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DE RUEHTA #0813/01 1271133
ZNR UUUUU ZZH
O 071133Z MAY 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5381
INFO RUCNCIS/CIS COLLECTIVE 1561
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0938
RUEHKO/AMEMBASSY TOKYO 1641
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RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1494

UNCLAS SECTION 01 OF 03 ASTANA 000813 
 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON ENRG EPET EINV KNNP KZ
SUBJECT:  KAZAKHSTAN:  VICE MINISTER OF ENERGY DISCUSSES NUCLEAR 
NON-PROLIFERATION, EITI, AND ENERGY PARTNERSHIP PRIORITIES 
 
REF:  (A) ASTANA 0734 
      (B) O'MARA-FAGIN APRIL 22 EMAIL 
      (C) STATE 07756 
      (D) STATE 28858 
 
ASTANA 00000813  001.2 OF 003 
 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On May 6, the Charge d'Affaires met with Vice 
Minister of Energy Asset Magauov to discuss the Kazakhstani 
government's financial commitments to the safe storage of spent fuel 
from the decommissioned BN-350 nuclear reactor, as well as the 
Extractive Industries Transparency Initiative (EITI), the Global 
Nuclear Energy Partnership, and the U.S.-Kazakhstan Energy 
Partnership.  During a cordial and friendly conversation, Magauov 
assured Charge and visitors from the Department of Energy's Office 
of Russian and Eurasian Affairs that the Ministry of Energy and 
Mineral Resources (MEMR) will secure $5 million this year for the 
BN-350 spent fuel program.  He also said Kazakhstan has accelerated 
reporting under the EITI and expressed confidence that the 
government will meet the March 9, 2010 deadline for validation. 
Magauov was pleased to receive an invitation to attend the next 
Infrastructure Development Working Group meeting of the Global 
Nuclear Energy Partnership.  He said Kazakhstan has valuable 
experience and expertise to share and promised that the government 
would send "an appropriately high-level representative" to the 
meeting.  The Vice Minister reiterated Kazakhstan's multi-vector 
policy on oil and gas exports, but emphasized that Kazakhstan will 
make energy transport decisions for commercial, not political, 
reasons.  He also requested that U.S. companies and U.S. government 
agencies working on nuclear safety issues brief him on their 
activities when they visit Kazakhstan.  END SUMMARY. 
 
FINDING FUNDING FOR BN-350 
 
¶3.  (SBU) Charge reviewed recent discussions about Kazakhstani 
government funding for the BN-350 Spent Fuel Disposition Program and 
gave Magauov a non-paper which stressed the importance of Kazakhstan 
meeting its funding commitments (see refs A, B, and C).  Magauov 
thanked the Charge and DOE representatives for the substantial 
technical assistance provided by the U.S. government and reiterated 
Kazakhstan's commitment to the program.  He said that MEMR's first 
request for $5 million to the Ministry of Economy and Budget 
Planning was rejected, but MEMR sent a second request on April 24, 
which Magauov said should be sufficient to secure funding. 
According to Magauov, he and Minister of Energy Sauat Mynbayev "need 
to have a long talk" with Prime Minister Karim Masimov about the 
program, because of its strategic importance to Kazakhstan and the 
significant resources that will be required to complete it.  Magauov 
estimated that the program could cost upwards of $400 million. 
 
PROGRESS TOWARD EITI VALIDATION 
 
¶4.  (SBU) Charge delivered talking points in reftel D, applauding 
Kazakhstan's progress on EITI and urging that it meet its deadline 
for EITI validation.  Magauov thanked the Charge for his support and 
praised the efforts of U.S. companies in particular to help 
Kazakhstan complete validation.  He said Kazakhstan is committed to 
the initiative, increased its budget for the program, and expects to 
complete validation by the deadline of March 9, 2010.  (NOTE:  On 
May 6, Odd Magne Instefjord, General Director of StatoilHydro 
Kazakhstan, who is on the EITI national council, told Energy Officer 
that the government has allocated $50 million in 2009 toward the 
initiative.  Also on May 6, World Bank Country Manager Sergei 
Shatalov acknowledged that the government has made excellent 
progress on EITI, but said that only 110 out of more than 300 
companies working in the extractive sector have signed up to date. 
Shatalov expressed doubt that Kazakhstan would meet the March 9, 
2010 deadline for validation, but he is confident that they will 
complete validation within two years.  END NOTE.)  Magauov said that 
the additional funding has enabled the government to accelerate its 
reporting and auditing activities and he expects the national 
 
ASTANA 00000813  002.2 OF 003 
 
 
council this year to complete audits of the 2007 and 2008 reports. 
Magauov also said there has been an "open, honest, and often heated 
debate" with the NGO community and the international oil companies 
over the most effective way to demonstrate and document transparency 
from oil revenues.  He then asked Charge if the United States had 
any plans to join EITI in the near future and said he would welcome 
an opportunity to compare notes and share lessons learned about EITI 
with colleagues in the United States. 
 
GLOBAL NUCLEAR ENERGY PARTNERSHIP 
 
¶5.  (SBU) Charge encouraged the government to become a more active 
participant in the Global Nuclear Energy Partnership (GNEP) and 
attend the next Infrastructure Development Working Group meeting 
from May 18-20, in Manchester, UK.  He also delivered a non-paper on 
this subject.  Magauov appeared delighted to receive the invitation 
and said, "We will definitely send someone at the appropriate 
level."  He told the Charge and the DOE representatives that 
Kazakhstan has much to offer in such a forum, including technical 
expertise and experienced personnel. 
 
MULTI-VECTOR OIL AND GAS EXPORTS 
 
¶6.  (SBU) When asked about Kazakhstan's plans to develop alternative 
export routes for its oil and gas resources, Magauov said that, 
historically, all of Kazakhstan's hydrocarbons were exported via 
Russia.  "While our relations with Russia are excellent and the 
majority of our oil will still go through Russia," he said, "we need 
alternative options to accommodate increased production."  He then 
listed several of the transportation projects currently under 
development, including the oil and gas pipelines to China, which he 
expects to be completed this year, the Eskene-Kuryk pipeline that is 
a central feature of the Kazakhstan Caspian Transportation System 
(KCTS), and the Caspian littoral (Prikaspiskiy) gas pipeline, which 
he said will initially have a design capacity of 20 billion cubic 
meters (bcm), but will likely be expanded to 40 bcm.  On KCTS, 
Magauov said Kazakhstan is wary of "unexpected requests" from 
Azerbaijan, such as tariffs, fees, or taxes, that could be assessed 
even after negotiations are complete.  "If that happens," he said, 
"we might come to the realization that sending our oil to Russia is 
actually a better deal."  Ultimately, however, Magauov insisted that 
Kazakhstan will base its oil export decisions on commercial, not 
political, factors. 
When asked about Kazakhstan's dealings with Iran, Magauov said he 
did not know of any major joint projects with Iran, other than the 
fact that private oil traders were conducting "some oil swaps" with 
Neka. 
 
A PLEA FOR MORE LOCAL CONTENT 
 
¶7.  (SBU) Magauov said he was relieved that the negotiations over 
Kashagan were complete and that work has continued to develop the 
field despite its enormous complexity and technical challenges.  He 
appealed for U.S. companies to invest in the local economy and 
increase local content, particularly when hiring workers for less 
skilled positions.  Magauov acknowledged that Kazakhstan lacks a 
sufficient number of skilled technicians in the oil and gas sector, 
and said that Kazakhstan's technical colleges are not prestigious, 
do not attract the best and brightest students, and graduates often 
have difficulty finding jobs. 
 
EAGER FOR ENERGY PARTNERSHIP 
 
¶8.  (SBU) Magauov expressed interest in reviving the U.S.-Kazakhstan 
Energy Partnership and asked for a little time to discuss the issue 
internally before presenting DOE a list of Kazakhstan's priorities 
for the Partnership.  He did mention, however, his interest in 
infrastructure, oil exports, and uranium mining.  When asked about 
renewable energy, Magauov said that the issue is actively discussed 
at the Ministry and that a new department was recently established 
to direct the government's policies and programs on renewable 
energy.  He then asked, rhetorically, how committed Western 
 
ASTANA 00000813  003.2 OF 003 
 
 
countries are to renewable energy sources, particularly if they are 
not economical or consume more energy than they generate.  For 
example, Magauov said, consumers in Kazakhstan have a choice:  they 
can purchase electricity from the coal-fired power plant at 
Ekibastuz for $0.03/kilowatt hour (kwh) or they can buy it from the 
wind farm at Zhengarsky for $0.07/kwh.  Magauov was nevertheless 
very receptive to a proposal from DOE to conduct a survey of 
Kazakhstan's renewable energy potential and welcomed additional 
information and resources in this regard.  Finally, the Vice 
Minister stated -- politely but firmly -- that U.S. companies and 
U.S. government agencies working on nuclear safety issues should 
brief him when they visit Kazakhstan.  He reminded the Charge and 
DOE that he is responsible for nuclear power and nuclear 
non-proliferation issues at the Ministry of Energy and said it is 
important for him to be informed about U.S. activities in these 
areas. 
 
MILAS