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DE RUEHTA #0198/01 0341016
ZNR UUUUU ZZH
O 031016Z FEB 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4503
INFO RUCNCIS/CIS COLLECTIVE 1123
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0520
RUEHKO/AMEMBASSY TOKYO 1226
RHEBAAA/DEPT OF ENERGY WASHDC
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RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0697
RUEKJCS/SECDEF WASHDC 0613
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 03 ASTANA 000198 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS TO USTDA (DAN STEIN) AND USTR 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON ETRD EFIN ELAB EPET AF KZ
SUBJECT:  KAZAKHSTAN:  PRIME MINISTER MASIMOV REQUESTS CLEAR MESSAGE 
THAT KAZAKHSTAN IS WELCOME IN THE WTO 
 
¶1. (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2. (SBU) SUMMARY:  Prime Minister Karim Masimov told the Ambassador 
on February 3 that he needs a clear message from the United States 
that Kazakhstan is welcome in the WTO in order to "slow down" the 
Russian-Belarus-Kazakhstan customs union and move forward first with 
Kazakhstan's WTO accession.  Masimov also: 
 
-- explained that the government's acquisition of majority stakes in 
two banks is a temporary measure and said they will ultimately be 
re-privatized; 
 
-- revealed the government has a "confidential plan" to devalue the 
tenge; 
 
-- reiterated his advice that international energy companies should 
have parliament ratify their contracts so that there is legal 
certitude the contracts are not affected by new legislation, 
including the new tax code; 
 
-- expressed doubts about the feasibility of a trans-Caspian gas 
pipeline; 
 
-- indicated that the government might consider increasing the quota 
for work permits for expatriates in 2010; 
 
-- said he had ordered Deputy Prime Minister Yerbol Orynbayev to 
move forward on the Public-Private Economic Partnership Initiative 
(PPEPI); and 
 
-- promised that he would visit Afghanistan sometime during 2009. 
END SUMMARY. 
 
NEED CLEAR MESSAGE ON WTO ACCESSION 
 
¶3. (SBU) During a February 3 meeting with the Ambassador,  Prime 
Minister Karim Masimov admitted that the proposed 
Russia-Belarus-Kazakhstan customs union could have a strong impact 
on Kazakhstan's WTO accession.  (NOTE:  As far as we understand, the 
necessary documents to form the customs union are to be finalized at 
the beginning of April.  END NOTE.)  Masimov said that originally, 
Russia and Kazakhstan had agreed that they would form the customs 
union only after both entered the WTO.  However, a current option is 
to form the customs union first, then have the customs union 
negotiate WTO accession.  This second option is not Kazakhstan's 
preference, Masimov explained.  However, to "slow down" the customs 
union and focus first on its own WTO accession, Kazakhstan needs a 
clear message from the United States, as well as from the EU, that 
it is welcome in the WTO -- something akin to the strong signal the 
United States gave to Ukraine.  Kazakhstan has not yet gotten such a 
message, he argued.  The message need not be a public one; rather, a 
private message will suffice.  Masimov noted that he is in frequent 
contact with Special Representative Richard Holbrooke, and said a 
message directly from Holbrooke to him by phone call would be 
sufficient.  The Ambassador promised to relay Masimov's request to 
Washington.  (COMMENT:  This should be seen as a question of 
sovereignty for Kazakhstan.  Masimov seemed thoroughly sincere that 
an authoritative call from the United States would be sufficient for 
him to put the brakes on the customs union locomotive speeding out 
of Moscow.  END COMMENT.) 
 
BANK TAKEOVER JUST TEMPORARY MEASURE 
 
¶4. (SBU) Referring to the government's February 2 acquisition of 
majority stakes in two major banks, BTA and Alliance, Masimov 
explained that this is only a temporary measure, and that eventually 
the government will move to re-privatize them.  He pointed out that 
economist Paul Krugman had essentially advised President Obama to 
take similar steps with U.S. banks.  Masimov noted that JP Morgan 
and Credit Suisse are advising the Kazakhstani government on bank 
restructuring issues.  He added that former National Bank Chairman 
Anvar Saidenov may be named CEO of BTA Bank.  On the issue of 
currency devaluation, Masimov said that the government has a plan to 
 
ASTANA 00000198  002 OF 003 
 
 
devalue the tenge, but it is confidential and thus he could not 
divulge dates or any other details. 
 
ADVICE TO COMPANIES TO RATIFY CONTRACTS 
 
¶5. (SBU) The Ambassador reminded Masimov that when Secretary Rice 
visited Astana on October 5, he had told her that international 
energy companies should have their contracts ratified by parliament. 
 The Ambassador asked whether this remains Masimov's view.  Masimov 
explained that he has strongly advised the CEOs of the companies to 
get their contracts ratified within the next several years, though 
has not insisted that they do so.  The choice is theirs. 
Ratification, however, is the means to provide legal certitude that 
the contracts are not affected by new legislation, including the new 
tax code.  Failure to ratify could ultimately lead to problems, 
including court rulings that undermine the legality of the 
contracts.  Masimov explained that he does not see this as an 
immediate issue, but one that could materialize within five or ten 
years.  He believes ratification should be done by 2012, before the 
next parliamentary elections, "after which, I can't guarantee you 
anything."  The Ambassador explained that the companies are 
concerned that parliament might try to change the terms of the 
contracts during the ratification process.  The companies also worry 
that propriety information and politically embarrassing contract 
details could be publicly released through ratification.  Masimov 
responded that a deal can be made in advance to ensure parliament 
does not try to change the contracts.  Regarding proprietary and 
embarrassing information, within several years, there will be 
demands made for release of all contract details in any event. 
 
DOUBTS ABOUT TRANS-CASPIAN GAS PIPELINE 
 
¶6. (SBU) Discussing progress on the Kazakhstan-Caspian 
Transportation System (KCTS) for oil, Masimov maintained that the 
political decisions had all been made.  Now it is just a matter of 
finalizing the commercial details.   He noted that the Georgian 
conflict had temporality slowed down discussions on building a 
second Baku-Tbilisi-Ceyhan (BTC) pipeline, but expected that there 
will be a renewed focus on the issue.  Masimov expressed doubts 
about the feasibility of a trans-Caspian gas pipeline to transport 
Turkmen gas to Azerbaijan.  He argued that LNG or CNG would be 
easier to do, and claimed that some private companies are interested 
in these options. 
 
MAY REVISIT WORK PERMITS ISSUE IN 2010 
 
¶7. (SBU) The Ambassador told Masimov that some of the international 
companies are concerned about Kazakhstan's stringent limit on work 
permits for expatriate personnel.  Masimov responded that this is an 
issue that the government might revisit in 2010.  However, for 2009, 
the quota has to remain limited because of political optics during 
the current economic crisis.  The government has to show the 
population that it is doing all it can to provide jobs for 
Kazakhstanis. 
 
MOVING FORWARD ON PPEPI 
 
¶8. (SBU) The Ambassador explained to Masimov that we hope to move 
forward on the Public-Private Economic Partnership Initiative 
(PPEPI), and that he and AmCham are seeking a meeting to discuss 
next steps with Deputy Prime Minister Yerbol Orynbayev.  Masimov 
said that Ornybayev should be available for such a meeting, 
stressing that he had given him clear instructions to proceed with 
PPEPI. 
 
WILL RESCHEDULE VISIT TO KABUL 
 
¶9. (SBU) The Ambassador noted that Masimov had to cancel his planned 
October 2008 trip to Kabul and asked whether he intended to 
reschedule it.  Masimov explained that the cancellation resulted 
from his need to remain in Kazakhstan to deal with the effects of 
the global financial crisis.  He assured the Ambassador that he 
would visit Afghanistan before the end of 2009, through no specific 
 
ASTANA 00000198  003 OF 003 
 
 
date has yet been set.  He also said that Kazakhstan would continue 
its assistance program for Afghanistan, but was uncertain how much 
money would be allocated for 2009.  He noted that despite 
Kazakhstan's difficult budget situation, the government has 
allocated $12 million to provide Tajikistan with fuel and grain. 
 
HOAGLAND