VZCZCXRO4947
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
RUEHKW RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW
RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHTA #1103/01 1831133
ZNR UUUUU ZZH
O 021133Z JUL 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5702
INFO RUCNCIS/CIS COLLECTIVE 1705
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1072
RUEHKO/AMEMBASSY TOKYO 1774
RUEHUL/AMEMBASSY SEOUL 0740
RUCNDT/USMISSION USUN NEW YORK 2353
RUEHNO/USMISSION USNATO 2671
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1256
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 1173
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 04 ASTANA 001103 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  DECL:  N/A 
TAGS: PREL PGOV PHUM ECON EPET KNNP AF RS KZ
SUBJECT:  KAZAKHSTAN:  SCENESETTER FOR UNDER SECRETARY BURNS'S JULY 
9-10 VISIT TO ASTANA 
 
¶1. (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2. (SBU) SUMMARY:  Your visit to Astana is a key opportunity for 
engagement with the leadership of our most important partner in 
Central Asia.  We have a robust bilateral relationship, with close 
cooperation on such critical issues as Afghan stabilization and 
reconstruction, nuclear non-proliferation, and developing 
Kazakhstan's vast energy resources to support global energy security. 
 With its upcoming 2010 OSCE chairmanship, Kazakhstan is poised for 
its most important international leadership role to date.  The 
Kazakhstanis will be particularly interested in getting a briefing on 
the Obama-Medvedev summit and on the status of the U.S.-Russia 
relationship -- which has a direct impact on Kazakhstan.  You should 
press the Kazakhstanis to take additional concrete steps to support 
Afghanistan.  You will want to get the Kazakhstanis' take on European 
security architecture, discuss their priorities for their OSCE 
chairmanship, and remind them that the chairmanship will place their 
country's record on democracy and human rights under additional 
scrutiny.  You should also reiterate our commitment to Kazakhstan's 
WTO accession.  END SUMMARY. 
 
FURTHER STRENGTHENING BILATERAL RELATIONS 
 
¶3. (SBU) The Kazakhstani leadership sees the new Obama administration 
as an opportunity to further strengthen bilateral relations. 
President Nazarbayev welcomed then President-elect Obama's early 
phone call last November, and subsequently invited him to visit 
Astana -- an invitation passed directly to POTUS by Senate Chairman 
Kasym-Zhomart Tokayev at an Alliance of Civilizations reception in 
Istanbul on April 7.  Nazarbayev very much appreciated the 
Administration's invitation to attend the 2010 global summit on 
nuclear security.  The Kazakhstanis recently requested that we 
establish a formal structure for high-level oversight of bilateral 
relations, like the Gore-Nazarbayev Commission under President 
Clinton. 
 
¶4. (SBU) Nazarbayev carefully balances Kazakhstan's relations with 
Russia, China, the United States, and the EU -- what he terms a 
"multi-vector" foreign policy.  The Kazakhstanis consider Russia 
their most important international partner, and Russia's influence is 
unequalled in Kazakhstan due to long historical and economic ties, 
Kazakhstan's large ethnic Russian population, and the predominance 
here of the Russian language.  Kazakhstan's close relationship with 
the United States serves as an essential counterweight -- reinforcing 
the country's sovereignty and independence and helping it to stave 
off excessive pressures from both its giant neighbors, i.e., China as 
well as Russia.  For the Kazakhstanis, high-level interactions with 
the United States, such as your visit, are thus important not only 
for their substance, but also for their symbolism -- sending a signal 
to Moscow that we remain closely engaged with them. 
 
AFGHANISTAN:  POISED TO DO EVEN MORE 
 
¶5. (SBU) The Kazakhstanis view insecurity in Afghanistan as a direct 
threat to Kazakhstan, through northward flow of Islamic militants and 
narcotics.  They have expressed concern about Karzai's Taliban 
reconciliation efforts.  They understand why the Afghan government 
wants to co-opt some moderate Taliban factions, but believe that 
there are practical and political limits on dialogue and compromise 
and consider any negotiations with the Taliban's core leadership to 
be a dangerous idea. 
 
¶6. (SBU) Kazakhstan has provided critical support for Afghan 
stabilization and reconstruction.  The details are discussed in the 
issue paper on Afghanistan prepared for your visit, but of most 
important note, the Kazakhstanis are participating in the Northern 
Distribution Network, and we have bilateral agreements from 2001 and 
2002 that allow U.S. military aircraft supporting Operation Enduring 
Freedom to transit Kazakhstani air space cost-free and to make 
emergency landings in Kazakhstan when conditions do not permit 
landing at Kyrgyzstan's Manas Air Base.  The Kazakhstanis have 
expressed an interest in doing even more, including sending staff 
officers to ISAF headquarters and perhaps deploying a military 
 
ASTANA 00001103  002 OF 004 
 
 
medical unit or military engineering team to Afghanistan.  They are 
currently developing a program to provide free university education 
in Kazakhstan to Afghan students. 
 
DEMOCRACY:  SLOW GOING 
 
¶7. (SBU) While the Kazakhstani government articulates a strategic 
vision of democracy, it has lagged on the implementation front.  The 
leadership remains resistant to competitive political processes -- 
and the situation is complicated by the fact that Nazarbayev is 
extraordinarily popular (with approval ratings in the 80-90 percent 
range in our own polling), while the opposition is weak, fractured, 
and comprised mostly of ex-Nazarbayev loyalists who fell out of favor 
with him.  Nazarbayev's Nur Otan party officially received 88% of the 
vote and won all the parliamentary seats in August 2007 elections 
which OSCE observers concluded did not meet OSCE standards.   The 
next elections, both parliamentary and presidential, are scheduled 
for 2012. 
 
¶8. (SBU) On a positive note, Nazarbayev has taken steps that could 
facilitate a transition to a more democratic system over the long 
run.  His Bolashak program provides scholarships annually for several 
thousand Kazakhstanis to receive higher education abroad, mostly in 
the West, where they absorb Western ideas and values.  He has also 
brought into government a new generation of young, ambitious 
bureaucrats -- many of whom studied in the West through Bolashak or 
our own programs. 
 
RAKHAT ALIYEV:  A MAJOR PREOCCUPATION 
 
¶9. (SBU) Nazarbayev's former son-in-law Rakhat Aliyev, who is living 
in exile in Europe, remains a major preoccupation for the government. 
 In late 2007, Aliyev began publicly releasing secretly-made 
recordings of embarrassing conversations among senior government 
officials, including some involving Nazarbayev himself. In two 2008 
trials, Aliyev was convicted in absentia of several serious offenses, 
including plotting a coup and ordering the murder of two bankers who 
disappeared without a trace.  He was sentenced to 20 years in prison 
and his assets were confiscated.  A German publishing house just 
published Aliyev's tell-all book entitled "Godfather-in-Law;" the 
Kazakhstanis have banned its distribution here.  From exile, Aliyev 
has tried to remake his image into one of a persecuted democratic 
reformer, while also dropping false hints that he is cooperating with 
and under the protection of the U.S. government -- a claim that many 
senior Kazakhstani officials seem to believe, despite our strongest 
denials.   We have made clear to the government that we have no ties 
whatsoever to Aliyev. 
 
ECONOMY:  AGGRESSIVE STEPS TO TACKLE ECONOMIC CRISIS 
 
¶10. (SBU) Kazakhstan is Central Asia's economic powerhouse, with a 
GDP larger than that of the region's other four countries combined. 
Economic growth averaged over 9% per year during 2005-07, before 
dropping to 3% in 2008 with the onset of the global economic crisis. 
The international financial institutions are predicting negative 2% 
growth for Kazakhstan in 2009, with an economic recovery beginning in 
¶2010.   While the country's economic success is partly due to its 
fortuitous natural resource deposits, astute macroeconomic policies 
and extensive economic reforms have also played an important role. 
Kazakhstan has a modern banking and financial system, a well-endowed 
pension fund, and a transparent sovereign wealth fund with 
approximately $20 billion in assets.  The government has taken 
aggressive steps to tackle the domestic reverberations of the global 
financial and economic crisis, allocating around $20 billion to take 
equity stakes in private banks, prop up the construction and real 
estate sectors, and support small- and medium-sized enterprises and 
agriculture.  A government takeover of the country's largest bank -- 
Bank Turam Alem (BTA) -- raised concerns because the authorities 
ousted BTA's chairman, Mukhtar Ablyazov, a leading financier of 
Kazakhstan's political opposition.  While Ablyazov, who is 
purportedly in self-imposed exile in Britain, argues that the 
takeover was politically motivated, reliable sources in the 
international community, including the EBRD, believe that he may have 
 
ASTANA 00001103  003 OF 004 
 
 
looted BTA of several billion dollars. 
 
¶11. (SBU) Kazakhstan's long-run economic challenge is to diversify 
its economy away from reliance on the energy sector.   In 2008, we 
launched a bilateral Private-Private Economic Partnership Initiative 
(PPEPI), which is bringing together the U.S. and Kazakhstani public 
and private sectors to make policy recommendations on improving the 
country's business climate and reducing other barriers to non-energy 
investments. 
 
SUSPENSION OF WTO NEGOTIATIONS 
 
¶12. (SBU) In June, Kazakhstan, Russia, and Belarus announced that 
they would be suspending their individual negotiations to accede to 
the World Trade Organization (WTO) and would instead launch joint 
negotiations in order to enter the WTO together as a customs union. 
This appears to have been a close-hold decision made at the highest 
political levels of the three governments, without consultation with 
technical experts.  We had ample warning over the past year that the 
Kazakhstanis were weighing the relative economic benefits of WTO 
accession and the customs union, and increasingly felt that the 
United States and European Union were not translating support for 
their accession at the political level into concrete results in the 
accession negotiations taking place at the technocratic level.  Since 
there does not appear to be a mechanism allowing a customs union to 
accede to the WTO without its member states doing so individually, we 
should reiterate our support for Kazakhstan's WTO accession and 
encourage them to continue their individual accession negotiations. 
 
ENERGY:  DIVERSIFYING TRANSPORT ROUTES 
 
¶13. (SBU) U.S. and Kazakhstani strategic interests are largely 
aligned on the development of Kazakhstan's vast energy resources. 
Both sides agree that U.S. and Western companies must continue 
playing a lead role in Kazakhstan's energy exploration and production 
projects and that diversifying transport routes will bolster 
Kazakhstan's sovereignty and enable it to capture the maximum 
benefits of its energy wealth.  Kazakhstan produced 70.7 million tons 
of oil in 2008 (approximately 1.41 million barrels per day), and is 
expected to become one of the world's top ten crude exporters soon 
after 2015.  While the country also has significant gas reserves (1.5 
trillion cubic meters is a low-end estimate), current gas exports are 
very limited for now, in part because gas is being reinjected to 
maximize crude output.  U.S. companies -- ExxonMobil, Chevron, and 
ConocoPhillips -- have significant ownership stakes in Kazakhstan's 
three major hydrocarbon projects, including Kashagan, the world's 
largest oil field discovery since Alaska's North Slope. 
 
¶14. (SBU) With major crude production increases on the horizon, 
Kazakhstan must develop additional transport routes to bring its 
crude to market.  Currently, most of Kazakhstan's crude is exported 
via Russia, though some exports flow east to China, west across the 
Caspian through Azerbaijan, and south across the Caspian to Iran.  We 
are focused on helping the Kazakhstanis implement the 
Kazakhstan-Caspian Transportation System (KCTS), which envisions a 
"virtual pipeline" of tankers transporting large volumes of crude 
from Kazakhstan Caspian coast to Baku, from where it will flow onward 
to market through Georgia, including through the Baku-Tbilisi-Ceyhan 
(BTC) pipeline.  While a trans-Caspian crude pipeline would likely be 
a cheaper long-term transport option, Kazakhstan is reluctant to 
openly pursue this option in the absence of an agreement on 
delimitation of the Caspian Sea among the five Caspian littoral 
states. 
 
NON-PROLIFERATION:  HALLMARK OF BILATERAL COOPERATION 
 
¶15. (SBU) Non-proliferation cooperation has been a hallmark of our 
bilateral relationship since Kazakhstan became independent and agreed 
to give up the nuclear arsenal it inherited from the USSR.  The 
Nunn-Lugar Cooperative Threat Reduction (CTR) program remains the 
dominant component of our assistance to Kazakhstan.  Key ongoing CTR 
activities include our efforts to secure the radiological material at 
the Soviet-era Semipalatinsk nuclear test site and to provide 
 
ASTANA 00001103  004 OF 004 
 
 
long-term storage for the spent fuel from Kazakhstan's plutonium 
breeder reactor. The Kazakhstanis are seeking additional ways to 
burnish their non-proliferation credentials.  On April 6, President 
Nazarbayev announced publicly that Kazakhstan is interested in 
hosting the Nuclear Threat Initiative's IAEA-administered 
international nuclear fuel bank.  The Kazakhstanis are also 
considering running for a seat on the IAEA Board of Governors, and 
continue to press us to support their joining the Missile Technology 
Control Regime (MTCR).  At a June 18 ceremony marking the 20th 
anniversary of the last nuclear test at Semipalatinsk, Nazarbayev 
proposed a new non-proliferation treaty to strengthen the global 
non-proliferation regime; expressed support for President Obama's 
statements in Prague about moving toward a world without nuclear 
weapons; and called on the UN to establish a "world non-proliferation 
day." 
 
HOAGLAND