VZCZCXRO5427
RR RUEHLN RUEHVK RUEHYG
DE RUEHTA #2283/01 3250810
ZNR UUUUU ZZH
R 200810Z NOV 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 3874
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0823
RUEHAK/AMEMBASSY ANKARA 2209
RUEHBUL/AMEMBASSY KABUL 0423
RUEHNE/AMEMBASSY NEW DELHI 0521
RUEHAST/USOFFICE ALMATY 0931

UNCLAS SECTION 01 OF 03 ASTANA 002283 
 
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, October 26 - 
November 8, 2008 
 
ASTANA 00002283  001.2 OF 003 
 
 
¶1.  Summary:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
 
-- State to Purchase Shares of Top Banks 
-- ArcelorMittal-Temirtau: Mandatory Leave Rescinded 
-- Will Democrats Grant Rapid Accession to the WTO? 
-- New Flight From Almaty to Bishkek 
-- Kazakhstani Business Association Writes to Michael Jackson 
-- Economic Statistics 
-- Energy Ministry Suggests Crude Export Duty Revision 
-- Tengiz Crude Pumped Through Baku-Tbilisi-Ceyhan 
-- KazMunayGas Still Interested in Buying Oil Fields in Russia 
-- China's Interest in MangistauMunayGas 
-- Kazakhmys Calls On Government To Buy Ekibastuz GRES-1 
-- Kazatomprom News 
-- Gazprom to Open An Office in Kazakhstan 
-- New President of KEGOC Appointed 
 
STATE TO PURCHASE SHARES OF TOP BANKS 
 
¶2.  The Government of Kazakhstan has made offers to the four largest 
Kazakhstani banks - Alliance Bank, Bank Turan Alem (BTA), Halyk 
Bank, and KazKommertsBank - to inject additional capital into their 
reserves as a result of the continuing global financial crisis. 
According to the Prime Minister, the total injection will amount to 
no more than $5 billion, and following the issuance of additional 
common and preferred shares, the Kazakhstani Government as 
represented by the Sovereign Wealth Fund "Samruk-Kazyna" will own 
25% of each of these four banks.  Masimov emphasized that the 
government does not plan to be a long-term stockholder and 
anticipates selling its shares of the banks' capital within the next 
3-5 years. 
 
ARCELORMITTAL-TEMIRTAU: MANDATORY LEAVE RESCINDED 
 
¶3.  ArcelorMittal-Temirtau signed a Memorandum of Mutual Cooperation 
with the Ministry of Industry and Trade, the Akimat (local 
government) of the Karaganda region, and the Sovereign Wealth Fund 
"Samruk-Kazyna" which allows the company to find jobs for the 4200 
employees who were sent on mandatory leave in September.  According 
to the memorandum, the entire group will return to work starting 
November 1, 2008 as part of the new conglomerate's plans to produce 
5,500-6,000 tons of iron per day, as well as approximately 900,000 
tons of coal monthly.  Several additional projects are scheduled to 
begin immediately, including reconstruction of the gas treatment 
system for the oxygen-converter plant, as well as reconstruction and 
modernization of several heating power plants. 
 
WILL DEMOCRATS GRANT RAPID ACCESSION TO THE WTO? 
 
¶4.  Local Kazakhstani newspaper Liter speculates that Astana is 
expecting serious changes from the newly-elected Obama 
administration, especially with regard to Kazakhstan's accession to 
the World Trade Organization (WTO).  According to Liter, the WTO 
negotiation process will advance beyond the current "dead point," 
thanks to the new Democratic leadership, which the paper speculates 
willhave a more flexible approach to negotiations. 
 
NEW FLIGHT FROM ALMATY TO BISHKEK 
 
¶5.  Air Astana has launched a new flight from Almaty to Bishkek. 
Roundtrip flights will be flown four times a week (on Mondays, 
Wednesdays, Thursdays and Sundays) and prices for the 55-minute 
flight will vary from 14,600 KZT (approximately $121.60) for a 
one-way ticket to 25,400 KZT (about $211.60) for a roundtrip fare. 
 
 
KAZAKHSTANI BUSINESS ASSOCIATION WRITES TO MICHAEL JACKSON 
 
¶6.  President of the Karaganda-based Central Kazakhstan Association 
of Entrepreneurs Talgat Doskenov wrote a letter to singer Michael 
Jackson, inquiring about the possible receipt of royalty payments 
from the Kazakhstani Ministry of Justice (MOJ).  According to 
Doskenov's organization, representatives of the MOJ regularly 
collect money from local businessmen who publicly play Jackson's 
 
ASTANA 00002283  002.2 OF 003 
 
 
songs in cafes and restaurants in a reported attempt to enforce 
intellectual property rights.  Doskenov believes that neither 
Jackson, nor his representatives ever receive these royalties from 
Kazakhstani officials.  He concludes in his letter that the official 
protection of intellectual is a good thing, but that in this case, 
it has became "absurd". 
 
ECONOMIC STATISTICS 
 
¶7.  According to the Kazakhstan Statistic Agency, the inflation rate 
was 13.9% year-on-year in October.  Food prices contributed the most 
to this growth, with a 16.9% year-on-year rate.  Service prices grew 
13.5%, and non-food goods increased by 9.7% year-on-year only.  The 
inflation rate for the period from December 2007 to October 2008 was 
8.8%.  According to experts at the Statistics Agency, inflation 
rates may be between 11% and 12% by the end of this year. 
 
¶8.  As of October 31, the total international reserves of the 
country (in current prices), including the $26.3 billion National 
Fund, was $47.35 billion, marking a 4.4% decrease over the previous 
month. 
 
KAZMUNAYGAS STILL INTERESTED IN BUYING OIL FIELDS IN RUSSIA 
 
¶9.  According to Dastan Abdulgafarov, business development manager 
of KazMunayGas Exploration and Production, the company plans to 
resume negotiations with TNK-BP to buy oil fields in Orenburg, 
Nizhnevartovsk, and Uvatsk regions of Russia.  (NOTE:  KazMunayGas 
owns 42% of the Pavlodar Petrochemical Plant, but seeks to buy the 
remaining 58%.  The plant is specifically designed to process crude 
from Russia.  END NOTE.) 
 
CHINA'S INTEREST IN MANGISTAYMUNAYGAS 
 
¶10.  On November 3, Megapolis published an interview with Mukhtar 
Umbetov, a leader of the "Aktau" trade union in Mangistau oblast, 
about the acquisition of MangistauMunayGaz (MMG) by national oil and 
gas company KazMunayGaz (KMG).  Umbetov believes that the 
transaction has been delayed in order to increase the price for a 
51% stake in MMG from $2.0-2.5 billion to $4.5-5.0 billion, so that 
the "latent" owners of MMG (allegedly, high-placed Kazakhstani 
officials) would get more money from the sale.  He also alleged that 
the funds for the purchase would come from a $5 billion transfer 
from the National Fund as a part of a $15-billion bailout plan of 
the Kazakhstani President.  Umbetov speculated that the remaining 
49% would be sold to a Chinese company. 
 
KAZAKHMYS CALLS ON GOVERNMENT TO BUY EKIBASTUZ GRES-1 
 
¶11.  According to the November 6 issue of "Capital" business weekly, 
Kazakhstan's biggest copper producer Kazakhmys called on the 
national power company Samruk-Energo to expedite the acquisition of 
its hydropower distributing plant Ekibastuz GRES-1 and the Maikuben 
West open coal mine.  Kazakhmys claims it has no funds to repay a 
loan to finance a $1.5-billion purchase of these assets from AES 
Corporation in March.  In October, Samruk-Energo and Kazakhmys 
signed a memorandum for conducting an audit of these assets within 
six months in order to complete the acquisition within one year. 
KAZATOMPROM NEWS 
 
¶12.  At a November 6 press conference, the president of Kazakhstan's 
national nuclear company Kazatomprom (KAP) Mukhtar Dzhakishev 
announced plans to help China's Guandong Nuclear Power Group and 
China's National Nuclear Corporation to build nuclear power plants 
in China.  He also noted that KAP might borrow up to $1.5 billion 
for these projects from its parent company, the Samruk-Kazyna 
National Welfare Fund.  According to Dzhakishev, KAP has lowered its 
projected output for uranium production from 9,000 to 8,700 tons in 
2008 and from 12,000 tons to 11,000 tons in 2009. 
 
GAZPROM TO OPEN AN OFFICE IN KAZAKHSTAN 
 
¶13.  The Board of Directors of Russia's Gazprom voted to open a 
representative office in Kazakhstan.  (NOTE:  In August, Gazprom 
announced plans to purchase gas stations in Kazakhstan to supply its 
 
ASTANA 00002283  003.2 OF 003 
 
 
petroleum products.  Gazprom also expressed interest in buying a 49% 
stake in MangistauMunayGaz, but was turned down by KazMunayGas.  END 
NOTE.) 
 
NEW PRESIDENT OF KEGOC APPOINTED 
 
¶14.  The "Interfax" wire service reported on October 28 that the 
ex-chair of the managing board of State Asset Holding Company 
"Samruk" Kanat Bozumbayev was named president of the Kazakhstan 
Electricity Grid Operating Company (KEGOC).  (NOTE:  Bozumbayev was 
previously president of KEGOC from May 2001 to August 2007.  END 
NOTE). 
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