This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 ALMATY 001210 
 
SIPDIS 
 
DEPT FOR SCA/CEN MUDGE 
DEPT PASS TO OPIC - BALLINGER 
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER 
DEPT PASS TO AID - EE-PHILLIPS/RUSHING 
TREASURY FOR OASIA/VELTRI 
USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS 
USDOC FOR 6110/ITA/TD/BI/RHALPERN 
ANKARA FOR CFC 
 
E.O. 12958: N/A 
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE 
March 19 - April 1, 2006 
 
¶1.  Summary: This information is drawn primarily from the 
Kazakhstani local press, and has not been checked for 
accuracy.  The opinions and policies expressed in this 
report are those of the authors, not the U.S. Government. 
 
--   New Refinancing Rate 
--   FSA to Toughen Requirements for Second-tier Banks 
--   Law on State Support of Innovation Activity 
--   Kazakhtelecom to Cut Tariffs 
--   Economic Statistics 
--   Kazakhstan Plans to Export Electricity to China 
--   First Concession for Power Line Construction Signed 
--   GOK, Subsoil Users Sign Memo on Procurement 
--   Expansion of Aktau Seaport 
--   Oil & Gas Statistics 
 
 
New Refinancing Rate 
-------------------- 
 
¶2.  The National Bank of Kazakhstan raised the annual 
refinancing rate from 8% to 8.5%, starting on April 1, 2006. 
Last February the annual rate of inflation reached 8.7%, the 
highest level since June 2001.  According to the National 
Bank, inflationary forces, such as an influx of foreign 
currency, an increase in gross demand, and credit expansion, 
will be evident in the coming months.  The Bank's decision 
aims at countering these pressures.  (Press-Service of the 
National Bank, March 20) 
 
FSA to Toughen Requirements for Second-tier Banks 
--------------------------------------------- ---- 
 
¶3.  According to the Financial Supervision Agency (FSA) 
Chairman Arman Dunayev, the government is concerned about 
growing foreign borrowing from commercial banks, and the FSA 
will likely make regulatory measures tougher.  "Our agency 
will revise the norms and ask the National Bank to revise 
minimal reserve requirements and limits of foreign exchange 
positions.  In fact, we have already started doing that, and 
I think that appropriate regulatory actions will be taken 
after proper coordination and approval," Dunayev said. 
(Interfax - Kazakhstan, March 29) 
 
Law on State Support of Innovation Activity 
------------------------------------------- 
 
¶4.  On March 23 President Nazarbayev signed into law the act 
"On State Support of Innovation Activity."  For the fist 
time, the law defines goals and principles of state support 
for innovation activity and rules of accreditation and 
functions of technological business-incubators and techno- 
parks; outlines the institutional infrastructure of 
innovation activity; classifies innovation grants; and 
outlines the sequence of project implementation. 
(Kazakhstanskaya Pravda, March 30) 
 
Kazakhtelecom to Cut Tariffs 
---------------------------- 
 
¶5.  "Currently, the domestic internet market is filled with 
providers that produce tough competition, compelling our 
company to constantly upgrade the quality of its services 
and offer favorable rate plans for consumers," reads 
Kazakhtelecom's press release.  Starting April 1, 2006, the 
night rates for internet access will be cut 25%, monthly 
fees for fixed-line telephone calls will be reduced 4%, and 
rates for international calls will be lowered for users of 
new telephone cards: Tarlan-Germany, Tarlan-Turkey and 
Tarlan-China.  (Interfax - Kazakhstan, March 29) 
 
Economic Statistics 
------------------- 
 
¶6.  According to the Financial Supervision Agency, 
Kazakhstan's commercial banks made a net profit of KZT 12.1 
billion (about $92.1 million) in the year to February 2006, 
a year-on-year increase of 112.3%.  Gross equity capital of 
the banking sector amounted to KZT 655.4 billion (about $5 
billion) as of March 1, a 2% increase.  Gross assets were 
KZT 4,655.5 billion (about $35.4 billion), up 3.2%.  Total 
revenues of the second-tier banks increased by 72.1% over 
the reporting period, amounting to KZT 104.8 billion (about 
$798 million).  (Interfax - Kazakhstan, March 29) 
 
¶7.  As reported by the FSA, in January-February Kazakhstani 
insurance companies collected a total of KZT 17 billion 
(approximately $129.4 million) in premiums, a 27.9% year-on- 
year increase from 2005.  Within the overall volume of 
premiums, the contribution of mandatory insurance comprised 
KZT 1.8 billion (about $13.7 million), a 24.1% year-on-year 
growth; voluntary private insurance was KZT 1.5 billion 
(about $11.4 million), up 56.2%; and voluntary property 
insurance stood at KZT 13.7 billion (about $104.26 million), 
up more than 25.9%.  (Interfax - Kazakhstan, March 29) 
 
Kazakhstan Plans to Export Electricity to China 
--------------------------------------------- -- 
 
¶8.  Kazakhstan and China have agreed to construct a coal- 
generated power station in Ekibastuz, Director of Electric 
Power and Coal Industry Department of Kazakhstan's Energy 
Ministry Bertisbayev reported.  A bilateral working group 
has begun a feasibility study.  The station, with a 
projected capacity of 7200 megawatts, will export about 40 
billion kilowatt-hours annually to China.  The length of the 
power line is to be 3,600 - 4,800 kilometers.  China 
estimates the project's costs at $4.5 billion, and 
Kazakhstan at $6-7 billion.  China will be responsible for 
finding a source of financing. (Izvestia Newspaper - 
Kazakhstan, March 30) 
 
The First Concession for Power Line Construction Signed 
--------------------------------------------- ---------- 
 
¶9.  The first concession for the construction of the 500 - 
kilometer inter-regional "North Kazakhstan - Aktobe Oblast" 
power line has been signed, Kazakhstan's Energy Ministry 
reported on March 28.  The cost of the project is about $122 
million.  The Parliament approved amendments to the Law on 
Power Industry, which allow the use of both private 
investments and pension funds' assets to construct power 
industry objects.  (KazInform - Kazakhstan, March 28) 
 
GOK, Subsoil Users Sign Memo on Procurement 
------------------------------------------- 
 
¶10.  On March 30, Minister of Industry and Trade Shkolnik, 
representatives of Halliburton, and representatives of the 
national oil company KazMunayGaz, signed memorandums "On 
Implementation of Extractive Industry Transparency 
Initiative Concerning Procurement" and "On Development of 
Local Content on Service Market of Subsoil Users". 
According to Shkolnik, these agreements will serve to meet 
World Trade Organization requirements prohibiting host 
legislation from compelling the use of local goods and 
services.  (Kazakhstan Today - Kazakhstan, March 30) 
 
Expansion of Aktau Seaport 
-------------------------- 
 
¶11.  Planned expansion of the Aktau international seaport 
(Mangystau Oblast) will double the total volume of cargo 
transit through the port to 23 million tons, the Prime- 
Minister's press-service reported.  Mobilex Oil Terminal 
company will undertake the expansion project.  Prime- 
Minister Akhmetov gave relevant ministries 10 days to 
outline the administrative procedures for creating an "Aktau 
Seaport free economic zone." (Kazakhstan Today - Kazakhstan, 
March 29) 
 
Oil & Gas Statistics 
-------------------- 
 
¶12.  In January - February, 1.8 million tons of oil were 
refined in Kazakhstan, 14.1% higher than during the same 
period in 2005, the GOK reported.  According to the Energy 
Ministry, oil processing in 2006 will amount to 12 million 
tons, 8% higher than in 2005; in 2010 - 15.7 million; and in 
2012 - 18 million.  (Oil Review - Kazakhstan, March 27) 
 
ORDWAY