08ASTANA962, KAZAKHSTAN – OIL EXPORT DUTY GOES INTO EFFECT, BUT

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Reference ID Created Released Classification Origin
08ASTANA962 2008-05-19 11:02 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO7469
OO RUEHLN RUEHVK RUEHYG
DE RUEHTA #0962 1401102
ZNR UUUUU ZZH
O 191102Z MAY 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2451
INFO RUCNCIS/CIS COLLECTIVE 0509
RUEHAK/AMEMBASSY ANKARA 2167
RUEHBJ/AMEMBASSY BEIJING 0048

UNCLAS ASTANA 000962 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ECON ETRD PGOV KZ
SUBJECT: KAZAKHSTAN - OIL EXPORT DUTY GOES INTO EFFECT, BUT 
DOES NOT APPLY TO MAJOR PROJECTS 
 
 
1. (U) Kazakhstan's recently announced duty on the export of 
crude oil and oil products went into effect on May 17.   The 
duty does not apply to companies whose contracts set fixed 
tax regimes, which means that Kazakhstan's three principal 
oil and gas projects -- Tengiz, Karachaganak, and Kashagan -- 
are exempted.  (Note:  Kashagan, of course, is still in the 
pre-production phase.  End Note.)  Energy Minister Mynbayev 
has previously explained that approximately 40 percent of 
Kazakhstan's current crude exports will be subject to the 
duty. 
 
2. (U) The crude oil duty is to be calculated on the basis of 
a sliding scale formula, taking into account the average 
market price for crude.  The initial duty will be $109.91 per 
ton, with a lower $27.43 rate applicable to those companies 
which already pay rent tax on crude exports. 
 
3.  (SBU) The Ministry of Finance published on May 16 a 
preliminary list of 38 companies to which the crude oil duty 
will apply.  Most are Kazakhstani, including KazMunaiGas 
Exploration and Production, a subsidiary of Kazakhstan's 
state oil and gas company, KazMunaiGas (KMG).  The list 
includes at least one U.S.-owned company, Caspi Neft TME, a 
subsidiary of Transmeridian Exploration Inc.  Caspi Neft TME 
is involved in developing the South Alibek oil field in 
Aktobe oblast.  (Note: Caspi Neft TME told the Ambassador in 
a recent meeting that they do not have a tax stabilization 
clause in their contract and thus did not expect to be exempt 
from the export duty.  End Note.) 
 
4. (SBU) Comment:  In introducing export duties on crude oil 
and oil products, the Kazakhstani government appears to have 
principally been motivated by a need to increase budget 
revenues.  Tax revenues from the non-extractive sector are 
lower than originally planned, and expenses are higher, both 
as a result of the domestic impact of the global financial 
crisis -- which has led to lower economic growth, a sharp 
contraction in the construction and real estate sectors, and 
a government program to prop up those two sectors.  The 
government is also considering introducing an export duty on 
metals.  We had previously been informed of plans for an 
export duty on wheat; however, that appears to have fallen by 
the wayside for now, with the government instead imposing a 
temporary export ban on wheat to ensure adequate domestic 
supply and to keep domestic prices down on wheat and bread. 
End Comment. 
ORDWAY

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