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Update No: 297 - (29/09/05)
Nazarbayev a shoo-in in presidential elections
President Nursultan Nazarbayev is receiving staunch support for his candidacy
for a third seven-year term. He will almost certainly win easily.
Kazakstan has pushed up its presidential election date to December 4th; and the
incumbent seems perfectly positioned to secure a third term.
Nazarbayev, who has presided over Kazakstan's boom economy since the country
gained independence in 1991, was formally nominated on September 9th by the Otan
Party. The presidential vote was originally scheduled for 2006, but parliament
on September 7th decided to delay election-day until December.
On September 26th in Almaty the Party of Patriots of Kazakstan, a loyalist
outfit, held its seventh congress during which it passed a resolution in support
of Nursultan Nazarbayev in the forthcoming presidential elections.
135 delegates from all regions of the republic took part in the congress.
Participation of the party in the forthcoming elections was on the agenda of the
congress. As a result of voting the majority gave their voices for the
resolution in support of Nursultan Nazarbayev.
Nazarbayev's main challenger in the election is expected to be Zharmakhan
Tuyakbai, a leader of the For a Just Kazakstan opposition movement.
Over the past two years, the democratic process has proven dangerous to
incumbents in Central Asia and the Caucasus. Disputed votes in Georgia, Ukraine
and Kyrgyzstan prompted regime-change in each country, a process commonly
referred as the "colour revolutions." But political observers in
Kazakstan say that Nazarbayev and his supporters have studied the political
lessons, and have implemented a comprehensive blueprint to avoid a repetition of
revolutionary events in Kazakstan.
Nazarbayev has so far implemented his political plan flawlessly, some political
analysts say. As a result, he appears to be virtually unbeatable. Political
analysts Vladimir Solovyev and Alexander Sidorov, writing in a commentary
published by the Kommersant daily on September 8th, noted that Tuyakbai "is
entering the election fight in not his best form and has little hope of
winning." Kazakstan, like other nations in Central Asia, has a history of
rigged elections. But Nazarbayev's popularity seems sufficiently strong at this
stage that he could easily win a free-and-fair vote, some observers say.
One commentary, published in late August by the Russian RIA Novosti news agency,
characterized Nazarbayev's strategy as the "colourless evolution." It
appears specifically designed to neutralize the forces that produced
revolutionary change in Georgia, Ukraine and Kyrgyzstan.
Moving up the election date is an important component of the president's
political strategy, as it gives the opposition little time to find its rhythm
and mount an effective presidential campaign.
Keeping the opposition off balance is a major component of the presidential
strategy, some analysts say. Since the country's parliamentary elections in
2004, the government has maintained political pressure on opposition parties
that is designed to keep Nazarbayev critics fragmented.
For much of 2005, opposition-oriented media outlets have faced considerable
official scrutiny, some being hit with huge fines in libel cases involving
government agencies -- cases that presidential critics insist are politically
motivated. Observers say the government has also resorted to outright
intimidation, noting several incidents last spring in which thugs tried to
disrupt opposition political activity.
Perhaps the most important aspect of Nazarbayev's re-election strategy centres
on social policy. Taking advantage of Kazakstan's oil-and-gas wealth, the
government has massively increased spending on social programs and education.
The rise in state spending is designed in large measure to alleviate a major
source of discontent - poverty - which has served as the catalyst for the
revolutions in Georgia, Ukraine and Kyrgyzstan.
Nazarbayev has also taken care in recent months to engage directly with voters
by travelling extensively across the country. In early September, for example,
Nazarbayev made a campaign-style visit to Almaty that received extensive
coverage on state television. At a September 6 appearance at a hospital,
Nazarbayev said the government would pay "special attention" to
improving healthcare in coming years. A day earlier, during a meeting with
business leaders, Nazarbayev stressed job creation. "Your work will improve
peoples' lives," the president told the assembled entrepreneurs. "They
will get jobs and income."
The US is cosying up to Nazarbayev
The last key aspect of Nazarbayev's strategy concerns foreign policy. The
Kazakstani government in recent weeks has sought to bolster relations with the
United States, which is widely suspected in Central Asia of acting as the
sponsor of the "color revolutions." In late August, Foreign Minister
Kasymzhomart Tokayev visited Washington, where he reaffirmed Kazakstan's support
for the US-led military operations in Iraq and Afghanistan. US officials,
including Secretary of State Condoleezza Rice and Secretary of Defence Donald
Rumsfeld, reciprocated by praising the Kazakstani government as a reliable
In addition, presidential supporters sought to use a September 6th visit to
Almaty by former US chief executive Bill Clinton to bolster Nazarbayev's
re-election bid. Clinton was in Kazakstan ostensibly to promote an anti-HIV/AIDS
initiative, but pro-presidential television reports hinted that the visit
provided a tacit US endorsement of Nazarbayev's candidacy. Many media outlets
emphasized Clinton's praise of Kazakstan's economic performance. "Bill
Clinton's visit ... is of particular significance," said one report
broadcast by Khabar Television on September 7th. "Washington has confirmed
once again who it counts on."
The colour revolutions
Nazarbayev has not been afraid to directly and publicly address the issue of
the colour revolutions. In a live television broadcast in late August,
Nazarbayev took questions via telephone from citizens. When one asked about the
possibility of the colour revolution phenomenon spreading to Kazakstan,
Nazarbayev countered that the country was too prosperous to experience such
upheaval. He also warned that an attempt to promote radical political change
could wreck Kazakstan's economic growth. "I am reminded of the brilliant
quote by Victor Hugo: 'Poverty gives birth to revolutions and revolutions give
birth to poverty," Nazarbayev said. He went on to urge citizens not to read
opposition newspapers, and maintained that his government was the best guarantor
of continued prosperity. "Only a blind man cannot see how much Kazakstan
has changed [for the better]," he said.
"We of course wish these countries [Georgia, Ukraine and Kyrgyzstan]
success. But all this [the colour revolution phenomenon] started because 80
percent of their populations lived below the poverty line," Nazarbayev
added. "And so far [since the revolutions] there is no improvement."
Chinese beat India for Kazak oil fields
China's biggest state-owned oil company announced recently that it would pay
US$4.18bn for a Canadian oil company with substantial reserves in Kazakstan,
China's largest foreign acquisition yet, the International Herald Tribune
China National Petroleum Corp. out bid India's state-owned Oil & Natural Gas
Corp. in reaching a deal to acquire PetroKazakstan. The bidding under-lined
growing competition for oil resources by the two most populous countries, both
of which are rapidly increasing their imports.
PetroKazakstan's acceptance of the CNPC bid is a consolation prize for China's
oil industry. Another state-controlled Chinese company, China National Offshore
Oil Corp., or Cnooc, withdrew its US$18.5bn offer for the US producer Unocal on
Aug 2nd following strong opposition in Congress.
But the tangled history of past Chinese oil investments in Kazakstan cast a
possible shadow on the deal.
Kazakstan has passed a law declaring its right to pre-empt the sale of any oil
property in the country. That low was the basis for many questions from analysts
Bernard Isautier, the company's chief executive, said that while Kazakstan could
pre-empt the sale of assets within the country, it could not block the sale of
"We are not speaking about a sale of assets where pre-emptive tights would
apply," he said. "We don't expect any problem in that regard."
In Astana, the capital of Kazakstan, Mikhail Dorofeyev, head of the media
department of KazMunaiGaz, the state oil company and industry regulator, said by
telephone that the company would have no comment on the announcement.
The recent deal may benefit from increasingly close relations between the Kazak
and Chinese governments, which have both suppressed Islamic fundamentalism along
their long common border, sometimes drawing criticism from human rights group.
CNPC has worked closely with the Kazak government on several projects. But a
publicly traded subsidiary of CNPC, PetroChina, has stirred controversy in the
Central Asian country by bringing in large numbers of Chinese workers instead of
Cnooc and the third of China's three state-owned oil companies, China Petroleum
& Chemical, known as Sinopec, had tried and failed to buy into Kazakstan's
huge Kashagan field two years ago. Their initial agreements to buy stakes were
pre-empted by foreign operators in the field, who invoked clauses in commercial
agreements for the oil field in an attempt to buy the stakes for themselves.
The Kazak government then invoked a legal pre-emption, claiming a partial stake
PetroKazakstan, based in Calgary, Alberta, but managed from Windsor, England, is
a considerably smaller company than Unocal, and it does not have Unocal's
extensive natural gas reserves or reputation for high technology. Nonetheless,
it commanded a price of US$55 a share in the deal recently, a premium of 21.1
per cent to the stock's closing price on the New York Stock Exchange.
In the oil industry, "China has consistently been willing to overpay for
assets - it's more of a security issue for them than the absolute price,"
said John Kuzmik, a partner and China specialist at Baker Botts, a Houston
energy law firm. Oil & Natural Gas Corp. reportedly bid US$3.6bn.
PetroKazakstan's main asset lies in its full ownership of one oil field, Kumkol
South, and half-ownership of two smaller ones, Kumkol North and Germunaigaz. The
company has managed to develop those fields even though they are locked in the
heart of Central Asia.
"It is a jewel - you look at the way they increased production," said
Vincent Noual, a specialist in Central Asian oil in the Geneva offices of HIS
Energy, a consulting firm.
PetroKazakstan has had a series of legal skirmishes with Lukoil of Russia, its
main partner in the oil fields. Lukoil's main pipeline from Kazakstan into
Russia is already full, but CNPC is expected to finish at the end of this year a
pipeline from Kazakstan into China.
The pipeline was originally planned to carry oil from other Chinese-owned oil
fields in Kazakstan but will have plenty of extra capacity to carry oil from
PetroKazakstan as well, Noual said.
The recent deal represents a huge payday for PetroKazakstan's investors and the
company's chief executive, Bernard Isautier.
PetroKazakstan used to be Hurricane Hydrocarbons, which was bankrupted in 1999
by low oil prices. But the company still held one superb investment: its stakes
in the Kazak oil fields, purchased for just US$120m in 1996 when Hurricane
bought the assets of Yuzhneftegaz, a Kazak state-owned oil company.
After the bankruptcy filing, Isautier joined the business, led the company out
of bankruptcy, bought 88 per cent of a large Kazak refinery for US$51m, and
began investing US$143m to develop the oil fields. As oil prices soared and the
value of the Kazak oil fields with them, PetroKazakstan's relations with the
Kazak government deteriorated. The government and the company have been locked
in extensive legal battles over issues like the company's flaring - or burning
off - of natural gas, which the government wants to see shipped to markets
Citigroup advised CNPC on the deal while Goldman Sachs advised PetroKazakstan.
Citigroup has agreed to provide CNPC with a letter of credit for the entire
value of the deal, with the state-owned Chinese oil company not borrowing any
money from other Chinese government agencies.
Cnooc's plan to finance much of its bid for Unocal with borrowings from a
government-controlled bank had fanned opposition to that deal in Congress over
The complex deal has an unusual feature that will allow Isautier, 62, to remain
active in Central Asian oil deals. He had said last spring that he planned to
retire this autumn, and the company disclosed in late June that it had been
approached by potential buyers.
CNPC agreed to pay US$54 in cash for each share and put US$76m, worth another
US$1 a share, into a new company that is to be spun off to PetroKazakstan
shareholders and led by Isautier.
BankTuranAlem opens first Tbilisi branch
Kazak BankTuranAlem (BTA), which holds assets of US$5.5bn, opened a branch
office in Tbilisi, the Georgian capital, on August 23rd, Kazinform reported.
BTA has already invested in the reconstruction of hotel Iveria in downtown
Tbilisi into a five-star hotel.
The Silk Road Group is BTA's major partner in Georgia. BTA has already set up
branches in Moscow, Kiev, Yerevan and Shanghai. Among the major shareholders of
BTA are the EBRD and IFC.
The delegation of the bank met with the head of National Bank of Georgia, Roman
Gotsiridze, who discussed with the delegation the economic peculiarities in
Georgian regions, the central bank's press service reported. "A regional
banking strategy was less apparent in the interests of foreign banks entering
Georgia so far," Gotsiridze was quoted as saying.
Gotsiridze said it would be interesting for the Kazak bank to work on the
development of the regional banking system. "The representation office is
part of a strategy - 'One bank, one account, the whole CIS'- which calls for the
creation of a bank network of our strategic partners, for servicing economic
interests of neighbour countries," said Bank TuranAlem's financial chief
Erik Sultankulov. Besides, the financial sector, BTA said that Kazakstan is also
interested in many other projects in Georgia, including the Batumi port, oil
infrastructure, and the energy sector. The Kazak bank paid US$2.5m to buy 49 per
cent of the shares of what is now BTA Silk Road Bank in March. BTA Silk Road
Bank plans to work in real estate and mortgage business.
The presidents of both countries agreed to develop economic relations between
their states during Georgian President Mikhail Saakashvili's visit to Kazakstan
Kazak President Nursultan Nazabayev had said then that no political or economic
obstacles could disturb the relations between the states. For his part,
Saakashvili said it is important for Georgia to be a partner with Kazakstan.
S&P raises Kazaktelecom rating to BB
Standard & Poor's Ratings Services announced on August 19th that it has
raised its long-term corporate credit rating on Kazaktelecom (OJSC) (KTC), the
incumbent fixed-line telecommunications operator in the Republic of Kazakstan,
to BB from BB-, reflecting the company's improving performance. The outlook is
stable. According to S&P's credit analyst, Lorenzo Sliusarev, the upgrade
indicates that KTC's business position is improving with continued dominant
market shares in key segments, network quality and capabilities has also
improved and the economic dynamics in Kazakstan is positive. The rating of KTC
also reflects KTC's strengthened financial profile, New Europe reported.
The rating remains constrained by the evolving market structure and changing
regulatory environment in the Kazak telecoms sector, the ongoing liberalisation
of long-distance services, and increasing competition. KTC's continuing network
investments and its sizeable dividend payouts-combined with plans to establish
its own mobile franchise-limit the prospective strength and flexibility of its
Sliusarev added that S&P has predicted that KTC's improved business profile
including the competitive advantage of owning a modern nationwide fibre-optic
network and manageable exposure to financial risk provide the company with the
means to manage through the ongoing market and regulatory restructuring and
China's CNPC offers US$4bn for PetroKazakstan
China's national oil company CNPC has entered an agreement to buy competitor
PetroKazakstan for an estimated US$4.18bn, a CNPC spokesperson announced in
Beijing recently, New Europe reported.
CNPC bid to pay US$55 for each share of PetroKazakstan which is listed in
Canada. The purchase price amounting to around 21 per cent over the current
market value beat an offer by India's Oil and Natural Gas Corporation (ONGC) of
between US$3.4bn and US$3.6bn.
PetroKazakstan shareholders must still approve the purchase by a two-thirds
majority at a meeting to be held in October.
Ownership of the Calgary-based PetroKazakstan, which controls about 12 per cent
of the oil production in Kazakstan, is part of a push by Chinese oil companies
to secure worldwide energy resources in light of increasing demand in China,
second only to the US in oil consumption.
Kazakstan has access to as much as 3 per cent of the world's oil reserves, and
the purchase fits in with CNPC's plans to build a pipeline for the transport of
oil from Kazakstan to China.
The purchase was made by CNPC International (CNPCI), a wholly- owned subsidiary
of CNPC, ranked 10th among the world's top 50 oil companies with operations in
more than 20 countries and a yearly production of 35 million tonnes of oil.
The agreement comes just weeks after the failed bid by China National Offshore
Oil Corporation's (CNOOC) to buy US oil company Unocal.
7-mo Kazak oil output grows 1%, gas 49%
Kazakstan edged oil production up 0.9 per cent year-on-year in January-July to
28.888 tonnes, the national statistics agency said recently, Interfax News
Gas condensate production rose 43.6 per cent to 6.775m tonnes and natural gas
production jumped 49.3 per cent to 9.29bn cubic metres (bcm). Kazakstan produced
5.835bcm of commercial gas, up from 5.731bcm a year previously. Kazakstan raised
oil and gas condensate exports 12.1 per cent year-on-year in the first half of
the year to 28.134m tonnes, the state statistics agency told Interfax. Value of
exports rose 78 per cent to 8.055bn Euro. Natural gas exports fell 24.7 per cent
to 7.418bcm and 31.3 per cent to 193.3m Euro. Gas imports fell 12.9 per cent to
5.709bcm and 6.6 per cent to 192m Euro.
FOOD & DRINK
Baltika brewery invests above US$4m in Kazakstan
Baltika brewery has invested into the economy of Kazakstan for the past three
years above US$4m, Kazinform recently reported.
Baltika has been supplying the market of Kazakstan since 2000. Last year the
brewery opened its affiliate in Almaty. The volume of the company's sales in
Kazakstan for the year of 2004 was 30 million litres of beer. So far, Baltika
brewery delivers its produce to 38 states of the world.
India reviews ties with Kazakstan
India and Kazakstan explored ways to bolster mutual cooperation in oil and
energy areas during foreign office consultations held in the Kazak capital
Astana recently, Kazinform reported.
Negotiations were held between the Secretary of the Indian Ministry of External
Affairs, Rajiv Sikri and Kazak Deputy Foreign Minister Vladimir Skolin and
Foreign Affairs Minister Kassymzhomart Tokaev were also present during the
meeting. The Kazak side assured it would help OVL-Mittal Enterprise, a joint
venture floated by ONGC Videsh Ltd. Indian Petroleum Minister Mani Shankar Aiyar
is likely to visit Almaty in October to attend the Kazakstan international oil
and gas exhibition.
The Kazak energy minister will also visit New Delhi to take part in the Asian
Energy Conference proposed to be held in November. Indian Minister of External
Affairs K Natwar Singh recently visited Kazakstan for the Shanghai Cooperation
Organisation summit in which India was, for the first time, granted observer