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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: 283 - (26/07/04)
Nazarbayev bestrides the world stage
Kazakstan is beginning really to count on the world stage. Presidents of France and Kazakhstan, Jacques Chirac and Nursultan Nazarbayev, agreed during a meeting in Istanbul at the NATO summit in early July that Chirac will make an official visit to Kazakhstan in 2005. Chirac and Nazarbayev also discussed bilateral agreements and the situation in Iraq and Afghanistan.
Nazarbayev spoke at a summit of the Euro-Atlantic Partnership Council [EAPC]. The summit was held as part of the NATO forum. Nazarbayev emphasized the EAPC's role in settling international conflicts. He spoke in favour of strengthening the NATO Partnership for Peace programme and confirmed that Kazakhstan is ready to take part in restoring Afghanistan.
Besides that, Nazarbayev spoke in favour of coordinating NATO activities with other institutions and international security organizations, namely, the Shanghai Cooperation Organization, the Collective Security Treaty Organization and the Central Asian Cooperation Organization.
Currently, Kazakhstan is taking part in NATO's Partnership for Peace programme and a programme for planning and analysis. Recently, according to senior officials at the Kazak Defence Ministry, Kazakhstan has been given the Alliance-plus-one format of partnership with NATO.
Industrial output up
The volume of industrial output in Kazakhstan increased 9.4% year-on-year in the first half, the State Statistics Agency has reported. "In January-June 2004, Kazakh industrial enterprises, including small auxiliary enterprises, the household business sector, produced product worth US$12,381,171 in existing prices, representing 109.4% of the January-June 2003 level," an agency press release says.
It says this growth was helped by increased output in the mining industry (11.5%), in processing (7.9%) and in the production and distribution of electricity, gas and water (4.8%). Production growth was posted throughout the country, except in the Akmola region, it says
Energy industry booming
The spectacular success story, however, is in energy, where oil output is growing by 9.4%.
Kazakh Energy and Mineral Resource Minister, Vladimir Shkolnik, insists that Kazakhstan has priority right to buy the British Gas stake in the international consortium Agip KCO, which is carrying out oil exploration work in the Northern Caspian. "We consider that in accordance with the production sharing agreement Kazakhstan is not a third party in relation to members of the consortium that have priority rights. According to Article 6 of the constitution, the right to subsoil resources belongs to the state. This is also set down in the Civil Code, and also in the law on subsoil resources and on oil," the minister said.
He said that these laws were in place when the PSA was signed with Agip KCO for the development of the Kashagan field. "Therefore we consider that we have rights here, and now we are involved in difficult legal dialogue," he said.
The partners in Agip KCO are ENI, ExxonMobil, Shell and TotalFinaElf, each with 16.67% interest, and ConocoPhillips and INPEX, each with 8.33%. BG has announced its withdrawal from the project and the other participants will buy its 16.67% share. However, the Kazakh government announced its plans to acquire this stake at market value in June.
In response to questions from journalists, the minister said that the situation with the arrest for debt by a court in Mangistau region of the Sunkar drilling rig, belonging to the US company, Parker Drilling, is not connected with the republic's negotiations to buy the BG stake. The Sunkar platform is currently in the port of Bautino in Mangistau region and its exploration work was halted a month ago. The company's property will remain under arrest until Parker Drilling pays US$6,225,084 to the republic for violating customs legislation.
Under the PSA, signed for 40 years in 1997 with the Kazakh government, the Agip KCO consortium is carrying out drilling work at a number of sections in the Kazakh sector of the Northern Caspian, the largest of which is the Kashagan field. The consortium plans to start industrial production in 2007-2008.
According to an announcement by Agip KCO, recoverable reserves at Kashagan are estimated at 7 billion - 9 billion barrels, with total geological oil reserves of 38 billion barrels.
The real problem for the Kazak oil industry is not reserves, which are being upped in total all the time and could be anywhere between 16bn barrels and 40bn. Nor is production a problem, it is getting the oil to market. Here pipelines are the key for such a remote country, above all diversifying away from Russia as the sole route out.
Agreement on oil transportation via Azerbaijan prepared by government
The big story here is Azerbaijan. Issues of possible oil transportation through the Caspian Sea through the territory of Azerbaijan were discussed on July 8th, at a meeting chaired by the prime minister of Kazakstan, Danial Akhmetov.
The head of the Kazak government expressed propositions on the Aktau - Baku - Baku - Tbilisi - Ceyhan project, at a meeting with representatives of "KazMunaiGas" NC" JSC. He drew the attention of the negotiating participants to the protection of Kazak interests in the first place. Akhmetov ordered the ministries and other authorities involved to complete the expert work on the draft agreement between the Kazak government and the Azeri government: "On the assistance and support of oil transportation via the Caspian Sea for transit through the territory of Azerbaijan" in a ten-day term.
Summing up the results of the meeting, the prime minister reminded its participants about the importance of work on further development of Aktau sea port as per the programme approved by President Nazarbayev.
Oil pipeline via Iran to the Persian Gulf?
Kazakhstan would like to construct a pipeline through Iran to the Persian Gulf as the main outlet for its natural resources, the country's president said.
Nazarbayev said in an interview with the Financial Times that he thought a southern route for his oil reserves was "the most attractive" both for his country and for U.S. companies that operated there. He said the current political relationship between the U.S. and Iran made such a project impossible, but he was hopeful ties would improve.
"It would be better than Baku-Tbilisi-Ceyhan, better than China, better than Russia," he said, referring to the country's existing infrastructure links. "It would be the best exit for us." His comments came shortly after Kazakhstan agreed details of pipeline links eastwards into China to meet growing energy demands by the Chinese, and he stressed the historical challenges of a landlocked country that had been closely tied to the Soviet Union.
Nazarbayev said one of Kazakhstan's principal demands in the creation of a planned economic zone with Russia, Ukraine and Belarus was also related to natural resources: it sought a reduction in the tariffs charged by Russia for its oil pipelines and railway freight. He said he thought that the four-country zone - which he said accounted for 80 percent of the Soviet-era economy - could begin operations by as soon as next year, which he described as a "pragmatic initiative for economic development".
He defended its benefits both for the region and the rest of the world against suggestions that it represented a re-creation of a Soviet-style political bloc. "Why does the West and the U.S. regard with scepticism and even criticism the fact that the post-Soviet region tries to promote integration?" he said. In spite of criticism of bureaucracy and corruption in Kazakhstan, Nazarbayev stressed his efforts at liberal economic reform and openness to foreign investment. He also re-affirmed his ambition to chair the Organization for Security and Cooperation in Europe in 2008.
S&P revises Kazaktelecom outlook to positive
Standard & Poor's Ratings Services said on June 18th that it revised its outlook on OJSC Kazaktelecom (KTC), the dominant fixed-line telecommunications operator in Kazakstan, to positive from stable. Standard & Poor's affirmed its BB- long-term corporate credit rating on the company. This action follows the progress made by KTC in its operating performance, as well as an improvement in it liquidity position, New Europe reported.
"The outlook revision further reflects the growing local demand for telecoms services, which should enable KTC to overcome uncertainties related to the earlier than expected liberalisation of the long-distance voice services market in Kazakstan, and challenging tariff rebalancing," said Standard & Poor's credit analyst Pavel Kochanov.
KTC's credit quality remains fundamentally constrained by the challenge of turning local telephony into a profitable business. This is due to its vast geographical operating area, a network requiring significant capital expenditure, and an unbalanced tariff structure. Expected liberalisation of the profitable long-distance market in 2004-2005 might weaken KTC's market position and performance, particularly if tariff rebalancing is not implemented consistently.
Other significant credit risks include exchange rate exposure - nearly all of the company's debt is denominated in foreign currencies and demands by the Kazak government (as a majority shareholder) for high dividend payments, which reduce the company's financial flexibility to fund its large capital expenditure requirements.
Nevertheless, KTC continues to benefit from its control of basic fixed-line infrastructure in the country, and fixed-line penetration can potentially grow from the current 15 per cent level. Ahead of market liberalisation, KTC's focus on efficiency and network modernisation positively affects operating fundamentals. The ratings are further supported by KTC's sound profitability. Standard & Poor's said that the credit quality of KTC might improve, provided that full liberalisation of the domestic long-distance and international telephony market is not conducted ahead of tariff rebalancing. This rebalancing will involve increases in local residential tariffs, as well as subsidies from the government to residential customers to support the affordability of basic telecoms services.
"Importantly, KTC's strategy to increase its control over the mobile market is not expected to lead to significant deterioration of credit metrics a primary condition for a rating upgrade," said Kochanov. Finally, dividend policy and liquidity profile will continue to remain important credit drivers for KTC, and any upgrade would therefore reflect a higher degree of comfort in this respect.
KazMunaiGaz to build terminals in Iran
Kazak national oil and gas company KazMunaiGaz and Kaznofta will build two oil terminals in Iran, Chairman of the Kaznafta board of directors, Marken Chaizhunusov, said, Interfax News Agency reported.
Chaizhunusov told Kazak Prime Minister, Daniyal Akhmetov, about agreements his company reached with KazMunaiGaz on launching joint work on projects to build two oil terminals to transport Kazak oil from Iran with a total storage of 150,000 metric tonnes, the Prime Minister's press service said in a statement.
"These terminals will allow for 1.5m tonnes of Kazak oil to be exported to Persian Gulf countries on terms favourable for Kazakstan," the statement read, although it does not specify the project's time frame or other parameters.
Kazakstan currently delivers its oil to Iran under a swap scheme. Iran announced at the end of March that it expects oil supplies from Kazakstan to double under the swap scheme over the next few months. In 2003 oil supplies from Kazakstan amounted to 50,000 bpd (barrels per day), of which KazMunaiGaz accounted for 30,000 bpd ad Canada's PetroKazakstan 20,000 bpd.
KazMunaiGaz plans to supply two million tonnes of oil under the swap scheme in 2004, while PetroKazakstan will supply one million tonnes. Kazakstan supplies oil by tanker through the Caspian to the Iranian port of Neka, and in exchange receives the equivalent at an Iranian port of Kharq in the Persian Gulf.
In turn, PetroKazakstan currently supplies oil to Teheran Oil Refinery by rail only, but plans to set up regular oil supplies to Iran through the Caspian. In exchange the company will receive light Iranian oil in the Persian Gulf.
Kazakstan boosts gas production 42% in H1
Kazakstan raised gas production tentatively 41.6% year-on-year to 9.784bn cubic metres of gas in January-June. The figure included 4,943bn cubic metres of natural gas, an increase of 46.6%, a government official said recently, Interfax News Agency reported.
Subsidiaries of KazMunaiGaz, the national oil and gas company, produced 598.892m cubic metres, 4.3% less year-on-year, including Ozenmunaigaz 554.4m cubic metres, down 4.0% and Embamunaigaz 44.492m cubic metres, down 8.9%.
The TengizChevroil joint venture produced 2.39bn cubic metres, up 10.7%, Karachaganak Petroleum Operating Co (KPO) 3.837bn cubic metres, up 38.2%; and the Tenge joint venture 30.671m cubic metres, down 14.7%. Mangistaumunaigaz produced 99.73m cubic metres and Aktobemunaigaz 1.34bn cubic metres, or 170% more. Gas production in June alone amounted to 1.516bn cubic metres, or 17.2% above target, including 886m cubic metres of natural gas. KazMunaiGaz subsidiaries produced 101.005m cubic metres, including Ozenmunaigaz 94.3m cubic metres and Embamunaigaz 6.705m cubic metres.
TengizChevroil produced 368.342m cubic metres, KPO 703.751m cubic metres, Tenge 3.944m cubic metres and Kazakhoil Aktobe 18m cubic metres in June. Mangistaumunaigaz produced 17.03m cubic metres and Aktobemunaigaz 93.295m cubic
FOOD & DRINK
Kazak food corporation gets loan
The Food Contract Corporation or Prodkorporatsiya, Kazakstan's main grain procurer for the state reserves, has received a loan worth US$105m from Credit Swiss First Boston (CSFB) to buy grain from the 2004 harvest, Kazinvestbank, which organised the loan, New Europe reported.
The Food Contract Corporation has received the largest loan in history given to Kazakstan's agriculture sector, CSFB said in a statement. The two-year loan was extended at LIBOR+2.75% with a one year grace period to pay off the principle debt and interest. Kazinvestbank won the right to organise the loan at an open tender in which six Kazak and international banks took part.
FOREIGN ECONOMIC COOPERATION
Astana and Beijing pledge to promote cooperation
Chinese senior party official, Li Changchun, on June 23rd exchanged views with Kazak Prime Minister, Daniyal Akhmetov, on the all-round development and promotion of mutually beneficial cooperation, Vietnam news agency reported recently.
Li, a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, said China and Kazakstan are mutually complementary in economy and trade and have broad prospects for further development.
The Chinese-Kazak good-neighbourly treaty of friendship and cooperation signed in 2002 has established a legal basis for bilateral ties, while cooperation in various sectors has paved the way for all-round development of bilateral ties, Li added.
Noting that China is Kazakstan's biggest trade partner, Akhmetov said the successful economic and trade cooperation between the two countries has contributed to Kazakstan's economic and social development and laid a solid foundation for all-round development of bilateral ties. He also expressed the hope that both sides could further promote bilateral cooperation in energy, hi-tech sectors and iron ore trade.
Li also had talks with Zharmakhan Tuyakbayev, speaker of the Lower House of the Kazak parliament, and vice president Otan Party. Kazakstan was Li's first stop during his four-nation tour that will take him to the Ukraine, Greece and France, the news agency reported.
Syndicate extends Halyk credit
A syndicate of banks has extended by one year and increased by €50m to €200m a credit for Halyk Savings Bank of Kazakstan, the press reported recently. Halyk CEO Asiya Syrgabekova and representatives from the lead managers Deutsche Bank and Raiffeisen Zentralbank - Ben Dobson and Robert Denks signed the corresponding agreement in Almaty on July 6th, Interfax News Agency reported.
Halyk Savings Bank of Kazakstan received a syndicated credit in July 2003 of €150m for one year, with the possibility of extending the credit. The interest rate on the credit was reduced from Libor plus 2.25% to Libor plus 1.6% and the number of participants in the syndicate increased from 29 to 37. The credit is being used to finance trade operations by large corporate clients of the bank to supply food and light industry equipment to the republic, in addition to road building machinery, equipment for the chemical and oil and gas sectors and also to pay for pre-export financing. Halyk Savings Bank is one of the three largest banks in the republic.
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