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DE RUEHTA #2083 2941212
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O 201212Z OCT 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3611
INFO RUCNCIS/CIS COLLECTIVE 0701
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2199
RUEHBJ/AMEMBASSY BEIJING 0102
RUEHKO/AMEMBASSY TOKYO 0812
RUEHIT/AMCONSUL ISTANBUL 0038
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/JOINT STAFF WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RHEHNSC/NSC WASHDC 0258
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/SECDEF WASHDC 0180
RUEAIIA/CIA WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RHEFAAA/DIA WASHDC
RUEHVEN/USMISSION USOSCE 1986
RUCNDT/USMISSION USUN NEW YORK 1935
RUEHNO/USMISSION USNATO 2271
RUEHBS/USEU BRUSSELS

UNCLAS ASTANA 002083 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN,EEB/ESC 
STATE PLEASE PASS TO USTDA DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV EPET EINV KZ
SUBJECT: KAZAKHSTAN:  EXXON-MOBIL PROVIDES UPDATE ON 
KASHAGAN NEGOTIATIONS 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) The Ambassador met on October 20 with Steve Rose, 
General Manager for ExxonMobil Kazakhstan and a direct 
participant in the ongoing negotiations to amend the Kashagan 
agreement.  Rose said that the Kashagan partners 
(KazMunaiGas, Eni, ExxonMobil, Shell, Total, Inpex, and 
ConocoPhillips) have reached agreement on the issue that was 
thought to be holding up the negotiations:  oil 
transportation and export.  Each company has now agreed to 
take individual responsibility for the lift, marketing, and 
sale of its own production share, rather than pooling 
transportation resources or using a joint transportation 
company.  Rose confirmed that Total and KazMunaiGas (KMG) 
have insisted on their right to sell Kashagan crude to Iran, 
although he said it was too soon to say how much.  He noted 
that ExxonMobil's legal team had reviewed existing U.S. 
legislation and sanctions against Iran and determined that 
this arrangement would not violate U.S. law. 
 
¶3.  (SBU) Rose flagged two additional issues, not mentioned 
by Maksat Idenov -- KMG First Vice President and the 
Kazakhstani government's lead negotiator on Kashagan -- 
during Idenov's October 6 meeting with Ambassador Mann (see 
septel), that remain to be resolved before the Kashagan 
agreement can be finalized:  (1) reimbursement to the 
consortium for $125-230 million in import customs duties, 
value added taxes, and penalties and fines that were paid, 
unnecessarily in ExxonMobil's view, by Kashagan 
subcontractors; and (2) the terms and conditions for a $1.78 
billion loan to KMG to cover its purchase of an additional 
8.4 percent stake in Kashagan.  According to Rose, the 
Western partners are willing to sell the shares to KMG at 
LIBOR plus 3 percent, but "we will insist on maintaining the 
flow and control of this money.  Their pledge must be rock 
solid." 
 
¶4. (SBU) Rose described Maksat Idenov as a "straight-shooter, 
very smart and savvy, with international experience as a 
Chevron Vice President in the Middle East."  Rose noted that 
Idenov strongly prefers to negotiate directly with senior 
vice presidents from the major international oil companies. 
He told the Ambassador that Idenov complained in a letter to 
the companies' CEOs when executives from ExxonMobil, Shell, 
and Total had to leave Astana earlier this month, after a 
two-week stay.  Rose said that all three executives are 
expected back in Astana on October 20 and will resume 
negotiations the following day. 
 
¶5. (SBU)  According to Rose, Idenov scheduled a meeting on 
October 20 with Prime Minister Masimov, Minister of Energy 
Mynbayev, Justice Minister Baliyeva, Supreme Court justices, 
and government prosecutors to discuss options for resolving 
the latest impasses.  Rose said that following his meeting 
with the Ambassador, he would be immediately returning to the 
negotiations, which the Kazakhstani government has said must 
be concluded by October 25. 
HOAGLAND