VZCZCXRO3223
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1038/01 1130348
ZNR UUUUU ZZH
R 230348Z APR 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9177
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0135
RUEHAK/AMEMBASSY ANKARA 2039
RUEHBUL/AMEMBASSY KABUL 0315
RUEHNE/AMEMBASSY NEW DELHI 0445
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 001038 
 
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TAGS: ECON EIND ENRG EPET EFIN KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, April 1 - 14, 2007 
 
 
ASTANA 00001038  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. 
 
-- Nazarbayev Meets Lord Mayor of London 
-- 30 Leading Corporations to Modernize Economy 
-- Finance Ministry's Press Release on Negotiations with  IRS 
-- Economic Statistics 
-- KMG Sells 50% of KazGerMunay to Subsidiary 
-- Kazakhstan Eyes Stake in Burgas-Alexandroupolis Project 
-- Kazakhstan to Increase Uranium Supplies to Japan 
-- Oil & Gas Production, Q1 2007 
 
 
 
Nazarbayev Meets Lord Mayor of London 
------------------------------------- 
 
¶2.  On March 30, President Nazarbayev met in Astana with Lord Mayor 
of the City of London John Stuttard.  According to Stuttard, the two 
countries' comparative advantages --Kazakhstan's natural resources 
and Great Britain's experience in developing financial markets, 
services, and education -- should be pooled to bring about fruitful 
partnership and cooperation.  Currently, seven Kazakhstani companies 
are listed on the London Stock Exchange (LSE), and nine others trade 
their securities on the LSE's Alternative Investment Market (AIM). 
(Interfax-Kazakhstan, April 2) 
 
30 Leading Corporations to Modernize Economy 
-------------------------------------------- 
 
¶3.  In an April 9 interview, President Nazarbayev said that in order 
to diversify the economy, the Government of Kazakhstan will choose 
the 30 best Kazakhstan-based companies.  These corporate leaders are 
expected to develop new industries, making the economy more 
competitive and globally integrated.  The recently created 
Commission on Economic Modernization would facilitate these 
companies' efforts.  (President's Press-Service, April 10) 
 
Finance Ministry's Press Release on Negotiations with IRS 
--------------------------------------------- ---- 
¶4.  The Finance Ministry issued on April 4 a press release about the 
late-March negotiations between the Ministry's Tax Committee and a 
high-level IRS delegation.  The press release notes that the 
meetings were the first mutual agreement process negotiations in the 
history of Kazakhstan.  The press release further states that the 
talks focused on the issue of double-taxation of the U.S.-based 
Parker Drilling Company.  According to the press release, the 
Kazakhstani side declared at the meetings' conclusion that its 
position -- that the income in question was earned and subject to 
tax in Kazakhstan -- remains unchanged.  (Interfax-Kazakhstan, April 
5) 
 
 
 
Economic Statistics 
------------------- 
 
¶5.  According to a statement released by the National Bank, 
Kazakhstan's 2006 current account deficit was $1.797 billion, up 
from $1.056 billion in 2005, a 70% increase.  According to the 
National Bank Chairman Anvar Saidenov, the large increase is a 
result of the foreign worker legalization campaign: starting in 
2006, wages paid to illegal migrants were included in the current 
account. (Interfax-Kazakhstan, April 3) 
 
¶6.  In January-March 2007, the total trade volume at Kazakhstan's 
financial exchanges, the Kazakhstani Stock Exchange (KSE) and the 
special trading floor of the Regional Financial Center of Almaty 
(RFCA), amounted to 8,342.3 trillion tenge (about $66.8 billion), a 
140% increase over the same period of 2006.  While most of the trade 
volume was in the currency market, trade in securities has increased 
significantly.  Over the same period last year, trade in stocks (at 
$793.5 million) increased 180%; in corporate bonds (at $1.1 billion) 
25%; and in government debt (at $2.0 billion) 100%. 
 
ASTANA 00001038  002.2 OF 002 
 
 
(Interfax-Kazakhstan, April 5) 
 
KMG Sells 50% of KazGerMunay to Subsidiary 
------------------------------------------ 
 
¶7.  On April 12, the shareholders of national oil and gas company 
KazMunayGas (KMG) subsidiary KMG Exploration & Production (KMG E&P) 
have approved the purchase of a 50% share in KazGerMunay, owned by 
the parent company, for KZT 133.3 billion (about $1.1 billion).  The 
purchase will be paid from the company's own funds.  After the 
purchase, KMG E&P will become Kazakhstan's second largest oil 
producer (behind TengizChevrOil).  In late July last year KMG 
acquired a 50% share in KazGerMunay from RWE Dea AG, EEG - Erdgas 
Erdol GmbH and the International Financial Corporation.  KMG E&P's 
partner in the joint venture is PetroKazakhstan.  (Interfax - 
Kazakhstan, April 12) 
 
Kazakhstan Eyes Stake in Burgas-Alexandroupolis Project 
--------------------------------------------- ---- 
 
¶8.  Kazakhstan seeks a stake in the Burgas-Alexandroupolis oil 
pipeline project, Kazakhstani Energy Minister Izmukhambetov told the 
press in Baku on April 4.  According to the Minister, a tentative 
understanding has been reached in which Kazakhstan will get part of 
Greece and Bulgaria's combined 49% stake in the project. 
Izmukhambetov added that, given the launch of the 
Burgas-Alexandroupolis project, it is necessary to speed up a 
decision on expansion of the Caspian Pipeline Consortium pipeline. 
(Interfax - Kazakhstan, April 9) 
 
Kazakhstan to Increase Uranium Supplies to Japan 
--------------------------------------------- --- 
 
¶9.  Kazakhstan's national atomic company KazAtomProm (KAP) will 
capture over 40% of Japan's nuclear fuel market by 2010, with plans 
to deliver approximately 4,000 tons of uranium per annum, KAP 
President Dzhakishev said at a briefing on April 14 in Almaty. 
Currently KAP supplies 3-4% of Japan's uranium needs.  According to 
the KAP President, these plans will become possible after the 
company signs a series of documents during a visit of Japanese 
officials and companies to Astana on April 29-30.  Some 
Kazakhstani-Russian joint ventures, specifically one for uranium 
enrichment, would be involved in supplying Japan's market, Mr. 
Dzhakishev revealed.  (Interfax - Kazakhstan, April 16) 
 
Oil & Gas Production, Q1 2007 
----------------------------- 
 
¶10.  In January-March Kazakhstan produced 16.6 million tons of oil 
and gas condensate, 10.8% higher than during the same period in 
2006, according to the GOK reports.  Of the 16.6 million tons, 
national oil and gas company KazMunayGas (KMG) produced 2.3 million 
tons of oil and gas condensate, while other companies with KMG 
participation produced 6.3 million tons of oil.  The TengizChevrOil 
joint venture was the largest producer, with 3.6 million tons during 
the period.  (Interfax - Kazakhstan, April 9) 
 
¶11.  In January-March Kazakhstan produced 7.3 billion cubic meters 
of gas, 17.8% higher than the first quarter of 2006, the GOK 
reported.  (Interfax - Kazakhstan, April 9) 
 
ORDWAY