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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: 348 - (16/12/09)

Kazakhstan is an extraordinary place. If Uzbekistan is the heart of Central Asia, Kazakhstan is the heart of Eurasia. This is where billion dollar deals are done.

Chinese come in force
The Chinese are very well aware of Kazakhstan 's vast potential, especially in the energy sector, which is so vital for them. Beijing has stepped up its presence in ex-Soviet Central Asia within the last few years by handing out billions of dollars in loans, snapping up energy assets and building an oil pipeline from Kazakhstan.

President Hu Jintao himself visited Kazakhstan and Turkmenistan on December 12-14 to open a historic gas pipeline. It travels from Turkmenistan via Uzbekistan and Kazakhstan to China across an 11,000km distance, one of the most remarkable engineering feats of modern times.

Below is the list of recent Chinese investments in Kazakhstan's energy sector:-

MANGISTAUMUNAIGAS
China's state-owned CNPC [CNPET.UL] bought Kazakh oil producer MangistauMunaiGas MMGZ.KZ for $2.6 billion in a joint deal with Kazakh state firm KazMunaiGas [KMG.UL] in November.

MangistauMunaigas, based in the Kazakh town of Aktau, has residual oil reserves of 812 million tonnes.
As part of the deal, China gave Kazakhstan $10 billion in loans.

SUMBE
China's Sinochem Corp is near a $320 million deal to buy Kazakh independent oil company Sumbe, industry sources said in November.
Sumbe SUMB.KZ produces about 4,000 barrels per day of oil and holds remaining recoverable oil reserves of some 66 million barrels.

KAZMUNAIGAS EP
China Investment Corp (CIC) bought an 11 percent stake in KazMunaiGas Exploration and Production (KazMunaiGas EP) (KMGq.L), an upstream arm of Kazakh state energy firm KazMunaiGas [KMG.UL]for $939 million in October.

KazMunaiGas EP produced 12 million tonnes of oil in 2008 and is one of Kazakhstan's top three producers. The total volume of its proved and probable reserves, as at the end of 2008, is 241 million tonnes (1.8 billion barrels).

URANIUM JV
China Guandong Nuclear Power Co (CGNPC) said in April it would develop a new uranium deposit in Kazakhstan with reserves of 40,000 tonnes together with Kazakh state firm Kazatomprom.
China plans to import a total of 24,200 tonnes of Kazakh uranium between 2008 and 2012, it said.

NATIONS ENERGY
State-owned investment group CITIC bought the Kazakh oil assets of Canada-based Nations Energy Co. Ltd. for $1.9 billion in 2006.
The cornerstone of those assets was the Karazhanbas oil and gas field, which has proven reserves of more than 340 million barrels and production of over 50,000 barrels per day.

PETROKAZAKHSTAN
CNPC International paid $3.96 billion to acquire a 33 percent stake in Kazakh oil producer PetroKazakhstan in 2005.

Biggest bank goes bust
In the last few years, big banks have found many surprising ways to lose billions of dollars by making loans that turned sour. But few can match the odd tale involving Kazakhstan and a little-known bank that many Western financiers wish had remained so to them.

From 2003 to 2008, the likes of Credit Suisse, Morgan Stanley, Royal Bank of Scotland, ING and others funnelled more than $10 billion in loans into Kazakhstan’s largest bank, Bank Turalem, as the large Central Asian country enjoyed a growth boom spurred by its rich deposits of oil and natural gas. So many of these loans are now bust that many foreign banks are facing write-offs of as much as 80 percent of their value, prompting investigations into why the loans went bad so fast, according to officials at Bank Turalem, which was taken over by the government earlier in 2009.

Hoping to become the dominant bank in the region, BTA, as the bank is known, cast its eye well beyond Kazakhstan and lent billions of dollars to finance vast real estate projects in Russia and Ukraine. It also lent to offshore companies with vague business plans and no trading histories to speak of, according to executives at BTA, who did not want to be identified because of the sensitivity of the matter. The money went to companies with names like Best Catch Trading and Sandown Holding, based in places as diverse as the Seychelles, the British Virgin Islands and England, that offered up little in the way of collateral, according to these executives.

Among other things, prosecutors in Kazakhstan and a team of international lawyers and accountants hired by Bank Turalem are investigating whether the foreign banks may have unwittingly financed a scheme by BTA’s former chairman, Mukhtar Ablyazov, to direct between $8 billion and $12 billion worth of BTA loans — about half of the bank’s loan book — to companies that he secretly controlled, according to lawyers representing BTA as well as prosecutors in Kazakhstan.

Mr. Ablyazov denies the allegations, insisting that the loans were proper and that the investigation is politically inspired because he has been a critic of the government. Mr. Ablyazov is a long-time political opponent of Nursultan Nazarbayev, Kazakhstan’s authoritarian president, and he fled Kazakhstan for London just days before the government took over BTA in February, 2009, fearing a government crackdown.

Whether the investigation reveals the foreign banks to have been careless, naïve or hoodwinked about how the loans would be used, the losses point to a recurring problem for supposedly smart and sophisticated international bankers. In past decades, international banks have rushed headlong into hot markets like Mexico and Argentina, and later into Thailand and Russia, only to suffer huge losses. Ignoring or forgetting lessons learned from those debacles, institutions poured billions of dollars to help finance property developments in Ireland, the global expansion of Icelandic banks and subprime mortgages in the United States, only to see much of that money evaporate.

“Capital markets have no memories,” said Richard Portes, a professor of economics at the London Business School. “Bankers simply charge premium spreads high enough to take defaults and still end up, on average, with profitable lending.”

Currently embroiled in arduous talks with BTA over restructuring their debt in the hope of trimming their losses, foreign bankers claim they did their homework before making the loans. However, none would publicly discuss their relationship with BTA and its controversial chairman. Deloitte, the accounting firm that is advising a steering committee representing the foreign banks, did not respond to a request for comment. In a statement, Credit Suisse, which lent close to $1.1 billion to BTA, the most of any bank, said its current exposure to BTA was immaterial to its financial condition and that “all transactions with BTA went through established due diligence procedures.” But, while BTA may have been the flavour of the day for international lenders, questions were being raised about it closer to home.

“BTA was one of the least transparent banks here, and there were a whole bunch of transactions prior to the seizure that indicated extremely lax banking,” said Michael Carter, the chief executive of Visor Capital, an investment bank based in Kazakhstan. “But Kazakhstan was very sexy at the time, and foreign banks were just shovelling in money, so much so that that banks here had more money than they knew what to do with.”

Mr. Ablyazov, 46, a small, energetic man who made his first fortune importing cars from Lithuania, maintains that the loans that BTA made were legitimate. He claims that the $9 billion charge against profits that the bank declared after he left — as well as the government takeover of the bank — represent the final stage of a plot by President Nazarbayev to wrest BTA from him.

“We have been a profitable and transparent bank, with $538 million in profits in 2007,” said Mr. Ablyazov in an interview through an interpreter in London. As he sees it, the robust support he garnered from international banks was an endorsement of his plan to remake BTA in the image of HSBC, the hugely successful international bank that grew from its roots as a colonial bank financing trade between China and Britain. He scoffs at the allegation that his ultimate aim was to siphon off profits. “We would do all this just to misdeal money? That would be a strange criminal to make a plan like this,” he said.

It may be some time before investigations determine if Mr. Ablyazov did anything illegal at BTA or is just the target of a political witch hunt. But BTA has already filed a civil suit against Mr. Ablyazov on a narrower claim in a British court that he misappropriated $295 million in bank funds last year; a judge ruled this month that the charges were serious enough to support the continued freezing of his assets.

What is not in dispute is that, even by the loose standards of the credit boom, few banks lent as aggressively as BTA. Between 2003 and 2007, the amount of its loans outstanding grew by an extraordinary 1,100 percent. Like many other banks in less developed countries, BTA relied heavily on foreign funds, as opposed to customer deposits, to propel its loan growth — so much so that its ratio of loans to deposits peaked at 3.6 to 1 in 2007, one of the highest anywhere in the world.

Mr. Ablyazov maintains that BTA would have paid off its loans had he remained at the helm and that the enormous charge-off was a ploy by Mr. Nazarbayev to seize control of BTA and damage a political rival’s reputation. Lawyers and BTA executives contend that many of the offshore companies were controlled by Mr. Ablyazov, and BTA lawyers are now trying to determine whether the loans were used to provide billions of dollars to Mr. Ablyazov’s own real estate projects — in particular, a 4,700-acre development outside Moscow in which BTA has a $1.5 billion credit exposure.

Although his title was chairman, Mr. Ablyazov took a hands-on approach when it came to the bank’s lending, even sitting on the regional credit committee that oversaw many of the questionable loans. In its 2008 report on BTA, Ernst & Young, the bank’s auditor, highlighted this unusual arrangement, citing it as a conflict of interest that “potentially contributed to the issuance of loans to offshore companies, which became uncollectible in 2008.”

Mr. Ablyazov disputes this claim, saying that he had headed this committee for three years without complaint from his auditor, and that the bank’s credit operations were transparent.

Nikolay Varenko, the deputy chairman of BTA and the executive leading the bank’s internal investigation into Mr. Ablyazov’s activities, disagrees. “The bank was like an investment fund for his own personal projects,” he said.

For Mr. Ablyazov, the question of how he deployed BTA’s loan book is just the latest in a series of battles he has been waging with President Nazarbayev. And while he may well have his enemies, few question his bravery. In 2001, he and several other reform-minded businessmen founded the Democratic Choice of Kazakhstan Party, the first opposition party to challenge Mr. Nazarbayev on the ground that he and his network of family insiders were monopolizing economic and political power.

A year later, he was sentenced to six years behind bars on charges related to his time as head of the government electricity company. Mr. Ablyazov claims the charges were politically motivated. He served a little over a year in Kazakhstan prison, where he says he was subjected to numerous beatings and other forms of torture.

After pressure from international human rights organizations, Mr. Ablyazov was released in 2003. In 2005 he took full control of BTA.
These days, he rents a 15,000-square-foot mansion on Bishops Avenue in London, one of London’s most exclusive neighbourhoods, where security guards stand day and night.

Unlike other oligarchs there, Mr. Ablyazov keeps a low profile in London. He says that his ultimate aim is to overthrow Mr. Nazarbayev, even though he could be caught up in British courts for years to come. “I am just here temporarily,” he insisted. “In the end I will return to Kazakhstan.”

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