08ASTANA2081, KAZAKHSTAN: TIMUR KULIBAYEV DISCUSSES OIL

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Reference ID Created Released Classification Origin
08ASTANA2081 2008-10-20 11:59 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXRO9486
OO RUEHBI RUEHCI RUEHFL RUEHKW RUEHLA RUEHLH RUEHPW RUEHROV RUEHSR
DE RUEHTA #2081/01 2941159
ZNY CCCCC ZZH
O 201159Z OCT 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3606
INFO RUCNCIS/CIS COLLECTIVE 0696
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2194
RUEHBJ/AMEMBASSY BEIJING 0097
RUEHKO/AMEMBASSY TOKYO 0807
RUEHIT/AMCONSUL ISTANBUL 0033
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/JOINT STAFF WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RHEHNSC/NSC WASHDC 0253
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/SECDEF WASHDC 0175
RUEAIIA/CIA WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEFAAA/DIA WASHDC
RUEHVEN/USMISSION USOSCE 1981
RUCNDT/USMISSION USUN NEW YORK 1930
RUEHNO/USMISSION USNATO 2266
RUEHBS/USEU BRUSSELS

C O N F I D E N T I A L SECTION 01 OF 03 ASTANA 002081 
 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/CARC, EUR/RUS, EEB/ESC 
STATE PLEASE PASS TO USTDA DAN STEIN 
 
E.O. 12958: DECL: 10/20/2018 
TAGS: PGOV EPET EINV GG AJ RS KZ
SUBJECT: KAZAKHSTAN:  TIMUR KULIBAYEV DISCUSSES OIL 
TRANSPORTATION AND GEORGIA INVESTMENTS 
 
REF: ASTANA 2008 
 
Classified By: Ambassador Richard Hoagland, Reasons 1.4 (b) and (d) 
 
1.  (C) SUMMARY:  Timur Kulibayev, Chairman of the oil and 
gas industry association KazEnergy and billionaire son-in-law 
of President Nazarbayev, met with the Ambassador and visiting 
Eurasian Energy Diplomacy Coordinator Ambassador Steve Mann 
on October 7 to discuss oil transportation issues, the global 
financial crisis, and Kazakhstan's investments in Georgia. 
Kulibayev reiterated Kazakhstan's commitment to a 
multi-vector transportation policy.   He maintained that 
Kazakhstan is considering all routes, including Iran. 
Kulibayev asked for U.S. Government assistance in getting 
Azerbaijan to permit Kazakhstan to ship crude through the 
Baku-Supsa pipeline.  He stressed that Kazakhstan remains 
committed to its strategic energy investments in Georgia. 
Kulibayev contended that Kazakhstan's oil and gas sector is 
not being affected by the global financial crisis.   END 
SUMMARY. 
 
KAZAKHSTAN'S MULTI-VECTOR APPROACH INCLUDES SOUTHERN ROUTE 
 
2.  (C) During an October 7 meeting with the Ambassador and 
visiting Eurasian Energy Diplomacy Coordinator Ambassador 
Steve Mann, Timur Kulibayev reiterated Kazakhstan's 
commitment to a multi-vector hydrocarbon transportation 
policy and stressed the importance of oil transportation via 
the Caspian Pipeline Consortium (CPC) pipeline, the 
Baku-Tbilisi-Ceyhan (BTC) pipeline, and the Kazakhstan 
Caspian Transportation System (KCTS) as alternatives to 
shipping through Russia.  He said that Russia is actively 
developing a detailed proposal to transport all Kazakhstani 
oil via Novorossiysk and Primorsk, which he said would not 
serve Kazakhstan's interests.  "We need to have another card 
to play with Russia," Kulibayev said.  "We need to have 
additional arguments."  Kulibayev met with us in a private 
hotel suite and spoke in a calm, quiet, measured voice 
throughout, smiling occasionally and switching to English at 
will.  He confirmed that CPC expansion negotiations are 
ongoing and said that Kazakhstan must increase its 
transportation capacity, particularly now that Tengizchevroil 
(TCO) has increased its output to 540,000 barrels per day. 
Kulibayev added that Kashagan production in 2013 will 
exacerbate transportation constraints and was critical of 
Eni, the lead operator of Kashagan, saying, "They haven't 
even considered the transportation question." 
 
3.  (C) Kazakhstan is looking at all transportation routes, 
including what Kulibayev referred to as the "southern route" 
via Iran.  He said that nothing is likely to happen soon, but 
informed us that Kazakhstan has developed a long-term 
business plan for significant crude shipments to the port of 
Neka in northern Iran.  According to Kulibayev, the oil would 
either be refined at one of three refineries in northern 
Iran, or it would be shipped via a future pipeline through 
Iran.  However, Kulibayev noted that if Kazakhstan 
successfully increases the transportation capacity of CPC, 
KCTS, and the Atasu-Alashkanou pipeline to China to 120-130 
million tons of crude per year, then "we would not need to 
ship to Iran." 
 
FRUSTRATION WITH BAKU-SUPSA 
 
4.  (C) Discussing KCTS in more detail, Kulibayev confided 
that Chevron CEO David O'Reilly told President Nazarbayev 
that Chevron would be willing to build a pipeline from Eskene 
to Kuryk, where crude would be loaded onto tankers and 
 
ASTANA 00002081  002 OF 003 
 
 
shipped across the Caspian Sea to Baku.  Kulibayev said with 
noticeable frustration that ExxonMobil subsequently expressed 
interest in the pipeline project, which has significantly 
slowed down progress. "Can't you get them (i.e., Chevron and 
ExxonMobil) together and work something out?," asked 
Kulibayev. 
 
5.  (C) Echoing earlier remarks from KazMunaiGas (KMG) 
President Kairgeldy Kabyldin (see reftel), Kulibayev said 
that the Governments of Kazakhstan and Azerbaijan have a 
memorandum of understanding (MOU) to ship Kazakhstani crude 
to Baku and onward to European markets.  Kulibayev said that 
Kazakhstan is meeting its commitment to develop the port of 
Aktau per the terms of the MOU, but complained that the 
existing
 Baku-Supsa pipeline that could transport the crude 
has not been used for the past two years.  Kulibayev 
confirmed that KMG is ready to buy Baku-Supsa outright or 
purchase shares in the pipeline.  "We need your help with the 
Azeris," Kulibayev said, "or we will look at other 
trans-Caucasus pipeline projects."  Kulibayev also said that 
President Nazarbayev is planning to visit Azerbaijan after 
the presidential elections there on October 15. 
 
FINANCIAL CRISIS "NOT AFFECTING OIL AND GAS SECTOR" 
 
6.  (C) According to Kulibayev, the global financial crisis 
has not had a significant impact on Kazakhstan's oil and gas 
production, although Kazakhstani commercial banks, 
construction companies, and smaller enterprises have been 
adversely affected.  Kulibayev said that the country's major 
economic indicators are stable and claimed that Kazakhstan's 
National (Oil) Fund has sufficient reserves to support the 
Government's budget for "two to three years," if necessary. 
 
KAZAKHSTAN'S INVESTMENTS IN GEORGIA 
 
7.  (C) When asked about Kazakhstan's investment plans in 
Georgia, Kulibayev said that Kazakhstan will remain a 
long-term, strategic investor and confided that Georgian 
President Saakashvili recently reassured Kazakhstani 
investors that Georgia welcomes investment from Kazakhstan 
and is committed to building strong, lasting ties to 
Kazakhstan.  "Of course," observed Kulibayev, "the conflict 
in August did not help make Georgia a more attractive place 
for foreign investment."  But he denied reports that 
Kazakhstan was divesting its Georgian assets.  On the 
contrary, he reaffirmed Kazakhstan's commitment to develop 
the Batumi oil terminal and said Kazakhstan "will continue to 
make long-term infrastructure investments in Georgia." 
 
8.  (C) When asked about reports that KMG plans to sell its 
gas distribution subsidiary in Georgia, KazTransGas-Tbilisi 
(formerly known as Tbilgas), Kulibayev surprised us by saying 
that President Saakashvili sent KMG a letter "a few months 
ago" asking if KMG would consider selling the company. 
Kulibayev said that KMG is willing to consider offers for it 
and speculated that the Government of Georgia would prefer to 
see KazTransGas-Tbilisi in Georgian hands.  He said that from 
the very beginning, KMG's acquisition of the company was 
driven by politics, not economics, and noted that KMG has 
made expensive and important infrastructure investments -- 
including the installation of gas meters -- in building the 
company into a stable, successful enterprise.  He said that 
KMG has been frustrated for some time by its inability to set 
tariffs at market rates and by Georgian government efforts to 
force KazTransGas-Tbilisi to deliver gas to rural residents 
with little ability to pay, while another Georgian company 
was a 
 
ASTANA 00002081  003 OF 003 
 
 
ssigned large industrial clients. 
 
9.  (U) Ambassador Mann has cleared this cable. 
HOAGLAND

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