VZCZCXRO5491
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 #1251/01 2050853
ZNR UUUUU ZZH
O 240853Z JUL 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5877
INFO RUCNCIS/CIS COLLECTIVE 1790
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1157
RUEHKO/AMEMBASSY TOKYO 1859
RUEHUL/AMEMBASSY SEOUL 0818
RUCNDT/USMISSION USUN NEW YORK 2407
RUEHNO/USMISSION USNATO 2725
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1342
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 1254
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 03 ASTANA 001251 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, H 
H PLEASE PASS TO CODEL BOEHNER 
 
E.O. 12958:  DECL:  N/A 
TAGS: OREP PREL PGOV PHUM EPET KDEM KNNP KZ
SUBJECT:  KAZAKHSTAN:  SCENESETTER FOR CODEL BOEHNER'S AUGUST 8-9 
VISIT TO ASTANA 
 
¶1. (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2. (SBU) SUMMARY:  Embassy Astana warmly welcomes your August 8-9 
visit to Kazakhstan, which comes at a particularly opportune time. 
With its upcoming 2010 chairmanship of the Organization for Security 
and Cooperation in Europe (OSCE) and its thriving energy sector, 
Kazakhstan is showing increasing confidence on the international 
stage.  Kazakhstan has proven to be a reliable security partner and a 
steady influence in a turbulent region.  The pace of democratic 
reform, however, has been slow, with political institutions, civil 
society, and the independent media still underdeveloped.  Our 
fundamental strategic objective is a secure, democratic, and 
prosperous Kazakhstan that embraces market competition and the rule 
of law; continues partnering with us on the global threats of 
terrorism, WMD proliferation, and narco-trafficking; and develops its 
energy resources in a manner that bolsters global energy security. 
END SUMMARY. 
 
ECONOMY:  AGGRESSIVE STEPS TO TACKLE ECONOMIC CRISIS 
 
¶3. (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 financial crisis. 
 The international financial institutions are predicting negative 2% 
growth for Kazakhstan in 2009, with an economic recovery beginning in 
¶2010.  Astute macroeconomic policies and extensive economic reforms 
have played an important role in Kazakhstan's post-independence 
economic success.   The country has a modern banking and financial 
system, a well-endowed pension fund, and a sovereign wealth fund with 
over $20 billion in assets.  The government has taken significant 
steps to tackle the domestic reverberations of the 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. 
 
¶4. (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 
investment.  On a less promising note, the Kazakhstanis announced in 
June that they would be suspending their bilateral negotiations to 
accede to the World Trade Organization (WTO) and would instead launch 
negotiations together with Russia and Belarus to enter the WTO 
jointly as a customs union.  We have informed Kazakhstan that there 
is, in fact, no mechanism allowing a customs union to accede to the 
WTO without its member states doing so individually. 
 
AN EMERGING ENERGY POWER 
 
¶5. (SBU) 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 
ConocoPhilips -- have significant ownership stakes in each of 
Kazakhstan's three major hydrocarbon projects:  Tengiz, Kashagan, and 
Karachaganak. 
 
¶6. (SBU) Tengiz, with 50% Chevron and 25% ExxxonMobil ownership, 
increased production to 600,000 barrels per day in 2008.   Kashagan 
-- the largest oilfield discovery since Alaska's North Slope and 
among the world's most technically complex oil development projects 
-- is expected to come on-line around 2014, with production reaching 
one million barrels per day of crude by 2020.  On June 12, 
ConocoPhillips signed a contract to explore and develop the offshore 
 
ASTANA 00001251  002 OF 003 
 
 
N Block, estimated to contain 2.13 billion recoverable barrels of 
oil.  China has recently increased its investment in Kazakhstan's 
energy sector, and through the state-owned China National Petroleum 
Corporation (CNPC) now controls approximately 20% of Kazakhstan's 
total oil production. 
 
¶7. (SBU) With these crude production increases on the horizon, 
Kazakhstan must develop additional transport routes to bring its 
crude to market.  Our policy is to encourage Kazakhstan to seek 
diverse transport routes, which will ensure the country's 
independence from transport monopolists.  Currently, most of 
Kazakhstan's crude is exported via Russia, although some exports flow 
east to China, west across the Caspian through Azerbaijan, and south 
across the Caspian to Iran. 
 
¶8. (SBU) We support the expansion of the Caspian Pipeline Consortium 
(CPC) pipeline, which is the only oil pipeline crossing Russian 
territory that is not entirely owned and controlled by the Russian 
government.  We are also helping the Kazakhstanis implement the 
Kazakhstan-Caspian Transportation System (KCTS), which envisions a 
"virtual pipeline" of tankers transporting up to one million barrels 
of crude per day from Kazakhstan's Caspian coast to Baku, from where 
it will flow onward to market through Georgia, including through the 
Baku-Tbilisi-Ceyhan (BTC) pipeline.  International oil companies are 
currently in negotiations with the government of Kazakhstan to build 
the necessary onshore pipeline and offshore marine infrastructure for 
this $3 billion project.  While a trans-Caspian crude pipeline would 
likely be a cheaper long-term transport option, Kazakhstan is 
reluctant to openly pursue such a pipeline in the absence of an 
agreement on delimitation of the Caspian Sea among the five Caspian 
littoral states. 
 
DEMOCRACY:  SLOW GOING 
 
¶9. (SBU) While the Kazakhstani government articulates a strategic 
vision of democracy, it has lagged on the implementation front. 
President 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. 
 
¶10. (SBU) When Kazakhstan was selected to be 2010 OSCE 
chairman-in-office at the November 2007 Madrid OSCE Ministerial 
meeting, Foreign Minister Tazhin promised his government would amend 
Kazakhstan's election, political party, and media laws in accordance 
the recommendations of the OSCE and its Office of Democratic 
Institutions and Human Rights (ODIHR).  (NOTE:  Tazhin also promised 
that as OSCE chairman, Kazakhstan would support the OSCE's Human 
Dimension and preserve ODIHR's mandate, including its critical role 
in election observation.  END NOTE.)  President Nazarbayev signed the 
amendments into law in February.  While key civil society leaders 
were disappointed that the new legislation did not go further, we 
considered it to be a step in the right direction and continue to 
urge the government will follow through with additional reforms. 
 
¶11. (SBU) While the Kazakhstanis pride themselves on their religious 
tolerance, religious groups not traditional to Kazakhstan, such as 
evangelical Protestants, Jehovah's Witnesses, Hare Krishnas, and 
Scientologists, have faced difficulties with the authorities. 
Parliament passed legislation in late 2008 aimed at asserting more 
government control over these "non-traditional" religious groups. 
Following concerns raised by civil society and the international 
community, President Nazarbayev chose not to sign the legislation, 
but instead sent it for review to the Constitutional Council (Court) 
-- which ultimately declared it to be unconstitutional. 
 
¶12. (SBU) Though Kazakhstan's diverse print media include many 
newspapers sharply critical of the government and of President 
Nazarbayev personally, the broadcast media are essentially 
 
ASTANA 00001251  003 OF 003 
 
 
government-controlled.  On July 10, President Nazarbayev signed  into 
law Internet legislation which will provide a legal basis for the 
government to shut down and block websites whose content allegedly 
violates the country's laws.  This appears to be a step in the wrong 
direction at a time when the Kazakhstan's record on democracy and 
human rights is in the spotlight because of its impending OSCE 
chairmanship.  We have expressed our disappointment that the 
legislation was enacted, and have urged the government to implement 
it in a manner consistent with Kazakhstan's OSCE commitments on 
freedom of speech and freedom of the press. 
 
AFGHANISTAN:  POISED TO DO EVEN MORE 
 
¶13. (SBU)  Kazakhstan has provided significant support to our 
stabilization and reconstruction efforts in Afghanistan, and in 
recent months, has expressed a willingness to do even more.  We 
signed a bilateral blanket over-flight agreement with Kazakhstan in 
2001 that allows U.S. military aircraft supporting Operation Enduring 
Freedom (OEF) to transit Kazakhstani airspace cost-free.  This was 
followed in 2002 with a bilateral divert agreement that permits our 
military aircraft to make emergency landings in Kazakhstan when 
aircraft emergencies or weather conditions do not permit landing at 
Kyrgyzstan's Manas Air Base.  There have been over 6500 over-flights 
and over 60 diverts since these agreements went into effect.  In 
January, Kazakhstan agreed to participate in the Northern 
Distribution Network -- which entails commercial shipment through 
Kazakhstani territory of non-lethal supplies for U.S. troops in 
Afghanistan.  Kazakhstan is working on sending several staff officers 
to the International Security Assistance Forces (ISAF) headquarters 
in Kabul and is considering providing small-scale non-combat military 
support, as it did for five-plus years in Iraq. 
 
¶14. (SBU)  The Kazakhstani government provided just under $3 million 
in assistance to Afghanistan during 2008 for food and seed aid and to 
construct a hospital, school, and road.  The Kazakhstanis are 
finalizing a proposal to provide free university education in 
Kazakhstan to Afghan students.  The government has also offered to 
provide training to Afghan law enforcement officers at law 
enforcement training institutes in Kazakhstan.  The Kazakhstanis hope 
to make Afghanistan a focus of their 2010 OSCE chairmanship. 
 
NON-PROLIFERATION:  A HALLMARK OF BILATERAL COOPERATION 
 
¶15. (SBU)  Non-proliferation cooperation has been a hallmark of our 
bilateral relationship since Kazakhstan quickly agreed to give up the 
nuclear weapons it inherited from the USSR after becoming 
independent.  The Kazakhstanis recently ratified a seven-year 
extension to the umbrella agreement for our bilateral Cooperative 
Threat Reduction (CTR) program, which remains the dominant component 
of our assistance to Kazakhstan.  Key ongoing CTR program activities 
include our efforts to secure the radiological material at the 
Soviet-era Semipalatinsk nuclear test site and to provide long-term 
storage for the spent fuel (sufficient to fabricate 775 nuclear 
weapons) from Kazakhstan's BN-350 plutonium breeder reactor. 
 
¶16. (SBU)  The Kazakhstanis are active participants in the Global 
Initiative to Combat Nuclear Terrorism and 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.   We welcomed the offer, but 
explained to the Kazakhstanis that they need to work out the details 
directly with the IAEA.  President Nazarbayev also has called for the 
United Nations to designate August 29 as annual World 
Non-Proliferation Day, which we support. 
 
HOAGLAND