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kazakhstan

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KAZAKSTAN


 

REPUBLICAN REFERENCE

Area (sq.km) 
2,717,300 

Population
16,731,303

Principal 
ethnic groups 
Kazaks 44.3%
Russians 35.8%
Ukrainians 5.1%
Germans 3.6%
and many others

Capital 
Astana
(formerly Akmola)

Currency
Tenge

President 
Nursultan Nazarbayev

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Background:
Native Kazaks, a mix of Turkic and Mongol nomadic tribes who migrated into the region in the 13th century, were rarely united as a single nation. The area was conquered by Russia in the 18th century and Kazakstan became a Soviet Republic in 1936. During the 1950s and 1960s agricultural "Virgin Lands" program, Soviet citizens were encouraged to help cultivate Kazakstan's northern pastures. This influx of immigrants (mostly Russians, but also some other deported nationalities) skewed the ethnic mixture and enabled non-Kazaks to outnumber natives. Independence has caused many of these newcomers to emigrate. Current issues include: developing a cohesive national identity; expanding the development of the country's vast energy resources and exporting them to world markets; and continuing to strengthen relations with neighbouring states and other foreign powers. 

Update No: 269 - (15/05/03)

The political regime in Kazakstan is as repressive as anywhere in Central Asia. But the president, Nursultan Nazarbayev, has at least not lost his marbles, as patently is the case with the president of Turkmenistan, Saparmurat Niyazov, who is too frightened to leave his capital to visit even his neighbours. He has renamed January after his own name and April ( and indeed bread) after his mother's, while he has issued his own new religion. Nazarbayev is sane, but no less strict a disciplinarian in politics. The essence of power is firmness and no letting up on internal opponents; such is the motto of the Central Asian dictators.
Some sort of show of political pluralism is now, however, the order of the day in Kazakstan. Yet it would never do to let the phenomenon get out of hand, that is involve any Western-style freedom. The government distinguishes between political parties that are 'constructive' and ones that are 'radical.' The former are all pro-government, the latter not. Only seven out of 19 parties were reregistered recently, a necessary procedure for political existence carried out by the Justice Ministry. "Democracy is not our starting point" said Nazarbayev recently; "it is our objective."
A law was passed in July last year that required all parties to re-register within six months and raised the minimum membership from 3,000 to 50,000, intending no doubt to put the goal safely beyond the reach of those without cash to organise such a recruitment, that is those outside the charmed circle of power. The seven registered include Oran, the president's party, the Communist Party (his former power-base), and surprisingly, the reformist group, Ak Zhol.
In fact Ak Zhol (Bright Road) made a remarkable effort to comply with the rules for re-registration, being the first to reach 50,000 members. Eight other reformist parties did not bother to apply, convinced that they would be refused official recognition. 
One of them was Azamat, whose leader, Pyotr Svoik, said the law was aimed at excluding them from the political process. In his view it matters little. Elections are rigged and only 10 of the 77 seats in the lower house are filled on a party basis.
Nevertheless, the lip-service being paid to pluralism could yet prove dangerous to the regime. The pro-presidential parties have proved to be poorly organised, unlike Ak Zhol. Commitment counts as well as cash.
The legitimacy of the regime resides not in the political process at all, but in its economic performance to date. So long as the economy grows all will be well for the regime; so thinks Nazarbayev, probably rightly.
The Kazak republic is keen to have an improved public image in the West, publishing a four-long page sponsored section in the International Herald Tribune on May 2nd. There is, indeed, plenty of good news to report, but there is also a long-running corruption scandal being unearthed by prosecutors in the US, where the Foreign Corrupt Practices Act is unique in world jurispudence for targeting its own business people for employing corruption. Mobil , now part of ExxonMobil, has been involved via an intermediary, James Giffen and Mercator, an investment bank. Since the president of Kazakstan himself, Nursultan Nazarbayev, is under suspicion of somehow being involved, the issue is decidedly sensitive. Naturally, the sponsored section made no mention of such unpleasantries.

Energy is booming
Kazakstan is a success story as far as its economy goes. It is humming along at 10% or so annual growth, premissed heavily on its vibrant oil and gas sector, whose exports have been buoyant throughout the 2000s. The aim is to raise output to three million barrels per day by 2015. "The future lies with Kazakstan," the oil minister, Vladimir Shkolnik, averred in the sponsored section, bravely ignoring the re-emergence of Iraq on the world energy scene: "The thirst for oil is growing, and there is only a limited amount. The hunt is on for new oil resources that can be produced efficiently, and all eyes are on the Caspian Sea shelf. The current level of world oil 
production is 76 million barrels a day. The current rate of consumption of recoverable reserves will be enough for the next 35 years. So the search is underway for new resources and oil that can be produced efficiently."
Kazakstan is stepping into the breach. The proven recoverable reserves in the Caspian sector alone, including Kashagan (a big recent find) but excluding Tengiz, are eight billion tons of hydrocarbons. Kazakstan produced 147million tons of oil in 2002 and is expected to produce 52m tonnes this year, 56m in 2004 and 61m in 2005. Within 10 years the aim is to raise output by 38m tonnes per year to 90m tonnes.

Foreign interest wanted
The government is planning to tender 120 offshore blocks of the Caspian Sea: "This shows that not all new investment needed for the oil and gas sector will go to Iraq," said Shkolnik. The government has approached the Caspian Sea Development program, now awaiting further approval by Nazarbayev, who takes a great interest in all that concerns foreign direct investment in the republic. He heads the Foreign Investors' Council that meets regularly to assess FDI in the country.
Kazakstan will not play favourites in awarding these contracts, he says. "All the companies have to meet certain criteria," explains Shkolnik. "It's very important to take into account the ecological sensitivities of this region, so we have to get the companies that respect this issue, have the most experience and work with the most modern technologies. An environmental catastrophe on the Caspian Shelf would close all the deposits for many years. The companies that win the tender will submit the best technical and financial proposals. They need to have the most modern technologies and a great deal of experience to take part."
Meanwhile, Kazakstan and Russia have formally signed agreements delimiting their respective sectors in the North Caspian Sea and joint development of three border structures: Tsentrainoye, Khvalinskoye (both belonging to Russia) and Kurmangazy (Kazakstan).
The Russian national oil company, Rosneft, is involved with Kazakstan's national oil company, KazMunaiGaz, in the development of hydrocarbons on the Kurmangazy project. Total reserves of oil at this site are estimated at 240 million tonnes. The oil consortium AGIP KCO has already begun working on the Kashagan offshore field; preliminary drilling results indicate that the field is huge. Recently, KazMunaiGaz created a new affiliate, KazMunaiTeniz, to take care of its offshore operations.
The 10th anniversary celebrations have just taken place of a major oil production joint venture, Tengizchevroil (TCO), one of the most successful oil projects in the former Soviet Union. ChevronTexaco holds a 50% stake in the venture.
Late last year, TCO became embroiled in a dispute with Kazakstani authorities over alleged ecological safety violations and taxation issues. The government says that all the problems have now been solved. Meanwhile, TCO has said it plans to boost annual output from the current 13 million tonnes to between 28 million and 30 million tonnes over the course of the next ten years.
Kazakstan holds 20% share in TCO. The problems arose over the optimal system of financing future development of the project, amounting to about US$3bn. The industry is awaiting the publication of the government's Draft Offshore Development Plan and Program.

Pipelines present a problem
As a land-locked country (excepting its Caspian Sea shelf) Kazakstan has problems getting its oil to far-flung markets.
The total carrying capacity of the 1,580km (948 mile) CPC pipeline that runs through Russia from Kazakstan is 67 million tonnes. The pipeline's first stage has a capacity to move 28 million tonnes. So this is Kazakstan's primary outlet. The second pipeline is Baku-Tbilisi-Ceyhan, not yet under construction. At the moment, 15% of the shares in BTC belong to companies that work in Kazakstan.
If current forecasts of oil reserves prove correct, Kazakstan will need one more oil pipeline. They are still considering their options - through Iran, across Kazakstan to China or through Russia to the Baltic Sea.

PetrolKazakstan
The Canadian oil firm, Hurricane Hydrocarbons, is Kazakstan's second largest oil producer and its largest and most successful private integrated oil company. It is proposing to change its name to PetroKazakstan. For the fourth quarter it has posted surging profits as oil prices and sales climb world-wide. Oil output is due to be 22% up in 2003 on that in 2002, a good record given very rough weather and port closures in the first quarter.
Hurricane first entered Kazakstan in 1991 through a joint venture. In 1996, it acquired a state-owned oil and gas company - Kumkol, in south-central Kazakstan - and in 2000, the Shymkent oil refinery in the country's south. Since acquisition in 1996, Hurricane has consistently increased reserves and has more than tripled production. The company has become the second-largest foreign oil producer through internally generated growth.
With the addition of the Shymkent refinery, Hurricane became a fully integrated oil company, and has become the largest refiner in Kazakstan. They plan to achieve a further increase of production and reserves in their current area of operations and hope to be regarded as the most effective and efficient onshore oil operator in Kazakstan. They plan to develop their downstream operations further, including having a larger network of retail stations. In addition, they look to establish a position in another oil basin in Kazakstan."
Cutting the cost of transporting oil is the company's main focus. It is heavily reliant on rail, and last year suffered a blow when it failed to close a deal for a stake in the Caspian Pipeline Consortium (CPC) export line. It expects to complete a 177km (110 mile) pipeline link called KAM by mid-year, giving it access to a new rail loading facility at Dzhusaly, southwest of its Kumkol production area. The new pipeline should lower transportation costs. The company also says it will continue negotiating for space in the CPC pipeline, lowering costs further.

Other sectors are fast growing too
The precious metals sector is another growth area, as are banking and the airline industry. The first foreign bank to come out at a strong niche has been ABN - AMRO, which came to Almaty in 1993. Kazakstan has come to have the most advanced financial system of any CIS state, according to ABN - AMRO's Jan Willem van der Bosch, with a pension fund of US$132m for 140,000 contributors, which has grown from nothing in five years.
Telecoms is a rapidly expanding sector as always, with a multi-media messaging service (MMS) coming in June from the Kazak, Swedish-Finnish-Turkish firm GSM Kazakstan. This, the country's biggest private telecommunications investor, operates the K'Cell network and the ACTIV prepaid system. 
Air Astana has been operating since May 2002, establishing itself as a market leader. The product of an agreement with BAE, it is helping to put the new capital, Astana, on the map.

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AVIATION

Loans for reconstruction on airport on the cards


The European Bank for Reconstruction and Development (EBRD) will assign an extra US$2.3m for the restructuring of Tashkent Airport, according to Interfax News Agency.
In the earlier reconstruction project, the amount stated did not include the loans for equipment foreseen in the project. The EBRD agreed to increase the amount of the earlier distributed loan. The supplementary funds will cover two passenger ladders and electrical equipment. 
The EBRD first credited US$36m for airport reconstruction and German KfW another US$12m. These resources have already been put to use. German-Turkish joint venture Philipp Holzmann-Bayturn and Siemens last year concluded reconstruction of the airport's passenger terminal at a cost of US$32m. The EBRD loan also permitted the reconstruction of the airport's ramp and taxi tracks for a cost of over US$9m. 

Russia launches military satellite from Kazak space centre

A military satellite of the Kosmos series has been launched from the Russian space centre Baykonur located in Kazakstan.
"The launch was carried out for the Defence Ministry from the state testing space centre Baykonur, using a heavyweight space rocket Proton-K, at 8.23 a.m. Moscow time on Thursday 24th April," the press service of the Russian Space Forces said, Interfax News Agency reported.
The first launch of a Proton-K rocket in 2003 was carried out by the Space Forces, which controlled its flight after launch and the placement of the satellite into orbit.

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BONDS

Eurobond to be issued on domestic, international markets

Eurobonds will be issued by the ATF Bank in Kazakstan on the domestic as well as international market, Interfax News Agency has reported.
On the domestic market, ATF Bank plans to place about US$35m in bonds. There has not been a final approval date set as yet.

International consortium, Kazak firm sign oil transportation deal

The Caspian Pipeline Consortium (CPC) and Kazakoil Aktobe have signed an oil transportation agreement, which will see Kazakoil Aktobe transporting crude from the Alibekmola field, using Kazakstan's access rights in CPC, CPC said in a press release recently.
"This is another important step in moving to CPC's full initial design capacity by early 2004," the press release quoted CPC General Director, Ian MacDonald, as saying.
CPC expects to start pumping Kazakoil Aktobe oil during May. The new shipper plans to transport 25,000 tonne per month, then increasing to about 50,000 tonnes per month during the second half of 2003, Prime-TASS News Agency reported.

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NUCLEAR ENERGY

Kazatomprom buys out Nuclear Energy Complex

Kazatomprom, Kazakstan's national nuclear corporation, recently bought the assets of bankrupt Mangistau Nuclear Energy Complex (MAEK) at an auction for 112m tenges, Interfax News Agency reported. 
The assets were auctioned in a single lot by the Dutch method, where bids go down. The minimum price for the lot was 111.769m tenges. The Mangyshlak complex went into receivership on January 16th this year with debts of 8.3bn tenges, 4.5bn tenges of it tax. The Mangyshlak nuclear complex was built in the 1960s and it continues to provide the Mangistay region's 315,000 population with drinking water and electricity. The BN-350 nuclear reactor, which has a 20-year service life, went on stream in 1973. It is currently being decommissioned. 
Kazatomprom is Kazakstan's uranium import and export monopoly and is already one of the world's top 10 uranium-mining companies, with 5% of global output. 

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