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KAZAKSTAN

Books on Kazakstan

Update No: 312 - (20/12/06)

Kazakstan is a large and important country in the heartland of Eurasia. Its vast and relatively untouched oil resources have attracted the attention of a number of countries eager to invest in Kazakstan's oil fields or at least import some of that oil. That is since it ceased to be a subject nation to the USSR in 1991.

The Turkish, not the Soviet, Union
The Kazaks spent over seventy years as part of the Soviet Union. Actually, they would much have rather been part of a looser-limbed Turkish Union. Now they can put this into effect.
The results of the November 17th summit of the leaders of Turkic-speaking nations exceeded the expectations of many diplomats and political analysts. The presidents of Azerbaijan, Kazakstan, Kyrgyzstan and Turkey took the first steps toward the creation of a Turkic commonwealth, giving an enthusiastic endorsement to efforts aimed at strengthening energy and security ties. 
The four leaders, along with Turkmenistan's envoy to Turkey, gathered at the Turkish Mediterranean resort city of Antalya for the summit, the eighth such gathering of its kind, but the first held in five years. Officials from Uzbekistan, who had been slated to attend, ended up boycotting the event due to a breakdown in relations with Turkey, which has been critical of the human rights record of the dire Uzbek regime. 
The participants signed a declaration committing the Turkic states to strengthen economic and transport ties, while stressing "the importance of the joint fight against terrorism, the proliferation of weapons of mass destruction, drug smuggling, weapons smuggling, human smuggling and other organized crimes." The statement also endorsed the concepts of Turkey's accession to the European Union, and a peace settlement to the Nagorno-Karabakh conflict that leaves the territory under Azerbaijan's control. 
"We declare that we support a peaceful solution to the Nagorno-Karabakh conflict in accordance with the principle of the territorial integrity of Azerbaijan, and that we will further support fraternal Azerbaijan in this dispute," Turkish President Ahmet Necdet Sezer said. 
The four leaders underlined both the "increasing importance of the Caspian Basin for the energy security of Europe" and the "strategic importance of the Baku-Tbilisi-Ceyhan [BTC] oil pipeline opening and the expected completion of the Baku-Tbilisi-Erzurum [BTE] natural gas pipeline." These offer Kazakstan alternative routes for its energy exports to the existing Russian ones.
They also stressed the importance of the possible addition of trans-Caspian transportation routes to both the BTC and the BTE. Sezer stressed in his opening speech the importance of involving energy-rich Turkmenistan in the summit process, and vowed that Ankara would work to facilitate energy exports from the Caspian Basin to Europe via Turkey. Turkic leaders underlined in the Antalya declaration that "increasing energy cooperation would positively and directly contribute to economic and political stability" in Eurasia. 

Nazarbayev springs a surprise
Kazakstan is the key player here in that it has truly vast energy resources - and other mineral ones for that matter. Kazak President Nursultan Nazarbayev took observers, and even many participants, by surprise by proposing the creation of a Turkic parliamentary assembly. Nazarbayev went on to nominate former Turkish president and prime minister Suleyman Demirel to serve as the proposed assembly's first chairman. 
Nazarbayev's proposal was indicative of his interest in exploring the feasibility of a full-blown Turkic commonwealth. "We have to discuss it," Kazakstani Foreign Minister Kasymzhomart Tokayev told EurasiaNet, referring to the commonwealth possibility. 
It would appear that Nazarbayev, Azerbaijani President Ilham Aliyev and Kyrgyzstani leader Kurmanbek Bakiyev now see closer cooperation as a way to leverage the collective influence of "200 million Turks," as Nazarbayev put it, in pursuit of specific policy aims. 
"The problem of one Turkic-speaking nation must be the problem of other Turkic-speaking nations," the Anatolia news agency quoted Aliyev as saying. Observers interpreted his comments as meaning Turkic states should collectively push for results in Turkey's EU accession process and Azerbaijan's Karabakh peace talks that are satisfactory to Ankara and Baku respectively. 

Momentous consequences for Europe and others
If the Turkic states actually opted to coordinate diplomatic action, they might have the collective muscle to alter the existing equilibrium in many geopolitical matters. 
In the case of Turkey's troubled drive to join the EU, for example, a Turkic commonwealth could influence Brussels' decision-making calculus by playing the energy card, letting it be known that a rebuff of Ankara could hinder the EU's access to Central Asian energy supplies. 
Kyrgyzstani diplomats also stressed that closer cooperation would enhance Bishkek's international profile. Kanat Tursunkulov, a top Kyrgyz Foreign Ministry official, said President Bakiyev's attendance at the summit, despite the "recent troubles" in Bishkek, underscored the Kyrgyz government's position that closer cooperation among Turkic states is a top political priority. 
Commenting on the outcome of the summit, a top Turkish diplomat said, "The era of romantic embracing has ended; the era of concrete cooperation has started." Nazarbayev, Aliyev and Bakiyev all quietly expressed a desire for their respective countries to host the next Turkic summit. At the same time, participants emphasized a need to proceed cautiously, seeking to dispel any impression that they are rushing toward institutionalizing the group. 

More than just oil power 
President Nazarbayev made some surprising comments on November 10th. The leader of a country that has attracted major investment from the West, Nazarbayev said Kazakstan does not need lecturing and advice from Western nations. 
And the country's leader -- President Nazarbayev -- is anxious for Kazakstan to be known internationally for more than simply being an oil exporter. Nazarbayev has organized international conferences on religion and building mutual trust in Eurasia that have drawn the heads of church and state and other famous people. 
Nazarbayev has skilfully charted Kazakstan's political course by balancing good relations with neighbours Russia and China as well as with the United States. He has also maintained good ties with his Central Asian neighbours to the south. 
But the Kazak president has not forgotten about the West either, in some part because it was mainly Western nations that sent corporate officials to Kazakstan with multimillion dollar -- and sometimes multibillion dollar -- contracts in the initial years after Kazakstan declared independence in 1991. 
Western nations also expressed interest in helping Kazakstan with its security needs. Kazakstan is a member of NATO's Partnership for Peace Programme and Kazakstan contributes a small force of ordnance disposal specialists to the multinational force in Iraq. 
But at a Kazakstan Civic Party meeting on November 10, Nazarbayev unexpectedly said there were limits to being a partner with some Western countries. 

Ignore Western Criticism? 
"We have enough advisers now, from here and from there, from the West, from beyond the ocean telling us how to live, how to work," he said. "In this connection it reminds me, and I often quote the words of Mr. Lee Kuan Yu [Singapore's first prime minister] -- with whom I often speak, write, and meet -- that there was always criticism addressed to him about the policies he implemented: about dictatorship, and pressure on parties, and so on and so forth.... And he said if one reacts to every criticism and runs to fulfil the proposals of each person, then it's impossible to get anything done. Our chief interest should be the people and Kazakstan, the rest is crap." 
The Kazak leader apparently wanted to emphasize this point, as he continued. "We've had enough," the president said. "Kazakstan is no longer a state that can be ordered about and told what to do. We know what we have to do. We shouldn't run after foreign recommendations with our pants down." 
Was there a message to the West in Nazarbayev's comments? Did the speech mark a turning point in Kazakstan's relations with the West? 

Off The Cuff Remarks 
John MacLeod, a senior editor with the London-based Institute of War and Peace Reporting, specializes in Central Asian affairs. He said Nazarbayev's comments were not that significant. 
"Well, I think he was speaking to a particular audience, and it wasn't a Western audience and it wasn't even a national-level government audience in Kazakstan," MacLeod said. "He was speaking to members of his own party and to members of the Civic Party, which is going to merge with his party-- the big Otan Party. I guess that he was just veering off the script and trying to tell [them] if you like local politicians [think] that everything is fundamentally ok with the country, that he's in charge, that he's not driven by external interests, and that they can rest comfortably with the merger of the two parties and with being part of his kind of big national project." 
MacLeod said that good ties with Russia and China do not mean that Kazakstan will forsake relations with the West. And he noted that as part of Astana's effort to boost Kazakstan's international image there is something Nazarbayev wants from Western nations. 
"Well, in the very short term what they're looking for is to chair the Organization for Security and Cooperation in Europe, the OSCE, and they're doing that to claim a kind of political legitimacy, internationally, to match an economic legitimacy that I think they already have; I mean Kazakstan is already a major oil player, maybe not by Gulf standards, but by any other standards," he said. 
Kazakstan is hoping to get the OSCE rotating chairmanship in 2009 and the country's diplomats have been touring OSCE countries and others trying to gain support for that bid. Nazarbayev was in Washington in September and the OSCE bid was part of his agenda there. A sign that Nazarbayev has not rethought his policy toward the West came November 14 when Nazarbayev attended the opening of the new U.S. Embassy in Astana and said ties between Astana and Washington -- the United States is the largest investor in Kazakstan -- are continuing to strengthen. 
Nazarbayev in London
The UK is a major investor and partner for the Kazaks. Nevertheless, it does not want to be patronized, as is clear from the above.
Prime Minister Tony Blair said he and his counterpart from Kazakstan Nursultan Nazarbayev discussed energy co-operation during bilateral talks in London. Speaking at a joint press conference, Blair said the two men also talked about broadening the relationship by linking up in financial services, particularly in equity markets.
Blair said Kazakstan was becoming an increasingly important player in the region, not just because of its energy reserves.
'This relationship is obviously about trade and energy. We are looking now at how we co-operate in the financial services sector,' he said.
'The role of Kazakstan is increasingly important because it demonstrates that, first, you have a country that, by being prepared to open up its economy, has achieved significant advance - and that's an important lesson,' he told reporters. 
'And secondly, you have many different ethnic and religious groupings and they are living together and Kazakstan is making progress as a whole, as a country, and that's an important lesson as well.' 
'Particularly in this region, we need stable partners and I think there is a whole new and different relationship that Europe should have with Kazakstan where we recognise that strategic importance. 
'And I would like to see Britain be a leading partner of Kazakstan in that endeavour, not just for trade and economic reasons but for political ones too.' 
Nazarbayev said he would be spending time in the City of London where a joint UK/Kazakstan economic forum was taking place. He added that he had brought a large number of Kazak businessmen with him. Nazarbayev is on a mission to make his country an economic powerhouse in the Central Asian region. 
China, Kazakstan to sign over 10 agreements during Nazarbayev's visit
This means the need for an opening to China. China and Kazakastan will sign about a dozen agreements of cooperation during Kazak President Nursultan Nazarbayev's upcoming visit, Chinese Foreign Ministry spokesman Qin Gang said Thursday. 
Nazarbayev will pay a state visit to China from Dec. 19 to 23 as guest of his Chinese counterpart Hu Jintao, and the two sides will exchange views on expanding cooperation in various fields. Chinese President Hu Jintao, top legislator Wu Bangguo and Premier Wen Jiabao will hold talks or meet with him respectively, Qin said. "China and Kazakstan have maintained a good-neighbourly relationship and the two sides will celebrate 15th anniversary of diplomatic relations next January," Qin said. 
In the past 15 years, Qin said, the bilateral ties between the two countries have been deepening and the China-Kazakstan strategic partnership has scored fruitful achievements within bilateral or regional organization framework. China highly values its relations with Kazakstan which is an important neighbour and partner of China, he added.

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ENERGY

Output at Kashagan oilfield set to beat forecasts by 25%

Kazakstan's giant Kashagan oilfield will produce 25 per cent more oil than expected once it hits peak production, international companies developing the field have found, the Financial Times reported on November 27th.
News that the field, the largest and most important discovered in more than 30 years, will yield significantly more than the 13bn barrels forecast is a breakthrough as dwindling world oil supplies and problems accessing oil-rich countries such as Iraq raise doubts about meeting rapidly increasing demand.
The Financial Times has learnt that peak production of the Kashagan field in the Caspian Sea, due a the end of the next decade, is expected to be 1.5m barrels a day, 25 per cent higher than published estimates. The field, operated by Eni, Italy's biggest oil and gas group, is expected to pump this amount each day for more than 10 years, meaning it will yield 10 per cent more reserves than currently assumed.
Kashagan's extra production is almost equivalent to all the oil produced in Sudan in 2005, according to latest figures. But Eni is expected to warn shortly that the complicated field - originally due to start pumping oil in 2005 - will take longer to develop. The operator has pushed back its start date several times, most recently to 2008, and is set to announce production will not start until 2009 at the earliest.
The field will also cost its partners, which include some of the world's biggest oil companies, more than the official estimate of US$29bn (£15bn). It is expected that the minimum price tag of Kashagan, already the world's most expensive energy project, will be in the mid-US$30bn range.
The field's partners include Total of France, Royal Dutch Shell, ExxonMobil and Conoco-Phillips of the US, Impex of Japan and KazMunaiGaz.
Steamy summer conditions winter temperatures of -40 degrees centigrade and high quantities of poisonous hydrogen sulphide make Kashagan perhaps the world's most complicated field.
"The project has been delayed but, from an engineering point of view, we need to give them credit for moving forward. I really admire the challenges they are taking on," said one analyst, who called the increased expectations "extremely important."
Disputes among the partners have also slowed the project. But the secondment of 50 ExxonMobil engineers has eased tensions, people close to the project said.
Kashagan is the world's most important oilfield in terms of reducing reliance on Russia and the Organisation of the Petroleum Exporting Countries, the cartel that controls 60 per cent of the world's remaining oil reserves, said Joseph Stanislaw, president of JAStanislaw Group, the advisory firm, and an expert on the region.

Kazakstan to choose partner to develop Nursultan field 

The Kazak Energy and Natural Resource Ministry considers that the Shell proposal for the development of the Nursultan (N) oil section in the Kazak sector of the Caspian is better than the ConocoPhillips proposal, New Europe reported recently.
"As regards the N project, not only Shell was interested, but ConocoPhillips also. As you know, a tender was held, in which Shell's indicators were slightly better. But during the negotiation process agreement was not reached in the given time, and as a result after the time expired ConocoPhillips submitted a new proposal, and recently Shell also made a new proposal," Kazak Energy and Natural Resource Minister, Baktykozha Izmukhambetov, told journalists after a government meeting in Astana on November 28th. He said that "in the near future, possibly even before New Year a decision will be reached on this project - either Conoco or Shell." "More than likely, the Shell proposal will probably be preferable: the indicators are better and it is working more actively at the moment," the minister said. He was unable to say what the planned volume of investment in the project is. "The volume of investment is part of the negotiation process, because we have not yet managed to decide. So, after we decide, we will consider the entire project," the minister said. The Nursultan section is in the Kazak sector of the Caspian Sea and covers an area of 7,625 square metres. Forecast geological resources at the section amount to 637 million tonnes of fuel equivalent.

Kazakstan, Azerbaijan partner up to supply oil and gas to Europe 

English scholar, Sir Halford John Mackinder, once said: "Who rules East Europe commands the Heartland; who rules the Heartland commands the World Island; who rules the World Island commands the World." 
Today Kazakstan and Azerbaijan are regarded by the world as an inseparable partnership. The oil and gas the two countries are rich in, as well as the countries' excellent location in the Caspian region, attract everybody's attention, New Europe reports. 
Azerbaijan's and Kazakstan's estimated oil reserves are 36 to 45 billion barrels and 102 to 104 billion barrels, respectively, and their estimated gas reserves are 46 trillion cubic metres and 141 to 171 trillion cubic metres, respectively.
Over the last year, Europe has focused its attention on Azerbaijan and Kazakstan, energy security being its top priority. The EU countries are looking for new energy sources and energy supply routes. Europe is looking at Kazakstan's oil supplies through Azerbaijan as an alternative to Russian imports.
A considerable number of European and American companies are doing business in Kazakstan and Azerbaijan. "The importance of Kazakstan and Azerbaijan in global energy security and in the development of the transport potential of the entire Eurasian region is growing each year," Kazak Foreign Minister, Kasymzhomart Tokaev, noted. This is the underlying idea behind today's cooperation between the two countries.
Kazakstan and Azerbaijan can realise their energy and transit potential through the Baku-Tbilisi-Ceyhan (BTC) oil pipeline launched last summer, referred to as a bridge connecting Kazakstan and Azerbaijan to the West. A month before the official launching ceremony, the heads of the two states signed an accession agreement for Kazakstan to join the pipeline. And in October this year, Azeri President, Ilkham Aliyev, signed a law essentially opening the new pipeline to Kazak oil. Initially, seven to 13 million tonnes of oil per year will be delivered to Baku by tankers. With the beginning of commercial development of the Kashagan shelf field, annual oil supplies from Kazakstan will grow to 25 million tonnes. This will be possible thanks to a new pipe from Aktau to Baku that is planned to be laid on the bottom of the Caspian Sea.
"The new law on transportation of the Kazak oil by the BTC will undoubtedly facilitate the growth of goods turnover between our countries," Ambassador of Azerbaijan to Kazakstan, Lyatif Gandilov, told New Europe in Astana in an interview.
After Kazakstan's official accession to the BTC, all the statements that Azerbaijan could fill the pipe on its own are history. In May this year, at a press conference during a regular CICA meeting, Aliyev said the BTC was meant solely for the Azeri oil. At the same time, the Azerbaijan ambassador told New Europe, new and promising oil fields had recently been found in the Azeri sector of the Caspian Sea.
Apart from oil, Europe is also very interested in the gas of the Caspian region. During the now more frequent visits of high-ranking EU officials to Kazakstan, the idea of building a new trans-Caspian pipeline is discussed more often. The gas pipe will cross five countries, including Kazakstan and Azerbaijan. Even as an idea, this project is believed to be a most ambitious one. Its planned throughput capacity is 32 billion cubic metres per year, and its estimated cost is US$ two billion. This idea is likely to become the focal point of discussion at an international energy forum scheduled to be held in Astana in late November. According to the Azerbaijan ambassador, the former head of the national oil company, and current Azerbaijan Energy Minister, Natik Aliev, is planning to participate in the forum.
Azerbaijan-Kazakstan cooperation is not limited to energy. "We have more than enough opportunities for our cooperation, and cannot list them all. The future of this cooperation will be discussed at the fifth session of the Intergovernmental Kazakstan - Azerbaijan Committee, which should take place early next year in Astana," Gandilov said. He also added that the Foreign Minister of Azerbaijan, Elmar Mamediarov, was expected to pay an official visit to Astana early in 2007.
The three meetings will discuss the existing and new joint Kazak-Azeri projects, the success of which will strengthen the role of the Caspian tandem -- Kazakstan-Azerbaijan -- in Eurasia.

KazMunaiGaz to pay US$350m for Orenburg gas plant stake 

Kazak national oil and gas company KazMunaiGaz is to pay US$350 million for a 50 per cent stake in a joint venture being set up with Gazprom based at Orenburg Gas Processing Plant, KazMunaiGaz gas projects Director, Bakhytzhan Isengaliev, said at a round table discussion in the Russian State Duma, Interfax News Agency reported.
He also said that the sides would invest US$250 million each in modernising the plant.
Russia and Kazakstan signed an intergovernmental agreement in October this year on the setting up of a joint venture based at Orenburg Gas Processing Plant to process gas from the Karachaganak field in West Kazakstan region.
Orenburggazprom head, Sergei Ivanov, told Interfax the KazMunaiGaz share in the joint venture is estimated at 9.5 billion roubles. "This will be enough to build two gas pipelines from Kazakstan to Orenburg, another gas processing plant, and a unit to produce sulphur," he said.
Ivanov said Deloitte & Touche valued the Orenburg Gas Processing Plant at 19 billion roubles. Russia will contribute the plant assets as its share in the joint venture.
The further development of the Karachaganak complex is related to the need to increase the recovery of gas, he said. "We will process about 8 billion cubic metres of gas from Karachaganak this year and can double that with investment," he said.
The gas will be sold by the Russian-Kazak company KazRosGaz. The joint venture will begin operating on January 1, 2007. "Within 15 years we will receive a guaranteed 15 billion cubic metres of gas per year," Ivanov said.
The gas processed by the joint venture will be supplied to the Kazak market as a priority, and will also be exported outside the republic by Gazprom or an organization authorized by the company.
The Karachaganak field, located in Western Kazakstan region, is one of the richest in the world. It has reserves of 1.2 billion tonnes of oil and 1.35 trillion cubic metres of gas. The field is being developed by Karachaganak Petroleum Operating (BG Group - 32.5 per cent, ENI - 32.5 per cent, Chevron - 20 per cent, LUKoil - 15 per cent).
Since 2002 KazRosGaz (a joint venture between Gazprom and KazMunaiGaz) has been supplying gas from the Karachaganak field for processing in Orenburg. In addition, KazRosGaz transits gas through Russia to CIS countries.
The Orenburg gas condensate field, which is the main raw material source for the Orenburg Gas Chemical Complex, has had falling output since 1997. With a gas processing capacity in Orenburg of 37.5 billion cubic metres per year, it has its own supplies of about 17 billion cubic metres. Supplies of additional gas from the Karachaganak field will make it possible to fully utilize the capacity of the Orenburg plant.
Gazprom and the consortium Karachaganak Petroleum Operating set up a joint working group to develop a mutually acceptable cooperation mechanism. This group developed various options for supplying gas from the Karachaganak field to Orenburg Gas Processing Plant, which resulted in a proposal to set up a joint venture based on the Orenburg plant, with a gradual increase in gas supplies from the Karachaganak field to 15 billion cubic metres per year.
Maximum processing levels (30.6 billion cubic metres, including 15 billion cubic metres from the Karachaganak field) will be reached in 2012.

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EUROBONDS

Kazkommertsbank places Eurobonds for US$500m 

Kazakstan's Kazkommertsbank placed US$500 million in Eurobonds at a yield of an annual 7.75 per cent, a source in banking circles told Interfax. The coupon rate was an annual 7.5 per cent. Credit Suisse and ING organised the issue, Interfax News Agency reported.
This is the fourth Eurobond placement by the bank this year.
Kazkommerts Finance 2 BV placed subordinated Eurobonds in July 2006 for US$200 million that will mature in July 2016.
In February 2006, Kazkommertsbank placed Eurobonds for 100 million Singapore dollars (around US$61 million) and in March placed five-year non-secured Eurobonds for 300 million euros.
In 2005 Kazkommertsbank was in fourth place in the Interfax-1000 rating of the largest banks in the Commonwealth of Independent States, and in first place among more than 30 Kazak banks.

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MINERALS & METALS

Ore giant boosts pellet exports 48.9% in 10 months 

Sokolov-Sarbai Mining Production Association (SSGPO), Kazakstan's biggest iron ore producer, boosted pellet exports 48.9 per cent year-on-year in January-October to 7.07 million tonnes and concentrate exports 86.6 per cent to 5.47 million tonnes.
Rudprom, the Russian agency which collates statistics about FSU ore producers, told Interfax that SSGPO doubled pellet exports to China to 2.92 million tonnes, and that pellet exports to Russia rose 24.2 per cent to 4.15 million tonnes. Concentrate exports to Russia rose 78.3 per cent to 4.67 million tonnes.
Kazakstan raised iron ore commodity production 13.8 per cent year-on-year in January-October to 15.43 million tonnes.

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