US embassy cable - 05ALMATY3912

C O N F I D E N T I A L  ALMATY 003912 
 
SIPDIS 
 
 
DEPT FOR EB/ESC; EUR/SNEC (MANN); EUR/CACEN (MUDGE) 
 
E.O. 12958: DECL: 10/30/2015 
TAGS: ENRG, EPET, KZ, Energy, POLITICAL 
SUBJECT: KAZAKHSTAN: PRESIDENT'S SON-IN-LAW RESIGNS FROM 
STATE OIL AND GAS COMPANY 
 
REF: ALMATY 3857 
 
Classified By: AMBASSADOR JOHN ORDWAY FOR REASONS 1.4(B) and (D) 
 
1. (C)  Summary.  In a surprise move, President Nazarbayev's 
son-in-law, Timur Kulibayev, resigned on October 22 as First 
Vice-President of the state-owned oil and gas company, 
reportedly to pursue private business interests.  Kulibayev's 
replacement is Aleksandr Pavlov, a former Deputy Prime 
Minister and current Deputy Chairman of Otan, Nazarbayev's 
political party.  Presidential Advisor Karim Masimov 
suggested to the Ambassador that Kulibayev's resignation 
would free the President to move against suspected corrupt 
individuals in the government.  Opposition politicians have 
interpreted the move as an electoral tactic aimed at 
countering their charges of nepotism and abuse of authority 
in the Nazarbayev administration.  Many here speculate, 
without clear evidence, that Kulibayev's resignation signals 
a decline of his influence in relation to Nazarbayev's other 
son-in-law, Rakhat Aliyev, the current First Deputy Foreign 
Minister.  As for Kulibayev's future, many in the oil sector 
believe he will re-emerge soon, perhaps as a major buyer of 
shares in KMG's oil-producing subsidiary, KMG Exploration & 
Production Joint Stock Company (KMG E&P), when the company 
makes a public offering of as much as 40% of its shares in 
early 2006.  End Summary. 
 
A Move to Clean Up the Administration? 
-------------------------------------- 
 
2. (C) Kazinform, the state news agency, broke the news of 
Kulibayev's resignation as KMG VP on October 22.  The agency 
reported simultaneously that Pavlov had been named to fill 
the vacancy. Earlier that morning, top Presidential Advisor 
Karim Masimov had alerted the Ambassador to the change, 
adding that Kulibayev would follow his resignation by issuing 
a public appeal to all his relatives to leave state service 
in order not to undermine Nazarbayev's position.  Masimov 
suggested to Ambassador that Kulibayev's departure would 
clear the way for the President to move against others who 
might be involved in corrupt activities. 
 
Opposition Imputes Election Motives 
----------------------------------- 
 
3. (C) Many observers on the scene here speculate that 
Nazarbayev, and not Kulibayev, may have instigated the 
resignation as a way of blunting opposition criticism during 
the electoral campaign that Nazarbayev's clan has abused its 
political and economic power. In an October 26 article 
published on-line, Oraz Zhandosov, co-chair of the opposition 
"True Ak Zhol" party and "For a Just Kazakhstan" movement, 
was quoted as saying that, "sooner or later," Kulibayev's 
"private interests" (which included a large share Nelson 
Resources until the oil company was sold to LuKoil on October 
15 -- see reftel) would create a "conflict of interest" with 
his responsibilities as KMG VP.  "Alga" leader Asylbek 
Kozhakhmetov went further, stating that "of course" 
Kulibayev's resignation was tied to the elections, and the 
fact that the opposition often criticized Nazarbayev's 
creation of a clan-based authority structure.  In a separate 
quote published in an oil and gas trade journal, Zhandosov 
outlined how the public would know if Kulibayev's resignation 
constituted a mere electoral tactic or a genuine change in 
administration direction:  "All of the KMG division heads 
were appointed by Kulibayev," Zhandosov noted. "If they don't 
get replaced, there won't be a change of policy; if they do, 
there will."  Skeptics of the theory that Kulibayev's 
resignation represents a dramatic shift in influence or 
policy point out that new KMG VP Pavlov is widely perceived 
to be Kulibayev's close confidant. Pavlov is Chairman of the 
Board of Directors of Halyk Bank, of which Kulibayev is 
believed to be a major shareholder. 
 
Speculation of Sibling Rivalry 
------------------------------ 
 
4. (SBU) The media and Embassy contacts alike have speculated 
that Kulibayev's resignation may signal a shift in influence 
from Kulibayev (who is married to Nazarbayev's middle 
daughter Dinara) to Aliyev (married to elder daughter and 
parliamentarian Dariga), who recently returned from a 
perceived "exile" in Vienna.  According to this argument, 
 
 
Nazarbayev maintains a balance of power around him by 
transferring overly-successful or ambitious individuals to 
less-advantageous posts. Kulibayev, the logic runs, had 
become too powerful, first by serving for three years as 
KMG's de facto chief, and then by acquiring a fortune from 
the sale of Nelson Resources. 
 
5. (C) One hint of a possible escalation in sibling rivalry 
comes from a rumor circulating in the oil industry: namely, 
that Kulibayev resigned in order to free himself (and sold 
his share of Nelson Resources in order to free his cash) for 
a bid to purchase shares in KMG E&P when as much as 49% of 
the company is sold in a public offering expected in early 
2006.  In mid-August Asar, the political party which Dariga 
Nazarbayeva heads, penned a public letter which criticized 
the planned privatization.  Plans to sell a stake in "a 
strategic asset of the Kazakh economy on the western market 
goes against Kazakhstan's long-term interests," the letter 
read, and later referred to the deal as "thoughtless" and 
"politically irresponsible." 
 
6. (C) Comment:  It is difficult to know which of these 
motives might have driven Kulibayev's resignation. 
Nazarbayev's family excels at keeping its differences and 
motives secret. We can only hope that Masimov is right, and 
that Nazarbayev intends to use this opportunity to root out 
corrupt individuals who might previously have been protected 
by their relationship with Kulibayev.  End comment. 
ORDWAY 
 
 
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