VZCZCXRO7930
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1430/01 1481047
ZNR UUUUU ZZH
R 281047Z MAY 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9552
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0178
RUEHAK/AMEMBASSY ANKARA 2052
RUEHBUL/AMEMBASSY KABUL 0328
RUEHNE/AMEMBASSY NEW DELHI 0455
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 001430 
 
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, APRIL 29 - MAY 12, 
2007 
 
ASTANA 00001430  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. 
 
-- "Kazakhgate" Funds to Go to Charity 
-- Kazakhstan's External Debt on the Rise 
-- EBRD to Increase Exposure to Kazakhstan 
-- Labor Minister Comments on Unemployment 
-- Kazakhstan Considering Trans-Caspian LNG Shipments 
-- Kazakhstan Views Russia as Main Oil Transit Route 
-- GazProm CEO Announces Progress in Orenburg Negotiations 
-- Nazarbayev Links CPC Expansion to Bosporus Bypass 
"Kazakhgate" Funds to Go to Charity 
----------------------------------- 
 
¶2.  On May 4, a trilateral agreement was reported between the 
governments of the U.S., Kazakhstan, and Switzerland on $84 million 
frozen in Swiss bank accounts.  The Swiss Foreign Ministry said the 
cash had been frozen in Switzerland as the result of a corruption 
case involving an (unspecified) American businessman (widely assumed 
to be James Giffen) and oil concessions in Kazakhstan.  The money 
will be used to establish a children's foundation named "Bota" 
(young camel) to provide support to children from low-income 
families.  The World Bank will develop the concept of the foundation 
with management transparency and efficiency in mind.  The Panorama 
newspaper commented, "most likely the Kazakhstani Government decided 
to accept this arrangement because a return of this money back to 
the national budget appeared unfeasible."  Television Channel 31 
cited the reaction of Ak Zhol's Oraz Zhandosov: "Frankly, I do not 
like the idea of a non-governmental foundation that will spend the 
government's money in Kazakhstan.  It resembles practices used in 
the early and mid-1990's, which we stopped in 1998."  ("Panorama" 
newspaper; Television Channel 31, May 11) 
 
Kazakhstan's External Debt on the Rise 
-------------------------------------- 
 
¶3.  According to Deputy Chairman of the National Bank, Gulbanu 
Aimanbetova, as of the end of 2006, Kazakhstan's total external debt 
reached $73.8 billion or 95.6% of GDP, compared to $42.6 billion a 
year earlier.  The increase was mostly due to banking sector 
borrowing, which grew by $18 billion to reach $33.3 billion by the 
end of the year.  As a result, the banking sector's share of 
Kazakhstan's external debt rose in 2006 from 35% to 45%, while the 
share of intracorporate debt fell from 44% to 34%.  At the end of 
the year, the non-financial sector's (intercorporate) debt stood at 
16% of the total, and the government's at 4%.  (Interfax-Kazakhstan, 
May 8) 
 
EBRD to Increase Exposure to Kazakhstan 
--------------------------------------- 
 
¶4.  The European Bank for Reconstruction and Development (EBRD) 
released information on its planned deals with two Kazakhstani 
banks.  EBRD will arrange a syndicated loan for Kazkommertsbank 
(KKB) worth $300 million.  The loan will consist of two parts, with 
five- and seven-year terms of maturity.  KKB plans to use the raised 
funds for mortgage lending, as well as diversification of its 
holdings away from real estate and the energy sector.  EBRD also 
plans to purchase 20% of common shares of KazInvestbank.  (Note: 
KazInvestbank is a commercial bank with a reported capital of $199 
million.  End note.)  This investment aims to facilitate 
KazInvestbank's expansion in the Central Asian region, development 
of retail crediting, and financing of small- and medium-sized 
enterprises.  (Interfax-Kazakhstan, May 8) 
 
Labor Minister Comments on Unemployment 
--------------------------------------- 
 
¶5.  Speaking to the Kazakhstani Parliament on May 7, Labor Minister 
Gulzhana Karagusova noted the emergence of "chronic" unemployment. 
She stated that 118,000 unemployed Kazakhstanis have not worked for 
a decade, 15.9% of the unemployed have not worked for at least three 
years, and 27% have no skills.  She also expressed concern over 
 
ASTANA 00001430  002.2 OF 002 
 
 
"so-called self-employed" people who teeter on the brink of poverty. 
 Last year, the Minister noted, the unemployment rate stood at 7.8%. 
 She added that the government intends to fine-tune its approaches 
to social protection.  (BBC Monitoring Central Asia, May 7) 
 
Kazakhstan Considering Trans-Caspian LNG Shipments 
--------------------------------------------- ----- 
 
¶6.  On March 4, Deputy Energy Minister Bolat Akchulakov told a 
visiting European Parliament delegation that Kazakhstan was "very 
seriously considering gas (LNG) deliveries across the Caspian 
Sea...rather than building an undersea gas pipeline, as this is the 
safest means of gas transportation."  Akchulakov also noted that the 
construction of a Trans-Caspian gas pipeline was a "very difficult 
proposition," given the varying interests of the five littoral 
states.  (Interfax - Kazakhstan, May 7) 
 
Kazakhstan Views Russia as Main Oil Transit Route 
--------------------------------------------- ---- 
 
¶7.  "Kazakhstan is absolutely committed to shipping most of its oil, 
if not all of it, through Russian territory," President Nazarbayev 
announced during a May 10 press conference following a meeting with 
Russian President Putin.  Nazarbayev pointed out of 52.3 million 
tons of oil Kazakhstan exported "this year," 42 million transited 
Russia.  Nazarbayev suggested that there were clear advantages to 
transporting Kazakhstani oil and gas through Russia. "The issue," he 
concluded, is that there be fair and mutually beneficial access." 
(Kazakhstan - Interfax, May 10) 
 
GazProm CEO Announces Progress in Orenburg Negotiations 
--------------------------------------------- ---------- 
 
¶8.  GazProm CEO Alexei Miller announced on May 10 that GazProm had 
reached "a very important agreement on the terms of buying 
Kazakhstan's gas from the Karachaganak field.  This is vital for 
setting up a joint venture on the basis of the Orenburg gas 
processing plant."  Kazakhstan's Energy Minister Izmukhambetov 
revealed the same day that the agreed price "is higher than 145 
dollars per thousand cubic meters."  (Interfax - Kazakhstan, May 
10) 
 
Nazarbayev Links CPC Expansion to Bosporus Bypass 
--------------------------------------------- ---- 
 
¶9.  On May 10, following meetings with Russian President Putin, 
President Nazarbayev announced that the expansion of the Caspian 
Pipeline Consortium (CPC) pipeline, from 23 to 40 million tons, 
would be linked with the planned Burgas-Alexandroupolis Bosporus 
bypass pipeline.  "We have agreed to a joint action plan whereby the 
construction of Burgas-Alexandroupolis and CPC expansion will be 
concurrent," Nazarbayev said.  Putin noted that Kazakhstani oil 
could comprise "a significant part" of the oil shipped through the 
Burgas-Alexandroupolis bypass. 
 
ORDWAY