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O 040157Z DEC 08 ZDK
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UNCLAS SECTION 01 OF 02 ASTANA 002392 
 
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PLEASE PASS TO USTDA DAN STEIN 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN EIND ENRG EPET KTDB KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, November 9 - 
November 22, 2008 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
 
¶2.  (SBU) Summary:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
 
-- National Bank Eases Reserve Requirements 
-- Use of the National Fund Criticized 
-- New Appointments 
-- Economic Statistics 
-- First Tengiz Crude Loaded at Batumi 
-- Kazakhstan-U.S. Joint Venture in the Caspian Sea 
-- Agip KCO Accused of Labor Law Violations 
-- Imperial Energy Leaves Kazakhstan 
-- More Transparent Karachaganak Petroleum Operating Tenders 
Demanded 
-- Energy Statistics 
 
NATIONAL BANK EASES RESERVE REQUIREMENTS 
 
¶3.  As of November 18, the National Bank has decreased minimal 
reserve requirements for second-tier banks.  The reserve 
requirements for domestic liabilities have decreased from 5 to 2%, 
and for external liabilities from 7 to 3%.  According to National 
Bank estimates, this will release approximately 350 billion tenge 
(about $2.9 billion) in cash into the economy. 
 
USE OF THE NATIONAL FUND CRITICIZED 
 
¶4.  The Director of the Kazakhstan Public Policy Research Center, 
Meruert Makhmutova, believes that Kazakhstan has opened its National 
Oil Fund too early.  According to Makhmutova, if budget revenues 
continue to decrease as expected, money from the National Fund will 
likely be needed to support social programs.  (NOTE: A large portion 
of the National Fund is currently earmarked to finance the purchase 
of bank shares in the top four Kazakhstani banks.  END NOTE.)  In 
her opinion, it is inappropriate to solve banks' internal problems 
at the expense of the National Fund, and that the banks should be 
expected to manage the financial crisis themselves. 
 
NEW APPOINTMENTS 
 
¶5.  The 40-year-old former Deputy Governor of the Kostanay region in 
northwest Kazakhstan, Asylzhan Mamytbekov, has been named Chairman 
of the Managing Board of KazAgro Holding Company.  Mamytbekov 
replaced Alikhan Smailov, who was re-appointed Vice-Minister of 
Finance. 
 
ECONOMIC STATISTICS 
 
¶6.  According to the National Statistics Agency, fixed capital 
investments in Kazakhstan in January-October 2008 were estimated at 
2.96 trillion tenge (approximately $24.7 billion), marking a 7.6% 
year-on-year increase.  The oil and gas sector remained the most 
attractive in terms of investment, absorbing 22.6% of the total 
investments.  Outside of the extractive sector, there was also 
notable investment growth in the following sectors: education (80%); 
electricity, gas and water supply (52.9%); hotels and restaurants 
(57%); and utility, social and personal services (35.6%). 
 
¶7.  In January-October 2008, Kazakhstan reduced its crude steel 
output by 3.9% year-on-year to 3,814,948 tons.  The output of flat 
steel products fell 14.3% to 2,461,011 tons, including 160,127 tons 
of tin-plate (down 9.9%), and 439,972 tons of galvanized steel (down 
10.8%).  Ferroalloy production, however, rose by 2.8% to 1,454,143 
tons. 
 
FIRST TENGIZ CRUDE LOADED AT BATUMI 
 
¶8.  According to KazTransOil (KTO), on November 19, Batumi Oil 
Terminal loaded a tanker with Tengiz oil for the first time in six 
years.  This oil shipment is the first tangible result of a 
long-term agreement signed between KTO and TengizChevrOil to 
 
ASTANA 00002392  002 OF 002 
 
 
transport Tengiz crude via the Trans-Caucasian corridor. 
 
KAZAKHSTAN-U.S. JOINT VENTURE IN THE CASPIAN SEA 
 
¶9.  On November 19, TenizService, a subsidiary of KazMunaiGas, and 
U.S. company M-I SWACO, established a joint venture called Kaz M-I 
to produce synthetic, water- and oil-based drill fluids.  Kaz M-I 
will also dispose of drill-cutting waste, supply oilfield chemicals 
and additives and provide equipment for mechanical cleaning of 
wells. 
 
AGIP KCO ACCUSED OF LABOR LAW VIOLATIONS 
 
¶10.  On November 14, the Atyrau newspaper "Prikaspiiskaya Kommuna" 
published an extensive report of a meeting held by the Atyrau Oblast 
Governor to discuss the operations of Agip KCO and its subsidiaries. 
 According to the report, the regional government accused Agip KCO 
of forcing employees at its Karabatan plant to work 60 hours a week 
instead of the maximum limit of 40 hours, paying dramatically 
different salaries to local and expatriate staff, refusing to sign a 
collective bargaining agreement, terminating bonus payments to 
employees, and failing to report on the amount of local content in 
its goods and services.  Responding to some of the claims, Agip KCO 
Director General Luciano Vasques noted that even though the company 
was not obliged to pay bonuses to its employees beyond their 
negotiated wages, it would continue this practice.  He also 
mentioned that the company submits a regular report on local content 
to national labor authorities and promised to submit a similar 
report to local authorities.  Berghey Ryskaliyev, Governor of Atyrau 
Oblast, was skeptical about Agip KCO's reported local content of 34% 
in 2008. 
 
IMPERIAL ENERGY LEAVES KAZAKHSTAN 
 
¶11.  On November 19, "Neft Rossii" reported that the British 
Imperial Energy Corporation decided to focus on its oil production 
in Russia and forego its license to explore the Severniy Tourgay oil 
field in Kostanay oblast.  (NOTE:  Previous press reports indicated 
that India's Oil and Natural Gas Corporation has sought to buy 
Imperial Energy.  END NOTE.) 
 
MORE TRANSPARENT KARACHAGANAK PETROLEUM OPERATING TENDERS DEMANDED 
 
¶12.  On November 20, a group of parliamentarians in West Kazakhstan 
created a working group to ensure the transparency of tenders 
conducted by Karachaganak Petroleum Operating B.V. (KPO), so that 
local small and medium enterprises would receive access to KPO 
contracts.  They also suggested revising clauses in the KPO 
Production Sharing Agreement to increase the annual amount of KPO 
investments in the social projects of West Kazakhstan oblast. 
 
ENERGY STATISTICS 
 
¶13.  According to the National Statistics Agency, from January to 
October, Kazakhstan produced 48.6 million tons of crude oil and 
27.32 billion cubic meters of natural gas, an increase of 6% and 
11.4%, respectively, over the same period in 2007.  From January to 
September, Kazakhstan produced 79.94 million metric tons of coal, 
and exported 24.79 million, valued at $627.2 million, which 
represented a 29.8% increase in export volume, and a 65.4% increase 
in export value over the same period in 2007. 
 
MILAS 
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