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TAGS: ECON EIND ENRG EPET EFIN KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, JULY 9 - 
22, 2006 
 
 
ALMATY 00002681  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. 
 
--   Series of Economic Laws Adopted 
--   Trade Policy Promotion Center Established 
--   Kazakhstani Companies and Western Stock Markets 
--   BTC Pipeline Opened 
--   Kazakhstan-China Pipeline Commissioned 
--   KMG Finalizes Purchase of 33% of PetroKazakhstan 
--   KMG Subsidiary Eyes IPO in Autumn 2006 
--   Russia, Kazakhstan Sign Declaration on Karachaganak Gas 
--   Oil & Gas Statistics, January-June 2006 
 
Series of Economic Laws Adopted 
------------------------------- 
 
¶2.  President Nazarbayev signed a number of tax cuts into 
law.  VAT will be lowered from the current rate of 15% to 
14% in 2007, 13% in 2008 and 12% in 2009.  A flat income tax 
of 10% will apply to all individuals, starting January 1, 
2007, replacing the current graduated rate.  In an effort to 
stimulate wage growth, the new legislation also reduces the 
social tax by 30%, starting January 1, 2008.  (Note: The 
social tax, a progressive tax ranging from 15% to 20%, is 
paid by employers on employees' wages.  End note.) 
(Interfax - Kazakhstan, July 10) 
 
¶3.  President Nazarbayev signed into law mandatory 
guarantees of deposits at second-tier banks in Kazakhstan. 
The statute provides for mandatory contribution by banks to 
a common fund, which will - in the case of bank failure - 
unconditionally compensate depositors in the amount of up to 
KZT 700,000 (approx. $5,912).  (Interfax - Kazakhstan, July 
11) 
 
¶4.  The law "On Competition and Restrictions on Monopoly 
Activity" has been signed by President Nazarbayev.  In an 
effort to foster competition, the law broadens the 
definition of market dominance and imposes bans on what it 
defines as monopolistic activity, anti-competitive actions, 
and abuse of market dominance.  Furthermore, the law 
outlines, for the first time, the powers and 
responsibilities of the Antimonopoly Agency, a government 
regulator functioning under the umbrella of the Ministry of 
Industry and Trade.  (Interfax - Kazakhstan, July 12) 
 
Trade Policy Promotion Center Established 
----------------------------------------- 
 
¶5.  The GOK has established the Trade Policy Promotion 
Center (TPPC) to study the consequences of the country's 
accession to the WTO.  According to a decree signed by the 
Prime Minister, the TPPC will focus on preparing 
"recommendations for streamlining national laws, as per 
provisions of key WTO agreements" and offering consulting 
services in "the development of the country's positions at 
international trade talks and settlement of international 
trade disputes."  (Interfax - Kazakhstan, July 11) 
Kazakhstani Companies and Western Stock Markets 
--------------------------------------------- -- 
 
¶6.  National Bank Chairman Saidenov does not expect large- 
scale IPOs by Kazakhstani companies on foreign stock 
exchanges.  In his opinion, "the vogue" among developing 
countries' enterprises for listing in London "is passing." 
The reason, he said, is that companies listing in the West 
are facing daunting disclosure requirements.  Saidenov 
noted, however, that the overall picture may still change if 
the exploratory subsidiary of KazMunayGaz, the national gas 
company, follows through on its plans to issue an IPO later 
this year.  In any case, he added, an increasing number of 
foreign IPOs by Kazakhstani companies will not require an 
adjustment in the GOK's current monetary policy. 
 
ALMATY 00002681  002.2 OF 003 
 
 
(Interfax - Kazakhstan, July 12) 
 
BTC Pipeline Opened 
------------------- 
 
¶7.  On July 13 the opening ceremony of the Baku-Tbilisi- 
Ceyhan (BTC) pipeline took place in the port of Ceyhan, 
Turkey.  The presidents of Turkey, Georgia and Azerbaijan, 
as well as other dignitaries, attended the event.  Energy 
Minister Izmukhambetov represented Kazakhstan.  According to 
Kazakhstani Vice-Minister of Energy Akchulakov, first 
Kazakhstani oil will be exported via the BTC pipeline by the 
end of 2008.  "At the present moment we signed a framework 
agreement which stipulates transportation of three million 
tones of oil via the BTC during the first years", Akchulakov 
said. (Oil Review - Kazakhstan, July 13) 
 
Kazakhstan-China Pipeline Commissioned 
-------------------------------------- 
 
¶8.  On July 11 the first "commercial" oil transported via 
the Kazakhstan-China pipeline arrived at the Alashankou 
reservoir in China, the Chinese newspaper Zhenmin Zhibao 
reported.  (In May, the pipeline was filled with "process" 
oil, but commercial deliveries were delayed until now due to 
customs issues.)  The Kazakhstani oil will flow another 252 
kilometers in China until it reaches its final destination, 
the Dushanji refinery in Sinkiang Uighur Autonomous Region. 
China plans to transport 3.5 million tons of oil in 2006 via 
this pipeline.  (Interfax - China, July 13) 
 
KMG Finalizes Purchase of 33% of PetroKazakhstan 
--------------------------------------------- ---- 
 
¶9.  On July 5, Kazakhstan's national oil and gas company 
KazMunayGaz (KMG) finalized the purchase from the Chinese 
National Petroleum Company (CNPC)  of 33% of PetroKazakhstan 
Inc. and 50% of Valsera Holding BV, a parent company of 
PetroKazakhstan Oil Products (Shymkent refinery).  KMG PKI 
Finance BV will finance the share purchase by issuing $1.372 
billion in 10-year bonds with a floating rate, using KMG's 
33% stake, along with 80% of the dividends payable by PK, as 
security. 
 
¶10.  On July 18 KazMunayGaz (KMG) finalized the buy-out of 
50% of the KazGerMunay joint venture.  On July 11 KMG First 
Vice-President Kulekeyev and representatives of Germany's 
RWE Dea AG, which has a 25% stake in the joint venture; 
Erdgas Erdol GmbH (17.5%); and the International Finance 
Corporation (7.5%) signed an agreement on KMG's purchase of 
their shares in the joint venture.  The other 50% interest 
in KazGerMunay belongs to PetroKazakhstan.  KazGerMunay 
explores, produces, transports, and sells hydrocarbons 
produced at the Akshabulak, Nuraly and Aksai fields in the 
southern part of the Turgai basin in Kyzylorda region. 
(Interfax - Kazakhstan, July 12) 
 
KMG Subsidiary Eyes IPO in Autumn 2006 
-------------------------------------- 
 
¶11.  KazMunayGaz Exploration & Production (KMG E&P) hopes to 
carry out an IPO in the fall, KMG First Vice-President 
Kulekeyev told reporters.  KMG's board of directors recently 
decided to float shares in the subsidiary.  "As regards the 
stake, up to 40% could be sold, some of them on Kazakhstan's 
stock market and some abroad," Mr. Kulekeyev said. 
According to him, an IPO for 40% of KMG E&P could raise more 
than $2 billion.  (Interfax - Kazakhstan, July 12) 
 
Russia, Kazakhstan Sign Declaration on Karachaganak Gas 
--------------------------------------------- ---------- 
 
¶12.  During the G8 Summit in St. Petersburg, Presidents 
Putin and Nazarbayev signed a mutual declaration on long- 
term cooperation in the field of refining and the sale of 
 
ALMATY 00002681  003.2 OF 003 
 
 
Karachaganak gas.  Putin and Nazarbayev instructed their 
governments to sign an intergovernmental agreement in 2006 
on the creation of a Russian-Kazakhstan joint venture 
governing the Orenburg Gas Processing Plant (GPP).  In early 
July the GazProm Board of Directors approved the joint 
venture between GazProm and KazMunayGaz on a "parity" basis. 
The contract provides for the supply of about 15 billion 
cubic meters of Karachaganak gas to the Orenburg plant in 
each of the next 15 years.  (Kazakhstan Today - Kazakhstan, 
July 17) 
 
Oil & Gas Statistics, January-June 2006 
--------------------------------------- 
 
¶13.  According to National Statistics Agency, Kazakhstan 
produced 28.6 million tons of crude oil in January-June, 13% 
higher than during the same period of 2005.  The Republic 
also produced 2.7 million tons of gas condensate, down 54% 
year-on-year.  National gas production was 12 million cubic 
meters, or 8.3% less than in the first half year of 2005. 
(Interfax - Kazakhstan, July 17) 
 
ORDWAY