09ASTANA416, KAZAKHSTAN: ECONOMIC AND ENERGY UPDATE, FEBRUARY 15-28

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Reference ID Created Released Classification Origin
09ASTANA416 2009-03-06 09:20 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO3767
OO RUEHBI
DE RUEHTA #0416/01 0650920
ZNR UUUUU ZZH
O 060920Z MAR 09 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4835
INFO RUCNCIS/CIS COLLECTIVE 1310
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0691
RUEHKO/AMEMBASSY TOKYO 1394
RUEHUL/AMEMBASSY SEOUL 0378
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 0784
RHEHNSC/NSC WASHDC 0871
RHEFAAA/DIA WASHDC
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHAST/USOFFICE ALMATY 1290

UNCLAS SECTION 01 OF 03 ASTANA 000416 
 
SIPDIS 
 
DEPT FOR SCA/CEN, EEB/ESC 
PLEASE PASS TO USTDA DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN EIND ENRG EPET KTDB KZ
SUBJECT:  KAZAKHSTAN:  ECONOMIC AND ENERGY UPDATE, FEBRUARY 15-28 
 
ASTANA 00000416  001.3 OF 003 
 
 
1.  SUMMARY:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
 
-- Minister Concerned About Manufacturing and Mining 
-- Inspection Moratorium for Small- and Medium-Sized Enterprises 
-- Population Census 
-- Economic Statistics 
-- Kazakhstan Postpones Energy Projects 
-- TengizChevrOil Requested to Reduce Sulfur Storage 
-- Kazakhstan to Build Additional Pipeline Section? 
-- Energy Ministry Presents Renewable Energy Law 
END SUMMARY. 
 
MINISTER CONCERNED ABOUT MANUFACTURING AND MINING 
 
2.  Speaking at a Cabinet meeting, Minister of Industry and Trade 
Vladimir Shkolnik expressed concern that manufacturing and mining 
have been hit especially hard by the economic crisis.  In January 
2009, production declined by 12.4 percent.  Iron ore extraction fell 
by almost half, while production of ferrous metals declined by 31.5 
percent.  As of February 14, 283 enterprises with 141,148 employees 
had stopped and cut back operations in 2009. 
 
3.  Shkolnik said Kazakhstan has cancelled export duties on raw 
aluminum.  Kazakhstan exports aluminum to Russia, China and the 
European Union.  The country's sole producer of aluminum is Aluminum 
of Kazakhstan, a subsidiary of Eurasian Natural Resource Corporation 
(ENRC).  In addition, the government decided to reclassify iron-ore 
pellets as secondary aluminum products.  According to Shkolnik, this 
change will allow enterprises in that industry to use investment 
preferences and reduce their tax burden. 
 
INSPECTION MORATORIUM FOR SMALL- AND MEDIUM-SIZED ENTERPRISES 
 
4.  Taking a cue from last year, on February 17, Kazakhstan 
reintroduced a moratorium on inspections of small and medium 
enterprises.  The moratorium will be effective until July 1.  There 
are a number of exceptions, however.  For example, the moratorium 
will not cover third-party audits and inspections targetting 
criminal activity, violations of sanitary norms, or subsoil use. 
 
POPULATION CENSUS 
 
5.  Kazakhstan started a population census on February 25.  Every 
citizen participating in the census will be asked to answer more 
than 40 questions, including those on ethnic identity, religion, 
income, knowledge of foreign languages, and computer skills.  The 
last census was conducted in 1999. 
 
ECONOMIC STATISTICS 
 
6.  In 2008, Kazakhstan's GDP was 15.91 trillion tenge 
(approximately $106.8 billion at current exchange rates).  Real GDP 
growth was 3.2 percent for the year 
 
7.  According to the National Statistics Agency, monthly inflation 
in February was 0.8 percent, while year-on-year inflation was 8.7 
percent.  In contrast to previous months, prices for non-food 
products contributed most to inflation with a 1.8 percent increase 
compared to January 2009.  Prices for food products and for services 
increased by 0.6 percent and by 0.2 percent, respectively. 
 
8.  According to the National Statistics Agency, the export of 
ferroalloys fell to 1.447 million tons in 2008, a decline of 4.5 
percent compared to the previous year.  However, because of price 
increases, the value of ferroalloy exports reached $2.96 billion in 
2008, double the 2007 figure.  Exports of flat steel products 
decreased by 17.7 percent to 2.48 million tons.  The value of flat 
steel exports was $2.07 billion --- 25.8 percent greater than in 
2007.  Aluminum exports grew 360 percent over 2007 to 108,400 tons, 
reaching $286.7 million in value.  Exports of lead decreased 16.4 
percent to 90,200 tons.  The value of lead exports was $202.9 
million -- a 17 percent decrease from 2007.  Exports of refined 
 
ASTANA 00000416  002.3 OF 003 
 
 
copper and copper alloys dropped to 355,100 tons, a 2.3 percent 
decrease, and totaled $2.5 billion. 
 
KAZAKHSTAN POSTPONES ENERGY PROJECTS 
 
9.  Galym Tumabayev, Director of the Information Policy Department 
at KazMunayGas (KMG) Trading House, said the Atyrau Petrochemical 
Plant will be launched in 2013, not 2011, as the company had 
announced last year.  Project operator Kazakhstan Petrochemical 
Industries is 51 percent owned by KMG Exploration and Production, 
24.5 percent owned by Kazakhstan's Sat&Co,
 and 24.5 percent owned by 
Lyondell Basell Industries. 
 
10.  At a February 23 Cabinet meeting, Minister of Energy and 
Mineral Resources Sauat Mynbayev said British Gas Group and Eni 
asked to postpone the third stage of development of the Karachaganak 
oil and gas field.  This stage was directly tied to the 
establishment of a new joint venture at Russia's Orenburg Gas 
Processing Plant and a 15-year contract to purchase Karachaganak 
gas. 
 
11.  Mynbayev confirmed that funds allocated for the construction of 
the Aktau nuclear power plant have been returned to the budget, 
since legal documents on the transfer of intellectual property from 
Russia to Kazakhstan have not yet been signed.  According to initial 
plans, the nuclear plant was to be equiped with VBER-300 reactors 
designed by the Afrikantov Experimental Bureau.  On February 26, 
Igor Shmelyev, Director of the Information Department at the 
Afrikantov Bureau, told reporters that the Bureau would complete 
work on VBER-300 regardless of Kazakhstan's participation in the 
project. 
 
TENGIZCHEVROIL REQUESTED TO REDUCE SULFUR STORAGE 
 
12.  Chevron and TengizChevrOil (TCO) funded a week-long trip to the 
United States and Canada for leading Kazakhstani reporters to learn 
about sulfur storage operations.  The reporters toured the Keyera 
gas generation plant in Alberta, which uses sulfur separation 
technology similar to that implemented by TCO.  The Keyera facility 
has never been fined for open sulfur storage since it began 
operations in 1971.  Representatives of Calgary's Energy Resources 
Conservation Board and Alberta Sulfur Research Ltd. assured the 
Kazakhstani reporters that sulfur poses no risk to health, and open 
storage of sulfur is the most expedient practice regardless of 
climate. 
 
13.  On February 26, Nurlan Iskakov, then-Minister of Environmental 
Protection, told the Senate that TCO should reduce the amount of 
sulfur stored from the current amount of 8.9 million tons to 1.2 
million tons by 2012.  On February 23, Energy Minister Mynbayev told 
the Mazhilis (the lower house of parliament) that the Ministry of 
Energy and Mineral Resources was negotiating with TCO to remove all 
sulfur by 2014.  The company has pushed for a deadline of 2017. 
 
KAZAKHSTAN TO BUILD ADDITIONAL PIPELINE SECTION? 
 
14.  At a Cabinet meeting on February 26, Mynbayev expressed concern 
that at some point Russia might decide to levy an export duty on 
Russian crude oil shipped to the Pavlodar Oil Refinery, which would 
make its petroleum products more expensive for domestic consumers. 
He proposed to assess the cost of constructing an additional section 
of the Kazakhstan-China oil pipeline from Atasu to Pavlodar, in 
order to bring Kazakhstani oil to Pavlodar.  Since the refinery is 
designed to process Russian crude, it would need to undergo major 
renovations to refine Kazakhstani crude. 
 
ENERGY MINISTRY PRESENTS RENEWABLE ENERGY LAW 
 
15.  On February 26, Energy Minister Mynbayev presented a draft law 
on renewable energy to the Committee on Environment and Nature of 
the Majilis (the lower house of parliament).  The Ministry's draft 
law was criticized for its lack of financial support by the state. 
Mynbayev argued that power distribution companies should be obliged 
 
ASTANA 00000416  003.3 OF 003 
 
 
by law to buy renewable energy; hence, there is no need for 
government financial aid.  Majilis Deputy Murat Abenov called the 
draft law "narrowly focused," supporting large power suppliers, but 
providing no benefits to small businesses that could use renewable 
energy. 
 
HOAGLAND

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