Books on Kazakstan
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Update No: 299 - (28/11/05)
Presidential election in December
Kazak President, Nursultan Nazarbayev, is seeking re-election in presidential
elections in December. The result is a foregone conclusion.
The economy has been growing faster than that of any other country in the world,
excepting perhaps that of China. GDP growth has averaged 10% per annum over the
last decade, on the back of massive expansion of the energy sector.
A huge deal, just concluded, is of double significance. It should clinch the
election for Nazarbayev. For it concerns energy and China. 'Vote for me and you
will get the Chinese path' is the subliminal message, which as everyone knows
has been a huge success story.
Canadian court approves CNPC deal
A Canadian court has approved the Chinese oil company CNPC's US$4.18 billion
takeover of PetroKazakhstan (PK), the Calgary-based company said, dealing a blow
to the Russian oil company Lukoil, a rival suitor. PetroKazakhstan said on
October 26th that it intended to close the deal with China National Petroleum
Corp. later in the day.
Lukoil had asked the court to block the deal because it said it had pre-emptive
rights to buy a 50% stake in Turgai Petroleum, a joint venture between Lukoil
CNPC's acquisition of PK, through its wholly-owned subsidiary CNPC International
(CNPCI), was successfully concluded to, after receiving formal approval from the
Court of Queen's Bench, in Calgary, Alberta. On October 18, 2005, PK
shareholders and proxy holders voted 99.04% in favour of the transaction,
clearing the way for CNPC to acquire 100% of the assets of PK for US$55 per
CNCP and PK announced an "Arrangement Agreement" outlining the
proposed transaction on August 22nd 2005. After two months of intense work, all
formal approvals and legal procedures have now been obtained and completed. CNPC
staff are ready to begin working with PK on the hand-over of business
operations. During the transition period, the operations of PK will continue as
usual and PK employees in Kazakstan will be unaffected.
Since its first foray into Kazakstan in 1997, CNPC, China's largest oil and gas
producer and supplier, has strictly followed local laws and regulations as well
as international best practices for the industry. CNPC continues to fulfil that
commitment through the application of advanced and proven technologies.
CNPC has developed good relationships with the Kazakstan government. The
cooperative Aktobe project was hailed by Kazak President Nazarbayev as the
"Model for Sino-Kazakstan Economic Co-operation." Upon acquisition,
and in keeping with these good relations, CNPC will cooperate with KazMunaiGaz
on the operations and management of PetroKazakhstan. Both parties have come to
an understanding and have signed an MOU.
The MOU outlines an agreement whereby CNPC will sell 33% of the PK assets for
US$1.4 billion (US$55 per share) and also agrees to set up a joint venture for
the operation of the Shymkent Oil Refinery.
PetroKazakhstan owns 12 oil fields and exploration licenses in 6 blocks in
Kazakstan, with great exploration potential. CNPC's strength in capital,
technology and management, as well as experience in Kazakstan, will be leveraged
to increase the production capacity of PK and provide a reliable supply to the
Sino-Kazakstan pipeline to be completed by year end. The increased investment in
oil and gas in Kazakstan and the acceleration of PK's development will play an
active role in ensuring a stable supply of oil products in Kazakstan, and in
promoting local economic development.
The success of CNPC's acquisition of PK marks a milestone of CNPC's
international development strategy, and ushers in a new era of cooperation
between China and Kazakstan in the oil and gas sector.
Nazarbayev warns foreign NGOs ahead of presidential election
Nazarbayev cautioned foreign nongovernmental organizations (NGOs) recently
that their activities will be closely watched, in the context of the election.
The Kazak president warned foreign NGOs not to interfere in the country's
politics and threatened to prosecute them if they meddled in the election
campaign. Nazarbayev is obviously concerned about a repeat of the 'colour'
revolutions that have hit other former Soviet states, although he has little
cause for real worry. The economy is doing spectacularly well, growing around
10% per annum on the basis of the vast republic's huge energy and mineral
Speaking to a gathering of civic groups in Astana, Nazarbayev devoted a good
portion of his speech to the work of foreign NGOs. In particular, the Kazak
president emphasised the negative roles he said such groups played in recent
changes of power in Georgia, Ukraine, and neighbouring Kyrgyzstan. Most in the
West would deem them as having had a positive role instead. No matter - as
Kipling put it:
"The West is the West; and the East is the East
And never the twin shall meet."
Except of course they are these days, as in Kyrgyzstan.
Nazarbayev said that in the wake of the so-called 'colour' revolutions in
those countries, Kazakstan's parliament has sought to pass new legislation
placing strict guidelines on the work of foreign NGOs. The proposed law on the
activities of NGOs in Kazakstan was overruled by the Constitutional Council in
August, but Nazarbayev said members of parliament were justified in seeking to
further regulate the role of NGOs.
"They [parliament] have seen the dangers that arose in neighbouring
countries when foreign NGOs insolently pumped in money and destabilized society.
The state was defenceless against this and what is happening now in these
countries you all know very well," Nazarbaev said.
Nazarbayev said NGOs, particularly foreign-based, have no right to finance
political parties, especially during election campaigns. He warned that
authorities would be paying special attention to NGOs ahead of December's
presidential vote. "Our parliament and government will follow closely
foreign and Kazak NGOs' activities to see if they observe our laws and our
constitution," Nazarbaev said.
Kazakstan is not the only country in Central Asia to try to restrict or regulate
the activities of NGOs, but it is the next country in the region to hold
Nazarbayev was among the leading critics of Kyrgyzstan's Tulip Revolution in
March and has said he believes foreign NGOs helped overthrow the government
there. What must have been especially vexing for him was that the former
president Akayev's son is married to his daughter in an echo of tribal dynastic
alliances of pre-communist days.
Some in Kazakstan, such as independent politician Zhaqsybay Bazylbay, see the
issue of NGOs and their activities as a security matter. Bazylbay hopes to run
in the upcoming elections and he sees nothing wrong with placing restrictions on
NGOs in Kazakstan. "I consider the idea of stopping the flow of
[international] grants [to NGOs] as a very correct move," he told RFE/RL.
"Why do you think the president is not right here? If he [the president]
has some good and strong points we have to name them also. I have always
supported and I will support the idea of strengthening our national
But not everyone sees it that way. Seydakhmet Quttyqadam, an independent
political analyst in Almaty told RFE/RL that the monitoring of NGOs has less to
do with security and more to do with keeping the current regime in place.
"Now, all those statements and ideas made by the president, all those
thoughts put forward by his team, are nothing more than an attempt to save their
power. They are trying to shut the mouths of the NGOs by questioning the
legitimacy of their activities," Quttyqadam said.
Dos Koshim, the director of the Independent Observers Network of Kazakstan, has
supported measures to keep foreign groups from meddling in Kazakstan's internal
affairs, but he did not agree that NGOs were responsible for such intrusions.
"Of course, we have to prevent any interference in our internal affairs,
but the stance of authorities that domestic and foreign NGOs in our country and
elsewhere in the world should be put under [their] control is an inconvenient
position. We monitored directly the elections in Georgia, Ukraine, and
Kyrgyzstan and I personally did not see any international NGO spending -- as
they [Kazak authorities] say -- 'tons of money' to bring people out in the
streets," Koshim said.
Meanwhile, Nazarbaev had very different words for Kazak NGOs. Noting that the
government already provides US$3.4 million annually to the country's more than
5,000 NGOs, Nazarbaev said that by 2011 that figure would be "not
less" than US$7.5 million per year.
AVIATION & SPACE
Kazakstan, Russia discuss aerospace complex
Kazak Prime Minister, Danial Akhmetov, met with MiG Russian Aircraft
Corporation's Director General, Alexei Fyodorov, to discuss military, technical
and space cooperation, the Kazak government said, Kazinform reported.
Akhmetov and Fyodorov focused on the use of MiG-31D fighters in the Ishim
aerospace project. Fyodorov spoke about the fighter's characteristics and said
Russia was interested in cooperation with Kazakstan on the launch of
micro-satellites. Akhmetov said Kazakstan intended to involve experts of the
world's leading companies in the project implementation. The Ishim aerospace
complex is designed to launch small civil satellites into low earth orbits. A
MiG-31 fighter will be used to carry a small missile with a 160-kilogram
satellite to the necessary altitude. Having detached from the carrier aircraft,
the missile will reach a higher altitude and put the satellite into low earth
Fitch assigns Turanalem's bank Eurobond BB rating
International ratings agency Fitch assigned Bank TuranAlem's (BTA) and TuranAlem
Finance BV's (TAF) new three billion Euro global medium term note programme
expected ratings of long-term BB for senior unsecured notes with maturities in
excess of one year and short-term B for senior unsecured notes with maturities
of less than one year), the agency said in a press release, New Europe reported.
It has also assigned an expected long-term BB rating to the upcoming three-year
US dollar floating-rate issue, which is the first draw-down under the programme.
The final ratings are contingent upon receipt of final documentation conforming
materially to information already received. Public issuance under the programme
will be rated separately. Apart from providing for the issuance of senior
unsecured notes, the programme provides for the issuance of subordinated notes,
the ratings of which would probably be lower than those of senior unsecured
notes. Likewise, the programme permits the issuance of structured notes, whose
ratings may differ from those assigned to non-structured notes, the release
said. Senior notes issued by TAF under the programme are unconditionally and
irrevocably guaranteed by BTA, rated long-term foreign currency BB/Stable,
long-term local currency BB+/Stable, short-term B, Individual C/D, Support 3,
and proceeds from such notes will be deposited with BTA. Proceeds from
subordinated notes issued by TAF will be on-lent to BTA under subordinated loan
Senior notes issued by BTA under the programme and BTA's guarantees of senior
notes issued by TAF, will rank at least pari passu with all present or future
unsecured senior obligations of the bank, save those preferred by relevant
provisions of law and of general application. Under Kazak law, the claims of
retail depositors rank above those of other senior unsecured creditors.
At end of the year, retail deposits accounted for 14 percent of BTA's total
liabilities, according to the bank's International Financial Reporting Standards
(IFRS) accounts. The terms and conditions of notes issued under the programme
contain a cross default clause and a negative pledge clause, the latter of which
allows for a degree of securitisation by BTA.
Should any securitisation be undertaken, Fitch comments that the nature and
extent of any overcollatesalization would be assessed by the agency for any
potential impact on unsecured creditors. Covenants also include restrictions on
mergers and consolidations by BTA. The terms of each issue of notes under the
programme will state whether the issuer or noteholders enjoy call or put
options, respectively, in regard to the notes. No such options will apply to the
upcoming debut issue.
Fitch assigns Kazkommertsbank Eurobond rating
International ratings agency Fitch assigned Kazkommerts International B.V.'s new
1.5 billion Euro guaranteed debt issuance programme expected ratings of
long-term 'BB' for notes with maturities in excess of one year) and short-term B
for notes with maturities of less than one year. It has also assigned an
expected Long-term BB rating to the upcoming debut 10-year issue under the
programme, New Europe reported.
The notes under the programme are unconditionally and irrevocably guaranteed by
Kazakstan's Kazkom-mertsbank ("KKB"), rated long-term 'BB'/Stable,
short-term 'B', Individual 'C/D', Support 3. The final ratings are contingent
upon receipt of final documentation conforming materially to information already
received, the release said. The notes of each series will rank at least pari
passu with all present or future unsecured and unsubordinated obligations of the
issuer and the guarantor, save those preferred by relevant provisions of law and
of general application.
Under Kazak law, the claims of retail depositors rank above those of other
senior unsecured creditors. In the first half of the year, retail deposits
accounted for 10 percent of KKB's total liabilities, according to the bank's
International Financial Reporting Standards accounts.
Covenants prevent KKB entering into transactions of five million Euro or more on
other than market terms and restrict dividend payments on ordinary shares to 50
percent of net income. The terms and conditions of the notes also contain a
cross default clause (triggered by default on indebtedness of 10 million Euro or
more) and a negative pledge clause, the latter of which allows for a degree of
securitisation by KKB.
Should any securitisation be undertaken, Fitch comments that the nature and
extent of any overcollateralisation would be assessed by the agency for any
potential impact on unsecured creditors. The terms of each issue of notes will
state whether the issuer or note holders enjoy call or put options,
respectively, in regard to the notes. No such options will apply to the upcoming
KKB was the largest commercial bank in Kazakstan by IFRS assets at end of the
year and has top three positions in all major market segments. One individual
controls a majority stake in the bank.
The European Bank for Reconstruction and Development is a minority shareholder
and actively involved in board-level decision making. Fitch also assigned KKB's
upcoming Tier 1 capital issue an expected rating of B+.
Kazakstan to become leading oil, gas exporter by 2012
Kazakstan plans to become one of the top ten hydrocarbon exporters in the world
by 2012, Kazak president, Nursultan Nazarbayev, said at the 21st, extraordinary,
congress of the Federation of Kazak Trade Unions in Astana on October 31st,
reported Interfax News Agency.
He said that by that time "the overall volume of industrial production in
the republic should more than double." Nazarbayev also said that the share
of industrial production "in the structure of GDP would increase 40 per
cent by the start of the next decade, compared with 2005." Nazarbayev said
that a target has been set of becoming one of the 50 most developed countries in
the world over the coming years. "The oil and gas sector and the entire
extraction industry will become the main donor for achieving this task," he
China's CNPC announces takeover of PetroKazakstan
The China National Petroleum Corporation (CNPC) said recently it had completed
the takeover of Canadian-registered PetroKazakstan in a deal reportedly worth
about US$4.2 billion, New Europe reported.
A Canadian judge ruled out a claim to an interest in PetroKazakstan by Russia's
LUKoil, giving CNPC "unconditional" leave to go ahead with the
takeover, CNPC said. "The transaction has been completed," the
official Xinhua news agency quoted CNPC officials as saying. PetroKazakstan
shareholders approved the deal after CNPC, China's largest oil producer,
reportedly secured the endorsement of Kazakstan's government by agreeing to sell
one-third of PetroKazakstan to state-owned KazMunaiGas.
Chinese Premier Wen Jiabao and Kazak Prime Minister Danial Akhmetov gave their
"strong support" for the deal between CNPC and KazMuniGas at a meeting
in Moscow, the agency said.
CNPC reportedly bid US$55 a share for PetroKazakstan in August, some 21 per cent
over market value and considerably higher than a reported rival bid by India's
Oil and Natural Gas Corporation (ONGC).
Ownership of the Calgary-based PetroKazakstan, which controls about 12 per cent
of the oil production in Kazakstan, is part of a push by Chinese oil companies
to secure worldwide energy resources in light of increasing demand in China,
second only to the US in oil consumption.
Kazakstan has access to as much as 3 per cent of the world's oil reserves, and
the purchase fits in with CNPC's plans to build a pipeline for the transport of
oil from Kazakstan to China.
The takeover will be made by CNPC International (CNPCI), a wholly-owned
subsidiary of CNPC, ranked 10th among the world's top 50 oil companies with
operations in more than 20 countries and annual production of 35 million tonnes
Kazakstan boosts oil refining 14% in 9 months
Oil refining in Kazakstan totalled 8.139m tonnes in the first 9 months of the
year, up 14% from the same period in 2004, a government spokesman said, Interfax
News Agency reported.
Refining in September amounted to over 916,000 tonnes. The Pavlodar and Atyrau
refineries increased processing by 19% and 38% to 2.538m and 2.754m tonnes
respectively. PetroKazakstan Oil products (formerly Hurricane Oil Products)
raised refining by 0.7% to 2,864m tonnes. In September, these refineries
processed 345,700 tonnes, 262,800 tonnes and 307,990 tonnes of crude
respectively. Production of gasoline in Kazakstan grew 19% in the first 9 months
to 1.696m tonnes, including 224,370 tonnes in September. The Pavlodar refinery
produced 665,140 tonnes in January-September (up 21%), with production of
620,550 tonnes at PetroKazakstan (up 4%) and 410,100 tonnes at Atyrau (up 44%).
Diesel production totalled 2.459m tonnes in the 9 months, up 15% year-on-year,
including 301,800 tonnes in September. The Pavlodar refinery produced 739,000
tonnes, up 198%, PetroKazakstan produced 952,000 tonnes, up 86%, and the Atyrau
refinery produced 768,000 tonnes, up 22%. Production of aviation kerosene
dropped 23% to 169,060 tonnes in the 9 months, and 27,700 tonnes in September.
Kazakstan-Sweden plan mutual investments protection
The government of Kazakstan recently submitted a draft law on ratification of
the agreement between the governments of Kazakstan and Sweden on encouragement
and mutual protection of investments, inform.kz website reported.
The agreement was reportedly endorsed by the governments during the official
visit of the president of Kazakstan, Nursultan Nazarbayev, to Sweden during
October. Former minister of industry and trade, Adilbek Djaksybekov, signed it
on behalf of Kazakstan.
Diplomats of both nations certified the signing as a milestone in the
development of Kazakstan's and Sweden's relationship, revealing great
opportunities to stimulate investing in the two states national economies.
Sweden ranks among the largest investor states for Kazakstan, according to
official data. External turnover of the states (ignoring unorganised trade) in
2000 made US$1.1 million, in 2001 it reached US$1.5 million, in 2003 it hit
US$6.8 million, and for January-September 2004 it soared US$1.9 million,
official statistics showed.
The Kazak government said in a statement that the ratification would
significantly contribute to the investment climate and further development of
mutual benefit trade and economic cooperation with Sweden.
However the said statement noted that the implementation of the ratification was
still pending official formalities. "It takes effect the first day of the
second month following the last written notification received through the
diplomatic channels on carrying out of requirements by the parties necessary for
its effectiveness in conformity with Article 11 of the treaty," it noted.
Kazak gold group to list in UK
A gold mining company from Kazakstan has announced plans to list on the London
Stock Exchange with a targeted market capitalisation of more than £500m.
Kazakhaltyn, one of the country's largest gold miners, planned to raise at least
£100m by the end of November, the Financial Times reported.
It follows successful London floatation by Kazakmys, the copper group, which
raised about £700m, and will add to the number of companies from Asia, Russia
and eastern Europe that have London listings.
About 25 per cent of the family-owned KazakGold, Kazakhaltyn's parent is to be
sold via a placing by ING.
Along with Peter Hambro Mining, KazakGold will be one of London's largest listed
Its gold output is relatively low but it owns mining rights to areas with the
largest gold reserves in Kazakstan and says it will become a significant
producer from next year.
Kazakhaltyn has been mining gold in northern Kazakstan since the 1920s. Kanat
Shaikhanovich Assaubayev, a geology professor, bought the then bankrupt company
from the Kazakstan government in 1999. Now chief executive, he paid about US$1m
(£560,000) for the assets.
Kazakhaltyn's three underground mines - Aksu, Bestyube and Zholymbet - had been
closed for three years, hit by low gold prices and a lock of investment.
The staff had not been paid during this time and Aidar Assaubayev,
vice-president of the group and the chief executive's son, said that first task
was to settle their back pay and buy back some of the mining equipment that had
been sold. The mines were re-opened in 2000.
At their pre-bankruptcy peak, the three mines were producing 244,000 ounces of
gold a year.
Kazakhaltyn is continuing to mine the underground gold seams but will focus on
building larger open-cast mines nearby and processing large amounts of lower
Kazakhaltyn aims to produce 1m ounces of gold a year by the end of the decade.
The company is a family affair. Mr Assaubayev Senior's wife manages community
relations and another of their sons is the chief operating officer, in charge of
developing new mining technology. The family is not selling any of its stake in
the Kazak gold listing. KazakGold plans to list in Kazakstan next year.
KazakGold has recruited several non-executive directors from outside Kazakstan,
to bring corporate governance in line with UK standards, Lord Daresbury, former
chairman of Highland Gold and an adviser to the Fleming family investment group,
has been hired as KazakGold's non-executive chairman. David Netherway, the chief
executive of Toronto-listed Afcan Mining Corp, is a non-executive director.