09ASTANA295, KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, FEBRUARY 1 –

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Reference ID Created Released Classification Origin
09ASTANA295 2009-02-19 09:51 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

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RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0295/01 0500951
ZNR UUUUU ZZH
O 190951Z FEB 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4665
INFO RUCNCIS/CIS COLLECTIVE 1218
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0601
RUEHKO/AMEMBASSY TOKYO 1307
RUEHUL/AMEMBASSY SEOUL 0304
RUEHNE/AMEMBASSY NEW DELHI 0539
RUEHIL/AMEMBASSY ISLAMABAD 2157
RUEHLM/AMEMBASSY COLOMBO 0049
RUEHKA/AMEMBASSY DHAKA 0057
RUEHKT/AMEMBASSY KATHMANDU 0014
RUEHBUL/AMEMBASSY KABUL 0441
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0780
RUEKJCS/SECDEF WASHDC 0696
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1232

UNCLAS SECTION 01 OF 03 ASTANA 000295 
 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESCA 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN EIND ENRG EPET SENV KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, FEBRUARY 1 - 
FEBRUARY 14 
 
ASTANA 00000295  001.2 OF 003 
 
 
1.  SUMMARY:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
 
-- Kazakhstan to Allow Islamic Banking 
-- Salary Ceiling for Top Managers of State Companies 
-- Ruling Party to Monitor National Fund 
-- Economic Statistics 
-- Environmental News 
-- Kazatomprom News 
-- Fitch Assesses Effect of Currency Devaluation 
-- New Chairman of Kazakhstan Electricity Association 
-- Energy Statistics 
END SUMMARY. 
 
KAZAKHSTAN TO ALLOW ISLAMIC BANKING 
 
2.  On February 12, President Nursultan Nazarbayev signed 
legislation introducing amendments to the Civil Code, Tax Code, and 
laws on banking, licensing, securities, and investment funds that 
will allow for the introduction of Islamic financial instruments in 
Kazakhstan.  The amendments prohibit "usurious fees" according to 
the principles of Islamic banking. 
 
SALARY CEILING FOR TOP MANAGERS OF STATE COMPANIES 
 
3.  On February 10, Prime Minister Karim Masimov called on state 
holding companies to set a salary ceiling for top managers, under 
which their salaries would not exceed the Prime Minister's 
(official) salary of 700,000 tenge (approximately $4,729) per month. 
 In mid-January, Kairat Aitekenov, a managing director of the 
Samruk-Kazyna National Welfare Fund, reported that the monthly 
salaries of Samruk-Kazyna's chairman and board members did not 
exceed 1.3 million tenge (approximately $8,783). 
 
RULING PARTY TO MONITOR NATIONAL FUND 
 
4.  On February 13, President Nazarbayev announced that a commission 
will be established under the Nur Otan ruling party to monitor the 
use of money taken from the National (Oil) Fund for the government's 
program to mitigate the effects of the global financial crisis. 
Approximately $8.1 billion will be withdrawn from the National Fund, 
which, according to the National Bank, held approximately $27.96 
billion on January 31. 
 
ECONOMIC STATISTICS 
 
5.  In January, Kazakhstan's gold and currency reserves, including 
the gross reserves of the National (Oil) Fund and the National Bank, 
fell by 1.1% from the previous month, to $46.244 billion.  According 
to the National Bank, Kazakhstan enjoyed a balance of payments 
surplus in 2008 of $8.9 billion, compared to a deficit of $7.3 
billion in 2007.  Exports totaled $72 billion for 2008, including 
$43.5 billion of oil and gas condensate.  Imports in 2008 totaled 
$38.5 billion, resulting in a trade surplus of $33.5 billion. 
 
ENVIRONMENTAL NEWS 
 
6.  On February 2, Minister of Environmental Protection Nurlan 
Iskakov proudly announced that waste emissions in 2008 were 149,000 
tons lower than the previous year.  In response, Yerlan Nigmatullin, 
Chairman of the Environmental Committee of the Mazhilis (the lower 
house of parliament), maintained that the decrease in emissions 
resulted not from the good work of the Environmental Ministry, but 
from a reduction in industrial production due to the global 
financial crisis.  Minister Iskakov criticized regional governments 
for failing to invest resources in order to address pressing 
environmental issues.  For example, according to Iskakov, in 2008, 
 
ASTANA 00000295  002.2 OF 003 
 
 
regional governments received 66 billion tenge (approximately $445 
million) in ecological fees, of which only 30 percent has been used 
to fund environmental projects.  Nigmatullin suggested replacing 
environmental fines with an environmental tax, which, in his 
opinion, would enable the government to invest funds more 
effectively.  Prime Minister Masimov has also spoken out in favor of 
this proposal.  "It is time for Kazakhstan's environmental 
legislation to meet world standards," Masimov stated.  (NOTE: 
Revenue from an environmental tax would go to the national budget, 
while revenue collected from environmental fines stays at the 
regional level.  END NOTE.) 
 
7.  On February 5, the Tax Code was amended to accommodate 
complaints from members of the Mazhilis that the
tax rate for 
industrial emissions, including gas flaring, had been set too low. 
At the request of the Mazhilis, sulfur oxide, nitrogen oxide, soot, 
hydrogen sulfide, and mercaptans -- which constitute 92% of all 
atmospheric emissions in Kazakhstan -- were included in the list of 
pollutants subject to taxation. 
 
8.  On February 11, a joint commission of the Ministry of 
Environmental Protection and the Ministry of Agriculture released 
the findings of their investigation into the death of 32 Caspian 
seals in 2008.  According to Murat Rakhimberghenov, Chairman of 
Ecological Regulation and Control at the Ministry of Environment, 
the seals died due to a lack of oxygen and the spread of a deadly 
virus among the seal population.  The commission found no evidence 
that oil spills or emissions were responsible for the deaths of the 
seals.  In 2007, nearly 1,000 seals died off Kazakhstan's Caspian 
Sea shore.  The seal population in the Caspian currently numbers 
between 350,000 and 400,000. 
 
9.  Rakhimberghenov also announced that the Ministry of Environment 
has ordered the North Caspian Operating Company operating the 
Kashagan oil field to build enclosed sulfur storage facilities. 
This announcement came despite the fact that the company has already 
completed construction on several new four-million ton sulfur 
storage units, which were inspected and approved by the Ministry of 
Environment. 
 
KAZATOMPROM NEWS 
 
10.  At a press conference on February 3, Mukhtar Zhakishev, 
president of national nuclear company Kazatomprom, announced that 
his company would sign a contract to supply uranium to India within 
one month.  (NOTE:  Kazatomprom and the Nuclear Power Corporation of 
India Limited signed an MOU on cooperation during President 
Nazarbayev's January trip to New Delhi.  END NOTE.)  Zhakishev also 
announced a joint venture with China's Guangdong Nuclear Power 
Group, which will assume 49% ownership of the Irkol and Semizbay 
uranium mines.  The two mines contain an estimated 1,250 tons of 
uranium.  Zhakishev reiterated Kazatomprom's plan to become the 
world's leading uranium producer in 2009, and said uranium output 
will reach 11,935 tons this year, if demand holds up. 
 
FITCH ASSESSES EFFECT OF CURRENCY DEVALUATION 
 
11.  According to a February 6 statement by the Fitch rating agency, 
KazMunayGas (KMG) is less vulnerable to exchange rate shocks than 
other Kazakhstani companies, since 48% of its revenue is generated 
in foreign currency.  However, Fitch warns that if there is a 
further devaluation of the tenge, the company's credit rating could 
suffer. 
 
NEW CHAIRMAN OF KAZAKHSTAN ELECTRICITY ASSOCIATION 
 
12.  On February 5, Shaimerden Urazalinov was named CEO of the 
 
ASTANA 00000295  003.2 OF 003 
 
 
Kazakhstan Electricity Association (KEA), a non-governmental 
organization representing over 30 companies in the electrical power 
industry.  Urazalinov is reportedly highly respected by the citizens 
of Karaganda oblast.  From 1999 to 2007, Urazalinov was a member of 
the Senate (upper house of parliament) representing Karaganda 
oblast, where he developed a reputation as an honest man who 
improved social services in Karaganda and refused to play favorites 
or accept kickbacks. 
 
ENERGY STATISTICS 
 
13.  According to the National Statistics Agency, in January, 
Kazakhstan produced 6.426 million tons of crude oil and gas 
condensate, an increase of 7.5% over the same period in 2007.  The 
Government of Kazakhstan also estimated that natural gas production 
in January would be approximately 1.54 billion cubic meters, a 
decrease of 2.9% year-on-year. 
 
HOAGLAND

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