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Books on Kazakstan
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Update No: 315 - (29/03/07)
The travails of tyrannical power in an oil-rich state
The death in December of President Saparmurat Niyazov of Turkmenistan came as a
shock to President Nursultan Nazarbayev of Kazakstan. It is not that he liked or
admired the Turkmen crackpot. Indeed, he took him to be exactly what he wants to
avoid. But it showed how fleeting is all temporal power and reminded him that
there will be a succession problem one day in Kazakstan too.
The 'stans' are interdependent and instability in one threatens it in others.
The situation in Kyrgyzstan two years on from the Tulip Revolution is hardly
re-assuring either, with new troubles brewing.
The Kazak regime has the advantage of a massive oil and commodities boom. GDP is
growing at around 10% per annum. But this is creating scope for enormous
corruption. Kazakstan is in the Nigeria league for corruption. Scandals are
implicating the president's extended family and entourage at a most sensitive
time as various huge Kazak flotations are being made on the London Stock
Exchange(LSE).
Political reshuffle involves president's son-in-law
It is in this disturbing context that President Nazarbayev on February 9th
abruptly removed his son-in-law, Rakhat Aliyev, as deputy foreign minister and
dispatched him to Vienna to serve as Kazakstani ambassador to Austria. The move
occurred days after Aliyev became embroiled in a controversy over the
disappearance of two former bank executives.
The presidential press service provided no reason for Aliyev's sudden departure
for Vienna. Aliyev, 44, put a positive spin on the move, saying he would act as
a diplomatic troubleshooter to advance Kazakstan's effort to chair the OSCE.
"The president is sending me as ambassador to Austria and the OSCE to solve
this task," Aliyev told the Kazakstan Today news agency. It will be
Aliyev's second diplomatic tour in Austria. He first served as a diplomat in
Vienna from 2002-2005. That appointment followed a political scandal in which
several officials accused Aliyev of plotting to unseat Nazarbayev as president.
Aliyev's departure comes amid an ongoing investigation into suspected financial
impropriety at one of Kazakstan's leading banks, Nurbank. The affair has plunged
the country's financial sector into controversy. Aliyev is perhaps the bank's
highest-profile shareholder, and in connection with the financial probe, he
adamantly denied allegations of unsavoury business practices.
The accusations surfaced in early February, when the wives of two former senior
Nurbank managers claimed their husbands had disappeared. The former chairman of
the board, Abilmazhen Gilimov, and his deputy, Zholdas Timraliyev -- who both
resigned from the bank in January -- had gone missing within the previous five
days, their wives announced on February 5th, according to reports published by a
variety of foreign and domestic news outlets, including The Associated Press.
Gilimov had not returned after reporting for questioning to the financial police
earlier that day, while Timraliyev had been missing since leaving for a Nurbank
meeting on January 31st. It has since emerged that Gilimov is being questioned
by law-enforcement agencies over financial wrongdoings at the bank, while
Timraliyev is wanted by police.
Timraliyev's wife, Armangul Kapasheva, alleges that prior to his disappearance,
Timraliyev was kidnapped and subjected to violence and intimidation in an
attempt to force him to ensure that management of a lucrative business centre in
Almaty, Kazakstan's financial capital, passed to the president's son-in-law.
Aliyev denies the charges. In an open letter to President Nursultan Nazarbayev,
Kapasheva claims that Gilimov and her husband left their homes on January 18th
thinking they were to accompany Aliyev on a business trip. Instead, she said,
they were taken to a sauna complex and held against their will for 24 hours.
Kapasheva alleged that her husband had been beaten up and threatened with death
unless he ceded to the demands.
Aliyev categorically denied the allegations. "The only thing in all these
versions, theories and rumours which is true is that I am indeed a Nurbank
shareholder. That is no secret to anyone," he said in remarks quoted by the
Kazakstan Today news agency. "Everything else, including information about
a supposedly missing former bank employee, is open slander resembling a
carefully-planned act of provocation." Aliyev could not be reached for
further comment.
Gilimov and Timraliyev resigned from the bank on January 19th. Nurbank issued a
press release announcing Gilimov's departure, giving no indication that the
split was acrimonious. Gilimov was moving jobs and being replaced by his deputy,
Gulmira Dzhumadillayeva, Nurbank said, thanking him for his contribution:
"Under his management Nurbank entered and firmly consolidated itself in the
top 10 banks in Kazakstan."
On January 31st, Kapasheva reported her husband missing after he failed to
return from a meeting with Dzhumadillayeva and Aliyev. The facts about what
happened next -- which subsequently led to the arrests of several senior police
officers -- are disputed.
Kapasheva says she encountered difficulties in reporting her husband missing,
but in the evening a police rapid-reaction squad arrived at the bank, where her
husband was thought to have gone earlier in the day. Bank security denied the
officers access. In a press release on February 5th, Nurbank described the
incident as an "attack on the bank's head office in Almaty."
Allegations have been levelled that the officers were seeking to remove
valuables and documents from the former managers' offices.
When the rapid-reaction squad arrived at the bank, the financial police were
already there conducting a search following allegations of financial
impropriety. They say the rapid-reaction squad tried to hinder the process.
"There has been an attempt by interested parties to cover up illegal
actions by rapid-reaction squad officers, [who were at the bank] apparently in
response to a statement received from Kapasheva," Almaty financial police
chief Vladimir Kurbatov told a news conference on February 5th.
Following the raid on Nurbank -- which declined to comment to EurasiaNet on the
case -- the head of Almaty's rapid-reaction squad and the city's deputy police
chief were arrested, and several dozen officers submitted resignations.
Financial police are investigating a case involving abuse of office, though no
charges have yet been brought.
"We do have many questions for the former management of Nurbank,"
Kurbatov told the press conference. "More than 10 people are currently
declining to appear before the investigation." He believes Timraliyev is on
the run, and says the police have evidence that he called his wife to say so.
Kapasheva does not deny that Timraliyev has been in touch, but believes it was
at someone's instigation. "He has called," she told EurasiaNet.
"I know it was his voice, but he was calling under pressure."
The police case centres on a suspicious payment of 809 million tenge -- some
US$6.5 million -- said to have been made on January 26th by Gilimov and
Timraliyev. Kapasheva dismisses allegations of wrongdoing by her husband,
questioning how he could have moved funds from the bank a week after he had
resigned. "He wasn't working there then… His signature was not
valid," she told EurasiaNet.
Kurbatov insists that the financial police are keeping an open mind. "We
have tried to show maximum objectivity and listen to all sides… [but]
preliminary investigations are not going in favour of the former
management," he said.
As the investigation continues, the case is becoming increasingly politicised.
MP Dariga Nazarbayeva, Aliyev's wife and the president's eldest daughter, says
it is an economic matter. "These are more fabrications; this is an attempt
now to take a normal criminal case onto a political level," Nazarbayeva
told Kazakstan Today.
Other members of Aliyev and Nazarbayeva's family are involved with Nurbank.
Their 22-year-old son, Nurali Aliyev, was voted onto Nurbank's board on 15th
January, and Aliyev's father, Mukhtar Aliyev, holds a 6.73 per cent share in the
bank.
The Nurbank case has cast an unwelcome spotlight on the country's banking
sector. Any damage to the sector's image is unwelcome at a time when
Kazkommertsbank and Halyk Bank recently floated on the London Stock Exchange and
are under investor scrutiny. Other Kazakstani banks are preparing to float
shares on the LSE.
Just a week before the controversy erupted, Kazakstan's banks held a publicity
drive in London aimed at boosting their reputations and promoting themselves as
responsible operators. The controversy casts a shadow on Kazakstan's investment
climate as a whole, raising questions about the manner in which business
disputes are settled. Observers will be closely watching the outcome of this
case to see if a fair and transparent solution can be found.
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AUTOMOBILES
Asia Auto to begin Chevrolet assembly
Kazakstan's Asia Auto plans this summer to begin production of Chevrolet
vehicles, the company said in a press release. The assembly agreement was signed
recently by Asia Auto President, Yerzhan Mandiyev, and GM Daewoo production
director, Won-Kyung Suh, New Europe reported.
Asia Auto will first assemble the Chevrolet Lacetti, Epica, and Captiva and
plans this year to produce 1,300 of them. GM Daewoo will supply the parts for
assembly.
The first Chevrolet cars assembled in Kazakstan will be available for sale in
July and will be sold through Asia Auto and Bipek Auto in Kazakstan.
Asia Auto was opened in 2003 when it began assembling the Niva for Russia's
AvtoVAZ. It is the only importer and producer of Skoda cars in Kazakstan. The
company can assemble up to four models simultaneously and has capacity for
45,000 cars a year.
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AVIATION & SPACE
Baikonur preparing for Anik F3 launch
The Baikonur Cosmodrome in Kazakstan is preparing for this year's first launch
of a Proton-M launch vehicle that will put Canada's Anik F3 telecommunications
satellite into orbit, the Khrunichev space research and production centre said
in a press release, New Europe reported.
"Specialists from various departments of the Khrunichev centre have begun
preparing the ground-based infrastructure of the cosmodrome and he launch
vehicle according to the general schedule of the Anik F3 programme," the
press release said.
The Anik F3 satellite is to arrive at the Baikonur centre on March 11, it said.
Anik F3 will provide a wide range of telecommunications, broadcasting, business
communications and Internet-based services to users across North America. The
satellite will be launched by ILS, Russian-US joint venture.
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ENERGY
Kazakstan may build oil refinery in Georgia
Kazakstan is considering building an oil refinery in Georgia, Kazak President
Nursultan Nazarbayev told a news conference after talks with his Georgian
counterpart Mikhail Saakashvili in Astana on March 6.
"Our energy and mineral resources ministry is considering the possibility
of building an oil refinery in Georgia," he said. Saakashvili told the same
news conference that the proposed refinery project may carry a price tag of up
to US$ one billion.
"It is a huge project. It will cost up to US$ one billion. But it is
increasingly important for the economy of Georgia and the region (the Caucasus)
as a whole," the president said. The oil refinery may be built in Batumi
using Kazak investment, he added.
Cooperation in the energy sector is a key element of Kazak-Georgian contacts,
Nazarbayev said. National oil and gas company KazMunaiGaz is planning to build
the oil refinery in the vicinity of the Batumi oil terminal, he said.
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FOREIGN COOPERATION
Astana, Moscow should focus on energy projects, Baikonur use
Russia and Kazakstan should focus on bilateral cooperation in innovative
projects in the fuel and energy sector, the effective use of the Baikonur Space
Centre, the exploration of the Caspian region's resources and efforts to expand
their mutual investment, Russian President Vladimir Putin said after
Russian-Kazak talks in the Kremlin on March 19.
"We consider it important to concentrate efforts (in Russian-Kazak
cooperation) on the most relevant areas of cooperation, primarily contacts in
the energy sector," Interfax quoted him as saying.
The two countries' cooperation in "using the Baikonur Cosmodrome more
effectively and exploring the Caspian area's resources" holds great
promise, the president said. "Cooperation in the nuclear power sector is
approaching qualitatively new frontiers," Putin said.
A March 19th meeting with key cabinet ministers addressed a project aimed at
creating a nuclear centre in charge of uranium enrichment, he said. Kazak
President, Nursultan Nazarbayev, confirmed his country's interest in
contributing to the effort during the negotiations, he said.
Nazarbayev invited Putin to pay an official visit to Kazakstan this summer and
discuss joint uranium mining and enrichment. "I have invited Vladimir
Vladimirovich for an official visit to Kazakstan this summer," Nazarbayev
said. "I think this will be another landmark event in our
cooperation," he said. "We will start joint development of uranium
deposits in Kazakstan, as well as joint enrichment and production of nuclear
fuel." The nuclear fuel will be available to any countries wishing to
develop peaceful atomic energy industries, Nazarbayev said.
The two leaders also discussed integration in the Commonwealth of Independent
States (CIS) and EurAsEC. Russia believes that economic integration in the CIS
could be boosted within the EurAsEC, with a single economic zone created
afterwards. "We believe that it is within the EurAsEC that mutually
beneficial economic integration of the Commonwealth countries can noticeably
expand and a single economic area formed later," Putin said. He also said
that Russia agreed with Kazakstan's position on eforming the CIS and developing
a Eurasian economic community.
For his part, Nazarbayev again proposed forming a Eurasian economic union of
states. "I think that a certain group of countries is ready for this,"
Nazarbayev said, adding that Europe had followed such a path and that Russia,
Kazakstan and a number of other countries "certainly, have such
opportunities." The EurAsEC was founded on October 10, 2000, by Belarus,
Kazakstan, Kyrgyzstan, Russia and Tajikistan, which were joined later by
Uzbekistan. Moldova, Ukraine and Armenia have observer status.
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FOREIGN INVESTMENT
Kazakstan invested over US$20bn abroad in 2-3 years
Kazak President, Nursultan Nazarbayev, has announced that Kazak companies
planned to invest about US$300 million in the Georgian economy in 2006.
"According to my information the investment plans of Kazak companies in
Georgia totalled about US$300 million last year," he said at a joint press
conference with Georgian President, Mikhail Saakashvili, after their talks in
Astana on March 6th, New Europe reported.
"It is a different issue whether the money has been actually invested, but
it is being channeled," Nazarbayev said. He was speaking about the
investment of Bank TuranAlem in the overhaul of a hotel in Tbilisi and in
several holidaymaking facilities on the Black Sea coast. He said the national
oil and gas company KazMunaiGaz also had plans to make solid investments.
"A KazMunaiGaz company, KazTransGaz, acquired gas distribution networks in
Tbilisi. This is a very important issue," Nazarbayev said. He added that
the oil and gas company is buying controlling shares in Batumi's seaport.
"This will be a very impressive investment," he said. Nazarbayev said
the current conditions in Georgia are very favourable for making business. He
said that in the past two-three years Kazakstan has invested over US$20 billion
in foreign countries.
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FOREIGN LOANS
ENRC could increase loan to US$1.5bn
Eurasian Natural Resources Corporation (ENRC, formerly Eurasian Industrial
Association, EIA), which represents some of Kazakstan's biggest mining and
metals companies, may raise a US$1.5 billion syndicated export loan facility
instead of an originally planned US$1 billion, a source in banking circles said,
Interfax News Agency reported.
ENRC said in December that it was seeking a five-year syndicated export loan
facility of US$ one billion. ABN Amro Bank N.V., Barclays Capital and Deutsche
Bank AG were mandated to arrange the loan. The source said the syndication,
which began in January, is now closed. "The company is deciding how much to
borrow," the source said.
ENRC Marketing AG will be the loan beneficiary and chrome corporation Kazchrome
will guarantee the loan with revenue from exports of ferroalloys. The loan will
be used for general corporate purposes, including the financing of ENRC's
capital expenditure program to support the group's strategic growth plan.
Eurasian Natural Resources Corporation is a vertically integrated metals and
mining group operating in Kazakstan. In 2005, Group revenues were in excess of
US$ three billion and EBITDA was US$1.3 billion.
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FOREIGN TRADE
Russian-Kazak turnover up 30%
Russian-Kazak trade turnover reached US$12.8 billion, a 30 per cent increase
compared to 2005, Chairman of the Federation Council's CIS affairs committee,
Vadim Gustov, said at a conference entitled Kazakstan's International
Cooperation: Status, Objectives and Perspectives in Astana on March 14th, New
Europe reported.
A total of 70 per cent of bilateral trade is guaranteed thanks to border
regions, he said, adding that the Russian parliament is going to pass a bill on
cross border cooperation. The senator expressed hope that "a similar bill
will also be passed in Kazakstan."
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HIV/AIDS
Kazakstan needs to tackle HIV/AIDS
The pace at which the HIV/ AIDS virus is spreading in Kazakstan may soon start
to pose a threat to national security, the country's chief epidemiologist,
Anatoly Belonog, said at a meeting with senior Health Ministry officials in
Astana on February 16th, New Europe reported.
"Recent inspections by the prosecutor's office have shown that numerous
violations continue to occur during blood preparation and transfusion procedures
in a large number of medical institutions in the republic. Gross violations of
the anti-epidemiological regime have been exposed in nearly half of the
republic's blood transfusion organisations and one-third of all medical
organisations," he said.
"We all need to considerably tighten control over medical organisations
because this situation remains unfavourable in the republic, with HIV/AIDS rates
growing 1.8 times last year," Belonog said. "Order must be restored in
this issue as soon as possible", because "we have to regard this
problem through the prism of the country's national security," he said.
The largest number of HIV/AIDS cases has been reported in the Karaganda and
Pavlodar regions, Almaty, the east and south of the country. Kazakstan, a
country with a 15.3 million population, has more than 7,000 HIV-infected people,
according to the health ministry.
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MINERALS & METALS
Kazakmys boosts earnings in 2006
Kazakmys Plc boosted net profit 155 per cent in 2006 to US$1.403 billion,
the London-listed, Kazakstan-based copper producer said in a statement, Interfax
News Agency reported on March 15th.
Revenue grew 94 per cent to US$5.046 billion. The corporation produced 405,000
tonnes of cathode copper last year, up 4.7 per cent from 2005, including 368,000
tonnes from its own concentrate. It sold copper for US$7,025 a tonne on average
- 85 per cent more than in 2005.
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TRANSPORT
A joint railway project is planned with Kazakstan
Azerbaijan's Foreign Minister, Elmar Mammadyarov, will invite Kazakstan to join
the construction of a railway linking Baku, Tbilisi and Kars during a visit to
Astana on February 27th, New Europe reported.
"We want Kazakstan to join this project and we'll discuss this issue,"
Mammadyarov told the press on February 12th. The minister said he also wants to
discuss prospects for broadening bilateral relations.
"Kazakstan has a new government, a new foreign minister and a new
parliamentary speaker. We are working on new projects. But we'll first of all
discuss Kazakstan's interest in the project to build the Baku-Tbilisi-Kars
railway," Mammadyarov said.
The construction of the railway is being funded by the governments of
Azerbaijan, Georgia and Turkey and will require US$420 million in investment.
Under a credit agreement, Azerbaijan will extend a US$200 million loan to
Georgia at one percent annually for 25 years to build the Georgian stretch. The
project involves the construction of a 29-kilometre stretch and repairs for a
160-kilometre stretch running across Georgia and for a 76-kilometre stretch in
Turkey, and the partial rehabilitation of the stretch across Azerbaijan.
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