VZCZCXRO2213
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #3026/01 2400253
ZNR UUUUU ZZH
P 280253Z AUG 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC PRIORITY 6681
INFO RUCNCIS/CIS COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 0243
RUEHNE/AMEMBASSY NEW DELHI 0373
RUEHAST/USOFFICE ASTANA
RUEHVEN/USMISSION USOSCE 1623

UNCLAS SECTION 01 OF 04 ALMATY 003026 
 
SIPDIS 
 
 
SENSITIVE 
 
SIPDIS 
 
DEPARTMENT FOR SCA/CEN (J. MUDGE), DRL/PHD (C. KUCHTA- 
HELBLING) 
 
E.O. 12958: N/A 
TAGS: PREL PGOV KDEM PHUM KZ
SUBJECT: KAZAKHSTAN: DAS FEIGENBAUM'S MEETINGS IN ALMATY 
 
 
ALMATY 00003026  001.2 OF 004 
 
 
¶1. (SBU) Summary:  During an August 22-24 visit to Almaty, 
SCA DAS Evan Feigenbaum met with a wide range of civil 
society, political, and business representatives who painted 
a vivid picture of the political and economic challenges 
facing Kazakhstan.  His interlocutors expressed concern 
about restrictions on the development of civil society, 
pressure on young people to stay out of politics, and 
limitations on freedom of the media.  Opposition leaders 
described a deteriorating political situation, where 
government rhetoric about political reform results only in 
window-dressing.  They accused the U.S. of not placing 
enough emphasis on democracy in its relations with 
Kazakhstan, and called for the creation of regional Russian- 
language satellite television.  Business representatives 
described an uncertain regulatory environment where audits 
and inspections are frequently used to pressure foreign 
investors.  End summary. 
 
------------------------ 
Civil Society Roundtable 
------------------------ 
 
¶2. (SBU) DAS Feigenbaum opened an August 23 roundtable in 
Almaty with representatives of Kazakhstani civil society by 
underscoring the U.S. government's continued commitment to 
support for civil society.  We believe that openness is 
necessary not only for the political health and stability of 
a country, but also for economic growth.  In response to 
Feigenbaum's question about the overall trajectory of civil 
society in Kazakhstan, Internews director Oleg Katsiyev 
explained that many obstacles exist to further civil society 
development, primarily the permission-based nature of the 
Kazakhstani system where Ministry of Justice registration is 
necessary for almost any activity.  In his assessment, the 
overall trend is negative, despite the recent defeat of 
problematic NGO legislation. 
 
¶3. (SBU) Ninel Fokina of the Almaty Helsinki Committee said 
that the GOK's "Concept on the Development of Civil Society" 
illustrated the official attitude that civil society is 
"undesirable but unavoidable."  The authorities see it as a 
potential threat to national security and therefore believe 
it requires strict regulation and control.  Following a 
recent series of controversial laws on the media, extremism, 
and national security, the government had changed its 
tactics, Fokina explained.  The authorities now use the 
amendment process to limit civil liberties further, in order 
to minimize transparency and avoid attracting attention. 
Recent amendments to the electoral law and law on mass media 
were prime examples. 
 
¶4. (SBU) Taskyn Rakhimbetova, head of the Republic Network 
of Independent Monitors, told Feigenbaum that her 
organization had come under increasing pressure during the 
2005 presidential election campaign.  About half of RNIM's 
volunteers, the majority of whom are students, dropped out 
due to pressure from the authorities.  Katsiyev echoed 
Rakhimbetova's comments, noting that the security services 
are now paying very close attention to young people and 
pressuring those who try to create independent 
organizations. 
 
¶5. (SBU) At the same time, Katsiyev noted, the Kazakhstani 
government is conducting a "propaganda campaign" to create 
pro-government NGOs and distribute grants to existing NGOs 
in order to exert control over them.  The kinds of 
organizations now being created, he said, are not what the 
~Q|~O_|?~_t}}_y?Q~7Q|~YQ?~Wpz~L`Oy4N9]OyO_Qs5 "Dm}&PiQJDQQof government 
officials, rather than to actual grassroots organizations. 
 
¶6. (SBU) The pressure is also rising on the independent 
media, according to Tamara Kaleyeva from the media freedom 
organization Adil Soz.  Authorities use the threat of 
prosecution to limit criticism; three journalists are on 
trial at the moment.  Many media outlets are dependent on 
the state for funding.  Katsiyev pointed out that some 
privately-owned media are financially healthy due to the 
strong advertising market in Kazakhstan, the third in the 
FSU.  There is a disturbing trend, however, of those close 
 
ALMATY 00003026  002.2 OF 004 
 
 
to power taking control of media outlets.  Almost all of the 
Almaty media is now controlled by the Nazarbayev family or 
their associates, Katsiyev said. 
 
--------------------------- 
Opposition Party Roundtable 
--------------------------- 
 
¶7. (SBU) During an August 22 roundtable with representatives 
of the political opposition, For a Just Kazakhstan leader 
Zharmakhan Tuyakbay told DAS Feigenbaum that the political 
situation was worsening.  Despite the government's rhetoric 
about political reform, the Democratization Commission was a 
charade, pressure was growing on the opposition, and the 
authorities were trying to conceal the truth in the 
Sarsenbaiuly murder case.  Tuyakbay claimed that the U.S., 
despite its own rhetoric, focused on security and economic 
issues in its relationship with Kazakhstan, rather than 
democracy.  He cautioned that President Nazarbayev's 
upcoming visit to Washington could result in more "empty 
promises," and urged that democracy issues be highlighted in 
the discussions.  Serikbolsyn Abdildin of the Communist 
Party echoed Tuyakbay's comments about U.S. policy, alleging 
that the U.S. provides "constant support" for the Nazarbayev 
regime and ignores human rights violations. 
 
¶8. (SBU) Galymzhan Zhakiyanov expressed the belief that the 
U.S. government works to promote democracy, but cautioned 
that the issue is not high enough on the U.S. agenda in 
Kazakhstan.  He claimed that deteriorating relations between 
the U.S. and Uzbekistan were the result of a similar failure 
to emphasize democratic principles.  Zhakiyanov claimed that 
Vice President Cheney's May statement in Astana praising the 
reform process in Kazakhstan had created a lack of public 
trust in U.S. policy.  He also called on the U.S. to hold 
Kazakhstan to commitments such as the 2001 U.S.-Kazakhstan 
joint statement, which called for democratic political 
reform, inter alia. 
 
¶9. (SBU) True Ak Zhol co-chair Bulat Abilov asked how the 
U.S. initiative to combat kleptocracy could be reconciled 
with the decision to invite Nazarbayev, involved in the 
Kazakhgate scandal, to Washington.  He described Kazakhstan 
as the classic case of a country rich in natural resources 
sliding into authoritarianism, citing oppression of the 
opposition, recent murders, and travel bans.  The government 
always argues that Kazakhstan must find its own path toward 
reform rather than following a Western model, Abilov said, 
but then does not propose alternative principles.  Instead, 
he claimed, the small group of people in charge create the 
appearance of progress through things like the OSCE 
chairmanship bid and the Democratization Commission. 
 
¶10. (SBU) There has been no progress toward democracy in 
Kazakhstan for five years, True Ak Zhol co-chair Oraz 
Zhandosov asserted.  He described the State Department's 
decision to move Kazakhstan to the Bureau of South and 
Central Asian Affairs as a mistake, given the importance of 
Russia's influence in the region, and called for the 
decision to be reversed.  DAS Feigenbaum explained that, 
with the move, the State Department was able to put the 
countries of Central Asia at the center of our regional 
policy, rather than allowing U.S. policy in the area simply 
to be derived from our policy toward Russia.  We seek to 
help the countries of Central Asia develop a broader range 
of international linkages by focusing omni-directionally. 
Ties to the south may now be the weakest but are very 
promising. 
 
¶11. (SBU) Zhandosov stated that the most effective way for 
the U.S. to promote political reform in Kazakhstan and the 
rest of Central Asia would be to support independent, 
Russian-language satellite television.  He claimed that this 
would be a much more effective use of assistance funding 
than the current menu of smaller programs, because it would 
provide the public for the first time with objective 
information.  Zhandosov also said that it would improve the 
image of the U.S. in the region by countering the 
misinformation conveyed by Russian television. Abilov urged 
the U.S. to think long term, arguing that if such a channel 
had existed in the Middle East ten years ago the U.S. might 
not be spending billions to rebuild Iraq now.  He cited the 
example of Al Jazeera, which began with support from the 
 
ALMATY 00003026  003.2 OF 004 
 
 
government of Qatar but is now a commercial operation, as a 
model for the creation of a Central Asian station. 
 
¶12. (SBU) Muratbek Ketebayev, of the Alga movement, said the 
U.S. should not pressure the GOK for democratization. 
"Democracy must be decided within Kazakhstan, not outside 
it," he said.  The U.S. should instead focus its efforts on 
supporting the development of civil society, supporting 
independent media (such as through the creation of 
television networks or the establishment of a network of 
independent printing presses), and pushing for the 
transparency of oil revenues, e.g., through the Extractive 
Industries Transparency Initiative.  He claimed that 
Nazarbayev spent $500 million on the 2005 presidential 
elections, which would not have been possible if there were 
proper control over oil revenues.  Maksim Kopylov, 
representing Ak Zhol chairman Alikhan Baymenov, agreed that 
limits on the media and civil society hindered Kazakhstan's 
development.  He added that corruption has reached huge 
proportions and constituted a serious threat to the country. 
 
¶13. (SBU) Responding to the concerns voiced by several 
participants about the U.S. government's priorities in its 
relationship with Kazakhstan, DAS Feigenbaum explained that 
U.S. foreign policy is always multi-dimensional.  While 
striking the correct balance between democracy and other 
issues has been the subject of debate throughout the history 
of American foreign policy, democracy has been a constant 
element of our policy.  Feigenbaum rejected the assertion 
that the U.S. focused only on security and economic issues 
in the region, noting that we had paid a price in Uzbekistan 
for our adherence to principles.  U.S. support for democracy 
around the world does not always yield the results we seek, 
he added, pointing to the electoral victories of anti-U.S. 
governments around the world but adding that this had not 
deterred the U.S. from principle.  He reminded the 
participants that President Bush's second inaugural address 
had called for democracy to be an organizing principle of 
international relations.  He also reiterated the work that 
U.S. assistance partners do in Kazakhstan, including to 
support the development of the very political parties the 
group represented.  The U.S. worked to promote civil 
society, free media, and the rule of law. 
 
----------------------- 
U.S Business Roundtable 
----------------------- 
 
¶14. (SBU) Participants in an August 24 discussion described 
the challenges facing U.S. business in Kazakhstan, primarily 
in the form of government pressure.  ConocoPhillips country 
manager Nick Olds called attention to the negative impact of 
constant tax inspections and audits.  Courtney Fowler of 
PriceWaterhouseCoopers explained that the Kazakhstani tax 
system prioritizes form over substance; while U.S. 
businesses generally have excellent internal controls and 
records, Kazakhstani tax inspectors will often not accept 
electronic records or approvals.  She added that an ongoing 
dispute between the Ministry of Finance and Procuracy 
General was exacerbating the situation, as foreign firms 
were caught up in the struggle. 
 
¶15. (SBU) Ken Mack, president of the American Chamber of 
Commerce, commented that some in Kazakhstan still clung to 
the Soviet notion that it was bad to make a profit.  He 
noted that corruption among tax officials contributed to the 
frequency of tax inspections.  Joel Benjamin of the law firm 
Denton Wilde Sapte explained that tax inspections arise for 
different reasons, including as pressure on a company by 
powerful individuals or the state, and due to the corruption 
of tax officials.  Fowler cited a third factor, namely the 
need for regional leaders to collect enough revenue to send 
to Astana. 
 
¶16. (SBU) Ted Etchison of Chevron noted that other types of 
regulations, such as environmental protection provisions, 
are also used to pressure foreign firms and extract fines. 
He cited the example of the Tengiz field, where the Ministry 
of Energy and Mineral Resources has contested the Ministry 
of Environment's claims that there have been violations. 
Benjamin cited the example of the law on gas flaring, which 
went into effect immediately upon passage with no phase-in 
period.  Inspectors appeared at some fields the following 
 
ALMATY 00003026  004.2 OF 004 
 
 
day, expecting to assess fines for non-compliance.  Many 
were shocked when foreign firms such as PetroKazakhstan shut 
down production rather than violate the law. 
 
¶17. (SBU) Participants noted that while most laws governing 
the business sector were well drafted, some legislation 
designed to deal with emerging issues has been rushed 
through without proper consultation and is harmful. 
Benjamin cited the Article 71 pre-emptive sale clause as an 
example; it impacts every energy transaction, and specifies 
no defined procedure for obtaining the GOK's decision on a 
sale.  It contains no exceptions, not even for publicly 
traded shares.  When the GOK fails to respond to a waiver 
application, the seller is placed in an ambiguous situation. 
Benjamin also criticized the lack of opportunity for public 
comment on draft legislation.  The parliament is required to 
consult accredited business associations on legislation 
affecting their sectors, but generally does not accept input 
from other sources. 
 
¶18. (SBU) Fowler commented that Kazakhstani firms are 
increasingly seeking to use IPOs to legitimize assets 
obtained under uncertain circumstances.  She expressed 
skepticism that the steps firms are taking to improve 
corporate governance in order to launch an IPO would result 
in fundamental change.  Many firms, she claimed, did not 
understand that the measures could not be superficial, but 
rather must impact the way the business operates.  Benjamin 
disagreed, stating that the firms he had worked with had 
made great progress toward assuring accountability and 
sustainability. 
 
ORDWAY