VZCZCXRO7062
OO RUEHIK
DE RUEHTA #2026/01 3170841
ZNR UUUUU ZZH
O 130841Z NOV 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6845
INFO RUCNCIS/CIS COLLECTIVE 2156
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1526
RUEHKO/AMEMBASSY TOKYO 2227
RUEHUL/AMEMBASSY SEOUL 1161
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1716
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 2008

UNCLAS SECTION 01 OF 03 ASTANA 002026 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, SCA/PPD, EEB/ESC, S/EEE, S/CIEA 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EINV EPET EAID SOCI KDEM KWMN KZ
SUBJECT:  KAZAKHSTAN:  ENERGY, EDUCATION, AND EXPECTATIONS IN 
ATYRAU 
 
REF:  (A) ASTANA 1983 
      (B) ASTANA 2005 
      (C) 08 ASTANA 2252 
 
ASTANA 00002026  001.3 OF 003 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Mud, oil, gas, and ambition blend to form the 
strange clay that molds the Western Kazakhstani city of Atyrau.  In 
a three-day visit from November 5-7, DCM, Energy Officer, and local 
staff met with the Deputy Governor of Atyrau oblast, toured oil and 
gas-related facilities, visited two U.S. government-funded projects, 
met with Western energy executives, and spoke to students at the 
cozy American Corner.  Atyrau is a place of two worlds.  The 
hard-nosed oil and gas industry representatives inhabit one world. 
They propel the work of multi-billion dollar international energy 
companies, certain that they can satisfy Kazakhstani government 
demands for local content as well as their own corporate goals.  The 
insular, traditional Kazakhstani community lives in the other world, 
fights for a piece of the action, and clutches its culture with the 
clipped sounds of the Kazakh language that one hears everywhere.  In 
the absence of a consulate or other official permanent presence, 
U.S. technical cooperation and exchange programs offer the United 
States small-scale opportunities to help that very traditional part 
of Kazakhstani society open up.  Longer term, we should consider how 
to strengthen our staff language capabilities and continuously 
monitor whether we need a more robust U.S. official presence in 
Western Kazakhstan.  END SUMMARY. 
 
DEPUTY AKIM:  BAKER HUGHES IS NOT OUR PROBLEM! 
 
¶3.  (SBU) At the last minute, a confirmed meeting with Akim 
(governor) Berghey Ryskaliev turned into a courtesy call with his 
first deputy, Bolat Daukenov.  With an official Akimat photographer 
and note-taker present, the DCM discussed the overall economic 
development of Atyrau oblast, the role of foreign direct investment 
and the current tax troubles of the American oil services firm Baker 
Hughes, which has asked for support and told the Embassy it faces 
tax evasion fines by the oblast financial police.  The DCM prefaced 
her comments on Baker Hughes with a brief summary of the Public 
Private Economic Partnership Initiative (PPEPI).  She told Daukenov 
that PPEPI is a joint initiative of the governments of the United 
States and Kazakhstan that enjoys strong support from Deputy Prime 
Minister Yerbol Orenbayev (ref A).  The first deputy hesitated, 
telling the DCM that, to the best of his knowledge, the Atyrau 
oblast has no outstanding issues or problems with any U.S. company. 
Then, after he received an expertly-timed call (from the Akim per 
our local staff), he firmly asserted that the case is now with the 
Ministry of Finance, out of the Akimat's hands.  He said it involved 
questions the U.S. Treasury Department and Internal Revenue Service 
currently are discussing in Frankfurt, and repeated this when the 
DCM pressed.  She closed by saying that we believe the Akimat can 
play a helpful role and hope the issue can be amicably resolved. 
(COMMENT:  We later learned that U.S. companies in Atyrau 
increasingly believe the Akimat's influence over the financial 
police is truly limited, because they report directly to the 
Ministry of Finance.  END COMMENT). 
 
TCO AND AGIP KCO:  A CONTRAST IN CORPORATE CULTURES 
 
¶4.  (SBU) From the General Director on down, from the first shuttle 
ride to the last gift exchange, we heard the mantra, "safety first," 
at Tengizchevroil (TCO).  Chevron is the lead operator of TCO, 
having invested billions of dollars in both the project and the 
local community.  TCO's director of government relations, Maria 
Karazhigitova, proudly told us that the Akim recently praised TCO 
General Director Todd Levy at an Akimat command performance meeting 
intended to persuade other companies to match the oil giant's record 
on corporate social responsibility.  TCO has shrewdly managed 
regional politics in other areas, including environmental protection 
and succession planning.  For example, as of January 1, 2010, TCO 
will replace its retiring, expatriate physician with a Kazakhstani 
 
ASTANA 00002026  002.3 OF 003 
 
 
national, and will follow suit with other senior positions over 
time. 
 
¶5.  (SBU) Despite Chevron's heft, track record, resources, and 
professionalism, problems occasionally arise.  On Friday November 6, 
fresh from tough negotiations in Astana, General Director Levy 
informed the DCM and Energy Officer that he had just lost the latest 
round with the national-level government on sulfur, which Kazakhstan 
wants to call a waste rather than a product.  The difference of one 
word could spell fines approaching $1 billion, "but we always win," 
said Levy, grimacing through his clear frustration.  (COMMENT: 
Later, we learned of more positive developments (ref B).  END 
COMMENT). 
 
¶6.  (SBU) At Agip KCO, which has the lead on developing the first 
phase of the Kashagan project, our team encountered a different 
culture.  On Saturday, November 7, American-citizen, 
public-relations manager Richard Fritz briefed the DCM and Energy 
officer on the vast Kashagan project.  Fritz' briefing stressed the 
well-known environmental sensitivities and corporate complexity of 
the project, but tensions in the ever-shifting partnership 
arrangement seeped through.  Agip KCO is now only an agent of the 
overall operator, the North Caspian Operating Company (NCOC).  When 
the DCM asked about profitability and getting the product to market, 
Fritz said "that's not our problem.  Our goal is to get up to 
450,000 barrels per day, but how it gets to market is the 
responsibility of each individual producer."  Whatever rules 
international companies play by in Atyrau, success apparently 
depends on how well they manage pressures, both from within and 
without. 
 
TRAINING AND LOCAL CONTENT:  THE PLANNING/EXECUTION GAP 
 
¶7.  (SBU) At dinner on November 5, Western business executives 
disagreed about whether their companies can meet local labor-content 
requirements, but all agreed they grapple with the issue and said 
the problem will grow as new projects come on line.  The DCM and 
Energy officer toured Agip KCO's state-of-the-art training facility 
built to help meet labor demand, complete with a year of 
English-language instruction and a virtual lock on a good-paying job 
after graduation.  Agip plans to spend up to $150,000 each to train 
more than 1,000 Kazakhstanis in various skills over a four-year 
period.  Another training facility demonstrated that Atyrau's two 
worlds can meet successfully.  Serik Abildinov of the Wood Group and 
his Australian joint venture partner Mark Peck train local employees 
on fire safety and marine rescue operations.  The two agreed that 
Kazakhstan's major oil exploration and production projects could 
reach local content goals if the government were more strategic in 
its approach, and if the companies were better forward-planners. 
The real trick, they suggested, is to manage expectations.  Projects 
will need skilled crafts, but not as many high-level managers as the 
Akimat might want. 
 
¶8.  (SBU) Meanwhile, local educational authorities seem trapped 
between the past and the future.  The DCM and Emboffs visited a 
USAID-funded project called, "Know About Business," ostensibly 
intended to ignite the spirit of small business entrepreneurship in 
teens.  The Ambassador's visit to the school a year ago was proudly 
chronicled in photos, which the director had specially laminated 
(ref C).  Baker Hughes and Chevron flew employees in from Almaty for 
the event, which the press covered.  The surreal hour featured a 
well-rehearsed presentation by a clearly Soviet-era trained teacher 
who whipped up her students' enthusiasm about the essentials of 
business:  "knowledge, ideas, capital and labor!"  At the rector's 
request, the DCM spoke in English with Russian interpretation.   He 
said some students from the villages did not understand Russian 
well.  The class was conducted in Kazakh. 
 
CULTURE AND EDUCATION 
 
¶9.  (SBU) On November 6, the DCM joined part of a day-long 
 
ASTANA 00002026  003.3 OF 003 
 
 
conference led by Democracy Commission grantee, the Zherles Social 
Foundation, on how to improve gender equality in Kazakhstan. 
Project presenter Gulnar Yeserkepova lamented that Kazakhstan is "so 
close, but so far away," from international standards on gender 
equality.  She said that the presidentially-approved action plan for 
gender equality lacks both resources and political will.  During a 
lively discussion, participants asked how they could emulate U.S. 
success.  The DCM said that gender equality is a long-term quest and 
noted that the right to vote for American women came well over 100 
years after the founding of the United States as a republic.  She 
stressed that while instruments developed by the government are 
important, society needs activists to foster ideas and advocate for 
change. 
 
¶10.  (SBU) The DCM and Emboffs stopped by the American Corner before 
departing Atyrau.  A group of about 50 students poured eagerly into 
a conference room to learn about U.S.-funded exchange programs.  We 
met with the newly-hired American Corner deputy director and toured 
the small, but well-appointed room which houses the newly-installed 
American Corner.  It featured bright natural light and a large 
supply of materials in Russian, Kazakh, and English from the 
Embassy's Public Affairs Section.  Spouses at TCO's American village 
compound have offered to volunteer as English language tutors.  All 
of this augurs well for building the previously underused center's 
utility and popularity. 
 
¶11.  (SBU) COMMENT:  The visit, the DCM's first to Atyrau, showed 
that the oil and gas giants can fend for themselves, but they face 
constant demands from the government at all levels to ensure that 
all citizens of Kazakhstan benefit from oil and gas production.  We 
will report septel on Atyrau's business climate.  A striking feature 
of this isolated city in the North Caspian is the large number of 
American citizens.  They proudly claim to constitute the largest 
concentration of Americans in Kazakhstan.  This may provide a basis 
for extending our official presence westward to serve Americans and 
develop our civil society outreach in a place that's important 
economically and politically, but hard to reach.  Such an effort 
would require expanded capability with the Kazakh language. 
Increasingly, private citizens and government officials in Atyrau 
oblast use Kazakh throughout their daily life, fulfilling a goal 
President Nazarbayev has recently articulated in his national unity 
policy.  Most of all, the visit showed that Atyrau is a great 
success story for the international community and for Kazakhstan. 
To keep it that way will require long-term planning, resolve, and 
foresight as the needs and expectations of Atyrau's two worlds 
continue to compete for resources and attention.  END COMMENT. 
 
HOAGLAND