08ASTANA1964, KAZAKHSTAN: DOING BUSINESS IN ATYRAU

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Reference ID Created Released Classification Origin
08ASTANA1964 2008-10-03 07:04 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO7869
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHPOD RUEHPW RUEHROV RUEHSR RUEHVK
RUEHYG
DE RUEHTA #1964/01 2770704
ZNR UUUUU ZZH
O 030704Z OCT 08 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3503
INFO RUCNCIS/CIS COLLECTIVE 0660
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2188
RUEHBJ/AMEMBASSY BEIJING 0063
RUEHKO/AMEMBASSY TOKYO 0772
RUEHIT/AMCONSUL ISTANBUL 0025
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 0140
RHEHNSC/NSC WASHDC 0218
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 ASTANA 001964 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS TO TDA DAN STEIN 
 
E.O. 12958:  N/A 
TAGS: PGOV EPET EINV KZ
SUBJECT:  KAZAKHSTAN:  DOING BUSINESS IN ATYRAU 
 
1. (U) Sensitive but unclassified.  Not for public Internet. 
 
2. (SBU) SUMMARY:  On September 18-20, DCM and Energy Officer 
visited Atyrau, the oil capital of Kazakhstan on the northeastern 
Caspian coastline.  Local government officials said that they 
welcome foreign investment and expressed interest in hosting an 
event with the American Chamber of Commerce.  International oil 
companies working in Atyrau had no major complaints about the 
business climate, but cited difficulty obtaining work permits for 
foreign employees as a potential issue going forward.  END SUMMARY. 
 
ATYRAU OBLAST AUTHORITIES WELCOME AMCHAM PARTNERSHIP 
 
3. (SBU) In a meeting with DCM and Energy Officer on September 18, 
Atyrau oblast Deputy Akim (Governor) Nurman Nurbekov called Atyrau 
the engine of growth for Kazakhstan's economy and said that the 
oblast welcomed foreign investment.  He called U.S. companies 
"important players" and "good corporate citizens" active in the 
local economy and specifically singled out Chevron, which owns 50% 
of Tengizchevroil (TCO) and has allocated more than $380 million 
from 1993 to 2007 to fund community development projects in health, 
education, and training.  When asked if there are any serious 
disputes between the local government and U.S. companies, Nurbekov 
said, "No, we have good relations with American companies and no 
concerns, and we work things out with them at the local level." 
Nurbekov told us that the oblast is eager to attract additional 
foreign investment and would welcome the establishment of U.S. joint 
ventures with Kazakhstani companies, particularly in the areas of 
petrochemicals, food processing, and construction.  When informed 
about the Public-Private Economic Partnership Initiative (PPEPI), 
Nurbekov said the akimat (oblast government) would be pleased to 
participate, for example, by hosting a roundtable together with the 
American Chamber of Commerce (AmCham), or by establishing a working 
group to discuss issues related to improving the business climate in 
Atyrau. "Whatever we can do at the local level," said Nurbekov, "we 
will do."  When informed that some international oil companies have 
had difficulty obtaining work permits for their foreign employees, 
Nurbekov explained that the Government of Kazakhstan issues a 
certain number of work permits at the beginning of each year, based 
on a request from state oil and gas company KazMunaiGas.  He 
conceded that the number of permits required might exceed the number 
requested and said that he would have no objection to working with 
individual companies to request additional work permits. 
 
DIFFICULTY OBTAINING WORK PERMITS 
 
4. (SBU) DCM and Energy Officer discussed the business climate in 
Atyrau at a September 20 meeting with two representatives of oil 
service companies, Dwayne Leismer, Atyrau-based International 
Accounts Manager for Schlumberger, and Alastair Fleck, Almaty-based 
East Caspian District Manager for Baker Hughes.  Neither one had 
major complaints or concerns about the local business climate, 
although both mentioned difficulties in obtaining work permits and 
the unpredictability of customs duties as constraints to doing 
business in Atyrau.  According to Leismer, since June 1, the 
Government of Kazakhstan has employed a new system for evaluating 
work permit requests, assigning points to each applicant based on 
age, experience, education, vocational training, and other factors. 
Unlike in the past, the new system allows a foreign employee to work 
in more than one oblast, but according to Leismer and Fleck, 
evaluation standards are not uniform across oblasts, and the 
Government has not determined how to score an applicant's work 
permit request if the applicant plans to work in more than one 
oblast. 
 
5. (SBU) Schlumberger's Leismer also said that work permit 
application procedures have become more onerous for foreign 
companies since the new regulation was adopted.  For example, 
applicants must submit notarized, translated copies of all 
documentation, which creates delays and increases costs.  As a 
result, companies are not able to fill approved positions because 
their preferred candidates cannot complete the procedures to obtain 
a work permit in a timely manner.  "This is potentially a very big 
 
ASTANA 00001964  002 OF 002 
 
 
issue for us," said Leismer.  Both Leismer and Fleck noted that 
despite substantial investments to enhance technical skills and 
capacity among Kazakhstani workers, the oil and gas industry faces a 
near-term shortage of skilled local la
bor, particularly petroleum 
engineers, pipe fitters, and welders.  The shortage is only 
exacerbated, according to Leismer, by the fact that international 
oil companies operating supergiant fields at Tengiz, Kashagan, and 
Karachaganak are "poaching" the skilled staff of the oil service 
companies.  (NOTE:  ExxonMobil Business Service Manager Adam Walker 
independently confirmed that international oil companies are 
likewise facing significant difficulties and delays obtaining work 
permits in Atyrau oblast.  END NOTE.)  When asked about their 
interest in the PPEPI, Leismer and Fleck said they were not aware of 
the initiative but were favorably disposed and would like to learn 
more.  They also said that both of their companies intended to 
become more active in the AmCham and suggested that on some issues, 
such as customs and work permits, a collective approach to dialogue 
with the government would be more productive than individual 
lobbying. 
 
6. (SBU) Agip Kazakhstan North Caspian Operating Company (Agip KCO) 
Public Relations Manager Richard Fritz told DCM and Energy Officer 
on September 20 that Agip KCO has had "constant battles with the 
Atyrau akim" and called the Government of Kazakhstan's emissions 
policy "insane" because it requires companies to describe in detail 
all potential emissions before operations commence.  Companies are 
not given the option of amending or modifying the list without 
penalty, according to Fritz, even if they make infrastructure 
investments that lower emissions.  Fritz also complained that Atyrau 
oblast is "squeezing" Agip KCO for a collective bargaining 
agreement, even though, according to Fritz, their employees have no 
interest in joining a labor union or entering into a collective 
agreement.  Fritz said that Atyrau oblast officials threatened to 
withhold Agip KCO work permits unless it agrees to a collective 
bargaining agreement.  Fritz volunteered that the Mangistau oblast 
akim is "much easier to work with -- just night and day."  (NOTE: 
Mangistau oblast is the second and much smaller partner for energy 
companies.  END NOTE.) 
 
HOAGLAND

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