Books on Kazakstan
Update No: 317 - (30/05/07)
Nazarbayev the regional king
Kazakstan's president, Nursultan Nazarbayev, bestrides Central Asia. Uzbekistan
may be more populous, but it has a dictator in charge who is too ghastly for his
own good, Islam Karimov, loathed at home and despised abroad.
Nazarbayev is striving to turn his energy-rich colossus of a nation into a force
for regional stability. He rather resembles President Chavez of Venezuala, which
is exerting a major influence on his neighbours by means of its oil wealth. It
is to be the 'Bank of the South.'
Nazarbayev lacks altogether Chavez's political radicalism. But then he lived
most of his life under communism, enough to cure anyone of far leftism.
The Kyrgyz conundrum
On a recent visit to Kyrgyzstan, Nazarbayev dangled the prospect of increased
investments in return for a commitment from Kyrgyz leaders to forswear political
Nazarbayev's motives aren't purely altruistic. They are rooted in pragmatism: he
is interested in taking preventative action that defends Kazakstan's economic
interests. Perhaps the greatest threat today to the continuation of Kazakstan's
economic boom is instability in neighbouring countries, a trend that could
potentially fuel radical Islam, produce a refugee crisis and/or cause
disruptions to existing export routes.
During his April 25-26 trip to Bishkek, Nazarbayev delivered a clear message to
his Kyrgyz counterpart, Kurmanbek Bakiyev: Focus on developing Kyrgyzstan's
economy, and the severity of political problems will begin to fade. "We
propose Kazakstan's experience of development and modernization, which only
comes in conditions of stability. Investment does not come to an unstable
country," Nazarbayev said in remarks broadcast by Kazakstan's state-owned
Khabar TV. Kazakstan is "ready to invest billions of dollars in
Kyrgyzstan's economy," provided that Kyrgyzstan demonstrates a greater
degree of political maturity, Nazarbayev added.
The failure of Bakiyev's administration to heed his warning could have dire
consequences, Nazarbayev said. Speaking in an interview given jointly to Khabar
and Kyrgyz state TV, Nazarbayev adopted an unprecedented stance of bluntly
commenting on Kyrgyz domestic political matters. "First, all [the factions]
must sit at the negotiating table, second, one must respect authorities who have
been elected by the people, and these authorities must use their power to
establish order in the country in a democratic and lawful way," Nazarbayev
"If neither the first nor the second solutions are accepted, Kyrgyzstan
will be left with the alternative of being the same as Afghanistan was in its
time: disturbances, anarchy -- everybody will do whatever he wants to --
extremism, terrorism, drugs trafficking -- all this. In this case, Kyrgyzstan
will turn into an enclave of instability," Nazarbayev continued. "Does
anybody really want this? I would rather not wish this on the Kyrgyz
As a means of encouragement, Nazarbayev offered $100 million dollars in
humanitarian aid for Kyrgyzstan, as well as wheat and fuel supplies. Kazakstan
is already Kyrgyzstan's largest investor, with $300 million invested in the
economy, accounting for 30 percent of total investment. With trade between the
two countries standing at $400 million in 2006, there appears to be room for
growth in economic cooperation, Nazarbayev said, pointing to Kazakstan's
business interests in Georgia as an example.
To attract further Kazakstani investment, Kyrgyzstan will not only have to forge
a more stable political environment, the president and parliament in Bishkek
will need to cooperate on the adoption of legislation that enhances investor
rights. Amid their power struggle, Bakiyev and his parliamentary foes largely
ignored policymaking and implementation responsibilities. In a report, titled
Asian Development Outlook 2007, the Asian Development Bank pointed to political
instability as a factor that "distracted [Kyrgyz] authorities and hampered
structural reforms, including the passage of key economic legislation."
In response, Bakiyev told Nazarbayev that trade and economic cooperation with
Kazakstan was one of his administration's top foreign policy priorities. Bakiyev
acknowledged existing deficiencies in Kyrgyzstan's investment framework and
expressed a commitment to closing legal gaps that hamper the country's ability
to attract foreign capital. In addition, the two presidents signed a joint
statement calling for an expansion of political and economic relations. It
specifically called for closer cooperation in combating terrorism, organized
crime, drug-trafficking and illegal migration. It also contained a provision for
joint action in "preventing threats to each other's independence,
sovereignty and territorial integrity."
Nazarbayev and Bakiyev agreed to set up an interstate council for discussing
bilateral issues. Some regional experts saw the council's creation as a step
toward the establishment of a Central Asian union, a concept that Nazarbayev has
championed of late.
There was one concrete outcome of Nazarbayev's visit -- the establishment of a
joint venture involving state-owned companies from Kazakstan, Kyrgyzstan and
Russia. The new venture is expected to finish construction on two hydroelectric
power stations located on the Naryn River -- Kambarata 1 and Kambarata 2 - the
Kazakstan Today news agency reported.
Analysts in Kazakstan generally lauded Nazarbayev's trip as a diplomatic victory
for Kazakstan and for the president personally, burnishing his image as a power
broker, and possibly boosting the country's bid to chair the Organization for
Security and Cooperation in Europe in 2009. "I think that one of the
priority goals of the visit was to show the leadership capacity of Kazakstan in
Central Asia; to send a message to the international community that Kazakstan is
willing to contribute its resources to [promote the] political and economic
stability of its neighbours," Anuar Ayazbekov, a research fellow at the
Institute for Economic Strategies-Central Asia, told EurasiaNet.
Ayazbekov and others noted that Nazarbayev, while proffering possible solutions
to Kyrgyzstan's political woes, was careful not to get too deeply involved in
the internal affairs of a neighbouring state. "Even if the visit was
planned to show support for Bakiyev, it was done in a very careful manner,"
Ayazbekov said. "Kazakstan's foreign office certainly realizes that
extending support only to one political group in Kyrgyzstan can entail long-term
consequences in the event of change of the regime."
Nazarbayev had originally planned to make an address in Kyrgyzstan's parliament,
which contains many of Bakiyev's strongest opponents, but he ended up not
appearing before MPs. "It clearly was a wise decision, since during [such
a] meeting a lot of politically sensitive issues that concern the elites of both
Kazakstan and Kyrgyzstan could have been raised by radical MPs," Ayazbekov
Bakiyev, ultimately, might have benefited more from the visit than Nazarbayev,
suggested Dosym Satpayev, the director of the Assessment Risks Group consultancy
in Almaty. "Bakiyev needed this more politically. He wants to show he is in
control of the situation in the country," Satpayev said.
Kazaks Gain Tajik Foothold
Kazakstan's growing economic presence in Tajikistan is all part of its
master plan to become a regional leader. On March 27, the Kazak state
communications company Kazaktelecom opened an office in Dushanbe, and the
following day the Tajik president received representatives from Samruk, the
company that manages Kazakstan's state assets.
Analysts interviewed by NBCentralAsia in Tajikistan say these events reflect
Kazakstan's growing influence on the Tajik economy. Trade between the two
countries went up by 14 per cent last year, reaching 214 million US dollars.
Several large Kazak companies are active in Tajikistan's mining, banking and
communications industries, and in supplying the Tajiks with Kazak grain.
Discussions about Kazak investments in small hydroelectric power stations are
currently under way.
According to economist Hojimuhammad Umarov, Kazakstan's supply of aluminium
oxide to plants in Tajikistan will strengthen the two countries' economic ties
even further. Aluminium oxide is the raw material processed at Tajikistan's
giant aluminium plant, one of its most important biggest industries.
Umarov says economic relations between the two countries can only get stronger,
so that Kazakstan may soon become one of Tajikistan's most important economic
A diplomatic source at Kazakstan's embassy in Dushanbe took a similar line,
noting that a new development strategy unveiled by President Nursultan
Nazarbayev a fortnight ago stresses the importance of building up relations with
other Central Asian countries.
"Since [Nazarbaev] presented Kazakstan's new development strategy, several
large state companies have been instructed to invest in Tajikistan," said
An expert from Tajikistan's Centre for Strategic Studies says
that by building up its economic presence, Kazakstan is also pursuing political
"With Kazakstan's level of development and its ambition to become regional
leader, it does not want its neighbours to be at all unstable," he says.
"Kazakstan will try to consolidate its position in Tajikistan in order to
influence domestic events."
Political scientist Parviz Mullojanov says that Kazakstan may seek to use its
economic advantage to get the Tajiks to side with it within regional
multilateral organisations such as the Shanghai Cooperation Organisation and the
Eurasian Economic Community.
Democratic opposition of Kazakstan established Constitutional Initiative
There is opposition to the regime, but it has to assemble abroad. The web
site of the United Social Democratic Party of Kazakstan reports that a
roundtable conference took place in Strasbourg on April 25. The European
Parliament discussed the constitutional reforms in Kazakstan. Representatives of
democratic parties and social action organizations from Kazakstan, deputies of
the European Parliament, representatives of the Council of Europe and its
Venetian Commission were present.
Kazakstan was represented by free-lance journalist and editor Yermurat Bapi,
Atameken Chairman Yerjan Dosmuhamedov, Akejan Kajegeldin (prime minister between
1994 and 1997), Alga! Chairman Asylbek Kojahmetov, Amirjan Kosanov of the United
Social Democratic Party, Serik Medetbekov of the Kazak Opposition Foreign
Bureau, and Kahar founder Bahytjan Toregojina.
Participants of the roundtable conference condemned the Constitution of
Kazakstan adopted in 1995 as inadequate to the internationally accepted
democratic standards and international obligations of the Republic of Kazakstan
and pronounced it in need of urgent reforms. Kazak opposition leaders proclaimed
establishment of Constitutional Initiative, a permanent advisory council of the
Kazak democratic forces.
Constitutional Initiative will chart a new Constitution of Kazakstan, compile
and publish proposals on the subject, and organize a nationwide discussion of
the constitutional reforms.
The draft Constitution of Kazakstan democratic forces came up with in 2005 may
provide the basis of the future document.
All political parties, social action organizations, and individuals are welcome
to join Constitutional Initiative and contribute to its work on the new
The so called Strasbourg Communiqué states that "We appeal to the European
Parliament, Council of Europe, and its Parliamentary Assembly, Organization for
Security and Cooperation in Europe to use every meeting with the president and
government of the Republic of Kazakstan to insist on putting an end to the
practice of political harassment of the opposition and journalists. We appeal to
these international bodies to insist on the release of Alibek Jumabayev and
Mahambet Abjan and on termination of criminal prosecution of Bahtyla Tumenova
and Bulat Abilov... We urge the European Parliament, Council of Europe, and its
Parliamentary Assembly, Organization for Security and Cooperation in Europe to
demand from the president and government of the Republic of Kazakstan annulment
of politically motivated sentences to opposition activists and journalists like
Muhtar Abljazov, Yermurat Bapi, Sergei Duvanov, Galymjan Jakiyanov, Azamat
Jegpisbayev, Akejan Kajegeldin, Amirjan Kosanov, Jasaral Kuanyshalin, Kaziz
Togusbayev, and many others."
Participants of the roundtable conference appealed to international political
bodies, national governments, parliaments, and political parties of OSCE members
to exert their influence with the Kazak authorities to have the latter register
the Alga! and Atameken parties and to declare a war on the corrupt deals
international corporations carry out in Kazakstan.
"We appeal as well for a stiffer procedures of control over stock exchange
activities of the Kazak companies like Kazakmys, Eurasian Industrial Group, and
Kazmunaigaz," the communiqué stated.
Fitch rates Kazmunaigaz BBB+ADs- outlook stable
Fitch Ratings has assigned National Company KazMunaiGaz (NC KMG) foreign and
local currency Issuer Default ratings (IDR) of BBB and a Short-term foreign
currency rating of F3. The Outlooks on the IDRs are Stable, the ratings agency
said in a press release. The ratings reflect NC KMG's strategic importance to
the Republic of Kazakstan (BBB/Positive/F3) in oil and gas, New Europe reported.
The Stable Outlook reflects Fitch's expectations that the company will continue
to enjoy state support both in terms of regulation and tariffs as well as
legislation designed to favour national interests, including 50 per cent
participation and operator rights in all newly discovered oil fields. NC KMG is
a vertically integrated oil and gas operator and the country's national oil and
gas champion with subsidiaries in onshore oil exploration and production (KMG
EP), oil transportation (KazTransOil (KTO+ADs- BBB-/Stable/3), natural gas
transportation and distribution (KazTransGas (KTG+ADs- BB/Stable/B)) and
marketing and trading of oil and petroleum products (TH KMG). The oil and gas
industry in Kazakstan accounts for more than 60 per cent of the country's total
exports, yielding earnings of approximately US$18 billion per year.
NC KMG has been chosen by the government to pursue strategic goals in the energy
sector including various acquisitions such as the purchase of a 50 per cent
stake in crude oil producer KazGerMunai for US$ one billion and 33 per cent
stake in PetroKazakstan Inc. for US$1.37 billion last year. NC KMG is the
country's second largest crude oil producer through its subsidiary KMG EP after
Tengizchevroil (BBB-) and is responsible for managing the majority of the
country's oil exports through KTO and all of the country's natural gas exports
S&P rates Temirbank's US$1.2 billion MTN programme
Standard & Poor's Ratings Services has assigned its B+/B ratings to the
US$1.2 billion MTN programme to be issued by Kazakstan-based Temirbank JSC
(B+/Stable/B) or Temir Capital B.V. (not rated), a Netherlands-based special
purpose vehicle, the ratings agency said, New Europe reported.
Under the programme, senior unsecured notes issued by Temir Capital will be
unconditionally and irrevocably guaranteed by Temirbank, the release said.
The ratings on Temirbank reflect its ambitious strategy, short track record, and
its small size, which exposes it to high funding risk, and to a lesser extent,
credit concentration risks, the release said.
The ratings also reflect the improving, but still vulnerable, domestic economic
environment of the Republic of Kazakstan (foreign currency, BBB/Stable/A-3;
local currency, BBB+/Stable/A-2) to which the bank, together with the rest of
the Kazak banking sector, is exposed. These negative factors are somewhat
mitigated by the bank's strengthening franchise, good business prospects, and
its supportive shareholder. Temirbank's strategic importance to its parent, Bank
TuranAlem (BTA; BB/Positive/B), is a positive rating factor. Although the bank
received several capital increases in the past, these have only been enough to
maintain capitalization at its current marginal level.
In the context of the Kazak banking sector, Temirbank is a midsize financial
institution. Although it ranked as the seventh-largest bank in Kazakstan by
assets at end-March 2007, Temirbank, like most other midsize local banks, holds
a relatively small market share of about two percent of the total banking
assets. Since mid-2005, the bank has been focusing on retail banking, and is
expected to form the domestic retail banking arm of the BTA group.
Putin pursues major Kazak, Turkmen energy agreements
Kazakstan's cooperation with Russia in transporting energy is strategic in
nature, Kazak President Nursultan Nazarbayev said. "Kazakstan is absolutely
committed to shipping most of its oil, if not all of it, through Russian
territory. We have always said this," Nazarbayev said at negotiations with
Russian President Vladimir Putin in Astana on May 10th, New Europe reported.
"Facts show that 42 million out of the 52.3 million tonnes of Kazak oil
that we transported this year passed through Russia," he said. "The
fuel and energy sector is the first and main issue" in cooperation between
Russia and Kazakstan, he said.
"This cooperation in the oil and gas sector is of a strategic nature. This
concerns, in particular, the transportation of Kazak hydrocarbons to
international markets using Russia's trunk pipelines and the joint processing of
hydrocarbons," Nazarbayev said.
Kazakstan will not search for other routes to transport its hydrocarbons, so
long as Russia provides a fair and mutually beneficial access to its pipeline
system, the Kazak president said at a joint press conference with Putin after
the negotiations. "I think that Russia is able to give more possibilities
to transport Kazak oil and gas through its territory. Kazakstan and other our
neighbours are unlikely to search for other routes," the president said.
"The issue is that there is fair and mutually beneficial access," he
said. "I am thankful to the Russian president and authorities, who
understand this and who have been working together with us on this issue,"
Nazarbayev also said the two countries agreed to increase the amount of Kazak
oil shipped to Russia via the Caspian Pipeline Consortium, a pipe running from
Kazakstan to the Russian Black Sea port of Novorossiik, to 40 million tonnes
from a current 23 million tonnes.
The increased amount, he added in the Kazak capital, could then be shipped to
Europe via the Bourgas-Alexandroupolis pipeline, a Russian-owned transit line
that is to run through Turkey and Greece. "We are thinking about this and
consider it possible," Putin said of the Bourgas-Alexandroupoli proposal.
"A large amount of the oil that could fill that pipeline may come from
Putin's trip to Central Asia coincided with a Polish summit, which took place
recently, devoted to securing energy sources other than Russia, which Kazak's
Nazarbayev had promised to attend in March, Russian daily Kommersant reported on
May 10, cited by Deutsche-Presse-Agentur (dpa). The newspaper said Nazarbayev
had cancelled in order to meet with Putin.
Russia also agreed to raise the price it pays for natural gas from Kazakstan's
Karachagansk fields to "more than US$145 per 1,000 cubic metres,"
Kazak Energy and Mineral Resources Minister Baktykozha Izmukhambetov told
reporters in Astana.
Putin and Nazarbayev were expected to meet again on May 12 in the Turkmen city
of Turkmenbashi, where they, along with new Turkmen President Gurbanguly
Berdymukhammedov, were expected to discuss energy cooperation.
Russia, Kazakstan, and Turkmenistan should reach significant agreements in the
energy sector, Putin said. "As for possible tripartite agreements in
Turkmenistan, I would ask you to have patience. We need to hold essential
negotiations with our Turkmen partners and friends, and I expect that we will
seal significant agreements," Putin said on May 10.
Turkmenistan claims the world's third-largest known natural gas reserves, most
of which it sends to Moscow, where state-owned natural gas monopoly Gazprom
blends Russian gas with Turkmen fuel for export.
China struck a deal with Turkmenistan last year to import 30 billion cubic
metres of the fuel annually beginning in 2009, and Moscow, Beijing and the West
are all seen to be courting Berdymukhammedov for access to the Central Asian
Russia may include oil supplies to China in Kazak exports
The Russian government could instruct the Industry and Energy Ministry to
include oil supplies to China transited via Kazakstan in the schedule for the
transportation of Russian oil for export, a source in a high-profile Russian
agency said, Interfax News Agency reported.
Russia and Kazakstan currently have an intergovernmental agreement stipulating
that interrelated oil supplies should not be subjected to customs duties. Thus,
there currently is not an export schedule for transporting Russian oil along
pipelines to China via Kazakstan. "However, interrelated supplies of Kazak
and Russian oil have stopped in recent years. Russian oil and oil products are
delivered to Kazakstan without any customs duties being charged, which is
economically advantageous for Kazakstan and allows for an equivalent increase in
hydrocarbon exports, but then the re-export of Russian oil to China occurs
frequently," the source said. Some 5.718 million tonnes of Russian oil were
delivered to Kazakstan in 2006 without customs duty payments. Of that amount,
about 4.5 million tonnes were intended for the Pavlodar Oil Complex, where 3.9
million tonnes of oil were refined in 2006, including Kazak raw materials, the
source said. "Therefore, a part of the Russian oil was re-exported from
Kazak territory, including to China along the Atasu-Alashankou oil pipeline.
Izmukhambetov pledges support for Turkmenistan-China gas pipeline
Kazakstan welcomes the construction of a gas pipeline between Turkmenistan and
China on its territory and is prepared to put forward a number of proposals to
support the choice of this route, Kazak Energy and Mineral Resources Minister,
Baktykozha Izmukhambetov, said Interfax News Agency.
During a recent working visit to Ashgabat, Kazak Prime Minister, Karim Masimov,
"specifically discussed the issue of the route of the future gas pipeline
from Turkmenistan to China" with Turkmen officials, Izmukhambetov said.
"We have various proposals and options. If the option (of building the gas
pipeline) through Uzbekistan directly through southern Kazakstan and on to China
is passed, we also have some of our own proposals," he said, noting that
"Turkmenistan has held preliminary discussions with China on this
Turkmenistan and China signed an intergovernmental agreement in Beijing in April
2006 on the construction of a gas pipeline between the two countries with
capacity to pump 30 billion cubic metres of gas per year starting in 2009.
Meanwhile, Kazakstan anticipates difficulties in the construction of a
Trans-Caspian gas pipeline and is considering possible LNG deliveries in
"The construction of a Trans-Caspian gas pipeline to Erzurum is a very
difficult proposition, as the Caspian Sea does not belong solely to Kazakstan.
Five nations adjoin this sea, and they have their own interests," Deputy
Energy and Mineral Resources Minister Bolat Akchulakov said at the seventh
meeting of the Kazakstan-EU Parliamentary Cooperation Committee in Astana on May
"We are very seriously considering gas deliveries across the Caspian
Sea," he said in reply to a question by European Parliament delegation head
Kazakstan is considering LNG deliveries, "rather than building an undersea
gas pipeline, as this is the safest way of gas transportation," he said.
"When a technical solution is found, we will certainly think about gas
supplies to Erzurum, as well," Akchulakov said.
According to earlier reports, Kazakstan is examining its possible participation
in construction of a Trans-Caspian gas pipeline.
KazMunaiGaz executive director Bakhytzhan Isengaliyev said the Trans-Caspian gas
pipeline will finally attract Russia's interest. "Russia does not see it
(Trans-Caspian gas pipeline project) quite positively, it sees it as an attempt
to bypass a partner. In my opinion, the situation in the gas market is currently
developing so that Russia can successfully use the Trans-Caspian gas pipeline
because Russian interests in Central Asia grow with every year," he said in
the interview with the Russian newspaper Izvestia published on May 3rd.
In particular, Russia's presence in the region will grow due to the changing
situation in Turkmenistan, he said. In addition, Russian-Uzbek cooperation is
positively developing, he said. "In the future, Russians will see that gas
transportation across the floor of the Caspian Sea is a very interesting project
for Russia in the foreseeable future," he said.
"The gas market is large enough, and everybody will find a place there. It
is important to overcome the feeling of your own exclusiveness and go over to
constructive cooperation, for which Kazakstan has been calling for a long time.
Modern challenges are much more serious than it may seem especially in the
energy sector, which is based mainly upon exhaustible, non-renewable
resources," he said.
GOLD, FOREX RESERVES
Gold, forex reserves up 3.4+ACU- in April
Kazakstan's gold and foreign currency reserves, including gross reserves at the
National Bank and assets of the National Fund, grew 3.4 per cent to US$38.705
billion in April, the National Bank said in a statement, New Europe reported.
The National Fund contained approximately US$16.438 billion on April 30. Net
forex reserves rose US$664.3 million to US$20.774 billion in April due to the
sale of currency on the domestic market, reduction of correspondent account
balances, foreign debt servicing and efforts to top the National Fund up. The
National Bank's assets in gold grew by US$38.7 million to US$1.489 billion in
April as a result of a 2.19 per cent increase in the price of gold on world