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DE RUEHTA #2470/01 3531626
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O 181626Z DEC 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4108
INFO RUCNCIS/CIS COLLECTIVE 0931
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UNCLAS SECTION 01 OF 02 ASTANA 002470 
 
SIPDIS 
 
DEPT FOR SCA/CEN, EEB 
DEPT PLEASE PASS TO USTDA DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN EIND ENRG EPET KTDB KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, NOVEMBER 23 - 
DECEMBER 6 
 
ASTANA 00002470  001.2 OF 002 
 
 
¶1.  SUMMARY:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
 
-- New Budget Code Signed by President 
-- Regional Trade News 
--   ArcelorMittal Guarantees Employment to Share Purchasers 
--   Renaissance Capital Advisor for Distressed Assets Fund 
--   Economic Statistics 
-- Kazakhstan to Strengthen Local Content Requirements 
-- Feasibility Study for Aktau Nuclear Power Plant 
-- British Gas and KazMunayGas Agree to Explore Hydrocarbons 
-- Embezzlement Charges Against Serik Burkitbayev 
 
NEW BUDGET LAW SIGNED BY PRESIDENT 
 
¶2.  On December 4, President Nazarbayev signed into law new 
legislation on government budgeting.  According to the presidential 
press service, the new law will introduce results-oriented methods 
for budget planning, implement a three-year budgeting process, and 
reinforce control over budget spending, especially in quasi-public 
institutions. 
 
REGIONAL TRADE NEWS 
 
¶3.  President Nazarbayev announced his support for Uzbek President 
Karimov's proposal to create a bilateral free-trade zone.  While 
receiving credentials from new Uzbek Ambassador Farukh Tursunov, 
President Nazarbayev said that Kazakhstan "has always welcomed the 
economic integration of the region."  He added that Kazakhstan and 
Uzbekistan "must continue to enhance the potential of mutually 
beneficial cooperation for the sake of Central Asian security and 
stability and further development of economic, cultural and 
humanitarian cooperation between our countries."  Kazakhstani-Uzbek 
bilateral trade doubled to more than $1.4 billion in 2007. 
 
¶4.  According to Afghan TV channel Ariana, the Afghan Ministry of 
Commerce is allocating $50 million for the purchase of 200,000 tons 
of wheat from Kazakhstan.  Afghanistan reportedly needs 1 million 
tons of wheat this year and only 30% of this total has been provided 
to date by aid agencies and the private sector. 
 
ARCELORMITTAL GUARANTEES EMPLOYMENT TO SHARE PURCHASERS 
 
¶5.  Employees of ArcelorMittal Temirtau were given a ten-day 
opportunity to buy shares in the enterprise as part of a management 
effort to promote corporate solidarity.  Shares were offered for 
2,280.50 tenge (about $19) each and employees could buy a maximum of 
200 shares.  According to the shareholder agreement, taxes must then 
be paid in both Kazakhstan and Luxemburg, and shares cannot be sold 
or earn dividends for the next three years.  However, in return for 
their share purchases, employee shareholders are guaranteed 
employment for the next three years.  Of the 45,000 Kazakhstani 
employees at ArcelorMittal facilities, only 150 became shareholders 
in this campaign, which was apparently received poorly.  (NOTE: 
ArcelorMittal recently laid off several thousand workers, citing 
reduced global demand for steel.  END NOTE.) 
 
RENAISSANCE CAPITAL NAMED ADVISOR FOR DISTRESSED ASSETS FUND 
 
¶6.  The Government of Kazakhstan named Russian investment bank 
Renaissance Capital to be advisor for the creation of a new 
distressed assets fund.  Renaissance Capital will work with the 
Samruk-Kazyna National Welfare Fund, which has been charged with 
implementing Kazakhstan's financial crisis rescue package.  One of 
Russia's biggest domestic investment banks, Renaissance Capital has 
been heavily impacted by the financial crisis and recently sold a 
50% ownership stake to metal and banking tycoon Mikhail Prokhorov. 
 
ECONOMIC STATISTICS 
 
¶7.  According to National Bank Chairman Anvar Saidenov, Kazakhstan's 
current account has a balance of payments surplus in excess of $9 
billion for the period January to September 2008.  This is partially 
 
ASTANA 00002470  002.2 OF 002 
 
 
due to a 66% growth in exports to $57 billion, and just an 18% 
increase in imports to $29 billion, resulting in a $28 billion trade 
balance surplus during that time period.  Saidenov said that the 
National Bank expects a current account surplus of $7-8 billion for 
all of 2008. 
 
¶8.  According to the National Statistics Agency, inflation in 
November was 11.3% year-on-year, and monthly inflation was 0.4%. 
Food prices increased 13.3% year-on-year, while prices on services 
and non-food products increased by 12.6% and 7%. 
 
KAZAKHSTAN TO STRENGTHEN LOCAL CONTENT REQUIREMENTS 
 
¶9.  During the 20th meeting of the Foreign Investors Council in 
Almaty on December 5, Kazakhstan's President Nursultan Nazarbayev 
called on the government and the Samruk-Kazyna National Welfare Fund 
to sign agreements within three months with subsoil users on local 
content requirements.  According to press reports, the President 
said that only 135 of 575 registered companies monitor local 
content, and high-profile subsoil users Tengizchevroil, Agip KCO, 
and Karachaganak Petroleum Operating Company were not among them. 
(COMMENT:  Each of these three international consortia keeps careful 
records on the number and percentage of Kazakhstani employees, as 
well as the value of contracts and subcontracts to Kazakhstani 
companies.  It is not clear why they did not appear on the register 
of companies that monitor local content.  END COMMENT).  On a 
positive note, BG Group was named "Best Investor of the Year." 
 
FEASIBILITY STUDY FOR AKTAU NUCLEAR POWER PLANT 
 
¶10.  The Interfax wire service reported on November 26 that by the 
end of 2008, Russia's Afrikantov Research and Development Bureau 
would complete a feasibility study for construction of a nuclear 
power plant in the vicinity of the decommissioned BN-350 plutonium 
fast-breeder reactor in Aktau, West Kazakhstan oblast. 
 
BRITISH GAS AND KAZMUNAYGAS AGREE TO EXPLORE HYDROCARBONS 
 
¶11.  On December 5, BG Group and KazMunaiGas signed a cooperation 
agreement to carry out a gas exploration and hydrocarbon reserves 
study. 
 
EMBEZZLEMENT CHARGES AGAINST SERIK BURKITBAYEV 
 
¶12.  Kazakhstan's financial police brought charges against former 
KazMunaiGas (KMG) President Serik Burkitbayev for embezzling 2.4 
billion tenge (approximately $20 million) from the Kazakhstan Oil 
and Gas Institute, a KMG subsidiary he had previously headed.  The 
top management of the institute allegedly paid five research 
institutes for fictitious engineering services. 
 
HOAGLAND