07ASTANA2761, KAZAKHSTAN: RISING BREAD PRICES PRESENT CHALLENGE

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Reference ID Created Released Classification Origin
07ASTANA2761 2007-10-03 09:35 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO5146
RR RUEHDBU
DE RUEHTA #2761 2760935
ZNR UUUUU ZZH
R 030935Z OCT 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 0858
INFO RUEHAH/AMEMBASSY ASHGABAT 7244
RUEHEK/AMEMBASSY BISHKEK 8171
RUEHDBU/AMEMBASSY DUSHANBE 2266
RUEHNT/AMEMBASSY TASHKENT 8063

UNCLAS ASTANA 002761 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SCA/CEN FOR M. O'MARA 
 
E.O. 12958: N/A 
TAGS: PGOV ECON KZ
SUBJECT: KAZAKHSTAN: RISING BREAD PRICES PRESENT CHALLENGE 
FOR GOVERNMENT 
 
 
1. (U) Summary:  The price of bread has increased by thirty 
percent in Kazakhstan over the last two months.  The bread 
crisis has galvanized opposition parties, who have been vocal 
in their criticism of the government.  The People's Communist 
Party has started a petition campaign in protest against the 
rise in costs, and other parties have expressed their support 
for the campaign.  The government has reacted by placing 
bakeries on the list of enterprises subject to state 
regulation. Prime Minister Masimov has also stated that he 
has not ruled out introducing a state monopoly on bread 
making. End Summary. 
 
2. (U) On September 27. representatives from Almaty bakeries 
announced that the price for a standard loaf of bread would 
rise to 55 tenge from 36 tenge as of September 29 (The 
average pension is 13,800 tenge, or just over $100 a month). 
One FSN based in Almaty told Poloff that the price of a small 
loaf of bread at his local store has increased from 30 tenge 
to 82 tenge in less than two weeks. Similar sharp price hikes 
were recorded in Shymkent, Taraz, Atyrau, and Astana. 
 
3. (U) Rising bread costs have occurred despite projections 
that Kazakhstan, the world's fifth largest grain exporter, 
will harvest a record-setting 20 tons of wheat.  Government 
officials claim that conditions on the world market have led 
to the surging prices.  Kazakhstan has also announced that it 
will soon begin to charge market rates for grain exports to 
the other nations of Central Asia. 
 
4. (U) On October 1, Prime Minister Masimov stated publicly 
that he will consider introducing a state monopoly on 
bread-making if prices do not stabilize.  "If in a week we 
fail to see certain measures and cooperation, I will make a 
decision about introducing a state monopoly," he said.  Prime 
Minister Masimov said publicly "Prices are soaring everywhere 
because of monopolization of markets and there are no other 
explanations.  In these circumstances, all akims have to 
resort to administrative resources to provide for free access 
to markets."  As a result, Oblast and Almaty city akims were 
instructed to speak with large producers of flour and bread 
and to stabilize prices on the domestic market.  All bakeries 
have been placed on the list of enterprises whose products 
will be subject to state regulation 
 
5. (U) Opposition parties have criticized the government for 
the recent price increases.  The People's Communist Party has 
started a petition campaign in protest of the increased bread 
prices.  On September 27, Ak Zhol, Auyl, and Rukhaniyat 
political parties expressed their support for the petition 
campaign.  The National Social Democratic Party released a 
statement blaming the government for not anticipating the 
spike in bread prices.  They called on the government to 
allocate funds from the state budget in order to provide 
assistance to those most affected by the increased cost of 
bread. 
 
6. (SBU) Comment: The price of bread was a potent political 
symbol in the Soviet Union and remains so in Post-Soviet 
states.  As a result, the surging price of bread is a matter 
of significant concern for the GOK and a first post-election 
opportunity for the opposition. With the rising bread costs 
tied to conditions on the world market, the question now is 
whether the GOK can maintain its free-market principles and 
resist the populist urge to introduce distortionary 
mechanisms. 
MILAS

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