09ASTANA538, KAZAKHSTAN: ECONOMIC AND ENERGY UPDATE, MARCH 1-14, 2009

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09ASTANA538 2009-03-26 04:50 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO0226
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DE RUEHTA #0538/01 0850450
ZNR UUUUU ZZH
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INFO RUCNCIS/CIS COLLECTIVE 1411
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0791
RUEHKO/AMEMBASSY TOKYO 1494
RUEHUL/AMEMBASSY SEOUL 0478
RUEHDI/AMCONSUL DUBAI 0140
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0974
RUEKJCS/SECDEF WASHDC 0887
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1353

UNCLAS SECTION 01 OF 03 ASTANA 000538 
 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/CARC, EEB/ESC 
PLEASE PASS TO USTDA DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EPET EINV KZ
 
SUBJECT:  KAZAKHSTAN:  ECONOMIC AND ENERGY UPDATE, MARCH 1-14, 2009 
 
ASTANA 00000538  001.2 OF 003 
 
 
1.  SUMMARY:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
 
-- News from the Banking Sector 
-- Samruk-Kazyna Updates 
-- Unemployment: a Growing Challenge 
-- 2009 Harvest Projection 
-- Economic Statistics 
-- Kazakhstan Seeks Controlling Stake in Trans-Caspian Project 
-- Status of Kazakhstan-China Gas Pipeline Project 
-- Kazakhstan Returns to Central Asian Power Grid 
-- The Atyrau Petrochemical Plant Project 
-- New KazMunaiGas Strategy to Sign Contracts 
-- Speculation Continues Around MangistauMunaiGas 
 
END SUMMARY. 
NEWS FROM THE BANKING SECTOR 
 
2.  According to the Deputy Prosecutor General of Kazakhstan, 
Rakhimbek  Mamyrbaev, former chairman of BTA Bank Mukhtar Ablyazov 
and his deputy Zhaksylyk Zharimbetov have been charged with misuse 
of funds and embezzlement.  They are accused of orchestrating a 
money laundering scheme using fake offshore companies.  Kazakhstan's 
KazTAG news agency reported that both Ablyazov and Zherimbetov were 
put on an international wanted list. 
 
3.  On March 2, Margulan Seisembayev, Chairman of the Board of 
Alliance Bank, said he expected National Welfare Fund Samruk-Kazyna 
to complete its takeover of the bank after Alliance secures waivers 
from its creditors.  He did not specify the timing of the deal.  On 
March 12, Kazakhstani Stock Exchange (KASE) suspended trading in the 
bank's common shares after they declined by more than 50 percent. 
 
4.  Kazkommertsbank must repay approximately $1.3 billion in 
external debt in 2009, the bank's press office reported.  This 
includes $250 million due in June, $500 million due in November, and 
$300 to be repaid in December 2009. 
 
5.  Nurbank named Marat Zairov, former deputy chairman of Halyk 
Bank, its new Chairman of the Management Board.  Zairov outlined the 
new priorities of the bank, which will include expanding its small 
and medium enterprise and retail operations.  Nurbank is owned by 
the oldest daughter of President Nazarbaev, Dariga Nazarbaeva; her 
son, 23-year-old Nurali Aliev, is the Chairman of the Board of 
Directors of Nurbank. 
 
SAMRUK-KAZYNA UPDATES 
 
6.  Bonds issued by National Welfare Fund Samruk-Kazyna with a total 
value of 405 billion tenge (approximately $2.7 billion) were listed 
on KASE on March 13.  They are the first release of Samruk-Kazyna's 
bond issue program, totaling 750 billion tenge (about $5 billion). 
Local experts say that pension funds and the National Fund could be 
the main buyers of the bonds. 
 
7.  Samruk-Kazyna plans to obtain export credit lines from Russia's 
VneshEconomBank and China's Export-Import Bank.  According to 
Samruk-Kazyna's CEO Kayrat Kelimbetov, these funds will be used to 
implement investment projects in Kazakhstan, such as the 
construction of a bitumen plant, a sodium hydroxide production plant 
and a petrochemical complex. 
 
UNEMPLOYMENT:  A GROWING CHALLENGE 
 
8.  According to Deputy Minister of Labor and Social Protection 
Serik Abdenov, about 1,049 jobs will be cut in "the nearest future" 
in Kazakhstan.  He said that in January 2009 unemployment grew by 
0.3 percent, and the total number of jobless people was 580,000. 
According to official information provided by the State Statistics 
Agency, the unemployment rate was 6.9 percent in January 2009. 
 
 
ASTANA 00000538  002.2 OF 003 
 
 
9.  In his annual address, President Nazarbayev issued an order to 
allocate 8.6 billion tenge (approximately $57 million) from the 
state budget to create jobs in social services and support 
employment of youth. 
 
2009 HARVEST PROJECTION 
 
10.  The Ministry of Agriculture forecasts the 2009 grain harvest to 
be at least 10 percent higher than last year.  In 2008, Kazakhstan 
harvested 17.2 million tons of grain. 
 
ECONOMIC STATISTICS 
 
11.  In 2008, JSC Food Corporation reported a net profit of 1,516 
million tenge (about $10.1 million), a 150% growth compared to 2007, 
when it earned 595 million tenge (approximately $3.96 million) in 
&#18
2;2007.  Food Corporation is a subsidiary of National Holding Company 
"KazAgro" and specializes in grain trading and storage. 
 
12.  According to the State Statistics Agency, Kazakhstan's trade 
surplus declined 3.6 times over last year, from $2.9 billion in 
January 2008 to $0.8 billion in January 2009.  Total foreign trade 
was $4.4 billion, a decline of 41.6 percent compared to January 
2008.  Exports fell to $2.6 billion, or 50.5 percent less than in 
January 2008; imports decreased 21.4 percent compared to January 
2008 to $1.8 billion.  In January 2009, the main destinations for 
Kazakhstan's exports were Italy, China, Russia; its largest import 
partners were Russia, China, and Ukraine. 
 
KAZAKHSTAN SEEKS CONTROLING STAKE IN TRANS-CASPIAN PROJECT 
 
13.  Commenting on the Kazakhstan Caspian Transportation System 
(KCTS) on March 10, Minister of Energy and Mineral Resources Sauat 
Mynbayev said that Kazakhstan "will not approach this pipeline, 
formally or informally, unless we own at least 51 percent."  He 
added that the Kashagan consortium and Chevron, representing 
Tengizchevroil, "put up a united front," but "we will not give up a 
controlling stake."  In an interview with Russian Nezavisimaya 
Gazeta on March 11, Alexander Shtock, Director of Due Diligence for 
the business consulting firm 2K Audit, speculated that "as long as 
Kazakhstan has other transportation options, Astana can impose tough 
requirements on its KCTS partners.  If Chevron does not compromise, 
then the Trans-Caspian project might be put on hold.  Russia, on the 
other hand, would also have to hurry up, as the Trans-Caspian 
project might slow down the expansion of the Caspian Pipeline 
Consortium (CPC) pipeline." 
 
14.  On March 5, Russian media reported that Kazakhstan's national 
oil and gas company KazMunayGas (KMG) established a subsidiary 
called KMG-TransCaspiy, which will manage the KCTS project.  Mukhit 
Mazhenov, former Deputy General Director of KazTransOil, KMG's oil 
transportation subsidiary, was appointed General Director of 
KMG-TransCaspiy.  Another former Deputy, Bulat Zakirov, was named 
Deputy General Director of the new company. 
 
STATUS OF KAZAKHSTAN-CHINA GAS PIPELINE PROJECT 
 
15.  On March 5, Beimbet Shayakhmetov, General Director of the Asian 
Gas Pipeline Company (which is owned by KMG's gas transportation 
subsidiary KazTransGas and Trans-Asia Gas Pipeline Ltd, an affiliate 
of the China National Petroleum Corporation), said that $2.5 billion 
of a projected total of $7.5 billion has already been invested in 
the construction of the 1,300-km Kazakhstan-China gas pipeline.  The 
gas pipeline is part of the Turkmenistan-Uzbekistan-Kazakhstan-China 
pipeline project.  The first segment of the pipeline, which will 
begin at Turkmenistan's gas deposits developed by CNPC, is expected 
to be built by 2010 and will carry 3.5 billion cubic meters (bcm) of 
Turkmen gas.  After the Chinese contractor builds the first of five 
gas compressors in the Kulan village of the Zhambyl oblast, the 
throughput capacity of the gas pipeline will reach 7.5 bcm a year. 
The construction of four additional gas compressors by 2012 will 
 
ASTANA 00000538  003.2 OF 003 
 
 
bring total annual capacity to 30 bcm. 
 
KAZAKHSTAN RETURNS TO CENTRAL ASIAN POWER GRID 
 
16.  The Kazakhstan Electric Grid Operating Company (KEGOC) resumed 
its operations in parallel with the United Power System of Central 
Asia (UPS) on March 13.  The power company withdrew from the grid on 
February 26 due to an imbalance between electricity generation and 
consumption among participating Central Asian countries. 
 
THE ATYRAU PETROCHEMICAL PLANT PROJECT 
 
17.  On February 27, Visor Capital, a local investment company, 
announced that it had acted as a broker on behalf of an unnamed 
third party to acquire a 50 percent stake in Kazakhstan 
Petrochemical Industries (KPI), the project operator of the planned 
Atyrau Petrochemical Plant.  Visor Capital and KMG Exploration 
Production, a KMG subsidiary which owns 51 percent of KPI, declined 
comment on the change in KPI's ownership structure.  (NOTE:  Prior 
to the transaction, the remaining 49 percent was owned by Sat&Co and 
Lyondell Basell Industries.  END NOTE.)  At a March 3 Cabinet 
meeting, Minister of Energy and Mineral Resources Sauat Mynbayev 
said Indian or other investors would participate in the project 
instead of Lyondell, which allegedly withdrew from the project. 
However, in a March 10 press release, Lyondell's president Just 
Jansz confirmed the company's "continued commitment and ongoing 
support to the KPI project."  (NOTE:  On March 20, Managing Director 
for Oil and Gas at Samruk-Kazyna Bolat Akchulakov confirmed that 
Lyondell will participate in the Atyrau Petrochemical Plant project, 
which is to be funded with equity (40 percent), and a syndicated 
loan (60 percent).  END NOTE.) 
 
NEW KAZMUNAYGAS STRATEGY FOR OFFSHORE CONTRACTS 
 
18.  Sunkar newspaper speculated on the new strategy of "official 
Astana" and KMG when choosing foreign partners.  According to the 
newspaper, the new strategy will limit the number of offshore blocks 
offered to foreign partners to only one (blocks would no longer be 
combined under one exploration license).  The government will sign 
contracts for the exploration of blocks located near the Kalamkas 
Sea oil deposit (e.g. Abay and Satpayev blocks).  Moreover, the 
newspaper claimed that under the new strategy, Kazakhstan sought 
Central and Eastern European assets from StatoilHydro in exchange 
for the Abai offshore block.  Kazakhstan also reportedly stipulated 
in new contracts with ConocoPhillips (N Block), the Korean National 
Oil Corporation (Zhambyl block), and India's Oil and Natural Gas 
Corporation (Satpayev block) that these companies must participate 
in Kazakhstan's petrochemical projects. 
 
SPECULATION CONTINUES AROUND MANGISTAUMUNAYGAS 
 
19.  A RusEnergy article predicted that by the end of March, India's 
Oil and Natural Gas Corporation (ONGC) would acquire the remaining 
stake in MangistauMunayGas (MMG).  The article claimed that Indian 
participation "would secure a balance within Kazakhstan's oil 
sector, currently dominated by U.S. and Chinese companies." 
Referring to an unknown source, RusEnergy suggests that MMG would be 
bought under a payment scheme similar to that used by CNPC to 
acquire the Shymkent oil refinery.  The author speculated that ONGC 
would buy 100 percent of MMG and transfer a controlling stake back 
to KMG, which, in turn, would reimburse ONGC out of future revenues. 
 ONGC reportedly agreed, provided it gets a stake in the Satpayev 
block.  (NOTE:  During the January 23-26 visit of President 
Nursultan Nazarbayev to India, KMG and ONGC signed an agreement to 
explore the Satpayev block.  END NOTE.) 
 
MILAS

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