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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)

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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 infighting. 

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 said. 

"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 people." 

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 said. 

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 partners. 

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 the source.

An expert from Tajikistan's Centre for Strategic Studies says that by building up its economic presence, Kazakstan is also pursuing political interests.

"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 Constitution.
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.

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CREDIT RATINGS

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 through KTG.

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.

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ENERGY

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," he said.
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 Kazakstan." 
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 nation's fuel.

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 issue."
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 tankers.
"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 3rd.
"We are very seriously considering gas deliveries across the Caspian Sea," he said in reply to a question by European Parliament delegation head Ona Jukneviciene.
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.

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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 markets.

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