Books on Kazakstan
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Update No: 309 - (26/09/06)
The Kazak conundrum
Kazakstan is the heart of former Soviet Central Asia. It is an enormous place,
the size of Western Europe, which only looks small on the map in comparison to
Siberia. It is of course the largest of the five 'stans,' with 60% of FSU
mineral resources. It has a dictatorial regime, as they all do - but far from
the most repressive.
It is trying to give a lead to the others as they struggle to come to terms with
modernity. It has the massive advantage of a booming economy- GDP has been
growing at more than 10% per annum in this decade, based on the exportation of
energy and other minerals.
The Astana-Washington axis
Washington is nurturing its loose alliance with oil-rich Kazakstan, the richest
and most stable country in the region. Vice President Dick Cheney visited in May
and praised President Nursultan Nazarbayev's record, despite what many analysts
say is his authoritarian style.
Nazarbayev is neither a nutcase like President Niyazov of Turkmenistan, nor a
sadistic brute like President Karimov of Uzbekistan, reasons why he is welcome
in the West. He came to Washington in September for the first time for five
years, a poignant reminder of 9:11.
In the wake of the September 11th 2001 attacks, the US forged ahead with
alliances throughout Russian-dominated Central Asia. Kazakstan became a close
ally there. It even sent a small unit to join the coalition occupying Iraq.
The Bush administration appears to duly appreciate the contributions made by the
Kazak peacekeeping battalion (Kazbat) that was deployed to Iraq in 2003 and also
the recent assurances by Deputy Kazak Defence Minister Bolat Sembinov that
Kazakstan would not withdraw Kazbat from Iraq. Nazarbayev did not miss the
opportunity to seek active US support in Kazakstan's drive for WTO membership
and chairmanship of the OSCE.
As Washington's most reliable partner, in Central Asia over the last five years,
Astana should get substantial support from Bush as a reward for this loyalty.
Kazakstan stands out as the only country amongst its Central Asian neighbours
that sent troops to a Muslim country, Iraq, more to please an important funder
than to defend the cause of peace in a distant land. But the non-combat mission
assigned to Kazbat, sparked little criticism from other Muslim countries,
including Astana's Central Asian neighbours. Washington should also acknowledge
Kazakstan's contributions in Afghanistan, such as training local personnel and
providing financial support for the Afghan government.
The US push into Central Asia is foundering
At first, the US push into Central Asia appeared to have few limits.
Washington established military bases in Kyrgyzstan and Uzbekistan from where it
could easily strike Afghanistan, while Russia, the long-time regional master,
could only look on.
These alliances in the name of Washington's "war on terror" made for
some unusual bedfellows. Not only did former communist states welcome US troops,
but Washington ignored the region's authoritarianism, including what human
rights experts describe as outright repression in Uzbekistan.
"But this period did not last long and it ended as soon as the US reverted
to its other agenda - the mission to spread democracy throughout the
world," said Dosym Satpaiyev, from the Risk Assessment Group.
The tide is turning. "In five years, (US) influence in Central Asia has
developed incredibly and now we are seeing a major reversal."
A turning point, Satpaiyev said, was the bloody repression in May 2005 in the
eastern Uzbek town of Andijan, where human rights organisations say several
hundred people were gunned down by troops.
Washington and its European allies piled pressure on Tashkent, while the Uzbek
government claimed that the trouble in Andijan had been stirred up by the US and
Islamist militants. Soon after, Tashkent ordered the closing of the US base on
its soil and expelled a number of US-funded non-profit group.
Russia swiftly began to restore its temporarily lost links. "Moscow
profited from the situation after having been forced for four years to watch its
influence collapse along its borders," a Western diplomat in Tashkent said
on condition of anonymity.
Central Asian nations sign nuclear pact in Astana
Five nations in Central Asia have signed a nuclear-free-zone treaty that
commits the region's rich uranium deposits to peaceful uses but leaves open
loopholes that could allow Russia to transport nuclear weapons into Central
It is the first mutual security pact among all five Central Asian nations, a
group that has often quarrelled about security issues.
By adopting the legally binding nuclear-free pact, the signatories - the former
Soviet republics of Kazakstan, Kyrgyzstan, Uzbekistan, Tajikistan and
Turkmenistan - agreed on September 8th that they would neither acquire nuclear
weapons nor allow them within their borders. But the treaty does not cancel an
agreement that the Central Asian nations signed in 1992 that allowed Russia to
transport and deploy nuclear weapons in Central Asia under certain
The United States, Britain and France boycotted the signing ceremony because
they objected to that aspect of the treaty, said embassy officials and
participants in the negotiations. Only Russia and China sent representatives to
Kazakstan to observe the signing.
Central Asia contains no nuclear weapons, but Kazakstan was home to the world's
fourth-largest nuclear missile arsenal in the wake of the Soviet Union's
dissolution, with 176 missiles. Kazakstan voluntarily decommissioned its nuclear
weaponry in the mid-1990s.
Nuclear-free zones often are opposed by the large nuclear powers because they
can limit the movement of military assets and expose military bases to intrusive
Central Asia: Japanese premier visits energy-rich region
Japanese Prime Minister Junichiro Koizumi travelled to Central Asia on
August 28th for the first visit to the region ever made by a Japanese head of
The visit to Kazakstan and Uzbekistan is the culmination of more than a decade
of effort by Japan to forge stronger links with the Central Asian republics.
Tokyo's policy of economic engagement, coupled with low-profile political
encouragement, has won praise from Central Asian leaders, leading Uzbek
President Islam Karimov to describe Japan as a role model.
Japan has given well over US$2 billion in economic and social aid to Central
Asia since those republics gained independence from the Soviet Union.
Energy From A Stable Source
Of course, Japan's great need for energy resources makes Central Asia an
attractive area to court. "Japan is very reliant upon imports of fossil
fuels, oil, etc., and Japan has to look for as many markets as it can, to ensure
that it can continue to have a good flow of resources, and these [Central Asian]
nations obviously provide a further opportunity for that," notes
Christopher Hood of London's Royal Institute of International Affairs.
Presently, some 80 per cent of Japanese oil comes from the Middle East, a region
threatened by war and instability.
Japanese Ambassador to Kazakstan Tetsuo Ito has made clear Japan's preoccupation
with Central Asian energy, saying, "We attach great importance to the
abundance of natural resources in this region as a stable source of energy
Tokyo realizes that in order to secure resources successfully in the long term,
it needs stable conditions in the exporting countries. Koizumi has shaped
Japanese policy with this in mind, encouraging regional cooperation among
Central Asian countries to increase their prosperity and therefore their
Beating Out Asian Rivals
Analyst Hood sees Koizumi's trip as part of Japan's effort to be in a good
position as competition increases with China and South Korea for Central Asian
oil and gas.
"Japan is trying to get in early to develop good relationships, so that
basically it will not have all its eggs in one basket," he says.
Tokyo is also interested in the possibility that cooperation in Asia could in
future years lead to the formation of an Asian common market, like that provided
in Europe by the European Union.
"The creation of a common market in Central Asia would be very profitable
for Kazakstan especially, and for other countries, including Japan,"
Ambassador Ito added..
Also, analyst Hood says the diplomatic row that has broken out between Japan,
China, and the Koreas over Koizumi's visits to a World War II shrine has left
the Central Asian states undisturbed.
"I don't think they feel themselves to be threatened in the same way [as
China and the Koreas] by a strong Japan, and I think in many respects that they
probably benefit more from a strong Japan," Hood says.
Japan Takes Independent Path
Political analysts see Tokyo's engagement with Central Asia as a possible
counterweight to the growing influence of the Shanghai Cooperation Organization
(SCO), the regional grouping comprising China, Russia, and all the Central Asian
states except Turkmenistan.
Although lacking the long-time influence of Russia over Central Asia and the
immediacy of China's presence, Japan has the leverage of its economic and
financial power and is determined to secure a share in the region's natural
resources, which would dilute China's possible dominance of the oil and gas in
Tokyo also aims to help swing the delivery possibilities for Central Asian
energy southward -- away from Russia and China.
Kazakstani assassination trial concludes with guilty verdicts, questions
Guilty verdicts in a highly publicized trial in Kazakstan are not putting an
end to the question: who killed opposition leader Altynbek Sarsenbayev?
Government critics suggest that officials were eager to wrap up the trial so
that it would not complicate President Nursultan Nazarbayev's upcoming visit to
A Kazakstani court announced the convictions of the 10 defendants in the
Sarsenbayev murder trial on August 31. The man alleged to have contracted the
murder, Yerzhan Utembayev, the former chief of staff of the Kazakstani senate,
received a 20-year prison term. The court gave a death sentence to the supposed
killer, Rustam Ibragimov, a former Interior Ministry employee. However, the
sentence is unlikely to be carried out given Kazakstan's moratorium on capital
punishment. The eight other defendants - all linked to Kazakstan's security and
interior forces - received prison sentences ranging from three to 20 years.
Sarsenbayev, along with his driver and bodyguard, were killed execution-style in
the mountains outside Almaty in February. Since then, the case has been a source
of political tension in the energy-rich Central Asian state. Sarsenbayev, a
one-time Nazarbayev lieutenant, had emerged as a leading opposition figure
following a very public split with the president.
According to the verdict read out at the trial's conclusion, Utembayev
contracted Ibragimov to murder Sarsenbayev in revenge for a newspaper article
making unflattering revelations about him. Ibragimov - who reportedly received
US$60,000 for the job - then set up a death squad comprising rogue members of
elite Kazakstani anti-terrorism units. The squad supposedly kidnapped
Sarsenbayev and his aides, and delivered them to Ibragimov, who proceeded to
kill the three men.
The version of events set out in the court verdict is almost identical to the
theory put forward by Interior Minister Baurzhan Mukhamedzhanov two weeks after
the murders occurred. Much of the prosecution's case rested on Utembayev's early
confession, backed up by a letter he, as a senior official, wrote to Nazarbayev
after his arrest. In the letter, Utembayev said that his antipathy for
Sarsenbayev prompted him to order the killing. Utembayev admits writing the
letter, but now disavows its contents, saying he wrote it under duress. During
the trialm, both leading defendants caused a sensation by recanting their
confessions, and, instead, alleging a conspiracy involving top-level political
In early August, Ibragimov implicated several high-level officials in the murder
plot, including Nartay Dutbayev, the former security service chief who resigned
over the revelation that security commandoes were involved in the murder, and
Senate speaker Nurtay Abikayev - the man constitutionally in line to take power
if anything happens to the president. Sarsenbayev's murder, Ibragimov claimed,
was part of an elaborate plan to overthrow Nazarbayev, who is scheduled to
travel to Washington later this month for an Oval Office meeting with US
President George W. Bush.
Dutbayev and Abikayev were not called to give evidence in court. Just over a
week after the allegations were made, the judge abruptly halted the trial at the
prosecution's request and began the summing up, without allowing time for the
introduction of further evidence. The decision prompted Sarsenbayev's relatives
to boycott the trial. An aide to Abikayev, Dastan Kadyrzhanov, cast doubt on
Ibragimov's credibility. "This looks like another stage in a planned
campaign to discredit a person who is part of the country's leadership,"
Many observers - including opposition leaders, journalists and relatives of the
victims - have found the court's version of events to be implausible. At an
opposition-sponsored public hearing August 29, Sarsenbayev's brother, Rysbek,
said that the court "has unfortunately not discovered on whose conscience
lies the blood of" the murdered trio.
Views on Ibragimov's coup-attempt allegations vary. Many have questioned why men
whose power rests on Nazarbayev would conspire to carry out a coup. Opposition
journalist Sergey Duvanov speculated that Sarsenbayev could have been abducted
in order to force him to discuss a coup plot and film him doing so, with a view
to discrediting the moderate opposition. "This was an act of provocation
against the opposition; they wanted to spread terror against… the
opposition," Duvanov said at the August 29 hearing.
Other speakers at the hearing voiced alarm that most of those convicted had
close links to Kazakstan's security establishment. "A group set up to fight
terrorism was used as a death squad," Rysbek Sarsenbayev said. The security
services and police "present a major danger to society and the state,"
added Tolegen Zhukeyev, a co-leader of the True Ak Zhol opposition party.
Zhukeyev was among those to characterize the murders as an "act of
political terror." Participants at the hearing called for a new trial to be
held in Almaty. The just-concluded trial took place in the town of Taldykorgan,
about a three-hour drive from Almaty. Relatives of the victims and opposition
leaders maintained the trial's remote location was designed to limit public
scrutiny of the proceedings.
There has been little official comment on the case and tellingly state media has
barely reported on the trial! Many have questioned the state's apparent
unwillingness to investigate allegations of higher-level involvement in the
murders. This "indicates that people from Nazarbayev's closest entourage
are behind the murders," Duvanov suggested at the hearing.
Daewoo could start producing buses, parts
South Korea's Daewoo Bus Global Co is considering the possibility of setting up
bus production in the eastern Kazak city of Semipalatinsk, Daewoo Bus Vice
President, Yaung Jae Choi, said at a meeting with Nurlan Omarov, head of the
municipal administration. Production could amount to 1,000 buses per year and
could be set up on the core of a former steel plant that has recently undergone
renovations, he said. Daewoo would also like to produce automotive parts for
buses in the region. "A project aimed at setting up a car factory is
currently being carried out in Semipalatinsk. In accordance with this project,
production of Chinese mini-trucks is slated to begin on the core of the steel
plant in the fall and the second goal is to produce Russian PAZ buses.
Production will be launched at the end of this year or the beginning of next
year. The third goal would be the production of Korean Daewoo buses in the
middle of next year, if we keep pace, or the end of next year," Omarov
said, Interfax News Agency reported.
"The company produces its products in a number of countries and will now
set up production in Kazakstan. According to the information of our guests,
they've received offers from Russia, Ukraine and Azerbaijan. But we are glad
that they chose us," he said.
Fitch affirms Bank TuranAlem at foreign currency IDR BB+
Fitch Ratings has affirmed the ratings of Kazakstan's Bank TuranAlem (BTA) at
foreign currency Issuer Default BB+, foreign currency Short-term B, local
currency Issuer Default BBB- (BBB minus), local currency Short-term F3, Support
3 and Individual C/D, the ratings agency said in a press release, New Europe
The Outlooks on the Issuer Default ratings (IDRs) are Stable, the release said.
The IDR, Short-term and Support ratings reflect the moderate probability of
support being forthcoming in case of need, from the Kazak authorities. The
individual rating reflects the risks of the bank's rapid loan growth and ongoing
CIS expansion, significant loan concentrations and certain weaknesses in the
operating environment. However, it also considers BTA's substantial domestic
franchise, reasonable performance and liquidity, quite diversified funding and
fairly low market risk appetite. The support floors for BTA's IDRs depend on the
sovereign's capacity and prosperity to provide support in the event of need.
Upside for the support floors is capped at BBB- (BBB minus), given Fitch's view
of the authorities' prosperity to support banks of BTA's size. The Stable
Outlooks on BTA's IDRs reflect those on the sovereign's IDRs.
Moody's upgrades Kecic's insurance strength rating
Moody's Investors Service has upgraded the insurance financial strength rating
of the State Insurance Corporation for the Insurance of Export Credit and
Investment of Kazakstan (Kecic) to Baa1 from Ba1, Moody's said in a press
The outlook on the new rating is stable. Headquartered in Almaty, Kazakstan,
Kecic was founded in August 2003 and started operations in February 2004. It is
100 per cent owned by the Republic of Kazakstan and is mandated to be the
primary provider of export credit insurance in the country, both commercial and
political. In addition, Kecic is writing inward reinsurance business in the
Kazak market. Commenting on the upgrade, Moody's said that a key factor that
added positive pressure on the rating was the upgrade of Kazakstan's foreign
currency bond rating to Baa2 from Baa3 on June 9th, 2006.
Fitch changes Kaztramoil's outlook to positive
Fitch Ratings has changed the Kazakstan-based oil pipeline monopoly company JSC
KazTransOil's (KTO) Outlook to Positive from Stable, the agency said, New Europe
KTO's Issuer Default rating (IDR) is affirmed at BB+ and Short-term rating at B.
The Positive Outlook foresees a gradual improvement in KTO's credit ratios as
the company begins to generate revenue from the newly completed Atasu-Alashankou
pipeline and further reduces debt. Higher cash flow from operations, combined
with lower capital expenditure, is expected to return the company to a positive
free cash flow position in 2006.
KTO's free cash flow deteriorated in 2005 as a result of costs incurred by its
joint venture with China's CNPC, the Kazakstan-Chinese pipeline LLP, for the
construction of the Atasu-Alashankou trunk pipeline. KTO's IDR is supported by
the strategic importance of the company to Kazakstan's oil transportation
infrastructure. It owns and operates 6,486km of oil pipelines and controls at
least 60 per cent of the total oil transportation volume. KTO, which is
classified as a natural monopoly in Kazakstan, charges its customers a flat
tariff for shipments through its pipeline. KTO has had stable tariffs since
2000, with an average of 2,413 tenges per tonne per 1,000km. For supplies to the
domestic market, the company uses a discount ratio of 0.54. The amount of the
tariff is set by the Anti Monopoly Agency of Kazakstan and is based primarily on
KTO's costs for maintaining and operating the pipeline. As such, this regulated
tariff regime means upside profit growth for the company is limited. However,
Fitch notes the expected additional earnings from the new Atasu-Alashankou
pipeline, as well as from an increase in water transportation tariffs. The
additional crude oil transportation volumes of around 10 million tonnes should
help to support the company's already existing customer base, which presently
guarantees transit of up to 20 million tonnes of Kazakstan's oil via the Russian
Transneft pipeline system per year. Of this volume of oil, 15m tonnes are
allocated to the Atyrau-Samara pipeline and up to five million tonnes to the
Makhachkala-Tikhoretsk pipeline. KTO's financial policy can be categorised as
AES to invest US$1bn in assets over 7 years
US energy corporation AES is planning to invest US$1bn over the next seven years
in its assets in Kazakstan, said John Abbas, AES vice president for Kazakstan,
Russia and Central Asia.
AES is planning to invest about US$1bn in Ekibastuz over the next seven years,
Abbas told an international conference on bilateral cooperation between
Kazakstan and the US. Abbas said once again that AES is concerned that
uncertainly in regulating the electricity market and imperfect Kazak legislation
could hinder the company's investment plans.
Kashagan project may be delayed until end 2009
The Kashagan oil field in Kazakstan's sector of the Caspian Sea might not go
commercially on stream until the end of 2009 or start of 2010, Kazak Energy and
Mineral Resources Minister Baktykozha Izmukhambetov told reporters.
"Perhaps it (commercial oil production at Kashagan) can be expected at the
end of 2009 or early 2010," Izmukhambetov said.
He said "technological processes" would be responsible for the delay.
"This is a huge, unique field. Kazakstan has never done anything like this
(large-scale commercial oil production in the Caspian). And there are other
issues to do with safety at the site and some additional technological
considerations have arisen in connection with this. Additional islands might
even have to be built," the minister said.
The AGIP KCO consortium, which is developing Kashagan, is so far declining to
comment on the start date. The consortium has said Kashagan contains to least
seven-nine billion barrels of recoverable oil, and overall geological resources
of 38 billion barrels.
KazMunaiGaz to raise more than £1bn on LSE
KazMuniaGaz, Kazakstan's state oil company, has announced its intention to
launch an international listing on the London Stock Exchange and domestically on
the Kazak Stock Exchange in the autumn, the Financial Times reported on Sept
The state is looking to raise significantly more than £1bn for its onshore
exploration and production unit through a listing of up to 40 per cent of the
business, according to bankers familiar with the sale.
The float will provide investors with an opportunity to buy into one of the
fastest expanding oil industries in the world. Revenues at the exploration and
production company, known as KMG E&P, have risen from US$1.2bn in 2003 to
US$2.6bn (£1.4bn) in 2005 while profit before tax has jumped from US$275m to
KazMunaiGaz is the third-biggest oil producer in the central Asian former Soviet
republic with proved and probable oil reserves of 1.515bn barrels at the end of
2005. It pumps an average daily volume of 188,000 barrels in the Atyrau and
Mangistau regions of western Kazakstan and is engaged in exploration activities
in the same regions.
Many of KMG E&P's fields are said to be mature by industry observers.
Offshore acreage in the Caspian Sea, where the real potential for production
growth lies, has not been included in the unit's portfolio.
The company has appointed three western independent non-executives to the board
to improve the perception of corporate governance - Paul Manduca, a
non-executive director at a number of UK companies; Christopher Mackenzie, an
investment banker; and Eddie Walshe, who has experience at BP and Britich Gas.
Banks underwriting the agreement are ABN Amro, Credit Suisse and Visor Capital,
a Kazak investment bank.
Russia, Kazakstan agree terms for Orenburg venture
Russia and Kazakstan have agreed the terms of an intergovernmental agreement on
cooperation to set up a joint venture based on Orenburg Gas Processing Plant.
The Russian governments press service said that Russian Prime Minister, Mikhail
Fradkov signed the corresponding directive on August 12th. The Russian Industry
and Energy Ministry has been ordered to sign the corresponding agreement on
behalf of the Russian government. The Kazak Energy and Natural Resource Ministry
will coordinate the implementation of the agreement on the Kazak side. According
to the document, authorised organisations from both countries - Gazprom and
KazMunaiGaz - will set up a company with equal participation based at Orenburg
Gas Processing Plant, New Europe reported.
Nazarbayev, Putin to sign deal to fund oil, gas processing JV
Russia and Kazakstan intend to sign a final agreement to set up an oil and gas
processing joint venture in October, Kazak President, Nursultan Nazarbayev, said
when meeting with Russian President, Vladimir Putin, in Sochi recently. "We
will sign a deal on gas. It is virtually ready, and there are only a few details
left to settle," he said, New Europe reported.
In addition, the two countries plan to sign an agreement on simplified border
crossing and the establishment of joint customs checkpoints at a meeting of the
chiefs of border agencies in Uralsk, Nazarbayev said. The signatories to the
Common Economic Space have drawn up 38 documents, which "could be adapted
to the EurAsEC (the Eurasian Economic Community), and then they could start real
integration," Nazarbayev said.
Putin noted in reply that relations between the two countries are developing
quite efficiently, including in the humanities area. The Russian and Kazak
Foreign Ministries are also expanding cooperation "to coordinate their
positions on the key international problems," he said.
"I really hope that Kazakstan will play its role on the international
arena," Putin said, adding that he implied possible Kazakstan's presidency
at the Organisation for Cooperation and Security in Europe (OSCE). "We will
provide all possible support to Kazakstan's candidacy," he said.