US embassy cable - 05ALMATY378

C O N F I D E N T I A L ALMATY 000378 
 
SIPDIS 
 
 
DEPT FOR EB/ESC (JONES), EUR/SNEC, EUR/CACEN (MUDGE) 
 
E.O. 12958: DECL: 02/02/2007 
TAGS: EPET, KZ, ECONOMIC, Energy 
SUBJECT: GOOD COP, BAD COP ON KASHAGAN? 
 
 
Classified By: POEC Chief Deborah Mennuti for reasons 1.4(b) and (d). 
 
1. (C) Summary: On the eve of key negotiations, Kazakhstani 
PM Akhmetov stated that the government will seek to acquire 
more than a pre-agreed 50% of British Gas' 16.67% in the 
mammoth Kashagan AGIP-KCO project. This pronouncement, which 
contradicts earlier statements by Energy Minister Vladimir 
Shkolnik, is sure to vex AGIP-KOC members and further 
reinforce images of the GOK as an unreliable business 
partner. End Summary. 
 
2. (C) Government of Kazakhstan (GOK) Prime Minister Daniyal 
Akhmetov announced on February 1 that the GOK would like to 
acquire more than the pre-agreed 50% of British Gas' (BG) 
16.67% in the giant AGIP-KCO Caspian project. According to 
the state news agency Kaz-Inform, Akhmetov announced that 
"50% is not the limit....we are returning our national 
wealth."  (Comment: Akhmetov enjoys a pro-statist reputation. 
End comment). The GOK, including Akhmetov and Shkolnik, plan 
a February 2 meeting in Astana with AGIP-KCO partners to 
discuss the sale. 
 
3. (C) Akhmetov's statement came days after Energy Minister 
Vladimir Shkolnik announced that AGIP-KCO consortium partners 
had agreed to sell 50% of the BG state to the GOK. Shkolnik 
appeared pleased with the deal: "I hope we can execute this 
transaction." Consortium partners, which include ExxonMobil 
(16.67%) and ConocoPhillips (8.33%), confirmed Shkolnik's 
statements. 
 
4. (C) Contradictory GOK utterings are certain to rile 
AGIP-KCO partners. Hakim Janah, ConocoPhillips' Kazakhstan 
country manager, told Econoff that "The GOK will not get more 
than half. If they want (more than half), they should not 
come to the (negotiating) table." 
 
5. (C) Comment: Akhmetov's statement may simply be a 
negotiating ploy to unsettle AGIP-KCO partners and strengthen 
the GOK's hand on issues dear to the consortium, such as 
governance and financing. If the GOK "50% plus" demands are 
genuine, we can expect AGIP-KCO pushback and another delay in 
inking the deal. Delays past March 2005, when BG's obligation 
under the  sales purchase agreement to sell to the AGIP-KOC 
partners expires, would create further uncertainties. Darker 
minds point to a side deal - without any negotiated 
guarantees on financing or governance - between the GOK and 
BG for all or part of its 16.67% share. The partners could 
still preempt, but the GOK could then counter with a December 
2004 law giving it the sovereign right of preemption. We will 
provide a more detailed read after the February 2 
GOK-shareholders meeting.  End comment. 
 
 
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