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KAZAKSTAN


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 29,749 24,205 22,400 60
         
GNI per capita
 US $ 1,780 1,510 1,350 119
Ranking is given out of 208 nations - (data from the World Bank)

Books on Kazakstan

REPUBLICAN REFERENCE

Area (sq.km) 
2,717,300 

Population
15,143,704

Principal 
ethnic groups 
Kazaks 44.3%
Russians 35.8%
Ukrainians 5.1%
Germans 3.6%
and many others

Capital 
Astana
(formerly Akmola)

Currency
Tenge

President 
Nursultan Nazarbayev




Update No: 307 - (27/07/06)

Azerbaijan, Kazakstan: BTC Pipeline Inaugurated
The Baku-Tbilisi-Ceyhan oil pipeline that sends Caspian Sea crude oil to the Mediterranean Sea was inaugurated on July 13th. By the end of 2008 the BP-led consortium that built and operates the line expects its throughput to total 1.0 million barrels per day, half of which will come from Azerbaijan and the other half from Kazakstan.
It requires some US$1bn to build an underwater oil pipeline from Kazakstan to Azerbaijan in order to export Kazak crude oil to the world market through the BTC main export pipeline, Azerbaijani industry and energy minister Natig Aliyev told APA. 
He said that building the submarine pipeline is economically efficient when annual export of Kazak crude oil via Azerbaijan reaches 25m tons, but, in the initial stage, the Caspian Sea Shipping Company's tankers can deliver Kazak oil to the Baku-Ceyhan pipeline. 
Total Company calculates that creation of the Caspian Sea Transportation System requires US$4bn. This money should be spent on construction of undersea pipeline and terminals on both sides.
The July 13th launch of the BTC oil pipeline marks the long-awaited completion of a project that is as much about geopolitics as energy. This is the pipeline that Russia absolutely did not want to happen, neither did the Iranians and neither did the Chinese. The latter are focused on securing as much Kazak oil as possible for a pipeline to China. Russia without the surface transit of Caspian oil as it always had until the break-up of the USSR, has lost leverage over both Azerbaijan and Kazakstan, let alone Georgia, who gains transit ties. Iran have been competing to have the oil flow through their territory to the world market. But amid the celebrations, questions persist about pipeline security. 
The stakes are sizeable. Stretching 1,760 kilometres, with eight pumping stations and 101 block valves, BTC is the second longest pipeline in the world. The US$4 billion project, completed a year later than originally expected, is projected to have a daily capacity of 1 million barrels. 
Long hailed for its geopolitical significance, the BTC pipeline is likely to take on additional prominence in 2007 when Kazakstan begins transporting 3 million tons of oil this year via the conduit. 

Turkish-Kazak trade and investment ties mount; but with plenty of scope for more
To put this all in a wider context, Turkey has always developed strong relations with the Central Asian Republics since their independence in 1991, including Kazakstan. Turkish companies have been investing in Central Asia for years, even in Soviet times, due to strong geographic, cultural and even language affinities with investments focused on sectors such as food, beverages, oil and energy, banking, retailing and tourism in Kazakstan. This relationship is one that many others from the Muslim world can look to leverage.
In 2000, the trade volume reported between Kazakstan and Turkey was US$465 million which was the highest amongst Turkey's trade with the Central Asian countries. This is set to mount mightily with the opening of the BTC oil pipeline.
Alarko Holding, a Turkish conglomerate is one of the biggest foreign infrastructure contractors in the Kazakstan Republic. They also Chair the Turkish - Kazak Business Council run under the auspices of DEIK (Foreign Economic Relations Board) a non-profit private sector organization. The Council serves to remove trade bottlenecks amongst the two countries as well as disseminate information on business opportunities in Kazak market. 
In early March, Dubai Bank signed an agreement with Daruma Corporate Finance of Turkey to develop and market Shari'ah compliant corporate finance and merchant banking services which would also be marketed to Turkey's Central Asian neighbours including Kazakstan. This partnership is reflection of Turkey's strength as a partner in helping launch many businesses into the Central Asian markets.
Even with such strong relations, the feeling amongst the Turkish business community seems to be that much more is desired. Yakup Kocaman, a Turkish business journalist comments that, "Even though the Central Asian countries have got very good relations with Turkey, many there say that Turkey has not realized the full potential of its Central Asian opportunities." Perhaps, partnering with other Muslim world investors to enter the Kazkahstan market is just the impetus that is needed to boost its trade and investment relations there, although the Muslim element of this is probably more important to lenders than to Kazak recipients, this being a secular nation.

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The following interview is particularly revealing of what the experts are hoping from, not only the BTC, but other collateral projects:- 

Kazakstan's joining the BTC becomes more and more profitable - department head of Turkish embassy
Trend's exclusive interview with Turkey'sAmbassador Reshid Uman, the head of the Department for Russia, South Caucasus and Central Asia (as well as Belarus, Ukraine and Moldova) of the Turkish Ministry of Foreign Affairs. 

Question: Addressing the official opening ceremony of the Baku-Tbilisi-Ceyhan (BTC) the Turkish Prime Minister Rejep Tayyub Erdogan reminded us of the new oil pipeline, Samsun-Ceyhan. Could you inform us profoundly about the project?

Answer: At present the implementation of the project is in the initial stage. Two companies - Italy's ENI and Turkey's Calik - have been issued with a license for construction of oil pipeline. Turkey invites all countries, which can deliver oil to the Samsun-Ceyhan oil pipeline, and Russia and Kazakstan rank as the first among them. We expect that the two countries will deliver their oil via the Samsun-Ceyhan pipeline, which will enable to essentially unload the Bosporus strait. 

Question: Is there a preliminary agreement with Russia and Kazakstan? 

Answer: The proposal was sounded during the last visit of the Azerbaijani President to Russia. A feasibility study of the project has been submitted to the Russian Foreign Minister in Turkey in June. The point is that there already exists the Burgas-Aleksandupolis pipeline. Russia should study and promote the most profitable of these two projects. Kazakstan has been informed of this projects. 

Question: If there is a feasibility study, it means the cost of the project is known?

Answer: The cost of the project is approximately US$1.5-2bn. 

Question: Will the delay in Kashagan field development and the first oil production for the fulfillment of the BTC affect other projects?

Answer: In the initial stage Kazakstan can deliver 7-8 million tons of oil via the BTC with a further increase up to 20 million tons by the period when bulk oil runs from Kashagan. BTC is a profitable project and Kazakstan's joining to it makes it more profitable. 
Moreover, it has of strategic importance not only for us, but also for Kazakstan. It has actually obtained the third variant after Russia and China, which Kazakstan can use for oil transportation. Of course, it is very good when there are three variants.

Question: What are the perspectives of construction of the Aktau-Baku pipeline?

Answer: As you know, in the initial stage oil will run from Aktau to Baku by tankers. The Aktau-Baku project is directed at future and we think more probably it will be possible to lay a pipeline via the Caspian Sea bottom to pump oil to the South Caucasus. But we know that the issue on the Caspian legal status is still to be defined. Nevertheless, we still believe that the resolution of the problem will easy the activities of the companies which will construct the pipeline. 

Question: Is the Kazak Foreign Minister expected to visit Turkey. What questions are expected to be on focus of discussions?

Answer: It will come as a returny visit of Kasimjomart Tokayev to the previous visit of the Turkish Foreign Minister to Kazakstan. There is nothing concrete. At the same time the chairman of the Turkish parliament to Kazakstan is also on schedule and the terms are still to be defined. It is planned to sign protocols on cooperation in the interparliamentary activities and there are grounds for cooperation. No considerable document will be signed during the visit. 
Moreover, a summit of leaders of Turkic-speaking nations will be held in Antalia, Turkey, on 17 November.

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The following article is a sage reflection on shifting geopolitical realities in Central Asia, so important for Astana among others:-

SCO: Cracks behind the façade
by Stephen Blank for Eurasianet 
To the chagrin of American diplomats, the Shanghai Cooperation Organization (SCO) has quickly emerged as a force to be reckoned with in Central Asia.
At the fifth annual SCO summit, held in mid-June in Shanghai, participants castigated the United States in a not-so-subtle fashion. An SCO declaration insisted that determining Central Asia's future was up to the states in the region, and not outside powers. "Models of social development should not be 'exported,'" the declaration stressed. 
Anti-Americanism is the glue that binds the six SCO member states - China, Russia, Kazakstan, Kyrgyzstan, Tajikistan and Uzbekistan - together. Washington's perceived role in stoking the Orange Revolution phenomenon - which peaked in March 2005 with the overthrow of Kyrgyzstan's government - unsettled Central Asian leaders, sending them running to Beijing and Moscow for political succor. As a result, the SCO, which as recently as 2004 was receiving scant attention from the State Department, rapidly developed into a geopolitical threat to US interests.
While surprised by the speed of the SCO's emergence, US diplomats and experts are now finding flaws in the organization that can potentially be exploited down the road.
One of the SCO's chief weaknesses is connected with the expansion dilemma that the organization is currently facing. The SCO's rapid emergence has made it attractive to other states in the region: both Iran and Pakistan, for instance, are openly eager to join. But many existing members are reluctant to accept these two controversial states, both currently observer members, believing that they could be a source of future geopolitical headaches.
Concerning Iran, both Russia and China withheld support for Tehran's full membership out of a desire not to enrage Washington at a particularly delicate time in the effort to resolve the Iranian nuclear program crisis. Beyond that, however, it is clear several other SCO members, especially Kazakstan and Kyrgyzstan, strongly oppose membership for Iran. Both believe that Iran, given its confrontation with the United States on the nuclear issue, could drag the SCO into a global crisis in which the organization is not directly interested
Astana and Bishkek aren't losing sight of the fact that under the SCO charter, members can potentially be asked to come to the defence of another member in case of an attack.
Meanwhile, Pakistani President Pervez Musharraf attended the Shanghai summit, where he lobbied for Islamabad's membership, emphasizing Pakistan's location as the bridge to the Indian Ocean. SCO members remain wary of Pakistan, due to the country's ongoing association with the Taliban and other Islamic radical groups. Even if the SCO didn't have such concerns, the organization would probably be reluctant to accept Pakistan as a full member without doing the same for India. 
Thus the fact that India doesn't seem interested in full membership at this time constitutes a substantial obstacle for Pakistan. India's stance toward the SCO was underscored by Prime Minister's Manmohan Singh absence from the Shanghai summit. New Dehli has been improving its relationship with Washington, and believes Russia and China want to use the SCO mainly as a platform from which to launch diplomatic attacks against the United States. At the same time, India wants to maintain touch with the organization out of a desire to cooperate with Beijing and Moscow on energy issues and direct security threats affecting the three states.
Outside of the expansion matter, Beijing and Moscow have differing visions for the SCO, but these differences are being papered over at present by both countries' shared desire to drastically reduce, or eliminate altogether US influence in Central Asia. Russia wants to transform the SCO into a club of energy producers, of which it would be the dominant partner. This notion, of course, not only goes against the interests of Central Asian producers, it also poses a threat to China and India, both of which are major consumers of Russian and Central Asian energy. 
In sharp contrast to the Russians' view, China wants to use the SCO as a facilitator of regional trade and investment, something that would enable Beijing to play the leading role. In political terms, China sees the SCO as a catalyst for the establishment of a new pan-Asian order, in which American military power and calls for democratisation are either excluded, or are negligible. 
Prior to 2005, Russia did not take the SCO so seriously, tending to see it as Beijing's creature. But with the sudden turn of events in 2005, which saw the United States lose its military base in Uzbekistan, while China pursued bases in Kyrgyzstan and Uzbekistan, Russian interest in the SCO rapidly increased. Moscow found itself determined to breathe new life into the SCO and advance its own agenda for the organization. Russia favours a US withdrawal only from Central Asia, not the entire Asian continent. Keeping a US presence on the Korean Peninsula, for example, would serve as a check on China's growing power-projection capabilities. Russian officials worry that without a US presence in East Asia, China would establish itself as the dominant partner in the SCO and other multilateral groupings - an unsavoury prospect for Russian elites.
Thus, behind the shared anti-American feelings, China, Russia and the other SCO members and observers harbour serious differences of opinion. Given these, it is unlikely that the SCO can develop anytime soon into an anti-NATO-like grouping along the lines of the Warsaw Pact. The SCO's consensus is a negative one, in which the parties agree only on what they don't like.
Since China and Russia show signs of wanting to use the SCO to pursue their own interests at the expense of smaller members and external powers, it is quite possible that differences will grow behind the facade of unity. Washington will no doubt be alert to exploit any openings to gain geopolitical advantage. While the political, ideological, and military dimensions of the New Great Game in Central Asia continue to heat up, it should be clear to all players that plenty of time remains in the contest. The SCO now appears to have momentum on its side, but such an advantage can dissipate quickly. 

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CREDIT RATINGS

Fitch assigns Halyk Bank Eurobond rating 


Fitch Ratings assigned Kazakstan-based Halyk Bank's (Halyk) 300 million Euro 7.75 per cent Eurobond due May 2013 a final Long-term BB+ rating, the ratings agency said in a press release, New Europe reported. 
Halyk is rated Long-term Foreign Currency IDR BB+ with a Stable Outlook, Local Currency IDR BBB- with a Stable Outlook, Short-term Foreign Currency B, Short-term Local Currency F3, Individual C/D, and Support 3, the release read. Halyk is the third largest bank in Kazakstan holding 12 per cent of the system's assets at end-2005. The bank operates the largest branch network in the country with 546 branches, reflecting its roots as the former state savings bank and also acts as a non-exclusive pension and social security payment and settlement agent. 

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ENERGY

Agreement to join Baku- Tbilisi-Ceyhan opens roads 

Kazakstan has officially joined the Baku-Tbilisi-Ceyhan oil and gas transport project. Recently the heads of Kazakstan and Azerbaijan signed an agreement that concluded three-years of negotiations. However, the new document signifies not the end of a long road, but the beginning of a new and more important one for Kazakstan, allowing it to create its own system to deliver volumes of black gold from its massive oil fields to Europe.
Kazakstan President, Nursultan Nazarbayev, had started the BTC accession talks with late president of Azerbaijan, Heidar Aliev, and he finished them with his son, Ilham. The agreement signing took place exactly one month before the official ceremony of oil pipeline commissioning that was held in Ceyhan on July 13th this year, New Europe reported.
Three years ago, in 2002, when Baku held an official launching of the oil pipeline construction project, three presidents had attended it: Geidar Aliev from Azerbaijan, Eduard Shevarnadze from Georgia, and Ahmet Necdet Sezer from Turkey. Out of the three, only the Turkish leader will be attending the forthcoming commissioning ceremony. Now the guests will include Ilham Aliev, Georgian President Mikhail Saakashvili, and Nazarbayev. It's worth mentioning that Kazakstan's accession to the project was achieved with some difficulty, as was the construction of the pipeline. First of all, Russia opposed it, as large volumes of the Caspian oil would flow west bypassing the Russian territory. 
According to the experts, BTC will cost Russia US$200 million in annual losses. But, in spite of the fact that Russia has been an old and reliable partner for Kazakstan in the oil sector, Astana has managed to balance the interests.
In addition, at the Baku summit in May this year, Ilham Aliev said the BTC could do without Kazak oil, as the pipeline was designed only for the oil from the Azerbaijan fields. However, a week before the summit, Aliev made a U-turn saying in his project presentation progress report that Azerbaijan could be used as a transit country to deliver Kazak and Uzbek hydrocarbons to the world markets.
"Considering that the Baku-Tbilisi-Ceyhan pipeline is a regional project, in 10 to 15 years, through global projects, it could transport four million barrels of oil to the world market," he said. So, the Azeri leader did admit that Kazakstan oil would be transported through the BTC, and the agreement on Kazakstan's participation in the pipeline project has been signed. According to experts, oil production in Azerbaijan is expected to decline in 2009, and it would be simply necessary to include Kazakstan, which will continue to increase oil production. Kazak oil output is expected to grow to 100 million tonnes by 2010 and to 150 million tonnes by 2015.
The new document has become not only a logical conclusion of the three-year long negotiations between Azerbaijan and Kazakstan, but it will also become a reference point for the two countries for construction of an Aktau-Baku trans-Caspian pipeline to deliver Kazak oil to the new pipeline. The initial transport of Kazak oil by the BTC is planned to be 7.5 million tonnes, with eventual growth to 20 million tonnes. "As long as the volume is within 20 million, we will sea-ship oil by tankers. But as soon as we hit this level, tanker shipment will become uneconomic and the question of construction of an underwater pipeline from Aktau to Baku will come up," KazMunaiGaz Managing Director, Kairgeldy Kabyldin, said. However, construction of the pipeline seems a distant proposition as its implementation would not be possible until the littoral countries determine the status of the Caspian Sea. Also, ecological considerations put construction of the pipeline under question. Any rupture of an underwater pipeline could cause serious environmental damage. Russia, which is among the five Caspian states, is categorically against such a project. All eyes and efforts are now set on the development of the Aktau and Kuryk ports that will handle the transit of oil. 
The Aktau port expansion works are already underway. The port's throughput should increase to 20 million tonnes for oil cargo and to 3.2 tonnes for dry cargo. For these purposes, the government has already issued a state guarantee for a private loan of US$25 million.
According to the accession agreement, Kazakstan is to build a 20 million tonne oil terminal in Kuryk. For its part, Azerbaijan is to build a similar terminal in Baku. KazMunaiGas has developed a general plan of development of the Kuryk port, but it is not known yet who will implement this plan and where the financing will come from. 
This is for the Kazak government to decide. But, it will most likely be financed by the BTC shareholders that operate in Kazakstan and that are keenly interested in having their crude delivered by their "own" pipeline. Such shareholders include Total, Eni, ConocoPhillips and Impex. All these companies will start to deliver oil from Kashagan in 2008. Presently, though, only 7.5 tonnes of Chevron oil goes from Tengiz to the pipeline. Chevron holds a slightly more than eight per cent interest in the BTC. 
But the Kazak oil will go to the BTC not only under the foreign flags. Last year, the Kazak government regained its interest in the Kashagan project - 8.33 per cent. And this interest will mean KazMunaiGas' participation in the pipeline plus a portion of the profit oil that the republic receives under a PSA with each foreign company operating in Kashagan and Tengiz.

Cost of connecting Kazakstan to BTC at 4bn Euro 

It would cost an estimated four billion Euro to form the Kazakstan Caspian Transport System (KCTS), which would enable Kazakstan to transport its own oil via the Baku-Tbilisi-Ceyhan (BTC) pipeline, Alain Przybysz, vice president of Total for Azerbaijan, Kazakstan and Turkmenistan said, Interfax News Agency reported.
Przybysz said work on the system might begin in 2009 and take a year to complete. He said Total, ENI, ConocoPhillios and Inoex, which are involved in the BTC project and in developing Kazakstan's offshore fields, would invest in the new system.
The project involves building a terminal in Kazakstan, a pipeline from the offshore Kashagan field to that terminal, a terminal in Azerbaijan, a Caspian tanker transport system and a connection with the BTC, he said. This is one option for transporting Kashagan's oil without causing environmental damage to the Caspian, Przybysz said. The transport system could eventually be linked with that of Russia, China and Kazakstan, he said. The system could be used to transport not just oil produced by the four investors but oil produced by other companies in Kazakstan, he said. Kashagan, which holds more than two billion tonnes of oil, is expected to go on stream in 2008.The State Oil Company of the Azerbaijani Republic (SOCAR) and Kazakstan's KazMunaiGaz started to discuss linking Kazakstan to the BTC pipeline back in November 2002. 

KazMunaiGaz seeks oil and gas projects abroad 

Zhaksylyk Kulekeev, KazMunaiGaz's first vice-president for finances, told New Europe in an interview that the Kazak national oil and gas company is only interested in projects where it can buy a controlling share.
Market observers have said that if KMG fails to acquire Mazeikiu it would be looking at a refinery in Romania. "We are interested in only those projects where we can buy a controlling share. We are not interested in the offers of 10 to 20 percent, including the Bucharest refinery. As regards to new acquisitions, we have interests not only in Europe, but also in Southeast Asia, China, but, at this point, we are not in a position to discuss them," Kulekeev explained.
KazMunaiGaz (KMG) lost a bidding war for the Lithuanian concern Mazeikiu Nafta, which was the Kazak company's second attempt to open a window to Europe. 
And again, as in the case with the Czech refinery Unipetrum, it was snatched from under KazMunaiGaz's nose by Polish company PKN Orlen, which, as was officially reported, had offered a higher price. "We also were prepared to pay a higher price. It is not the price that matters here. It is a question of big politics," Kulekeev said. There is information that a Russian bank has helped to finance the deal.
Regarding building a relationship with its competitor, Orlen, which is planning to enter the Kazak oil market in order to participate in the development of oil fields, KazMunaiGaz's first vice-president for finances said his company is also interested in entering the Polish market. "Orlen operates outside Poland too. It has a wide network of service stations all over Europe, especially in Western Europe, and we also want to enter that market," he said. However, in Kazakstan KMG controls only two per cent of retail oil products market. "We plan to increase our presence from two per cent to 10-15 per cent, and this year we intend to spend over US$450 million to expand the service station network," he said.
Kulekeev had mentioned earlier two more proposed major acquisitions by the national company. They include the purchase of a 50 per cent share in JV KazGerMunai and 33 per cent of PetroKazakstan from China National Petroleum Corporation (CNPC). Both deals are quite expensive: the first is evaluated at US$ one billion and the second will tip the scale at US$1.37 billion. Asked where KazMunaiGaz will acquire the money to pay for the shares, Kulekeev said part of it will be borrowed from western banks and the other part will be its own money.
"We have a few financing options. The problem is that the shareholders do not want to part with their shares ... But I think we should be able to resolve this issue by the end of the year," he said. "The same is true for the 33 per cent of PetroKazakstan. A source of financing is available. The only problem is to persuade the partner to sell the shares. To buy the 33 per cent, we can raise over US$ two billion if we issue an IPO for 40 per cent of our subsidiary. But the government has not made any final decision yet, although we have done a lot of preparatory work," Kulekeev said. Regarding Kazakstan participation in the Baku-Tbilisi-Ceyhan, he said the BTC accession work is underway. "By 2010, the company intends to build the Iskene pipeline in the Atyrau Region to the Kuryk port, including an oil loading terminal. The pipeline will be 950 kilometres long. It will initially carry five million tonnes of oil, with a prospect of carrying up to 36 million tonnes, to Kuryk, from where oil will go by the Caspian Sea to Baku and then to the BTC," he said.
He also said that the construction of an Aktau-Baku underwater pipeline can be considered only after the status of the Caspian Sea has been defined. Assuming that all the issues get resolved, it should not be difficult to build a pipeline in one to one and a half years. The pipeline would carry at least 20 million tonnes. Kazakstan intends to supply up to 40 million tonnes to Baku in the coming years.

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FOREIGN LOANS

Asian Development Bank to loan Alyans 50 million 

Asian Development Bank (ADB) and JSC Alliance Bank (ALB) of Kazakstan signed a US$50 million five-year senior loan. ADB is to issue this loan to Kazakstan's Alyans Bank so that the bank can increase financing to small and medium business, the ADB press service said in a release, New Europe reported.
The diversification of the Kazak economy toward non-oil investments, particularly through the small and medium enterprise (SME) sector, is a crucial factor for Kazakstan's sustainable and inclusive economic development, especially after the oil boom recedes. The loan marks "the first ADB project for the financing of the Kazak private sector" and also "the first project without the issuing of governmental guarantees," the release says. "To achieve sustainable and inclusive economic development, creating conditions for growth of the SME sector is of key importance," said Stephen Wermert, country director of ADB's resident mission in Kazakstan. He added that the loan will help ALB grow its SME loan portfolio by providing part of the needed debt funding. It will also demonstrate viability and boost investors' and creditors' confidence in the country's banking sector.

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MINING

Hambledon Mining starts developing Kazak gold field 

Hambledon Mining Plc has started to develop the Sekisovskoye-Tserkovka gold deposit in Kazakstan, the company said in a statement for the London Stock Exchange, Interfax News Agency reported.
Hambledon received the necessary permits from Kazakstan's government in April to start an open pit development at the Sekisovskoye-Tserkovka gold deposit. The field is estimated to contain 2.8 million ounces of gold. The section that Hambledon Mining intends to start mining this year contains seven percent of the gold. It is expected that the section will yield 30,000-35,000 oz of gold per year over a life of six years.

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