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PP RUEHIK
DE RUEHTA #2110/01 3380450
ZNR UUUUU ZZH
P 040450Z DEC 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 6945
INFO RUCNCIS/CIS COLLECTIVE 2214
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1578
RUEHKO/AMEMBASSY TOKYO 2279
RUEHUL/AMEMBASSY SEOUL 1213
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1773
RUEKJCS/SECDEF WASHDC 1623
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/AMCONSUL ALMATY 2052
RUEAWJL/DEPT OF JUSTICE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC 0053

UNCLAS SECTION 01 OF 05 ASTANA 002110 
 
SENSITIVE 
SIPDIS 
 
STATE FOR INL, SCA/CEN 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PINS SNAR SOCI KZ
SUBJECT:  KAZAKHSTAN:  SCENESETTER FOR INL ASSISTANT SECRETARY DAVID 
¶T. JOHNSON 
 
ASTANA 00002110  001.3 OF 005 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Embassy Astana warmly welcomes your December 9 
visit to Kazakhstan.  Kazakhstan has proven to be an increasingly 
reliable security and law enforcement partner and a steady influence 
in a potentially turbulent region.  Kazakhstan's willingness to host 
the Central Asia Regional Information and Coordination Center 
(CARICC) opening and its eagerness to train regional 
counter-narcotics police speak to its value as a key partner in 
Central Asia.   END SUMMARY. 
 
SECURITY COOPERATION AND TRANSNATIONAL CRIME 
 
¶3.  (SBU) Kazakhstan, on the crossroads of the ancient Silk Road, 
also finds itself on the crossroads of transnational crime.  The 
United Nations Office of Drugs and Crime (UNODC) estimates that up 
to 20% of Afghan opiates transit through Kazakhstan.  In addition, 
Kazakhstan is both a source and destination country for trafficking 
in persons.  It could have become a center for laundering 
transnational criminal profits given its status as the most 
developed banking system and most stable economy in the region. 
However, the government's strong political will, new legislation 
based on international standards, and the creation of a financial 
intelligence unit have helped prevent such a development. 
 
¶4.  (SBU) Kazakhstan willingly cooperates with the United States to 
fight terrorism, stem the flow of illegal narcotics, and fight 
trafficking in persons.  Law enforcement agencies recognize their 
limitations and continue to seek our technical assistance.  The 
Bureau for International Narcotics and Law Enforcement Affairs 
(INL), the Office of Antiterrorism Assistance (ATA), and the 
Department of Defense's Office of Military Cooperation (OMC) provide 
equipment and technical assistance to law enforcement and security 
services in Kazakhstan. 
 
¶5.  (SBU) Kazakhstan is deeply interested in being a regional leader 
in law enforcement.  The Central Asian Regional Information and 
Coordination Center (CARICC) is based in Almaty.  All countries in 
Central Asia, Russia, and Azerbaijan are members.  The Inauguration 
of CARICC on December 9 will be preceded by an experts' meeting on 
December 8 to discuss issues of cooperation.  The CARICC events will 
be an opportunity for Kazakhstan to showcase its international 
cooperation. 
 
¶6.  (SBU) Kazakhstan's law enforcement academies are also seeking to 
be regional training hubs.  During your visit, the Ministry of 
Interior (MVD) will open its newly renovated Interagency 
Counter-Narcotics Training Center.  The Center, co-funded by the 
United States and the EU's Border Management in Central Asia Program 
(BOMCA), will train Afghan police and will be open to all countries 
in the region. 
 
¶7.  (SBU) Kazakhstan is also eager to work with the United States to 
combat trafficking in persons (TIP).  Kazakhstan is a Tier II 
country, but has faced the realities of its TIP problem and 
continues to seek training and technical assistance.  The government 
has provided funding through a newly-created NGO to operate a 
victims' shelter in Astana.  INL funded the creation of the Anti-TIP 
Training Center at an MVD Institute, which provides in-service 
training for police officers on a regular basis. 
 
¶8. (SBU) Kazakhstan recently passed an anti-money laundering (AML) 
law and has established a financial intelligence unit (FIU).  INL 
has worked closely with both the new FIU and the Financial Police to 
provide training courses.  Currently, an INL-funded English-language 
fellow works at the Financial Police Academy with instructors and 
cadets.  The fellow also provides training courses for the FIU.  The 
Financial Police Academy has been eager for additional training 
sessions in all facets of AML and corruption.  INL recently funded 
FBI training courses at the Academy for senior-level regional 
 
ASTANA 00002110  002.3 OF 005 
 
 
officials of the Financial Police.  This year, INL also funded the 
travel of senior-level delegations from both the FIU, which attended 
a seminar at FinCEN, and the Financial Police Academy, which visited 
FLETC and the FBI Academy. 
 
ECONOMY:  AGGRESSIVE STEPS TO TACKLE ECONOMIC CRISIS 
 
¶9.  (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 Monetary Fund is predicting negative 2% 
growth for Kazakhstan in 2009, with a modest economic recovery 
poised to begin in 2010.  Astute macroeconomic policies and 
extensive economic reforms have played an important role in 
Kazakhstan's post-independence economic success.  The government has 
taken significant steps to tackle the domestic reverberations of the 
economic crisis.  It has allocated around $20 billion to take equity 
stakes in private banks, propped up the construction and real estate 
sectors, and supported small- and medium-sized enterprises and 
agriculture. 
 
¶10.  (SBU) The banking sector continues to struggle, as Kazakhstan's 
leading commercial banks have been unable to repay creditors and 
seek to restructure their debt.  In July, BTA Bank, the country's 
largest commercial bank, declared a moratorium on interest and 
principal payments.  BTA's external debts are valued at $13 billion, 
of which the bank said it will repay $3 billion this year.  In 2008, 
BTA's net losses were $7.9 billion, and total obligations exceeded 
the value of its assets by $4.9 billion.  Kazakhstani authorities 
continue to investigate former BTA Chairman Mukhtar Ablyazov and 
other former top managers of the bank.  On July 14, the Prosecutor 
General's office charged 12 members of BTA's credit committee with 
embezzlement.  Six were found guilty and sentenced to jail.  Many 
high-level bankers have fled the country and charges continue to 
pile up in the banking sector.  Ablyazov fled to London, where he 
remains. 
 
NON-PROLIFERATION:  A HALLMARK OF BILATERAL COOPERATION 
 
¶11.  (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 fast-breeder reactor. 
 
¶12.  (SBU) On December 1, the government of Kazakhstan initiated a 
dry run to finalize logistics and security planning for the 
transportation of spent fuel from the BN-350 fast breeder reactor in 
Aktau to the Baikal-1 storage facility located in the Semipalatinsk 
Test Site.  As part of this Cooperative Threat Reduction project, 
Kazakhstan is responsible for funding the actual transportation of 
the spent fuel, which it has committed to complete before the end of 
¶2010.  12 train-loads of five railcars each will transport the 300 
metric tons of spent fuel from the reactor to the storage facility 
constructed by the U.S. government.  Property tax liability for 
technical assistance recipients has been a long-term obstacle for 
completing the project.  However, the Kazakhstani government is 
working on a series of decrees that would authorize tax-free 
equipment transfer.  Kazakhstani funding of the transport of the 
fuel has also been problematic, as the transport operations are 
initiated during a time of severe budget cuts taken to deal with the 
global financial crisis.  While an emergency decree freeing enough 
money for two transport runs was finally issued in September, it 
 
ASTANA 00002110  003.3 OF 005 
 
 
came too late in the year to obligate.  As such, we remain concerned 
that the current level of 2010 funding will not be enough to handle 
all 12 sorties. 
 
¶13.  (SBU) The Kazakhstanis are active participants in the Global 
Initiative to Combat Nuclear Terrorism and are seeking additional 
ways to help them burnish their non-proliferation credentials.  We 
have welcomed President Nazarbayev's April 6 announcement that 
Kazakhstan is interested in hosting the Nuclear Threat Initiative's 
IAEA-administered international nuclear fuel bank.  During his 
October 6-8 visit to Kazakhstan, Deputy Secretary of Energy Daniel 
Poneman assured the Kazakhstani government that we will support 
their proposal although we have been clear that the Kazakhstanis 
need to work out the technical details directly with the IAEA. 
President Nazarbayev also has called for the United Nations to 
designate August 29 as annual World Non-Nuclear Testing Day, and he 
plans to personally attend the Global Nuclear Security Summit in 
Washington in April 2010. 
 
AFGHANISTAN:  POISED TO DO EVEN MORE 
 
¶14.  (SBU) Kazakhstan has supported 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.  Kazakhstanis followed 
this 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 (NDN) -- 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, further down the road, might consider 
providing small-scale non-combat military support, as it did for 
five-plus years in Iraq. 
 
¶15.  (SBU) In 2008, the Kazakhstani government provided 
approximately $3 million in assistance to Afghanistan for food and 
seed aid and to construct a hospital, school, and road.  In 
November, the Kazakhstani Foreign Ministers signed in Kabul a $50 
million intergovernmental education agreement for Kazakhstan to 
train 1,000 Afghan specialists in five years.  The government has 
also offered to provide training to Afghan law enforcement officers 
at law enforcement training institutes in Kazakhstan.  Kazakhstan's 
Border Guard Service is ready to allow Afghan cadets to attend its 
full four-year academy as soon as the appropriate bilateral 
agreements are signed.  The Kazakhstanis intend to make Afghanistan 
one of their priority issues during their 2010 chairmanship of the 
Organization for Security and Cooperation in Europe (OSCE). 
 
DEMOCRACY:  SLOW GOING 
 
¶16.  (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 parliamentary and presidential elections are scheduled for 2012 
although rumors of early parliamentary elections are intensifying. 
 
¶17.  (SBU) Kazakhstan will become Chairman of the OSCE on January 1. 
 At the recent Athens Ministerial, State Secretary-Foreign Minister 
Saudabayev asserted that Kazakhstan will unswervingly uphold 
principles of OSCE.  When OSCE ministers accepted Kazakhstan's bid 
to chair the organization in 2007, Kazakhstan committed to uphold 
 
ASTANA 00002110  004.3 OF 005 
 
 
the current mandate of the OSCE Office for Democratic Institutions 
and Human Rights (ODIHR), support the Human Dimension, and initiate 
domestic electoral, media, and political party reforms by the end of 
¶2008.  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 to 
follow through with additional reforms. 
 
¶18.  (SBU) On September 3, the Balkash district court near 
Kazakhstan's largest city, Almaty, sentenced 
The country's leading human rights activist Yevgeniy Zhovtis to four 
years imprisonment for vehicular manslaughter, and the appeals court 
upheld this decision on October 20.  On the request of the defense, 
a judicial panel is currently reviewing the decision.  The 
conviction stemmed from a July 26 accident in which Zhovtis struck 
and killed a pedestrian with his car.  Local and international civil 
society representatives and opposition activists heavily criticized 
the trial for numerous procedural violations.  Some observers allege 
that the harsh sentence imposed on Zhovtis, a strong critic of the 
regime, was politically motivated.  The Ambassador has publicly 
urged the Kazakhstani authorities to provide Zhovtis access to fair 
legal proceedings, the Embassy issued a statement on October 22 
expressing concern about the process following the appeal decision, 
and we continue to raise the case with senior government officials 
in Astana and in Washington. 
 
¶19.  (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 -- 
which ultimately declared it to be unconstitutional. 
 
¶20.  (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 
government-controlled.  On July 10, President Nazarbayev signed into 
law Internet legislation which provides a legal basis for the 
government to shut down and block websites whose content allegedly 
violates the country's laws.  On October 22, a Kazakhstani appeals 
court upheld the Editor-in-Chief of "Alma Ata Info" newspaper's 
August 8 sentence to three years in prison for publishing 
confidential internal documents of the Committee for National 
Security (KNB).  In addition, the courts have levied 
disproportionately large fines for libel against two opposition 
newspapers over the past year, forcing one paper to close while 
another is still fighting the case through appeals.  These appear to 
be steps in the wrong direction at a time when Kazakhstan's record 
on democracy and human rights is in the spotlight because of its 
forthcoming OSCE chairmanship.  We have expressed our disappointment 
about the Internet legislation and libel regime, and have urged the 
government to implement the Internet law in a manner consistent with 
Kazakhstan's OSCE commitments on freedom of speech and freedom of 
the press. 
 
OIL AND GAS PRODUCTION 
 
¶21.  (SBU) Kazakhstan produced 70.7 million tons of oil in 2008 
(approximately 1.41 million barrels per day (bpd), and is expected 
to become one of the world's top ten crude oil exporters soon after 
¶2015.  From January - August, Kazakhstan increased oil production by 
8.8%, to 41.83 million tons, compared to the same period last year. 
U.S. companies -- ExxonMobil, Chevron, and ConocoPhillips -- have 
significant ownership stakes in each of Kazakhstan's three major 
hydrocarbon projects:  Tengiz, Kashagan, and Karachaganak. 
 
ASTANA 00002110  005.3 OF 005 
 
 
 
¶22.  (SBU) While Kazakhstan has significant gas reserves (2.0 
trillion cubic meters is a low-end estimate), current gas exports 
are less than 10 billion cubic meters (bcm), in part because gas is 
being reinjected to maximize crude output, and in part because 
Gazprom, which has a monopoly on the gas market in the region, pays 
producers only a fraction of the going European price.  The 
country's 40 bcm gas pipeline to China will help to break that 
monopoly, although the majority of the gas that will be exported via 
this pipeline will come from Turkmenistan and Uzbekistan, not 
Kazakhstan.  The first line of the China gas pipeline was completed 
in July, and the first shipments are planned in November. 
Kazakhstani gas exports to China will be modest, 4-6 bcm annually. 
The government of Kazakhstan has made several public statements 
confirming that it has no objection to the Nabucco gas pipeline 
project, but the government has emphasized that Kazakhstan does not 
and will not produce enough gas to supply the pipeline. 
 
OIL AND GAS TRANSPORTATION 
 
¶23.  (SBU) With significant oil 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.  In July, for example, national 
oil company KazMunaiGaz (KMG) announced the completion of the 
Atasu-Alashankou segment, and it recently began pilot crude 
shipments via the Kenkiyak-Kumkol segment of the 3,000 kilometer oil 
pipeline to China, which will initially carry 200,000 bpd, with 
expansion capacity of 400,000 bpd. 
 
¶24.  (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 also support implementation of the 
Kazakhstan Caspian Transport 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.  Negotiations with international 
oil companies to build the onshore pipeline and offshore marine 
infrastructure for this $3 billion project have recently stalled, 
although the government has expressed an interest in resuming 
talks. 
 
SPRATLEN