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RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #0293/01 0350216
ZNR UUUUU ZZH
R 040216Z FEB 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 8357
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0025
RUEHAK/AMEMBASSY ANKARA 2017
RUEHBUL/AMEMBASSY KABUL 0291
RUEHNE/AMEMBASSY NEW DELHI 0423
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 000293 
 
SIPDIS 
 
DEPT FOR SCA/CEN (O'MARA) 
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, January 15 - 28, 
2007 
 
 
ASTANA 00000293  001.2 OF 002 
 
 
¶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 Halyk Bank Shareholders 
-- Development of Textile Cluster 
-- Economic Statistics 
-- KMG, Agip KCO, TCO Sign Kazakh Caspian Transport  System MOU 
-- KMG Critical of Agip KCO Performance 
-- Agip KCO Faces Labor Problems 
-- Kazakhstan 2006 Oil Exports 
-- Kazakhstan Oil Production Forecast for 2007 
 
New Halyk Bank Shareholders 
--------------------------- 
 
¶2.  After a successful December 2006 IPO on the London Stock 
Exchange, Halyk Bank acquired new foreign investors.  Consequently, 
the bank's shareholders have changed: Almex Holding, controlled by 
Dinara and Timur Kulibaev (the second daughter of President 
Nazarbayev and her husband) holds 58.05% of Halyk's common stock; 
Deutsche Bank Trust Company Americas and Merix International 
Ventures Ltd hold 17.38% and 6.4% respectively; and Halyk Bank's 
Pension Savings Fund, 5.28%.  (Respublika Business Review, January 
26) 
 
Development of Textile Cluster 
------------------------------ 
 
¶3.  Within the framework of the development of the "Ontustik" Free 
Economic Zone, a new state cotton-processing plant was launched in 
South Kazakhstan oblast.  According to  Agriculture Minister Esimov, 
the opening of this facility brought an end to the previous cotton 
processing monopoly in the region and allowed local farmers to earn 
an additional KZT 900 million (about $7.1 million) during the 2006 
harvest. The plant has a processing capacity of 60 thousands tons of 
raw cotton per year.  ("Liter" newspaper, January 23) 
 
Economic Statistics 
------------------- 
 
¶4.  According to the Financial Supervision Agency (FSA), as of 
January 1 2007, the total assets held by Kazakhstani mutual funds 
reached KZT 48.66 billion (about $385.9 million); this represents a 
395% increase since January 2006.  Assets of equity investment funds 
increased 385% last year, to KZT 67.35 billion (about $534.1 
million). Currently, there are 86 mutual funds and 14 equity 
investment funds in Kazakhstan.  (Interfax - Kazakhstan, January 26) 
 
 
¶5.  FSA reports that Kazakhstani insurance organizations collected 
premiums of KZT 120.2 billion (about $953 million) in 2006, a 79.1% 
year-on-year increase.  Voluntary property insurance constituted 
74.5% of the overall volume of premiums, at KZT 89.5 billion 
(approximately $709.8 million).  Life insurance was the most dynamic 
insurance sector; insurance premiums of this type grew 2.6 times and 
reached KZT 3.7 billion in value (about $29.3 million).  Total 
assets of insurance companies grew to KZT 135.5 billion (about $1.1 
billion) in 2006, and total insurance reserves amounted KZT 67.6 
billion (approximately $536.1 million).  (Interfax - Kazakhstan, 
January 26) 
 
KMG, Agip KCO, TCO sign KCTS MOU 
-------------------------------- 
 
¶6.  On January 24, the national oil company KazMunayGaz, the Agip 
KCO consortium, and the TengizChevrOil joint venture signed a 
Memorandum of Understanding on the Kazakhstan Caspian Transport 
System (KCTS).  The KCTS will transport  Kashagan and Tengiz oil 
through a planned Eskene-Kuryk pipeline to a terminal on the 
Kazakhstani Caspian coast, from which the oil will be carried by 
tanker to Baku, for onward shipment through the Baku-Tbilisi-Ceyhan 
pipeline.  Initial KCTS capacity will be 25 million tons of oil, 
which will eventually be increased to 38 million tons.  The cost of 
 
ASTANA 00000293  002.2 OF 002 
 
 
KCTS is estimated at $3 billion, with completion scheduled for 
2010-2011.  (Interfax - Kazakhstan, January 26) 
 
KMG Critical of Agip KCO Performance 
------------------------------------ 
 
¶7.  The national oil company, KazMunayGaz, has serious complaints 
about the performance of North-Caspian project contractor Agip KCO 
because of delays in Kashagan oil production, KMG President 
Karabalin stated on January 23.  KMG plans to hire independent 
consultants to conduct an investigation into the delays; the results 
are to be reported to State Holding Company "Samruk" and the GOK. 
Agip KCO shareholders include Eni, Total, ExxonMobil, Shell, 
ConocoPhillips, Inpex, and KMG.  Initially, Kashagan development was 
to start in 2005.  It was then delayed until 2008.  According to 
current official estimates, commercial operations are to start in 
2008-09.  (Interfax - Kazakhstan, January 24) 
 
Agip KCO Faces Labor Problems 
----------------------------- 
 
¶8.  On January 18, more than 200 Kazakh workers employed by the 
Turkish construction company "GATE Insaat Taahut Sanayi ve Ticaret" 
went on strike, demanding to be paid the same wages as foreign 
workers.  ("GATE," an Agip KCO subcontractor, is constructing an oil 
processing facility in Karabatan, near offshore Kashagan.) After 
conducting an audit, the Atyrau Oblast Committee for Compliance with 
Foreign Labor Law suspended the foreign labor work permits for both 
"GATE" and another Agip KCO subcontractor, "Bonatti S.p.A" for one 
month.  Beginning on February 1, both companies are ordered to find 
Kazakhstani replacements for all foreign specialists whose actual 
positions deviate from those approved by the Kazakhstani 
authorities.  The Committee also announced its intention to conduct 
audits of all of Agip KCO's contracting organizations for compliance 
with foreign labor legislation. 
 
¶9.  In a January 20 meeting with the Atyrau Oblast Administration 
Chief, ENI Vice President Guido Michelloti announced that Agip KCO 
would establish a worker trade union at the oil processing project 
in Karabatan, and would consider increasing wages paid to Kazakh 
workers involved in the project.  Agip KCO Regional Director Luciano 
Vasques announced at a January 24 press conference that "Agip KCO 
will continue to monitor workers' living and working conditions, in 
order to ensure that high standards are maintained without any 
ethnic discrimination."  He also promised that the consortium would 
organize professional skills training for its 1,500 workers, in 
order to reduce the need for foreign labor in the middle and long 
term.  (Interfax - Kazakhstan, January 29) 
 
Kazakhstan Oil exports in 2006 
------------------------------ 
 
¶10.  In 2006 Kazakhstan exported 57.1 million tons of oil, 9% higher 
than in the previous year, the Energy Ministry reported.  The 
principal export route was through the CPC pipeline - 24.4 million 
tons of oil.  Other export routes include: Atyrau-Samara - 15.6 
million tons, Aktau port - 9.9 million tons, Orenburg - 2.4 million 
tons, Atasu-Alashankou - 2.2 million tons.  (Interfax - Kazakhstan, 
January 18) 
 
Kazakhstan Oil Production Forecast for 2007 
------------------------------------------- 
 
¶11.  According to Energy Minister Izmukhambetov, Kazakhstan will 
produce the same level of oil and gas in 2007 as in 2006 - about 65 
million tons.  "Most of the oil is produced onshore at old fields, 
the recovery rate of which is declining," the Minister explained, 
adding that "a considerable increase in production is expected in 
2008 after TengizChevrOil's new production facilities are onstream". 
 (Interfax - Kazakhstan, January 22) 
 
ORDWAY