08ASTANA1944, KAZAKHSTAN: DECISION NOT TO BUILD POTI GRAIN

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Reference ID Created Released Classification Origin
08ASTANA1944 2008-10-01 11:15 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXRO5963
OO RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHTA #1944 2751115
ZNY CCCCC ZZH
O 011115Z OCT 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3485
INFO RUCNCIS/CIS COLLECTIVE 0657
RUCNCLS/SOUTH AND CENTRAL ASIAN COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2185
RUEHBJ/AMEMBASSY BEIJING 0060
RUEHKO/AMEMBASSY TOKYO 0769
RUEHIT/AMCONSUL ISTANBUL 0022
RHEHNSC/NSC WASHDC 0215
RUEKJCS/SECDEF WASHDC 0135
RUEAIIA/CIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

C O N F I D E N T I A L ASTANA 001944 
 
SIPDIS 
 
E.O. 12958: DECL: 10/01/2018 
TAGS: PREL EAGR EINV RS GG KZ
SUBJECT: KAZAKHSTAN:  DECISION NOT TO BUILD POTI GRAIN 
TERMINAL WAS APPARENTLY A COMMERCIAL ONE 
 
Classified By: Ambassador Richard E. Hoagland, Reasons 1.4 (b) and (d) 
 
1. (U) In contradiction to earlier Kazakhstani government 
claims, it now appears that Kazakhstan's decision not to 
build a grain terminal at Georgia's Poti port was actually a 
commercial one that had no connection to the recent Georgia 
conflict, according to several sources. 
 
2. (C) Prime Minister Masimov informed Assistant Secretary 
Boucher on September 2 that negotiations with the Georgian 
side on building the 24,000-ton terminal had been temporarily 
put on hold due to the security situation in Georgia.  On 
September 22, Agriculture Minister Kurishbayev told 
parliamentarians at a Majilis session that the whole project 
had, in fact, been cancelled because of the conflict. 
 
3. (U) Express-K newspaper, however, published a detailed 
article on October 1 which explained that, in reality, the 
the decision not to build the Poti grain terminal was purely 
a commercial one.  An unnamed source at Kazakhstan's 
state-owned Foodstuffs Corporation, which owned the 
Kazakhstani share of the Poti project, told Express-K that 
the Kazakhstani and Georgian sides were each supposed to 
invest $9 million into the terminal, with Georgia's 
investment consisting of land and equipment.  After an 
independent audit determined that the land was worth just $4 
million and the equipment offered was outdated and thus 
worthless, the Kazakhstanis demanded that the Georgians come 
up with $5 million in cash to make up the difference.  When 
the Georgians could not do so, the Kazakhstanis backed out of 
the deal.  According to the unnamed source, the Foodstuffs 
Corporation is instead considering building a grain terminal 
in Batumi on its own, without Georgian co-participation. 
(NOTE:  Kazakhstan's state oil and gas company, KazMunaiGas, 
already owns 100 percent of the Batumi oil terminal.  END 
NOTE.) 
 
4. (C) In separate October 1 conversations, Georgian Embassy 
counselor Zurab Kozmava and Agricultural Ministry chief 
phytosanitary expert Kudaberdy Butayev (who is charged with 
certifying the safety of Kazakhstan's grain exports) 
confirmed for us the accuracy of the Express-K article. 
Kozmava maintained that the Kazakhstani government had 
publicly ascribed its decision not to build the terminal to 
the post-conflict security situation because it wanted to 
curry political favor with Russia, while also lowering the 
profile of Kazakhstan's extensive investments in Georgia. 
Kozmava expected the Kazakhstanis would ultimately move 
forward on building a grain terminal in Batumi, a location 
which made more commercial sense for them than Poti. 
 
HOAGLAND

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