08ASTANA1309, KAZAKHSTAN – BURKITBAYEV SURPRISE CHOICE AS NEW

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Reference ID Created Released Classification Origin
08ASTANA1309 2008-07-21 11:29 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXRO2295
PP RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHTA #1309/01 2031129
ZNY CCCCC ZZH
P 211129Z JUL 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 2786
INFO RUCNCIS/CIS COLLECTIVE 0567
RUCNCLS/SCA COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 ASTANA 001309 
 
SIPDIS 
 
E.O. 12958: DECL: 07/21/2018 
TAGS: EPET PGOV EINV PINR KZ
SUBJECT: KAZAKHSTAN - BURKITBAYEV SURPRISE CHOICE AS NEW 
KMG HEAD 
 
Classified By: Pol-Econ Chief Steven H. Fagin, Reasons 1.4 (b) and (d) 
 
------- 
Summary 
------- 
 
1. (C) Serik Burkitbayev, chairman of "Samgau," replaced 
Uzakbay Karabalin as KazMunayGas president on May 29. 
Burkitbayev is a long-time government insider with a mixed 
record.  Contacts at KazMunayGas and western oil and gas 
companies called the move a surprise and saw no obvious 
explanation for the change.  At a ceremony at Tengiz on June 
5, several western oil executives said that one key issue for 
KMG will be whether First Vice President Maksat Idenov 
retains his position.  Idenov told us on July 10 that he has 
established a good relationship with Burkitbayev and is 
actively engaged.  End Summary. 
 
---------------------------------------- 
Serik Burkitbayev: An Old-School Insider 
---------------------------------------- 
 
2. (SBU) On May 29, Serik Burkitbayev, chairman of the 
"Samgau" National Science and Technology Holding Company, was 
named the new president of KazMunayGas (KMG), replacing 
Uzakbay Karabalin.   Unlike his three immediate predecessors, 
all of whom hail from western Kazakhstan's Atyrau oblast, 
Burkitbayev was born in Zhambul oblast in the south.  In 
contrast to Karaballin, Burkitbayev speaks English.  While 
his sole prior energy sector experience was his tenure as 
director of the Oil and Gas institute during 2003-2007, 
Burkitbayev has a reputation as a solid manager who quickly 
grasps the technical details of projects. 
 
3. (C) Burkitbayev has held a number of high-ranking 
positions and has at times been at the center of controversy. 
 In 1996, as president of Kazakhtelecom, Burkitbayev was 
blamed for bankrupting Kazpochtabank, at the time one of the 
biggest and most stable banks in the country, when he ordered 
all Kazakhtelekom accounts transferred to Kazcommertsbank and 
publicly declared Kazpochtabank insolvent -- a charge that 
was not true. (Comment: The move against Kazpochtabank was 
initiated by then Prime Minister Kazhegeldin, with whom 
Burkitbayev has been closely linked). 
 
4. (C) In 1997, Burkitbayev annulled Kazakhtelecom's contract 
with Deutschetelecom and sold a 40 percent share to Daewoo, 
which was a producer of telecommunications equipment, not an 
operator.  Kazakhtelecom then bought telecommunications 
equipment from Daewoo which was not compatible with local 
equipment.  In order to repay the loans necessary to purchase 
the equipment, telephone tariffs were raised.  In 1998, 
Burkitbayev misled the government by reporting 
Kazakhtelecom's expenses acquiring Daewoo equipment as Daewoo 
investments in Kazakhtelecom. 
 
5. (SBU) As Minister of Transport and Communications from 
1998-2000, Burkitbayev was accused by local newspapers of 
creating artificial obstacles to thwart potential competitors 
of Kazakhtelecom and of lobbying for two Turkish companies 
(Rumeli Telekom and Telsim Mobil) that purchased a 60 percent 
stake in the second biggest mobile network operator in 
Kazakhstan.  The owners of the Turkish companies, part of the 
so-called Uzan family, were charged with financial crimes in 
Turkey in 2005. 
 
6. (SBU) Burkitbayev has twice faced corruption 
investigations.  In 1999, the State Anti-Corruption Committee 
investigated Burkitbayev for his role in allowing a single 
private company to control all of the government's 
telecommunications services.  In 2001, the Almaty 
Prosecutor's Office investigated Burkitbayev's activities as 
president of Kazakhtelecom.  In neither instance were charges 
ultimately levied against Burkitbayev. 
 
7. (C) In 2005, the U.S. company BSI became embroiled in a 
dispute over payment for the sale of its shares in the joint 
venture Byelkamit to a group of Kazakhstani companies.  After 
an agreement was reached, the Kazakhstani purchasers 
attempted to renege on payment, while still acquiring the 
shares.  The Kazakhstani companies involved were owned by 
Burkitbayev. 
 
------------------------------ 
Oil Insiders Surprised by Move 
------------------------------ 
 
8. (C) Oil and gas executives gathered at Tengiz on June 5 
for a ceremony to mark Tengiz's second generation expansion 
expressed surprise at the KMG shake-up.  Jay Johnson, 
Managing Director of Chevron International's Eurasian Unit, 
 
ASTANA 00001309  002 OF 002 
 
 
said the move was unexpected.  He added that he hoped KMG 
First Vice President Maksat Idenov would remain in his 
position, a view echoed by several western oil 
representatives.  Steve Rose, ExxonMobil Kazakhstan General 
Manager, said that he received a letter after the change from 
Karabalin in which Karabalin wrote that he looked forward to 
continuing to work with ExxonMobil, although he did not say 
in what capacity.  (Comment: Karabalin was subsequently named 
head of MangistauMunayGaz, a company in which KMG is 
acquiring a majority share.  Idenov told us that Karabalin is &#x000A
;under investigation for corruption and may be arrested. 
Given the relationship between Idenov and Karabalin, this may 
be more wishful thinking than an accurate prediction.  End 
Comment.) 
 
9. (C) Sagyndyk Nuraliyev, BP Country Representative, saw 
Burkitbayev's appointment as a move against Timur Kulibayev. 
According to Nuraliyev, both Burkitbayev and Idenov owe their 
loyalties to President Nazarbayev, whereas Karabalin is close 
to Kulibayev.  (Comment:  Kulibayev appears firmly entrenched 
again in the inner circle.  He recently explained to the 
Ambassador that he first brought Burkitbayev in to KMG, as 
head of the Kazakhstan Oil and Gas Institute, a KMG 
subsidiary.  Kulibayev described Burkitbayev as a "good 
manager."  Burkitbayev's appointment thus does not appear to 
be a move to lessen Kulibayev's influence, but Burkitbayev is 
still viewed as the "President's Man".  Patty Graham, 
ExxonMobil General Relations and Public Affairs Director for 
Kazakhstan, told us that in a recent meeting, Kulibayev was 
unable to confirm whether Burkitbayev would be attending an 
ExxonMobil anniversary celebration in Saudi Arabia. 
According to Graham, Kulibayev has in the past been able to 
immediately answer for his closest allies.  End Comment.) 
 
10. (C) Arman Darbayev, KMG Executive Director for Oil 
Transportation and Service Projects, told us on June 11 that 
his colleagues at KMG also had not expected the change in KMG 
leadership.  Darbayev doubted the veracity of rumors that 
Karabalin will return to KMG.  Given the friction between 
Karabalin and Idenov, as long as Idenov remains KMG First 
Vice President, a Karabalin return appears to be unlikely, he 
argued. 
 
------- 
Comment 
------- 
 
11. (C) Serik Burkitbayev takes over at KMG at a crucial time 
for the company, which is on the cusp of real transformation, 
but is also stretched thin because of a number of recent 
purchases and new projects.  Given Burkitbayev's past record, 
his appointment is not cause for optimism, but he can dispel 
doubts by supporting Maksat Idenov's efforts to reform KMG. 
For his part, Idenov told us on July 10 that he has 
established a good relationship with Burkitbayev and is 
actively engaged.  End Comment. 
ORDWAY

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