VZCZCXRO4848
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #3177/01 3270752
ZNR UUUUU ZZH
R 230752Z NOV 07 ZDK CITING RUEHNT #8033 3280830
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 1235
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0309
RUEHAK/AMEMBASSY ANKARA 2109
RUEHBUL/AMEMBASSY KABUL 0367
RUEHNE/AMEMBASSY NEW DELHI 0481
RUEHAST/USOFFICE ALMATY 0009

UNCLAS SECTION 01 OF 03 ASTANA 003177 
 
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 KTDB KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, NOVEMBER 5 - 18, 
2007 
 
ASTANA 00003177  001.8 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. 
 
 -- UniCredit Group Finalizes Purchase of ATF Bank 
 -- British Companies Expanding in Kazakhstan 
 -- SCO Members to Enhance Customs Cooperation 
 -- China's Ex-Im Bank to Finance Telecom Investment in Kazakhstan 
 -- Economic Statistics 
 -- Economy Ministry Suggests an End to the Use of PSAs 
 -- TengizChevrOil Pays $309M Fine 
 -- KazMunayGas Purchases 50% of Former Nations Energy 
 -- KazMunayGas, CNPC Agree on New Gas Pipeline 
 -- Oil & Gas Statistics for January-October 2007 
 
 UniCredit Group Finalizes Purchase of ATF Bank 
 --------------------------------------------- - 
 
¶2.  Bank Austria Creditanstalt AG (BA-CA), the division responsible 
within the UniCredit Group for commercial banking activities in 
Central and Eastern Europe, finalized the acquisition of 91.8% of 
the total issued share capital of Kazakhstan-based ATF Bank (Almaty 
Merchant Financial Bank) for approximately $2.1 billion. 
Specifically, BA-CA acquired 95.6% of total issued common shares for 
$1.66 billion and 85.0% of total issued preferred shares for $456 
million.  Through the acquisition of ATF Bank, the UniCredit Group 
is establishing a major presence in Kazakhstan and expanding its 
operations in Kyrgyzstan, Tajikistan and Russia.  (Press-Service of 
ATF bank, November 14) 
 
 British Companies Expanding in Kazakhstan 
 ----------------------------------------- 
 
¶3.  U.K. Ambassador to Kazakhstan Paul Brummell said in an interview 
to Interfax-Kazakhstan that the number of British financial 
companies interested in operating in Kazakhstan is increasing.  This 
provides a great opportunity for cooperation with Kazakhstani 
companies listed on London Stock Exchange.  Ambassador Brummell also 
noted that Great Britain remains one of the key investors in 
Kazakhstan, with a total of over $5 billion invested in the 
country's economy over the past 15 years.  In Ambassador Brummell's 
opinion, the trend of increasing British investment in Kazakhstan 
will continue for the foreseeable future.  (Interfax - Kazakhstan, 
November 12) 
 
 SCO Members to Enhance Customs Cooperation 
 ------------------------------------------ 
 
¶4.  Shanghai Cooperation Organization (SCO) member-states signed an 
intergovernmental agreement on customs cooperation and mutual 
assistance.  Russian Prime-Minister Zubkov called the agreement "an 
important tool for creating a comprehensive security system within 
the SCO."  The parties also agreed to review the SCO's basic 
economic documents, particularly long-term programs for multilateral 
trade and economic cooperation.  (Interfax - Kazakhstan, November 
5) 
 
 China's Ex-Im Bank to Finance Telecom Investment in Kazakhstan 
 ---------------------------- --------------------------------- 
 
¶5.  Kazakhstan-based KazKommertsBank (KKB) signed a $34 million 
credit agreement with China's Export-Import Bank to finance the 
import of telecommunications equipment from Huwai Technologies Co., 
a leading Chinese producer.  The credit, to be provided with a 
flexible repayment schedule over the course of seven years, will be 
used to develop a cellular network in cooperation with KazTelecom. 
(Central Asia General Newswire, November 14) 
 
 Economic Statistics 
 ------------------- 
 
¶6.  "As of November 1, 2007 the assets of the National Oil Fund were 
valued at $20.2 billion.  By the end of 2007, we expect them to grow 
to $25-26 billion dollars," the then-Finance Minister Korzhova 
 
ASTANA 00003177  002.2 OF 003 
 
 
reported to the Mazhilis on November 12.  The assets of the National 
Oil Fund stood at just $14.0 billion at the end of 2006.  (Interfax 
- Kazakhstan, November 12) 
 
¶7. The average (mean) nominal monthly salary in September was KZT 
53,005 (approx. $438), a 28.9% increase (16% in real terms) over 
September 2006.  Kazakhstan's official living monthly salary (as of 
October 2007) was KZT 11,079 ($91.50).  (Kazakhstani Statistics 
Agency, November 13) 
 
Economy Ministry Suggests an End to the Use of PSAs 
------------------------- ------------------------- 
 
¶8.  Kazakhstan's Ministry of Economy and Budget Planning has 
submitted a proposal to the GOK to stop using Production Sharing 
Agreements (PSAs) with subsoil users in the future, abolish VAT 
privileges for geological prospecting activities and increase 
existing rates of royalties, Galymzhan Zhakupov, Head of the 
Ministry's Tax Policy and Forecasting Department, said at a 
KazEnergy association meeting on November 5.  "In the future 
contracts should be concluded on a concession basis.  The earlier 
concluded PSAs will be effective until they expire," he said. 
According to Zhakupov, currently PSA taxation is extremely 
complicated and non-transparent.  Moreover, tax inspections and 
audits are made more difficult because of differences between terms 
set in PSAs and current legislative norms.  (Reuters - Astana, 
November 5) 
 
TengizChevrOil Pays $309 Million Fine 
------------------------------------- 
 
¶9.  An Atyrau regional court upheld the decision of a regional 
economic court to levy a fine of KZT 37.4 billion (approx. $309 
million) against TengizChevrOil (TCO) for illegal storage of 2.8 
million tons of solid sulfur in 2003-06.  The court rejected TCO's 
appeal TCO made earlier.  It also rejected a notice of protest filed 
by the Atyrau regional environmental office which demanded that TCO 
pay a large sum -- KZT 74.4 billion (approx. $615 million) -- for 
its alleged violations.  (Interfax - Kazakhstan, November 2) 
 
KazMunayGas Purchases 50% of Former Nations Energy 
------------------------- ------------------------ 
 
¶10.  Exploration & Production KazMunayGas (E&P KMG, an oil producing 
subsidiary of KazMunayGas) and China's CITIC Canada signed an 
agreement for E&P KMG to buy a 50% stake in CITIC Canada Petroleum 
(the former Nations Energy Company, whose main asset is the 
Karazhanbas field in Mangystau region).  The document was signed 
during the 4th meeting of the Kazakh-Chinese Cooperation Committee 
on November 8.  The E&P KMG board of directors approved the 
$930-million acquisition in early October.  CITIC Group reached an 
agreement to purchase Nations Energy Company for $1.91 billion on 
October 25, 2006.  Later Nations Energy was renamed CITIC Canada 
Petroleum.  Having received approval for the deal, on December 28, 
2006 CITIC granted KMG a one-year option to purchase a 50% stake in 
CITIC Canada Petroleum.  (Interfax - Kazakhstan, November 12) 
 
KazMunayGas, CNPC Agree on New Gas Pipeline 
------------------------------------------- 
 
¶11.  On November 8, on the sidelines of the official visit of 
Chinese Vice-Premier Wu Yi to Kazakhstan, KazMunayGas and China 
National Petroleum Company (CNPC) signed an agreement spelling out 
the fundamentals of the construction and operation of a gas pipeline 
between Kazakhstan and China.  The sides agreed to set up a 
jointly-owned company which will own the gas pipeline. 
Implementation of the project is contingent upon approval of a 
feasibility study. The project is designed to be implemented in two 
phases.  Initially, a pipeline would be laid from the borders of 
Uzbekistan and Kazakhstan to China via Shymkent (south Kazakhstan), 
with an annual capacity of 40 billion cubic meters.  Later, the 
pipeline would be extended between Beyneu, Bozoi (west Kazakhstan), 
Kyzyl Orda (south Kazakhstan) and Shymkent, with an annual capacity 
of 10 billion cubic meters.  (Interfax - Kazakhstan, November 12) 
 
 
ASTANA 00003177  003.2 OF 003 
 
 
Oil & Gas Statistics for January-October 2007 
--------------------------------------------- 
 
¶12.  According to the National Statistics Agency, from January to 
October 2007, Kazakhstan produced 46 million tons of crude oil, 2.1% 
more than in the same period in 2006, and 10 million of gas 
condensate, 17.9% more year-on-year.  During the first ten months of 
2007 Kazakhstan produced 24 billion cubic meters of natural gas, a 
14.1% increase from the January-October 2006 period.  (Interfax - 
Kazakhstan, November 12) 
 
ORDWAY