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DE RUEHTA #1355/01 2180725
ZNR UUUUU ZZH
O 060725Z AUG 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5974
INFO RUCNCIS/CIS COLLECTIVE 1821
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RHEFAAA/DIA WASHDC
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RUEKJCS/SECDEF WASHDC 1282
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RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1772

UNCLAS SECTION 01 OF 03 ASTANA 001355 
 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EPET ENRG EINV EFIN ELAB KZ
SUBJECT:  KAZAKHSTAN:  ECONOMIC AND ENERGY UPDATE, JULY 19-AUGUST 1 
 
ASTANA 00001355  001.2 OF 003 
 
¶1.  SUMMARY:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
-- Refinancing Rate is Reduced Again 
-- Amendments to Currency Control and Currency Regulation Law 
Approved 
-- National Bank's Comments on New Currency Law 
-- Banking Sector Updates 
-- Wheat Harvest Forecast 
-- Air Traffic Control System Improved 
-- Business Results of KMG 
-- KMG Becomes Sole Stockholder of KazMorTransFlot 
-- Did Dutbayev Accomplish His Mission? 
 
REFINANCING RATE IS REDUCED AGAIN 
 
¶2.  Starting July 10, the National Bank of Kazakhstan lowered the 
refinancing rate from 8.5 percent to 8 percent.  According to a 
National Bank statement, this decision was driven by current trends 
in the financial market and the lower inflation rate.  This is the 
second refinancing rate reduction in three months.  The National 
Bank reported that the lower refinancing rate would help support and 
stabilize the domestic banking sector. 
 
AMENDMENTS TO CURRENCY CONTROL AND CURRENCY REGULATION 
LAW APPROVED 
 
¶3.  Kazakhstan's Law on Currency Regulation and Currency Control was 
amended and approved by President Nazarbayev on July 4.  Among other 
provisions, the new law:  softens currency regulation regimes; 
raises from $10,000 to $50,000 the ceiling on so-called transaction 
passports for export-import operations; removes notification 
requirements for opening accounts in foreign banks; and exempts 
duty-free trade from mandatory licensing.  Additionally, the law 
broadens the spectrum of special currency regime measures that could 
be introduced should there be any "threat to the economic security 
of Kazakhstan and to the stability of its financial system."  Among 
other amendments, the National Bank is now allowed to set the spread 
between selling and buying currency at exchange points. 
 
NATIONAL BANK'S COMMENTS ON NEW CURRENCY LAW 
 
¶4.  In a July 28 interview with the "Kazakhstanskaya Pravda" 
newspaper, the National Bank's deputy governor, Daniyar Akishev, 
said that the spread for currency exchange will presumably be 
applied to the most widely used currencies, including the U.S. 
dollar, the euro, the pound sterling, the Russian ruble and the 
Chinese yuan.  Akishev noted that the spread will be set in absolute 
values and not in percentages. For example, the spread between 
selling and buying rates of a certain currency will be set at a 
maximum of two tenge.  Akishev also added that the spread will be 
applied temporarily during periods of panic buying of foreign 
currencies. 
 
BANKING SECTOR UPDATES 
 
¶5.  According to Interfax-Kazakhstan, "Astana-Finance" JCS (AF) 
intends to present a plan for internal and external debt 
restructuring to its creditors by late August 2009.  At a July 16 
meeting in London between top AF managers and creditors, Elmira 
Ibatullina, chairwoman of the Managing Board, said the two sides 
were able to come to an understanding on a number of issues.  AF 
hopes to reach agreement on a restructuring plan by late September 
¶2009.  Ibatullina said that the company wants to save its reputation 
and maintain relationships with banks willing to provide assistance. 
 The external debt of the company is $1.148 billion, including 
$688.8 million debt on Eurobonds. 
 
¶6.  Renaissance Capital's report on Kazakhstani banks said that "the 
financial position of Halyk Bank and CenterCredit Bank are the best 
among the domestic banks; the financial position of Kazkommertsbank 
is not as good, and ATF Bank will need help from its parent, 
UniCredit Group."  In the opinion of Renaissance Capital, distressed 
assets account for about 30 percent of the banking sector's total 
assets.  If the banks make provisions to cover all doubtful assets, 
 
ASTANA 00001355  002.2 OF 003 
 
¶1.  SUMMARY:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
-- Refinancing Rate is Reduced Again 
-- Amendments to Currency Control and Currency Regulation Law 
Approved 
-- National Bank's Comments on New Currency Law 
-- Banking Sector Updates 
-- Wheat Harvest Forecast 
-- Air Traffic Control System Improved 
-- Business Results of KMG 
-- KMG Becomes Sole Stockholder of KazMorTransFlot 
-- Did Dutbayev Accomplish His Mission? 
 
their registered capital will be far below the threshold set by the 
Financial Supervision Agency (FSA).  However, Renaissance Capital 
does not see any serious problems with that, as the banks may 
increase their equity capital (or make provisions) from their profit 
or debts due in the future periods. 
 
¶7.  According to the FSA, the banking sector recorded a $613 million 
net loss in June 2009, for a year-to-date net loss totaling $1.5 
billion.  Sector assets and loans declined by 0.2 percent and 0.4 
percent month-on-month respectively, while deposits increased by 2 
percent.  Thus, the loans-to-deposit ratio of the sector fell to 190 
percent from the previous level of 195 percent.  Local experts 
believe this official data confirms the trend of deteriorating asset 
quality. 
 
WHEAT HARVEST FORECAST 
 
¶8.  According to Agriculture Minister Kurishbayev, Kazakhstan can 
harvest nearly 14 million tons of wheat this year, or 1.5-2 million 
tons more than in 2008.  This would be possible, Kurishbayev 
continued, if the August weather is favorable, and the harvesting 
campaign begins on time.  Early in July, the Minister said that 
wheat exports in 2009, including wheat surpluses from the last year, 
have the potential to reach 7-8 million tons, marking 2 million tons 
in growth compared to last year. 
 
AIR TRAFFIC CONTROL SYSTEM IMPROVED 
 
¶9.  National air traffic control company "KazAeroNavigatsia" 
reported that four major air traffic control centers will be opened 
in Astana, Aktobe, Almaty, and Shymkent.  KazAeroNavigatsia director 
general Sergey Kulnazarov said this modernized and advanced control 
system would replace a system composed of eighteen disaggregated 
points.  Kulnazarov added that the Aktobe center, which will serve 
the entire Western Kazakhstan region, is furnished with Lockhead 
Martin equipment. 
 
BUSINESS RESULTS OF KMG 
 
¶10.  The volume of oil and gas condensate extracted during the 
period January-June 2009 amounted 9 million tons, marking a 1.2 
percent increase over the same period of 2008.  The volume of oil 
transported via main pipelines increased by 3 percent compared to 
the same period last year, totaling 30.4 million tons; gas 
transportation was 46.5 billion cubic meters.  Oil transported by 
water exceeded projected levels by 23 percent, due to intensive 
shipments in shipments to Makhachkala (Russia), Neka (Iran), and 
Baku (Azerbaijan).  Consolidated profits for KazMunaiGas (KMG) were 
39 billion tenge (about $259.3 million), 22 percent higher than 
projected. The national budget received 248 billion tenge 
(approximately $1.65 billion), nearly 15 percent of all national 
budget revenues collected in the first half of 2009. 
 
KMG BECOMES SOLE STOCKHOLDER OF KAZMORTRANSFLOT 
 
¶11.  KazMunaiGas recently acquired a 50 percent stake in the 
national maritime shipping company, KazMorTransFlot. The stock was 
transferred from the National Welfare Fund Samruk-Kazyna. 
 
DID DUTBAYEV ACCOMPLISH HIS MISSION? 
 
 
ASTANA 00001355  003.2 OF 003 
 
¶1.  SUMMARY:  This information is drawn primarily from the 
Kazakhstani local press and has not been verified for accuracy. 
-- Refinancing Rate is Reduced Again 
-- Amendments to Currency Control and Currency Regulation Law 
Approved 
-- National Bank's Comments on New Currency Law 
-- Banking Sector Updates 
-- Wheat Harvest Forecast 
-- Air Traffic Control System Improved 
-- Business Results of KMG 
-- KMG Becomes Sole Stockholder of KazMorTransFlot 
-- Did Dutbayev Accomplish His Mission? 
 
¶12.  According to the Kazakhstan Telegraph Agency (KazTAG), former 
Kazakhstani intelligence chief Nartai Dutbayev was dismissed as Vice 
President of Kazatomprom, a position he has held since September 
¶2008.  From 2001-2006, Dutbayev served as the head of the National 
Security Committee (KNB), Kazakhstan's main intelligence agency. 
From 2006-2008, Dutbaev served as rector of the KNB Academy.  KazTAG 
could not confirm whether or not Dutbayev's dismissal was part of a 
recent government purge of top officials at Kazatomprom.