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RR RUEHLN RUEHVK RUEHYG
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ZNR UUUUU ZZH
R 310150Z JAN 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 1630
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0376
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E.O. 12958: N/A 
TAGS: ECON EIND ENRG EPET EFIN KTDB KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, JANUARY 6 - 18, 
2008 
 
ASTANA 00000182  001.2 OF 003 
 
 
¶1.  Summary:  This information on economic and energy developments 
in Kazakhstan is drawn primarily from the local press, and has not 
been verified for accuracy. 
 
--   GOK Economic Policy in 2008 
-- New Appointments 
-- US Bank Provides Loan to Kazakhstani Partner 
-- Economic Statistics 
-- KazMunayGas Will Explore N Block on the Caspian Shelf 
-- KazMunayGas Secures Loan for Rompetrol Acquisition 
-- Power Loss Prevention Program to Be Implemented 
-- New Shell Country Chairman Assumed Duties on January 1 
-- Energy Statistics for 2007 
 
GOK Economic Policy in 2008 
--------------------------- 
 
¶2.  The Government of Kazakhstan (GOK), the National Bank of 
Kazakhstan (NBK) and the Financial Supervision Agency (FSA) approved 
a joint statement on the main directions of the country's economic 
policy.  According to preliminary estimates, Kazakhstani GDP growth 
in 2007 was 8.7 percent.  As a result of difficulties attracting 
external financing, the GOK is predicting a reduction in credit and 
only 5-7 percent GDP growth in 2008.  Priority tasks for the NBK and 
the FSA will be to maintain inflation at, or below, 10 percent, 
strengthen supervision and regulation of private banks, and provide 
private banks with short-term liquidity if necessary.  The GOK will 
continue to provide financing to construction companies through its 
development institutions.  This step will allow for the completion 
of many apartment buildings currently under construction in Astana 
and other regions of Kazakhstan.  (Kazakhstanskaya Pravda, January 
9) 
 
New Appointments 
---------------- 
 
¶3.  KazakhTelecom announced the appointment of Askar Yesengarayev as 
new Chairman of the Board of Directors. Yesengarayev previously held 
positions as the Managing Director of the Samruk State Holding and 
as Chairman of the Information Agency of the Republic of Kazakhstan. 
 KazakhTelecom dominates the Kazakhstani telecommunications market. 
The government owns approximately 52% of the company, which is 
managed by Samruk.  (Interfax-Kazakhstan, January 14) 
 
¶4.  Kazyna Sustainable Development Fund Deputy Chairman Maksat 
Kabashev has been selected Chairman of the Managing Board of the 
National Investment Fund (NIF) of Kazakhstan.  (Note.  NIF is one of 
the development institutions operating under the umbrella of Kazyna. 
 The Fund fosters the development and direction of industries in 
non-extractive sectors through direct investment and co-ownership of 
businesses. End Note.) He was replaced at Kazyna by Zeinulla 
Kakimzhanov.  (Interfax-Kazakhstan, January 15) 
 
US Bank Provides a Loan to Kazakhstani Partner 
--------------------------------------------- - 
 
¶5.  National City Corporation (USA) has authorized a $30 million 
loan to Kazakhstan-based TsentrKredit Bank (TKB), according to a 
January 8 TKB press release.  The loan was granted for seven years 
with a two-year grace period and will be spent on the development of 
the bank's retail business.  According to the press release, the 
U.S. Overseas Private Investment Corporation provided a loan 
guarantee.  (BBC Monitoring Central Asia, January 9) 
 
Economic Statistics 
------------------- 
 
¶6.  In 2007, agricultural output reached 1.07 trillion tenge (about 
$8.84 billion), having grown 8.4% in comparison with 2006.  The 
gross grain harvest rose 22% to 20.1 million tons in 2007. 
Production of meat was 1,504 million tons, a 4% increase over the 
1,446 million tons produced in 2006.  The production of milk 
increased by 2.9%, reaching 5,037 million tons.  Overall, livestock 
production in 2007 grew by 4% to 469.5 billion tenge (approximately 
$3.88 billion), and crop output increased by 12.7% to 600.1 billion 
 
ASTANA 00000182  002.2 OF 003 
 
 
tenge (about $4.96 billion).  (Interfax-Kazakhstan, January 15) 
 
¶7.  According to the National Statistics Agency, Kazakhstan's 
foreign trade surplus shrank by 5.6%, from $13.531 billion in 
January-November 2006 to $12.809 billion for the same period in 
¶2007.  Foreign trade grew 28.9% during that 11-month period to 
$72.349 billion, including a 22.3% growth in exports to $42.579 
billion, and a 39.8% growth in imports to $29.77 billion.  The top 
ten export destinations were Italy (16.3% of total exports), 
Switzerland (15.6%), China (12%), Russia (10%), France (8.4%), 
Ukraine (2.4%), UK (2.1%), Turkey (2%) Uzbekistan (1.8%), and the 
U.S. (1%).  The top ten import sources were Russia (35.4% of total 
imports), China (10.7%), Germany (8%), the United States (5%), 
Ukraine (4.7%), Japan (4.3%), Italy (3.6%), Turkey (3%), the UK 
(2.3%), and France (2.2%).  (Interfax-Kazakhstan, January 15) 
 
KazMunayGas Will Explore N Block on the Caspian Shelf 
--------------------------------------------- -------- 
 
¶8.  Kazakhstan's Ministry of Energy and Natural Resources signed a 
Production Sharing Agreement (PSA) with Kazakhstan's national oil 
and gas company, KazMunayGas (KMG), to explore the promising N (or 
"Nursultan") Block on the Caspian shelf.  The N Block was discovered 
in the mid-1990's.  Its reserves are estimated at 600-700 million 
tons of hydrocarbons.  KMG experts believe that this block has more 
gas than oil.  The major complication in its exploration is its deep 
location below the sea (40 to 230 meters), which is expected to 
result in high extraction expenses.  Exploration work will start in 
the second half of 2008.  (Express-K newspaper, January 12) 
 
KazMunayGas Secures a Loan for Rompetrol Acquisition 
--------------------------------------------- ------ 
 
¶9.  KazMunayGas (KMG) has concluded a deal for a one-year $3.1 
billion syndicated loan from ABN Amro, Credit Suisse, and Calyon. 
The annual interest rate is LIBOR plus 0.9%.  The loan will be used 
to fund the acquisition of a 75% stake in Romania's Rompetrol Group 
N.V.  The acquisition will double KMG's refining capacity by 
providing access to two Rompetrol refineries in Romania and 
significantly increase its retail infrastructure by providing access 
to 630 filling stations in seven European countries.  (Interfax - 
Kazakhstan, January 10) 
 
Power Loss Prevention Program to be Implemented 
--------------------------------------------- -- 
 
¶10.  The State Agency for the Regulation of Natural Monopolies 
(AREM) has proposed that power companies seeking tariff increases 
submit a three-to-five-year power loss prevention plan.  According 
to AREM, today standard "technical losses" are 60% for water, 22% 
for electricity, and 33% for heat.  Compensation for standard 
technical losses consumes as much as 50% of tariffs, and therefore 
the implementation of power loss prevention programs should result 
in significant tariff reductions.  (Interfax - Kazakhstan, January 
16) 
 
New Shell Country Chairman Assumed Duties on January 1 
--------------------------------------------- --------- 
 
¶11.  Royal Dutch Shell Plc has appointed Campbell Keir as General 
Manager and Country Chairman for Shell Kazakhstan Development B.V. 
Keir was previously Managing Director for Shell Syria Petroleum 
Development, General Manager of the Al Furat Petroleum Company, and 
Country Chairman of Shell Syria.  Between 1999 and 2003, he worked 
as Managing Director for Shell Exploration and Production in 
Thailand.  Upon appointment, Keir established his priorities as 
working closely with KazMunayGas, continuing to expand Shell's 
program of local content development and social investment, and 
moving Shell's main office from Almaty to Astana by mid 2008. 
(Interfax - Kazakhstan, January 17) 
 
Energy Statistics for 2007 
-------------------------- 
 
¶12.  According to the National Statistics Agency, in 2007, 
 
ASTANA 00000182  003.2 OF 003 
 
 
Kazakhstan produced 55.5 million tons of crude oil (2.2% more than 
in 2006) and 11.9 million tons of gas condensate (11.6% more 
year-on-year.)  Natural gas production rose 15.7% to 16.6 billion 
cubic meters.  coal production fell 1.9% to 94.4 million tons. 
Electricity production grew 6.2% to 76.15 billion kilowatt-hours. 
(Interfax - Kazakhstan, January 15) 
 
¶13. Kazakhstan produced 6,637 tons of uranium in 2007, 25.7% more 
than in 2006. In 2008, the country plans to increase its production 
to around 9,600 tons of uranium.  (Press service of Kazatomprom, 
January 15) 
 
ORDWAY