VZCZCXRO2836
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #2298/01 1790840
ZNR UUUUU ZZH
R 280840Z JUN 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC 5954
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 1907
RUEHBUL/AMEMBASSY KABUL 0220
RUEHNE/AMEMBASSY NEW DELHI 0356
RUEHAST/USOFFICE ASTANA

UNCLAS SECTION 01 OF 03 ALMATY 002298 
 
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 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EIND ENRG EPET EFIN KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, JUNE 11 - 
24, 2006 
 
 
ALMATY 00002298  001.2 OF 003 
 
 
¶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. 
 
--   Amendments to the 2006 Republican Budget 
--   Financial Violations of Foreign Companies in Kazakhstan 
--   Seimar Investment Group and Alliance Bank 
--   Eurasian Development Bank Board Formed 
--   China Telecom Opens a Branch in Almaty 
--   Kazakhstan Officially Joins BTC 
--   Gazprom, Karachaganak Consortium Set up Joint Venture 
--   TOKAMAK Nuclear Reactor to Start Operation in 2008 
--   Kazakhstan Chooses Sites for Nuclear Plant Construction 
--   Oil & Gas Statistics, January-May 2006 
 
Amendments to the 2006 Republican Budget 
---------------------------------------- 
 
¶2.  The Kazakhstani Parliament has approved amendments to 
the 2006 Republican Budget.  The budget assumes revenues of 
KZT 1,533.9 billion (about $13 billion, or 17.6% of 
projected GDP for 2006), expenditures of 1,660.1 KZT billion 
(about $14 billion, or 19% of GDP) and a deficit of KZT 
126.2 billion (about $1 billion, or 1.4% of GDP).  Starting 
July 1, a new budgetary mechanism will be used: instead of 
flowing directly into the budget, all oil revenues will 
first be accumulated in the National Fund and then 
transferred to the budget in the amount determined by the 
Parliament and the Government.  (Interfax - Kazakhstan, June 
21) 
 
Financial Violations of Foreign Companies in Kazakhstan 
--------------------------------------------- ---------- 
 
¶3.  Foreign companies operating in Kazakhstan have, in the 
past several years, caused the country damages worth KZT 40 
billion (about $339 million), Chief of the Financial Police 
Kalmurzayev said at a conference in Almaty.  According to 
Kalmurzayev, tax evasion by foreign companies alone has 
caused damages amounting to KZT 24 billion (approximately 
$203.4 million).  In addition, he said, foreign companies 
have received illegal monopoly revenues reaching KZT 103.8 
billion (about $880 million) and failed to fulfill 
investment obligations in the amount of nearly KZT 19 
billion (about $161 million).  (Interfax - Kazakhstan, June 
12) 
 
Seimar Investment Group and Alliance Bank 
----------------------------------------- 
 
¶4.  Seimar Investment Group (SIG), a Kazakhstani company, 
has increased its holdings in Alliance Bank from 41.08% to 
72.8% of voting shares.  As the bank's press service 
announced, "SIG plans to increase this stake through further 
purchases of shares from minority shareholders; now Seimar 
I.G. has a controlling interest in Alliance Bank and is its 
core owner."  SIG is one of the largest investment companies 
in Kazakhstan.  Alliance Bank is among the five largest 
banks, with assets totaling $3.7 billion and equity capital 
of $263 million as of May 1.  (Interfax - Kazakhstan, June 
13) 
 
Eurasian Development Bank Board Formed 
-------------------------------------- 
 
¶5.  The first session of the Russian-Kazakhstani Eurasian 
Development Bank (EADB)'s board meeting took place in 
Almaty.  "On the board, Russia will be represented by 
Industry and Energy Minister Viktor Khristenko and Deputy 
Finance Minister Sergey Storchak; Industry and Trade 
Minister Vladimir Shkolnik and Vice Finance Minister Askar 
Yelemesov will represent Kazakhstan," said the bank's June 
10 press release.  Assistant to the Russian Finance Minister 
Igor Finogenov was appointed chairman of the EADB's board, 
 
ALMATY 00002298  002.2 OF 003 
 
 
while Bulat Zhamishev, Deputy Chairman of the National Bank 
of Kazakhstan, became his deputy.  (Interfax - Kazakhstan, 
June 12) 
 
China Telecom Opens a Branch in Almaty 
-------------------------------------- 
 
¶6.  China Telecom, China's leading communications operator, 
has opened an Almaty branch as a step within the framework 
of the Shanghai Cooperation Organization's (SCO) plan to 
develop the regional communications network, said the 
company's press release.  In 1998, China Telecom 
participated in building the fiber optic Trans Asia Europe 
Line to link China to Europe via Central Asian countries. 
In addition, Xingjian Telecom, a China Telecom subsidiary, 
has launched "a hotline" for service subscribers in China, 
Kazakhstan, Tajikistan and Kyrgyzstan.  (Interfax - China, 
June 12) 
 
Kazakhstan Officially Joins BTC 
------------------------------- 
 
¶7.  On June 16 in Almaty, Azerbaijani President Aliyev and 
Kazakhstani President Nazarbayev signed a treaty to 
facilitate the transportation of petroleum from Kazakhstan 
across the Caspian Sea and Azerbaijan to international 
markets via the Baku-Tbilisi-Ceyhan system (BTC).  The 
agreement was signed during President Aliyev's visit to 
Almaty to take part in a Conference on Interaction and 
Confidence Building Measures in Asia (CICA).  President 
Nazarbayev has been invited to attend the BTC commissioning 
ceremony on July 13 in Ceyhan, Turkish Vice Prime Minister 
Abdullah Gul announced during the CIMA summit.  (Interfax - 
Kazakhstan, June 19) 
 
Gazprom, Karachaganak Consortium Set up Joint Venture 
--------------------------------------------- -------- 
 
¶8.  The preparation of documents for the creation of a 
Russian-Kazakhstani joint venture (JV) to expand the 
Orenburg gas processing plant is almost accomplished, 
Gazprom Board Deputy Chairman Ryazanov announced on June 20 
in Moscow.  The decision is to be finalized within a week. 
The JV is planned to start operation in January 2007.  In 
May, Presidents Putin and Nazarbayev agreed to begin the 
second phase of the construction of the gas refinery in 
Orenburg as JV on 50/50 terms.  (Interfax - Kazakhstan, June 
20) 
 
TOKAMAK Nuclear Reactor to Start Operation in 2008 
--------------------------------------------- ----- 
 
¶9.  The TOKAMAK thermonuclear reactor is to be set up and 
launched in 2008, National Nuclear Center Director General 
Kadyrzhanov said on June 20.  According to Kadyrzhanov, 
preparatory work has by and large been completed.  TOKAMAK 
is being created by a group of Kazakhstani and Russian 
scientists under the leadership of the Russian Academy of 
Sciences Academician and President of the Kurchatov 
Institute Velikhov.  TOKAMAK is a part of the international 
project for creation of the world's first industrial 
thermonuclear reactor.  The European Union, India, China, 
Russia, the U.S., South Korea and Japan participate in the 
project.  (Interfax - Kazakhstan, 21) 
 
Kazakhstan to Chooses Site for Nuclear Plant Construction 
--------------------------------------------- ------------ 
 
¶10.  Kazakhstani scientists intend to identify a site by 
year's end for the construction of possible nuclear power 
plant in Kazakhstan, National Nuclear Center Director 
General Kadyrzhanov stated in Almaty on June 20.  Currently 
there is a choice between Aktau (in Kazakhstan's West, BN- 
350 nuclear reactor territory), Balkhash (South, the GOK's 
initial intention in 1998) and Kuchatov (East, former 
 
ALMATY 00002298  003.2 OF 003 
 
 
Semipalatinsk nuclear test site).  Kadyrzhanov voiced 
support for the Kurchatov option, while energy producers 
prefer Balkhash.  According to preliminary calculations, the 
nuclear power plant construction will cost a minimum of $800 
million.  The GOK will finance 30-40% of the project, with 
the rest likely covered by private investors.  (Interfax - 
Kazakhstan, June 20) 
 
Oil & Gas Statistics, January-May 2006 
-------------------------------------- 
 
¶11.  Kazakhstan produced 23.8 million tons of crude oil from 
January-May 2006, 3% higher than the same period in 2005, 
according to the National Statistics Agency.  During the 
same period the country produced 10 million cubic meters of 
natural gas, 9.5% less than in January-May, 2005.  (Interfax 
- Kazakhstan, June 19) 
 
ORDWAY