US embassy cable - 05ALMATY3479

UNCLAS  ALMATY 003479 
 
SIPDIS 
 
 
DEPT FOR EUR/SNEC AMBASSADOR MANN, EUR/CACEN JMUDGE, ALSO 
FOR EB/IPC/IEC/EPC 
BAKU FOR ENERGY OFFICER 
ENERGY FOR CWASHINGTON 
COMMERCE FOR CENTRAL ASIA DESK OFFICER DSTARKS 
TREASURY FOR CENTRAL ASIA DESK OFFICER MGAERTNER 
DEPARTMENT PLEASE PASS TO OPIC BALLINGER, EVERHART 
DEPARTMENT PLEASE PASS TO TDA STEIN, GREENIP 
 
SENSITIVE 
 
E.O. 12958: NA 
TAGS: ECON, ENRG, EPET, PREL, PGOV, KZ, ECONOMIC, Energy 
SUBJECT: KAZAKHSTAN: SHKOLNIK ASSURES AMBASSADOR ON BTC 
IGA/HGA RATIFICATION 
 
1. (SBU) Summary: Ambassador Ordway, accompanied by OPIC 
Chief Economist Steven Everhart, met with Minister of 
Energy and Mineral Resources Vladimir Shkolnik on September 
27 in Astana.  Shkolnik assured the Ambassador and Everhart 
that Kazakhstan would sign off on the recently initialed 
Baku-Tbilisi-Ceyhan IGA and further stated that the 
stability of the IGA and HGA would be solidified by their 
explicit ratification in Parliament.  End Summary. 
 
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BTC Agreements Will Be Ratified 
------------------------------- 
 
2. (SBU) Shkolnik was quick to assure the Ambassador that 
Kazakhstan indeed plans to sign the BTC IGA that was 
initialed September 24.  He cautioned, however, that the 
internal GOK process of collecting approvals from all 
involved ministries would take time.  He did not predict a 
timeframe, but noted that President Nazarbayev had 
instructed him to conclude the agreement quickly.  Shkolnik 
attributed the non-signature of the IGA in Baku last May to 
his having only two days to circulate the initialed text to 
the ministries before the planned signing. 
 
3. (SBU) Shkolnik also told the Ambassador and Everhart that 
Kazakhstan planned to follow "the same" procedure for the 
tax scheme as Azerbaijan had in its Host Government 
Agreement (HGA) with investors.  Most importantly, he said 
unequivocally that the IGA and HGA will be submitted as a 
package for ratification in Parliament, thereby assuring 
their immutability.  (Note: Shkolnik referred to the 
agreements as a "paket," but it would be excessive to 
conclude that this means Parliament could not, if it chose, 
act on them individually.  End Note.)  Everhart told 
Shkolnik that OPIC would view ratification as a strong 
indicator of a stable investment climate that would argue in 
favor of OPIC expanding its activities in Kazakhstan. 
 
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Domestic Law Questions 
---------------------- 
 
4. (SBU) Ambassador followed up on Shkolnik's assurances 
about ratification of the BTC agreements by raising U.S. 
concerns about the apparent technical error in Article 20.2 
of the recently enacted Law on International Agreements. 
(NOTE: Article 20.2 appears to state that Kazakhstan's 
domestic legislation has priority over all international 
agreements, even those that are ratified.  The MFA 
representative at the BTC negotiations recently admitted 
that the law was only intended to reach non-ratified 
agreements.  The Constitution of Kazakhstan establishes the 
principle of the primacy of treaty law.  End Note.) 
 
5. (SBU) Shkolnik again assured the Ambassador that the 
Constitution clearly guarantees that ratified agreements are 
not subject to interference from domestic legislation. 
However, he did not appear to be immediately familiar with 
the technical error in Article 20.2, so it is not clear if 
he is personally involved in any effort to get Parliament to 
correct the law.  (Note:  In a conversation later that day, 
Foreign Minister Tokayev categorically assured the 
Ambassador that this "mistake" would be corrected, he hoped 
by the end of the year.) 
 
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TDA Grant Falls Through 
----------------------- 
 
6. (U) The Ambassador also raised the issue of the proposed 
TDA Grant Agreement to Shkolnik.  Shkolnik declined to sign 
the grant because he believed that the terms of reference no 
longer described what the grant would do.  While he 
regretted the loss of the funds due to the end of the fiscal 
year, he was not prepared to sign a document that called for 
activities that duplicated work already done. 
 
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Comment 
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7. (SBU) As usual, Shkolnik was voluble and open, despite 
having only been on the job for a day after a serious bout 
of the flu.  His statement that both the IGA and the HGA 
will be submitted to Parliament for ratification is 
undoubtedly a positive development.  This meeting also 
included discussion of some non-proliferation topics, which 
are addressed Septel. 
 
Ordway 
 
 
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