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Update No: 310 - (26/10/06)
Mr Nice Guy in the Central Asian plateau
George W. Bush, and his vice-president, Dick Cheney, say lots of nice things
about President Nursultan Nazarbayev, president of Kazakstan. It is increasingly
evident that his country has an awful lot of oil; and both greatly respect that.
On September 29th, Bush portrayed the leader of Kazakstan, who came to
Washington for a state luncheon, as a "steadfast partner in the
international war on terrorism." Nazarbayev leapt onto the post-9:11,
anti-terrorist bandwagon like a tiger, with marvellous, indeed, munificent
He could not have got his timing better. The global prices of oil were soaring;
and then they soared still further. The economy is booming. It has the highest
rates of GDP growth in the world - after Azerbaijan- around 10% per annum.
According to Bush and US state-controlled media, he is leading a transition to
democracy and liberalizing his nation's economy. He's been lauded for
privatising old Soviet-era state industries and inviting foreign companies to
invest in the exploitation of what may be the world's largest untapped oil
Kazakstan, Bush says, "is now a free nation." It depends on what your
definition of "free" is, of course.
Nazarbayev the pragmatist
There are several things to be said about Nazerbayev in his favour. He is sane,
not a fact to be taken for granted about Central Asian despots. He gave up
nuclear weapons in 1994, a very intelligent thing to do. After all whom could he
have possibly used them against?
This decision is rebounding to his credit in the wake of the birth of the North
Korean nuclear bomb. He is regarded as the one Central Asian despot with whom
one can do business, indeed in every sense. This is profoundly true.
Considering that his Central Asian neighbours are ruled by megalomaniacal
despots (Turkmenistan) and mass murderers (Uzbekistan), or are disintegrating
into anarchy and civil strife (Kyrgyzstan and Tajikistan), President
Nazarbayev's regime appears relatively benign.
But he's merely the best of a bad lot, perhaps inevitably so in Central Asia.
The other side needs to be stated
Scratch the gloss of the gleaming energy-boom-funded skyscrapers rising over
the Kazak metropolises of Almaty and Astana, and it becomes clear that the
United States is giving the red-carpet, 21-gun salute treatment to another
right-wing dictator of the variety propped up during the Cold War. Back then,
selling out democratic values undermined US credibility on human rights and
provoked anti-Americanism. It is arguable that the same policy is sowing the
seeds of the next 9/11.
Nazarbayev, the Communist Party boss of the Kazak S.S.R. at the time of the 1991
collapse of the Soviet Union, has been Kazakstan's strongman since independence.
He points to the 91 percent of the vote he received in the most recent
presidential election as proof of his popularity, but international observers
universally condemned the December 2005 vote as tainted by fraud and violence.
Counting the corpses of the opposition
It would have been difficult to lose an election like this. Galimzhan
Zhakianov, leader of the main opposition Democratic Choice of Kazakstan (DVK)
party, had been rotting in prison since 2002. Finally, early in 2005, Nazarbayev
had the DVK banned entirely for "inciting social tension" and
A few weeks after promising to release evidence that Nazarbayev and his family
were involved in oil-related corruption, Zamanbek Nurkadilov, a former
Nazarbayev cabinet minister who joined the nation's sole remaining viable
opposition party, For a Fair Kazakstan (NAZ), was found dead at his home in
Almaty, a pistol lying at his side. Nurkadilov had been shot three times--twice
in the heart and once in the head. Kazak authorities ruled his death a suicide.
Even after he won another seven-year term, misfortune continued to befall Kazaks
who spoke out against Nazarbayev. On February 13th 2006, reported Radio Free
Europe, the bodies of Nurkadilov's replacement as NAZ leader and four aides
"were discovered on a desolate stretch of road outside Almaty...their
bodies riddled with bullets and their hands bound behind their backs."
Altynbek Sarsenbayev had recently announced his own intention to release proof
of Nazarbayev and his cronies' misuse of oil revenues.
The government blamed five rogue officers of its KNB (ex-KGB) security service
for the contract killing. No one believes the official story.
The Kazak regime, which presents itself as the kinder, gentler face of Central
Asian autocracy, has ruthlessly crushed attempts to curtail freedom of
expression, a crucial building block of an open society. Journalists have been
threatened, beaten and jailed. After the leading independent newspaper
Respublika published an interview with a Russian politician that criticized
Nazarbayev in May 2005, it was ordered closed. A printing house that agreed to
publish a successor newspaper, Set-kz, was shuttered as well. The state Internet
monopoly, controlled by one of Nazarbayev's daughters, blocks access to
opposition and independent Web sites.
Since a presidential proclamation signed by President Bush in 2004 bans visits
by corrupt foreign officials to the United States, Nazarbayev--embroiled in a
"Kazakgate" influence peddling scandal scheduled for federal court
later this fall--was legally ineligible to come to Washington last week.
Consultant and lobbyist James Giffen will soon face charges that he funnelled
more than US$78 million in bribes from his energy company clients, most of it to
Nazarbayev and his former prime minister. According to the Justice Department,
Giffen also gave Nazarbayev's wife fur coats and a snowmobile, and even paid
Nazarbayev's daughter's tuition at George Washington University. U.S. officials
call Kazakgate one of the largest violations of the Foreign Corrupt Practices
Act in history.
According to a reliable source, high-ranking White House officials are
pressuring the Justice Department to drop the case.
The name of the game
Kazakstan's geopolitical importance is obvious. It is the largest producer
of Caspian Sea oil, borders Russia, China and the other Central Asian states,
and has granted the US Air Force landing rights at Almaty's airport for
operations in Afghanistan. Moreover, it's a rare "friendly" country in
the Muslim world: Kazakstan is the only Central Asian republic to have sent
troops to Iraq.
In all the ways that matter, however, Nazarbayev presides over a police state
that is indistinguishable from his more notorious neighbours, such as Islam
Karimov, president of Uzbekistan. Karimov ordered and personally supervised the
massacre of at least 700 demonstrators in the Uzbek city of Andijan. The May 13,
2005 incident, known in the region as "Uzbekistan's Tiananmen Square,"
prompted criticism from the Bush Administration and thousands of anti-Karimov
refugees to seek political asylum in neighbouring republics.
Kazakstan recently deported eight Uzbek refugees granted official asylum-seeker
status by the United Nations to Uzbekistan, whose military police are infamous
for boiling political prisoners to death.
Nazarbayev appeared at a joint press conference with Karimov in March 2006,
nearly a year after the Andijan massacre.
"Of course, we regret everything happened [at Andijan]," said
Nazarbayev. "However, it should be said that another end [i.e., not killing
the demonstrators] would have destabilized now the whole region."
Destabilisation might have given Kazakstan's 15 million citizens, 99 per cent of
whom live in poverty while Nazarbayev steals the oil and gas beneath their feet,
a chance to liberate themselves. Sadly and once again, the US government is
siding with a dictator over the people.
North Caspian operator estimates Phase-1 investment
The initial stage of development of the North Caspian project, which involves
the development of the Kashagan field and a number of other oil structures in
the Kazak sector of the Caspian Sea, will involve total investment of US$14-15
billion. "The figure that was announced to the public concerns the first
phase. This figure is US$14 billion - US$15 billion," Eni CEO, Paolo
Scaroni, said at a briefing on October 10th after a meeting with Kazak
President, Nursultan Nazarbayev. Eni is the operator of the North Caspian
project, New Europe reported.
Scaroni was unable to say what the total cost of the project would be. He said
that this would be known after a new schedule and budget for the project are
agreed by Agip KCO shareholders. The Eni chief said that the revised schedule
and budget would be submitted to consortium participants by the end of this
year. Agip KCO Managing Director, Umberto Carrara, said earlier that commercial
oil production at the Kashagan field in the Kazak sector of the Caspian Sea
would not begin before 2009. However, according to the production sharing
agreement for the project, commercial development should have started in 2005.
Scaroni said at the briefing that the delay in the start of commercial
development of the Kashagan field is due to additional steps to protect the
environment and workers. He said that for the company the main thing is to
protect workers, and their health, particularly from hydrogen sulphide. As a
result, the company is making certain changes in the construction of its
offshore infrastructure, he said. He said that of course this is resulting in
certain delays and in additional costs. However, he said that their impact would
be limited and would not influence the economics of the entire project.
ConocoPhillips, Shell eye Nursultan project
Shell and ConocoPhillips are ready to become participants in the Nursultan (N)
project in the Kazak sector of the Caspian, KazMunaiGaz First Vice president,
Zhaksybek Kulekeev, said at the KIOGE-2006 oil and gas conference in Almaty.
"We currently have strategic partners with which we are involved in
dialogue. For the N project, at the finish line are Shell and ConocoPhillips,
and one of these could become our partner. This will be decided in the near
future," he said, New Europe reported.
Meanwhile, KazMunaiGaz Managing Director, Zgakyp Marabaev, said that a
production sharing agreement for this project would be signed by the end of this
"It has been decided to provide the development rights under a PSA. A
contract should be signed by the end of 2006," he said.
"We have held a formal tender, which has highlighted two companies and we
should now carry out a final appraisal of which of the partners it will be more
profitable for us to progress with. We will announce this soon," he said.
He said that there are several possible options for this project. In particular,
he did not rule out that KazMunaiGaz might have two partners.
The Nursultan section is in the Kazak sector of the Caspian Sea and covers an
area of 7,625 square kilometres. Forecast geological reserves at the section
amount to 637 million tonnes of fuel equivalent. According to current
legislation, Kazakstan's share in new oil production projects should not be less
than 50 per cent.
Kazatomprom, CNNC look into joint projects
Kazakstan's Kazatomprom nuclear company and the China National Nuclear
Corporation (CNNC) are studying possible schemes for implementing joint
projects. "Our Chinese partners asked us to put off the decision on setting
up a joint venture until a program of advancing nuclear power engineering had
been approved. This has now happened and the formation of the joint venture is
being discussed," Kazatomprom Vice President, Sergei Yashin, said at an
international conference on pressing problems of the uranium industry in Almaty
recently, New Europe reported.
The Kharasan field in the Kyzylorda region was named as a possible raw materials
base for the venture. The formation of the joint venture is only being
discussed, and the pattern of cooperation may be reviewed. "So far it is
impossible to say definitely that it will be set up. Priorities may change. It
is possible that we will opt for long-term sales," he said.
Extension of Altai pipeline discussed
Russian gas giant Gazprom considers the previously planned route for the Altai
gas pipeline through Khanty-Mansiisk autonomous district, Tomsk region and Altai
to China to be the most effective, Bogdan Budzulyak, head of the company's gas
transportation and storage department, said. He said some deputies are proposing
to extend the Altai gas pipeline through Kazakstan, but the company believes its
route to be more effective, New Europe reported.
The Gazprom representative said running the pipeline through a transit country
would increase the costs of the project. He said that the exact cost of the
pipeline has not yet been calculated, but that it would amount to between US$
four billion to US$ five billion, depending on the geological conditions on the
In March, Russia announced plans to build two gas pipelines to China from
Siberia to export 60-80 billion cubic metres of gas per year.
The route of a pipeline from Western Siberia to China is to be agreed by the end
of this year, it is to be designed in 2007 and construction is set to start in
Central Asia declares itself a nuclear weapons free zone
The five countries of Central Asia, Kazakstan, Kyrgyzstan, Uzbekistan,
Tajikistan and Turkmenistan have signed a treaty creating a nuclear weapons free
zone in their lands. Semipalatinsk, the former Soviet nuclear test site in
eastern Kazakstan, was the scene for the treaty's historic signing on September
8th, New Europe reported.
Under the treaty, the five countries have committed themselves to ban the
production, acquisition and deployment of nuclear weapons and their components.
The treaty does not prohibit the use of nuclear energy for peaceful purposes.
"This is our contribution to global security," Kazakstan' Foreign
Minister, Kasymzhomart Tokayev, said. "It will become an impetus for the
coordinated efforts of the world community in non-proliferation and prevention
of the acquisition of weapons of mass destruction by terrorists. It will
undoubtedly become an important step in the development of peaceful nuclear
India committed to expand its presence
Textiles, information technologies and jewellery are the three most promising
directions for development of relationships between India and Kazakstan, the
ambassador of India to Kazakstan, Ashok Kumar Mukerjee, said, New Europe
"Kazakstan is not oil fields only. And I am pleased that over the last 18
months the relationship between our countries has become more active not only in
the oil industry but also in the other sectors of economy," the Indian
He noted that earlier India's interests in Kazakstan were limited to the oil and
gas sector. The Indian National Company has been negotiating with the Kazak
government for participation in the development of a number of oil fields in the
Caspian Sea area. As is known, the National Company participated in a tender for
purchase of shares of Canadian PetroKazakstan that owned oil fields at the south
of Kazakstan and a refinery in Shymkent. But it lost the tender to the Chinese
The Indian ambassador believes that textiles, information technologies, and
jewellery are the three most promising directions for development of
relationships between India and Kazakstan.
"India can share its experience in the field of information technologies.
In particular, we can share our experience in application of information
technologies in education and healthcare," he said.
"India has already implemented a project of so-called tele-medicine in five
African countries. This project allows a patient in, say, Kenya to receive an
advice from a doctor who is in Ethiopia," - the ambassador explained.
He also noted that Kazakstan could benefit from India's experience in
introducing e-government. "Both India and Kazakstan have large territories.
We have already been using for years the electronic connection between the
central government and the local bodies in different states of the country. And
we could share our experience in this field," he said.
There has already been progress in this direction: at the end of September the
two largest Indian IT companies will open their branches in Almaty.
In trade, jewellery appears to be the most promising direction. According to the
Indian ambassador, India receives up to US$16 billion annually from the sale of
jewellery. And one more thing: 10 to 11 diamonds out of 12 in the world are
worked in India.
"We are considering opening a joint venture to make and market jewellery
(and Kazakstan has the minerals for that) for export to other countries,"
the ambassador noted. "Especially since the northern Indian design is
similar to that of Central Asia," he added.
Another direction is textiles. India is the second largest producer of textile
after China. "In the south of Kazakstan, in Shymkent, where a cotton
cluster is being formed, eight to nine Indian companies plan to invest their
money and expertise in the industry," the ambassador said.
As for India's interests in the north of Kazakstan, it can cooperate with the
national company Kazakstan Engineering to start a joint production of spare
parts. "India has 10 years of experience of manufacturing spare parts for
Mercedes and Ford," the ambassador noted.
Tourism is another area for cooperation. There are direct flights between Almaty
Nazarbayev, Putin set priorities in bilateral cooperation
Russia will welcome any investments from Kazakstan, Russian President, Vladimir
Putin, said. Asked at a press conference in Uralsk on October 3rd why Russian
investments in Kazakstan kept growing in the 1990s and are now on the decline,
Putin replied, "Money always looks for opportunities to be used better, and
we will welcome any investments from Kazakstan," Interfax News Agency
Kazak President, Nursultan Nazarbayev, said in reply to the same question,
"Some money has appeared." Having saturated the needs of the Kazak
market, local investors are looking for other markets, he said. "According
to my data, Kazak companies have invested some eight billion Euro in the Russian
economy," Nazarbayev said at a joint press conference with Putin after the
forum of border regions on October 3rd in Uralsk, the administrative centre of
Western Kazakstan, Interfax News Agency reported.
The Kazak president said that Russia's LUKoil alone has invested 2.4 billion
Euro in the Kazak economy. Putin said that trade between the two countries was
nearing 12 billion Euro a year. "We are working on ennobling the structure
of the trade turnover," Putin said.
Russian-Kazak trade will reach 11 billion Euro this year, Nazarbayev said.
Earlier forecasts indicated a 30 percent rise in the two countries' trade to
nine billion Euro, Nazarbayev said. Border districts account for 70 percent of
bilateral trade, Putin said. At the same time, as the structure has not yet
changed significantly, the share of the processing industry has considerably
grown in absolute terms, Putin said.
Russian Industry and Energy Minister, Viktor Khristenko, believes that the
intergovernmental agreement signed in Uralsk with Kazakstan on the creation of a
joint venture on the basis of the Orenburg gas processing plant may be ratified
"Everything related to prices and terms is a matter of contracts between
companies. I know that such a package is under the works and there is quite
enough time until the end of the year to complete the package and ratify the
agreement," he told Interfax in Uralsk after the signing ceremony.
Meanwhile, Vnesheconombank (VEB) Chairman, Vladimir Dmitriyev, and Kazak
Development Bank (KDB) Board Chairman, Kayrat Kelimbetov, signed an Action
Program between the two banks meant to support inter-regional cooperation, trade
and economic links between the border regions of Russia and Kazakstan. The
agreement was signed in the presence of Putin and Nazarbayev in Uralsk. The
objective of the program is to stimulate economic and investment cooperation
between companies located in the border areas of Russia and Kazakstan,
especially joint projects with state support at the national or regional level,
a VEB press release says.
According to the document, the parties intend to cooperate in the financing of
investment projects, support commodity producers and extend consulting services
to enterprises and power structures in Russian regions and in Kazakstan.
Priority will be given to investment projects in such economic sectors as power
engineering, agriculture, metallurgy, the building industry, the development of
transports, forest industry, advanced technologies, etc., the press release
says. During the talks, Putin said, "The fuel and energy sector, nuclear
power, the agro-industrial complex and space research are the priorities in
"Relations between our countries, as well as regional and international
issues, were on the agenda. Among the priorities we singled out the fuel and
energy sector, nuclear power, agro-industry, transport infrastructure and space
research," he said. "It is obvious that joint activity in these
spheres will not only bring substantial financial benefits, but also raise the
competitiveness of Russian and Kazak companies in world markets," he said.
Special attention was also paid to integration, including CIS reforms and the
development of cooperation within the Eurasian Economic Community and the Common
Economic Space, he said. "Russia and Kazakstan are the locomotives of many
integration processes in the former Soviet space," Putin said. The boom in
foreign borrowing by the private sector in Kazakstan and Russia could create big
risks for the economies of the two countries, President of the Economic Analysis
Institute and former Russian Presidential Adviser, Andrei Illarionov, told