US embassy cable - 05ALMATY2950

UNCLAS  ALMATY 002950 
 
SIPDIS 
 
 
DEPT PASS TO 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 
July 24 - August 6, 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. 
 
--   Special Economic Zone in South Kazakhstan 
--   Kazakhstan Cuts Poverty Level 
--   GoK to Change Currency Exchange Policy 
--   First Issue of Infrastructure Bonds 
--   New Representative for Caspian Sea Status 
     Negotiations Appointed 
--   MOU on EITI Joining Drafted 
--   First Exploration Well at Tub-Karagan Block Abandoned 
--   New Oil Deposit in Western Kazakhstan Discovered 
--   Kazakhstan Needs $7.5 Billion in Petrochemical Industry 
     Investment 
 
 
Special Economic Zone in South Kazakhstan 
----------------------------------------- 
 
2.  According to Prime Minister Akhmetov, the GoK will 
allocate KZT 841 million (approximately $6.2 million) to 
construct infrastructure facilities in the "Ontustik" 
special economic zone for the development of the cotton- 
textile cluster in South Kazakhstan Oblast.  It is planned 
to set up large and medium textile plants and attract new 
technologies, expanding the range of cotton processing, to 
improve product quality and labor productivity.  (Interfax- 
Kazakhstan, July 27) 
 
Kazakhstan Cuts Poverty Level 
----------------------------- 
 
3.  The part of the population with income below the 
subsistence line was 15.3% in Q1 2005 versus 19.1% in 
January-March 2004, the National Statistics Agency reported. 
Currently, the population of Kazakhstan exceeds 15.1 
million.  In rural areas the poor accounted for 23.9%; this 
is almost three times as much as in urban areas, where the 
figure is 8.4%.  The subsistence line was increased by 8.3% 
in Q1 2005 compared to the same period of last year, and is 
now set at KZT 5,841 (approximately $43).  (Interfax - 
Kazakhstan, 27 July) 
 
GoK to Change Currency Exchange Policy 
-------------------------------------- 
 
4.  "In the medium term, it is possible that we will set 
limits for the fluctuation of the real exchange rate and 
inflation," Prime Minister Akhmetov said during a government 
meeting.  The huge inflow of petrodollars caused the 
appreciation of the tenge, and as a result made local 
manufacturers less competitive.  In 2004, the tenge 
appreciated 15% against the US dollar and 7% against the 
Euro.  "Guaranteeing the competitiveness and stability of 
the real exchange rate has to be one of the main principles 
of the country's development strategy," Akhmetov concluded. 
(Dow Jones International News, 27 July) 
 
First Issue of Infrastructure Bonds 
----------------------------------- 
 
5.  The Financial Supervision Agency (FSA) registered the 
first issue of infrastructure bonds for KZT 30 billion 
(approximately $220.6 million).  The bonds are issued for 
construction of a new railway connecting Shar and Ust- 
Kamenogorsk, the representative of state-owned Kazakhstan 
Investment Fund (KIF) said.  The concessionary company 
Doszhan Temir Zholy is the issuer of the new securities. 
The bonds' maturity (KZT 1,000 each paper (about $7.4)) is 
in 23 years; the railway construction is planned for three 
and a half years.  KIF hopes that pension funds and 
commercial banks will be the main purchasers of the bonds. 
(Interfax-Kazakhstan, July 29) 
 
New Representative for Caspian Sea Status Negotiations 
Appointed 
--------------------------------------------- ------------- 
 
6.  Ambassador-at-Large Yerik Utembaev was appointed as the 
new representative of Kazakhstan to the Caspian Sea status 
negotiations, according to a Presidential Decree from July 
27.  Earlier, Utembaev, age 39, served as Deputy Secretary 
of Kazakhstan's Security Council and Deputy Chair of the 
Agency for Strategic Planning.  (Interfax - Kazakhstan, 
August 1) 
 
MOU on EITI Joining Drafted 
--------------------------- 
 
7.  The GoK has drafted a Memorandum of Understanding (MOU) 
on Kazakhstan's accession to the Extractive Industry 
Transparency Initiative (EITI), Kazakhstani Energy Minister 
Shkolnik informed on July 29.  Thirteen mining companies and 
forty-nine oil and gas companies were listed in the MOU, 
although membership is voluntary.  The MOU is expected to be 
signed in September during the KIOGE oil and gas exhibition. 
(Interfax - Kazakhstan, August 1) 
 
First Exploration Well at Tub-Karagan Block Abandoned 
--------------------------------------------- -------- 
 
8.  On August 2, Lukoil abandoned its first exploration 
well at the Tub-Karagan block (central part of Kazakhstani 
sector of the Caspian Sea).  No oil or gas bearing reserves 
of commercial value were found.  Tub-Karagan shareholders 
are Lukoil Overseas (50%) and KazMunayTeniz, offshore 
subsidiary of the national oil producer KazMunayGaz, (50%). 
All costs incurred during the exploration period are to be 
paid by the Russian party.  (Lukoil Overseas press-release, 
August 2) 
 
New Oil Deposit in Western Kazakhstan Discovered 
--------------------------------------------- --- 
 
9.  CNPC-Aktobemunaygaz, a subsidiary of Chinese National 
Petroleum Corporation (CNPC) in Kazakhstan, discovered an 
oil deposit in the central block of eastern part of the 
Caspian depression (Aktobe Oblast), the company's General 
Director Jian Chi informed on July 29.  The deposit was 
named "Umit" ("Hope") and has reserves of about 70-75 
million barrels of oil.  (Interfax - Kazakhstan, August 1) 
 
Kazakhstan Needs $7.5 bn in Investments in Petrochemical 
Industry 
--------------------------------------------- -------- 
 
10.  A study conducted by the Economics Ministry with the 
aid of the Nexant consulting company (USA) called for $7.5 
billion in investments in the petrochemical industry during 
the next fifteen years.  (Interfax - Kazakhstan, August 1) 
 
ASQUINO 
 
 
NNNN