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Books on Kazakstan
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Update No: 318 - (28/06/07)
President for life
The parliament in Kazakstan has obligedly abolished all term limits on the
duration of a presidency. The president can stand for re-election as many times
as he likes.
Few doubted that this would be the case in practice. It is now a matter of
principle. Nursultan Nazarbayev is president for life, if he so wants. He might
as well drop the 'Nur' from his first name and call himself Sultan Nazarbayev
instead.
He is keen to keep his son-in-law out of the reckoning for the succession at all
events (see below).
The need of a new thematic
He needs a new theme to justify his pertinacity in power. He has found one.
The Kazaks are keen to differentiate themselves from the Russians, their
'protector's' hitherto. They are scarcely regarded as more than an appendage of
their mentor to the north, despite their massive energy and mineral wealth.
The Kazak president has some imagination. He knows that his country is
extraordinarily rich, but land-locked. He has found the solution. Expand to the
west.
The construction of the Suez Canal changed history, uniting the Mediterranean
Sea with the Persian Gulf and obviating the need for the long haul round the
Cape of Good Hope. So did that of the Panama Canal, linking the Atlantic and
Pacific Oceans at their most vital junction.
Now comes the idea of the Eurasian Canal to rival either of them in
significance, bringing Central Asia into Europe.
Kazakstan Proposes Caspian-Black Sea Canal
President Nazarbayev has proposed building a canal between the Caspian Sea
and the Black Sea to ease Central Asian trade with world markets. He has
proposed to ship its oil from the Caspian to the Black Sea. "A navigable,
Eurasian canal linking the Caspian and Black Seas could be crucially
important," Nazarbayev said.
Nazarbayev was addressing a conference audience immediately after Russian
President Vladimir Putin had exhorted his neighbours to intensify their economic
cooperation. However, Nazarbayev appeared intent to distance himself from such a
goal. "Integration isn't a goal in itself," Nazarbayev said, but
should rather be driven by "objective causes."
He went on to deliver a thinly-veiled criticism of Russia's stranglehold on the
export routes for Kazak oil. The Russian government is currently blocking an
expansion of the Caspian Pipeline Consortium's Tengiz-Novorossisk pipeline,
which is the main route of Kazak oil to world markets. "If there are no
alternative export routes, we'll have to look for them," Nazarbayev said.
"Our region is rich in resources, but we have to deliver them to market,
and we will naturally develop the routes that are most favourable to us."
Nazarbayev also attacked the ineffectiveness of the Commonwealth of Independent
States, the loose grouping of newly independent republics set up in the wake of
the Soviet Union's collapse.
"Centrifugal forces have proved stronger than our efforts to
integrate," Nazarbayev said.
Russia's trade with its former Soviet neighbours has nonetheless picked up
sharply in recent years, its imports from the CIS doubling since 2001 to more
than $24 billion in 2006. However, they now account for only 15% of Russia's
imports, compared to a share of more than 30% a decade ago.
Central Asia's Dutch Disease
The International Crisis Group on June 11th distributed its new report on
stability risks in the Central Asian countries that are extracting hydrocarbons
- Kazakstan, Turkmenistan and Uzbekistan.
ICG believes that the main problem for the Stans is "the Resource
Curse" - hydrocarbons can become a source of destabilization, if
petrodollars are spent inadequately by the authorities of these countries.
Experts say that Kazakstan (occupying the 7th place in the world with its oil
reserves), handles its incomes better than its neighbours. But they also warn of
the future problems:
"More has been spent on Pharaoh-like projects such as the new capital,
Astana, than on healthcare or education. Growth has been impressive but the
wealth gap has widened faster. The economy remains undiversified, manufacturing
has been stunted by an over-valued currency and the whole country will be
subject to a shock if energy prices come down", the report reads.
Earlier, the World Bank also voiced concerns over the prospects of development
of some countries, including Kazakstan. In particular, WB was alarmed by the
overheating of the economy and by the large extent of its external borrowings.
ICG report also contains recommendations for the European Union, which will
adopt a new EU Strategy in Central Asia within the next few weeks. In this
Strategy, as expected, energy issues and "neutral" environmental and
educational topics will prevail over the problems of democracy.
"If the Western countries continue to turn a blind eye to the human rights
record of the region, counting on short-term benefits, they risk greater
instability in Central Asia that will aggravate their energy and security
problems in the long run", ICG expert Charles Esser says.
******
The following is a most penetrating overview of the Kazak predicament anent
Nazarbayev:-
Kazakstan's powerful president
Jun 8th 2007
From the Economist Intelligence Unit ViewsWire
Rakhat Aliyev, the Kazak president's son-in-law, is facing extradition from
Austria on charges of kidnapping and extortion. Mr Aliyev's precipitous fall
from grace is the second event to shake Kazakstan's political scene in the past
month, coming as it did just several weeks after parliament amended the
constitution to remove the term limit on President Nursultan Nazarbayev. The two
developments underline that Mr Nazarbayev is far from ready to relinquish power.
The decision to waive the term limit on Mr Nazarbayev, enabling him to stay in
office after his current term runs out in 2012, was barely discussed by
parliament and faced virtually no opposition. A largely rubber-stamp body,
parliament is dominated by Mr Nazarbayev's supporters, following the merger of
various pro-presidential parties in 2006. Ironically, the constitutional
amendments were introduced in the context of broader changes aimed ostensibly at
devolving some of the powers currently enjoyed by the president to the
legislature. These changes were the result of year-long discussions by a
constitutional committee, set up by Mr Nazarbayev partly in response to
international criticism of his failure to implement democratic reforms.
Unacceptable criticism
Notably, one of the most vocal opponents of the decision was Mr Aliyev's
father-an MP and a prominent member of the president's Nur Otan
(Light-Fatherland) party-who denounced the move, warning that it was a step
backwards for democratisation. Mr Rakhat Aliyev himself also sharply criticised
the decision. Shortly afterwards, two media outlets associated with Mr Aliyev
and his wife, Dariga Nazarbayeva, were suspended by the Kazak authorities for
three months for apparently violating the country's language laws.
Mr Aliyev was stripped of his official position as Kazakstan's ambassador to
Austria, and placed under criminal investigation for his alleged involvement in
the kidnapping earlier this year of several senior officials at one of the
country's major banking institutions, Nurbank, in which he is a major
shareholder. In early June he was arrested by the Austrian authorities and
released on police bail, pending a decision on whether to extradite him. Mr
Aliyev has denied the charges, describing them as politically motivated, and
attributing them to the fact that he had recently informed Mr Nazarbayev that he
intended to contest the presidency in 2012.
Cultural learnings of Austria
Mr Aliyev is no stranger to political controversy. He has already served one
term as ambassador to Austria, in 2001, following claims that he was preparing
to instigate a coup against Mr Nazarbayev. Evidence of the alleged coup was
never publicised; a more likely explanation for his exile from Kazakstan was
that it was precipitated by competing business interests, notably those close to
Timur Kulibayev (also Mr Nazarbayev's son-in-law), who heads a rival political
faction in Kazakstan.
Allowed to come back to Kazakstan in 2005, Mr Aliyev's return to favour seemed
assured when he was appointed deputy minister of foreign affairs. However, the
subsequent 18 months proved a difficult time for him and Ms Nazarbayeva, a
leading political figure in her own right. In 2006 Ms Nazarbayeva was forced to
merge her party, Asar (Together), with the president's party-apparently an
attempt to neutralise her as a political force. The authorities also announced
plans to increase the state's share in Ms Nazarbayeva's Khabar media network
from just over 50% to full ownership (although as of mid-2007 this had not yet
occurred), signalling the president's displeasure with her often outspoken
criticism of his government's policies.
A new political scandal hit the country in late 2005-early 2006 when two
prominent opposition figures, both critics of Mr Nazarbayev, were murdered. A
senior official close to the then speaker of the Senate, Nurtay Abykayev, was
convicted of the killing of the second, following which Ms Nazarbayeva called
publicly for Mr Abykayev to resign, on the grounds that he was the immediate
superior of the convicted murderer.
Having apparently weathered the controversy created by subsequent allegations by
a member of the security services that Mr Aliyev had been involved in the
killing (Mr Aliyev successfully sued the intelligence officer for libel), in
January 2007 he became embroiled in the Nurbank scandal. Shortly afterwards Mr
Nazarbayev appointed him as ambassador to Austria, a move that was probably
already planned but that the president had to bring forward. Any hope that Mr
Nazarbayev had that the move to Austria would isolate Mr Aliyev from domestic
politics was dashed, however, as the allegations against his son-in-law refused
to die down.
Making a point, at home and abroad
However much the Nurbank scandal (see our archives) which involves the
murder of one bank official and other evil actions. It was seen to be damaging
the presidential circle's reputation, the decision to initiate an international
arrest warrant against Mr Aliyev was nevertheless unexpected. Notwithstanding Mr
Aliyev's claim that his presidential aspirations were the catalyst for his
arrest, it is likely that there is a combination of motives.
Mr Aliyev's presidential ambitions were undoubtedly a factor; together with his
wife he headed one of Kazakstan's main political factions, and was widely
believed to be jockeying for power, in the event that Mr Nazarbayev were to
leave office. If he did in fact confirm to Mr Nazarbayev earlier this year that
he intended to contest the presidency, this presumably came at a time when the
president was preparing to alter the constitution to remove the limits on his
term. Mr Nazarbayev might have perceived the threat that Mr Aliyev would spend
the next five years strengthening his position to contest the election as too
high to risk, and therefore decided to act now to remove him from the political
arena.
Another reason why Mr Nazarbayev might have decided to act now against Mr Aliyev
was that the ongoing scandal at Nurbank was damaging Kazakstan's aspirations to
chair the Organisation for Security and Co-operation in Europe (OSCE) in 2009-Mr
Aliyev's diplomatic remit in Vienna included the promotion of Kazakstan's bid.
At their meeting in late 2006 the OSCE postponed until their next summit in 2007
a decision on whether to award Kazakstan the chair, following concerns among
some Western members that the country's democratic record was incompatible with
this role.
Many of the political and administrative reforms under discussion in Kazakstan
in 2007 are believed to have been instigated partly in response to this
criticism, although these are by and large cosmetic, and are unlikely to lead to
the more pluralistic and participatory political system that some members of the
OSCE had pushed for. That caveat notwithstanding, the controversy surrounding Mr
Aliyev could not have been helping Kazakstan's bid; by contrast, the Kazak
authorities could use the president's decision to hold him to account as an
example of their willingness to address corruption at the highest levels.
Don't discount Dariga
A potential risk for Mr Nazarbayev now is that Austria rules against Mr
Aliyev's extradition, for example if it were to judge that he would not receive
a fair trial in Kazakstan; Mr Aliyev has already sought political asylum in
Austria. In this scenario, Mr Aliyev could become a focus for some form of
opposition in exile-although Mr Nazarbayev will probably take comfort from the
fact that Mr Aliyev is a highly unpopular figure in Kazakstan, and would not
necessarily be able to rally sufficient support behind him.
Mr Aliyev's fall from grace raises interesting questions about what will happen
to his wife, Ms Nazarbayeva, and their political and business rival, Mr
Kulibayev. The absorption of Ms Nazarbayeva's party into the president's party
in July 2006 and subsequent actions against her media interests suggest that her
political star is waning. However, Ms Nazarbayeva has proved resilient to
setbacks, and is likely to do so again, particularly if she decides to distance
herself from her husband. In the past many of her political ideas have resonated
with parts of the elite, but her association with the universally unpopular Mr
Aliyev has prevented her from gaining much open support. That said, the notion
of a dynastic succession is unlikely to command as broad a backing in Kazakstan
as, for example, in Azerbaijan, where in 2003 the elite proved willing to
endorse the transfer of the presidency from Heydar Aliyev to his son, Ilham.
Advantage Kulibayev?
The arrest of Mr Aliyev both strengthens Mr Kulibayev and, potentially,
serves as a warning not just to him, but to other political figures that might
be harbouring presidential ambitions. As Mr Aliyev and Ms Nazarbayeva have seen
their political fortunes tarnished over the past year, so those of Mr Kulibayev
have apparently been rising. He was appointed head of the board of the state oil
and gas giant, Kazmunaygaz, in June 2006, and in January 2007 one of his allies,
Karim Masimov, was promoted to the post of prime minister.
Nevertheless, Mr Kulibayev's prospects have not been entirely positive, and it
is likely that should he redirect his ambitions from business to politics, he
too will face difficulties. A political party with which he is associated,
Atameken, has still not been able officially to register. The party, which in
its opening congress in late 2006 said that it supported Mr Nazarbayev,
represents Kazakstan's growing entrepreneurial class and has the eradication of
corruption in the economy as one of its principal aims.
This segment of society probably represents one of the main risks to Mr
Nazarbayev, given rising dissatisfaction among private businesses with the pace
of reforms to the economy and business environment, as well as the entrenched
position of the state in many economic sectors, against which private
enterprises find it impossible to compete. Were Mr Kulibayev to win the support
of Kazakstan's businessmen, he could potentially present a credible challenge to
Mr Nazarbayev by the time of the next election whenever that might happen.
Even if Mr Nazarbayev does not intend to stand again for the presidency, his
decision to act now against Mr Aliyev indicates that he is far from ready to
step down from politics yet. The arrest of Mr Aliyev serves as a warning to
other pretenders to the throne that even the highest members of the elite are
vulnerable. Regardless of Mr Nazarbayev's intentions in 2012, he has made it
clear that he will tolerate no challenge in the coming years.
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ENERGY
TengizChevroil to transport oil to Georgia by rail
TengizChevroil, which is developing the Tengiz and Korolevskoye fields in
Kazakstan's Atyrau region, has proposed transporting 20 million tonnes of oil by
rail from the Tengiz field through Azerbaijan to Georgian ports on the Black Sea
over the next five years, Interfax News Agency quoted Arif Askerov, head of
Azerbaijani State Railways, as telling journalists.
"TengizChevroil has suggested transporting 20 million tonnes (of oil) by
rail from Azerbaijan to Georgia's Black Sea ports over the next five years. A
final agreement has yet to be reached on this issue, but talks are being
held," he said.
In addition, experts from the transportation agencies of Azerbaijan, Georgia and
Kazakstan are carrying out marketing research to increase cargo transport along
the Aktau-Baku-Poti/Batumi route, he said.
"In particular, the possibility of transporting sulphur, metals, coal and
other cargoes from Kazakstan through Azerbaijan is being considered. Tariffs on
the transit of Kazak oil and oil products through Azerbaijan and Georgia are
also being reviewed. The sides intend to make the tariffs appealing to attract
cargo to this transport corridor," Askerov said. Oil shipments via
Azerbaijani State Railways are to grow 13.3 percent to 17 million tonnes in
2007, he said.
Kazatomprom to start supplying fuel pellets
Kazakstan's national nuclear corporation Kazatomprom plans to start supplying
fuel pellets and powders to China in two years, Mukhtar Dzhakishev,
Kazatomprom's president, said, Interfax News Agency reported. "I hope we'll
start supplying China in two years," Dzhakishev said.
In the meantime, Kazatomprom expects to obtain the necessary certification for
the pellets and powders produced by its Ulba Metals Plant, he said. "We
need to certify these products for the reactors used in China today, in
particular Guangdong Nuclear Power," Dzhakishev said.
Kazatomprom and China Guangdong Nuclear Power Holding (CGNPC) signed an
agreement on broader strategic cooperation in Beijing on May 24th. They said
they would cooperate in the production of nuclear fuel for Chinese power plants
and provide raw materials for China's developing atomic energy industry.
"Yes, we agreed that Kazatomprom would supply Chinese power plants. This is
an exception, when China lets a foreign company in," Dzhakishev said.
In time, Kazatomprom and China intend to work together in fuel assembly
production. "The joint production of fuel assemblies is possible in time -
either with the Guangdong corporation or with Kazatomprom's participation as a
shareholder in existing fuel plants," Dzhakishev said.
Dzhakishev could not say when these plans might come to fruition. "It all
depends on a whole range of procedures due to take place in China, like the
restructuring of the nuclear industry there. China is due to reach a decision,
and after that it will be possible to say when we can move forward in this
issue. For now we're looking at powders and pellets, and we'll decide on
assemblies once the Chinese nuclear industry's restructuring is in motion,"
Dzhakishev said.
Dzhakishev said Kazatomprom would meet the requirements of the Chinese
corporation, which was looking to control half of the Chinese nuclear power
market. "China plans to build another 31 reactors and have 40 in all, but
it's clear that these plans could be revised and that the figure could be far
higher," he said. Dzhakishev said that Kazatomprom would stop exporting
natural uranium in time and ship nuclear fuel abroad.
Trans-Anatolian pipeline bets on Kazak oil supplies
In line with the diversification efforts for oil supplies, it seems that the
Baku-Tbilisi-Ceyhan (BTC) pipeline has become a catalyst for other projects.
After BTC, plans to construct the Bourgas-Alexandroupolis pipeline that had been
suspended for almost 13 years are finally back on line. The main purpose of this
project is to unclog the busy Bosporus Straits. Also brought back to life and
actively debated is the Odessa-Brody-Plock oil pipeline that plans to carry
Caspian oil to Central Europe, New Europe reported.
Meanwhile, Turkey has just started construction of another oil pipeline that
will bypass the Bosporus: Samsun-Ceyhan. This project is called Trans-Anatolian
Pipeline Project (TAP). It is implemented by two oil companies: Turkish Calik
Enerji and Italian ENI.
It's worth noting that all the existing and proposed oil pipelines going through
the territory of the other countries are designed to include Kazak oil.
"The Trans-Anatolian pipeline is a very risky project, as it has started
without any signed oil supply guarantees. It is known though that it is being
built with the future Kashagan resources in view, where the commercial
production of oil is expected to be postponed again, until 2011. The project
managers have shown a combative spirit by starting the project in such
conditions," the Executive Director for Oil Refining and Petrochemistry of
KazMunaiGas, Shuhrat Danbai, told New Europe.
The Trans-Anatolian pipeline will be 555 kilometres long. It will go through the
territory of only one country, Turkey, and it will connect two sea ports, Samsun,
on the Black Sea, and Ceyhan, on the Mediterranean Sea. The cost of the project
is estimated at US$1.5-2 billion. Design capacity - 50 million tonnes of oil per
year. The pipeline is expected to become operative in 2010.
The first to announce the news about a concrete plan to build the
Trans-Anatolian pipeline was the Turkish Prime-Minister, Tayyip Erdogan, at the
opening ceremony of the Baku-Tbilisi-Ceyhan pipeline in July of last year.
He then said the new pipeline could receive Russian and Kazak oils. "Turkey
is inviting all countries that can supply oil to this pipeline, and Russia and
Kazakstan are the first among those invited. We expect these two countries to
provide their oil to Samsun-Ceyhan, the purpose of which is to substantially
unclog the Strait of Bosporus," the Turkish premier said.
But, considering the fact that Russia is planning to build its own pipeline,
Bourgas-Alexandroupolis, it is unlikely that the Trans-Anatolian pipeline can
count on Russian oil. As far as Kazakstan is concerned, both Bourgas-
Alexandroupolis and BTC are counting on its resources. The Bourgas-
Alexandroupolis pipeline, for which the Caspian Pipeline Consortium is going to
be expanded, will receive crude from Russia and Kazakstan. BTC is currently
receiving Azeri crude. In the future, according to an agreement between
Azerbaijan and Kazakstan, Kazak oil should flow into it.
In such a case, a reasonable question arises: Are there prospects for the
Trans-Anatolian pipeline to be filled considering that the Kashagan oil that it
is designed for may be delayed for an undefined time?
There may be enough oil for all three pipelines -- Baku-Tbilisi-Ceyhan,
Bourgas-Alexandroupolis, and Samsun-Ceyhan, specialists believe. "According
to the calculations of the Turkish side, the Black Sea region may have a balance
of 240 million tonnes of oil, and according to our company - 180 million tonnes.
But in any event, these volumes will be sufficient to operate both the
Bourgas-Alexandroupolis pipeline, the design capacity of which is 35 million
tonnes with future expansion up to 50 million tonnes, and the 50 million tonne
Trans-Anatolian pipeline. That is, the two pipelines will use 50 million tonnes
each. The remaining 80 million tonnes will go through the Bosporus - such is the
throughput capacity of the Strait. Therefore, there should be enough oil under
any political scenario. Even the rough calculations confirm the viability of the
new project," the KazMunaiGas representative told New Europe.
So, all parties involved hope that there will be enough crude for all and that
the earlier announced plan of Kazakstan to produce 150 million tonnes by 2015 do
not remain only a declared intention considering the Kashagan delays and the
frustrated hopes for the other field - Kurmangazy.
KazMunaiGas E&P to acquire 50% of CITIC Canada Petroleum
KazMunaiGas E&P has received from its parent company, KazMunaiGas, an option
to acquire a 50 per cent stake in CITIC Canada Petroleum (formerly Nations
Energy Company Ltd), KazMunaiGas E&P said in a statement, Interfax News
Agency reported.
The company should exercise the option by September 1st 2007, by mutual
agreement the deadline may be extended. "Kazakstan is a priority region of
operations and the option to acquire Karazhanbasmunay is another example of our
aspiration to expand our resource base on beneficial terms for the company. We
are working in close cooperation with CITIC and are planning to exercise the
option and complete the deal by the end of 2007, after a careful analysis of all
aspects of the deal, and on conditions that the deal is approved by the board of
directors," KazMunaiGas E&P Director General Askar Balzhanov was quoted
as saying in the press release, cited by Interfax. At the end of December 2006
KazMunayGas and China's CITIC Group signed an agreement on the principles for
acquiring 50 per cent of shares in Nations Energy. Based on a value for 100 per
cent of shares in that company of US$1.9 billion, the 50 per cent stake is worth
US$955 million.
KazMunaiGas eyes large oil company in Europe
Kazak national oil and gas company, KazMunaiGas, hopes to acquire a large
company in Europe in the near future, with several oil refineries and a network
of filling stations, company First Vice President, Zhaksybek Kulekeev, said,
Interfax News Agency reported.
"Our plans include the purchase of a good, large asset in several countries
in Europe. This company should have three oil refineries and up to three
thousand filling stations," he said. Kulekeev did not disclose the name of
the country or the country where it is located, or the possible timeframe for
the deal. "At the moment we are holding talks, bargaining. In the near
future we will announce both the country and the company," he said.
Kazatomprom's net profit soars in 2006
Kazakstan's national nuclear company, Kazatomprom, made 47.22 billion tenge in
net profit in 2006, four times more than in 2005 (11.92 billion tenge).
The officially published unaudited consolidated report indicates that revenue
from the sale of products and services in 2006 amounted to 39.55 billion tenge
(compared with 26.38 billion tenge in 2005), with costs at 26.58 billion tenge
(compared with 16 billion tenge in 2005), Interfax News Agency reported.
The company's assets grew to 137.34 billion tenge from 63.095 billion tenge,
equities reached 78.187 billion tenge from 31.6 billion tenge, and the charter
capital was 7.98 billion tenge compared with 7.896 billion tenge in 2005.
Kazatomprom is Kazakstan's national exporter of uranium and other dual-purpose
materials. It is wholly owned by the energy and mineral resources ministry.
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FOREIGN COOPERATION
Turkmenistan, Kazakstan sign long-term agreement
Turkmen President, Gurnbanguly Berdimuhammedov, and his Kazak counterpart
signed a package of bilateral agreements on May 28th-29th in Astana, which aim
to deepen Turkmen-Kazak interaction. Foreign Minister, Rashid Meredov, reported
it at the Cabinet of Ministers meeting, Turkmenistan.ru reported.
It was predicted that a long-term treaty on cooperation in the trade and
economic sphere till 2020 as well as a number of intergovernmental and
interdepartmental documents would be signed in Astana. Agreements reached during
the summit in Turkmenbashi regarding, first of all, laying of the East-Caspian
gas pipeline and new North-South transport corridor will be furthered.
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TELECOMMUNICATIONS
KazakTelecom increases IFRS net to 9.29 billion tenge
KazakTelecom boosted net profit to International Financial Reporting Standards (IFRS)
to 9.29 billion tenge in the first quarter of 2007, up 12 percent from 8.289
billion tenge in the same period of last year, Kazakstan's national telecoms
provider said in a financial statement.
Sales revenue grew to 28.503 billion tenge in 2006, from 26.378 billion tenge in
2005. Assets grew to 242.152 billion tenge from 231.882 billion tenge during the
quarter. Liabilities fell to 88.877 billion tenge from 95.019 billion tenge.
Equity increased to 153.276 billion tenge from 136.862 billion tenge.
KazakTelecom is the leading telecommunications operator in Kazakstan. Samruk
Holdings owns a 52 percent state stake in the company.
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