
 
 
1. (SBU) Summary:  After initially welcoming the reform proposals 
outlined in President Nazarbayev's May 16 speech, the Kazakhstani 
opposition movement has become sharply critical of the measures 
after analyzing the actual text of the constitutional amendments. 
The last-minute inclusion of a provision exempting Nazarbayev from 
term limits added fuel to the fire.  Complaints relate to the way 
the changes were pushed through without debate, and the content: 
many of the changes benefit the president rather than the 
legislative branch, as advertised.  While the critics have a point, 
they also appear to be underestimating the potential impact of an 
expanded, more diverse Mazhilis.  The full impact of the reforms 
will only be clear once related legislation is approved, beginning 
with a package of election law amendments introduced to parliament 
on June 1.  End summary. 
 
 
---------------------------- 
Initial Cautious Optimism... 
---------------------------- 
 
2. (SBU) Immediately following President Nazarbayev's May 16 address 
to parliament in which he described his reform proposals in general 
terms, many in the political opposition reacted with cautious 
optimism (Ref A).  Social Democratic Party leader Zharmakhan 
Tuyakbay issued a statement describing the package as a "first step 
toward democratic reform," while calling for further reforms and 
more public debate.  True Ak Zhol co-chair Oraz Zhandosov told the 
Ambassador on May 16 that he viewed the majority of the proposals as 
beneficial. 
 
3. (U) On May 17, True Ak Zhol issued a public statement describing 
the amendments as "contradictory":  while they saw measures such as 
moving to a proportional system for electing the Mazhilis and 
requiring maslikhat approval of oblast akims as positive, they were 
critical of other measures such as residency requirements for 
parliamentary candidates and the lengthening of maslikhat terms. 
The party also noted that the reforms did not go far enough in 
establishing true local self-government by directly elected akims 
and maslikhats.  They called on the Mazhilis and Senate to revise 
the draft legislation to address these weaknesses. 
 
------------------------------- 
...Followed by Heated Criticism 
------------------------------- 
 
4. (SBU) When the May 18 joint session parliament approved the 
package unanimously after only 21 minutes of deliberation, including 
a last-minute measure lifting term limits on Nazarbayev as 
Kazakhstan's "first president" (Ref B), the opposition sharply 
changed its tone.  True Ak Zhol co-chair Bulat Abilov told the press 
on May 22 that a country with a lifelong president "cannot be called 
democratic.  The reform shows that Kazakhstan is moving back to the 
Soviet past, and the autocracy of the regime is only getting 
stronger." 
 
5. (U) On May 23, the Social Democratic Party and True Ak Zhol 
issued two joint statements.  The first announced the formation of a 
pre-electoral bloc called "For a Just Kazakhstan" in anticipation of 
early Mazhilis elections.  The second sharply criticized the content 
of the amendments and the way they had been passed.  The majority of 
the changes "limit the rights and freedoms of the people of 
Kazakhstan, violate the principles of the system of checks and 
balances, and contradict Kazakhstan's international obligations," 
the statement read.  It criticized the "shamefully short" 
deliberation period, as well as the introduction of residency 
requirements for Senate and Mazhilis candidates; the provision 
allowing the Senate, a body not directly elected by voters, to 
exercise the functions of the whole legislature if the Mazhilis is 
dissolved; the provision allowing the president to dissolve the 
parliament and maslikhats at all levels for any reason; and the fact 
that the president will in the future appoint almost one-third of 
senators and nine Mazhilis members.  The statement went on to say 
that the amendment lifting term limits on Nazarbayev "violates the 
constitutional norm on the equality of all citizens before the law, 
and in fact leads to the irremovability of the regime.  Moreover, 
this amendment clearly violates the procedure for amending the 
constitution stipulated in Articles 53 and 91." 
 
---------------------------- 
Tuyakbay Takes on the Senate 
---------------------------- 
 
 
ASTANA 00001558  002.2 OF 003 
 
 
6. (SBU) Although not on the speakers' list, Tuyakbay was allowed to 
address a May 30 Senate conference on democratic reform chaired by 
Senate Speaker Kasymzhomart Tokayev and attended by Pol-Econ Chief. 
In sharp contrast with the other speakers, who uniformly praised the 
amendments and Nazarbayev's lea
dership, Tuyakbay stated bluntly that 
the measures had provoked "bewilderment and fear" among the public. 
He criticized the working group led by Igor Rogov (Ref C) for not 
responding to proposals received from the Social Democratic Party 
and others, and questioned "the sincerity of the leadership" 
regarding reforms.  A visibly irritated Tokayev interrupted Tuyakbay 
to point out that his comments after Nazarbayev's speech had been 
relatively positive, and to ask why his approach had changed. 
Tuyakbay replied "the president's speech and the published text of 
the amendments are two different things:  the speech provoked 
optimism and seemed a step forward, but afterward those expectations 
were not fulfilled." 
 
7. (SBU) Tuyakbay continued his remarks, noting concerns over the 
expanded ability of the president to dissolve parliament and 
claiming that overall, the amendments strengthened the president's 
ability to resolve conflicts in his favor.  Noting that the 
increased role of the parliament in the formation of the government 
had been touted as a major improvement in the system of checks and 
balances, Tuyakbay explained that previously the president was 
required to obtain the parliament's consent before appointing a new 
prime minister; under the new provisions he will have to consult 
with Mazhilis party factions before proposing a candidate for the 
approval of the Mazhilis.  Tuyakbay asked rhetorically, "how will 
this change anything, except to provide opportunity for more 
political intrigue?"  Concluding his remarks, Tuyakbay said that the 
new constitution does not follow the path of democratic development 
or the will of the nation; it is difficult to say what results it 
will bring.  In a possible allusion to the Aliyev scandal (Ref D), 
Tuyakbay alleged that "we have seen the destabilizing effect in 
recent days."  He called for the creation of an independent Center 
on Constitutional Reform to develop proposals that are in the 
interests of all segments of society. 
 
8.  (SBU) All the major television channels, including Khabar, 
Astana TV, and Kazakhstan 1, reported on the Senate event.  Only the 
centrist and nominally independent Channel 31 covered Tuyakbay's 
comments, however. 
 
------------------------------- 
Preliminary Analysis of Changes 
------------------------------- 
 
9. (SBU) Opposition leaders are correct in their assessment that 
many of the changes increase the formal authority of the president. 
The Mazhilis and Senate will, however, gain additional leverage 
against the executive authority. For example, the reforms make it 
easier for the Mazhilis to succeed in a no-confidence vote against 
an individual minister or the Cabinet as a whole, lowering the 
threshold from a two thirds majority vote to a simple majority vote. 
 (Note: In the case of individual Cabinet members, a no-confidence 
vote is considered an appeal to the president for the dismissal of 
the Cabinet member; the president may refuse to dismiss the Cabinet 
member, in which case the Mazhilis may try again in six months.  If 
they succeed the second time, the president must dismiss the Cabinet 
member.  In the case of a no-confidence vote against the whole 
Cabinet, the Cabinet ministers must submit their resignation to the 
President.  If the president declines the resignations, he shall 
have the right to dissolve parliament.  End note.) 
 
10. (SBU) The impact of several changes to the Mazhilis and Senate 
and will depend on subsequent legislative changes and 
implementation.  For example, the Mazhilis will grow by 30 seats (to 
107), with nine deputies to be chosen by the 
presidentially-appointed Assembly of Peoples of Kazakhstan and the 
rest to be directly elected.  (Note:  The amendments to the 
constitutional law on elections submitted by the Presidential 
Administration to parliament on June 1 specify that Mazhilis members 
will be elected on a proportional, party list basis.  The minimum 
threshold for a party to be represented will remain 7%.  End note.) 
If elections under the new rules are conducted fairly, the enlarged 
Mazhilis could include at least a few opposition members - 
particularly if the True Ak Zhol-Social Democrats bloc comes up with 
a persuasive unified platform. 
 
11. (SBU) The changes to local self government were modest, but 
somewhat positive.  In the future, maslikhats rather than the Prime 
Minister will recommend oblast-level akims for appointment by the 
president.  The maslikhats can also vote to recommend that the 
president dismiss an akim by a simple majority, rather than a 
 
ASTANA 00001558  003.2 OF 003 
 
 
two-thirds vote as previously required.  The term for maslikhats is 
increased from four to five years, which some observers have 
criticized as distancing maslikhat members, who are directly 
elected, from their constituents.  Some have also criticized the 
fact that the president can now dissolve maslikhats for any reason; 
previously, only the Senate could do so for reasons prescribed by 
law. 
 
12. (SBU) Comment: While it is true that many of the constitutional 
amendments increase the president's formal authority, they will not 
increase his actual power.  Under the current system, President 
Nazarbayev makes every critical decision on government and 
parliamentary appointments, regardless of what the Constitution 
says.  Some of the changes merely codify actual practice, such as 
having the president appoint the ministers of Foreign Affairs, 
Defense, Internal Affairs, and Justice; in reality, the president, 
not the Prime Minister, currently chooses all the ministers, and the 
four listed above report directly to him.  The changes to 
presidential authorities may be an effort to ensure that 
Nazarbayev's successor, who will not have the same amount of 
personal power to bend the system to his will, will not be too 
disadvantaged.  In the near term, the most significant change 
brought about by the constitutional amendments is the increase in 
the number of directly-elected seats in the Mazhilis.  If the 
Kazakhstani authorities have the political will to address the 
underlying problems that have resulted in flawed elections in the 
past, new Mazhilis elections could/could bring a more diverse body 
with greater leverage over the executive branch.  End comment. 
 
MILAS

Wikileaks

07ASTANA1544, KAZAKHSTAN PREPARING FOR GREATER INVOLVEMENT IN

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Reference ID Created Released Classification Origin
07ASTANA1544 2007-06-06 05:09 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO6630
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1544/01 1570509
ZNR UUUUU ZZH
P 060509Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9681
INFO RUCNCIS/CIS COLLECTIVE 0195
RUEHC/SECSTATE WASHDC//SCA COLLECTIVE/ 9682
RUEHVEN/USMISSION USOSCE 1757
RUEHAST/USOFFICE ALMATY
RUEHBUL/AMEMBASSY KABUL 0332
RUEKJCS/SECDEF WASHDC 0043

UNCLAS SECTION 01 OF 03 ASTANA 001544 
 
SIPDIS 
 
DEPARTMENT FOR SCA/CEN (M. O'MARA) 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL AF KZ
SUBJECT: KAZAKHSTAN PREPARING FOR GREATER INVOLVEMENT IN 
AFGHANISTAN 
 
ASTANA 00001544  001.2 OF 003 
 
 
1. (U) Summary: On May 25, SCA Special Envoy for Assistance to 
Afghanistan Ambassador Ronald Neumann briefed key government and 
business officials on the current situation in Afghanistan with the 
aim of encouraging greater Kazakhstani involvement in reconstruction 
and stabilization efforts.  The Kazakhstani officials acknowledge 
the importance of a stable Afghanistan to their own interests, and 
are in the process of developing an aid program for Afghanistan and 
encouraging Kazakhstani businesses to invest in projects in 
Afghanistan.  The Government of Kazakhstan requested additional 
information on potential projects in Afghanistan, and appears open 
to guidance from the international community.  End summary. 
 
--------------------------------------------- --------- 
KAZAKHSTAN: "CONSENSUS HERE TO DO MORE" IN AFGHANISTAN 
--------------------------------------------- --------- 
 
2. (U) On May 25, Ambassador Neumann met with Vice Minister of 
Foreign Affairs Nurlan Yermekbayev, Vice Minister of Industry & 
Trade Kuandyk Bishimbayev, Vice Minister of Defense General Bolat 
Sembinov, and the Prime Minister's international relations section 
head Serikbay Zhumabayev to discuss potential Kazakhstani 
involvement in Afghanistan. In addition, he met with Ulf Wokurka, 
deputy chairman of the Samruk state holding company, and Maksat 
Mukhanov, managing director of the Kazyna Sustainable Development 
Fund, to discuss business and investment opportunities in 
Afghanistan.  Ambassador Neumann described the current political, 
economic, and military situation in Afghanistan, the importance of 
success in Afghanistan for the whole region, and the priorities for 
reconstruction and infrastructure development in Afghanistan. 
 
3. (SBU) Ambassador Neumann's interlocutors consistently reported 
that the Government of Kazakhstan knows the importance of 
stabilizing Afghanistan and is prepared to step up its involvement 
there, both through development/humanitarian assistance and business 
investment.  Vice Minister Yermekbayev headed a Kazakhstani 
delegation to Afghanistan in April, and said that there is a 
"consensus here to do more" in Afghanistan.  He also noted that the 
Afghans were openly expecting assistance and investment from 
Kazakhstan, given Kazakhstan's proximity and economic success.  Vice 
Minister Bishimbayev also participated in the April delegation to 
Kabul, and agreed that stability in Afghanistan is crucial to 
stability in the whole region. Zhumabayev of the Prime Minister's 
office said that Kazakhstan's relationship with Afghanistan is a 
priority, and that Kazakhstan supports all initiatives aimed at 
stabilizing Afghanistan, particularly initiatives made through the 
Conference on Interaction and Confidence Building Measures in Asia, 
the Shanghai Cooperation Organization, and the Collective Security 
Treaty Organization. 
 
--------------------------------------------- --- 
KAZAKHSTAN CURRENTLY CRAFTING ASSISTANCE PACKAGE 
--------------------------------------------- --- 
 
4. (SBU) Bishimbayev heads the Kazakhstani side of a joint 
Kazakhstan-Afghanistan commission established to study Kazakhstani 
assistance and investments in Afghanistan and develop an aid program 
for Afghanistan. Bishimbayev reported that Kazakhstan is considering 
an aid program in the range of $25-50 million, and is currently 
focused on the construction of a hospital and the renovation or 
construction of schools.  He also said that Kazakhstan would 
eventually like to provide technical training to Afghans at 
Kazakhstani educational institutions. According to Bishimbayev and 
Yermekbayev, Kazakhstan hopes to finalize its assistance proposal in 
June, circulate it for interagency approval, and then host an Afghan 
delegation in August to discuss the program. 
 
5. (SBU) Bishimbayev indicated that Kazakhstan is very interested in 
obtaining additional information from the Afghan government and the 
international community about various projects under consideration 
in Afghanistan, and responded with interest when Ambassador Neumann 
discussed the importance of airport, road, and infrastructure 
projects.  He said that the Kazakhstani side has requested more 
detailed and comprehensive information from the Afghan government on 
the various ongoing and anticipated projects that Kazakhstan might 
become involved in, but that he is still awaiting a response from 
the Afghan side.  He expressed some frustration that he does not 
know the identity of his counterpart on the Afghan side of the 
commission after his initial contact, former Deputy Commerce 
Minister Hyder Reza, resigned. Bishimbayev said that the Government 
of Kazakhstan currently communicates with the Government of 
Afghanistan through the Ministry of Foreign Affairs. (Note: Post has 
already compiled some of the information Bishimbayev requested, and 
will forward it to him.  End note.) &#
x000A; 
ASTANA 00001544  002.2 OF 003 
 
 
 
--------------------------------------------- ------- 
KAZAKHSTANI BUSINESSES SEEK INVESTMENT OPPORTUNITIES 
--------------------------------------------- ------- 
 
6. (SBU) Yermekbayev and Bishimbayev also reported that the 
Government of Kazakhstan is attempting to facilitate Kazakhstani 
business investment in Afghanistan.  Yermekbayev said that a 
Kazakhstani mining company is already bidding on a copper mining 
venture in Afghanistan, and expressed hope that Kazakhstani 
companies would find success in the bidding process for various 
projects.  Bishimbayev said that Kazakhstani companies were 
exploring projects including the construction of electric 
transmission lines from Tajikistan and railroad links from Central 
Asia to Afghanistan. 
 
7. (SBU) Mukhanov, managing director of the government-affiliated 
Kazyna Sustainable Development Fund, said that Kazyna stands ready 
to support private Kazakhstani companies interested in joint 
ventures in Afghanistan. Kazyna supports private investment in 
coordination with government policy, and offers support in the form 
of co-funding, credit, and insurance.  He said that a Kazyna 
representative participated in the Kazakhstani delegation to Kabul 
in April, and Kazyna has studied potential areas of cooperation 
between Kazakhstan and Afghanistan, but has not yet been involved in 
any Afghan projects. Mukhanov reported that Kazyna is interested in 
additional information about doing business in Afghanistan, 
including how to promote Kazakhstani companies, factors for 
Kazakhstani companies to be aware of, and the legal framework for 
business activities in Afghanistan. 
 
8. (SBU) Wokurka, deputy chairman of the Samruk state holding 
company, explained that the state companies under the Samruk 
umbrella are not currently involved in any projects in Afghanistan, 
though it is conceivable they may be interested in the future. 
(Note: Samruk manages government-owned stock in Kazakhstan's major 
business companies, including KazMunaiGaz, KazakhTelecom, the 
KazTemirZholy railroad company, and the KEGOC transmission grid 
company.  End note.) Wokurka stated that in December 2006, Samruk 
was empowered to undertake infrastructure-related investment 
projects, though at this point investment projects are limited to 
those in Kazakhstan and its immediate neighbors. 
 
9. (SBU) Wokurka responded with interest to two projects described 
by Ambassador Neumann: a possible project to increase the capacity 
of Turkmenistani power transmission lines to Afghanistan, and a 
project to extend a portion of the Uzbek power transmission grid to 
Afghanistan. Wokurka requested additional information on these 
projects, and promised to contact the appropriate officials at the 
KEGOC transmission grid company to gauge their interest.  (Note: 
Post has already forwarded additional information to Wokurka 
concerning the Uzbek power project.  End note.) 
 
10. (SBU) Poloff asked Wokurka about the possible future export of 
excess electric energy capacity from southern Kazakhstan to 
Afghanistan.  Wokurka said that Samruk was involved in financing a 
new coal fired power plant near Lake Balkhash and a new 
hydroelectric plant, but these projects would be devoted to serving 
the energy needs of southern Kazakhstan, and would not produce 
sufficient energy for export. 
 
------------------------------------------- 
DEFENSE MINISTRY ENGAGES ON MILITARY ISSUES 
------------------------------------------- 
 
11. (SBU) In his meeting with General Sembinov, Ambassador Neumann 
received an overview and Kazakhstani perspective on the bilateral 
defense cooperation relationship.  Sembinov noted that the 
U.S.-Kazakhstani partnership had strengthened over the years and was 
on the verge of becoming something more comprehensive.  He 
highlighted the success of the HMMWV program, but noted with 
frustration the slowness of the Huey II program and the lack of 
progress on C-130 aircraft.  Sembinov closed his presentation by 
stating that Kazakhstan had taken great political risk in going with 
U.S. equipment, and that now it was the U.S.' turn to show its 
commitment to the bilateral relationship by following through on 
both the Huey II helicopter and C-130. 
 
12. (SBU) Ambassador Neumann then provided a detailed briefing on 
the current tactical situation in Afghanistan.  Sembinov and his 
staff were very interested in the threat level of each of the main 
Afghan sectors (north, east, south, and west), as well as the role 
of Provincial Reconstruction Teams (PRTs) in Afghanistan.  Sembinov 
 
ASTANA 00001544  003.2 OF 003 
 
 
was also interested in Ambassador Neumann's assessment of Taliban 
combat tactics and their success (or lack thereof) on the 
battlefield.  Sembinov provided no further details about possible 
Kazakhstani participation in a PRT, but said he understood that a 
KAZBRIG Peace Support Operation deployment somewhere in the 
near-term was essential to the long-term health of the KAZBRIG. 
 
---------------------------------------- 
KAZAKHSTAN CAUTIOUS ABOUT MANAS AIR BASE 
---------------------------------------- 
 
13. (SBU) In his meeting with Yermekbayev, Ambassador Neumann 
stressed the strategic importance to operations in Afghanistan of 
the Manas Air Base in Kyrgyzstan, and encouraged the Government of 
Kazakhstan to support continued operations at the base. Yermekbayev 
said that Kazakhstan supports the ongoing anti-terrorist campaign in 
Afghanistan, and promised to consider the United States government 
viewpoint on Manas Air Base, including at the upcoming Shanghai 
Cooperation Organization meeting.  However, he cautioned that 
Kazakhstan cannot interfere in another country's internal affairs, 
and that perceived Kazakhstani involvement in Kyrgyz affairs was a 
sensitive issue in Kyrgyz politics. 
 
14. (SBU) Ambassador Neumann also discussed Manas Air Base with 
Sembinov.  Neumann thanked Sembinov for Kazakhstan's support to both 
Operation Iraqi Freedom and Operation Enduring Freedom, and said 
that the operations of Manas Air Base would be far less effective 
without on-going Kazakhstani support (blanket overflight clearance 
and Almaty airport emergency divert landing support).  Ambassador 
Neumann asked for Kazakhstan's support at the upcoming August 
Shanghai Cooperation Organization summit in Bishkek in deflecting 
calls for the removal of the airbase.  Sembinov stated that while 
the summit was a political matter, he understood the airbase's 
importance to coalition operations in Afghanistan, noting that 
Kazakhstan had proven its reliability as a partner in the War on 
Terror. 
 
------- 
COMMENT 
------- 
 
15. (SBU) Comment:  Kazakhstani officials are sincere in their 
recognition that stabilizing Afghanistan is crucial to the region, 
and the government a
ppears poised to translate its verbal support 
for rebuilding Afghanistan into concrete action.  The planned $25-50 
million aid package is larger than Post anticipated, and Kazakhstan 
appears willing to tailor its involvement toward international 
priorities, including infrastructure projects.  Kazakhstan remains 
understandably cautious about venturing into new territory as a 
donor, in part due to lack of an assistance implementation 
mechanism; lack of information and poor communication with their 
Afghan counterparts may also hinder progress.  Post will continue to 
supply the government with information concerning Afghanistan and 
encourage continued movement on their aid package and business 
investments. End comment. 
 
MILAS

Wikileaks

07ASTANA1528, KAZAKHSTAN: ALMATY NOTES, MAY 2007

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Reference ID Created Released Classification Origin
07ASTANA1528 2007-06-05 06:02 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO5323
RR RUEHAST RUEHDBU
DE RUEHTA #1528/01 1560602
ZNR UUUUU ZZH
R 050602Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9670
INFO RUEHVEN/USMISSION USOSCE 1754
RUEHEK/AMEMBASSY BISHKEK 8015
RUEHNT/AMEMBASSY TASHKENT 7924
RUEHAH/AMEMBASSY ASHGABAT 7169
RUEHDBU/AMEMBASSY DUSHANBE 2146
RUEHMO/AMEMBASSY MOSCOW 1412
RUEHAST/USOFFICE ALMATY
RUEHNO/USMISSION USNATO 2216

UNCLAS SECTION 01 OF 03 ASTANA 001528 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM KZ
SUBJECT: KAZAKHSTAN: ALMATY NOTES, MAY 2007 
 
REF: A. Astana 1033, B. Astana 1415, C. Astana 1129 
 
1. The "Almaty Notes" series is intended to maintain focus on 
developments in civil society, the media, and the opposition in 
Kazakhstan's "southern capital" following the move of the Embassy to 
Astana. 
 
Opposition Challenges Formation of Election Commissions 
--------------------------------------------- ---------- 
 
2. Three opposition parties, True Ak Zhol, the Social Democratic 
Party, and the Communists, filed a lawsuit against the Almaty City 
Maslikhat challenging the way the city precinct election commissions 
were formed.  In early April during by-elections for Almaty City 
precinct election commissions, the three opposition parties won only 
20 of the 821 vacant seats (Ref A).  The opposition leaders stated 
that the selection process was a farce designed to make the election 
process non-transparent.  The hearing began on May 8 in the 
Bostandyk district court but was quickly adjourned.  When it resumed 
on May 11, more than a dozen policemen were present; some of them 
urged the elderly opposition activists there to observe the trial to 
disperse.  True Ak Zhol activist Marzhan Aspandiyarova nevertheless 
gave interviews to journalists standing at the entrance of the court 
building.  The event ended peacefully. 
 
3. On May 10, the Almaty City Maslikhat invited representatives of 
various political parties, including the opposition, to a round 
table meeting to discuss the formation of election commissions. 
The round table was organized to discuss controversial aspects of 
the formation, because the current legislation does not provide a 
detailed procedure.  Following the discussion, the participants 
signed a memorandum on cooperation.  The participants from the 
opposition True Ak Zhol and Social Democratic parties insisted that 
their opinions, which differed from the opinions of others, be 
included in the memorandum.  The opposition representatives insisted 
on transparency of lists of nominees for election commission seats 
and spoke against "file" voting, meaning voting for the list of 
candidates rather than individuals.  (Panorama weekly, May 11) 
 
Conference on Local Election Observation 
---------------------------------------- 
 
4. An international conference on the Further Development of Local 
Election Observation in Kazakhstan, was held in Almaty on May 14. 
The participants stressed that the monitoring of election procedures 
should be conducted long before the day when an election is held. 
The secretary of the Central Election Commission (CEC), Bakhyt 
Maldeshev, spoke in favor of close cooperation of the CEC with local 
observers. The conference was organized by OSCE Almaty and the 
Republican Network of Independent Observers.  (AC TV, May 14) 
 
True Ak Zhol and Social Democrats Form Electoral Bloc 
--------------------------------------------- -------- 
 
5. On May 23 two opposition parties, True Ak Zhol and the Social 
Democrats, announced their intention to set up an electoral bloc. 
They stated that they assume that following the recent 
constitutional amendments, the authorities will dissolve parliament 
and conduct early elections this fall. 
 
Protests against Constitutional Amendments 
------------------------------------------ 
 
6. On May 24, a group of 30 people, including opposition journalist 
Sergey Duvanov, went to the central square of Almaty to protest the 
recent constitutional amendments.  Duvanov alone was detained and 
spent several hours in a police station.  The next day the City 
Special Inter-District Administrative Court tried Duvanov for 
organizing an unsanctioned rally.  He admitted the violation but 
stated that the law restricting freedom of speech was not in line 
with the International Convention on Civic and Political Rights 
signed by Kazakhstan.  Duvanov was fined 18,564 tenge ($152).  About 
a dozen of opposition activists and journalists attended the trial 
to support Duvanov. 
 
7. In a June 1 article in the Respublika weekly, Duvanov expressed 
his disappointment with the opposition parties that had failed to 
support his protest action.  Duvanov wrote: "There could be a good 
reason.  The constitution was re-written and the president has been 
made president for life.  It does not happen every year.  However, 
the opposition parties limited themselves to making traditional 
statements.  Lately, the opposition has preferred to just do 
paperwork against the regime." 
 
8. On May 29, journalist Yekaterina Belyayeva of the "Vzglyad" 
 
ASTANA 00001528  002 OF 003 
 
 
weekly went to the Monument of Independence on the Almaty central 
square with a poster reading "Constitutional Amendments - the Road 
to Totalitarianism."  After thirty minutes the police arrested her 
and took her to a district police station, where she was detained 
for three hours. 
 
9. On May 30, poli
tical scientist Galym Agileuov went to the same 
central square to protest the amendments.  He was wearing a 
cardboard crown on his head.  After fifteen minutes, the police 
arrested Agileuov and two of his colleagues.  (Vremya daily, June 
2) 
 
Follow-up to Nurbank Incident 
----------------------------- 
 
10. On May 10 the police in Almaty detained two employees of KTK TV 
channel, Ivan Likhouzov and Vitaliy Piskunov, an officer of the 
Presidential Guard, major Nurlan Sarypbekov, and the Nurbank's 
security chief, Yerlan Sarsenbekov, as witnesses in connection with 
a case of the Nurbank former deputy chairman, Zholdas Timraliyev 
(Ref B).  Timraliyev disappeared on January 31.  According to 
Interior Ministry press secretary Bagdat Kozhakhmetov, the Almaty 
police have launched a criminal investigation into the case.  Major 
Nurlan Sarypbekov was arrested as a suspect involved in the 
abducting of Timraliyev.  Piskunov was placed under arrest as a 
suspect involved in a fraud.  Other witnesses were questioned and 
set free.  (Vremya daily, May 16) 
 
 
11. On May 15, the Medeu district court in Almaty continued the 
hearing of the criminal case against Abilmazhin Gilimov and six 
officers of Almaty police special squad who were charged with 
organizing and participating in the January 31 attack on the Nurbank 
office in Almaty.  The officers filed a motion asking the court to 
transfer Gilimov from the Almaty City detention center to the 
detention center of the National Security Committee because his life 
was allegedly in danger.  The judge approved the motion.  Then the 
court continued questioning witnesses.  (Vremya daily, May 16) 
 
Businessmen Lambast Aliyev 
-------------------------- 
 
12. A group of well-known businessmen, including leading bankers 
Mukhtar Ablyazov and Nurzhan Subkhanberdin, made a statement on May 
30 lambasting Rakhat Aliyev.  In their statement the businessmen 
reported that they themselves had experienced Rakhat Aliyev's way of 
doing business and the political pressure that he exerted for 
personal purposes with the help of law enforcement bodies.  "Today 
any of us might find himself in the place of the kidnapped bank 
managers.  We are concerned that Aliyev and his accomplices can 
resort to any provocations against people and stability in the 
society.  We are calling on progressive forces to support the 
president's efforts and to preserve the stability" the statement 
read.  (Vremya daily, May 30) 
 
13. A group of associations representing medium-size businesses made 
a separate statement blaming Rakhat Aliyev for seizing their 
businesses in the past.   According to the statement, "many have 
fallen victims to Rakhat Aliyev and his henchmen including the ones 
from law enforcement.  He is to blame for ruined lives and projects 
that have not been realized."  The businessmen have called on 
everyone to support the president's efforts to root out corruption 
and "raids" on other people's property.  (Vremya daily, May 31) 
 
Calls to Reinvestigate Nurkadilov, Sarsenbayev Murders 
--------------------------------------------- --------- 
 
14. In a May 29 statement on Rakhat Aliyev, the True Ak Zhol party 
demanded that the tragic deaths of politicians Zamanbek Nurkadilov 
and Altynbek Sarsenbayev and his driver and bodyguard  be 
re-investigated in light of press reports about Aliyev's involvement 
in these cases.  (Vremya daily, May 30) 
 
 
Police Continue to Search for Missing Journalist 
--------------------------------------------- --- 
 
15. The police continue to search for missing journalist, Oralgaysha 
Zhabagtaykyzy (Ref C), the Interior Ministry press secretary told a 
press briefing in Almaty on May 14.  "The investigation does not 
exclude any of the versions, including the one, which assumed that 
her disappearance was linked to her professional activities," the 
press secretary said.  (Interfax, May 14) 
 
Almaty Crisis Center Left without Shelter 
 
ASTANA 00001528  003 OF 003 
 
 
----------------------------------------- 
 
16. The "Podrugi" (Girlfriends) crisis center in Almaty is looking 
for new premises, because their old shelter, which could hold 16 
women, had been demolished.  According to the executive director of 
the center, Yelena Karsten, the amount they were paid for the old 
facility is sufficient to buy only a four-room apartment, which can 
hold a maximum of eight women.  (Vremya daily, May 16) 
 
MILAS

Wikileaks

07ASTANA1512, KAZAKHSTAN,S FINANCIAL SECTOR: A DANGER TO ITSELF

WikiLeaks Link

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Reference ID Created Released Classification Origin
07ASTANA1512 2007-06-03 11:04 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXRO3722
PP RUEHDBU
DE RUEHTA #1512/01 1541104
ZNY CCCCC ZZH
P 031104Z JUN 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9651
INFO RUCNCIS/CIS COLLECTIVE 0191
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEBAAA/DEPT OF ENERGY WASHDC

C O N F I D E N T I A L SECTION 01 OF 04 ASTANA 001512 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EB; SCA/CEN (O'MARA) 
 
E.O. 12958: DECL: 06/04/2017 
TAGS: ECON EFIN PGOV KZ
SUBJECT: KAZAKHSTAN,S FINANCIAL SECTOR: A DANGER TO ITSELF 
(AND OTHERS)? 
 
REF: A. ASTANA 1243 
     B. ASTANA 1240 
     C. ASTANA 1122 
     D. ASTANA 1234 
 
Classified By: Pol-Econ Chief Deborah Mennuti; reasons 1.4 (b) and (d). 
 
1. (SBU) Summary:  In spite of the failure of a regional bank 
and the International Monetary Fund's recent characterization 
of Kazakhstani private sector external borrowing as an 
emerging "global market risk," the mood among Kazakhstani 
financiers remains upbeat.  With no end to petrodollars in 
sight, they see major opportunities for growth in financial 
services, particularly insurance and asset management. 
Still, the IMF's focus on the size of Kazakhstani banks' 
external borrowings has helped highlight the Kazakhstani 
economy's vulnerability to higher global interest rates as 
another risk to the country's financial system.  Most 
well-informed observers are already concerned by the apparent 
real estate bubbles in Astana and Almaty.  Even more, when 
speaking frankly, acknowledge that the twin deficits of 
proper corporate governance and the rule of law remain major 
obstacles to the development of Kazakhstani business in 
general and the financial sector in particular.  End summary. 
 
Driven by Oil and Intent to Keep Going 
-------------------------------------- 
 
2. (SBU) However they may assess the principal economic 
risks, decision-makers in the Kazakhstani financial sector 
agree that oil will, for the foreseeable future, continue to 
fuel the Kazakhstani economy and, concomitantly, the 
financial services industry.  Roman Solodchenko, CEO of Bank 
Turan Alem (BTA), told a visiting Treasury official and 
econoff on April 16 that the outlook for the Kazakhstani 
economy remains rosy, as oil prices are not expected to 
plunge.  Even if oil does fall, Solodchenko noted, it will 
still support economic growth, because oil contracts are 
structured in such a way that the actors are interested in 
increasing production "no matter what the oil price does." 
Furthermore, Solodchenko implied, the Kazakhstani 
Government's (GOK's) ongoing sterilization of its oil 
revenues through the National Fund has limited the government 
budget's dependence on the oil sector, thus cushioning the 
economy against any dramatic falls in the price of oil. 
 
3. (C) Notably, Kazakhstan's National Bank (NBK) Deputy 
Chairman Gulbanu Aimanbetova does not see oil's classic side 
effect, "Dutch disease," as a significant problem for the 
Kazakhstani economy.  She explained during an April 17 
meeting that Kazakhstani firms rely heavily on imports for 
their inputs, citing the example of Rakhat Candy, which 
imports 70-80% of its inputs.  Tenge appreciation, therefore, 
does not necessarily have an adverse effect on the global 
competitiveness of Kazakhstani producers, since it helps 
lower their costs, according to Aimanbetova.  (Note: 
Aimanbetova may have merely been restating the GOK's official 
position, which another NBK official described as "Kazakhstan 
does not have Dutch disease, just the symptoms."  Whatever 
the GOK's principal decision-makers think of the threat of 
Dutch disease, however, they are currently embarking on a new 
major effort to diversify the economy away from the 
extractive sector.  Ref A, B, and C.  End note.) 
 
Kazakhstan: Attracting Capital (and Notoriety) 
--------------------------------------------- - 
 
4. (SBU) While oil-funded economic optimism is the spirit of 
the day, views appear to be significantly more diverse in 
regard to the Kazakhstani private sector's current borrowing 
binge abroad.  The already much-discussed phenomenon was 
featured in the IMF's April 2007 Global Financial Stability 
Report.  The IMF report specifically highlighted the combined 
external borrowing by Russia's and Kazakhstan's private 
sectors as "an emerging market risk."  The report makes 
particular note of the external borrowing by Kazakhstani 
banks.  In 2006, according to IMF figures, Kazakhstan's 
financial institutions borrowed $8.4 billion abroad; in just 
the first 44 days of 2007 (Jan. 1 through Feb. 13), they 
borrowed $6.3 billion.  The report sees this as a factor in 
the context of "global risks," due to Kazakhstan's 
"relatively low capital adequacy" and "relatively high 
nonperforming loans ratio," particularly when the country's 
rapid credit growth is taken into account. 
 
5. (C) One prominent actor in Kazakhstan's financial sector 
 
ASTANA 00001512  002 OF 004 
 
 
privately called the IMF's decision to place Kazakhstan 
alongside the U.S. and Russia "flattering."  Some 
well-informed observers expressed to us the view that the 
causes of the Kazakhstani private sector's borrowing binge 
were rational and benign, rather than speculative and 
dangerous.  Kazakhstan's banks, they explained, are turning 
abroad to access long-term capital that they cannot obtain at 
home.  Magzhan Auezov, Ma
naging Director of KazKommertsBank 
(KKB), remarked, "it's just that borrowing abroad is 
cheaper," echoing the often-stated view that Kazakhstan's 
banking system, although widely described as the 
most-developed in the CIS, is not an adequate source of 
long-term capital.  Some bankers explained that while the 
public-at-large continues the gradual post-Soviet process of 
warming up to banking, deposits remain relatively small and 
"flighty."  As a result, the argument goes, the domestic 
market only provides banks with limited, short-term capital, 
forcing seekers of long-term capital to go abroad. 
 
6. (C) NBK's Aimanbetova, however, stated unequivocally her 
concern with the extent of the banks' external borrowing. 
Kazakhstan's external debt - now at $73 billion - has, she 
said, greatly expanded in the past two years due to private 
sector borrowing.  Banks are currently responsible for 45% of 
the country's external debt, she added.  Aimanbetova also 
said that banks are becoming overly aggressive as they drive 
up interest rates in competition for deposits.  Erlan 
Balgarin, CEO of Centras Securities, an Almaty-based 
investment company, was more blunt in an April 16 
conversation.  Credit expansion, he said, represents a 
serious risk to the Kazakhstani economy.  Banks enjoy a high 
ability to borrow but very limited investment opportunities, 
which leads them to provide loans to questionable projects. 
As a result, Balgarin concluded, the quality of the credit 
portfolio tends to be very low. 
 
7. (SBU) The Financial Supervision Agency (FSA) recently 
tried to limit banks' external borrowing by instituting 
stricter reserve requirements.  As these requirements take 
effect, some of the largest banks are turning to issuing 
equity abroad or seeking foreign investors as alternate ways 
of attracting foreign capital.  For now, however, the IMF 
figures appear to indicate that the external borrowing binge 
is continuing. 
 
Real Estate: How Big a Risk to the Economy? 
------------------------------------------- 
 
8. (C) There is consensus among observers that a lot of the 
capital borrowed abroad by Kazakhstani banks ends up flowing 
into domestic real estate.  There appears to be agreement 
among top Kazakhstani bankers that the real estate markets in 
Almaty and Astana pose risks.  However, the bankers differ in 
the levels of their concern and their approaches to mortgage 
lending.  The National Bank's Aimanbekova said that the real 
estate market is being driven by "speculative, not real, 
demand," and that "problems" are expected in 2008.  She 
blamed the excess demand on Kazakhstan's shadow economy, 
which produces large sums of money in need of laundering. 
(Note: for discussion of Kazakhstan's shadow economy, see Ref 
A.  End note.)  Balgarin of Centras seconded this view: 
compared to securities investments, he said, real estate 
investments enjoy a high level of non-transparency, making 
them an ideal vehicle for "parking" illicit capital.  Greater 
transparency of the oil sector, Balgarin added, would lessen 
pressure on the real estate market and "spread money around." 
 
9. (C) Grigoriy Marchenko, the CEO of Halyk Bank and former 
NBK Chairman, echoed Aimanbekova's comments, telling us on 
April 17 that real estate prices are "the biggest industry 
risk for the banking system" and that a correction could come 
in 2008.  Marchenko emphasized his bank's "contrarian" 
orientation in treading carefully in the real estate sector. 
Yet even he qualified his pessimism: while the real estate 
market, he said, is overpriced in Astana and Almaty, it 
remains "very segmented" and still has room to grow "in the 
provinces." 
 
10. (C) BTU's Solodchenko -- who described his bank as "not 
the most aggressive one" in the context of real estate (that 
title, he said, belongs to KKB) -- provided a mixed view.  He 
said that Kazakhstan -- with a living space per capita figure 
of 17 square meters -- still has some catching up to do with 
Eastern Europe's 34 square meters per capita.  Solodchenko 
added, however, that his bank has now pulled out of Astana's 
real estate market, which is approaching "saturation" at 
 
ASTANA 00001512  003 OF 004 
 
 
22-23 square meters per capita.   Still, he stated, the real 
increase in housing in Almaty is not as great as it may 
appear.  The first floors of many residential buildings, 
Solodchenko explained, have been converted to retail stores. 
The need to replace this "lost" residential space, combined 
with the continuing post-Soviet "decompression" of extended 
families crammed into single apartments, is often viewed as 
at least partly responsible for driving the demand. 
 
11. (C) Auezov of KKB, Kazakhstan's largest bank, readily 
acknowledged his bank's substantial involvement in the real 
estate sector.  However, he said, KKB's risk is "particularly 
structured."  Auezov explained that KKB focuses on financing 
construction, including construction of industrial and 
governmental buildings.  This preference for "construction 
risk," he implied, helps insulate KKB from the risks of the 
real estate market's fluctuations.  Mukhtar Bubeyev, 
Department Head at the Financial Supervision Agency (FSA), 
expressed a similar perspective, stating that Kazakhstan's 
banking sector is "quite diversified."  The real exposure to 
the real estate market, he said, is shouldered by mortgage 
companies, which also fall under FSA's purview. 
 
After Valut Transit Debacle: How Good is the Oversight? 
--------------------------------------------- ---------- 
 
12. (C) Most observers do not see the recent collapse of the 
Karaganda-based Valut Transit Bank (VTB) as an indication of 
systemic problems in Kazakhstan's banking system.  (Note: Ref 
D reports the legal proceedings surrounding VTB.  End note.) 
The consensus appears to be that the VTB's downfall was 
precipitated by unmistakably "criminal" factors.  Balgarin of 
Centras framed the saga in terms of corporate governance; the 
bank, he said, issued a lot of credit to finance its own 
stockholders' projects.  Other observers echoed this view but 
differed somewhat in their assessment of the regulator's 
(i.e. the FSA's) fault in the bank's downfall.  Bakhyt 
Mazhenova, General Director of the Deposit Insurance Fund, 
shared her personal  opinion with us that "politicization" 
and "weakness" of the FSA prevented it from spotting and 
bringing to light the VTB's troubles in a timely fashion. 
Other observers also thought that the FSA may have been 
excessively timid and slow to the scene, particularly in 
pulling the sinking bank's license. 
 
13. (C) Halyk's Marchenko, however, painted a picture of a 
largely blameless FSA, which was simply prevented from doing 
its job by a lack of power and a faulty legal system.  It was 
essentially impossible, Marchenko said, for the regulator to 
unravel the multi-layered loan sche
me at the center of the 
VTB's demise.  Any action the FSA takes, he explained, can be 
challenged in court.  Marchenko added that in the VTB case 
the FSA likely assumed that it would lose such a challenge, 
"even if (the bank) had not bribed the judge - a big if." 
FSA's Bubeyev, while sounding rather defensive about the VTB 
scandal, appeared to support Marchenko's thesis.  In the wake 
of the VTB's bankruptcy, Bubeyev said, legislative amendments 
have been enacted, expanding the FSA's powers.  The 
legislation, in part, dictates that the FSA's instructions 
must be followed even if they are being challenged in court. 
 
14. (C) Marchenko suggested that knowledgeable domestic 
investors, particularly large financial institutions 
(including Halyk), had pulled their investments out of VTB in 
time to avoid falling victim to the bank's collapse.  On the 
other hand, foreign institutions and domestic depositors, 
Marchenko added, could not see the trouble coming. 
 
15. (C) The ripple effects for Kazakhstan's financial sector 
of the collapse of the VTB are, according to a discernible 
consensus, rather limited.  Mazhenova of the Deposit 
Insurance Fund (DIF), "Kazakhstan's FDIC," however, stated 
that the impact on the banking system would have been "big," 
had the DIF not made payments to the VTB's depositors.  The 
DIF's actions, she said, prevented a major outflow of capital 
from the banking system following the VTB's collapse. 
Mazhenova said that the failed bank served 100,000 depositors 
and held 250,000 accounts.  Mazhenova described the VTB as a 
"large regional bank" and a key player in the economy of the 
industry-heavy Karaganda Oblast.  The DIF, she said, insures 
bank deposits up to the amount of KZT 700,000 (approx. 
$5,833); 52% of VTB's deposits were under that threshold. 
Mazhenova stated unequivocally that the VTB meltdown is 
taking a major financial toll on the DIF, resulting in 
obligations of approximately KZT 15 billion (approx. $125 
million).  She added that a decision has been made to grant 
 
ASTANA 00001512  004 OF 004 
 
 
to the DIF an inflow of capital, possibly to the tune of 5 
billion KZT (approx. $41.7 million), from the National Bank. 
 
New Horizons and Where the Buck Stops... 
---------------------------------------- 
 
16. (SBU) In spite of the clouds of the VTB debacle and 
excessive external borrowing by banks, Balgarin of Centras 
presented an optimistic vision of the Kazakhstani financial 
sector's foreseeable future.  The asset management and 
insurance industries, he said, lag behind the "very 
well-developed" banking sector but have great potential. 
Balgarin added that insurance companies may receive a major 
impetus if existing pension funds come under their 
management.  While the lack of "financial literacy" among the 
Kazakhstani public remains an obstacle, he said, "the public 
mind is evolving."  As evidence, he cited $20-22 billion now 
in deposits and $400 million under asset management, although 
only 15-20% of the latter is "active on the market." 
 
17. (C) Balgarin was decidedly gloomier when discussing 
issues of corporate governance.   He said that the lack of 
transparency is a problem, and that it is very difficult for 
a shareholder to influence a company.  "The problem," 
Balgarin stated, "is not legislation but the legal system and 
the culture.  When it comes to enforcing rights, the buck 
stops at the courthouse steps."  Balgarin's remark was a 
clear allusion to the notion that the fate of the Kazakhstani 
financial services industry is strongly tied to that of the 
domestic corporate sector, which remains plagued by poor 
corporate governance and the legal system's failures in 
enforcing contractual and property rights. 
 
Comment 
------- 
 
18. (SBU) Whatever the extent of the risks that Kazakhstan's 
overindulgence in foreign debt brings to the global financial 
system, the phenomenon certainly exposes Kazakhstan's banking 
system to external risks, particularly higher interest rates. 
 Should global interest rates rise, Kazakhstani banks may 
find it difficult to refinance their maturing -- and 
mushrooming -- debt.  A possible switch in focus from debt to 
equity may alleviate this concern.  Concern will remain, 
however, over the quality of the banks' investments and 
loans, particularly in real estate. 
 
19. (SBU) The optimists' assessment that Kazakhstan's banking 
sector is relatively impervious to a possible bursting of the 
real estate bubble understates the wider socio-economic 
effects of a truly hard landing.  Astana and Almaty's 
construction boom relies on the cheap labor of untold numbers 
of Central Asian migrants, who will abruptly and collectively 
become unemployed if the real estate music stops. 
Furthermore, many middle-class Kazakhstanis in Astana and 
Almaty - many with mortgages - have invested large portions 
of their net worth in newly built apartments.  A wave of 
foreclosures would be a phenomenon both unprecedented and 
deeply worrying for an important layer of Kazakhstani 
society.  While well-informed observers increasingly mention 
2008 as the year when the real estate market is likely to 
peak, the behavior of market bubbles is notoriously difficult 
to predict.  End comment. 
GILMER

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