VZCZCXRO1262
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 #1613/01 2651026
ZNR UUUUU ZZH
O 221026Z SEP 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6318
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE 1954
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1323
RUEHKO/AMEMBASSY TOKYO 2022
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1509
RUEKJCS/SECDEF WASHDC 1390
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 2490
RUEHNO/USMISSION USNATO 2804

UNCLAS SECTION 01 OF 02 ASTANA 001613 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN (PLEASE PASS TO PARTY AT UNGA) 
ALSO FOR EEB/ESC 
PLEASE PASS USTDA AND OPIC 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EFIN KZ GM UK
SUBJECT:  KAZAKHSTAN:  GERMANS HYPER ABOUT BTA RESTRUCTURING MOU 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Germany is highly concerned that BTA bank is 
about to declare bankruptcy, endangering large investments by the 
German export credit agency.  Our sources in ExIm disagree, and 
believe a settlement is in the works.  Berlin has asked SCA that 
Secretary Clinton express concern to Foreign Minister Saudabayev 
during their meeting at UNGA.  We suggest this is unnecessary, based 
on ExIm's reading of the situation.  END SUMMARY. 
 
¶3.  (SBU) On September 21, German Charge d' Affaires in Astana, 
Wolfgang Brett, informed EconOff that the London-based negotiations 
between BTA bank and its creditor steering committee failed to reach 
a debt restructuring agreement.  According to the Brett, the German 
government and their export credit agency (ECA) Euler Hermes 
believed that the absolute failure of negotiations to sign an MOU on 
BTA debt restructuring by the September 18 deadline set by the 
Financial Supervision Agency (FSA) implied in imminent declaration 
of bankruptcy.  Fearful of an imminent declaration of bankruptcy, 
Brett said that the German Embassy submitted a sharply-worded 
non-paper (see text in para five below) to Kazakhstani government 
agencies, including the Ministry of Foreign Affairs, the Ministry of 
Finance, the National Bank, the FSA, Samruk Kazyna and BTA on 
September 18.  Brett requested similar action from the U.S. Embassy. 
 On September 22, Brett informed EconOff that the German MFA in 
Berlin had contacted SCA Deputy Assistant Secretary George Krol 
directly about the perceived failure of negotiations.  According to 
Brett, DAS Krol said that Secretary Clinton would raise this issue 
during her upcoming meeting with Foreign Minister Saudabayev. 
 
¶4.  (SBU) Well-informed officials at the U.S. Export-Import (ExIm) 
Bank, the USDA Credit Programs Division, the Kazakhstani FSA, and 
BTA contradict German statements.  According to ExIm Bank Asset 
Management and Restructuring Officer Katie Janik, the steering 
committee members met in London for seven days straight, working 12 
hours per day to negotiate an acceptable MOU before the FSA's 
September 18 deadline for submission.  Working through the night on 
Thursday September 17, they created an acceptable MOU.  However, 
several last-minute changes to the wording of some "non-critical" 
passages caused a one day delay in submission, which missed the 
deadline.  This situation, she believes, may have triggered the 
Germans' anxious response.  Janik confirmed that the MOU was 
eventually signed by all steering committee members, including the 
German ECA Euler Hermes, and BTA, and accepted by the FSA for 
review.  While Janik conceded that the sides have not resolved every 
detail of debt restructuring, ExIm Bank considers the negotiations a 
success, because the MOU warded off the immediate specter of 
bankruptcy and gave all parties more time.  The debt restructuring 
negotiation process will continue for the next six weeks. 
 
¶5.  (SBU) BEGIN TEXT OF GERMAN EMBASSY NON-PAPER: 
 
The Government of the Federal Republic of Germany is most concerned 
to note that the negotiations between the BTA Bank and its creditors 
on restructuring did not arrive at a successful conclusion.  The 
Government of the Federal Republic of Germany fears that this 
development may result in most disadvantageous consequences for the 
BTA Bank and its creditors, but also for the economic development of 
Kazakhstan and for economic relations between Germany and 
Kazakhstan. 
 
The Government of the Federal Republic of Germany has followed the 
negotiations taking place in London very closely and takes the view 
that it is still possible to achieve a fair agreement between the 
two sides.  However, a prerequisite for this is that the Kazakh side 
itself makes a substantial contribution towards the success of the 
negotiations. 
 
The Memorandum of Understanding negotiated between the parties and 
accepted by the creditor side reflects the progress attained in the 
negotiations this week.  The Government of the Federal Republic of 
 
ASTANA 00001613  002 OF 002 
 
 
Germany expects the negotiations between the contracting parties to 
be continued on this basis with a desire to find a mutually 
acceptable solution. 
 
END TEXT. 
 
¶6.  (SBU) COMMENT:  The German ECA Euler Hermes is one of 14 members 
of the BTA steering committee that participated in the London-based 
negotiations during the week of September 10-17.  Of the approximate 
$920 million in ECA exposure to the troubled Kazakhstani banking 
sector, Euler Hermes accounts for approximately $500 million and 
therefore has actively mobilized resources to ensure that all 
relevant levels of the Kazakhstani Government remain aware of 
Germany's concerns regarding full repayment of trade finance debt. 
While the MOU does not signal the successful restructuring of BTA, 
it does incorporate additional input by steering committee members 
and is widely seen as progress towards the eventual stabilization of 
the Kazakhstani banking sector.  END COMMENT. 
 
HOAGLAND