VZCZCXRO0532
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1994/01 2050501
ZNR UUUUU ZZH
R 240501Z JUL 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 0160
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0224
RUEHAK/AMEMBASSY ANKARA 2073
RUEHBUL/AMEMBASSY KABUL 0340
RUEHNE/AMEMBASSY NEW DELHI 0468
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 03 ASTANA 001994 
 
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, JULY 8-21, 2007 
 
ASTANA 00001994  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. 
 
-- Amendments to Budget 2007 Signed 
-- Amendments to Budget Code Approved 
-- Government Seeks to Curb Inflation 
-- The Railroad Gathers Steam... 
-- ...And KamAZ Trucks Along 
-- KazAtomProm to Purchase 10% of Westinghouse 
-- KazAtomProm to Set up Three New Facilities 
-- KZ/RU Consortium Wins Tender for 51% of Turkish Petrochem Co. 
-- Kazakhstan Welcomes Oil Cooperation with Croatia 
-- Bogatyr Access Komir Names New Director General 
 
Amendments to Budget 2007 Signed 
-------------------------------- 
 
¶2.  Amendments to the national budget 2007 were approved by 
President Nazarbayev.  The document raised the projected 2007 budget 
deficit from 1.2% to 2.2% of the GDP.  The amendments also increased 
the annual inflation forecast from the range of 5-7% to 7-9% and 
adjusted the projected annual GDP growth from 8.6% to 9.7%.  The 
projection for 2007 GDP now stands at 12,464 billion KZT (approx. 
$102.4 billion).  (Interfax-Kazakhstan, July 5) 
 
Amendments to Budget Code Approved 
---------------------------------- 
 
¶3.  President Nazarbayev has signed amendments to the Budget Code. 
According to the president's press service, this law aims to 
introduce a more comprehensive definition of "budgetary oil 
revenues" and ensure their timely transfer to the National (Oil) 
Fund (NF).  The term "oil revenues" currently covers the 
government's revenues from exploration, production and sales of oil 
and gas condensate.  The new law creates additional income sources 
for the NF by classifying as "oil revenues" such government revenues 
as penalties charged for delays in fulfillment of contractual 
liabilities or non-compliance with rules governing oil production 
technology.  (Interfax-Kazakhstan, July 2) 
 
Government Seeks to Curb Inflation 
---------------------------------- 
 
¶4.  Consumer Price Index (CPI) rose by 0.8% during the month of 
June.  This is the highest monthly inflation rate for any June since 
¶1997.  Growth of food prices was responsible for 54.5% of inflation, 
services - 26.6% and non-food products - 18%.  According to Anvar 
Saidenov, Chairman of the National Bank, growth of money supply and 
a doubling of credit volume were the main causes of accelerating 
inflation.  In response, the Government asked the National Bank to 
tighten controls over money supply and called on various state 
agencies to continue its policy of stock exchange development and 
encouragement of industrial growth through higher labor 
productivity.  As of June 2007, the year-on-year rate of inflation 
was 8.1%.  (Izvestiya-Kazakhstan newspaper, July 17, Press-Release 
of the National Bank, July 3) 
 
The Railroad Gathers Steam... 
----------------------------- 
 
¶5.  The national railway company Kazakhstan Temir Zholy (KTZ) has 
declared a $177.6 million profit in 2006 after a $129.5 million loss 
in 2005. The company stated that its assets soared from $5.1 billion 
in 2005 to $6.35 billion in 2006, while equity capital increased 
from $3.9 billion to $4.35 billion.  KTZ is wholly owned by the 
Samruk State Holding Company. (Interfax-Kazakhstan, July 11) 
 
...And KamAZ Trucks Along 
------------------------- 
 
¶6.  KamaAZ-Engineering, a Russian-Kazakhstani joint venture auto 
assembly plant (located in Akhmolinskaya Oblast in northern 
Kazakhstan), reported a sharp year-on-year increase in output.  In 
January-June 2007, the company assembled $52.7 million worth of 
 
ASTANA 00001994  002.2 OF 003 
 
 
trucks, compared to $21.1 million the year before. 
 
KazAtomProm to Purchase 10% of Westinghouse 
------------------------------------------- 
 
¶7.  Kazakhstani national atomic company KazAtomProm (KAP) is in 
talks to purchase 10% of the stock of U.S.-based nuclear reactor 
manufacturer Westinghouse Electric Co. from Toshiba Corp., which 
holds a 77% stake in Westinghouse.  According to KAP President 
Dzhakishev, the $486-million deal is to be finalized by autumn 2007 
and will be financed by the company's own assets.  The deal is to be 
coordinated with the U.S. authorities, said KAP President. 
Observers speculate that the deal may stem from Toshiba's interest 
in obtaining access to Kazakhstan's uranium.  In turn, Kazakhstan 
may gain access to Japan's uranium enrichment technologies and a 
distribution channel for its uranium production.  (Interfax - 
Kazakhstan, July 18) 
 
¶8.  Four U.S.-based non-governmental organizations (NGOs) have 
called on the Bush administration to reject Kazakhstan's bid to 
acquire a share in Westinghouse.  According to the NGOs, the deal 
would undermine non-proliferation efforts and hand over sensitive 
nuclear technologies to the Kazakhstani regime, which they described 
as cruel, repressive and undemocratic.  (RIA Novosti - Russia, July 
19) 
 
KazAtomProm to Set up Three New Facilities 
------------------------------------------ 
 
¶9.  Ulba Mill (a division of KazAtomProm) has launched three 
projects, with a total value of $848 million, under the aegis of the 
Kazakhstani Government's (GOK's) "30 corporate leaders" program. 
The projects aim to create the complete cycle of nuclear fuel 
production in Kazakhstan.  The project on production of uranium 
hexafluoride and fuel assemblies will ensure fuel supply for 
third-generation reactors.  Ulba is also implementing a beryllium 
project to provide feedstock for nuclear fusion reactors and space 
engineering.  The third project is production of tantalum, which 
would be employed in manufacturing of super-light condensers with 
the use of nanotechnologies.  (Interfax - Kazakhstan, July 3) 
 
KZ/RU Consortium Wins Tender for 51% of Turkish Petrochem Co. 
--------------------------------------------- ----- 
 
¶10.  On July 8, "TransCentralAsia Petrochemical Holding" consortium 
won the tender for 51% of Turkish petrochemical company "Petkim 
Petrokimya Holding" with a $2.05 billion bid.  The shareholders of 
the consortium are the Russian bank "Troika Dialog," the Kazakhstani 
investment group "Eurasia" (controlled by TuranAlemBank Head Mukhtar 
Ablyazov) and the "Caspi Neft" company, a Kazakhstani subsidiary of 
the U.S.-based "Transmeridian Exploration Incorporated."  However, 
Turkey's Privatization Ministry has requested a national security 
review of the consortium shareholders due to "negative comments 
among the Turkish community."  Furthermore, the trade union of 
Turkish petrochem specialists declared its opposition to the deal. 
(webside nomad.su/Kazakhstan - July 18) 
 
Kazakhstan Welcomes Oil Cooperation with Croatia 
--------------------------------------------- --- 
 
¶11.  Kazakhstan is interested in exporting its hydrocarbon resources 
to Croatia and, via Croatia, to western Europe, Kazakhstani 
President Nursultan Nazarbayev said at a joint press conference with 
Croatian President Stjepan Mesic on July 3.  According to President 
Nazarbayev, Kazakhstani companies are interested in developing 
Croatian oil and gas pipelines, and they also seek to become 
shareholders of European-based (or -linked) oil refineries and 
seaports. 
 
¶12.  National oil and gas company KazMunayGas plans to take part in 
the privatization of Croatian oil company INA, 44% of which is owned 
by the Croatian government, Kazakhstani Energy Minister 
Izmukhambetov said after his meeting with INA Executive Director 
Petrovic.  "The sides agreed that after the Croatian side provides 
concrete proposals for the privatization of INA, a Kazakhstani 
delegation will travel to Zagreb for further talks," the statement 
 
ASTANA 00001994  003.2 OF 003 
 
 
said.  INA owns about 450 filling stations and two oil refineries in 
Croatia.  (Interfax - Kazakhstan, July 9) 
 
Bogatyr Access Komir Names New Director General 
--------------------------------------------- -- 
 
¶13.  Sergey Opanasenko has been named a new director general of 
Bogatyr Access Komir (BAK), a Pavlodar Oblast affiliate of the 
U.S.-based Access Industries Inc.  Opanasenko, formerly employed by 
Russia's electricity transmission company RAO UES, has been with 
Access Industries since 2006.  Opanasenko replaces Dennis Price, who 
became Director General of "Sayran ON", a subsidiary of "Kuat," a 
leading Kazakhstani construction company.  (Interfax - Kazakhstan, 
July 11) 
 
MILAS