Monthly Archives: January 2009

09ASTANA187, KAZAKHSTAN: LIFE ON THE STEPPE, JANUARY 24-30

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Reference ID Created Released Classification Origin
09ASTANA187 2009-01-31 02:32 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

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INFO RUCNCIS/CIS COLLECTIVE 1116
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RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 02 ASTANA 000187 
 
SIPDIS 
 
STATE FOR SCA/CEN, DRL 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM EPET SOCI KDEM KCRM KWMN KZ
SUBJECT:  KAZAKHSTAN:  LIFE ON THE STEPPE, JANUARY 24-30 
 
1.  The following is part of a series of weekly cables from Embassy 
Astana with tidbits on daily life in Kazakhstan. 
 
KARAGANDA DISABLED: "SEX PLEASE" 
 
2.  A disability rights group in Karaganda called on the government 
to legalize prostitution and to provide disabled people with special 
"cards or checks for a specified amount to be used (to pay) for the 
services of commercial sex," local media reported.  Tirlik 
("Everyday Life") chairwoman Roza Petrus said Kazakhstan's disabled 
people have limited possibilities for intimacy and "that affects 
their physical and mental health.  Call-girls, who offer sex in 
classified advertisements, refuse to come when they learn the client 
is disabled.  The simply hang up the phone or turn away at the 
door."  According to Petrus, the problem does not apply specifically 
to men:  "The majority of disabled people in Kazakhstan are women. 
They are physically handicapped, but in every respect are women that 
want to be loved." 
 
3.  Not waiting for the government to act, some prostitutes took it 
upon themselves to remedy the situation.  Last week, Petrus happily 
announced that she received unexpected support from the Karaganda 
sex workers.  "Representatives of commercial sex services approached 
me," Petrus said, "and said that at a general meeting they decided 
to offer their services to Karaganda's handicapped with steep 
discounts of up to 90 percent," Karavan newspaper reported.  "I am 
very happy that at least the prostitutes showed real compassion and 
understanding of our problems," she added. 
 
4.  Tirlik's request was an impressive publicity stunt, yet it also 
points to a deeper problem, literally hidden from the public. 
According to a World Bank discussion paper published last year, 
around 405,000 Kazakhstanis -- 2.7 percent of the total population 
-- receive state social disability allowances.  Legislation covering 
the interests of the disabled is nominally quite liberal, granting a 
quota for university places and employment.  On a societal level, 
however, people with physical and mental disabilities are 
effectively sidelined from public life.  It is very rare to see 
disabled people in Kazakhstan, and most cities remain poorly 
equipped to deal with physically handicapped people. 
 
KAZAKHSTANI CRIMINALS TAP INTO OIL PIPELINE 
 
5.  A recent rise in criminal activity resulting from the current 
economic crisis has provided some examples of real ingenuity and 
out-of-the-box thinking on part of the Kazakhstani criminals.  Last 
week, police in Almaty oblast arrested members of a criminal group 
that ran a complex operation to siphon off crude oil from the 
Atasu-Alashankou pipeline which takes Kazakhstani petroleum to 
China. 
 
6.  A team of criminals from various parts of Kazakhstan decided to 
forgo the usual petty theft and other schemes, and put its eyes on 
the real prize of Kazakhstan.  Despite the recent fall in the price 
of oil, the potential for profits in oil trading remain huge, 
especially since stealing entails virtually zero production costs. 
Yet like drilling for oil in the ground, drilling for oil flowing 
inside a pipeline is a technologically difficult operation.  To 
overcome the technological challenges, the group apparently 
recruited engineers, welders and other specialists -- and a security 
team armed with automatic weapons to protect the operation from 
unwelcome surprises. 
 
7.  The group drilled several holes into the pipeline, which runs 
from oil fields in southern Kazakhstan through the Almaty region to 
China, and then pumped oil into tank trucks waiting nearby.  Each 
drilling operation took twenty minutes.  The police became involved 
after a tip-off from the Chinese and directed their focus on the 
usual suspects: local criminal groups and insiders from a local oil 
trading company and security firm.   After an initial investigation, 
seventeen people were arrested during one "oil drilling operation." 
The whole incident has a touch of an international scandal that has 
the Chinese up in arms.  Closer to home, however, Kazakhstan's 
"Rybachinskie" organized crime group, which operates in Almaty 
oblast, has reportedly expressed unhappiness about the competition. 
 
VILLAGERS LEFT TOO CLOSE TO OIL FIELD 
 
8.  A district court in Astana has agreed to review a lawsuit 
against the government which alleged that it failed to ensure the 
 
ASTANA 000001
87  002 OF 002 
 
 
relocation of people living close to the Karachaganak oil field. 
Three Kazakhstani NGOs -- Crude Accountability-backed Green 
Salvation, Shanyrak, and Kazakhstan International Bureau for Human 
Rights -- filed the lawsuit last year on behalf of the residents of 
the village of Berezovka.  Part of the village is located in the 
sanitary protection zone around Karachaganak, which by law should be 
left uninhabited for environmental safety reasons.  According to the 
lawsuit, the government was responsible for relocating the residents 
of the village, but failed to act.  "At the end of the day, it is 
not they (the local residents) that came to populate the oil field, 
it is (the oil company) which came to occupy their land," writes 
Kazakhstani newspaper "Megapolis."  Karachaganak Petroleum Operating 
(KPO), the operator of the Karachanak field, maintains that, while 
aware of the dispute, it has no influence on the decision. 
 
HOAGLAND

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09ASTANA184, KAZAKAHSTAN WILL ATTEMPT TO ADVOCATE FOR MANAS

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Reference ID Created Released Classification Origin
09ASTANA184 2009-01-30 08:53 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXYZ0000
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DE RUEHTA #0184 0300853
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FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4487
INFO RUEHAH/AMEMBASSY ASHGABAT IMMEDIATE 7373
RUEHEK/AMEMBASSY BISHKEK IMMEDIATE 8350
RUEHDBU/AMEMBASSY DUSHANBE IMMEDIATE 2421
RUEHBUL/AMEMBASSY KABUL IMMEDIATE 0428
RUEHMO/AMEMBASSY MOSCOW IMMEDIATE 1572
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RUEKJCS/SECDEF WASHDC IMMEDIATE 0605
RUEKJCS/JOINT STAFF WASHDC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE 0689

C O N F I D E N T I A L ASTANA 000184 
 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/RUS 
 
E.O. 12958: DECL: 01/30/2014 
TAGS: PREL PGOV MARR RS KG KZ
SUBJECT: KAZAKAHSTAN WILL ATTEMPT TO ADVOCATE FOR MANAS 
COALITION AIRBASE 
 
REF: SECSTATE 08300 
 
Classified By: AMBASSADOR RICAHRD E. HOAGLAND: 1.2 (B), (D) 
 
1.  (C) As instructed reftel, Embassy Astana attempted to 
communicate talking points to the highest possible level. 
Presidential Foreign Policy Adviser Khairat Sarybay is in 
Davos, Switzerland, at the World Economic Forum with 
President Nursultan Nazarbayev.  Foreign Minister Marat 
Tazhin is in Almaty.  The newly appointed First Deputy 
Foreign Minister just returned from his tour as Ambassador to 
Russia and, in any case, is generally considered to be 
pro-Russia.  The newly appointed Deputy Foreign Minister for 
the Americas is not yet in place.  We worked with Foreign 
Ministry Americas Director Talgat Kaliyev, and initially 
passed him the talking points as a non-paper in English and 
Russian, emphasizing the urgent need for action.  During this 
first meeting of the day, Kaliyev noted Kyrgyzstan's 
President Bakiyev is very strapped for cash and is in the 
process of trying to consolidate his power domestically. 
 
2.  (C) In a later conversation with the Ambassador, Kaliyev 
said he had already passed the talking points to Foreign 
Minister Tazhin, who took them with utmost seriousness and 
promised to do what he could at the Commonwealth Strategic 
Treaty Organization ministerial in Moscow on February 2. 
According to Kaliyev, Tazhin recommended against a Nazarbayev 
call to Bakiyev because "Bakiyev does not like to receive, 
and usually does not listen to, advice from Nazarbayev." 
However, Kaliyev suggested Foreign Minister Tazhin would 
welcome a call from Secretary of State Clinton to emphasize 
the urgency of the issue and to discuss options. 
 
3.  (C) For one other option, Kaliyev noted that State 
Secretary Kanat Saudabayev, a long-standing confidant of 
Nazarbayev, arrives in Washington, DC, the evening of 
February 1 to begin a several-day series of meetings. 
Kaliyev suggested that a high-level intervention with 
Saudabayev "would not be harmful." 
 
4.  (C) COMMENT:  We recognize that the suggestions of a 
Clinton call to Tazhin and a high-level meeting for 
Saudabayev in Washington could be construed as a bit 
self-serving.  However, we have urgent national-security 
business to conduct, and probably no option should be taken 
off the table.  END COMMENT. 
HOAGLAND

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09ASTANA173, KAZAKHSTAN: KOREANS SHARE U.S. VIEWS ON MADRID COMMITMENT

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Reference ID Created Released Classification Origin
09ASTANA173 2009-01-29 09:49 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO8743
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UNCLAS SECTION 01 OF 03 ASTANA 000173 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, DRL 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PINR SOCI SCUL KDEM KIRF KS KZ
SUBJECT:  KAZAKHSTAN:  KOREANS SHARE U.S. VIEWS ON MADRID COMMITMENT 
LAWS, CONCERNED ABOUT RELIGION LEGISLATION 
 
REF: (A) ASTANA 0169 
      (B) 08 ASTANA 0282 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  Poloff met several times in January with South 
Korean Embassy First Secretary Lee Jooil and Second Secretary Lee 
Moon-bae to discuss political and cultural relations between 
Kazakhstan and South Korea.  South Korea remains one of Kazakhstan's 
most important trading partners and largest investors (see reftel 
A).  In recognition of the importance of this relationship to both 
parties, South Korea's Prime Minister and Foreign Minister visited 
Kazakhstan in 2008.  However, despite a strong and cooperative 
economic and political relationship, South Korea is frustrated with 
the slow pace of the approval process for a land-lease agreement to 
build a new embassy in Astana.  South Korea shares U.S. views that 
Kazakhstan's new political party, election, and media legislation is 
a step in the right direction on democratization.  However, the 
Koreans are concerned about new religion legislation, in particular 
because most Korean expatriates in Kazakhstan are missionaries. 
While ethnic Korean citizens of Kazakhstan remain influential in 
Kazakhstani political and business circles, most are not interacting 
with the South Korean business community.  These Korean Embassy 
officials also commented on the hardships of working in Astana.  END 
SUMMARY. 
 
DISAPPOINTED WITH DELAYS IN BUILDING NEW EMBASSY 
 
3.  (SBU) During a January meeting, South Korean Embassy First 
Secretary Lee Jooil told Poloff that a high priority for his Mission 
is obtaining Kazakhstani permission to construct a new building for 
their embassy in Astana, which would be located several hundred 
meters from the U.S. Embassy.  Lee said that when Korean Ambassador 
Il Soo Kim met recently with a Kazakhstani Deputy Foreign Minister 
to discuss the land-lease agreement, the Deputy Foreign Minister 
said that all internal procedures had been completed within the 
Kazakhstani government, but Kazakhstan will need "some sort of 
assurance" that if the capital of South Korea is moved out of Seoul, 
Kazakhstan will receive "parity of conditions."  Lee expressed 
surprise and frustration at this latest development, pointing out 
that four years ago, when Ambassador Kim presented his credentials, 
President Nazarbayev promised South Korea a land plot for a new 
embassy building in Astana.  Lee recounted that when Prime Minister 
Han Seung-soo visited Kazakhstan in May 2008, Kazakhstani officials 
told the Korean Embassy to "please wait."  During Foreign Minister 
Yu Myung-hwan's October 2008 visit, the Kazakhstani government asked 
South Korea to "wait just a little bit longer."  Lee told Poloff 
"the fact that no agreement has yet been finalized after several 
high-level visits and promises has been very disappointing."  Lee 
said that Korea's Ministry of Foreign Affairs and Trade (MOFAT) is 
anxious to resolve this problem quickly, but is not willing to 
incorporate any statement about parity into the Astana land-lease 
agreement.  If Kazakhstan drops its insistence on the parity clause 
and approves the land-lease agreement, Lee emphasized that South 
Korea is ready to begin construction immediately.  The building 
designs are complete, and the embassy has already chosen a prominent 
Korean construction company, Highvill, to be its contractor. 
 
SIMILAR VIEWS ON MADRID LEGISLATION, RELIGION LAW 
 
4.  (SBU) Lee Jooil said South Korea shares the U.S. view that the 
media, election, and political party laws recently approved by 
Kazakhstan's parliament to fulfill Kazakhstan's Madrid commitments 
are "a step in the right direction towards democratization," and 
that it is important to take whatever pragmatic steps are possible 
to encourage further progress.  Lee said that his Ambassador agrees 
that we must uphold democratic values without being overly 
ideological.  He also emphasized that Korea shares U.S. concerns 
about the religion law that President Nazarbayev sent to the 
Constitutional Council for review, and stressed that his embassy is 
particularly interested in how the law would affect Korean 
missionaries in Kazakhstan.  Lee pointed out that the Korean 
expatriate community in Kazakhstan is relatively small, and that 
 
ASTANA
00000173  002 OF 003 
 
 
most of these expatriates are, in fact, missionaries.  He estimated 
that there are 100 Korean missionaries in Kazakhstan in total, 
mostly running small churches with approximately 30-40 members each. 
 Lee admitted that many Korean missionaries in Kazakhstan hold 
NGO-worker visas, not religious-worker visas. 
 
ETHNIC KOREANS POPULATION REMAINS INFLUENTIAL 
 
5.  (SBU) Although ethnic Korean citizens of Kazakhstan constitute 
only 100,000 or so people -- about 0.7 percent of Kazakhstan's 
overall population -- many hold influential positions in 
Kazakhstan's business and political spheres.  (NOTE:  As reported in 
reftel B, Kazakhstan's ethnic Korean community dates from the 1930s, 
when Stalin deported Koreans en masse from the Russian Far East to 
Kazakhstan.  END NOTE.)  Ethnic Koreans have been particularly 
active in the financial, real-estate, construction, and retail 
sectors, all of which have been severely affected by the global 
financial crisis.  The most prominent Kazakhstani Koreans include 
Vladimir Kim and Vladimir Ni of Kazakhmys Corporation (both of whom 
are very close to President Nazarbayev), Oleg Nam of Kuat 
Construction, Victor Tsoi of Ak Ayul Construction, and Yuriy Tchkay 
of Caspian Bank.  Lee Jooil said that to his chagrin, most of these 
ethnic Korean businessmen are not actively promoting South Korean 
business interests in Kazakhstan.  Lee told Poloff that one reason 
is that most Kazakhstani Koreans speak practically no Korean.  Lee 
noted that he has never even spoken in Korean with the Chairman of 
the Astana branch of the Association of Koreans in Astana, Dr. 
Alexander Kim; when Lee and Kim met, they speak in English instead. 
Lee noted exceptions include two ethnic Koreans on his staff who 
learned Korean through a program that the Korea International 
Cooperation Agency (KOIKA) administers. 
 
KOREA PLANS TO INCREASE ITS CULTURAL ACTIVITIES 
 
6.  (SBU) In fact, KOIKA's teaches Korean to any interested 
Kazakhstani citizens, regardless of ethnicity.  Lee told Poloff that 
KOIKA's Kazakhstan director, who has been in Astana for two years, 
is very energetic, increasing KOIKA's budget and programs.  Korea is 
also investing in cultural programming in Kazakhstan.  At a photo 
exhibition on December 8 entitled "Korea -- Forwards and Upwards" 
Poloff met Ambassador Kim and the South Korean Embassy's new 
Director for Cultural Affairs, Han Sung-rae, who discussed their 
plans to open a new Korean Cultural Center in the spring of 2009. 
 
AMBASSADOR KIM:  RARE KOREAN DIPLOMAT WITH GOOD RUSSIAN 
 
7.  (SBU) Neither Lee Jooil nor Second Secretary Lee Moon-bae speaks 
Russian.  Both said that Ambassador Kim is one of the very few South 
Korean diplomats who speak Russian well.  They explained that 
Ambassador Kim studied Russian in London on his own during the Cold 
War era when South Korea and the Soviet Union did not have 
diplomatic relations.  Korea's Deputy Chief of Mission in Astana, 
who previously served in Moscow, also speaks Russian.  Lee Jooil 
told Poloff that his own inability to speak Russian makes life very 
difficult for him in Kazakhstan, both professionally and personally. 
 Since few Kazakhstani MFA officials and local staff at the Korean 
Embassy speak Korean, Lee has to communicate in English to handle 
all work-related matters. 
 
LIFE WITHOUT GOOD KIMCHEE 
 
8.  (SBU) Both Lee Jooil and Lee Moon-bae stressed that Astana is a 
serious hardship posting for Korean diplomatic personnel.  They 
noted that while there are four or five Korean restaurants in 
Almaty, there is only one in Astana.  Lee complained that at that 
restaurant, "the food is not very good," and even the least 
expensive entrees cost more than $15.  However, since it is the only 
Korean restaurant in Astana, Lee reported embassy staff often 
entertain there.  Lee said the restaurant, which is owned by Yuriy 
Tckhay, has almost always been empty when he dined there, and opined 
that "it must be a venue used for Tckhay's political purposes, 
rather than a for-profit business." 
 
 
ASTANA 00000173  003 OF 003 
 
 
HOAGLAND

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09ASTANA170, KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, JANUARY 4 – JANUARY

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Reference ID Created Released Classification Origin
09ASTANA170 2009-01-28 11:15 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

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RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHAST/USOFFICE ALMATY 1146

UNCLAS SECTION 01 OF 02 ASTANA 000170 
 
SIPDIS 
 
DEPT FOR SCA/CEN, EEB 
PLEASE PASS TO USTDA DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN EIND ENRG EPET KTDB TI CH IN KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, JANUARY 4 - JANUARY 
17, 2009 
 
ASTANA 00000170  001.2 OF 002 
 
 
1.  Summary:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
 
-- New Refinancing Rate 
-- Update from Samruk-Kazyna 
-- Humanitarian Aid for Tajikistan 
-- Arcelor Mittal To Modernize Coal Mines 
-- China To Build A Gas-Fired Power Plant In Aktobe 
-- Sunkar Resources To Buy Tengiz Sulfur 
-- KazMunayGas Buys MangistauMunayGas 
-- ONGC To Develop Satpayev Block 
-- Railway To Be Built In Kuryk Sea Port 
-- Preliminary 2008 Energy Statistics 
 
NEW REFINANCING RATE 
 
2.  On January 1, 2009, the National Bank of Kazakhstan (NBK) 
lowered the refinancing rate from 10.5% to 10% per annum.  According 
to the NBK's press release, this decision was driven by the 
deceleration of inflation in 2008-2009 and the necessity to support 
the banking sector with short-term liquidity.  The lower refinancing 
rate will help the NBK to maintain stability in the banking sector. 
 
UPDATE FROM SAMRUK-KAZYNA 
 
3.  According to Kayrat Kelimbetov, CEO of the Samruk-Kazyna 
National Welfare Fund, the first auctions to purchase distressed 
bank loans will be held in February.  He said that the management of 
the Distressed Assets Fund has already started negotiations with 
commercial banks to sell these loans, which will be categorized as 
mortgages, credits for small and medium business, or corporate 
loans.  The government plans to capitalize the Distressed Assets 
Fund with $1 billion from the national budget. 
 
4.  On January 17, 2009, Kayrat Kelimbetov and German Gref, 
President of Russia's Sberbank, met in Astana to discuss the 
anti-crisis measures taken by both countries.  They agreed that 
Samruk-Kazyna and Sberbank should synchronize their actions and keep 
each other informed on the implementation of their respective 
anti-crisis programs. 
 
5.  The monthly salaries of Samruk-Kazyna's Kelimbetov and his 
deputies Timur Kulibayev and Arman Dunayev do not exceed 1.3 million 
tenge (approximately $10,731), the fund's managing director Kayrat 
Aitekenov said.  Given the current crisis conditions in Kazakhstan, 
Samruk-Kazyna's top managers received no annual bonuses at the end 
of 2008, and fund employees will receive no raises in 2009. 
 
HUMANITARIAN AID FOR TAJIKISTAN 
 
6.  Kazakhstan will pay off its $12-million state debt to Tajikistan 
in-kind by supplying it with wheat worth $5 million, diesel oil 
worth $4 million, and fuel oil worth $3 million.  The debt was 
originally corporate debt which the Government of Kazakhstan took 
over.  In December, Kazakhstan decided to redeem it in the form of 
official humanitarian aid. 
 
ARCELORMITTAL TO MODERNIZE COAL MINES 
 
7.  On January 8, ArcelorMittal Temirtau announced plans to invest 
$300 million in 2009 to modernize its coal mines. 
 
CHINA TO BUILD A GAS-FIRED POWER PLANT IN AKTOBE 
 
8.  "Khabar" television reported on January 6 that the Northern 
China Company (NCC) signed a memorandum of understanding with the 
Aktobe Regional Administration to build a 120-MW gas-turbine power 
plant in Aktobe Oblast.  The NCC would invest $140 million to 
complete the $200-million project by 2011. 
 
SUNKAR RESOURCES TO BUY TENGIZ SULFUR 
 
9.  On January 13, Tengizchevroil signed a protocol of intentions 
 
ASTANA 00000170  002.2 OF 002 
 
 
with Sunkar Resources Plc, a British-owned phosphate fertilizer 
producer, to supply Sunkar's sulfuric acid plant with sulfur 
starting in 2011. 
 
KAZMUNAYGAS BUYS MANGISTAUMUNAYGAS 
 
10.  On January 12, Kazakhstan's state oil and gas company 
KazMunayGas (KMG) signed a contract to buy a 50% stake plus two 
voting shares in MangistauMunayGas (MMG) from the Indonesian-based 
Central Asia Petroleum Ltd.  MMG has recoverable reserves of 194 
million tons of crude oil.  With the deal KMG also gains control 
over the Pavlodar Petrochemical Plant.  China's national o
il company 
is widely expected to be awarded the remaining minority stake in 
MMG. 
 
ONGC TO DEVELOP SATPAYEV BLOCK 
 
11.  During President Nazarbayev's January state visit to India, 
Minister of Energy Mynbayev signed a contract with India's Oil and 
Natural Gas Corporation Videsh (ONGC) to award the oil company a 
30-40% stake in the Satpayev offshore block.  KazMunayGas and ONGC 
Videsh signed a memorandum of understanding to develop the oil field 
jointly in February 2005.  The block holds an estimated 253 million 
tons of recoverable reserves of crude oil. 
 
RAILWAY TO BE BUILT IN KURYK SEA PORT 
 
12.  On January 13, "Khabar" television reported that at the end of 
2008, a group of private investors signed a contract with the 
Ministry of Transport and Communications to build a 14-km railway at 
the Kuryk seaport to transport crude oil.  The construction of the 
railway, with a projected throughput capacity of 5.5 million tons of 
crude a year, is expected to be completed in 2011 in order to ship 
crude from the Kashagan oil field when it comes on-stream. 
 
APPOINTMENTS IN KAZMUNAYGAS 
 
13.  The Board of Directors of KazMunayGas named Nurbol Sultan 
Director General of KMG subsidiary KazTransOil; Bolat Nazarov the 
Director General of KMG subsidiary KazTransGas; and Ardak Kassymbek 
the Managing Director of KMG.  Prior to the appointments, Sultan 
supervised the Corporate Finance Department of KMG, Nazarov was the 
Deputy Director General of KazRosGas, and Kassymbek held the post of 
the Executive Director of KMG. 
 
PRELIMINARY 2008 ENERGY STATISTICS 
 
14.  According to preliminary government estimates posted on January 
12, Kazakhstan produced 70.6 million tons of crude oil and gas 
condensate in 2008, an increase of 4.8% over 2007.  Kazakhstan 
exported 62.3 million tons of crude oil, 2.8% more than in 2007. 
Kazakhstan produced 105 million metric tons of coal, an 11.2% 
increase compared to the previous year.  National  nuclear company 
Kazatomprom produced 8,500.5 tons of uranium, an increase of 28% 
over 2007. 
 
HOAGLAND

Wikileaks

09ASTANA166, KAZAKHSTAN: MINISTRY OF ENERGY OFFICIAL DISCUSSES NATURAL

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Reference ID Created Released Classification Origin
09ASTANA166 2009-01-28 11:07 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO8718
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0166/01 0281107
ZNR UUUUU ZZH
O 281107Z JAN 09 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4466
INFO RUCNCIS/CIS COLLECTIVE 1099
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0497
RUEHKO/AMEMBASSY TOKYO 1203
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0672
RUEKJCS/SECDEF WASHDC 0588
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1139

UNCLAS SECTION 01 OF 03 ASTANA 000166 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EPET EINV KZ
SUBJECT:  KAZAKHSTAN:  MINISTRY OF ENERGY OFFICIAL DISCUSSES NATURAL 
GAS MARKET DYNAMICS 
 
ASTANA 00000166  001.2 OF 003 
 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  On January 21, Energy Officer discussed the 
production, marketing, and sale of Kazakhstani gas with an official 
from the Ministry of Energy and Mineral Resources.  He described the 
role of market intermediaries KazTransGas, KazRosGas, and Gazprom, 
disclosed prices Kazakhstan pays to import gas from Russia and 
Uzbekistan, announced Kazakhstan would soon increase the transit 
fees it charges Gazprom, praised Russia for being a reliable 
partner, and criticized Uzbekistan for dramatic price increases and 
unpredictable supply.  END SUMMARY. 
 
THE STRUCTURE OF KAZAKHSTAN'S GAS MARKET 
 
3.  (SBU) On January 21, Energy Officer met with Timur Imashev, 
Director of the Gas Industry Department in the Ministry of Energy 
and Mineral Resources, to discuss the gas market in Kazakhstan. 
After numerous attempts to explain the convoluted connections and 
overlapping owners of Kazakhstan's gas market, Imashev hurriedly 
took out a blank sheet of paper, scribbled a series of circles and 
arrows, and explained that there are two main market mechanisms for 
the transportation and sale of gas in Kazakhstan, one in the west 
and one in the south of the country. 
 
KAZROSGAS:  MORE THAN A MERE MIDDLEMAN 
 
4.  (SBU) Kazakhstan produces approximately 30 billion cubic meters 
(bcm) of gas annually, including liquefied natural gas, natural gas 
liquids, and dry natural gas.  The operators of large fields in 
Karachaganak in Western Kazakhstan oblast, Tolkyn in Mangistau 
oblast, and Tengiz in Atyrau oblast sell their natural gas to 
KazRosGas, a 50-50 joint venture of KazMunaiGas (KMG) and Gazprom. 
(NOTE:  KazRosGas was established during a state visit to Kazakhstan 
by Russian President Putin on November 28, 2001.  Its mandate is to 
manage Kazakhstan's gas import and export operations; treat raw gas 
at processing plants; explore, develop, and operate gas fields; 
secure natural gas transport routes; conduct gas swap operations; 
and operate joint venture projects in natural gas transportation. 
KazRosGas is registered in Astana and maintains offices in Moscow 
and Zug, a well-known tax haven in Switzerland where Ukraine's 
notorious RosUkrEnergo is also registered.  Kairat Boranbayev is 
Chairman and General Director; other senior executives include Asia 
Sirgabekova, First Deputy Director for Economic Issues; Nurlan 
Abdrasulov, First Deputy Director for Marketing; and Malik 
Kushaliev, Deputy Director for Legal Affairs.  Kushaliev is also the 
point of contact for a company called Centrex Central Asia Gas, 
which is registered in Baar, Switzerland.  END NOTE). 
 
5.  (SBU) According to Imashev, KazRosGas transports gas from 
Karachaganak, Tolkyn, and Tengiz to Orenburg, Russia, where it is 
processed for commercial sale.  KazRosGas then imports the processed 
gas into Kazakhstan and sells approximately 10 bcm to regional gas 
distribution companies such as KazTransGas-Aimak, a wholly-owned 
subsidiary of KMG, for domestic users in western Kazakhstan. 
KazRosGas also sells up to 1.2 billion cubic meters to Gazprom for 
Russia's domestic consumption via the Central Asia Center (CAC) gas 
pipeline, which is operated by Intergaz Central Asia (ICA).  (NOTE: 
ICA is a wholly owned subsidiary of KazTransGas and the monopoly 
operator of gas transportation pipelines in Kazakhstan.  ICA manages 
the network of gas pipelines in Kazakhstan on the basis of a 20-year 
concession agreement with the government, which is valid until 2017. 
 ICA's total (both domestic and export) gas transportation volume 
plan for 2007 was 124.8 bcm.  KazMunaiGas, not Gazprom, owns the 900 
kilometers of CAC pipeline on Kazakhstani territory.  END NOTE). 
 
TENGIZCHEVROIL GAS PRODUCTION, MARKETING AND SALES 
 
6.  (SBU) In 2008, Tengizchevroil (TCO) produced approximately 6.8 
billion cubic meters (bcm) of gas.  According to TCO's Commercial 
Manager for Products, Marketing and Transportation, Mark Heinemann 
(protect), in 2008, TCO sold 1.84 bcm to more than 16 domestic 
customers -- including industrial enterprises and regional 
 
ASTANA 00000166  002.2 OF 003 
 
 
governments in Atyrau, Mangistau, and Western Kazakhstan -- and 1.92 
bcm to KazRosGas for export.  TCO used the balance of production 
(more than 3 bcm) for re-injection and opera
tional purposes.  TCO's 
domestic sales were concluded directly with end-users and the gas 
was transported via pipeline between Tengiz and Kulsary and via the 
CAC. 
 
7.  (SBU) Heinemann said that TCO's export sales were handled by 
KazRosGas and one other, unnamed buyer and transported via the CAC. 
Heinemann noted that Gazprom controls all of the gas pipelines in 
Russia and does not allow other parties such as TCO to make direct 
sales to customers in Russia.  He confirmed that TCO sells gas for 
export to KazRosGas, which sells it to RosUkrEnergo, the only 
company authorized by Gazprom to bundle gas from Central Asia and 
package it for onward shipment and sale.  RosUkrEnergo then sells 
the bundled gas to UkrNaftoHaz, which sells it directly to customers 
in Ukraine.  Heinemann said that Gazprom has strictly prohibited any 
gas from Central Asia to be sold to markets or customers in Western 
Europe and he expects that arrangement to continue. 
 
8.  (SBU) TCO also produces butane and propane liquid petroleum gas 
(LPG), which it sells to domestic buyers in Kazakhstan.  According 
to Heinemann, in 2008, TCO produced approximately 851,000 metric 
tons of LPG.  TCO sold 58,000 metric tons of LPG to customers in 
Kazakhstan and 801,000 metric tons to customers in Europe and 
Turkey.  The difference of 7,000 metric tons came from inventory. 
All deliveries of LPG were made by LPG rail tank car. 
 
UZBEKISTAN GAS SUPPLIES KAZAKHSTAN'S SOUTHERN REGION 
 
9.  (SBU) KazTransGas buys natural gas from Uzbekistan and 
transports it to customers in the south-eastern region of 
Kazakhstan.  Imashev said that Kazakhstan typically buys more gas 
than it needs from Uzbekistan and swaps a certain percentage with 
Russia (he said 100 million cubic meters, but that may have been 
merely for illustrative purposes).  KazTransGas sends the swap 
amount northward to Alexandrov Gai in Russia via the CAC, where 
Gazprom provides an equivalent amount to KazTransGas for domestic 
use in the western region.  Imashev had high praise for Russia's 
role in these transactions, saying, "They meet us more than half way 
and handle all of the customs paperwork to import and export the 
gas." 
 
WHAT PRICE DOES KAZAKHSTAN PAY FOR GAS? 
 
10.  (SBU) Karachaganak Petroleum Operating B.V. representatives 
said they sell sour (unprocessed) gas to KazRosGas for approximately 
$20 per thousand cubic meters (tcm).  Imashev confided that 
KazTransGas pays approximately $80/tcm for clean, dry gas from 
Orenburg.  He said that KazTransGas pays approximately $300/tcm for 
the Uzbek gas delivered to Kazakhstan's southern domestic market, 
nearly twice the amount it paid in 2008.  Imashev conceded that 
Uzbekistan has every right to charge what the market will bear, but 
he complained that since there is no firm contract in place, 
Uzbekistan is free to change the terms and delay or cut supplies at 
will, without penalty.  He said Uzbekistan will even "cut of the tap 
from time to time.  They're playing games with us."  (NOTE: 
KazTransGas is building a west-south gas pipeline from Beineu to 
Bozoi to Akbulak to avoid importing gas from Uzbekistan. 
Construction has been delayed because of the financial crisis, but 
this remains a high priority project for KMG.  END NOTE).  Minister 
of Energy and Mineral Resources Sauat Mynbayev would not disclose 
the price Kazakhstan will pay to import gas from Russia, but he did 
tell journalists on January 21 that KMG signed a deal with Gazprom 
on December 31, 2008, to supply 4.6 bcm to the Kazakhstani domestic 
market. 
 
EUROPEAN PRICES COME TO CENTRAL ASIA 
 
11.  (U) On January 21, Prime Minister Karim Masimov ordered the 
Ministry of Energy and Mineral Resources to calculate the impact of 
Russia's anticipated shift to European pricing for gas.  "There is 
 
ASTANA 00000166  003.2 OF 003 
 
 
no way out of this situation," he said.  "We need to be very well 
prepared for this transition.  We need to know what it will cost 
us."  Masimov then added, "I took part in the gas dispute between 
Russia and Ukraine and there is one very important conclusion we 
must draw:  Russia will move to European prices at home and with 
exports to Ukraine and other countries in 2011."  (NOTE:  In 
January, Gazprom signed contracts with Uzbekistan and Turkmenistan 
to purchase natural gas at approximately $301/tcm in the first 
quarter of 2009, more than double what it paid in 2008.  END NOTE). 
 
KAZAKHSTAN RAISES TRANSIT TARIFFS 
 
12.  (U) Perhaps in anticipation of paying higher prices for Uzbek 
and Russian gas, on January 22, KMG increased the transit fee it 
charges Gazprom by 21%, from $1.40/tcm per 100 km to $1.70/tcm per 
100 km in 2009.  (COMMENT:  This rate is below European market 
rates, but is approximately the same amount that Ukraine charges 
Gazprom to transit gas to Europe.  END COMMENT). 
 
GOVERNMENT ANNOUNCES BAN ON GAS FLARING 
 
13.  (U) On January 16, the Minister of Environmental Protection, 
Nurlan Iskakov, announced that the Ministry would stop issuing 
mineral resources licenses to oil companies if they fail to comply 
with gas utilization standards.  "There will be no licenses issued 
to any of the 30 oil companies after 2010 unless they cease all gas 
flaring," he said at a meeting of the environment protection 
committee.  In 2008, Iskakov claimed companies in Kazakhstan flared 
6.9 billion cubic meters of natural gas.  He said that China's 
National Petroleum Corporation already incurs a fine of $80,000 per 
day for excessive flaring. 
 
14.  (SBU) The Ministry of Energy's Imashev said the government is 
serious about reducing emissions, but he admitted that zero 
emissions is an "impossible standard."  Imashev said that gas 
flaring is necessary for safety reasons to provide an emergency 
outlet to relieve pressure in the well.  He said that the Ministry 
of Energy has made this point to the Cabinet and will continue to 
discuss and debate the Ministry of Environmental Protection's new 
measure. 
 
15.  (SBU) COMMENT:  Tracing the steps and stages of the gas market 
in Kazakhstan is not easy to do.  In particular, precious little 
information is publicly available about the trading companies that 
market and transport Kazakhstan's natural gas, both domestically and 
to export markets.  Even privately, foreign companies and government 
officials are loath to disclose proprietary information about price, 
volume, and fees.  Nevertheless, from the information we have 
gathered to date, it is clear that intermediaries such as Gazprom 
and KazRosGas play a critical, and lucrative, role getting 
Kazakhstan's gas to market and have significant influence over who 
gets what, when, and how much they pay.  END COMMENT. 
 
HOAGLAND

Wikileaks

09ASTANA165, KAZAKHSTAN: MEDIA REPORTS ON HUMAN TRAFFICKING CASES FOR

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Reference ID Created Released Classification Origin
09ASTANA165 2009-01-28 10:36 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO8716
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0165/01 0281036
ZNR UUUUU ZZH
P 281036Z JAN 09 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 4463
INFO RUCNCIS/CIS COLLECTIVE 1096
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0494
RUEHKO/AMEMBASSY TOKYO 1200
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0669
RUEKJCS/SECDEF WASHDC 0585
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1136

UNCLAS SECTION 01 OF 03 ASTANA 000165 
 
SIPDIS 
 
STATE FOR INL/AAE, G/TIP, SCA/CEN (O'MARA) 
 
E.O. 12958: N/A 
TAGS: PGOV SOCI KCRM RU UZ KZ
SUBJECT:  KAZAKHSTAN:  MEDIA REPORTS ON HUMAN TRAFFICKING CASES FOR 
THE SECOND HALF OF 2008 
 
ASTANA 00000165  001.2 OF 003 
 
 
1.  SUMMARY:  The following is a summary of local media reports on 
human trafficking cases in Kazakhstan from July to December 2008. 
END SUMMARY. 
 
LABOR EXPLOITATION 
 
2.  December 2, Kazakhstanskaya Pravda:  In October, an oblast-level 
court in Karaganda increased a lower court's sentence from a 
one-year, suspended sentence to 10 years in prison.  The defendant 
was convicted of kidnapping a resident of Abai in 2000 and, for 
almost eight years, forcing him to work on a farm and tend cattle. 
The victim escaped and reported his imprisonment to police.  During 
the course of the investigation, the victim received assistance from 
the police as part of the national program on the protection of 
participants in criminal trials.  The defendant's two brothers 
threatened the victim. The police provided him with an apartment 
during the investigation. 
 
3.  November 13, Interfax:  Police officers in Kulsary, Atyrau 
oblast in western Kazakhstan, freed a family of Uzbek migrant 
workers held on a farm for one and a half years.  The workers were 
sold to a local farmer for approximately $80.  After two members of 
the family, the 47-year-old father and a 10-year-old son, escaped, 
police found them at a railway station.  The family reported that 
they had been beaten and that a 16-year-old son was still being held 
on the farm.  A criminal case has been opened against the farmer. 
 
4.  August 27, Liter:  A judge in Karaganda dismissed a labor 
exploitation case after the 36-year victim and his captors 
"reconciled their differences."  The victim was reportedly chained 
in a backyard, severely beaten, fed bread once a day, and forced to 
work chopping wood for an outdoor cafe.  The court did not question 
the reconciliation, despite the fact that the victim still bears the 
scars of the beatings he received at the hands of the two 
defendants.  Though the police expressed frustration with the 
dismissal, the court was unable to proceed without the testimony of 
the victim. 
 
5.  August 16, Express-K:  An operation conducted in the South 
Kazakhstan oblast targeting businesses employing teenagers in 
physically difficult or harmful conditions resulted in the filing of 
criminal cases against the owners of bakeries, cafes, and gas 
stations.  Prosecutors reported that the worst conditions were in 
car washes, where minors worked up to 10 hours in water during cold 
weather for very low salaries.  In bakeries, teenagers worked in a 
variety of jobs while breathing in natural gas used to heat clay 
ovens.  Inspectors found that all the teenagers working in the 
bakeries were from Uzbekistan. 
 
SEXUAL EXPLOITATION 
 
6.  November 17, Liter and Interfax:  Eight women from Uzbekistan 
forced to work as prostitutes were released from a brothel in 
Zhibek-Zholy, South Kazakhstan oblast.  The brothel in which the 
women were held was discovered during an inspection by prosecutors 
and police during a joint operation.  The women are being housed by 
the police until they testify at trial. 
 
7.  September 26, Karavan:  In Karaganda, a woman was arrested for a 
second time for forcing young girls (the ages were not reported) 
into prostitution.  After her first conviction, she received a 
two-year suspended sentence, after which she continued doing 
business.  She recruited girls at the railway station, offering 
housing and employment.  When girls arrived at the brothel, their 
passports were taken away for "registration."  At the time of the 
woman's arrest, police found three girls in her brothel.  Each girl 
had been working in the brothel, on average, for a month and a half 
and reported receiving 10 of the $70 paid by customers. 
 
8.  August 25, Megapolis:  A 19-year-old from Petropavlovsk in North 
Kazakhstan oblast offered two under-aged girls jobs as waitresses 
and baby sitters and brought them to an apartment where she lived 
with her boyfriend.  The couple then forced the girls to work as 
prostitutes.  In June 2008, the woman was arrested after receiving 
$50 from a client at a sauna where she delivered one of the girls. 
She had been in business since March 2007.  Criminal charges were 
filed against the woman for pimping and trafficking in minors; the 
boyfriend disappeared and is being sought by police. 
 
ASTANA 00000165  002.4 OF 003 
 
 
 
9.  August 13, Interfax,
 Megapolis, Vremya, Express-K:  Police in 
Almaty arrested two women on suspicion of pimping and organizing a 
brothel.  According to police, a 23-year-old resident of 
Ust-Kamenogorsk, the administrative centre of East Kazakhstan 
oblast, called police to report that she and six other girls were 
being held in an apartment and being forced to work as prostitutes. 
During the search, police discovered a cellar where the girls were 
kept for a year.  One of the freed girls said that she had been 
promised a job as a waitress for $500 a month.  Other girls told 
similar stories.  Only three agreed to file criminal charges.  The 
madam insisted that she was only the cook and did not know why the 
girls were kept in the cellar.  Police detained the actual cook, who 
had worked in the brothel for five years feeding the girls once a 
day. 
 
10. August 13, Liter:  Police arrested members of a 
Kazakhstani-Uzbek criminal group that trafficked 15 women, including 
one minor, from Uzbekistan to Kazakhstan for purposes of sexual 
exploitation.  The victims were held in an apartment in Almaty after 
being offered jobs as waitresses.  Police arrested a 23-year-old 
woman from Uzbekistan, who was a cashier, and two Kazakhstani pimps. 
 Police are still searching for a Kazakhstani woman who worked as a 
recruiter. 
 
11.  August 7, Interfax, Express-K:  Brothels in which twenty-three 
women and three minors from Uzbekistan had been working were closed 
by police in Almaty.  The brothels were owned by a 29-year-old woman 
from South Kazakhstan oblast who was under surveillance for 
approximately one month until police found the two one-room 
apartments used as brothels.  Thirteen women from Uzbekistan were 
found in each apartment and none had identification documents.  The 
madam started doing business in 2006 and recruited only women from 
Uzbekistan.  A criminal case was initiated. 
 
12.  August 6, BBC Monitoring Central Asia:  On March 26, police in 
Uzbekistan arrested a criminal group trafficking women from 
Uzbekistan to Kazakhstan.  The head of the group worked with two 
accomplices to drug five women and sell them to two Kazakhstanis for 
$250 each.  Once in Kazakhstan, the women were forced to work as 
prostitutes.  An investigation is on-going. 
 
13.  July 4, Karavan:  Police in Almaty discovered an injured 
16-year-old girl on the sidewalk outside of an apartment building. 
She reported that she had been held against her will, forced to work 
as a prostitute, and tortured for several months.  The girl had come 
to Almaty from a small village in East Kazakhstan oblast looking for 
work.  Her mother had died three years earlier and she had no other 
family.  She took a job in a small, local canteen but was soon 
fired.  A fellow villager promised her a good job in Almaty and 
brought her to stay with friends, a married couple with a 
three-year-old child.  The girl was then informed that she had been 
purchased for $500.  She was forced to work as a prostitute, 
receiving seven clients a day for $100 each.  She was also made to 
clean the house, do laundry, cook, and care for the child.  One 
night when she failed to hear the child cry, the mother poured 
boiling water on the girl's back, resulting in third-degree burns. 
When the girl tried to escape, she was shown video of a previous 
girl's fingers being chopped off for trying to escape.  The girl 
jumped from the fifth floor and broke her back.  A criminal case was 
opened and an investigation was conducted haphazardly.  The girl was 
later moved out of Almaty by an NGO and police closed the 
investigation for insufficient evidence. 
 
CHILD PORNOGRAPHY 
 
14.  November 12, Interfax:  A Kazakhstani woman, arrested on theft 
charges in Rudnyi, was discovered to be subject of a Russian warrant 
for using her children to produce pornographic films.  In 1998, the 
woman, her boyfriend, and two children went to Moscow for work, 
where she gave birth to three more children.  Russian police 
uncovered evidence that she, her boyfriend, and other friends 
produced pornographic films with her five children, ranging in age 
from two to ten.  The woman is currently in a Kazakhstani jail and 
police are searching for her boyfriend.  (NOTE:  Because this is an 
ongoing case, the police are unable to release information to Post. 
Press reports include no information on whether or when the woman 
will be extradited to Russia.  END NOTE.) 
 
ASTANA 00000165  003.4 OF 003 
 
 
 
HOAGLAND

Wikileaks

09ASTANA150, KAZAKHSTAN: MINISTER OF ECONOMY SUPPORTS CLOSER

WikiLeaks Link

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Reference ID Created Released Classification Origin
09ASTANA150 2009-01-27 01:42 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO5522
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0150/01 0270142
ZNR UUUUU ZZH
O 270142Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4448
INFO RUCNCIS/CIS COLLECTIVE 1093
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0491
RUEHKO/AMEMBASSY TOKYO 1197
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0666
RUEKJCS/SECDEF WASHDC 0582
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1125

UNCLAS SECTION 01 OF 03 ASTANA 000150 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/IFD/OMA, EEB/EPPD, ISN 
STATE PLEASE PASS TO USAID 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN EAID KNNP KZ
SUBJECT:  KAZAKHSTAN:  MINISTER OF ECONOMY SUPPORTS CLOSER 
COOPERATION WITH U.S. GOVERNMENT 
 
REF: (A) 08 ASTANA 2547 
      (B) 08 ASTANA 2320 
      (C) ASTANA 0068 
(D) 08 ASTANA 2226 
 
ASTANA 00000150  001.2 OF 003 
 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  On January 23, the Ambassador met Minister of 
Economy and Budget Planning Bakhyt Sultanov and discussed the 
government's response to the financial crisis, the new tax code, 
administrative barriers to doing business, the joint 
U.S.-Kazakhstani Program for Economic Development (PED), and the 
transportation and storage of spent fuel from the decommissioned 
BN-350 breeder reactor.  The Minister said the government has set 
aside funds to continue PED for an additional three years, if the 
U.S. government is also willing to contribute to the program.  He 
declined to specify the amount of money Kazakhstan will provide for 
the safe storage of BN-350 spent fuel, but did say the government is 
committed to the program, which he argued will require an expensive, 
comprehensive solution.  The Minister also requested U.S. government 
support for the second annual International Economic Forum, to be 
held in Astana on March 11-12, and confirmed that the government 
will honor tax stability clauses in existing contracts, an issue of 
particular concern to international oil companies.  END SUMMARY. 
 
THE NEXT GENERATION IS HERE AND NOW 
 
3.  (SBU) The Ambassador met for nearly ninety minutes with Minister 
Sultanov, an accomplished and articulate 37-year old technocrat with 
degrees in electrical engineering and economics.  Sultanov has spent 
his entire career in government and has advanced rapidly through the 
ranks of the Ministry of Finance (1994-2002) and Ministry of Economy 
and Budget Planning, where he has served as Minister since August 
2007.  Sultanov's most striking characteristic is his youthful 
appearance, although he does not appear to be overwhelmed by the 
authority of his office.  During a long, comprehensive, and candid 
briefing, Sultanov spoke expertly on a wide-range of complex issues. 
 Throughout, he was relaxed, composed, and self-confident, without 
hubris or arrogance.  He listened politely, smiled frequently, spoke 
English easily, removed his stylish glasses to underscore a point, 
and joked with the Ambassador that government bureaucracy can be 
both a hindrance and a convenience, recognizing that it does provide 
checks and balances. 
 
4.  (SBU) Sultanov brought a large team to the meeting, including 
Baurzhan Tortayev, Director for International Policy, who is 
responsible for coordination with USAID; Zhamilya Tokabekova, 
Director of Budget Policy and Planning; Saltanat Kuzganova, Director 
of International Relations; Mirsakasim Baibekov, Director of 
Industrial Development, who covers manufacturing industries in the 
so-called "real economy"; Alibek Bakayev, Chief of Protocol; and 
Zhikar Yulianova, Press Secretary.  The assembled officials appeared 
even younger than the Minister, with the exception of Baibekov, who 
is in his mid-50s and played the role of elder statesman and senior 
advisor. 
 
HIGH PRAISE FOR PED 
 
5.  (SBU) Sultanov expressed his government's high regard for the 
joint Program for Economic Development (PED) and said the Ministry 
plans to continue funding the program, scheduled to end in 2009, for 
an additional three years, if the U.S. government continues to 
contribute as well.  (NOTE:  Sultanov did not say what percentage of 
future costs he expected the U.S. government to cover.  END NOTE). 
He said the Ministry has already consulted with all relevant 
administrative and government agencies to lay the groundwork for a 
three-year extension.  Sultanov said that if both governments decide 
to extend PED, they will need to prepare a report documenting the 
results of previous project activities.  "We must make the business 
case to the Prime Minister and parliament," he said, adding that the 
Ministry recently submitted similar reports on joint activities with 
 
ASTANA 00000150  002.2 OF 003 
 
 
the World Bank, the European Union, and the OECD.  Sultanov said the 
process of identifying, developing, implementing, and monitoring a 
project can be long and bureaucratic, but said the Ministry is 
willing to make the necessary invest
ment of time and money to 
deliver lasting results.  "We are results-oriented," emphasized 
Sultanov.  The Ambassador praised PED, said we will consider the 
request for an extension seriously, and promised to get back to the 
Minister.  (NOTE:  See reftel A for post's proposed approach to 
extending PED for three additional years.  END NOTE.) 
 
FRIENDLY COMPETITION 
 
6.  (SBU) Sultanov said the government takes very seriously the 
various international rankings and indices used to assess economic 
performance.  In particular, he cited the World Bank's Doing 
Business index and the World Economic Forum's Competitiveness index. 
 He said they have helped to stimulate administrative reforms that 
he hopes will lower barriers to business growth.  Sultanov confided 
that colleagues in the government of Kyrgyzstan also monitor their 
government's ranking on these indices and acknowledged that there is 
a friendly competition to join the ranks of the top 30 countries. 
Sultanov emphasized, however, that the ranking itself is less 
important than the results of reforms.  "The rating is a convenient 
way for external observers to assess the business climate," but what 
really matters is the reality on the ground.  Sultanov said his team 
is currently working to combine the various international indicators 
into a single, comprehensive index that will track Kazakhstan's 
progress toward its goal of developing an open, diverse, competitive 
economy. 
 
SOCIAL PROGRAMS PARAMOUNT 
 
7.  (SBU) Sultanov said that Kazakhstan was one of the first 
countries in the world to experience the effects of the global 
financial crisis, having suffered through the August 2007 banking 
crisis (reftel B).  He argued that the lessons learned during this 
earlier crisis helped to prepare the government for the broader 
events of 2008.  Sultanov said the abrupt end to external borrowing 
seriously affected Kazakhstan's banking sector, while the high price 
of oil in the fall of 2008 constrained plans to diversify the 
economy.  In a comprehensive thirty-minute presentation, Sultanov 
summarized the government's anti-crisis program, which has been 
previously reported (reftel C).  He confirmed that the government's 
projected GDP growth rate in 2009 is from one to three percent, with 
two percent growth the consensus opinion of the Ministry and the 
International Monetary Fund.  He also confirmed that the government 
has based its current three-year budget on the assumption that oil 
prices will average $40 per barrel. 
 
8.  (SBU) In a moment of surprising candor, Minister Sultanov 
admitted that the government "missed an early opportunity" to take 
care of individual apartment owners whose buildings have not yet 
been finished.  (NOTE:  Sultanov was referring to the so-called 
"dolshiki," or those who are owed apartments but have not yet 
received them.  A significant number have become grass-roots social 
activists and have gained increasing attention and influence over 
the past nine to twelve months through public protests.  END NOTE). 
Sultanov claimed that the government is now responding very quickly 
and ably to the needs of the dolshiki and stressed that the 
government's anti-crisis program guarantees funding for all 
essential social programs; other programs will be funded only if 
they have a "multiplier effect" on economic growth and unemployment, 
he said. 
 
PROMISES, PROMISES 
 
9.  (SBU) When asked whether the government would provide the 
minimum amount ($5 million) required this year to transport spent 
fuel from the BN-250 breeder reactor in Aktau to its long-term 
storage site near Semipalatinsk, Sultanov hesitated and, for the 
first time, asked for guidance.  He turned and whispered a question 
 
ASTANA 00000150  003.2 OF 003 
 
 
to Baibekov, Director of Industrial Development, who shook his head 
in response.  Sultanov then told the Ambassador, "I'm sorry, but I 
don't have all the details about this program at the moment." 
Sultanov did say, however, that $5 million alone would not solve the 
problem of transport of the spent fuel and its long-term storage, 
and called for a long-term, comprehensive solution, which he 
admitted would be very expensive, costing as much as $500 million. 
"We cannot commit to this amount of funding right now," he said, 
"but we will maintain current safety measures and will begin to 
develop a more comprehensive solution."  (COMMENT:  Sultanov was 
clearly not briefed on the details of the BN-350 program, including 
the fact that the U.S. government is bearing a significant portion 
of program expenses.  END COMMENT.) 
 
TCO TAX STABILITY GUARANTEED 
 
10.  (SBU) EconOff asked the Minister whether international oil 
companies with tax stability clauses in existing contracts should 
pay taxes according to the terms of their contracts or according to 
the new Tax Code, adopted earlier this year (reftel D).  Sultanov 
responded that the new Tax Code will certainly alter the tax regime 
of new contracts, but companies with contracts containing tax 
stability clauses -- he specifically mentioned Tengizchevroil (TCO), 
in which Chevron owns 50% and ExxonMobil owns 20% -- will be 
protected and should continue to pay taxes according to the terms of 
their contracts. 
 
INTERNATIONAL ECONOMIC FORUM 
 
11.  (SBU) In closing, Sultanov announced that the government will 
host the second annual International Economic Forum in Astana on 
March 11-12, and asked for the support and assistance of the U.S. 
government.  The Minister said that he had just received 
confirmation that morning that President Nazarbayev would open the 
conference and he said the keynote speakers would be Columbia 
University professors Edmund Phelps and Robert Mundell, who won the 
Nobel Prize for Economics in 2006 and 1999, respectively.  The 
Ambassador said that he would certainly support the event and would 
encourage colleagues in the U.S. government and other diplomatic 
missions to participate. 
 
HOAGLAND

Wikileaks

09ASTANA148, KAZAKHSTAN: UPDATE OF INFORMATION ON WORST FORMS OF CHILD

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Reference ID Created Released Classification Origin
09ASTANA148 2009-01-26 10:45 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO5013
OO RUEHAST
DE RUEHTA #0148/01 0261045
ZNR UUUUU ZZH
O 261045Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4446
RUEHC/DEPT OF LABOR WASHDC IMMEDIATE
INFO RUCNCIS/CIS COLLECTIVE 1091
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0489
RUEHKO/AMEMBASSY TOKYO 1195
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0664
RUEKJCS/SECDEF WASHDC 0580
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1122

UNCLAS SECTION 01 OF 02 ASTANA 000148 
 
SIPDIS 
 
STATE FOR SCA/CEN, DRL/ILCSR FOR TU DANG 
DOL/ILAB FOR TINA MCCARTER 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM ELAB EIND ETRD SOCI KZ
SUBJECT:  KAZAKHSTAN:  UPDATE OF INFORMATION ON WORST FORMS OF CHILD 
LABOR 
 
REF: (A) 08 STATE 127488 
      (B) 08 ASTANA 1028 
      (C) 07 ASTANA 3256 
      (D) 06 ASTANA 891 
      (E) 05 ALMATY 3112 
      (F) 04 ALMATY 3206 
 
1.  SUMMARY: Per retel A, this cable provides updated information on 
Kazakhstan's compliance with international norms on the prevention 
of the worst forms of child labor.  The cable updates reftels C, D, 
E, and F.  This information is provided to assist in the 
determination of Kazakhstan's continued eligibility for benefits 
under the Generalized System of Preferences (GSP).  Post concludes 
that the Kazakhstani government is meeting its obligations under the 
relevant ILO Conventions to prevent and punish illegal child labor 
practices.  There is currently no justification for altering 
Kazakhstan's eligibility for the GSP on the basis of child labor 
issues.  END SUMMARY. 
 
2.  Kazakhstan does not have an acute problem with the worst forms 
of child labor, although local and international NGOs active in the 
country report that child labor is used in the seasonal production 
of cotton and tobacco, primarily in Kazakhstan's southern regions. 
There are no comprehensive national statistics on the use of child 
labor in cotton and tobacco production, although NGO studies have 
found that over 70 percent of the children employed in these fields 
are from migrant families, primarily Uzbek and Kyrgyz.  Children are 
generally not found doing hazardous jobs like heavy manufacturing, 
construction, or mining. 
 
3.  Kazakhstan is a member of the ILO Conventions "On the Worst 
Forms of Child Labor" and "On the Minimum Age for Admission to 
Employment," and other international agreements concerning child 
labor.  Kazakhstani law forbids the worst forms of child labor. 
Kazakhstan is engaged in a number of efforts to combat the worst 
forms of child labor, in partnership with international 
organizations and NGOs.  Government labor inspectors and NGOs play a 
key role in monitoring the observation of children's rights.  The 
Ministry of Labor is responsible for enforcing child labor laws and 
for administrative offences punishable by fines; the Ministry of 
Interior is responsible for investigating criminal offenses.  The 
Ministry of Labor reported no incidents involving illegal child 
labor in the first ten months of 2008; government experts have 
acknowledged, however, that more needs to be done to combat child 
labor in agriculture. 
 
4.  International organizations such as the ILO, UNICEF, and UNDP 
provide the Government of Kazakhstan with technical assistance in 
combating problems of child labor.  During 2005-2007, the Ministry 
of Labor and NGOs, supported by ILO-IPEX, completed a 3-year 
"Regional Program on the Worst Forms of Child Labor."  In January 
2006, the government established a Committee for Protection of Child 
Rights in the Ministry of Education and Science to implement 
national policy in the area of the protection of children's rights. 
In 2006, UNICEF began a pilot project entitled "Protection of 
Children's Rights and Development of a Mechanism for Monitoring 
Children's Rights," in partnership with the Ministry of Education 
and Science, Ministry of Labor and Social Protection, Human Rights 
Ombudsman's office, local governments, and NGOs.  On another front, 
local government and law enforcement officers perform inspections to 
detect school truants. 
 
5. In 2007, the government signed a two-year agreement with national 
employer associations in which the parties committed not to allow 
the use of forced labor and the worst forms of child labor, and to 
take active efforts to eradicate these forms of labor and develop 
alternative employment opportunities for children and their 
families. The Ministry of Education's 2007-2011 "Children of 
Kazakhstan" program addresses child labor issues and proposed pilot 
projects on alternative jobs for children and a series of 
Kazakh-language radio programs to raise awareness of the issue. 
Over the past two years, local NGOs have partnered with the ILO to 
 
ASTANA 00000148  002 OF 002 
 
 
implement 40 projects designed to prevent the worst forms of child 
labor in Kazakhstan. 
 
6.  COMMENT:  Post is satisfied that the Government of Kazakhstan 
takes the issue of child labor seriously.  While the problem of 
child labor among the migrant community remains a challenge, the 
government is making a credible effort to deal with the problem. 
Pos
t recommends against any change to Kazakhstan GSP eligibility on 
the basis of child labor issues.  END COMMENT. 
 
HOAGLAND

Wikileaks

09ASTANA147, KAZAKHSTAN: ENTREPRENEUR NURLAN KAPPAROV DESCRIBES

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Reference ID Created Released Classification Origin
09ASTANA147 2009-01-26 10:45 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO5012
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0147/01 0261045
ZNR UUUUU ZZH
O 261045Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4444
INFO RUCNCIS/CIS COLLECTIVE 1089
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0487
RUEHKO/AMEMBASSY TOKYO 1193
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0662
RUEKJCS/SECDEF WASHDC 0578
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1120

UNCLAS SECTION 01 OF 02 ASTANA 000147 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EINV EFIN EAGR EPET ENRG KZ
SUBJECT:  KAZAKHSTAN:  ENTREPRENEUR NURLAN KAPPAROV DESCRIBES 
ECONOMIC SITUATION, BUSINESS OPPORTUNITIES 
 
ASTANA 00000147  001.2 OF 002 
 
 
1. (U) Sensitive but unclassified.  Not for public Internet. 
2. SUMMARY:  During a January 22 meeting with the Ambassador, 
Kazakhstani entrepreneur Nurlan Kapparov stressed the need for 
further banking-sector reforms and signaled his approval of the 
recent appointment of Grigoriy Marchenko to head the National Bank. 
Kapparov expects a devaluation of the tenge.  He named agriculture, 
real estate and construction, oil services, and renewable energy as 
sectors of the economy with great potential for development over the 
long-run.  Kapparov defended Kazakhstan's stringent work permits 
system for foreigners as necessary to ensure that foreign 
enterprises train local workers to take over positions in their 
companies.  He said that the Lancaster Group that he heads has plans 
to build a plant in Astana to manufacture polysilicon for solar 
panels, but has had difficulty thus far in attracting the necessary 
financing.  END SUMMARY. 
BANKING SECTOR NEEDS FURTHER REFORM 
 
3. (SBU) Kazakhstani entrepreneur Nurlan Kapparov -- the 
38-year-old, Harvard-educated, head of the Lancaster Group holding 
company -- told the Ambassador on January 22 that the government's 
financial assistance to the banking sector (which is aimed at 
mitigating the effects of the global financial crisis) will be 
wasted if further banking reforms are not implemented.   The banking 
sector's problems, he argued, go beyond the financial crisis, but 
"no one paid attention" when concerns were raised earlier about the 
quality of the country's top banks.  Kapparov suggested that bank 
oversight is made more difficult by the fact that the Financial 
Supervision Agency (FSA), which is responsible for bank regulation, 
is independent and does not report to the National Bank.  He 
signaled his approval of the recent appointment of banker Grigoriy 
Marchenko to be chairman of the National Bank.  Kapparov described 
Marchenko -- who previously served as National Bank head during 
1999-2004 -- as uniquely qualified for the job, having been the lead 
figure in establishing Kazakhstan's banking sector a decade ago.  He 
maintained that Marchenko is likely to have unofficial control over 
the FSA, pointing out that FSA head Yelena Bakhmutova is a Marchenko 
protege.  This could be the first step toward a merger of the two 
agencies, Kapparov added. 
 
TENGE DEVALUATION EXPECTED 
 
4. (SBU) The Ambassador asked Kapparov whether he believes the tenge 
will be devalued relative to the dollar.  Kapparov first noted that 
he has his own direct experience in banking, since the Lancaster 
Group holds a majority stake in KazInvestBank.  (NOTE:  The EBRD and 
Citibank hold the remaining shares.  END NOTE.)  He said he expects 
a devaluation, arguing that the government cannot sustain the 
current exchange rate for much longer.  Kapparov pointed out that 
the currencies of several of Kazakhstan's major trading partners, 
notably the Russian ruble, have fallen in value recently, worsening 
Kazakhstan's terms of trade.  This fact in particular, he contended, 
argues for the tenge's devaluation. 
 
GREAT POTENTIAL IN AGRICULTURE 
 
5.  (SBU) In response to a question from the Ambassador, Kapparov 
enumerated several sectors of the economy which he believes have 
great long-term potential for development.  Agriculture, he said, 
should be a particular focus for the country.  According to 
Kapparov, the agricultural sector is already "quite strong," with 
several billion-dollar companies, including some that control vast 
agricultural land tracts.  With the introduction of new technology 
to raise productivity, the country's agricultural output could be 
increased two-fold or more, he maintained.  Unlike energy 
consumption, which fluctuates with economic conditions, food 
consumption is relatively stable.  In China, increasing urbanization 
is leading to growing food demand that domestic production cannot 
keep up with, Kapparov contended.  He noted that Arab investors, 
often a bellwether, have made large investments in Kazakhstani 
agriculture through private equity funds, and are considering 
additional acquisitions. 
 
 
ASTANA 00000147  002.2 OF 002 
 
 
BULLISH ON REAL ESTATE AND CONSTRUCTI
ON 
 
6. (SBU) Kapparov is also bullish about real estate and construction 
over the long-term, but admitted that recovery of those sectors 
ultimately depends on the world economy.  He pointed out that 
following the fall of the Soviet Union, half-finished construction 
projects sat idle for years.  Once the economy picked up in the late 
1990s, a lot of those projects were finally finished off.  Kapparov 
predicted that within three or four years, currently idle projects 
will be completed. 
 
DEFENSE OF WORK PERMITS SYSTEM 
 
7. (SBU) Kapparov believes that the oil services sector has great 
potential for domestic Kazakhstani companies, in particular because 
of the government's local content requirements.  He pointed out that 
ERSAI Caspian Contractor, a joint venture between Lancaster and 
Italy's Saipem, is Kazakhstan's largest oil services company, with 
major contracts to provide support to the Kashagan project.  The 
Ambassador explained that Western companies are concerned about 
local content requirements, as well as Kazakhstan's stringent work 
permits system that can make it difficult to bring in necessary 
expatriate personnel.  Kapparov, however, insisted that the work 
permits system is essential in pushing companies to train locals so 
that they have the skills to ultimately take over positions in 
foreign companies.  He indicated that he has put this into practice 
at ERSAI:  the company, which was established in 2003, currently has 
1500 employees, only 100 of whom are expats, and is training a 
Kazakhstani to take over as CEO in two years. 
 
PLANS FOR POLYSILICON PLANT 
 
8. (SBU) Kapparov cited renewable sources of energy as another 
sector with great potential for Kazakhstan.  He explained that the 
Lancaster Group has developed a project to build a $400 million 
polysilicon plant in Astana, but is struggling to come up with the 
financing.  According to Kapparov, the plant would manufacture four 
percent of the world's supply of polysilicon for solar panels, using 
industrial polysilicon produced by factories in Karaganda and 
Taldykorgan.  He had already met with Prime Minister Masimov the 
previous day to discuss the project, and is working with the 
Samruk-Kazyna National Welfare Fund to attract debt financing. 
Unfortunately, the government itself is strapped for funds, he 
explained.  According to Kapparov, the Lancaster Group was offered 
the opportunity to build the plant in Abu Dhabi, but made a 
political decision to construct it in Astana to support the 
development of a domestic renewable energy sector.  This plant is 
the first step in developing a domestic solar industry.  In the 
future, Kazakhstan could be home to solar energy farms providing 
electricity for domestic usage, as well for export to neighboring 
countries, including both China and Russia, Kapparov explained. 
 
HOAGLAND

Wikileaks

09ASTANA146, KAZAKHSTAN: MINISTER OF FINANCE PROMISES ANTI-MONEY

WikiLeaks Link

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If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #09ASTANA146.
Reference ID Created Released Classification Origin
09ASTANA146 2009-01-26 10:04 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO4944
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0146/01 0261004
ZNR UUUUU ZZH
O 261004Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4442
INFO RUCNCIS/CIS COLLECTIVE 1087
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0485
RUEHKO/AMEMBASSY TOKYO 1191
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0660
RUEKJCS/SECDEF WASHDC 0576
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1118

UNCLAS SECTION 01 OF 02 ASTANA 000146 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/IFD/OMA, EEB/EPPD, ISN, S/CT 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV PTER ECON EFIN KNNP KCRM KZ
SUBJECT:  KAZAKHSTAN:  MINISTER OF FINANCE PROMISES ANTI-MONEY 
LAUNDERING LAW IN FIRST QUARTER OF 2009 
 
REF: (A) ASTANA 68 
      (B) 08 ASTANA 2226 
 
ASTANA 00000146  001.2 OF 002 
 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  On January 23, the Ambassador met with Minister 
of Finance Bolat Zhamishev and Deputy Customs Committee Chairman 
Sofia Aisagalieva to discuss Kazakhstan's response to the global 
financial crisis, pending legislation on Anti-Money 
Laundering/Counter-Terrorism Financing (AML/CTF), and customs duties 
and value-added taxes assessed on U.S. technical assistance 
delivered under the Cooperative Threat Reduction (CTR) program. 
Minister Zhamishev said the AML/CTF legislation was passed out of 
committee in the Mazhilis -- the lower house of parliament -- on 
January 21 and he expects the law to be enacted during the first 
quarter of 2009.  In a pleasant surprise, Aisagalieva said the 
Customs Committee is willing to allow CTR assistance to enter 
Kazakhstan duty-free, even though the new CTR agreement has not yet 
been ratified by parliament.  END SUMMARY. 
 
PLEASANT FIRST IMPRESSION 
 
3.  (SBU) Minister Zhamishev was professional, polite, and extremely 
well-prepared for the meeting.  A pleasant, bald 51-year old, 
Zhamishev makes a favorable first impression with his smart 
appearance, attention to detail, and respect for others.  Aware of 
the Ambassador's extensive service throughout the region, Zhamishev 
joked, "I know that you have worked in Afghanistan, Pakistan, 
Tajikistan, Uzbekistan, and now, I am pleased to welcome you to 
Kazakhstan.  You have worked in nearly all of the 'stans.'  Even 
though our countries share the same suffix, I'm sure you are well 
aware that we are all very different."  Zhamishev and Aisagalieva 
both congratulated the Ambassador on the inauguration of President 
Obama.  Zhamishev said he was particularly impressed by the fact 
that more than two million people came to Washington "without 
official encouragement" to attend the ceremony. 
 
ANTI-MONEY LAUNDERING LEGISLATION MOVES FORWARD 
 
4.  (SBU) Zhamishev announced that a parliamentary working group 
discussed the draft Law on Anti-Money Laundering/Counter-Terrorism 
Finance (AML/CTF) this week and resolved all outstanding issues.  He 
said the legislation was passed out of committee in the lower house 
of parliament (Mazhilis) on January 21 and will be considered at a 
plenary session of the Mazhilis in the near future.  He expects 
passage of the law "in the first quarter" of 2009. 
 
FINANCIAL MONITORING COMMITTEE ESTABLISHED 
 
5.  (SBU) According to Zhamishev, his Ministry's 
recently-established Financial Monitoring Committee does not 
currently review or monitor financial data, since the relevant 
AML/CTF legislation has not yet been passed and no information is 
authorized to flow to the Committee.  Once the new law is passed, 
those entities being monitored will have up to 12 months to update 
information systems, processes, and reporting to ensure full 
compliance with the law.  During that one-year period, the Committee 
will conduct systems testing and staff training to prepare for its 
new monitoring role.  Zhamishev said that all necessary reports and 
documents for the Committee's review will be provided in electronic 
form, not hard copy. 
 
CUSTOMS COMMITTEE PROMISES ACTION ON CTR ASSISTANCE 
 
6.  (SBU) Aisagalieva said that in the view of the Customs 
Committee, assistance imported into Kazakhstan under the Cooperative 
Threat Reduction (CTR) agreement is subject to value-added tax and 
customs duties because parliament has not yet ratified the CTR 
agreement and it is therefore not in force.  (COMMENT:  We do not 
accept this view.  In fact, following President Nazarabayev's 
October 15 decision to sign-off on the CTR agreement's ratification, 
the MFA sent us an aide memoire confirming that the Kazakhstani 
 
ASTANA 00000146  002.2 OF 002 
 
 
government recognizes the clause in the agreement under which it is 
to be provisionally applied from it date of signature -- i.e., from 
December 13, 2007.  END COMMENT.)   Aisagalieva did acknowledge, 
however, the government's decision to extend the agreement for an 
additional seven years and said the Customs Committee is working
to 
expedite the parliamentary ratification process.  As a gesture of 
good will, she promised that the Customs Committee will exempt CTR 
technical assistance, provided it receives relevant supporting 
documentation from the Ministry of Economy and Budget Planning 
certifying the purpose and beneficiaries of the items. 
 
FINANCIAL CRISIS IMPACT ON KAZAKHSTAN 
 
7.  (SBU) Zhamishev said that, as a small, open, market economy, 
Kazakhstan has not been immune from the effects of the global 
financial crisis.  He specifically said that the financial/banking 
sector has come under pressure, particularly because one-half of its 
assets are debts to foreign creditors.  The non-extractive 
industries have been hardest hit, particularly the construction 
industry.   The Minister noted that the rapid decline in the price 
of oil came as a "second wave" of the crisis and will have a 
significant effect on the 2009 budget.  He expects the government to 
reduce infrastructure investments in 2009 -- including school and 
road construction -- but he doubted this would have a serious, 
negative impact on the economy.  He emphasized that the government 
will "absolutely" cover all outstanding debt obligations and fund 
all essential social programs. 
 
INTEREST IN IMPROVING INVESTMENT CLIMATE 
 
8.  (SBU) Zhamishev noted that Kazakhstan's new tax code lowers the 
corporate income tax, although it increases taxes on oil and gas 
companies.  Nevertheless, Zhamishev asserted that the overall tax 
rate on the energy sector is lower than in many oil-producing 
countries and he expressed confidence that Kazakhstan will remain an 
attractive investment destination for major oil companies.  He said 
the government is committed to improving the investment climate in 
Kazakhstan and noted, for example, that the Ministry works very 
closely with the World Bank to reduce administrative barriers to 
doing business and to implement international standards for trade 
and investment. 
 
HOAGLAND

Wikileaks

09ASTANA140, KAZAKHSTAN: MEDIA PRAISE INAUGURATION OF “PRESIDENT

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Reference ID Created Released Classification Origin
09ASTANA140 2009-01-26 03:45 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO4710
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
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RUEHNO/USMISSION USNATO 2467

UNCLAS SECTION 01 OF 02 ASTANA 000140 
 
SIPDIS 
 
STATE FOR SCA/CEN, SCA/PPD 
 
E.O. 12958: N/A 
TAGS: PGOV PREL SOCI KPAO KMDR KDEM KZ
SUBJECT:  KAZAKHSTAN:  MEDIA PRAISE INAUGURATION OF "PRESIDENT 
HOPE" 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (U) SUMMARY:  The Kazakhstani media's reaction to President 
Obama's inauguration has been overwhelmingly positive and laudatory. 
 The coverage has ranged from detailed accounts of the inaugural 
speech to human interest stories only tangentially tied to the 
event.  There have been a few dismissive comparisons with the 
outgoing administration, but it is noteworthy, if not surprising, 
that the heaviest criticisms of former President Bush are appearing 
in the Kazakh-language press, which caters to a more Muslim 
audience.  END SUMMARY 
 
"PRESIDENT HOPE" 
 
3.  (U) "Liter," a pro-government, Russian-language daily, published 
two analytical articles about President Obama.  In its analysis of 
the President's inaugural speech, "Liter" concluded that his 
eloquence "met people's expectations."  It said that he preferred to 
use words like "struggle" and "challenge," while his predecessor 
"loved to talk about freedom."  "Liter" noted that in "addressing 
the dilemma of the anti-terrorist campaign -- security vs. freedom 
-- Obama decided in favor of the latter."  Reporting that Obama 
plans to repeal the Patriot Act and close the "well known Guantanamo 
prison," "Liter" asserted that, "After its two recent wars, America 
has decided to step away from the concept of preventative wars." 
The paper drew attention to the President's mention of nuclear 
threat reduction, saying that line "warmed the soul of Kazakhstan," 
since Kazakhstan was the first post-Soviet country to voluntarily 
abandon its nuclear arsenal. 
 
4.  (U) In a second analytical article called "President Hope," 
"Liter" quoted an "International Herald Tribune" editorial by Henry 
Kissinger predicting that America would no longer be able to take on 
a "messiah role" in international affairs without considering other 
countries' interests.  Noting Obama's lack of international 
experience, the editorial expressed the hope that Obama would not 
"become hostage" to American foreign affairs experts who "until now 
have believed that America appeared on the earth first of all, and 
then monkeys, and only afterwards human beings." 
 
"AMERICA'S GORBACHEV"? 
 
5.  (U) Radio Free Europe/Radio Liberty's "Radio Azzatyk" outlet 
asked several prominent Kazakhstani politicians and other public 
figures their opinions of the new President.  Opposition figure 
Peter Svoik, who is Deputy Chairman of the Azat Party, called Obama 
"America's Gorbachev."  He explained that Obama was coming to power 
in a time of great change, "but like Gorbachev, Obama might end up 
with limited influence on the processes initiated by his own 
reforms."  Alikhan Baimenov, head of Ak Zhol -- a party usually 
considered to be the government's pocket opposition -- emphasized 
that in his speech, "Barack Obama concentrated on infrastructure, 
science, new technologies, renewable sources of energy, education, 
and cutting state expenditures.  Our government should learn this 
(lesson).  It is necessary to create infrastructure instead of 
creating impressive projects."   Serik Abdrakhmanov, leader of the 
pro-pro-government Adilet Party, remarked, "Barack Obama will depart 
from stereotypes....  That's why, to my mind, the world will turn 
from confrontation to diplomacy.  We'll remember his respectful 
attitude to different cultures, to other people."  He concluded, 
"Barack Obama expressed his own thoughts and not (a paper) written 
by his assistants."  Seitkazy Matayev, Chairman of the Union of 
Journalists, stressed "the fact Barack Obama came to power has 
proved to the world that there is true democracy in the United 
States." 
 
KAZAKH-LANGUAGE PAPERS ADD CRITIQUE OF BUSH YEARS 
 
6.  (U) The pro-government, Kazakh-language "Aikyn" was also very 
bullish on the Obama presidency.  It devoted two pages to the 
transition.  The first page catalogued the "failures of George W. 
Bush," summarizing events from the last eight years, such as the 
September 11 attacks, the wars in Iraq and Afghanistan, and 
Hurricane Katrina.  On the facing page it glowingly covered the 
inauguration day events.  Progressive, Kazakh-language "Zhas Alash" 
 
ASTANA 00000140  002 OF 002 
 
 
took a similar tack, expressing high expectations for Obama's term 
in office but also unable to resist a parting shot at Bush.  "None 
of Bush's political initiatives has brought positive re
sults.  The 
American people grew tired of Bush."  (COMMENT:  Kazakh-language 
newspapers cater to the ethnic Kazakh, more traditionally Muslim 
population largely concentrated in southern Kazakhstan.  These 
publications tend to follow their Russian-language counterparts very 
closely except on issues that particularly pertain to Kazakh 
ethnicity and Islam.  END COMMENT.) 
 
KAZAKHSTAN'S INAUGURAL QUEEN 
 
7.  (U) On a lighter note, official, Russian-language 
"Kazakhstanskaya Pravda," independent, Russian-language "Vremya," 
and "Liter" all profiled a student from Almaty's Al Farabi 
University, Gaukhar Amantayeva.  A participant in the State 
Department's UGRAD exchange program at the University of Nebraska, 
Amantayeva was selected to attend the inauguration.  She "took part 
in a festive march of students from different countries and also 
attended the inaugural ball."  Her selection to participate in the 
inaugural events made her a major news story in Kazakhstan, and she 
was quoted as saying that her "dream is to invite Barack Obama to 
Kazakhstan." 
 
SENIOR OFFICIALS UNIFORMLY POSITIVE 
 
8.  (U) Since November, every senior official the Ambassador has met 
has praised the election and subsequent inauguration of President 
Obama, noting in one form or another, "This was true democracy in 
action.  A presidential adviser said, "For those of us who want 
democracy for Kazakhstan, this election was enormously valuable.  We 
can believe again in change.  We can believe again in hope." 
 
HOAGLAND

Wikileaks

09ASTANA139, KAZAKHSTAN: LIFE ON THE STEPPE, JANUARY 17-23

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Reference ID Created Released Classification Origin
09ASTANA139 2009-01-23 11:23 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO3792
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
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INFO RUCNCIS/CIS COLLECTIVE 1084
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
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RHEHNSC/NSC WASHDC 0657
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RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS ASTANA 000139 
 
SIPDIS 
 
STATE FOR SCA/CEN, SCA/PPD 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM SOCI KPAO KDEM KZ
SUBJECT:  KAZAKHSTAN:  LIFE ON THE STEPPE, JANUARY 17-23 
 
1.  The following is another of the weekly cables from Embassy 
Astana with tidbits on daily life in Kazakhstan. 
 
UPROAR LEADS TO RETENTION OF NATIONALITY IN PASSPORTS 
2.  On January 5, Kazakhstan began issuing new, electronic 
passports.  Complying with international conventions, the new 
documents dropped "nationality" designations which up to now had 
been included in Kazakhstani passports. (NOTE:  In this context, 
"nationality" means ethnicity.  END NOTE.)   The nationality 
designation is a relic of the Soviet days when all Soviet passports 
included such information.  With Kazakhstan's decision to drop the 
nationality designation, the only CIS countries to continue using it 
would have been Turkmenistan and Uzbekistan. 
3.  The absence of the nationality designation, however, set off a 
storm of indignation that unified Kazakhstan's parliament, the 
political opposition, and the media.  Those opposing the exclusion 
of the nationality designation argued that the step would lead to 
"denationalization" and a gradual loss of ethnic identity among 
Kazakhstan's multi-ethnic population.  (COMMENT:  There are more 
than 120 ethnic groups living in Kazakhstan.  END COMMENT.)  Not 
surprisingly, the government quickly backtracked, and, on January 19 
Prime Minister Karim Masimov asked the Ministry of Justice, which is 
in charge of issuing passports, to reintroduce the nationality 
designation.   However, Minister of Justice Zagipa Baliyeva stressed 
that according to the Kazakhstani constitution, citizens can choose 
which nationality they want recorded in their Kazakhstani travel 
documents. 
KAZAKHSTANIS BELIEVE OBAMA BRINGS HOPE NOT JUST FOR AMERICA 
4.  Radio Azattyk, the Kazakhstani service of Radio Free 
Europe/Radio Liberty, took the pulse of public opinion following the 
inauguration of President Barack Obama.  Most respondents expressed 
hope that the new administration would bring change, not just for 
the United States but for the entire world.  Some suggested that the 
spirit of change may reach as far as Kazakhstan, while others 
remained skeptical about the prospects for positive change in their 
home country.  The deputy chairman of the Azat opposition party, 
Petr Svoik, compared President Obama to Mikhail Gorbachev.  Svoik 
believes that, Obama's tenure, just like Gorbachev's, will be marked 
by events of great significance, but warned that Obama himself might 
end up with limited influence on the processes initiated by his own 
reforms.  Seitkazy Matayev, Chairman of the Union of Journalists, 
said that Obama's election proved to the world that "there is true 
democracy in the United States." 
UNIVERSITIES MAY EXPEL THOUSANDS OF STUDENTS 
5.  As many as 200,000 students unable to afford tuition fees are 
facing the prospect of being expelled from universities, local media 
reported.  Feeling the pinch of the economic crisis in the country, 
many students and their parents find themselves without their own 
means, or access to loans, to pay for increasingly more expensive 
education.  In the last few years, many Kazakhstani universities 
have raised their tuition.  In Almaty, Kazakhstan's biggest city, 
the average tuition has risen to approximately $4,000.  An 
organization of concerned parents already asked universities to 
lower the tuition and allow delays in payments, and called on the 
government to step in and help provide financial assistance. 
6.  The Ministry of Education and Science cautioned that the public 
should not jump to conclusions.  While they admitted occasional 
cases of students being unable to finish their degrees because they 
were not able to come up with the tuition, they said that the 
figures given by activists are greatly exaggerated.  Nevertheless, 
the authorities acknowledged the problem and the possible 
consequences of high tuition.  Prime Minister Masimov instructed the 
Ministry of Education and Science and public universities to find a 
solution quickly, since, in Masimov's words, "this issue is turning 
from a purely economic one into purely political one." 
PUBLISHER "DONATES" MEDIA COMPANY TO RULING PARTY 
7.  Yerlan Bekhozhin, the head of Liter Media, which publishes daily 
newspapers Aikyn (in Kazakh) and Liter (in Russian), reportedly 
decided to "donate" his company to Nur Media, a media holding 
company recently established by the ruling Nur Otan party.  "At the 
time of this economic crisis, I wanted to contribute something to 
the ruling party, even though I am not a member," he said.  "Just 
imagine if everyone simply
gave away his or her beloved assets to 
the party, how easily we would survive the crisis!"  Bekhozhin 
himself, however, does not see his own future with Nur Media.  "I 
will think about doing something new, since it's not the first time 
I have had to start over." 
 
HOAGLAND

Wikileaks

09ASTANA135, KAZAKHSTAN: MFA PROPOSES DEAL ON PEACE CORPS

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Reference ID Created Released Classification Origin
09ASTANA135 2009-01-23 10:48 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXRO3788
OO RUEHBI RUEHCI RUEHFL RUEHKW RUEHLA RUEHLH RUEHNP RUEHPW RUEHROV
RUEHSR
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RUEHKO/AMEMBASSY TOKYO 1185
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RHEFAAA/DIA WASHDC
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RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 0568
RHMFISS/CDR USCENTCOM MACDILL AFB FL

C O N F I D E N T I A L SECTION 01 OF 03 ASTANA 000135 
 
SIPDIS 
 
STATE FOR SCA/CEN, CA/OCS 
FRANKFURT FOR REGIONAL CONSULAR OFFICER 
 
E.O. 12958: DECL: 01/23/2029 
TAGS: PGOV PREL CASC KZ
SUBJECT: KAZAKHSTAN:  MFA PROPOSES DEAL ON PEACE CORPS 
VOLUNTEER CASE ENTAILING CONVICTION AND DEPORTATION 
 
REF: A. ASTANA 0055 
     B. 08 ASTANA 2576 
     C. 08 ASTANA 2410 (NOTAL) 
 
Classified By: Ambassador Richard E. Hoagland:  1.4 (B), (D) 
 
1. (C) SUMMARY:  After State Secretary Kanat Saudabayev 
declined to intervene in the criminal case involving Peace 
Corps Volunteer Anthony Sharp, the Ambassador raised it with 
Presidential Foreign Policy Advisor Kairat Sarybay on January 
15.  Sarybay tasked resolving the matter to MFA Americas 
Department Director Talgat Kaliyev.  In meetings on January 
21 and 23, Kaliyev explained to us that the case can not 
simply be made to disappear.  Instead, he proposed that there 
be a brief closed trial, with no media, where Sharp will be 
convicted and given a suspended sentence, after which he will 
be immediately deported from the country.  Kaliyev said that 
he had spoken directly with the judge overseeing the case, 
and indicated that the proposal would be acceptable to all 
the relevant parties among the authorities.  Kaliyev has 
briefed Foreign Minister Tazhin, who purportedly supports 
this solution.  We explained that the decision about whether 
to accept the proposal would be Sharp's alone to make, in 
consultation with his lawyers.  We told Kaliyev that as an 
alternative, Sharp might be willing to plead guilty to 
trespassing, a crime which carries a maximum penalty of 15 
days in jail, if the other charges, including the explosives 
charge, are dropped.  He said he would look into this 
alternative and get back to us by January 27.  Peace Corps 
Director and Consular Chief will travel to Ridder on January 
26 together with Sharp's lawyers and will inform Sharp and 
the lawyers about the government's proposal.  END SUMMARY. 
 
DEAL PROPOSED ON PEACE CORPS VOLUNTEER CASE 
 
2. (C) After State Secretary Kanat Saudabayev declined to 
intervene in the criminal case involving Peace Corps 
Volunteer Anthony Sharp, the Ambassador raised the matter 
with Presidential Foreign Policy Advisor (and former Deputy 
Foreign Minister) Kairat Sarybay.  On January 15, the 
Ambassador provided Sarybay with the same non-paper on the 
case that he had given to Saudabayev (see ref A).  Sarybay 
phoned the Ambassador on January 20 and informed him that he 
had tasked resolving the issue to MFA Americas Department 
Director Talgat Kaliyev. 
 
3. (C) Kaliyev called in Pol-Econ Chief on January 21 and 
explained that he had spoken with "many people" involved with 
the case and had stressed to them the potential "political 
complications" for the bilateral relationship. 
Unfortunately, it was not simply possible to make the case 
disappear, given that Sharp was allegedly caught with 
explosives and that "classified maps" were found in his 
apartment.  That said, there was a recognition that Sharp had 
no "evil intentions."  Thus, Kaliyev had come up with a 
proposal to resolve the situation.   This would entail a 
trial -- a perfunctory one -- in a closed court, without any 
media or publicity.  Sharp would be found guilty, given a 
suspended sentence, and immediately deported from the 
country.  Kaliyev said this proposal would be acceptable to 
all the relevant parties among the authorities. 
 
4. (C) Pol-Econ Chief promised that we would review the 
proposal and get back to Kaliyev as soon as possible.  He 
stressed that we believe the case against Sharp is a clear 
provocation.  We are concerned that it might have originated 
from Astana, and that the Committee for National Security 
(KNB) could be involved.  Kaliyev responded dismissively. 
The KNB is, of course, well aware of the case, since it 
involves a foreigner, but "they are not happy with it," he 
maintained. 
 
5. (C) At the end of the meeting, Kaliyev told Pol-Econ Chief 
that it is important that Peace Corps volunteers behave 
appropriately and not get themselves in trouble.  He 
requested information about the legal basis for the Peace 
Corps program in Kazakhstan, including whether the program 
 
ASTANA 00000135  002 OF 003 
 
 
has a formal bilateral agreement with the government. 
Pol-Econ Chief said he would obtain this information from the 
Peace Corps. 
 
PROPOSAL REITERATED IN FOLLOW-UP MEETING 
 
6. (C) Following in-house discussions with the Ambassador on 
January 22, Pol-Econ Chief, Peace Corps Country Director, and 
Consular Chief met together with Kaliyev on January 23.  On 
this occasion, Kaliyev was accompanied by Tauboldy Umbetbayev 
from the MFA's Consular Department.   Kaliyev reiterated his &#x0
00A;proposal for resolving the Sharp case.  He made it clear that 
he had, in fact, spoken directly with the judge overseeing 
the case.  According to Kaliyev, the judge cannot simply 
release Sharp, because he was caught with dynamite in a bag, 
and items found in his apartment "do not conform to his legal 
status in the country."  Nevertheless, the Kazakhstani side 
is ready to close its eyes to all of this in the spirit of 
our good bilateral relationship and the fact that Sharp did 
not have any evil intentions.  Kaliyev insisted that we 
should not worry -- Sharp will not spend any time in jail. 
He said he had briefed Foreign Minister Tazhin, who agreed 
with the proposal.   Presidential Foreign Policy Advisor 
Sarybay is also in the loop. 
 
7. (C) This proposal is the best option for Sharp to be free 
to leave the country, Kaliyev insisted.   If Sharp wants to, 
he is welcome to appeal the guilty verdict from the safety of 
the United States.  Kaliyev reassured us that a U.S. consular 
officer could be present at a closed trial, and said he would 
check to confirm that Sharp's lawyers could be there too.  As 
Kaliyev envisions it, this would be a very quick affair. 
Perhaps the judge would just read out the charges, 
immediately hand down a guilty verdict, and suspend the 
sentence.  Kaliyev refused to speculate on the outcome if the 
proposal is declined and the case goes to a public trial. 
Pol-Econ Chief, Consular Chief, and Peace Corp Director made 
clear to Kaliyev that the final decision about whether to 
accept the proposal would be Sharp's to make, in consultation 
with his lawyers. 
 
8. (C) Consular chief and Peace Corps Director told Kaliyev 
that they had spoken with Sharp's attorneys and understood 
that it is possible in the Kazakhstani legal system to plead 
guilty to a lesser charge.  Sharp might be willing to plead 
guilty to trespassing, a crime which carries a maximum 
penalty of 15 days in jail, if the others charges, including 
the explosives charge, are dropped.  Kaliyev said that there 
is only so far he can go in interfering in the legal process, 
but promised to look into the possibility and get back to us 
with an answer about this alterative by January 27. 
 
9. (C) Peace Corps Director reminded Kaliyev that in his 
January 21 meeting with Pol-Econ Chief, he had asked about 
the legal status of the Peace Corps in Kazakhstan.  In fact, 
he explained, Peace Corps has an overall bilateral agreement 
with the government, and three separate MOUs under it, with 
the Ministries of Education and Science, Information and 
Culture, and Trade and Industry.  Kaliyev indicated that 
there are "some in the government" who want to know how long 
the agreement is valid for, and how Kazakhstan can terminate 
it.  He admitted that in this regard, Sharp's conviction on 
explosives charges would be a problem for the Peace Corps 
program in Kazakhstan.  However, he stressed that the MFA 
supports the Peace Corps -- "we believe your people are doing 
a great job" -- and said that there is no reason to be 
worried about the future of the Peace Corps "for now." 
 
NEXT STEPS 
 
10. (C) Peace Corps has hired new attorneys for Sharp through 
the Almaty office of Chadbourne and Parke.  They began 
working on the case on January 22.  They believe that the 
case is very weak and are preparing a vigorous defense. 
Court proceedings are, for the moment, scheduled to begin on 
January 28.  Peace Corps Director and Consular Chief intend 
to travel to Ridder on January 26 together with Sharp's 
 
ASTANA 00000135  003 OF 003 
 
 
lawyers.  They will inform Sharp and the lawyers about the 
government's proposal, as well as the discussion with Kaliyev 
about a guilty plea to trespassing.  Sharp will need to make 
his own decision about the government's proposal, in 
consultation with the lawyers.  That said, at this juncture, 
it is clear that the government will not simply make this 
case go away by deporting Sharp without any trial.  If the 
case goes to trial in an open court, the attendant publicity 
may make it very unlikely for Sharp to be acquitted or to be 
convicted and given a suspended sentence.  In addition, 
should Sharp's lawyers be successful in poking holes in the 
case, the judge might send it back for reinvestigation, 
causing a delay that could last for months.  We hope to hear 
back from Kaliyev on January 27 about the alternative of a 
guilty plea to trespassing.  Sharp spoke with Peace Corps 
Director on January 23 following the meeting with Kaliyev and 
said that the police were in the process of again searching 
his office and the office of Ak-Em Ridder, the local 
organization he had previously worked for as a volunteer. 
HOAGLAND

Wikileaks

09ASTANA134, KAZAKHSTAN: DEMOCRACY IN ACTION AT EDITOR’S CLUB

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Reference ID Created Released Classification Origin
09ASTANA134 2009-01-23 10:21 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO3503
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
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DE RUEHTA #0134/01 0231021
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FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4427
RUCNCIS/CIS COLLECTIVE 1078
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
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RUCNDT/USMISSION USUN NEW YORK 2136
RUEHNO/USMISSION USNATO 2464

UNCLAS SECTION 01 OF 03 ASTANA 000134 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, SCA/PPD, DRL 
 
E.O. 12958: N/A 
TAGS: PGOV PREL SOCI KPAO KDEM KZ
SUBJECT:  KAZAKHSTAN:  DEMOCRACY IN ACTION AT EDITOR'S CLUB 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (U) SUMMARY:  On January 21, the Ambassador attended a meeting 
of the Astana Editors-in-Chief Club.  Though this organization has 
been in existence for some time, it has recently risen in profile 
through increased government ties and impressive leadership.  The 
government-approved Editors' Club combines both opposition and 
pro-government journalists.  The Ambassador was the first foreign 
diplomat ever invited to attend one of its sessions.  Drawing on his 
background in journalism and public affairs, he spurred a lively, 
two-and-a-half-hour discussion about the media situation in 
Kazakhstan, and answered - and corrected - many misperceptions about 
U.S. policy.  The Club freely discussed the recent amendments to the 
media law that were proposed pursuant to Kazakhstan's Madrid 
commitments, as well as the libel law and other media topics.  After 
the session, the Club leadership asked the Ambassador to provide an 
American journalist to teach master classes.  This Club is a 
government-approved public association, and, as such, is emblematic 
of the interesting proto-democracy the government of Kazakhstan has 
the self-confidence to encourage.  END SUMMARY. 
 
3.  (U) The Astana Editors-In-Chief club has 56 members, led by 
former owner and general director of the Astana television channel 
"ERA," Mirbulat Kunbayev.  Kunbayev is well-respected in media 
circles, being seen as an honest facilitator among pro-government, 
independent, and opposition voices.  His leadership of the club has 
coincided with its rise to prominence, an ascension marked by a 
visit late last year by Minister of Culture and Information, Mukhtar 
Kul-Mukhamed, who called the club "a reliable partner of the 
Ministry."  The Club worked with the government to draft the media 
amendments proposed to address the commitments made by Kazakhstan at 
the 2007 OSCE ministerial in Madrid where it was awarded the 2010 
chairmanship of the organization.  Kunbayev firmly defended the 
Media Law amendments but also acknowledged they do not meet highest 
expectations.  He suggested they should be seen as steps forward in 
a continuing process. 
 
CLUB ENCOURAGES SPIRITED DEBATE 
 
4.  (U) Despite his association with the government, Kunbayev has 
not excluded independent and opposition voices from the Club's 
membership.  This became clear from the first exchange of the 
afternoon, just after the Ambassador delivered his opening remarks. 
The first questioner, from centrist "Channel 31 Television," 
disagreed with Kunbayev about the Media Law amendments, saying they 
address only the most "stupid" restrictions and don't positively 
affect the way journalists do their jobs.  Later, a reporter from 
oppositionist "Svoboda Slova," dismissed the amendments as 
"cosmetic, not substantive," and asserted they are simply a way to 
ease Kazakhstan into the OSCE chair.  (COMMENT:  That Kunbayev 
promotes open debate is a credit both to his leadership and to the 
government's commitment to multiple voices in public debate.  END 
COMMENT.) 
 
JOURNALISTIC RESPONSIBILITY 
 
5.  (U) The afternoon's major debate focused spiritedly on the media 
amendments, journalistic responsibility, and libel.  Some maintained 
the amendments absolve journalistic defendants from the burden of 
proof in libel cases, which they had previously borne, and make 
plaintiffs and defendants equal in the eyes of the law.  However, in 
Kazakhstan truth still does not serve as a defense in defamation 
cases, and this law has been used often to close newspapers and 
punish inquisitive journalists, some of the most out-spoken 
journalists maintained.  Kunbayev questioned whether journalistic 
errors should not be punished by law, since "the first and foremost 
duty of reportorial responsibility is to bring truthful information 
to readers.  Otherwise reporters will feel free to provide any false 
and fabricated information using this protection in the law, and 
that will not provide a good service to our society."  The 
Ambassador disagreed and explained the U.S. standards of press 
freedom, journalistic responsibility, and libel and how they have 
historically evolved.  (COMMENT:  The subsequent RFE/RL report of 
this exchange lost all nuance and portrayed the Ambassador as a 
black-and-white critic of the government on this issue.  END 
 
ASTANA 00000134  002 OF 003 
 
 
COMMENT.) 
 
6.
  (U) The Ambassador posed the question, "How do you as 
journalists prevent wrong information, or how do you prevent 
negative propaganda?"  He gave as an example the recent false 
reports in the Kazakhstani press that American soldiers had been 
spotted at the Almaty Airport taking measurements for a future 
military base.  This sparked a debate with the representative from 
pro-government "Megapolis," who underlined a more typical 
Kazakhstani approach to journalistic responsibility.  She insisted 
that "each media outlet has is own opinion and the right to express 
it," completely missing the Ambassador's distinction between opinion 
pieces and straight news.  The Ambassador responded that 
professional journalists have the responsibility to base their 
opinions on objective reality, not fantasy suppositions or, even 
worse, black propaganda that might be fed to them.  The journalist 
riposted the Embassy has the responsibility to contact the editorial 
board of an offending press report to set the record straight.  The 
Ambassador responded, "That's an excellent suggestion - thank you!" 
 
OFF-THE-WALL PUBLIC OPINION 
 
7.  (U) It would not be an encounter with Kazakhstani journalists 
without a bizarre question or two.  One reporter insisted that 
Kazakhstanis are more European than the other peoples of the region, 
in part because "our women marry Europeans," and asked for the 
Ambassador's opinion.  The editor of "Capital Morning" insisted that 
President Obama had promised to provoke "war and crisis" in the next 
few years, and stated that because the United States was currently 
engaged in military conflicts and Kazakhstan was not, democracies 
are more likely to cause wars.  (NOTE:  However, after her 
aggressive questioning, the editor asked the Embassy's public 
affairs staff for closer cooperation on her paper's nascent 
English-language page.  END NOTE.)  Another journalist asserted that 
the world economic crisis was the result of the U.S. dollar not 
being backed by gold and asked if the Ambassador agreed that a new 
"world currency" would emerge after the crisis. 
 
8.  (SBU) A self-declared "opposition journalist" charged that the 
United States has stopped paying attention to democracy in 
Kazakhstan during the past few years and is "cozying up to the 
regime" because of Kazakhstan's oil.  He asked the Ambassador why 
the United States doesn't "break relations with Kazakhstan to teach 
it a lesson and force it to become a democracy."  (COMMENT:  We have 
heard this simplistic analysis from leaders of some of the so-called 
opposition parties.  We say "so-called," because these parties have 
no substantial influence in Kazakhstan's political debate.  Rather 
than build real grass-roots constituencies, they tend to think that 
"Uncle Sam's approval and support" will lift them to power.  END 
COMMENT.) 
 
CLUB REQUESTS MASTER CLASSES BY A U.S. JOURNALIST 
 
9.  (U) The Club leadership was clearly delighted to have the 
Ambassador as a guest, emphasizing that he was the first foreign 
diplomat ever to have appeared at a Club meeting.  The event was 
covered extensively by the Kazakhstani mass media, including all the 
major television stations.  Kunbayev is also seeking closer 
cooperation between the Editors-in-Chief Club and the Embassy.  He 
suggested that the Embassy bring an American reporter to Astana to 
teach master classes for his Kazakhstani colleagues.  Ambassador 
Hoagland heartily endorsed the idea and committed to find a way to 
make this happen. 
 
10.  (SBU) COMMENT:  Some stereotype the Kazakhstani media as either 
supine, government-controlled toadies (television and the majority 
of newspapers) or irresponsible, bomb-throwing oppositionists (a 
minority of Almaty-based publications).  However, the Astana 
Editors-in-Chief Club represents serious journalists interested in 
improving their level of professionalism, even while they debate 
what that entails.  This meeting opened a door for the Embassy to a 
corps of influential journalists who are likely to shape the future 
of the media in Kazakhstan, especially Mirbulat Kunbayev, whose 
rising profile and balanced facility with the whole spectrum of 
Kazakhstani journalists marks him as someone to watch on the media 
 
ASTANA 00000134  003 OF 003 
 
 
scene. 
 
11.  (SBU) COMMENT CONTINUED:  Some critics in the West tend to 
dismiss Kazakhstan's government-approved "public associations" like 
the Editors-in-Chief Club, primarily because of their government 
imprimatur and, perhaps, because we do not perceive them as 
Western-style, wholly independent NGOs.  In our experience, 
Kazakhstan's public associations are indeed a valuable element of 
democratic institution-building, because those like the 
Editors-in-Chief Club are inclusive of a broad range of opinion, 
including opposition voices.  We suggest our goals -- and ideals -- 
would be better served to recognize the valuable contribution to 
democracy-building these public associations are making in a very 
complicated and conflicted part of the world where Russia's views 
tend to dominate news and information.  A good number of 
Kazakhstanis want to work with us, but within their own system.  We 
should both respect and carefully, wisely take advantage of that. 
END COMMENT. 
 
HOAGLAND

Wikileaks

09ASTANA131, KAZAKHSTAN: CHEVRON CAUTIONS CPC EXPANSION NOT YET A DONE

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Reference ID Created Released Classification Origin
09ASTANA131 2009-01-22 11:10 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO2459
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RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0131/01 0221110
ZNR UUUUU ZZH
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FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4421
INFO RUCNCIS/CIS COLLECTIVE 1076
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RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0474
RUEHKO/AMEMBASSY TOKYO 1180
RHEBAAA/DEPT OF ENERGY WASHDC
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RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0649
RUEKJCS/SECDEF WASHDC 0563
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1113

UNCLAS SECTION 01 OF 02 ASTANA 000131 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EPET EINV KZ
SUBJECT:  KAZAKHSTAN:  CHEVRON CAUTIONS CPC EXPANSION NOT YET A DONE 
DEAL 
 
REF:  (A) 08 ASTANA 2144 (B) 08 ASTANA 1910 (C) 08 ASTANA 2226 
 
ASTANA 00000131  001.2 OF 002 
 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  Chevron is pleased with the December 17, 2008, 
agreement to expand the capacity of the Caspian Pipeline Consortium 
(CPC) pipeline, but is concerned that the deal could still fall 
through before the project is sanctioned.  Although there are no 
technical obstacles to the Kazakhstan Caspian Transportation System 
(KCTS), critical details still needed to be negotiated, particularly 
on Caspian maritime logistics and safety.  Since Tengizchevroil 
(TCO) more than doubled its production in 2008, it needs greater 
transportation capacity and is in talks with the State Oil Company 
of the Azerbaijan Republic (SOCAR) to use the Baku-Supsa pipeline. 
Chevron said recent changes to the investment climate in Kazakhstan 
jeopardize the principles of tax stability and the sanctity of 
contracts.  END SUMMARY. 
 
CHEVRON PLEASED WITH AGREEMENT TO EXPAND CPC... 
 
3.  (SBU) Jay Johnson, Managing Director of Chevron's Eurasia 
Business Unit, told Energy Officer on January 15 that he was pleased 
with the agreement reached on December 17, 2008, to expand the 
capacity of the Caspian Pipeline Consortium pipeline from 32 million 
tons (approximately 700,000 barrels per day, or bpd) to 67 million 
tons (1.34 million bpd).  Johnson said he was pleasantly surprised 
that BP, the only consortium member that did not sign the expansion 
agreement, nevertheless signed a series of technical agreements that 
allowed the project to move forward, including one that reserves 
cash for the requisite engineering studies.  He confirmed that BP 
requested, and was denied, permission to negotiate the sale of its 
6.6% share in CPC with investors outside the consortium. 
 
BUT "IT'S NOT A DONE DEAL YET" 
 
4.  (SBU) Despite BP's acquiescence, Johnson cautioned that "CPC 
expansion is not a done deal."  He said the consortium has one year 
- until December 2009 - to sanction the project, by which time BP 
plans to sell its shares and exit the consortium.  BP does not own 
sufficient upstream assets to justify further investment in CPC and 
its business operations in Kazakhstan are fundamentally misaligned 
with the expansion endeavor (reftel A).  Johnson does not believe 
that BP will deliberately drag out negotiations over the sale of its 
shares until the last minute.  On the contrary, he said Lukoil, 
which has a right of first refusal as BP's main joint venture 
partner, "will squeeze BP hard on this deal."  In fact, Johnson said 
his biggest fear is if "BP gets burned, then they'll refuse to 
sanction the expansion." 
 
KCTS FUNDAMENTALS ALREADY AT WORK... 
 
5.  (SBU) Commenting on the Kazakhstan Caspian Transportation 
System, Johnson said there are no technical obstacles to building 
the first segment of the project, a pipeline from Eskene (near the 
supergiant Tengiz oil field in Atyrau oblast) to Kuryk (south of the 
port of Aktau).  He confirmed that Chevron is representing 
Tengizchevroil (TCO) in the negotiations, while ExxonMobil is 
representing the so-called G-6, or Kashagan consortium.  Johnson 
said the pipeline could be built in 18 months "if we just quit 
screwing around."  In fact, Johnson said that an embryonic KCTS is 
already operational:  TCO currently ships Tengiz crude by rail to 
the port of Aktau, where it is loaded onto 12,000 deadweight ton 
tankers, shipped to Baku, and loaded onto rail cars to the Georgian 
port of Batumi or pumped directly into the Baku-Tbilisi-Ceyhan (BTC) 
pipeline. 
 
KCTS COMPLEXITY COULD CREATE DIFFICULTIES AND DELAYS 
 
6.  (SBU) Johnson cautioned, however, that this is an extremely 
complex, multifaceted project with many potential bottlenecks.  For 
example, TCO has voluntarily limited exports via BTC to 5% of that 
pipeline's capacity, due to the high mercaptan content of Tengiz 
 
ASTANA 00000131  002.2 OF 002 
 
 
crude.  (NOTE:  Higher volumes of Tengiz crude would impact the 
quality of the blend and restrict refining options and the product 
mix.  For example, jet fuel cannot contain mercaptans.  END NOTE). 
In addition, Johnson said the small tankers currently in use would 
be insufficient to accommodate the increased volumes expected from 
TCO and Kashagan by 2013.  "We've done a logistical study," he said,
 
"and determined that you cannot run enough smaller ships to carry 
all the crude.  It just would not be safe.  We definitely need the 
bigger ships with safety features like inert gas systems and double 
hulls." According to Johnson, other potential problems for KCTS 
include the capital costs of dredging and modernizing the port of 
Kuryk, the training and accreditation of crews, legislation to 
govern the administration of ports, and the amount of paperwork 
required to move ships across the Caspian.  Johnson said it would be 
a mistake to underestimate the importance of the latter, noting that 
the current procedures are paper-based and can take several days to 
process a single ship. 
 
NEGOTIATING WITH SOCAR TO USE BAKU-SUPSA 
 
7.  (SBU) Johnson said that TCO doubled production at the end of 
2008 - from 270,000 bpd to more than 540,000 bpd - and confirmed 
that TCO is in talks with Azerbaijan's national oil company SOCAR to 
ship up to 100,000 barrels per day of Tengiz crude via the "westward 
route", or Baku-Supsa pipeline.  He said that TCO plans to expand 
even further in the next five years.  Although TCO's Future Growth 
(Phase III) expansion has not yet received final approval from the 
Board - "the government of Kazakhstan wants to take a close look at 
it" - Johnson called it "an active project currently under 
development."  Future Growth would expand TCO's production to more 
than 1 million barrels per day. 
 
INVESTMENT CLIMATE CONCERNS 
 
8.  (SBU) When asked if Chevron is pursing new development 
opportunities in Kazakhstan, Johnson shook his head no and said, 
"There are some areas we are interested in, but we are not actively 
exploring anything, not in this business environment."  He said it 
is very expensive to explore in Kazakhstan's unforgiving climate - 
"it costs $50 million to drill a well in the Caspian" - but 
emphasized that legal and regulatory changes were more of a 
deterrent than cost.  For example, Johnson noted that the draft 
Subsoil Law no longer grants investors the right to go to 
international arbitration in case of a dispute with the government 
(reftel B) and said the new Tax Code raises real questions about the 
government's respect for the sanctity of contracts, particularly the 
tax stability clauses of existing agreements with international oil 
companies (reftel C).  Finally, Johnson said that the Karachaganak 
consortium - in which Chevron owns 20% -- has paid under duress more 
than $760 million in crude export duties in the last nine months 
alone.  (NOTE:  Although the government recently cancelled the crude 
export duty effective January 26, it is not clear if this is a 
permanent or temporary suspension.  END NOTE). 
 
HOAGLAND

Wikileaks

09ASTANA112, KAZAKHSTAN: 2009 INVESTMENT CLIMATE STATEMENT

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Reference ID Created Released Classification Origin
09ASTANA112 2009-01-22 00:46 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO1974
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
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RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0112/01 0220046
ZNR UUUUU ZZH
O 220046Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4384
INFO RUCNCIS/CIS COLLECTIVE 1057
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RHEHNSC/NSC WASHDC 0630
RUEKJCS/SECDEF WASHDC 0544
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1092

UNCLAS SECTION 01 OF 19 ASTANA 000112 
 
SIPDIS 
 
STATE FOR EEB/IFD/OIA, SCA/CEN 
 
E.O. 12958: N/A 
TAGS: PGOV EFIN ETRD ELAB KTDB OPIC USTR KZ
SUBJECT:  KAZAKHSTAN:  2009 INVESTMENT CLIMATE STATEMENT 
 
REF:  08 STATE 123907 
 
ASTANA 00000112  001.2 OF 019 
 
 
1.  Per reftel, below is Post's submission for the 2009 Investment 
Climate Statement for Kazakhstan. 
 
2.  BEGIN TEXT: 
 
Kazakhstan 
 
2009 Investment Climate Statement - Kazakhstan 
 
Openness to Foreign Investment 
 
Kazakhstan has made significant progress toward creating a market 
economy since its independence in 1991. The European Union in 2000 
and the U.S. Department of Commerce in March 2002 recognized the 
success of Kazakhstan's reforms by granting it market economy 
status.  Kazakhstan also has attracted significant foreign 
investment since independence.  By July 2008, foreign investors had 
invested a total of about $76.1 billion in Kazakhstan, primarily in 
the oil and gas sector during the country's fifteen years of 
independence.  Following independence, the government created a 
favorable regime for oil and gas investments at the same time that 
it undertook other liberalizing economic measures and began an 
ambitious privatization program. 
 
Despite continuously increasing investment into Kazakhstan's energy 
sector, concerns remain about a tendency on the part of the 
government to challenge contractual rights, to legislate preferences 
for domestic companies, and to create mechanisms for government 
intervention in foreign companies' operations, particularly 
procurement decisions.  Together with vague and contradictory legal 
provisions that are often arbitrarily and inconsistently enforced, 
these negative tendencies feed a perception that Kazakhstan is less 
than fully open to investment.  Four major pieces of existing 
legislation affect foreign investment. These are: 1) the 2003 law 
"On Investment"; 2)  the 2003 Customs Code;" 3) the 2007 law "On 
Government Procurement, with recent amendments made in 2008; and 4) 
the 2008 Tax Code . These four laws provide for non-expropriation; 
currency convertibility; guarantees of stability in the legal 
regime; transparent government procurement; and incentives in 
certain priority sectors.  However, inconsistent implementation of 
these laws and reforms at all levels of government remains the key 
obstacle to business in Kazakhstan. 
 
There has been a trend in favoring domestic investors over 
foreigners in most state contracts.  Furthermore, amendments passed 
in 1999 to the Oil and Gas Law require mining and oil companies to 
use local goods and services.  According to these "local content" 
regulations, subsurface users in Kazakhstan are obligated to 
purchase goods and services from Kazakhstan entities -- provided 
that the local goods meet minimum project standards -- and to give 
preference to the employment of local personnel.  Prospective 
subsurface users are required to specify in their tenders the 
anticipated local content of their work, goods, and services.  Since 
2002, a designated government body must approve all tender 
documents, participate in tender committees, and approve all tender 
committee decisions, in order to ensure compliance.  In December 
2008, a new Subsurface Law was approved by parliament, superseding 
legislation on oil production and exploration, mineral resources 
mineral management, and production sharing agreements (PSAs).  The 
Law, expected to be signed by the President in January 2009, allows 
the government to annul contracts in the extractive sector if they 
are deemed to be harmful to Kazakhstan's economic security or 
national interests.  The legislation also requires separate 
contracts for exploration and production operations, puts shorter 
time limits on exploration contracts, enhances the government's 
authority to terminate contracts not in compliance with the law, and 
requires tax stability clauses in individual contracts to be 
approved by parliament.  In addition, under the terms of the 
legislation, no future contracts would be structured as production 
sharing agreements (PSAs), companies are required to establish equal 
terms, conditions, and pay for Kazakhstani and foreign workers, and 
the government would evaluate subsoil resource bids based on 
 
ASTANA 00000112  002.2 OF 019 
 
 
promised social contributions. 
 
Tax experts consider Kazakhstan's tax laws to be among the most 
comprehensive in the former Soviet Union.  In January 2009, 
Kazakhstan adopted a new Tax Code that will increase tax revenues 
from the extractive industries.  The new Tax Code will l
ower 
corporate income taxes, the crude oil rent tax, and the value added 
tax, while introducing new taxes for mineral extraction and excess 
profits.  Business associations and investment advisors are 
concerned that the new code may undermine tax stability clauses in 
existing and future contracts.  The government has said it will 
guarantee tax stability only for existing production sharing 
agreements (PSAs) and for one major hydrocarbon project which has a 
tax and royalty contract, if the contracts are ratified by 
legislative acts of the Kazakhstani parliament. 
 
The new Tax Code applies taxes universally and allows only a limited 
set of exemptions.  The code applies an international model of 
taxation, based on the principles of equity, economic neutrality, 
and simplicity.  According to many experts, this code is an 
improvement over its predecessor and a step forward in establishing 
a transparent and effective tax system, particularly for the 
non-extractive sectors. 
 
Starting January 1, 2009 the corporate income tax rate will be 
decreased from 30% to 20%. The rate will then be lowered to 17.5% in 
2010, and 15% in 2011.  The value-added tax (VAT) will continue to 
be reduced every year as well. In 2006, the VAT was 16%, in 2007 - 
14%, in 2008 - 13%, and in 2009 the VAT will be 12%.  The 
progressive social tax imposed on employees' earnings will have a 
flat rate of 11%. The personal income tax rate for residents will be 
10%.  Depending on the specific type of income, non-residents 
working in Kazakhstan are responsible for payment of income tax 
rates that range between 5% and 15%. 
 
In 2008, Kazakhstan introduced, adjusted, and ultimately abandoned 
an export duty on crude oil and oil products.  On April 8, Prime 
Minister Karim Masimov signed a decree establishing the duty.  Each 
quarter thereafter, the Ministry of Finance reviewed the export duty 
rate in light of average Brent crude prices and adjusted the amount 
of the tariff according to a published formula.  On December 29, 
however, the Government announced that it would abolish the export 
duty as of January 26, 2009. 
In addition to concerns about tax stability, contract sanctity, and 
tender transparency, companies in the oil and gas industry have 
reported difficulty doing business for a number of other reasons, 
including delays in obtaining work permits for expatriate employees, 
alleged environmental violations followed by large fines, 
inconsistent enforcement of a Kazakh language law, and unexpected 
customs delays and documentation.  In January 2003 President 
Nazarbayev signed a new law "On Investments" that superseded and 
consolidated past legislation governing foreign investment.  The law 
establishes a single investment regime for domestic and foreign 
investors, and provides, inter alia, guarantees of national 
treatment and non-discrimination for foreign investors.  It 
guarantees the stability of existing contracts, with the 
qualification that new ones will be subject to amendments in 
domestic legislation, certain provisions of international treaties, 
and domestic laws dealing with "national and ecological security, 
health and ethics." 
 
The 2003 law provides for dispute settlement through negotiation, 
Kazakhstan's judicial process, and international arbitration. 
However, the law narrows the definition of investment disputes and 
lacks clear mechanisms for access to international arbitration. U.S. 
investors should note that the U.S.-Kazakhstan Bilateral Investment 
Treaty, as well as the New York Convention, protect U.S. investor 
access to international arbitration.  Additionally, the Kazakhstani 
Constitution, as well as the 2003 law "On Investments," specifies 
that ratified international agreements have precedence over domestic 
law.  The May 2005 Law on International Agreements appeared to 
contradict this legal hierarchy, setting precedence of the domestic 
law of Kazakhstan over its international agreements   However, 
Kazakhstan amended this law in February 2007, eliminating this 
 
ASTANA 00000112  003.2 OF 019 
 
 
contradiction.  Finally, in December 2004 Kazakhstan adopted a law 
"On International Commercial Arbitration" (see "Dispute Settlement" 
for full discussion). 
The 2003 law currently contains investment incentives and 
preferences based on government-determined sectoral priorities, and 
provides for investment tax preferences, customs duties exemptions, 
and in-kind grants. 
According to provisions of the new Tax Code, investment tax 
preferences such as ten-year corporate income tax exemptions and 
exemptions from land and corporate property taxes will likely be 
removed from the investment law via amendments expected in 2009. 
However, preferences for some sectors in the form of custom duties 
exemptions and in-kind grants will remain.    (Customs duties 
exemptions are limited to equipment that is destined for use in 
production processes exclusively in Kazakhstan, and to  imported 
equipment/components if Kazakhstani-produced stocks are not 
available or do not meet international standards.) 
In 2001, Kazakhstan adopted transfer-pricing legislation, which 
gives tax and customs officials the authority to monitor 
export-import transactions in order to prevent the understatement of 
earnings through manipulation of export prices.  Foreign investors 
are concerned that the government specifically rejected the use of 
OECD standards for determining a proper market price under the 
transfer-pricing legislation, creating instead a methodology that 
fails to fully account for all cost and quality differences.  The 
government in effect holds that transfer-pricing can take place even 
in transactions between unrelated parties, because the practice, 
until recently, was defined by transaction prices that differ from 
market prices by a deviation of 10%.  Kazakhstan's deviation from 
international methodology on this complicates the ability of firms 
to obtain relief under treaties on avoidance of double taxation from 
their home countries.  This remains a contentious issue with 
investors. 
The new law on transfer pricing adopted in July 2008 will in the 
opinion of its authors allow for improved control of transfer 
pricing by applying the commonly accepted "arm's length principle." 
 This law is expected to come into force on January 1, 2009. 
Foreign investors admit that the new law is more closely aligned 
with international standards.  However, there is concern that the 
law may be applied not only to transactions with related parties, 
but also to all international transactions, and may present a major 
challenge in 2009.  Driven by suspected government mandates to 
generate revenues, it is suspected that tax authorities may apply 
provisions of transfer pricing rules to all international 
transactions of foreign enterprises. 
Kazakhstani law holds that no sectors of the economy are fully 
closed to investors, although there are sectoral limitations, 
specifically a 20% ceiling on foreign ownership of media outlets and 
49% restriction on foreign ownership in the telecommunications 
sector.  However, a December 2005 law lifted the restrictions on the 
participation of foreign capital in the banking sector. A ban on 
foreign bank and insurance company bran
ches remains in force. 
Finally, the 2005 Production Sharing Agreement law mandates that the 
state oil company be a minimum 50% participant in new offshore 
projects. In practice, investors may find that a joint venture with 
a well-connected local partner is advantageous in navigating the 
legal and political complexities of operating in Kazakhstan 
Insurance supervision and licensing powers are exercised by the 
Financial Supervision Agency. February 2006 amendments to the Law on 
Insurance have eliminated participation restrictions for foreign 
legal entities in insurance and re-insurance organizations in 
Kazakhstan. 
Restrictions also exist on foreign ownership of land in Kazakhstan. 
See below (A.6 "Right to Private Ownership and Establishment"). 
The government plays a large role in overseeing foreign investment. 
Government officials, sometimes at the highest levels, screen major 
foreign investment proposals. 
The new Subsoil Law reiterates the state's right of first refusal on 
the purchase of shares in new exploration and production projects in 
the extractive industries.  In 2005, the Kazakhstani government 
broadened its claim of priority purchase rights to include shares of 
companies that have invested in the oil and gas sector. The same 
amendments allow the government to block the sale of oil and gas 
assets in the interest of "national security." Additional amendments 
 
ASTANA 00000112  004.4 OF 019 
 
 
to the Subsoil Law signed in December 2008 also assign the 
government the right to exclude companies from participating in oil 
and gas investment program tenders in the interests of "national 
security." 
Foreign firms operating in Kazakhstan frequently report harassment 
by the Financial Police via unannounced inspections and other 
methods.   One company reported a request from the Financial Police 
for confidential information on employees, with no apparent 
connection to an ongoing investigation. 
It is important to note that in practice the application of tax laws 
has been uneven, and in some cases blatantly unfair. This has been 
particularly true in cases where a company is involved in another, 
unrelated dispute with the authorities. Foreign investors have 
complained of a lack of evenhandedness in the authorities' 
application of other laws or regulations as well. In some cases, the 
investors have interpreted regulatory pressure as an effort to 
extract bribes. 
Investors should not assume that agreeing to a settlement with tax 
authorities following an investigation or civil case will prevent 
the pursuit of charges under criminal provisions.  At times the 
authorities have used criminal charges in civil disputes as a 
pressure tactic. 
By law and in practice, foreign investors are allowed to participate 
in all privatization projects. There appears to be no discrimination 
against foreign investors after an investment is made.  However, 
many foreign companies cite the need to protect their investments 
from a near-constant barrage of decrees and legislative changes, 
most of which do not "grandfather" existing investments.  In 
addition to arbitrary tax inspections, foreign investors also 
complain of problems with closure on contracts, delays and irregular 
practices in licensing, land fees, etc.  Some foreign firms have 
expressed concern that government organizations fail to live up to 
their side of the contract, particularly regarding payment. This 
often prevents the foreign partner from moving ahead with its 
investment program.  When this occurs, the investor is exposed to 
government charges of non-performance and the real possibility that 
the government will cancel the contract. 
Foreign workers are required to have a work permit to work legally 
in Kazakhstan. Obtaining these work permits can be difficult and 
expensive. The government cites the need to boost local employment 
by limiting the issuance of work permits to foreigners. U.S. 
companies should consult legal firms for assistance (see A.5 for 
details) in obtaining work permits.  The work permits quota system 
is based on the 1998 Law on Employment  of the Population.  Under 
this system, the government limits the number of work permits 
available to foreigners, based on the area of specialization and 
geographic region. 
In December 2007, Kazakhstan adopted new regulations on foreign 
labor that the Ministry of Labor and Social Protection claims 
simplify the issuance of work permits to foreigners,  They do, 
however, also place additional requirements on employers to support 
the domestic labor market.  According to the new regulations, 
permits for foreign labor are issued only in the event that suitable 
candidates cannot be found in country, which is subject to 
verification and assessment by Kazakhstani labor authorities.  Those 
foreign employers that do receive permits for foreign laborers are 
expected to meet specific terms of agreement that include the 
training of Kazakhstani citizens to eventually fill positions held 
by foreigners, the gradual overall replacement of foreign labor with 
Kazakhstani citizens, and the creation of new jobs for domestic 
workers in the event that production volumes increase.  The scale of 
these individualized terms is directly proportional to the number of 
foreign workers hired.  Kazakhstani labor authorities are expected 
to complete their review of work permit applications for foreigners 
within 20 days.  If awarded, employers must provide authorities with 
documents within 10 days, guaranteeing the prompt departure of 
foreigners after the expiration of their permits.  From 2003 -2008, 
the quota has steadily increased from 0.14% to 1.6%.  However, 
because of the current economic crisis conditions, the government 
has reduced the quota for foreign labor by half; in 2009 it will be 
only 0.75% of the active labor force. 
Conversion and Transfer Policies 
There are minimal restrictions on converting or transferring funds 
associated with an investment into a freely usable currency at a 
 
ASTANA 00000112  005.2 OF 019 
 
 
legal market-clearing rate. 
In 1996, Kazakhstan adopted Article 8 of the IMF Articles of 
Agreement, which stipulates that current account transactions, such 
as currency conversions or the repatriation of investment profits, 
will not be restricted. In 1999, the Government and National Bank of 
Kazakhstan announced that the national currency would be allowed to 
float freely at market rates, thus abolishing the previous managed 
exchange rate system. 
No distinction is made between residents and non-residents when 
opening bank accounts. There are no restrictions whereby different 
types of bank accounts are required for investment or import/export 
activities. For non-residents, money transfers in currency 
associated with foreign investments, whether inside or outside of 
the country, can take place without restriction. The National Bank 
permits non-residents to pay wages in foreign currency. Foreign 
investors may convert and repatriate tenge earnings made inside 
Kazakhstan. 
In June 2005 the President signed the Law on Currency Regulation and 
Currency Control. This law lifted restrictions on money transfers: 
both residents and non-residents are allowed to take up to $10,000 
in cash out of the cou
ntry without documentation of the money's 
origin.  However, the transfer of cash amounts exceeding $3,000 must 
be declared; the transfer of amounts exceeding $10,000 must be 
accompanied by the certification of the National Bank.  Beginnning 
January 1, 2007 all licensing requirements and procedures for 
foreign currency operations were elimiated.  Since that time, 
agencies conducting transactions with foreign currency, including 
bank payments and transfers relating to capital movements, either 
have to simply register or notify the central bank of their 
operations. 
The National Bank requires an "Import [or] export transaction 
passport," ostensibly for the purpose of currency control. The 
document, which re-states information from other documents, 
complicates import and export processing. There is a real question 
whether the law is effective for its stated purpose - to ensure that 
the proceeds from export sales are returned to Kazakhstan, and to 
prevent money laundering and fraudulent over-invoicing of imports. 
In 2008, the National Bank announced impending amendments to the Law 
on Currency Control that would further liberalize currency controls, 
including an increase on the ceiling for transactions requiring 
passports from $10,000 to $50,000. 
In July 2006, Kazakhstan adopted an amendment to its Customs Code, 
requiring submission of export declaration forms of country of 
origin for bringing goods into Kazakhstan.  This resulted in an 
unintentional virtual shutdown for imports from many countries, 
particularly from the United States.  The July amendment was 
repealed in November, ending the problem. 
The U.S. Embassy is not aware of any concerns with regard to 
remittance policies or availability of foreign exchange for 
remittance of profits. 
In 2001, the government announced an amnesty for all Kazakhstani 
citizens repatriating cash or transferring money during a 30-day 
period. The legalized money was not taxed and became available to 
its owners at the end of the amnesty period. Kazakhstanis 
repatriated $480 million under this amnesty, of which almost 90% was 
brought to banks in the form of cash.   Another amnesty, which 
concluded on August 1, 2007, resulted in legalization of nearly $7 
billion in property. 
Based on rules adopted in late 2005 relating to the control of 
currency turnover and capital flows, the National Bank regularly 
monitors currency operations of selected non-residents. This 
procedure primarily affects the following sectors: the oil and gas 
industry, construction, mining, as well as companies providing 
architectural, engineering and industrial design services. According 
to the National Bank, this monitoring will furnish the National Bank 
with better statistical data on the balance of payments and external 
debt. 
Expropriation and Compensation 
The Investment Law of 2003 represents a step back from the clarity 
of the 1994 law with regard to expropriation and compensation. The 
2003 law allows nationalization by the state in cases "as provided 
in legislative acts of the Republic of Kazakhstan." Unlike the 1994 
law, it does not provide clear grounds for expropriation. 
Similarly, the 1994 law required "prompt, adequate and effective" 
 
ASTANA 00000112  006.2 OF 019 
 
 
compensation at fair market value, with interest. The new law 
differentiates between nationalization and requisition, providing 
full indemnification of the investor in the case of the former, but 
only payment of market value in the case of the latter. Bilateral 
investment treaties (BITs) between Kazakhstan and other countries, 
including the U.S., also refer to compensation in the event of 
expropriation. 
There has been one case of legal expropriation of a foreign 
investor's property for public purpose. The investor ultimately 
submitted the case for international arbitration. In May 2006, after 
lengthy delays and negotiations, the government paid the amount 
awarded by the arbiter. 
Some foreign investors have encountered serious problems short of 
expropriation. In one instance, in 1996, three foreign companies 
were forced to relocate their offices under pressure from the 
government. In 1997, investors, after reviving an important mine, 
found they could not obtain export licenses for their ore, although 
the right to export was written into their contract. The same year 
another investor alleged forgery and fraud by government officials, 
claiming its employees had been physically threatened in a 
management dispute at its ferro-alloy venture in northern 
Kazakhstan. 
The Embassy is aware of one case, in 1992, of government action 
tantamount to expropriation, when a U.S. company was deprived of its 
rights to explore and develop an oil deposit in Atyrau Oblast. In 
1999, the Stockholm Arbitral Court found that the government's 
action was tantamount to expropriation. After the U.S. Embassy 
raised the case with the government, it paid in full the amount of 
compensation called for in the arbitral award. 
Dispute Settlement 
There have been a number of investment disputes involving foreign 
companies in the past several years. While the disputes have arisen 
from unrelated, independent circumstances, many are linked to 
alleged breaches of contract or non-payment on the part of 
Kazakhstani state entities. Some disputes relate to differing 
interpretations of joint-venture agreement and production sharing 
agreement (PSA) contracts; one questions the legality of the 
government's use of ex-post facto regulations governing value added 
taxes.  The disputes involve, in some instances, hundreds of 
millions of dollars.   A recurring theme remains the 
unpredictability of actions taken by tax authorities and other 
regulatory agencies. Kazakhstan is still in the process of building 
the institutional capabilities of its court system. Until this is 
complete, the performance of courts in the country will be less than 
optimal. Problems also arise in enforcing judgments. Given a 
relative lack of judicial independence, there is ample opportunity 
for interference in judicial cases. 
General commercial law principles are established in Kazakhstan's 
Civil Code. 
The 2003 law "On Investments" defines an investment dispute as "a 
dispute ensuing from the contractual obligations between investors 
and state bodies in connection with investment activities of the 
investor." It states that such disputes can be settled by 
negotiation, in Kazakhstani courts, or through international 
arbitration. According to the law, disputes not falling within the 
above-noted category "shall be resolved in accordance with the laws 
of the Republic of Kazakhstan." While some investors find this 
legislation problematic since it does not address disputes between 
private entities, others believe that Kazakhstan's Civil Code and 
Civil Procedure Code provide private parties with recourse to 
foreign and/or third party courts. 
Additionally, in December 2004, Kazakhstan adopted a law on 
international arbitration. The law appears to give broad authority 
for judicial review of arbitral awards in Kazakhstan. An early test 
case yielded decidedly mixed results. In 2005, a U.S. company became 
embroiled in a dispute over payment for the sale of its shares in a 
joint venture to a grou
p of Kazakhstani companies. The London Court 
of International Arbitration (LCIA) issued a preliminary ruling 
ordering that the shares be frozen pending its final decision. The 
acting Kazakhstani court, however, ignored the LCIA's ruling, and 
proceeded with its own hearings. The case was ultimately decided by 
the Supreme Court of Kazakhstan in the U.S. company's favor. In 
January 2006, however, the Astana City Court relied on an 
international convention loophole to decline the LCIA's award of 
 
ASTANA 00000112  007.2 OF 019 
 
 
legal costs to the U.S. firm on the grounds that doing so would be 
detrimental to "public order" in Kazakhstan. In May 2006, that 
decision was overturned, and the legal costs were awarded. 
Kazakhstan has been a member of the International Center for the 
Settlement of Investment Disputes (ICSID) since December 2001. 
Any international arbitral award rendered by the International 
Center for the Settlement of Investment Disputes (ICSID), any 
tribunal applying the United Nations Commission on International 
Trade Law Arbitration rules, the Stockholm Chamber of Commerce, the 
London Court of International Arbitration, or the Arbitration 
Commission at the Kazakhstan Chamber of Commerce and Industry 
should, by law, be enforced in Kazakhstan 
The U.S.-Kazakhstan Bilateral Investment Treaty can serve to 
buttress the law "On Investment" in this area. Kazakhstan ratified 
the New York Convention on the Recognition and Enforcement of 
Foreign Arbitral Awards in 1995. 
Creditor rights are set forth clearly under the current law on 
bankruptcy. However, the 1997 bankruptcy legislation is hindered by 
its complexity and numerous subsequent amendments, resulting in 
considerable misapplication in practice. The Committee on Work with 
Insolvent Debtors, operating under the umbrella of the Ministry of 
Finance, is Kazakhstan's official bankruptcy agency. 
The Law "On Bankruptcy" approved in 1997 was amended in May 2007, 
and again in July 2008.  It contains a detailed list of creditors' 
rights and prescribes a mechanism for their enforcement.  The 2008 
amendments define a comprehensive list of Governmental authorities 
in bankruptcy procedures, and expand the rights of enterprises 
during possible rehabilitation procedures. 
Monetary judgments are normally made in domestic currency. 
In general, the Government of Kazakhstan has a mixed record of 
addressing investment disputes. Foreign investors have often had to 
endure protracted negotiations. Most investors prefer to handle 
investment disputes privately, rather than make their cases public. 
 
In addition, the law "On Investments" restricts recourse to 
international arbitration and places more reliance on the 
Kazakhstani judicial system for dispute resolution. The U.S. Embassy 
advocates on behalf of U.S. firms with investment disputes. 
Performance Requirements and Incentives 
The Investment Committee under the Ministry of Industry and Trade is 
responsible for monitoring the fulfillment of obligations undertaken 
by investors. If the committee determines that a company has not 
complied with its financial or other contractual obligations, the 
government may revoke the operating license of the company. 
With the exception of investments in oil production or mining, rules 
on local content and local sources of financing vary from contract 
to contract.  Typically, an investor's obligations might include an 
obligation to train local specialists and contribute to the social 
development of the respective regions. 
Technology transfers frequently occur and sometimes are written into 
contracts, but are not explicitly required for foreign investment. 
The Investment Law of 2003 provides tax preferences, customs duties 
exemptions, and in-kind grants as incentives for investment in 
government-determined priority sectors. To obtain the preferences, 
the investor enters into a contract with the Investment Committee. 
Under the law, the government may rescind such incentives, and 
collect back payments on duties, etc. including fines, if the 
investor fails to fulfill contractual obligations. The early 2006 
amendments to the Investment Law eased compliance and audit 
requirements for firms wishing to qualify for the preferences. The 
law provides the same preferences for domestic and foreign 
investors.  Preferences are, however, determined on a case-by-case 
basis. The Ministry of Industry and Trade reported that for the last 
years it signed 400 contracts for a total of about $7-8 billion, in 
which such preferences were extended.   Roughly a quarter of these 
investments had foreign involvement. 
The preferences system echoes the government's policy of 
diversifying the economy away from the extractive sector and largely 
focuses on selected clusters. The overall list contains 245 types of 
activities grouped into 36 categories. The system applies to new 
enterprises as well as to existing enterprises making new 
investments; the duration of the tax preferences increases with the 
size of such investments. The government is, however, expected to 
amend the Investment Law in 2009, thereby removing most of the 
 
ASTANA 00000112  008.2 OF 019 
 
 
previously enumerated preferences in an attempt to increase 
transparency and promote more uniform application of tax codes. 
In 2006-2007, the government created four large state-owned holding 
companies; Samruk, Kazyna,, KazAgro, and Samgau.  The Samruk State 
Holding Company, modeled on Singapore's Temasek, manages the state's 
shares in a growing number of large enterprises. The Kazyna 
Sustainable Development Fund oversees the government's development 
institutions aiming to stimulate the country's non-extractive sector 
and diversify the economy.  KazAgro manages the state's agricultural 
holdings.  Samgau, the newest holding, is charged with stimulating 
the development of domestic know-how in the high-tech sector.  In 
2007, the government announced formation of Social Entrepreneurial 
Corporations (SECs).  Charged with managing regional government's 
holdings, SECs are meant to serve as a link between business and 
regional governments.  Most recently, in October 2008, the 
Kazakhstani government announced as part of its program to deal with 
the effects of the global financial crisis the merger of Samruk and 
Kazyna, as well as the regional SECs, into the Samruk-Kazyna 
National Welfare Fund. 
There are no known cases in which U.S. or other foreign firms have 
been denied participation in government-financed or subsidized 
research and development programs on a national basis. The 
Kazakhstani government has recently taken a strong interest in 
dedicating state resources to the support of research and 
development. How such projects will be administered in practice 
remains to be seen. 
The government has liberalized its trade policies and has passed 
legislation to begin bringing its legal and trade regimes into 
conformity with World Trade Organization (WTO) standards. Kazakhstan 
submitted its Memorandum on the Foreign Trade Regime (MFTR) in 1996 
and the first round of consultations on WTO accession took place in 
1997. Kazakhstan has made significant progress in implementing a 
legal framework necessary for accession and
signed bilateral 
protocols on market access for goods and services with several of 
its major trading partners.  As of January 1, 2009   Kazakhstan had 
completed bilateral negotiations with 21 countries out of 26 members 
of the Working Party.  Kazakhstan is also a member of the Eurasian 
Economic Community (EEC), along with Russia, Kyrgyzstan, Belarus, 
Tajikistan, and Uzbekistan.  Armenia, Moldova and Ukraine currently 
have observer status. In 2006, Kazakhstan, Russia, and Belarus 
announced the formation of a trilateral customs union. There are 
plans to eventually expand it to include other EEC countries. The 
union aims to bring about coordinated customs procedures and a high 
degree of uniformity in its members' external tariffs.  The 
government's working assumption appears to be that the country will 
enter the WTO before the customs union will enter into force, 
However, the global financial crisis has increased the political 
appeal of regional integration in some governmental circles. 
Kazakhstan permits the importation of goods from EEC partners and 
certain developing or less-developed countries either free of duty, 
or at a reduced rate. There are no special requirements for engaging 
in trade-related activities. In keeping with internationally 
accepted practices, registration as an entrepreneur, legal entity, 
or branch/representation office is required. 
Right to Private Ownership and Establishment 
Foreign and domestic private entities have the right to establish 
and own business enterprises and to engage in all forms of 
remunerative activity. Private entities can freely buy and sell 
interests in business enterprises. However, state-owned enterprises 
do sometimes enjoy better access to markets, credits, and licenses 
than private entities. 
Kazakhstan's constitution provides that land and other natural 
resources may be owned or leased by persons who are Kazakhstani 
citizens according to conditions established by law. The 2003 Land 
Code allows citizens of Kazakhstan to own agricultural land and 
urban land with commercial and non-commercial buildings and 
complexes, including dwellings and land used for servicing these 
buildings. Under the 2003 Land Code, only Kazakhstani citizens 
(natural and legalized) and Kazakhstani companies may own land. The 
Land Law does not allow private ownership for the following types of 
land: 
-- land used for national defense and national security purposes; 
-- specially protected natural territories, resorts, recreational 
land and territories of a historical and/or cultural significance; 
 
ASTANA 00000112  009.2 OF 019 
 
 
-- forests, water reservoirs (lakes, rivers, canals, etc.), 
glaciers, swamps, etc.; 
-- public areas (urban or rural settlements); 
-- main railways and public roads; 
Short-term land leases may last for up to five years. The maximum 
period for long-term land leases are 49 years. Foreigners may rent 
agricultural land for up to 10 years. Foreigners may also own 
agricultural land through either a Kazakhstani-registered joint 
venture or a full subsidiary. 
Protection of Property Rights 
Secured interests in property (fixed and non-fixed) are recognized 
under the Civil Code and the 2003 Land Code. Mortgage lending grew 
dramatically in recent years, though decelerated in 2007-2008 
because of the global financial crisis.  A credit bureau system does 
exist, but is in very early stages of development. The Ministry of 
Finance has created a national mortgage agency, which issues bonds 
secured by mortgages purchased from banks. All property and lease 
rights for real estate must be registered with special 
government-owned Real Estate Centers, which exist in cities and 
rural district QQQ[8,uBO rights (IPR).  In 2004, Kazakhstan ratified the 1997 World 
Intellectual Property Organization (WIPO) Copyright Treaty and the 
WIPO Performances and Phonographs Treaty, and amended the Copyright 
Law to affirmatively protect pre-existing works and sound 
recordings. In 2005, Kazakhstan amended its Criminal and Civil Codes 
to make IPR crimes easier to prosecute and to toughen penalties for 
violators.  The 2005 amendments played a significant role in USTR's 
2006 decision to remove Kazakhstan from the Special 301 Watch list. 
While Kazakhstan has demonstrated a commitment to improving its IPR 
regime, substantial weaknesses, particularly in the area of civil 
dispute resolution, still remain. 
Patents and trademarks: Patent protection is available for 
inventions, industrial designs and prototypes. Patents for 
inventions are available with respect to processes and products that 
are novel and have industrial applications. However, patent 
protection for certain types of products and processes -- such as 
layout designs and plant variety - is not yet available. The 
National Institute of Intellectual Property performs formal 
examination of patent applications. 
 Patents for inventions are granted for a period of 20 years; 
patents for industrial designs are granted on a preliminary basis 
for five years. This period may be extended for an additional 10 
years if the preliminary patent is converted to a patent. Prototypes 
are granted a five-year initial period of protection, with the 
possibility of an additional three-year extension. Unsuccessful 
applicants have the right to appeal decisions of the National 
Institute of Intellectual Property and the Committee for 
Intellectual Property Rights. Kazakhstan is a member of the 
Moscow-based Eurasian Patent Bureau and the Munich-based European 
Patent Bureau. 
Trademark violation is a crime. Enforcement has historically been 
questionable, but U.S. companies are generally confident that their 
trademarks are protected in Kazakhstan. Still, imported counterfeit 
goods can commonly be found at local markets. There are marked 
disparities in fees charged to domestic patent and trademark 
applicants, as compared to foreign applicants. Applications for 
trademark, service mark and appellations of origin protection should 
be filed with the National Patent Office and approved by the 
Committee for Intellectual Property Rights. Trademarks and service 
marks are afforded protection for a period of 10 years from the date 
of filing. 
Copyrights: The Law on Copyrights and Related Rights was enacted in 
1996. The law is largely in conformity with the requirements of the 
WTO TRIPS Agreement and the Berne Convention. 
In late 2006, the government stated its plans to provide customs 
officials with ex officio authority to seize counterfeit products at 
the border.  However, appropriate legislation has not been passed. 
Complicating the issue is the government's concern that granting ex 
officio powers may exacerbate corruption at customs checkpoints. 
Amendments to the Administrative, Criminal and Civil Procedural 
Codes have been adopted to bolster IPR enforcement capabilities. IPR 
 
ASTANA 00000112  010.2 OF 019 
 
 
enforcement measures, while still somewhat sporadic, are 
increasingly robust. Prosecutions, under both the Criminal and 
Administrative Codes, have led to a steady legitimization of the 
domestic trade in copyrighted material. Progress in IPR protection 
through civil courts is less pronounced as the judicial system

develops the expertise necessary to resolve the more complex civil 
disputes. 
Illegal software development and manufacture generally is not 
conducted in Kazakhstan; Russia and Ukraine are believed to be the 
major sources of bootleg software to the local market. 
Kazakhstan ratified the Berne Convention for the Protection of 
Literary and Artistic Works in 1998 and the Geneva Phonograms 
Convention in 2000. 
Transparency of Regulatory System 
Transparency in the application of laws remains a major problem in 
Kazakhstan and an obstacle to expanded trade and investment. Foreign 
investors complain of changing standards and of corruption. While 
foreign participation is generally welcomed, some foreign investors 
point out that the government is not always even-handed and 
sometimes reneges on its commitments. Although the Investment 
Committee of the Ministry of Industry and Trade was established to 
facilitate foreign investment, it has had limited success in 
addressing the concerns of foreign investors. 
Opportunities for public comment on proposed laws and regulations 
are sporadic and generally limited. Often, contradictory norms 
hinder the functioning of the legal system. While Kazakhstan has 
recently defined more clearly which laws take precedence in the 
event of a contradiction, it has become clear that stability clauses 
granted investors under previous versions of the Foreign Investment 
Law or other legislation may not necessarily protect investors from 
changes in the legal and tax regulatory regime. The 2003 Investment 
Law holds that contracts signed subsequent to its enactment may be 
subject to amendments in domestic legislation and international 
treaty provisions that change "the procedure and conditions of the 
import, manufacture, and sale of goods subject to excise duties.  As 
an additional complication, oblast authorities may create additional 
bureaucratic encumbrances, especially in the licensing and issuance 
of permits.. 
Kazakhstan, by law, will provide compensation for violations of 
contracts that were properly entered into and guaranteed by the 
government. Where the government has merely "approved" or 
"confirmed" a foreign contract, Kazakhstan's responsibility is 
limited to performing administrative acts necessary to facilitate 
the subject investment activity (acts "concerning the issuance of a 
license, granting of a land plot, mining allotment, etc."). 
Kazakhstan's institutional governance is weak, further adding to the 
problems of transparency in commercial transactions. Senior 
government officials have a large say in minor and major 
transactions, and decisions are often made behind closed doors.  A 
1995 Licensing Law established the legal framework for licensing 
activities in Kazakhstan. It requires the relevant agency to issue a 
license within one month of a company's submitting all required 
documents.  The law was further amended in 1998, 2005, and January 
2007.  The 2007 amendments simplified procedural requirements for 
issuing licenses, reduced the number of licensed activities from 426 
to 349, and introduced a mechanism to help prevent the extension of 
this list by other legal acts.  On a whole, as estimated by experts, 
licensing for the period 2004-2007 was reduced three-fold, while 
licensing in agriculture, education and health care has been 
decentralized.  However, licensing remains a problematic area for 
business, particularly for small- and medium- sized enterprises. 
Efficient Capital Markets and Portfolio Investment 
Kazakhstan's efforts to create a sound financial system and a stable 
macroeconomic framework have been notable among former Soviet 
republics.  Much progress has been made in creating and implementing 
an adequate legal framework. In comparison with other parts of the 
economy, reform of the financial system has been deeper and more 
effective. The financial system has started to mediate financial 
resource flows and direct them to the most promising parts of the 
economy.  Official policy is clearly supportive of credit allocation 
on market terms and the further development of legal, regulatory, 
and accounting systems that are consistent with international norms. 
 
The National Bank has demonstrated a willingness to pursue monetary 
 
ASTANA 00000112  011.2 OF 019 
 
 
tightening in response to inflationary pressures. In 2006, it raised 
the refinancing rate twice as well as toughened reserve requirements 
for second-tier banks.  Capital inflows and commodity exports from 
2001-2007 enabled the National Bank to accumulate foreign exchange 
reserves, and at the same time to lower interest rates and maintain 
inflation in the single-digit range.  The global financial crisis 
has dramatically reduced capital inflows forcing the National Bank 
to slightly adjust its monetary policy.  In 2008, the refinancing 
rate was reduced from 11% to 10% and reserve requirements for 
second-tier banks were softened.  As of December 31, 2008, the net 
gold and hard currency reserves of the National Bank stood at $19.4 
billion; the total gold and hard currency reserves of Kazakhstan, 
including National Bank reserves and reserves accumulated in the 
National (Oil) Fund, reached $46.7 billion, marking 21% growth 
during 2008.  The National Bank has pursued market-based policies 
that have contributed to financial sector development and to 
exchange rate stability. In 1999 the National Bank created a deposit 
insurance system in order to attract the nearly $1 billion in cash 
it estimated people were hoarding at home.  Since then, private 
deposits have grown forty-fold, from less than $300 million in 
November 1999 to $12.27 billion in November 2008. 
To better support the banking sector during the global economic 
crisis, the Government has increased the maximum limit for deposit 
insurance seven-fold from 700,000 tenge (just under $6,000) to 5 
million tenge (about $42,000). 
Most domestic borrowers receive credit from Kazakhstani banks. 
However, foreign investors find the margins taken by local banks and 
the collateral required for credit to be very onerous. It is usually 
cheaper and simpler for them to use retained earnings or borrow from 
their home country.  The Kazakhstani Stock Exchange is struggling to 
gain momentum and, as such, not yet a realistic source of funds (see 
below). Since 1998, Kazakhstani banks have placed Eurobonds on 
international markets and obtained syndicated loans, the proceeds of 
which have been used to support domestic lending.  Leading 
Kazakhstani banks have been able to obtain reasonably good ratings 
from international credit assessment agencies.  The National Bank 
and the Financial Supervision Agency (FSA) supervise the banking 
system and have overseen a steady consolidation and strengthening of 
it. 
The global liquidity crunch, which hit in late summer 2007, 
presented a substantial challenge to the Kazakhstani banking system, 
which had come to rely heavily on external borrowing over the 
preceding five-year period.  Kazakhstani banks had been directing 
much of the borrowed funds into the country's construction and real 
estate sectors, particularly in the form both of construction 
financing and for mortgages for new housing in Astana and Almaty. 
The s
udden global liquidity dry-up abruptly left some leading 
Kazakhstani banks unable to continue their aggressive external 
borrowing, forcing them to curtail their domestic lending activity. 
While policymakers widely saw this development as a healthy 
correction in view of the preceding liquidity glut, the National 
Bank of Kazakhstan and the government introduced measures in late 
2007 to provide liquidity to the banking system and inject capital 
in the cooling construction sector.  Continued world-wide financial 
turmoil, marked by falling commodity prices and increasing 
unemployment have exacerbated the situation of Kazakhstan's largest 
banks.  In October 2008, the Kazakhstani government announced 
stabilization plans that include the purchase of 25% ownership 
stakes of Kazakhstan's four largest private banks, thereby injecting 
an anticipated additional $4 billion in to the banking system. 
Since 1999, a market for debt securities has been rapidly developing 
in Kazakhstan. Several dozen bank and non-bank corporations - large 
and small - have issued bills, notes and bonds with maturities 
ranging from three months to seven years. Earlier issues have 
matured and been redeemed; so far, there have been no defaults. 
Rates for borrowers have declined on average from approximately 16% 
in September 1999 to approximately 9% in 2006. Maturities have 
increased from 1.5 years to up to 10 years during the same period. 
During the first ten months of 2008 the stock exchange demonstrated 
an intense interest in debt securities of high quality, with the 
number of transactions involving corporate bonds increasing 2.5 
fold.  By the end of 2008, the yield index for corporate bonds was 
12.3%.  Kazakhstan's pension system reform has boosted the bond 
market by creating a pool of capital. The market for fixed-income 
 
ASTANA 00000112  012.2 OF 019 
 
 
securities has grown from $74,000 in September 1999 to over $12.5 
billion in December 2008. 
In 2008, the yield rate on middle-term government notes was 8.94% at 
maximum. Longer-term government notes (with maturities up to 10 
years) were offered at 9.27%. 
The Kazakhstani Stock Exchange (KSE) has been in operation since 
1997. In 2008, the floors of the Kazakhstani Stock Exchange and 
Almaty Regional Financial Center (AFC) were merged and new listing 
rules were introduced. As of December 2008, KSE and AFC had 101 
registered members, of which 52 are listed as category "A"  fully 
operational financial institutions. 
Inadequate financial records prevent many other companies from being 
put on the exchange.  Moreover, company managers fear diluting 
control of their enterprises by selling more shares. 
As of October 1, 2008, the total capitalization of the KSE was 
$58.87 billion, or 46.8% of GDP. This negative trend of declining 
value has continued since the mid- 2007, and 2008 was marked by a 
decrease in the  capitalization of the stock exchange in both the 
absolute value of total capitalization and capitalization relative 
to GDP . 
Trading on the KSE is overwhelmingly dominated by block trades, 
liquidity is low, and the spreads are extremely wide. In 2006, 
several large Kazakhstani companies issued initial public offerings 
on the London Stock Exchange (LSE). In compliance with a 2006 law 
requiring any foreign IPO by a Kazakhstani company to be accompanied 
by a domestic issuance, these companies also offered shares on the 
KSE. However, despite these offerings and the Kazakhstani pension 
funds' (see below) tentative moves to invest in KSE-traded shares, 
the exchange remains in a very early stage of development. Due 
largely to Kazakhstani companies' recalcitrance to dilute ownership 
and provide extensive disclosure, the Kazakhstani debt market is 
substantially more developed. The plans for the "Almaty Financial 
Center" (see below) aim to spearhead the development of Kazakhstan's 
financial markets. 
The Financial Supervision Agency (FSA), Kazakhstan's main financial 
regulator, has broad authority over the banking and insurance 
sectors, as well as the stock market.  The FSA is financed from the 
National Bank's budget and subordinated to the President of 
Kazakhstan. 
In 1998, the government introduced an accumulative pension system 
that requires all employed persons to contribute 10% of their salary 
to the pension funds. As of November 2008, the 14 funds (13 private 
and one state-owned) operating in Kazakhstan held approximately 
$11.5 billion in pension savings.  Custodian banks hold pension 
assets. Asset management companies invest the contributions on 
behalf of the pension funds. While the government provides specific 
restrictions on how the pension funds may invest, these restrictions 
were relaxed in 2006, allowing some involvement in Kazakhstani 
equities. As of 2008, pension assets must still be invested in 
specific categories of securities, including corporate and 
government bonds and securities issued by foreign governments. 
Pension funds overall did not fare well in 2008 because of global 
losses and risky investment policies.  For the period of 
January-November 2008, eight major pension funds had total losses 
amounting to $99.3 million.  The government planned to sell some 
shares of state enterprises on the national stock market, partly to 
provide a more profitable alternative vehicle for the investment of 
pension fund assets. Amendments made to pension fund legislation in 
November 2008 guarantee the preservation of pension savings, and 
grant individual investors the right to choose either a 
conservative, moderate, or aggressive type of individual investment 
portfolio.  In November 2008, the government also announced plans to 
use accumulated pension funds in housing and infrastructure projects 
as part of its financial stabilization package, 
There appear to be no "cross-shareholding" or "stable shareholder" 
arrangements used to restrict foreign investment in private firms 
through mergers and acquisitions. Joint stock companies may not 
cross-hold more than 25% of each other's stock unless they have an 
exemption codified by law and may not exercise more than 25% of the 
votes in a cross-held joint stock company. Kazakhstani law 
recognizes companies as "related" if one company or legal entity 
holds more than 20% of the shares of another. However, the owning 
company may not vote more than 25% of the total shares at the 
general meeting of shareholders of the related company. The general 
 
ASTANA 00000112  013.2 OF 019 
 
 
meeting must approve various corporate actions, such as mergers and 
acquisitions. This rule applies to all persons, domestic or foreign. 
 
There have been very few hostile takeovers in Kazakhstan, primarily 
because there are few publicly traded firms. Defensive measures are 
not targeted toward foreign investors in particular. Current 
legislation provides a legal framework for takeovers. The Civil Code 
requires a company that has purchased a 20% share in another company 
to publish information about the purchase. 
The mutual investment fund industry remains small but is growing 
rapidly.  As of October 1, 2008, total assets of the mutual 
investment funds amounted to $2.38 billion, representing a 105% 
increase when compared to October
 2007 figures.  Investment in 
equity of legal entities and Kazakhstani corporate securities remain 
a significant share of the consolidated mutual fund investment 
portfolio. 
The 1998 Law on Joint Stock Companies provides the basis for the 
regulation of open and closed-type joint stock companies. It also 
contains clauses to protect investors in often-abused circumstances, 
such as: 
-- issuance of additional shares; 
-- maintenance of charter capital and restrictions on payments of 
dividends; 
-- re-purchase by a company of its own shares; 
-- debt-to-equity conversions; 
-- fiduciary duties imposed on company officers; 
-- proxy votes; 
-- independent audit; and 
-- the determination of asset values during the sale of company 
property. 
The Law on Joint Stock Companies also regulates tender offers for 
stock of open joint stock companies by requiring the purchaser to 
notify the Financial Supervision Agency and the target company of 
their intention to purchase 30% or more of the target company and, 
after such purchase, to make an offer to all remaining shareholders 
to purchase their shares at the average price during the last six 
months before the purchase. 
There are no laws or regulations specifically authorizing firms to 
adopt articles of incorporation or associations that limit or 
prohibit foreign investments. The Law on Joint Stock Companies, 
however, allows charter limits on the number of shares or votes that 
one shareholder may have. 
In March 2007, the Government accepted amendments to legislation 
regarding the protection of minority stockholders' interests.  The 
enactment of this law was prompted by numerous violations of 
minority stockholders' interests. In addition, this step was driven 
by the Government's intention to promote the development of stock 
exchange. 
Standards, including sanitary and phyto-sanitary standards, are 
promulgated solely by the Committee for Technical Regulation and 
Metrology (Gosstandard). Proposals for adoption, amendment, or 
abolishment of state standards are normally prepared by technical 
committees constituted by Gosstandard, and may include producers, 
scientific and engineering associations, and technical experts. 
Foreign participation in the standardization process is regulated by 
international multilateral and bilateral agreements. 
Political Violence 
There have been no incidents of politically-motivated violence 
against foreign investment projects. Kazakhstan has been stable 
since independence. Politically-motivated civil disturbances remain 
exceptionally rare. Kazakhstan has good relations with its 
neighbors. The government continues to express concern over the 
security of its borders with Kyrgyzstan and Uzbekistan, which it 
views as vulnerable to penetration by extremist groups. 
Kazakhstan's 2007 parliamentary elections took place without 
violence or unrest.  President Nazarbayev's Nur Otan party won every 
seat in the lower house of parliament with an overwhelming majority 
of the votes.  In its assessment, the OSCE noted that the election 
did not meet a number of OSCE commitments and international 
standards for democratic elections.  Although opposition groups 
denounced the election as fraudulent, there were no significant 
demonstrations against the announced results. The next parliamentary 
elections are scheduled to take place in 2012. 
The February 2006 murders of a prominent opposition politician and 
 
ASTANA 00000112  014.2 OF 019 
 
 
his two associates were perceived by opposition parties as 
politically motivated.  The former chief of staff of the Senate was 
convicted in August 2006 of having ordered the murders; prosecutors 
charged that he was motivated by personal animosity. 
Corruption 
Although the Kazakhstani Criminal Code contains special penalties 
for accepting and giving bribes, corruption is prevalent throughout 
Kazakhstan. The Ministry of Interior, the Financial Police, the 
Disciplinary State Service Commission, and the Committee for 
National Security (KNB) are responsible for combating corruption. 
The government has taken some measures to address corruption and 
increased its attention to the problem through educational and 
public awareness efforts.  President Nazarbayev publicly deplored 
corruption and encouraged media to report about it.  Some lower and 
middle-ranking officials and minor political figures have been 
penalized on corruption charges. 
Transparency International has a national chapter in Kazakhstan. The 
government has signed on to the Extractive Industries Transparency 
Initiative (EITI). 
U.S. firms have cited corruption as a significant obstacle to 
investment. Law enforcement agencies have on occasion pressured 
foreign investors perceived to be uncooperative with the government. 
The government and local business entities are widely aware of the 
legal restrictions placed on U.S. business abroad (i.e., the Foreign 
Corrupt Practices Act). 
In 2003 in the United States two American citizens were charged with 
violating the Foreign Corrupt Practices Act in a case that received 
significant international media attention. The two allegedly 
channeled tens of millions of dollars in bribes to two senior 
Kazakhstani officials during the 1990's in order to facilitate oil 
deals for American companies. One is currently serving a jail term. 
The criminal case against  the second defendant is ongoing. 
Bilateral Investment Agreements 
The United States-Kazakhstan Bilateral Investment Treaty came into 
force in 1994. In 1992, the United States and Kazakhstan signed an 
Investment Incentive Agreement. 
In 1996, the Treaty on the Avoidance of Double Taxation between the 
United States and Kazakhstan came into force. However, an ongoing 
dispute with a U.S. investor raises concerns with the government's 
tax treaty compliance. Since independence, Kazakhstan has ratified 
treaties on the avoidance of double taxation with thirty-nine 
countries. In 2008, Kazakhstan signed, but has not yet ratified 
treaties with five countries, including Malaysia, Armenia, 
Luxembourg, Arab Emirates, and Japan.   Kazakhstan has bilateral 
investment agreements in force with thirty-eight countries, 
including the United States, Great Britain, Germany, France, 
Austria, Russia, Korea, Iran, China, and Turkey. In 2009, the 
Kazakhstani Parliament is expected to ratify investment agreements 
with Qatar, the Eurasian Economic Community, Armenia, and the Slovak 
Republic. 
OPIC and Other Investment Insurance Programs 
The Overseas Private Investment Corporation (OPIC), an independent 
U.S. Government agency that provides project financing, political 
risk insurance, and a variety of investor services, has been active 
in Kazakhstan since 1994. OPIC is seeking commercially viable 
projects in the Kazakhstani private sector. OPIC offers a full range 
of investment insurance and debt/equity stakes. 
Kazakhstan is a member of the Multilateral Investment Guarantee 
Agency (MIGA). 
Labor 
The 1999 Labor Law and the Constitution guarantee basic workers' 
rights, including the right to organize and the right to strike. 
Teachers, miners and workers at a variety of enterprises have 
conducted occasional strikes for generally short periods during the 
past
 several years. In September 2006 the death of 41 miners in an 
explosion at Mittal Steel Termirtau's "Lenin" coal mine triggered an 
unprecedented wave of strikes. Mittal's striking coal miners were 
joined by steel workers which shut down operations at each of the 
eight coal mines owned by the company for a week. The strike ended 
after Mittal agreed to substantial raises. Subsequently, two U.S. 
companies operating coal mines in Kazakhstan raised wages 25-30% in 
order to avert threatened strikes. 
The 1996 Law on Labor Disputes and Strikes lays out the procedure 
for resolving disputes. However, the law also restricts strikes by 
 
ASTANA 00000112  015.4 OF 019 
 
 
requiring, inter alia, that a peaceful attempt at a solution first 
be made, that two-thirds of the labor collective must approve the 
strike, and that the employer must be warned 15 days in advance in 
writing. In addition, strikes for political purposes are forbidden. 
 
A separate 1992 Law on Collective Bargaining Agreements sets out the 
basic framework for concluding such agreements. There are a growing 
number of instances in which  unions have successfully negotiating 
collective bargaining agreements with management.   Following a 
widely publicized mining tragedy and subsequent strike in January 
2008, the government launched a pro-union campaign called "Sign a 
Collective Bargain" intended to empower workers to more effectively 
protect their rights as members of the workforce.  This marked a 
significant change in policy in which independent unions and 
collective bargaining groups are "no longer seen as the enemy" 
according to a prominent independent labor union organizer. 
In May 2007, Kazakhstan passed a new Labor Code, encompassing all 
the preceding legislation under a single umbrella.  Key provisions 
of all the previous labor laws were retained.  The Labor Code 
extended minimum mandatory vacation time from 18 to 24 days, 
provided an outline of labor unions' and labor representatives' 
rights, and toughened rules governing the dissolution of labor 
contracts. 
The 1993 Law on Professional Labor Unions provides a legal guarantee 
against limitations of labor. It also grants socio-economic, 
political and personal rights and freedoms as a result of membership 
in a union and prohibits the denial of employment, the denial of 
promotion or termination of employment on the basis of such 
membership. Kazakhstan also joined the International Labor 
Organization (ILO) in 1993. As of January 2007, Kazakhstan has 
ratified 17 ILO conventions including those pertaining to minimum 
employment age, forced labor, discrimination in employment, equal 
remuneration, and collective bargaining, and the worse forms of 
child labor. 
In 2008, the minimum subsistence wage is still only $102.8 per 
month, with 13.5% of the population receiving income below that 
level.  Starting January 1, 2009, the minimum pension will be $82.10 
per month.  By government estimates, in the 3rd quarter of 2008, 
unemployment was 6.4%. 
Kazakhstan has an educated and technically competent workforce. 
However, the demand for specialized skilled labor created by the 
simultaneous development of several major oil fields in western 
Kazakhstan has exceeded locally available supply. Foreign investors 
increasingly cite a lack of skilled workers and technical 
professionals. Management expertise and marketing skills are also in 
short supply. Many large investors rely on foreign workers, 
particularly from Turkey, to fill the vacuum. In turn, the GOK has 
made it a priority to ensure that Kazakhstani citizens are 
well-represented on foreign enterprise workforces, and is 
particularly keen to see Kazakhstanis hired into the managerial and 
executive ranks of those enterprises. In late 2006, the government 
discussed measures limiting the inflow of foreign workers, 
particularly unskilled, and pressuring large foreign investors to 
hire and train Kazakhstanis. Since 2001, the quota system has 
required employers to search for local workers prior to the issuance 
of work permits for foreigners (see section A.1.). U.S. companies 
are strongly advised to contact locally-based law and accounting 
firms, as well as the U.S. Commercial Service in Almaty, for the 
latest information on work permits. 
Employers' reliance on foreign labor in the face of persistent 
poverty in rural Kazakhstan became a political issue in 2006 and 
2007. The debate revolved around the underlying causes of some 
violent incidents between Kazakhstani and foreign workers. The 
tension was epitomized by a major October 2006 brawl that involved 
over 400 workers. Policymakers often point to disparities in wages 
and working conditions between Kazakhstani and foreign workers. 
Employers retort that the domestic lack of skilled labor frequently 
necessitates management of Kazakhstani laborers by foreigners. 
Foreign - Trade Zones/Free Ports 
A system of tax preferences exists for enterprises engaging in 
prescribed economic activities in the so-called "special economic 
zones." As of December 2007, four such zones had been established: 
the "New Administrative Center" in Astana, the Seaport of Aktau, the 
Alatau Information Technology Park (near Almaty), and the Ontustik 
 
ASTANA 00000112  016.2 OF 019 
 
 
Cotton Center in south Kazakhstan.. In the second half of 2006, the 
government took steps toward establishing the Almaty Financial 
Center, a legal and institutional framework aimed at making Almaty 
the financial capital of Central Asia. The plans, which are still in 
very early stages of implementation, include tax privileges for 
major participants in the financial marketplace: investors, 
broker-dealers, and issuing corporations. The legal framework for 
the Almaty Financial Center includes a specialized court with 
jurisdiction over civil disputes between the Financial Center's 
participants 
Annual Gross Foreign Direct Investment Flows by Country of Origin 
(Millions of Dollars; nominal) 
      1993-2006  2007       2008 (1st half)  Total 
USA   13,550.1   2,454.9      819.6 16,824.1 
Netherlands 7,826.1  3,148.7     1,628.1  12,602.9 
UK    5,240.6   733.0       499.8 6,473.4 
Italy  2,844.6  517.2       267.1 3,628.9 
France  2,352.3  1,022.6       507.5 3,882.4 
Switzerland  2,256.1   633.2       115.2 3,004.5 
South Korea   2,129.7  232.3       119.6  2,481.6 
China  2,043.4 358.2      354.2 2,755.8 
Canada   1,919.7   314.1   70.0  2,303.8 
Russia   1,713.8   772.0     375.3  2,861.1 
Japan   1,347.7  405.3      201.3 1,954.3 
Turkey   1,005.4  337.1      85.0   1,427.5 
Others   7,179.6  6,586.3   2,119.8   15,886.2 
TOTAL   51 409.1  17,514.9    7,162.5 76,086.5 
Source: National Bank of Kazakhstan 
Annual Gross Foreign Direct Investment Flows by Sector (Millions of 
dollars; nominal) 
1993-2006  2007  2008 (1st half)  Total 
AGRICULTURE,  53.0  - 24.93  4.5        32.6 
HUNTING AND 
FORESTRY 
MINING AND   24,682.3   4,656.9   1,644.0 30,983.2 
QUARRYING 
mining of coal 39.8   -0.7   31.0  70.1 
and lignite, 
extraction 
of peat 
extraction of  22,409.7  4,316.3  1,438.1 28,164.1 
crude 
petroleum 
and natural 
gas 
mining of  308.
9   148.9  90.0  547.8 
uranium and 
thorium ores 
mining of  1864.6   188.0 49.3  2,101.9 
metal ores 
other mining 
and quarrying  59.2    4.5   35.6  99.3 
MANUFACTURING  5,708.8  893.5  428.1 7,030.4 
including but 
not limited 
manufacture of 
food products, 757.3  63.0  80.5  900.8 
beverage and 
tobacco products 
manufacture of 
coke, refined 
petroleum 
products   492.4  -189.9   33.7  336.2 
and nuclear 
fuel 
manufacture of  153.5  11.9   9.5   174.9 
chemicals 
and chemical 
products 
manufacture of 39.6    25.4  9.5   74.5 
rubber and 
plastics 
products 
manufacture of  112.1  28.3  41.7   182.1 
 
ASTANA 00000112  017.2 OF 019 
 
 
other 
non-metallic 
mineral products 
manufacture 3,495.0   671.1 68.9   4,235.0 
of basic metals: 
manufactures 407.1   23.3  5.9    436.3 
of ferrous 
metals 
manufacture of 3,069.8  628.9  52.2  3,750.9 
basic precious 
and non-ferrous 
metals 
manufacture of  18.2   19.0   10.8   48 
fabricated 
metal products 
except 
machinery 
and equipment 
manufacture   25.6  0.2   0.9   26.7 
of machinery 
and equipment 
manufacture   470.8 53.9   65.3 590 
of electric 
and computing 
machinery 
manufacture of  84.2   149.7 26.5  260.1 
transport 
equipment 
manufacture,   5.7   4.6  3.3   13.6 
n.e.c 
ELECTRICITY,   725.9  36.6  46.5  809 
GAS AND WATER 
SUPPLY 
CONSTRUCTION   783.9 483.2  226.4  1,493.5 
WHOLESALE AND   1,862.1 1,238.3  437.7 3,538.1 
RETAIL TRADE, 
REPAIR OF 
MOTOR VEHICLES, 
MOTORCYCLES 
AND PERSONAL AND 
HOUSEHOLD GOODS 
HOTELS AND   125.5  49.2  19.2   193.9 
RESTAURANTS 
TRANSPORT   690.6  301.3  48.5   1,040.4 
 AND 
COMMUNICATION 
land transport  402.4  39.7   9.6  451.7 
including 
  transport 
  via pipelines  379.7  36.6   4.3   420.6 
water   -8.1   0.9  0.5   -6.7 
transport 
air transport   28.1  2.3   1.1   31.5 
supporting   339   150.7 42.7  532.4 
transport 
activities 
post and    229.8 -11.7  38.6   256.7 
telecommunication 
including    226.1  -14.5 38.1   249.7 
telecommunication 
FINANCIAL    946.9  2,938.3  798.6  4,683.8 
ACTIVITY 
REAL ESTATE ,  14,774.3 6,963.8  3,375.6  25,113.7 
RENTING 
AND BUSINESS 
ACTIVITIES 
Including 
but not limited 
real estate 
activities   134.2  65.4   22.7  222.3 
 
legal, 
accounting, book- 
keeping and 
 
ASTANA 00000112  018.2 OF 019 
 
 
auditing           131.2 142.4  50.0  323.6 
activities, 
tax consultancy, 
market research, 
business and 
management 
consultancy 
geological   14,153.4  6,631.3  3,245.0 24,029.7 
exploration and 
prospecting 
activities 
 
EDUCATION,   394.8  98.1   89.4   582.3 
HEALTH AND 
SOCIAL WORK 
ACTIVITIES,   360.8 0.0   0.0   360.8 
N.E.C. 
TOTAL        51409.1 17,514.9 7,162.5  76,086.5 
Source: National Bank of Kazakhstan 
 
FDI as a Percentage of GDP 
2006  2007  2008(1st half) 
13.1% 16.7% 12.4% 
Source: National Bank of Kazakhstan 
 
Kazakhstani Direct Investment Outflows 
Millions of US dollars, nominal 
Country of 
Destination  2004-2006      2007   2008(1st half)  Total 
Austria     0.7  8.8  0.1   9.6 
Azerbaijan      3.2    3.5   0.0  6.7 
Armenia        3.5     4.0   0.3  7.8 
Afghanistan   0.0  0.0  0.0  0.0 
Byelorussia   4.8  -0.1  1.5  6.2 
Bulgaria    0.0   1.5   0.9   2.4 
Belgium   0.0  0.1  0.0  0.1 
Great Britain    11.8  162.2 24.5   198.5 
Hungary   0.0  0.1  0.0  0.1 
Virgin Islands  73.6  374.8  64.4  512.8 
Germany    217.5   14   2.0  233.5 
Guernsey   0.0  0.0  0.1  0.1 
Hong Kong    0.0   60.0  0.0  60.0 
Greece   0.0  0.1  0.0  0.1 
Georgia    67.9  50.7  -29.9 88.7 
Dominican Republic  10.0  -9.8  0.0  0.2 
Egypt   0.0  0.0  0.0  0.0 
Israel    0.4   1  0.3   11.1 
India   0.1   7.2   0.0   7.3 
Iran     0.0   1.6  1.3   2.9 
Ireland   0.0  0.1  0.1  0.2 
Spain   0.0  1.8  1.6  3.4 
Italy    0.1   0.0   0.0  0.1 
Canada    43.1  3.9   0.0  47 
Cayman Islands   0.5  0.5   0.0  1.0 
Cyprus    0.8  90.7  326.0 417.5 
China   12.9  51  25.9  89.8 
Kyrgyzstan   160.2  144.2 -10.6 293.8 
Latvia    1.9   0.3   0.0  2.2 
Libya   0.0  0.0  0.1  0.1 
Lithuania    -1.0   2.1   0.0  1.1 
Liechtenstein  0.0  0.1  0.0  0.1 
Luxemburg    9.5  1.8   0.0  7.7 
Mauritius   0.0  0.1  0.1  0.2 
Malaysia     0.8  1.4  0.3  2.5 
Marshall Islands   0.0   96.0  0.0  96.0 
Isle of Man         6.6  0.0   0.0  6.6 
Mongolia     0.1  0.1  1.7   1.9 
Netherlands   659.8 -274.3 556.2 941.7 
Nigeria     0.0   0.2  0.0  0.2 
United Arab Emirates 1.4 50.9  17.9  70.2 
Poland   0.0  0.0  18.6  18.6 
Russia    311.3  537.4  263.1 1111.8 
Seychelles  28.3  0.0  0.0   28.3 
Serbia   0.0  0.0  0.1  0.1 
 
ASTANA 00000112  019.2 OF 019 
 
 
Singapore    2.4  65.5  0.0   67.9 
South Korea    0.0  1.4  0.0  1.4 
USA     11.3  423.3 18.0   452.6 
Tajikistan    12.4  20.9  1.6   34.9 
Thailand        0  49.2  0.0   49.2 
Turkmenistan     0.0  0.0  0.0  0.0 
Turkey     50.0  328  5.5  383.5 
Uganda   0.0  0.0  0.0  0.0 
Uzbekistan    94   34.8  0.5  129.3 
Ukraine     13.1  112.4 14.5  140 
France      0.0  8.3   4.4   12.7 
Czech Republic  -3.8   8.2  0.0  4.4 
Switzerland   204.2 282.6  169.8 656.6 
Estonia     0.0   0.0   0.0  0.0 
South Africa  0.0  0.0  0.1  0.1 
Other Countries   11.0  4.6  4.1   19.7 
TOTAL   2024.4 2733  1485.1 6242.5 
Source: National Bank of Kazakhstan 
Investments as of 2008 
The oil and gas sector accounts for approximately 70% of the $76.1 
billion that has been invested in Kazakhstan, with U.S. firms 
consistently ranking as the largest foreign investors.  U.S. firms 
with noteworthy investment in Kazakhstan's petroleum sector include 
Chevron, ExxonMobil, and ConocoPhillips. Other major foreign 
investors in this sector include LukArco, Agip, Shell, Inpex, Eni, 
Total, British Gas, Lukoil, Mitsubishi, and the Chinese National 
Petroleum Corporation (CNPC).  Other major US investors include 
Philip Morris (over $320 million in tobacco processing), and General 
Electric Transportation (locomotive modernization facility). Other 
major non-US foreign investors include Arcelor Mittal and BAE 
Systems. 
 
END TEXT. 
 
HOAGLAND

Wikileaks

09ASTANA109, KAZAKHSTAN: WORLD BANK HEALTH-CARE SYSTEM REFORM PROJECT

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Reference ID Created Released Classification Origin
09ASTANA109 2009-01-21 10:44 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO1357
OO RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0109/01 0211044
ZNR UUUUU ZZH
O 211044Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4382
INFO RUCNCIS/CIS COLLECTIVE 1055
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0453
RUEHKO/AMEMBASSY TOKYO 1159
RUEAUSA/DEPT OF HHS WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0628
RUEKJCS/SECDEF WASHDC 0542
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1088

UNCLAS SECTION 01 OF 02 ASTANA 000109 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, OES/PCI 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EAID SOCI SENV KZ
SUBJECT:  KAZAKHSTAN:  WORLD BANK HEALTH-CARE SYSTEM REFORM PROJECT 
 
REF:  08 ASTANA 02290 
 
ASTANA 00000109  001.2 OF 002 
 
 
1. (U) Sensitive but unclassified.  Not for public Internet. 
 
2. (SBU) SUMMARY.  The World Bank's five-year project for reforming 
Kazakhstan's outmoded health-care system is progressing but faces 
considerable difficulties.  Planned reforms include health financing 
and budget planning; health-care quality improvement; an independent 
accreditation system; the production of evidence-based clinical 
practice guidelines; voluntary blood donations; international 
standards for laboratories and blood transfusions; reform of medical 
education and science; health information systems; health-care and 
project management; safe and affordable pharmaceutical products; and 
the introduction of international sanitary standards for food 
safety.  The World Bank is optimistic that it can help Kazakhstan 
become one of the top 50 countries in the world with respect to the 
quality of its health-care system, but it is concerned that the 
government is not spending its money as efficiently as it should. 
While the new health minister, Zhaksylyk Doskaliyev, supports the 
Bank project, he also wants to create a single provider for 
pharmaceutical products.  National Medical Holding is now moving 
rapidly to consolidate health-care centers in Kazakhstan, and the 
Bank is concerned about this development.  END SUMMARY. 
 
WORLD BANK TO REFORM HEALTH-CARE SYSTEM 
 
3. (SBU) Regional Environmental Officer (REO) and Environmental 
Specialist recently met with World Bank Health Project Coordinator 
Bibigul Alimbekova, who said that the Bank's project to reform 
Kazakhstan's outmoded health-care system is progressing but faces 
considerable difficulties.  The Ministry of Health is the 
implementing agency and the government of Kazakhstan will be 
contributing 60 percent of the estimated costs (almost $300 million 
spread out over five years, 2008-2013), with the World Bank 
contributing the rest.  One year into the project, the World Bank 
thus far has paid out $26 million. 
 
4. (SBU) Alimbekova said the World Bank's project aims to introduce 
international standards by changing the way institutions provide 
health-care throughout Kazakhstan.  The project also seeks to build 
long-term institutional capacity in the Ministry of Health and other 
health-care institutions in support of Kazakhstan's own program of 
health-care reform (the State Health-care Reform and Development 
Program, 2005-2010). 
 
5. (SBU) Alimbekova said this reform sets out several major areas 
for improvement: 
 
-- health financing, including investment and budget planning; 
-- health-care quality, to include an independent accreditation 
system, evidence-based clinical practice guidelines, voluntary blood 
donations, and international standards for laboratories and blood 
transfusions; 
-- medical education and medical science; 
-- health-care facility management, with pilots in three oblasts; 
-- safety, quality, and affordability of pharmaceutical products 
that involve procurement, pricing, monitoring, packaging, and 
quality control; and 
-- food safety and international sanitary standards. 
 
6. (SBU) Alimbekova said the World Bank has very good partnerships 
with the World Health Organization, USAID, and the United Nations 
Children's Fund (UNICEF), and together they can help build up 
Kazakhstan's health-care capacity.  Although she said this will be 
very challenging, Alimbekova is nevertheless optimistic that the 
World Bank can help Kazakhstan become one of the top 50 countries in 
the world with respect to the quality of its health-care system. 
She cautiously added that, while the government claims to increase 
its health-care spending every year, careful analysis reveals that 
it is often a small increase.  More importantly, she said, it all 
depends on how the money is spent.  The World Bank is now doing 
surveys to show that the government's health-care spending is not as 
cost-effective as formerly believed. 
 
NEW MINISTER SUPPORTS REFORM PROJECT 
 
7. (SBU) The Ministry of Health is still coming to terms with the 
 
ASTANA 00000109  002.2 OF 002 
 
 
forced resignation of former Minister Anatoliy Dervonoy and is 
adjusting to life under the new minister, Dr. Zhaksylyk Doskaliyev 
(see reftel).  (NOTE: Dr. Doskaliyev, appointed in November 2008 to 
be Minister, is also well known for heading the Kazakhstani medical 
team that performed the world's first op
eration to transplant a 
human embryo's nerve cells into a patient suffering from 
myelosyringosis, a disease of the spinal cord.  He is credited with 
pioneering this technique.  END NOTE.).  She said all of the World 
Bank's former partners and ministry counterparts are now gone and 
the Minister is busy installing a new team.  Accordingly, the World 
Bank is retracing its steps and has begun the process of 
"sensitizing" the new members to the Health Reform Project's issues. 
 She is optimistic that the new Minister will be receptive, since, 
as previous Chairman of the Kazakhstani Heath Care Agency, he was 
one of its great supporters.  However, Alimbekova admitted that the 
new Minister also has his own personal agenda -- that there should 
be only a single provider for all medical products and 
pharmaceuticals in Kazakhstan.  For now, the Bank is waiting until 
Doskaliyev has finished reshuffling personnel and made new 
appointments, and then the Bank will start to work again with the 
Ministry on this health reform project. 
 
CONCERNS ABOUT NATIONAL MEDICAL HOLDING 
 
8. (SBU) According to Alimbekova, the state-owned National Medical 
Holding (NMH) is moving to consolidate national health centers 
throughout Kazakhstan.  NMH has absorbed six of these national 
health centers and has plans eventually to control ten.  She said 
the World Bank is very concerned about this development, explaining 
that "it is not in Kazakhstan's best interests" since it has the 
potential to result in a health-care monopoly. 
 
9. (SBU) NOTE:  The Kazakhstani Government announced the 
establishment of NMH on May 31, 2008, and turned over six medical 
facilities and the Kazakh Medical Academy to NMH as subsidiaries. 
Two of these centers are the National Center for Maternal and Child 
Health and the Child Rehabilitation Center.  In recent conversations 
with USAID staff, some of the chief doctors in these health-care 
centers have noted a lack of staff expertise for the operation of 
some of the high-tech, modern equipment purchased for the centers. 
During a January 15 meeting with the Ambassador, NMH CEO Almaz 
Sharman, a dual U.S.-Kazakhstani national, readily admitted that a 
shortage of medical expertise is a major problem for NMH, as a 
result of which he would like to recruit foreign doctors, including 
Americans, to work in Kazakhstan.  Sharman is also looking for a 
foreign company to manage one of NMH's medical centers, and, per a 
contract with the Kazakhstani government, is seeking a foreign 
partner, such as Harvard Medical International, to provide training 
for 50 Kazakhstani hospital managers, most of whom will work at 
Kazakhstani health-care facilities not connected to NMH.  END NOTE. 
 
HOAGLAND

Wikileaks

09ASTANA106, KAZAKHSTAN: MAZHILIS LEADERS DISCUSS BILATERAL AGENDA

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Reference ID Created Released Classification Origin
09ASTANA106 2009-01-20 10:38 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO0605
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0106/01 0201038
ZNR UUUUU ZZH
O 201038Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4380
INFO RUCNCIS/CIS COLLECTIVE 1053
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0451
RUEHKO/AMEMBASSY TOKYO 1157
RUEAWJA/DEPT OF JUSTICE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0626
RUEKJCS/SECDEF WASHDC 0540
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 02 ASTANA 000106 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB, ISN, H 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM PTER ECON KDEM KNNP KZ
SUBJECT:  KAZAKHSTAN:  MAZHILIS LEADERS DISCUSS BILATERAL AGENDA 
WITH THE AMBASSADOR 
 
1. (U) Sensitive but unclassified.  Not for public Internet. 
 
2. (SBU) SUMMARY:  During separate January 16 meetings with the 
Ambassador, Mazhilis Speaker Ural Mukhamedzhanov and Mazhilis 
International Relations, Defense, and Security Committee Chairman 
Nurbakh Rustemov expressed hope that the Obama Administration would 
further strengthen bilateral ties.  They asked for stepped up U.S. 
support for Kazakhstan's WTO accession, commencement of negotiations 
on a bilateral Mutual Legal Assistance Treaty (MLAT), Kazakhstan's 
graduation from Jackson-Vanik restrictions, and elimination of the 
annual human rights certification.  Mukhamedzhanov and Rustemov 
promised quick Mazhilis action in ratifying the Cooperative Threat 
Reduction (CTR) agreement.  They said the Madrid commitments 
legislation incorporated "serious changes" that will move the 
country in a democratic direction.  The Ambassador pressed for 
adoption of Anti-Money Laundering/Counter-Terrorism Finance 
(AML/CTF) legislation.  Mukhamedzhanov responded positively, 
explaining that the Kazakhstanis are also very interested in getting 
the legislation passed.  END SUMMARY. 
 
HOPE THAT OBAMA FURTHER STRENGTHENS BILATERAL TIES 
 
3. (SBU) In separate January 16 meetings with the Ambassador, 
Mazhilis Speaker Ural Mukhamedzhanov and Mazhilis International 
Relations, Defense, and Security Committee Chairman Nurbakh Rustemov 
said they hoped the incoming Obama Administration would further 
strengthen the U.S.-Kazakhstan bilateral relationship. 
Mukhamedzhanov stressed the importance of continuing dialogue at the 
presidential level.  Both Muzhamedzhanov and Rustemov took note of 
significant U.S.-Kazakhstan inter-parliamentary contacts -- 
including the November trip to the United States of a Rustemov-led 
Mazhilis delegation and several recent CODEL visits to Kazakhstan -- 
while Muzhamedzhanov pointed out that almost 30 percent of Mazhilis 
members are part of a Mazhilis caucus for cooperation with the U.S. 
Congress.   The two asked for even more interactions between the 
Mazhilis and Congress.  Rustemov, who also heads the ruling Nur Otan 
party's foreign relations office, said he would welcome 
opportunities for Nur Otan leaders to visit the United States to 
meet their counterparts in U.S. political parties. 
 
4. (SBU) Noting that the United States is one of Kazakhstan's top 
economic partners, Mukhamedzhanov said Kazakhstan hopes for more 
U.S. investment in the non-extractive sector and at the regional 
level and looks forward to implementation of the Public-Private 
Economic Partnership Initiative (PPEPI).  Rustemov said that he 
would like OPIC to become more active in Kazakhstan.  He stressed 
that WTO accession remains a Kazakhstani priority and asked for 
stepped up U.S. support in the accession process.  The Ambassador 
reiterated U.S. support for the PPEPI.  He said he had recently 
discussed WTO accession with Deputy Industry and Trade Minister 
Zhanar Aitzhanova, Kazakhstan's lead WTO negotiator, and noted that 
a senior USTR official would visit Kazakhstan in February to discuss 
accession issues. 
 
REQUEST FOR MLAT NEGOTATIONS, LIFTING JACKSON-VANIK 
 
5. (SBU) Muzhamedzhanov and Rustemov both said that Kazakhstan would 
like to negotiate a bilateral Mutual Legal Assistance Treaty (MLAT) 
with the United States.   The Ambassador promised to relay their 
request to Washington, but explained that Congress would first have 
to authorize such negotiations and that it would likely take a long 
time to finalize an agreement.  He suggested that Kazakhstani 
Ambassador to the United States Yerlan Idrissov discuss an MLAT 
directly with Congress. 
 
6. (SBU) Muzhamedzhanov and Rustemov also asked that we graduate 
Kazakhstan from Jackson-Vanik and remove the annual human rights 
certification.  The Ambassador explained that a bilateral WTO 
accession agreement should pave the way to lifting Jackson-Vanik 
restrictions. 
 
SWIFT ACTION PROMISED ON CTR AGREEMENT 
 
7. (SBU) Mukhamedzhanov and Rustemov explained to the Ambassador 
 
ASTANA 00000106  002 OF 002 
 
 
that the Mazhilis had just received the Cooperative Threat Reduction 
(CTR) agreement from the government, but promised that they would 
take swift action on ratifica
tion.  Rustemov said that the aim was 
to get the agreement through the Mazhilis before State Secretary 
Kanat Saudabayev's trip to Washington the week of February 2.  He 
indicated that the Mazhilis was not satisfied with the quality of 
the Kazakh-language version of text (NOTE:  The agreement was 
executed in English and Kazakh. END NOTE), and hinted that the 
Kazakhstanis might request that we accept small revisions to the 
Kazakhstan-language version to improve the grammar. 
 
"SERIOUS CHANGES" IN MADRID COMMITMENTS LEGISLATION 
 
8. (SBU) Noting that parliament had recently approved the Madrid 
commitments legislation, Mukhamedzhanov said the amendments adopted 
to the election, political party, and media laws represent "serious 
changes" that will move the country in a democratic direction and 
toward compliance with European standards -- which is a key aim of 
Kazakhstan's Path to Europe Program.  Rustemov admitted that not 
everyone is satisfied with the new legislation, but pointed to 
specific positive provisions, including one the will guarantee that 
at least two parties are represented in parliament. 
 
POSITIVE REACTION ON AML/CTF LEGISLATION 
 
9. (SBU) The Ambassador told Mukhamedzhanov that he understood that 
Kazakhstan began work on an Anti-Money Laundering/Counter-Terrorism 
Finance (AML/CTF) law in 2006, but the legislation remains bottled 
up in the Mazhilis.  We would like to see the legislation adopted as 
soon as possible, he stressed.  This would be consistent with 
Kazakhstan's Path to Europe program, since Europe has strong AML/CTF 
legislation in place.  Muzhamedzhanov responded positively, 
explaining that the Kazakhstanis are also very interested in getting 
the legislation passed. 
 
HOAGLAND

Wikileaks

09ASTANA102, KAZAKHSTAN STILL UNDECIDED ON NABUCCO SUMMIT IN

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Reference ID Created Released Classification Origin
09ASTANA102 2009-01-20 09:44 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXRO0550
OO RUEHBI RUEHCI RUEHFL RUEHKW RUEHLA RUEHLH RUEHNP RUEHPW RUEHROV
RUEHSR
DE RUEHTA #0102 0200944
ZNY CCCCC ZZH
O 200944Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4375
INFO RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY 1052
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0450
RUEHKO/AMEMBASSY TOKYO PRIORITY 1156
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RHEFAAA/DIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY 0625
RUEHNO/USMISSION USNATO PRIORITY 2463
RUCNDT/USMISSION USUN NEW YORK PRIORITY 2135

C O N F I D E N T I A L ASTANA 000102 
 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/RUS, EEB 
 
E.O. 12958: DECL: 01/20/2019 
TAGS: PGOV PREL ECON EPET RS HU KZ
SUBJECT:  KAZAKHSTAN STILL UNDECIDED ON NABUCCO SUMMIT IN 
BUDAPEST? 
 
REF: BUDAPEST 0039 
 
Classified By: Ambassador Richard E. Hoagland:  1.4 (B), (D) 
 
1.  (C) Hungarian Ambassador Janos Balla called on the 
Ambassador January 20 to deliver the current Hungarian draft 
of the Budapest Nabucco Summit scheduled for January 27.  He 
expressed deep frustration that one week before the summit he 
has yet to pin down who will represent Kazakhstan, if anyone. 
 
2.  (C) Ambassador Balla said originally both President 
Nursultan Nazarbayev and Prime Minister Karim Masimov had 
been invited.  In Balla's presence at a reception in 
December, Nazarbayev had instructed Foreign Minister Marat 
Tazhin to ensure representation at an appropriately high 
level.  Balla was to have met with Minister of Economy and 
Budget Bakhyt Sultanov on January 16 to hear whom Kazakhstan 
would send to Budapest, but Sultanov cancelled the meeting 
with only two hours' notice and had his staff tell Balla the 
Foreign Ministry would provide the name.  However, Balla has 
so far been unable to get an appointment with the appropriate 
deputy foreign minister (Foreign Minister Tazhin returned 
only on January 20 from winter vacation).  The European 
Ambassadors are hosting a lunch on January 21 for Minister of 
Energy and Mineral Resources Sauat Mynbayev, where Balla 
hopes he can pry out a reply from Mynbayev. 
 
3.  (C) Also on January 20, Czech Republic Ambassador Bedrich 
Kopecky told the Ambassador that he thought Prime Minister 
Masimov had asked Minister Mynbayev to attend the Nabucco 
Summit, or to send a suitable representative. Hoever, Post 
has not yet independently confirmed this report. 
 
4.  (C) Balla said he has no proof but a strong suspicion 
that Russia is putting heavy pressure on Kazakhstan not to 
attend the Nabucco Summit.  He asked rhetorically, "If PM 
Masimov can fly to Moscow on short notice for the Gas Summit 
on January 17, why is it so hard to find someone for the 
Nabucco Summit?" 
 
5.  (C) Ambassador Balla is well-briefed on Kazakhstan's 
hydrocarbon resources, especially in the North Caspian area. 
He said mostly Hungarians ran the Soviet hydrocarbon 
operations around Atyrau before Kazakhstan's independence, 
and he stays in close touch with the over 1,000 Hungarians 
who still live and work there.  According to Balla, Europeans 
are increasingly aware that Kazakhstan's North Caspian has 
"massive" untapped natural gas deposits (no further 
information), although the country is focusing mostly on oil 
production at this time. 
 
6.  (C) COMMENT:  President Nazarbayev and a large gaggle of 
ministers will be in New Delhi January 23-26, and Astana is 
increasingly consumed with preparing for that important 
visit.  However, the government of Kazakhstan can usually 
walk and chew gum at the same time, and so it seems a bit 
curious at this late date it has not yet told Hungary who, if 
anyone, will go to Budapest to attend the Nabucco summit. 
END COMMENT. 
HOAGLAND

Wikileaks

09ASTANA95, KAZAKHSTAN: CENTCOM CDR PETRAEUS MEETS PRESIDENT

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Reference ID Created Released Classification Origin
09ASTANA95 2009-01-20 05:56 2011-08-30 01:44 SECRET Embassy Astana

VZCZCXRO0320
PP RUEHBI RUEHCI RUEHFL RUEHKW RUEHLA RUEHLH RUEHNP RUEHPW RUEHROV
DE RUEHTA #0095/01 0200556
ZNY SSSSS ZZH
P 200556Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 4366
INFO RUCNCIS/CIS COLLECTIVE PRIORITY 1049
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0447
RUEHUL/AMEMBASSY SEOUL PRIORITY 0238
RUEHKO/AMEMBASSY TOKYO PRIORITY 1153
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFAAA/DIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY 0622
RUEKJCS/SECDEF WASHDC PRIORITY 0537
RUEHNO/USMISSION USNATO PRIORITY 2460
RUCNDT/USMISSION USUN NEW YORK PRIORITY 2132

S E C R E T SECTION 01 OF 03 ASTANA 000095 

SIPDIS 

STATE FOR P, SCA/CEN, EUR/RUS, NEA/IR 

EO 12958 DECL: 01/19/2029 
TAGS PGOV, PREL, AF, IR, RS, KZ 
SUBJECT:  KAZAKHSTAN:  CENTCOM CDR PETRAEUS MEETS PRESIDENT 
NAZARVAYEV, JANUARY 14

Classified By: Ambassador Richard E. Hoagland: 1.4 (B), (D)

1. (S) SUMMARY: President Nazarbayev told CENTCOM Commander General Petraeus:
-- the situation in Afghanistan greatly worries him; the Taliban should never be allowed to become a coalition partner in the Afghan government;
-- Iran cannot be allowed to become a nuclear state, but the United States needs to talk directly with Tehran, and he is willing to be helpful;
-- Kazakhstan will never again be “colonized,” but has excellent relations with Russia and China
-- the West has underestimated the depth of Russia’s wounded pride, but he is willing to be helpful if the Obama administration has “a wise response” to Russia. END SUMMARY.

2. (SBU) U.S. Central Command Commander General David Petraeus met with Kazakhstan’s President Nursultan Nazarbayev on January 14 for twice the scheduled time, 70 minutes. The U.S. side included Major General Robert Allardice (CENTCOM J5), POLAD Michael Gfoeller, and the Ambassador (note taker).  Security Council Secretary Kaibek Suleymenov, Presidential Foreign Policy Adviser Khairat Sarybay, and Magzhan Ilyassov of the presidential administration accompanied President Nazarbayev.

AFGHANISTAN

3. (S) General Petraeus thanked President Nazarbayev for the recent formal ratification of the long-existing over-flight and divert agreements, as well as for Kazakhstan’s willingness to participate in the Northern Distribution Network for Operation Enduring Freedom in Afghanistan. He briefed the president on Iraq and Afghanistan. Nazarbayev responded, “Afghanistan greatly worries us. I am often in touch with (Afghanistan President Hamid) Karzai. He says the situation is good and the economy is growing; but I know he controls only 30% of his territory, and if the Afghan economy is growing, it’s based on drugs. We are already providing humanitarian and reconstruction assistance, but we need better security in Afghanistan if we are to do more. The United States and Kazakhstan have a common interest in strengthening Afghanistan.” Nazarbayev said he knows Karzai wants to involve the Taliban in his government and commented, “That would be greatly dangerous.” General Petraeus explained that Karzai’s position is more nuanced: the goal would be to break up the Taliban and reconcile some, “but we have no illusion that Mullah Omar could ever join the government.” Nazarbayev replied, “If there’s a chance to break up the Taliban, that’s fine; but the Taliban leadership will never change its position.”

4. (S) Nazarbayev told General Petraeus, “You’re aware of Afghan history; no foreign country ever succeeded in invasion. Afghans have to govern themselves.” Calling the situation in Afghanistan “very complicated,” Nazarbayev said he knows some the potential candidates to succeed Karzai, but none of them could unify and lead Afghanistan. “Karzai is weak, but it’s better to keep him on.” Nazarbayev added he’s heard Karzai claim the Taliban are trained in Pakistan and said he accepts that as credible. Nazarbayev added Central Asia needs a common policy on Afghanistan, “but that hasn’t happened.” He alluded to Uzbekistan’s support for the ethnic Uzbek leader Dostum.

IRAN

5. (S) Nazarbayev judged that Iran is a problem in the region, and General Petraeus fully agreed. Nazarbayev said, “I have good contacts among the leadership in Iran. I’ve tried to explain to them that Kazakhstan was once nuclear but
ASTANA 00000095 002 OF 003
fully gave up that status. I tell them it would be to their benefit to be non-nuclear. That would draw new assistance and investment.” General Petraeus said he again fully agreed with the president, but noted Iran’s policy is determined by the Revolutional Guard al-Quds Force commander, not by President Ahmedinejad or the Foreign Ministry. Nazarbayev noted he had once talked to Ahmedinejad for two and a half hours about such issues, “but in the end I realized I had just wasted my time.” He said Supreme Leader Ayatollah Khameni told him that even if Iran compromises on the nuclear issue, the United States would always find another reason to criticize “because they hate us -- all the United States wants is to conquer the entire region and steal the oil.” General Petraeus interjected, “We could have bought all the oil in the region for 100 years for what we’ve spent in Iraq!” Nazarbayev, looking a bit amused, said, “I know. I’m just telling you what he said.” Without specifying his interlocutor, Nazarbayev said he’d asked if Tehran is willing to talk to the United States, “and they said yes. I conveyed this to President-elect Obama during our (post-U.S. election) phone call.” General Petraeus commented the United States had had three rounds of talks with Iran about Iraq but had gotten nowhere. Nazarbayev said, “I have no illusion U.S. negotiations with Iran would be easy or fast, but we cannot let Iran have nuclear weapons. I want to be helpful with Iran.”
&#
x000A;6. (S) Nazarbayev added he has discussed Iran’s nuclear ambitions with Russian President Medvedev and Prime Minister Putin: “I emphasize to them a nuclear Iran is in no one’s interests.” General Petraeus responded that it’s important to get Russia to be helpful with Iran: “They seem conflicted. Sometimes they help; sometimes they send weapons.” Nazarbayev said, “I told Obama that he has a good chance to have good relations with Mevedev. That’s important for us, too, since Russia and Kazakhstan are neighbors.”

RUSSIA

7. (S) General Petraeus told President Nazarbayev Kazakhstan’s special relationship with Russia is not a problem for the United States. “It’s not a zero-sum game for us. You can have good relations with Russia and China as well as with us.” Nazarbayev said he fully agreed, adding, “I tell Russia and China we have our own resources. We are Kazakhs. We were colonized for over 500 years, first by the Golden Horde, then by the western Chinese, then by Russia. We’ve been independent for only 17 years, and we do not want to be colonized again. We will never be ‘under’ Russia or China. We have enough resources and a reasonably educated population to make our own choices. We want stability, development, and cooperation. We all have to have Russia ‘inside the tent.’ I’d like the United States and the European Union to help with this.”

8. (S) Nazarbayev said the West had made real mistakes after the collapse of the Soviet Union by not treating Yeltsin with respect. He said Yeltsin had once gone to the NATO-Russia Council where he had been “teased.” Nazarbayev explained Russia has great, but now injured, pride. It was once a great empire, and Russian soldiers had played a large role in winning the Great Patriotic War (WW II), but the West seems to refuse to understand this. For Russia, maintained Nazarbayev, “face” is everything. Nazarbayev said he had frequently told President Medvedev that being an energy superpower is not enough; it’s essential to develop international leadership with a spirit of cooperation. Nazarbayev said Medvedev was “almost there,” but then the “Georgia mistake happened.” Nazarbayev concluded, “If the new U.S. administration has a wise response to Russia, I’d be glad to help” with the relationship.

9. (S) NOTE: While waiting for Nazarbayev to enter the meeting room, General Petraeus ask Foreign Policy Adviser Sarybay why Kazakhstan had moved its capital from Almaty to
ASTANA 00000095 003 OF 003
Astana. Sarybay answered, “There are probably 20 different reasons people give. In fact, in the first few years of independence, several maps appeared that made our northern border unclear, and so the President ‘planted the flag.’” This is the first time we are aware that a senior official has confirmed Nazarbayev moved his capital to prevent Russian nationalists from annexing the northern third of Kazakhstan, which hotheads, including some in the Duma at that time, claimed was historically part of Russia. END NOTE.

10. (S) COMMENT: Nazarbayev looked as fit as ever and was very well-briefed, discussing details of the U.S.-Kazakhstan military relationship without notes. He was not shy that he sees himself as an international statesman. We know he was genuinely pleased with President-elect Obama’s telephone call, and we judge his offers to be helpful for the United States with Iran and Russia are genuine. END COMMENT.

11. (U) General Petraeus has cleared this cable. HOAGLAND

Wikileaks

09ASTANA94, KAZAKHSTAN: CENTCOM CDR PETRAEUS MEETS PRESIDENT

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Reference ID Created Released Classification Origin
09ASTANA94 2009-01-20 00:53 2011-08-30 01:44 SECRET Embassy Astana

VZCZCXRO0169
PP RUEHBI RUEHCI RUEHFL RUEHKW RUEHLA RUEHLH RUEHNP RUEHPW RUEHROV
DE RUEHTA #0094/02 0200053
ZNY SSSSS ZZH
P 200053Z JAN 09 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 4364
INFO RUCNCIS/CIS COLLECTIVE PRIORITY 1047
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0445
RUEHUL/AMEMBASSY SEOUL PRIORITY 0236
RUEHKO/AMEMBASSY TOKYO PRIORITY 1151
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RUEHNO/USMISSION USNATO PRIORITY 2458
RUCNDT/USMISSION USUN NEW YORK PRIORITY 2130

S E C R E T SECTION 02 OF 03 ASTANA 000094 
 
SIPDIS 
 
STATE FOR P, SCA/CEN, EUR/RUS, NEA/IR 
 
E.O. 12958: DECL: 01/19/2029 
TAGS: PGOV PREL AF IR RS KZ
SUBJECT:  KAZAKHSTAN:  CENTCOM CDR PETRAEUS MEETS PRESIDENT 
NAZARVAYEV, JANUARY 14 
 
*********************** 
* Missing Section 001 * 
*********************** 
 
 
ASTANA 00000094  002.2 OF 003 
 
 
fully gave up that status.  I tell them it would be to their 
benefit to be non-nuclear.  That would draw new assistance 
and investment."  General Petraeus said he again fully agreed 
with the president, but noted Iran's policy is determined by 
the Revolutional Guard al-Quds Force commander, not by 
President Ahmedinejad or the Foreign Ministry.  Nazarbayev 
noted he had once talked to Ahmedinejad for two and a half 
hours about such issues, "but in the end I realized I had 
just wasted my time."  He said Supreme Leader Ayatollah 
Khameni told him that even if Iran compromises on the nuclear 
issue, the United States would always find another reason to 
criticize "because they hate us -- all the United States 
wants is to conquer the entire region and steal the oil." 
General Petraeus interjected, "We could have bought all the 
oil in the region for 100 years for what we've spent in 
Iraq!"  Nazarbayev, looking a bit amused, said, "I know.  I'm 
just telling you what he said."  Without specifying his 
interlocutor, Nazarbayev said he'd asked if Tehran is willing 
to talk to the United States, "and they said yes.  I conveyed 
this to President-elect Obama during our (post-U.S. election) 
phone call."  General Petraeus commented the United States 
had had three rounds of talks with Iran about Iraq but had 
gotten nowhere.  Nazarbayev said, "I have no illusion U.S. 
negotiations with Iran would be easy or fast, but we cannot 
let Iran have nuclear weapons.  I want to be helpful with 
Iran." 
 
6.  (S) Nazarbayev added he has discussed Iran's nuclear 
ambitions with Russian President Medvedev and Prime Minister 
Putin:  "I emphasize to them a nuclear Iran is in no one's 
interests."  General Petraeus responded that it's important 
to get Russia to be helpful with Iran:  "They seem 
conflicted.  Sometimes they help; sometimes they send 
weapons."  Nazarbayev said, "I told Obama that he has a good 
chance to have good relations with Mevedev.  That's important 
for us, too, since Russia and Kazakhstan are neighbors." 
 
RUSSIA 
 
7.  (S) General Petraeus told President Nazarbayev 
Kazakhstan's special relationship with Russia is not a 
problem for the United States.  "It's not a zero-sum game for 
us.  You can have good relations with Russia and China as 
well as with us."  Nazarbayev said he fully agreed, adding, 
"I tell Russia and China we have our own resources.  We are 
Kazakhs.  We were colonized for over 500 years, first by the 
Golden Horde, then by the western Chinese, then by Russia. 
We've been independent for only 17 years, and we do not want 
to be colonized again.  We will never be 'under' Russia or 
China.  We have enough resources and a reasonably educated 
population to make our own choices.  We want stability, 
development, and cooperation.  We all have to have Russia 
'inside the tent.'  I'd like the United States and the 
European Union to help with this." 
 
8.  (S) Nazarbayev said the West had made real mistakes after 
the collapse of the Soviet Union by not treating Yeltsin with 
respect.  He said Yeltsin had once gone to the NATO-Russia 
Council where he had been "teased."  Nazarbayev explained 
Russia has great, but now injured, pride.  It was once a 
great empire, and Russian soldiers had played a large role in 
winning the Great Patriotic War (WW II), but the West seems 
to refuse to understand this.  For Russia, maintained 
Nazarbayev, "face" is everything.  Nazarbayev said he had 
frequently told President Medvedev that being an energy 
superpower is not enough; it's essential to develop 
international leadership with a spirit of cooperation. 
Nazarbayev said Medvedev was "almost there," but then the 
"Georgia mistake happened."  Nazarbayev concluded, "If the 
new U.S. administration has a wise response to Russia, I'd be 
glad to help" with the relationship. 
 
9.  (S) NOTE:  While waiting for Nazarbayev to enter the 
meeting room, General Petraeus ask Foreign Policy Adviser 
Sarybay why Kazakhstan had moved its capital from Almaty to 
 
ASTANA 00000094  003 OF 003 
 
 
Astana.  Sarybay answered, "There are probably 20 different 
reasons people give.  In fact, in the first few years of 
independence, several maps appeared that made our northern 
border unclear, and so the President 'planted the flag.'" 
This is the first time we are awar
e that a senior official 
has confirmed Nazarbayev moved his capital to prevent Russian 
nationalists from annexing the northern third of Kazakhstan, 
which hotheads, including some in the Duma at that time, 
claimed was historically part of Russia.  END NOTE. 
 
10.  (S) COMMENT:  Nazarbayev looked as fit as ever and was 
very well-briefed, discussing details of the U.S.-Kazakhstan 
military relationship without notes.  He was not shy that he 
sees himself as an international statesman.  We know he was 
genuinely pleased with President-elect Obama's telephone 
call, and we judge his offers to be helpful for the United 
States with Iran and Russia are genuine.  END COMMENT. 
 
11.  (U) General Petraeus has cleared this cable. 
HOAGLAND

Wikileaks

09ASTANA91, KAZAKHSTAN: MFA DIPLOMATIC NOTE CONFIRMS GOVERNMENT’S

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Reference ID Created Released Classification Origin
09ASTANA91 2009-01-16 11:37 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO8895
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0091 0161137
ZNR UUUUU ZZH
O 161137Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4362
INFO RUCNCIS/CIS COLLECTIVE 1045
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0618
RUEKJCS/SECDEF WASHDC 0533
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS ASTANA 000091 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/FO, SCA/CEN 
 
E.O. 12958: N/A 
TAGS: PGOV PREL MARR AF KZ
SUBJECT:  KAZAKHSTAN:  MFA DIPLOMATIC NOTE CONFIRMS GOVERNMENT'S 
APPROVAL OF TRANSIT OF GOODS FOR AFGHANISTAN 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) The Embassy has received a diplomatic note from the 
Kazakhstani Ministry of Foreign Affairs confirming the government's 
approval of the transit of non-military goods for Afghanistan 
shipped through the Distribution Network of Operation Enduring 
Freedom (DNOEF).  A translation of the full text of the note is in 
para 3. 
 
3. (SBU) BEGIN TEXT 
 
Diplomatic Note 22-1/75 
 
The Ministry of Foreign Affairs of the Republic of Kazakhstan 
expresses its compliments to the Embassy of the United States of 
America and in response to the Embassy's diplomatic note of December 
11, 2008, has the honor to inform that Kazakhstan expresses its 
consent to the transit of commercial cargo of non-military purpose 
through the territory of Kazakhstan to Afghanistan, excluding the 
goods and materials noted in Enclosure 1 of the above-referenced 
diplomatic note.  (NOTE:  For the sake of clarity, this was the 
enclosure in our December 11, 2008 diplomatic note which listed the 
military goods, such as ammunition, that we promised we would not 
ship through Kazakhstan.  END NOTE.) 
 
The Ministry avails itself of this occasion to renew to the Embassy 
the assurances of its highest consideration. 
 
Astana, January 14, 2009 
 
END TEXT 
 
HOAGLAND

Wikileaks

09ASTANA90, KAZAKHSTAN: LIFE ON THE STEPPE, JANUARY 10-16

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Reference ID Created Released Classification Origin
09ASTANA90 2009-01-16 10:39 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO8816
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0090/01 0161039
ZNR UUUUU ZZH
O 161039Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4359
INFO RUCNCIS/CIS COLLECTIVE 1042
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHVV/ISLAMIC COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0441
RUEHKO/AMEMBASSY TOKYO 1147
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0615
RUEKJCS/SECDEF WASHDC 0530
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 03 ASTANA 000090 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, SCA/PPD, IIP 
 
E.O. 12958: N/A 
TAGS: PGOV ECON SOCI SCUL KPAO KCRM KZ
SUBJECT:  KAZAKHSTAN:  LIFE ON THE STEPPE, JANUARY 10-16 
 
1. The following is the first in a new series of weekly cables from 
Embassy Astana with tidbits on daily life in Kazakhstan. 
 
MASIMOV JOINS BLOGOSPHERE 
 
2. Prime Minister Karim Masimov has joined the Kazakhstani 
blogosphere by starting his very own weblog ("primeminister. 
government.kz").  In a bid to connect with the people -- or at least 
those 14 percent who have Internet access -- Masimov started 
"blogging" on New Year's Eve, and his first post attracted wide 
attention from fellow Kazakhstani bloggers.  With the hope that the 
blog provides the "end user interested in the doings of the 
Government and the socio-economic situation" with interesting, 
useful information, Masimov announced that "in the future, the blog 
will be filled with practically all necessary information." 
 
3. Masimov asked his readers and fellow bloggers to leave comments 
which he promised to read in full.  A number of people responded; at 
last count, the first post has received almost three hundred 
comments.  The contributions ranged from wishes of wellness to 
questions about the status of the economy and complaints about the 
quality of tap water in villages.  Masimov has since ordered the 
cabinet to investigate the criticisms, Reuters reported.  One topic 
that received specific attention was the case of LiveJournal, a 
popular blogging platform which has reportedly been blocked in 
Kazakhstan.  A number of readers asked why it has been blocked, when 
the blockage would be lifted, and what the Prime Minister himself 
(as a fellow blogger) intends to do about it. 
 
4. The blog launch certainly generated a buzz and won approval among 
Internet users in Kazakhstan.  Obviously happy with this step, 
Masimov told his ministers on January 12 to start their own personal 
blogs to get closer to the people.  "I have opened a blog on the 
government website," Masimov told a government meeting, "so I order 
all ministers to start personal blogs where people will be able to 
ask you questions that you must answer." 
 
"INTELLECTUAL SCHOOL" OPENED TO EDUCATE FUTURE ELITE 
 
5. On January 12, President Nursultan Nazarbayev officially opened a 
new school for gifted children in Astana.  As part of the 
President's project, "20 Intellectual Schools of the First 
President", 19 other schools are soon to follow in all Kazakhstani 
major cities.  The government allocated 5 billion tenge 
(approximately $42 million) from the 2009-10 budget to fund the 
project.  Astana's first "intellectual school" will focus on natural 
sciences and will provide an education to 1,200 students.  Each of 
these students will be provided with a laptop computer and access to 
a broadband wireless network.  Moreover, the school will have its 
own online education portal through which parents will be able to 
check on their children's progress and participate in the 
educational process. 
 
6. According to preliminary information, the government will foot 
part of the bill, while the rest will be paid by the parents of the 
"young intellectuals."  The schools are to provide an experimental 
platform to test new learning programs and modern educational 
technologies.  "We are confident that the best children in all of 
Kazakhstan showing exceptional talent in these fields (i.e., 
mathematics and physics) will find themselves in these schools, in 
which we will raise the future elite of our country," Nazarbayev 
said at the opening ceremony. 
 
COURT BRIBES MOST EXPENSIVE, SURVEY FINDS 
 
7. In a survey conducted by the Association of Political and Social 
Scientists (APSS), 71.7 percent of respondents reported that they 
were at least one time involved in corruption during the last three 
months of 2008, Interfax reported.  Courts topped the list as 
requiring the most expensive bribes (an average bribe of nearly 
$3,746), followed by military enlistment offices ($1,591).  The 
average bribe for purchasing and registering land was $1,415, and 
for employment and career advancement $776.  The survey showed that 
people consider customs and police to be the most corrupt government 
agencies.  The courts, education and healthcare institutions, and 
procurator's offices do not fare much better in the survey. 
 
GOVERNMENT APPARENTLY READY TO DITCH "TALON" SYSTEM 
 
ASTANA 00000090  002 OF 003 
 
 
 
8. Several years ago, ostensibly in response to the increasing 
n
umber of traffic violations, Kazakhstan's lawmakers came up with an 
idea to force greater accountability on the part of the local 
drivers.  In addition to their driver's licenses, each driver would 
be issued a card called a "talon" (which can be translated as 
"voucher") with an electronic chip that would store a driver's 
traffic violation history.  The traffic police would then be 
equipped with mobile terminals to read the information stored on the 
talons.  In fact, drivers would even have the option to deposit a 
balance on their talons and use them to pay their fines 
electronically at the scene of a violation.  A local company called 
Kazakhstan Processing Center was selected, without a bidding 
process, to produce the talons and distribute them among the driving 
population.  The deadline for introduction of the talon system was 
set for January 1, 2009. 
 
9. "Talonization", as the process has been dubbed in the local 
media, has received considerable attention among the public, most of 
it negative.  Questions focused mostly on the opaqueness of the 
entire process.  Why does one need to introduce a card with 
information almost identical to already existing driver's licenses? 
Why is the entire process, including the management of the personal 
information of millions of citizens, to be controlled by a virtually 
unknown business entity? 
 
10. Critics did not have to wait long to be justified in their 
skepticism.  Kazakhstan Processing Center, which was supposed to 
issue the talons, showed itself not up to the task.  As requests for 
talons started coming in, the backlog grew, and as early as the 
summer of 2008, when only about 10 percent of all drivers turned in 
their applications, the wait time was several months to receive a 
talon.  Questions about how the company would be able to handle the 
expected rush leading up to the deadline of January 1, 2009, became 
more pressing.  A "solution" came from Kazakhstan Processing Center 
itself, which announced that due to the high demand, talons would be 
sold for 1,200 tenge (approximately $10).  Only after thousands of 
drivers had paid did the Ministry of Internal Affairs (MVD) finally 
insist that all talons had to be issued for free.  Kazakhstan 
Processing Center itself never removed the price information from 
its website, despite promises that it would return money it received 
for the talons. 
 
11. However, with the deadline fast approaching, it became clear 
that the company would be unable to provide all drivers with their 
talons in time.  At first, the MVD took a hard stance and announced 
that every driver would be required to have a talon by New Year's 
Day 2009 and would be fined if they did not obtain one.  Later, the 
MVD softened its tone, and suggested a six-month transition period 
when drivers would only be warned and asked to get their talons. 
Soon rumors began to spread that the entire talon system would be 
brought to an end before it even took effect.  It finally appears 
that the "talonization" idea will be put out of its misery. 
Purportedly relying on high-ranking MVD sources, Mazhilis 
(parliament) member Sat Topkapbayev announced on January 14 that 
talons would, in fact, be abolished.  An official MVD announcement 
has yet to be made, but it seems that the majority of Kazakhstanis, 
already used to similar schemes, chose the right strategy to wait 
out the talon. 
 
BALLET DANCERS ON STRIKE 
 
12. Ballet dancers from the National Opera and Ballet Theater in 
Astana protested their poor living conditions and miserable salaries 
by canceling a January 9 performance.  Most of the 60 dancers live 
in dormitories, four to five per room, though some of them have 
spouses and children.  The dancers, who were invited to join the 
theatre when it was started nine years ago, were promised apartments 
in Astana.  Since then, only one of them was able to secure an 
apartment, and recently the theater management announced that no 
apartments will be given out.  With salaries of around 50,000 tenge 
(approximately $420) a month, the dancers find that buying 
apartments in Astana with their own financial resources is out of 
the question.  The theater has national status, and thus falls under 
the competency of the Ministry of Information and Culture. 
Therefore, the Astana akimat (mayor's office) does not provide 
housing to the theater's employees as it does to the employees of 
municipal theaters. 
 
ASTANA 00000090  003 OF 003 
 
 
 
HOAGLAND

Wikileaks

09ASTANA89, KAZAKHSTAN: OIC SPECIAL ENVOY CUMBER DISCUSSES DEMOCRACY,

WikiLeaks Link

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If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #09ASTANA89.
Reference ID Created Released Classification Origin
09ASTANA89 2009-01-16 10:20 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO8793
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0089/01 0161020
ZNR UUUUU ZZH
O 161020Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4357
INFO RUCNCIS/CIS COLLECTIVE 1040
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHVV/ISLAMIC COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0439
RUEHKO/AMEMBASSY TOKYO 1145
RUCNDT/USMISSION USUN NEW YORK 2127
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0613
RUEKJCS/SECDEF WASHDC 0528
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 02 ASTANA 000089 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, DLR/IRF, IO 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM SOCI KDEM KISL KZ
SUBJECT:  KAZAKHSTAN:  OIC SPECIAL ENVOY CUMBER DISCUSSES DEMOCRACY, 
GAZA CONFLICT WITH ASTANA-BASED DIPLOMATS 
 
REF: ASTANA 0083 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY: During a January 9 dinner with U.S. Special Envoy 
to the Organization of the Islamic Conference (OIC) Sada Cumber, 
ambassadors and other diplomats from several OIC-member countries 
and India freely exchanged views on the pros and cons of the 
democracy, the current conflict in Gaza, and the need to separate 
religion from politics.  END SUMMARY. 
 
"WHAT GOOD IS A DEMOCRACY?" 
 
3.  (SBU) On January 9, the Ambassador hosted a dinner with 
Astana-based diplomats in honor of U.S. Special Envoy to the 
Organization of Islamic Conference (OIC) Sada Cumber.  The guests 
were Azerbaijani Ambassador Lyatif Gandilov, Egyptian Ambassador 
Abdallah Alarnosy, Iraqi Charge d'Affaires Khaldun Aljama, Indian 
Ambassador Ashok Sajjanhar, and Afghan Embassy Second Secretary Mir 
Hagjoo.  (NOTE:  All of the invitees, with exception of Sajjanhar, 
represent OIC member countries.  END NOTE.) 
 
4.  (SBU) The dinner, which started on courteous and genteel terms, 
became animated and somewhat emotional as time progressed.  The 
conversation began with a general discussion of the pros and cons of 
democracy.  India's Sajjanhar noted that democracy does not appear 
overnight, arguing that "the seeds of India's democracy were sown 
forty years ago."  Egypt's Alarnosy asked "What good is a democracy 
when you have poverty and no security?"  Sajjanhar countered that 
democratic rule is an effective tool against poverty in that it 
allows people to voice their grievances through the political 
process, but he conceded that "sometimes the people's expectations 
grow faster than their income."  Cumber contended that lack of 
political accountability is the greatest obstacle to development 
facing the Muslim world.  He pointed out that despite controlling 82 
percent of the world's resource wealth, Muslim countries account for 
only 8 percent of the world's economic output.  The Ambassador 
summed up the general sentiment that "democracy is, or should be, 
for the people." 
 
GAZA CONFLICT A HOT TOPIC 
 
5.  (SBU) Egypt's Alarnosy suddenly shifted gears and declared that 
the United States "has a double standard on democracy."  "How can 
you talk about democracy with things like Guantanamo and Gaza?" he 
charged.  Cumber countered that the Muslim world and the United 
States agree on the need to resolve the conflict in Gaza.  India's 
Sajjanhar agreed, but added that "the vast collateral damage in Gaza 
only raises the prestige and popularity of Hamas."  "This is your 
democracy!" declared Egypt's Alarnosy emotionally, and added, "The 
United States has no standing as a moral broker." 
 
6.  (SBU) Azerbaijan's Gandilov pointed out that there are 
similarities between the situation in Gaza and Azerbaijan's 
long-standing dispute with Armenia over Nagorno-Karabakh.  Armenia, 
he claimed, has ignored the UN Security Council resolutions 
demanding it withdraw from the Azerbaijani territory it has 
occupied, and the OSCE Minsk group charged with mediating the 
conflict "has been useless."  The root of this 14-year-old conflict, 
stressed Gandilov, is the contradiction between the principle of 
self-determination and the principle of territorial integrity.  "Our 
problem needs a global approach, with an objective broker." Why 
blame the United States, asked Gandilov, for issues that could be 
resolved with a stronger involvement from the UN? 
 
7.  (SBU) The Ambassador noted that to resolve such long-standing 
conflicts, a country's strategic interests must take a back seat to 
the interests of the people.  Egypt's Alarnosy contended that "the 
world does not want to solve Gaza's problem."  Cumber proposed that 
perhaps Secretary of State-designate Hillary Clinton could "pick up 
where Bill Clinton left off" in the Israeli peace process.  "That 
will be wholly dependent on Israel," declared Alarnosy, noting with 
chagrin that until the conflict is resolved, the refugees from Gaza 
will continue "flowing our way."  What the world needs is "democracy 
on the international level and a complete reorganization of the 
global economy," he asserted.  He conceded Cumber's point, however, 
 
ASTANA 00000089  002 OF 002 
 
 
that the Muslim world has to take on more responsibility and "pull 
itself up." &#
x000A; 
RELIGION HAS NO PLACE IN POLITICS 
 
8.  (SBU) Azerbaijan's Gandilov noted that the Gaza conflict, like 
many others, is complicated by the "question of God."  "Religion has 
no place in politics," he argued, "because God is one for all, but 
different for each."  He proposed that world leaders abandon 
"purposeless" summits -- "Leaders hug, but wars continue!" -- and 
concentrate instead on finding a common language.  Gandilov's 
comments were greeted with emphatic agreement from all.  The 
Ambassador concluded the dinner by thanking the participants for 
their honesty and candor, noting that world politics needs more of 
such open exchanges of views. 
 
9. (U) Special Envoy Cumber did not/not clear this cable. 
 
HOAGLAND

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09ASTANA83, KAZAKHSTAN: SPECIAL ENVOY CUMBER ENCOURAGES ASTANA TO

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Reference ID Created Released Classification Origin
09ASTANA83 2009-01-15 10:33 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO7567
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0083/01 0151033
ZNR UUUUU ZZH
O 151033Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4351
INFO RUCNCIS/CIS COLLECTIVE 1038
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHVV/ISLAMIC COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0437
RUEHKO/AMEMBASSY TOKYO 1143
RUCNDT/USMISSION USUN NEW YORK 2125
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0611
RUEKJCS/SECDEF WASHDC 0526
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 02 ASTANA 000083 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, DRL/IRF, IO 
 
E.O. 12958: N/A 
TAGS: PGOV PREL KISL KDEM KZ
SUBJECT:  KAZAKHSTAN:  SPECIAL ENVOY CUMBER ENCOURAGES ASTANA TO 
TAKE A STRONGER ROLE IN THE OIC 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  In a January 9 meeting with U.S. Special Envoy 
to the Organization of the Islamic Conference (OIC) Sada Cumber, 
State Secretary Kanat Saudabayev underlined Kazakhstan's commitment 
to promoting inter-confessional understanding and expressed hope 
that the tradition of strong relations between the United States and 
Kazakhstan will continue under the new Administration.  SE Cumber 
encouraged Kazakhstan to take a stronger role in the Muslim world 
and set an example as a moderate Muslim country.  In a separate 
meeting with Deputy Foreign Minister Nurlan Yermekbayev, Cumber 
proposed that Kazakhstan consider hosting the OIC's triennial summit 
of heads-of-state and take the lead in continuing Saudi Arabia's 
inter-faith dialogue initiative.  Yermekbayev agreed that a slow and 
steady push from the moderate countries could change the 
"conservative spirit" within the OIC.  END SUMMARY. 
 
INTER-CONFESSIONAL ACCORD IS A TOP PRIORITY 
 
3.  (SBU) In a January 9 meeting in Astana with U.S. Special Envoy 
to the Organization of the Islamic Conference (OIC) Sada Cumber, 
State Secretary Kanat Saudabayev noted that one of President 
Nursultan Nazarbayev's "top priorities" is to promote 
inter-confessional accord, and argued that this "wise policy" has 
allowed Kazakhstan to be the "lucky exception" among post-Soviet 
states in avoiding religious conflicts.  He thanked the United 
States government for its support for Kazakhstan's international 
initiatives to promote inter-cultural and inter-confessional 
dialogue, including the Common World Forum and the Conference of 
World Religious Leaders.  Saudabayev explained that Kazakhstan's 
growing international role was the decisive factor in its decision 
to bid for the 2010 chairmanship of the Organization for Security 
and Cooperation in Europe (OSCE) and the 2011 chairmanship of the 
OIC.  He said that he assigns "great weight" to SE Cumber's visit. 
As he put it, "It is obvious that the United States sees us as a 
partner." 
 
4.  (SBU) SE Cumber responded that Kazakhstan and the United States 
share a commitment to supporting personal freedom in the context of 
a multi-ethnic state.  Saudabayev assured Cumber that Kazakhstan has 
"no alternative" to such a policy.  Kazakhstan chose the path toward 
democracy and a market economy and has made "gradual, but 
irreversible" progress since independence.  In this time, Kazakhstan 
has never had "major disagreements" with the United States, noted 
Saudabayev, but there have been times when the two disagreed on the 
pace of Kazakhstan's reforms.  Perhaps not everybody in the United 
States government understands that Kazakhstan is moving as fast as 
"circumstances allow," he mused. 
 
5.  (SBU) SE Cumber favorably noted Kazakhstan's progress since 
independence and explained that the United States sometimes "pushes" 
Kazakhstan because it wants it to succeed.  He told Saudabayev that 
Kazakhstan has solidified its leadership in Central Asia and 
expressed the hope that it would do the same in the Muslim world. 
"Central Asia is at the core of cosmopolitan Islamic values," he 
stressed, and Kazakhstan's upcoming 2011 OIC chairmanship is a 
chance to promote moderate Islam and counter the effects of radical 
"narrow" Islam.  Instead of "investing in theocracy" like Saudi 
Arabia and Iran, Kazakhstan has chosen to invest in education and 
democratic development, stressed Cumber, and the Muslim world can 
learn from Kazakhstan's example. 
 
APPRECIATION FOR PRESIDENT-ELECT OBAMA'S PHONE CALL 
 
6.  (SBU) Saudabayev agreed with SE Cumber that "there is a lack of 
closeness and understanding" among Muslim nations and that 
organizations like the OIC and the League of Arab States do not 
command great respect even among their founders.  He praised 
President Bush for his "unprecedented" outreach to the Muslim world 
and advised the United States to "continue to highlight the examples 
of countries where democracy and Islam coexist."  He told Cumber 
that he was "proud" that President Nazarbayev was one of the first 
world leaders to speak by telephone with President-elect Obama and 
expressed the hope that the new Administration will "continue our 
tradition of good relations."  Cumber told Saudabayev that in his 
conversations with the Obama transition team, he named Kazakhstan as 
 
ASTANA 00000083  002 OF 002 
 
 
one of the four Muslim-majority countries President Obama s
hould 
consider visiting within the first 100 days of taking office. 
 
SECULAR COUNTRIES HAVE DIFFICULTLY BEING HEARD IN OIC 
 
7.  (SBU) In a separate meeting, Deputy Foreign Minister Nurlan 
Yermekbayev underlined that the government of Kazakhstan greatly 
appreciated Ambassador Zalmay Khalilzad's attendance at the Common 
World Forum ministerial meeting in Astana in October 2008.  Sharing 
his thoughts on the OIC, he said the organization has the potential 
to represent the whole spectrum of Islamic diversity, but he 
lamented that "secular countries have a hard time being heard."  SE 
Cumber responded that moderate Muslim countries, like Kazakhstan, 
should take on a stronger role in the organization.  He contended 
that the initiative of King Abdullah of Saudi Arabia on inter-faith 
dialogue started off strong but has since lost steam.  Cumber 
proposed that Kazakhstan take the lead on continuing the effort, 
noting that the Vatican seemed quite open to the idea when he raised 
it during a recent visit. 
 
8.  (SBU) SE Cumber welcomed the fact that Kazakhstan will host the 
2011 OIC ministerial and encouraged Yermekbayev to think about 
hosting the triennial summit of OIC heads-of-state.  Noting that the 
summit occurs once every three years and that the hosts for the next 
two summits have already been determined, he said that Kazakhstan 
"would have plenty of time" to prepare.  Cumber suggested that 
Kazakhstan concentrate on two important issues:  how to bring the 
Muslim world together, and how to encourage the "silent moderates" 
within the OIC.  Yermekbayev welcomed Cumber's suggestions and said 
he would take them under serious consideration.  He said that a 
slow, but steady, push from the moderates could "change the 
conservative spirit" within the OIC. 
 
HOAGLAND

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