08ASTANA2116, KAZAKHSTAN: CITIBANK EXECUTIVES DISCUSS THEIR LOCAL

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Reference ID Created Released Classification Origin
08ASTANA2116 2008-10-24 11:21 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO3352
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHPOD RUEHPW RUEHROV RUEHSR RUEHVK
RUEHYG
DE RUEHTA #2116/01 2981121
ZNR UUUUU ZZH
O 241121Z OCT 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3652
INFO RUCNCIS/CIS COLLECTIVE 0725
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0125
RUEHKO/AMEMBASSY TOKYO 0835
RUEHIT/AMCONSUL ISTANBUL 0056
RUEHBS/USEU BRUSSELS
RUEHVEN/USMISSION USOSCE 2009
RUCNDT/USMISSION USUN NEW YORK 1958
RUEHNO/USMISSION USNATO 2294
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0281
RUEKJCS/SECDEF WASHDC 0203
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 0853

UNCLAS SECTION 01 OF 02 ASTANA 002116 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN KZ
SUBJECT:  KAZAKHSTAN:  CITIBANK EXECUTIVES DISCUSS THEIR LOCAL 
OPERATIONS AND PLANS 
 
ASTANA 00002116  001.2 OF 002 
 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  During an October 22 meeting with the 
Ambassador, Shirish Apte, CEO of Citibank Central and Eastern 
Europe, and Dan Connelly, CEO of Citibank Kazakhstan, described 
Citibank as doing very well in Kazakhstan.  They disclosed a recent 
agreement for Citibank to serve as the banking institution for the 
Kashagan consortium.  The two also offered a somewhat pessimistic 
prognosis for the Kazakhstani banking sector over the coming year. 
END SUMMARY. 
 
ONGOING SUPPORT FOR WESTERN OIL COMPANIES 
 
3.  (SBU) Citibank established a representational office in 
Kazakhstan in 1994, in Almaty, and opened its first bank branch in 
the country in 1998.  Many of the larger western companies operating 
in Kazakhstan are Citibank clients, including those in the oil and 
gas sector.  Apte said that Citibank has avoided consumer banking 
for fear of possible money laundering, but that business overall is 
very good.  He disclosed that Citibank had recently signed a custody 
agent agreement to provide banking services for the six partners in 
the Kashagan consortium.  Generally enthusiastic about the 
arrangement, Apte nevertheless expressed concern about the 
possibility of being caught in the middle of a financial conflict 
between the Kazakhstani government and the other consortium members. 
 
 
BANKING SECTOR COULD FACE SEVER DIFFICULTIES 
 
4.  (SBU) Apte and Connelly offered a somewhat pessimistic take on 
the Kazakhstani banking sector for the coming period.  Pointing to 
"challenging markets and times for many economies," Apte argued that 
Kazakhstan can do little wrong because of its energy riches, wealth 
of mineral resources, and strong agricultural base.  He said that, 
nevertheless, Kazakhstan will be facing some special challenges in 
the coming year.   According to Apte, the banking system is "very 
stretched."  Explaining that as bankers they are not particularly 
fond of regulation, Apte and Connelly nonetheless admitted that 
there is a serious lack of financial regulation in Kazakhstan.  Apte 
said that unlike the banking crisis in the United States, which is 
more or less contained among domestic lenders, banks here are very 
exposed to the global market. 
 
5.  (SBU) Apte noted that one-fourth of the foreign debts of 
Kazakhstan's banking sector are set to mature next year.  When the 
markets open up next year, Kazakhstani banks will thus need to 
borrow more money.  However, it is increasingly likely that overseas 
banks will not roll over their existing credit to Kazakhstani banks. 
 According to Apte, if oil prices continue to drop, this will also 
increase the likelihood that the banks will be denied the necessary 
rollover.  In Apte's opinion, the discontinued lending of overseas 
banks combined with a possible run on deposits by consumers could 
set into motion a banking sector crisis, requiring a Kazakhstani 
government bailout.   When asked if he was "cautiously optimistic," 
Apte said he would prefer to "wait and see" before sharing any 
optimism.  According to Apte, there is already a 30-40% probability 
that there will be no rollover for the loans. 
 
CITIBANK LOOKING FOR WORK WITH THE GOVERNMENT 
 
6.  (SBU) Following the meeting with the Ambassador, Apte and 
Connelly were scheduled to meet with Finance Minister Zhamishev. 
According to Apte, Citibank would like to officially offer its 
consulting services to the Kazakhstani government.  He noted that 
they have had "some experience in these situations."  Citibank would 
also be willing to offer financing for government bond issues in the 
future, if needed. 
 
ASTANA 00002116  002.2 OF 002 
 
 
 
HOAGLAND

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