US embassy cable - 05ALMATY4256

UNCLAS  ALMATY 004256 
 
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 
November 13 - November 26, 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. 
 
--   Early Repayment of Foreign Loans in 2005 
--   WTO Protocol with Japan Signed 
--   ADB and Kazakhstan: New Forms of Cooperation 
--   New Owner of Karaganda Airport 
--   Economic Statistics 
--   Kazakhstan-China Pipeline Completed 
--   Plans of the International Consortium Agip KCO 
--   TCO to Export Tengiz Oil by the Southern Route 
--   EBRD and DBK to Finance North-South Power Line 
 
Early Repayment of Foreign Loans in 2005 
---------------------------------------- 
 
2.  "Taking into account current conditions in the 
international loan market and in order to sterilize the 
excessive money supply, the Finance Ministry took a decision 
to repay ahead of schedule those foreign loans of the 
government that are most expensive to service.  The amount 
of money to be paid is $849 million, which is equal to KZT 
111 billion," Finance Minister Dunayev announced at a 
government meeting on November 21.  (Interfax-Kazakhstan, 
November 21) 
 
WTO Protocol with Japan Signed 
------------------------------ 
 
3.  Kazakhstan completed bilateral talks with Japan on the 
conditions for the access of goods and services to its 
market.  A protocol to this effect was signed in Astana on 
November 23.  Japan is one of the G-8 countries with which 
Kazakhstan concluded the negotiations.  As Industry and 
Trade Minister Sauat Mynbayev said, "we have not completed 
negotiations with the USA and the European Union. There will 
be difficult negotiations with Canada and Australia because 
these countries are very interested in our agricultural 
sector being more open."  (Interfax-Kazakhstan, November 23) 
 
ADB and Kazakhstan: New Forms of Cooperation 
-------------------------------------------- 
 
4.  The Asian Development Bank signed a memorandum of 
understanding on its first public-private investment in 
Kazakhstan.  ADB President Haruhiko Kuroda said in a meeting 
with President Nazarbayev that the coming project with 
Almaty Power Consolidated (a regional energy supplier) would 
help upgrade APC power transmission and distribution lines 
and would be a new form of partnership based on investments 
without sovereign guarantees.  Also, the ADB is consulting 
with the GoK on a possible Tenge bond issue directed at 
developing the national stock market.  (Central Asian 
Newswire, November 15) 
 
New Owner of Karaganda Airport 
-------------------------------- 
 
5.  Sky Service airline from Almaty is a new possessor of 
Sary Arka airport in Karaganda.  According to the 
Karagandinskaya Oblast Finance Department, the company 
acquired the airport by tender for KZT 650,352 million 
(approximately $4.8 million).  Under the agreement signed 
with the new owner, the Karagandinskaya oblast government 
holds a "golden share," which allows it to interfere in 
affairs of the airport at any time.  Sky Service is expected 
to invest in official uniforms and professional training of 
airport personnel.  Karagandinskaya oblast is one of the 
industrially advanced regions of Kazakhstan, with 1.3 
million habitants.  (Interfax-Kazakhstan, November 16) 
 
Economic Statistics 
------------------- 
 
6.  According to the National Statistics Agency, the gross 
domestic product (GDP) of Kazakhstan totaled KZT 5,169.3 
billion (approximately $38.3 billion) in January-September 
2005.  Real GDP was 108.9% of Real GDP in the same period of 
2004.  The 8.9% GDP growth was attributed to growth of real 
volumes in all sectors of the economy: industry - up 4.2%, 
agriculture - up 7.4%, construction - up 8.8%, 
transportation and communication services - up 9.5%, trade - 
up 9%. (Interfax-Kazakhstan, November 11) 
 
7.  Kazakhstan's external trade surplus totaled $7,916.6 
million in January-September 2005 versus $4,977.3 million 
during the same period of 2004, a 59% increase.  As the 
National Statistics Agency reports, Kazakhstan's foreign 
trade turnover was $33,004.6 million in this period 
(excluding unauthorized trade), up by 42.2% compared to the 
same period of last year, with exports of $20,460.6 million 
(up by 45.2%) and $12,544 million of imports, including 
transportation and insurance expenses (up by 37.6%). 
(Interfax-Kazakhstan, November 14) 
 
Kazakhstan - China Pipeline Completed 
------------------------------------- 
 
8.  According to Xinhua News Agency, the 1,000-kilometer 
(625-mile) pipeline is designed to carry 20 million tons 
(140 million barrels) of oil annually from Kazakhstan to 
China.  Alatau Pass, where the final link in the pipeline 
was welded on November 14, is expected to become a hub for 
railway, road and pipeline networks for the remote region in 
China's northwest.  The pipeline was build by state-owned 
China National Petroleum Corporation and KazMunaiGas 
(Kazakhstan's national oil and gas company).  (Associated 
Press Newswires, November 15) 
 
Plans of the International Consortium Agip KCO 
--------------------------------------------- - 
 
9.  Agip KCO plans to start commercial extraction at 
Kashagan deposit at the end of 2008.  "We work within the 
program, according to which oil production is scheduled at 
the end of 2008," Agip KCO regional director for Kazakhstan 
Luciano Vasques said on November 14 in Atyrau (Kazakhstan's 
"oil capital" on the Caspian Sea).  (Interfax-Kazakhstan, 
November 15) 
 
10.  Agip KCO intends to construct an oil and gas refinery 
complex near Atyrau within its North Caspian Project by June 
2008. As Agip KCO surface facilities manager Daniele Nazzani 
announced, "we plan to complete building and assembly works 
by this time, i.e. the plant will be ready for launching." 
The project capacity of the oil treatment system would be 
450,000 barrels a day or 22.5 million tons a year, and gas 
treatment system up to 6.2 billion cubic meters a year. 
(Interfax-Kazakhstan, November 16) 
 
TCO to Export Tengiz Oil by the Southern Route 
--------------------------------------------- - 
 
11.  Tengizchevroil (TCO) signed commercial contracts to 
export crude oil by the "Southern Route."  TCO did not 
specify the names of the signatory companies and the oil 
volumes to be exported.  As TCO press release reports, 
".the Southern Route will allow us to export crude from 
Tengiz through Aktau across the Caspian Sea to Baku, 
Azerbaijan, and further on to Batumi, Georgia, to the Black 
Sea for further deliveries to international markets." 
(Interfax-Kazakhstan, November 23) 
 
EBRD and DBK to Finance North-South Power Line 
--------------------------------------------- - 
 
12.  The Kazakhstan Electricity Grid Operating Company JSC 
(KEGOC) signed loan agreements with the EBRD and state-owned 
Development Bank of Kazakhstan (DBK) to implement the 
construction of North-South power transmission line.  KEGOC 
will receive $87.8 million in loans: the EBRD will provide 
$52.8 million for 12 years; and Raiffeisen Zentralbank 
sterreich, Bayerische Landesbank, Calion and Citibank will 
syndicate $35 million for 9-12 years under EBRD auspices. 
Additionally, the DBK will loan KEGOC KZT 6.97 billion 
(about $51.8 million) for 15 years.  (Interfax-Kazakhstan, 
November 25) 
 
Ordway