US embassy cable - 05ALMATY1927

UNCLAS  ALMATY 001927 
 
SIPDIS 
 
 
DEPT FOR EUR/CACEN MUDGE 
DEPT PASS TO OPIC - BALLINGER 
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER 
DEPT PASS TO AID - EE-PHILLIPS/RUSHING 
TREASURY FOR OASIA/VELTRI 
USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS 
USDOC FOR 6110/ITA/TD/BI/RHALPERN 
ANKARA FOR CFC 
 
E.O. 12958: N/A 
TAGS: ECON, EIND, ENRG, EPET, EFIN, KZ, ECONOMIC, Energy 
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE 
May 1-14, 2005 
 
 
1.  Summary: This information is drawn primarily from the 
Kazakhstani local press, and has not been checked for 
accuracy.  The opinions and policies expressed in this report 
are those of the authors, not the U.S. government. 
 
--   Mazhilis Committee Suggests Foreign Borrowing Limits 
--   Pipe Plant Launched in Aktobe 
--   Latvia Opens Trade Mission in Kazakhstan 
--   Economic Statistics 
--   KazMunayGaz Acquires 50% of BG's Kashagan Share 
--   GoK Outlines Caspian Port Development 
--   First Kazakhstani Tanker to Arrive at Aktau Port 
--   Kazakhstan Restricts Turgai Petroleum Oil Production 
--   Atyrau Oblast Administration Criticizes Foreign 
     Companies 
 
 
Mazhilis Committee Suggests Foreign Borrowing Limits 
--------------------------------------------- ------ 
 
2.  "Inflation is being pushed in Kazakhstan by a huge amount 
of external borrowing by commercial banks, and almost 
uncontrollable foreign borrowing by the national private 
sector.  Therefore, it would be effective to introduce a 
parliamentary approval system over ceilings for corporate 
foreign borrowing," Chairman of the Committee on Finance and 
Budgeting Kenzhegali Sagadiev said during a joint session of 
Parliament.  According to him, "as of September 30, 2004, 
inter-company debt grew two-fold over the past four years, 
from $6.9 billion in 2000 to $13.6 billion in 2004." 
Sagadiev defined it as a threat to national economic 
security.  (Interfax-Kazakhstan, May 06) 
 
Pipe Plant Launched in Aktobe 
----------------------------- 
 
3.  On May 12, Kazakhstani President Nursultan Nazarbayev 
participated in the opening ceremony of a plant producing 
pipes and fittings using glass fiber-fortified polyester. 
This project was implemented by Hobas Pipes Kazakhstan Ltd. 
and financed by a 14.7 million Euro loan from the state-owned 
Development Bank of Kazakhstan.  The design capacity of the 
plant is 190,000 meters of pipe with diameters ranging from 
200 mm-1.4 m per annum.  The estimated useful life of the 
pipes is 80-100 years.  These products are intended for the 
domestic market to provide the population with high-quality 
potable water.  (Interfax-Kazakhstan, May 12) 
 
Latvia Opens Trade Mission in Kazakhstan 
---------------------------------------- 
 
4.  The Latvian Investment and Development Agency opened its 
representative office in Kazakhstan in 2002; however, now 
Latvia has decided to open its trade mission in the republic 
in order to expand commercial bilateral ties.  The trade 
mission's head, Andrejs Pumpurs, reports that trade turnover 
between Latvia and Kazakhstan was $11.5 million last year, 
which is up 85.9% compared to 2003.  The key objective of the 
mission will to provide Kazakhstani businessmen with 
information about Latvian business opportunities, its 
national laws and tax system.  (Interfax-Kazakhstan, May 12) 
 
Economic Statistics 
------------------- 
 
5.  The net profit of the republican state enterprise Aktau 
International Trade Seaport on the Caspian Sea was KZT 
344,347,000 (approximately $2.7 million) in the first quarter 
of 2005, according to the company's financial statements 
published in the official press.  The seaport's net profit in 
Q1 2004 was KZT 530,710,000 (about $4.1 million).  As 
reported elsewhere, Aktau seaport transshipped a total of 2.7 
ml tons of freight in January-March 2005.  (Interfax- 
Kazakhstan, May 06) 
 
6.  Kazakhstan Temir Zholy (KTZ), the national rail company 
of Kazakhstan, closed the first quarter of 2005 with a net 
loss exceeding KZT 1.427 billion (approximately $11 million.) 
The company drew a net profit of KZT 915.3 ml (approximately 
$7 million) in January-March 2004.  Currently, the company 
accounts for more than 68% of the total cargo turnover and 
 
over 57% of passenger turnover in the country.  More than 
125,000 people are employed in Kazakhstan's railway industry. 
(Interfax-Kazakhstan, May 11) 
 
KazMunayGaz Acquires 50% of BG's Kashagan Share 
--------------------------------------------- -- 
 
7.  On May 4, Agip KCO and the GoK finalized Kazakhstan's 50% 
purchase of British Gas's (BG) share (16.67%) in the North 
Caspian project for $913 million.  Approximately $300 million 
of the sales price went for cash calls made since the initial 
sale was announced in 2003.  At present, ENI, ExxonMobil, 
Shell and Total each control 18.52%, up from 16.67% while 
ConocoPhillips has 9.26% versus 8.33% before the purchase. 
INPEX and state producer KazMunayGaz (KMG) each have 8.33%. 
 
8.  KazMunayGas (KMG) President Uzakbay Karabalin announced 
that Kazakhstan self-financed the purchase, thanks in part to 
internal company restructuring.  Kazakhstani Energy Minister 
Vladimir Shkolnik reported that during the life of the 40- 
year PSA, Kazakhstan will earn $60 billion, and the 
consortium will gross $85 billion, though $57 billion of that 
is cost oil.  (Interfax - Kazakhstan, May 09) 
 
GoK Outlines Caspian Port Development 
------------------------------------- 
 
9.  The GOK announced that Kazakhstani oil transport across 
the Caspian will increase from 4.8 million tons in 2004 to 38 
million tons per annum in 2016.  The government plans to 
conduct a feasibility study of Kuryk, a new port south of 
Aktau, as well as to increase Aktau's capacity.  There are 
also plans to construct a railway and highway from Kuryk to 
Atyrau, and to build a shipyard.  (Interfax - Kazakhstan, May 
09) 
 
First Kazakhstani Tanker to Arrive at Aktau Port 
--------------------------------------------- --- 
 
10.  KazMorTransFlot (KMTF) announced the arrival in Aktau of 
the first Kazakhstani tanker, "Astana," on May 22.  The 
12,000 ton tanker was built at Russia's Vyborg ship yard. 
(Interfax - Kazakhstan, May 09) 
 
Kazakhstan Restricts Turgai Petroleum Oil Production 
--------------------------------------------- ------- 
 
11.  Kazakhstan's Energy Ministry limited oil production at 
Turgai Petroleum, a Lukoil/PetroKazakhstan joint venture, 
because of excessive flaring.  Daily oil production was 
restricted by 24,800 barrels in response to alleged 
environmental damage caused by gas flaring at the Kumkol 
field.  The reduction is one one-third of planned production 
for 2005.  The production limits will remain in force during 
2005 until the company adheres to a December 2004 law on 
"full gas utilization."  (Interfax - Kazakhstan, May 02) 
 
Atyrau Oblast Administration Criticizes Foreign Companies 
--------------------------------------------- ------------ 
 
12.  On April 25, the appointed governor of Atyrau Oblast 
charged foreign companies with discriminating against local 
employees.  He singled out ChevronTexaco's TCO, Agip KCO, and 
the state owned Atyrau refinery.  The same day, the Oblast 
Administration and 136 foreign companies signed a bilateral 
labor agreement.  (Interfax - Kazakhstan, May 02) 
 
ASQUINO 
 
 
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