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News Bulletin No 30

Kazakhstan Ready for OSCE Troika & Chairmanship
Kazakhstan Offers Military Airfield to NATO Forces in Afghanistan

Kazakhstan: Government comes to the banks’ rescue
Enhancement of Kazakhstan’s participation should be top priority for the Government: President Nazarbayev
UAE's Mubadala, Conoco agree Kazakh deal

Kazakhstan has the last laugh with GAC

Category: General
Posted by: admin

News Bulletin
Released by the Embassy of the Republic of Kazakhstan to the United States of America

No 30 December 8, 2008


• Kazakhstan Ready for OSCE Troika & Chairmanship
• Kazakhstan Offers Military Airfield to NATO Forces in Afghanistan


• Kazakhstan: Government comes to the banks’ rescue
• Enhancement of Kazakhstan’s participation should be top priority for the Government: President Nazarbayev
• UAE's Mubadala, Conoco agree Kazakh deal


• Kazakhstan has the last laugh with GAC


Kazakhstan Ready for OSCE Troika & Chairmanship


Kazakhstan will become a member of the OSCE Troika in 2009, before taking the chairmanship of the Organization in 2010. This new position within the organization will put the Central Asian country at the center of the 16th OSCE Ministerial Council that takes place in Helsinki on the 4th and 5th of November 2008. Kazakhstan was the collective candidate of the Commonwealth of Independent States (CIS) and the first ever elected candidate from a former Soviet Union country.

The OSCE Chairmanship is a logical result of Kazakhstan's 16 years of independent political and economic development and according to Marat Tazhin, Minister of Foreign Affairs of Kazakhstan, "its origins can be traced back tothe address made by President Nursultan Nazarbayev at the OSCE Lisbon Summit in 1996."

At the Helsinki meeting, Minister Tazhin should emphasize the necessity to find a better balance between the three dimensions of the OSCE – Human Rights, Security, Economy - and to relieve the Organization from accusations of selectivity and application of double standards. In order to prepare Kazakhstan's chairmanship and prove the country's genuine involvement towards the OSCE's democratic values, Minister Tazhin's government introduced a package of reforms aimed at developing a multiparty system, liberalizing political parties' activity and democratizing the media legislation.

Another direction that Kazakhstan wants to follow in the context of its future chairmanship is the promotion of an equal political dialogue between civilizations; the country's capital Astana hosted a conference (last October) titled 'Common World: Progress Through Diversity' that gathered together more than 50 Foreign Ministers from both the Muslim and the Western world.

Kazakhstan also elaborated a State programme called 'Path to Europe' to bring relations with European countries to the level of strategic partnership, to actively employ European models to improve Kazakh laws, and to attract advanced technologies and expertise in management and institutional evolution.

All these initiatives clearly show that Kazakhstan is committed to a programme of liberalization, democratization and change in accordance with the principles on which the OSCE is built.

As the OSCE chairmanship rotates annually, the Chairman-in-Office (CiO) is assisted by the previous and succeeding Chairpersons to assure continuity of the Organization's activities. Together, the three CiOs - present, past and future - form the OSCE Troika. In 2009 the Troika consists of Greece, Finland and Kazakhstan.


Kazakhstan Offers Military Airfield to NATO Forces in Afghanistan

Eurasia Daily Monitor, Jamestown Foundation

Recently, members of the Kazakhstan Senate ratified two agreements allowing U.S. and NATO coalition forces to use Almaty airport as an emergency airfield for fighter planes flying on missions to Afghanistan. The news hardly produced any comments from government headquarters, but what leaked through the scarce comments in the press was quite enough to whip up nationalist sentiments among the Russian military in Moscow. Army General Petr Deineko, a former commander of the Russian air forces, drew a parallel between the West’s intention to install an anti-missile defense system in Eastern Europe and the prospect of an airfield in Kazakhstan. He said that the Kremlin should react calmly to new realities and not “work up hysteria...” He added, nevertheless, that current circumstances in which “our allies take unprecedented decisions opening air space to the flights of American planes requires heightened vigilance from us” (Nezavisimaya Gazeta, December2).

Kazakh Defense Ministry officials failed to elaborate on the details of the agreement to use the airfield. It appears that for Kazakhstan, NATO, and the United States, the backup airfield will be a symbol of military cooperation between the West and Central Asia rather than a practical military airbase. The growing contingent of U.S. and NATO military units in Afghanistan could be more effectively transported using the currently operating airfields of Termez in Uzbekistan, Dushanbe in Tajikistan, and Mari in Turkmenistan, which are close to the combat areas of Afghanistan, instead of making a long and expensive flight to Almaty along the Chinese border.

Although the wisdom of creating an airfield in Almaty with no proper runways, lights and warehouses, or navigation facilities adapted for military planes remains unclear to many, the political analysts in Kazakhstan and Russia link it to the renewed focus by American President-elect Barack Obama on Central Asia, particularly Kazakhstan. Observers give at least three reasons for Kazakhstan’s increasing strategic importance in global policy. First, with Obama’s pledge to raise the American contingent in Afghanistan to 20,000, the U.S. forces will not be able to rely entirely on Manas airfield in Kyrgyzstan. Second, by expanding their military presence in Central Asia, the United States and NATO forces are determined to squeeze Russia and China out of the oil-rich and strategically important region. This strategy also corresponds to the U.S.-backed plan of creating a Greater Central Asia extending from Afghanistan, through the Central Asian states, to the Middle East. Third, by gaining access to an airfield in Kazakhstan, the United States will have an opportunity to watch and gather intelligence on Chinese nuclear facilities. Whatever the true reasons for a renewed Western march in Central Asia may be, it signals a weakening position of the Russian-led Collective Security Agreement Organization (CSTO) and similar political and military structures in the CIS space.

The political analyst Ruslan Zhumali recalls the unsuccessful attempt of Kazakh and Uzbek diplomats to mend relations with the unruly Afghan Taliban in the past and does not pin much hope on the Collective Security Treaty Organization as a peacemaking force. The only factor preventing bellicose mobs of Afghan tribes from pouring into neighboring states, including Kazakhstan, seems to be the United States and NATO coalition forces, and therefore it is vitally important for the Kazakh Defense Ministry to cooperate with North Atlantic alliance (Aikyn, December 4).

Apart from a sense of military security on its southern borders, the agreement gives Kazakhstan the very tempting prospect of updating and modernizing its military, particularly its air-defense system. On a number of trips to Moscow in recent years, Kazakh Defense Minister Danial Akhmetov has inspected Russian military equipment and bargained for some sophisticated hardware; but Russian technical assistance and personnel training, albeit relatively cheap for all members of the CSTO, has never satisfied Kazakhstan’s ambition to adopt NATO standards for its army, which is equipped at present with obsolete Russian-made weaponry. Kazakhstan’s progress in cooperating with NATO was too slow, however, mainly because of the political necessity of forging an economic and political alliance with its powerful neighbors, Russia and China. Kazakhstan signed two agreements supporting U.S. and NATO military operations in Afghanistan, within the framework of the Enduring Freedom plan, on December 15, 2001, and on June 10, 2002. Astana was in no hurry, however, to ratify them. Even before military operations in Afghanistan began, the United States had tried unsuccessfully to negotiate the lease of two airfields from Kazakhstan.

The ratification of the agreements by the Kazakh Senate is a small but decisive step in Kazakhstan’s growing ties with NATO. It offers the country a possibility to realize Defense Minister Danial Akhmetov’s recurring dream of introducing an integrated air-defense system into the army and raising the combat capabilities of the nascent Caspian fleet.



Kazakhstan: Government comes to the banks’ rescue


As was widely expected, the government in Kazakhstan has stepped in to support the central Asian republic’s embattled banking sector. Since the onset of the global credit crunch last August, Kazakh banks have found themselves under severe pressure given the choking off of cheap funding from abroad, which helped to finance the rapid expansion of branch networks and lending portfolios at home. At the same time the domestic economic environment has deteriorated rapidly, with GDP this year expected to come in at 4.5% – less than half the 10% average annual growth levels seen since the start of the decade. The straitened economic circumstances have also led to a sharp increase in bad debt levels. While pre-credit crunch non-performing loans were in the range of 1.5% to 3% they have now jumped to 7% to 8% although some observers believe the true figure is as high as 15%.

Given such a gloomy prognosis, the prices of Kazakh bank shares and bonds had slumped as investors fretted over lower earnings and whether banks would be able to fulfil their foreign debt service obligations. In the face of such concerns, the Kazakh authorities decided to act decisively. In mid-November, after two weeks of negotiations, they unveiled details of a plan under which the government is to inject a total of $3.47 billion into the country’s top four banks – BTA Bank, Kazkommertsbank, Halyk and Alliance Bank – in return for no more than 25% of common shares. A further $1.5 billion has been earmarked for other banks in the top 10.

Under the terms of the deal, banks will receive funds in the form of capital, preference shares and subordinated debt. Majority shareholders will see their holdings diluted for the time being but they will have first refusal on buying back the stakes from the government over a four-year period, starting next November. According to Milena Ivanova, banking analyst at Renaissance Capital in Almaty, the capitalization package will not be dilutative for minority shareholders on the common share level.

News of the government’s action prompted a dramatic recovery in the equity valuations of the quartet of banks, with shares in Kazkommertsbank, for example, up 176% to $8 from their 52-week low of $2.90 on October 24.

The support from the Kazakh authorities was welcomed by the banks, with Kazkommertsbank’s chief executive, Nina Zhusupova, commenting: "We believe that it was an appropriate decision by the government to provide funding to the economy not only through state-owned development institutions but also through commercial banks. It will compensate for the credit shortage in the domestic market and improve access to finance for companies and individuals during the global financial crisis."


Enhancement of Kazakhstan’s participation should be top priority for the Government: President Nazarbayev


“We have no single methodology of estimating Kazakhstan’s participation. Thus, there is no accurate estimate of Kazakh producers’ share in supplies to subsoil users”, President Nazarbayev said at the meeting of the Foreign Investors’ Council in Almaty.

“According to official data, only 135 companies out of 575 subsurface users undergo sufficient monitoring. Furthermore, such oil giants as “TengizChevroil”, “Agip KCO” and “Karachaganak Petroleum Operating” are out of the list of monitored companies”, President Nazarbayev said.

“KazMunaiGaz national Company is authorized to work with subsoil users on large projects. It should coordinate annual procurement plans, annual programs of capital and operational works. However, KMG does not use its authority and does not serve the best interests of developing Kazakhstan’s participation in joint projects. It is necessary to redress the situation”, President emphasized.

The President believes that it is the lack of Government activity to blame. “The Government did not set tasks and criteria, did not take real measures in working with Kazakhstan’s producers”, the Kazakh leader stressed.

President Nazarbayev referred to some countries which have achieved considerable results in solving this problem. He named Brazil, Malaysia, Norway and Britain, where the share of domestic participation amounts to 50 – 80%. “Of course this is the result of a long and hard work. Thus the development of Kazakhstan’s participation should become an issue No. 1 for the Kazakh Government. It will help develop our real sector. Our plans on diversification and industrialization depend on it”, the President concluded.

He commissioned Deputy Prime Minister Umirzak Shukeyev to work on the issue in the Government, create a high-level working group with the participation of ministers and representatives of the “SamrukKazyna” Fund’s management, and work with every subsoil user on the issues of Kazakhstan’s participation.


UAE's Mubadala, Conoco agree Kazakh deal


The UAE's Mubadala Development Co said on Sunday it has signed a preliminary deal with U.S. major ConocoPhillips and Kazakhstan's state energy firm to develop an offshore Kazazh oil and gas block.

Conoco and Abu-Dhabi government-owned investment agency Mubadala will each hold a 24.5 percent stake in the offshore Kazakh block in the Caspian Sea, Mubadala said.

Kazakh state oil and gas firm KazMunaiGas will hold the majority stake.

Conoco and Mubadala have until the end of the year to finalise the terms of the contract for Kazakhstan's "N" block, Mubadala said.

Conoco won a contract earlier this year with government-owned Abu Dhabi National Oil Company (ADNOC) for a $10 billion-plus project to develop sour gas reserves in the emirate.

Abu Dhabi leads the seven-member United Arab Emirates, and holds over 90 percent of the UAE's oil reserves. The UAE is the world's fifth-largest oil exporter.

Abu Dhabi already has big plans for investment in Kazakhstan.

Government-owned IPIC and Kazakhstan launched a $1 billion fund to invest in energy and other sectors in July. IPIC also plans to develop a $5 billion-plus petrochemical project in Kazakhstan.



Kazakhstan has the last laugh with GAC

GAC news release
Company strengthens position in Central Asian oil and gas industry with unique and innovative promotion

Singapore, 2 December 2008 – GAC Group, a global leader in shipping, logistics and marine services, opened two new offices in Kazakhstan recently and celebrated the strategic move with another first – by hosting a pioneering comedy tour of the country.

GAC has a reputation for its creative thinking and innovative approach to branding and promotion through sports sponsorship and is, according to Group Project Logistics Manager Laurance Langdon, always looking for fresh ideas to showcase the GAC brand:

“I wanted to find a new, exciting way in which to promote the arrival of GAC in Kazakhstan which would particularly appeal to the burgeoning expatriate community,” he explains.  “Having spent a lot of time in the country and with a background in stand-up comedy, it became clear to me that a comedy tour would be an entertaining and welcomed alternative to traditional corporate launches. We wanted to draw attention to our new offices and services here, while at the same time giving the decision makers in the audience a good time.”

The stars of the November shows were award-winning comedians Craig Campbell and Nick Wilty. Campbell, a native Canadian now living in the UK, has been described as “a very, very funny man” in the Times Review while The New Yorker heralded Wilty as “one of the top five acts … in New York”.  Laurance Langdon has worked with both performers who consistently sell out shows around the world. “Their style of comedy fitted the occasion perfectly,” he asserts, and the Kazakhstan comedy tour was the first of many:

“Feedback was positive beyond our expectations – some customers were even offering to partner GAC to host more shows!  We had thought about making the comedy tour an annual event, but based on demand, we will have to consider increasing the frequency.  We’re also planning to extend the concept of entertaining the troops in the oil field to other countries where GAC has a presence in the oil and gas sector.  In 2009, we want to take the comedy tour to Turkmenistan, Nigeria, Mozambique and the Middle and Far East and then back to Kazakhstan.”

The Air Astana sponsored tour kicked off at the Intercontinental Hotel, Almaty, and was followed by another at the Renaissance Hotel in Aktau.  The concluding performance took place at the Renaissance in Atyrau.

GAC’s expansion into Kazakhstan reflects Central Asia’s status as one of the world’s principal oil and gas producing areas, and its aim to gain a share in the lucrative business which has grown dramatically over the last two to three years.  GAC has been present in Turkmenistan since 2000.

“It’s essential to have a presence in Central Asia and the Caspian Sea to meet the needs of the energy industries,” says Matthew Towse, General Manager of GAC Kazakhstan.  “Thanks to the discovery of the Kashagan field in the North Caspian Sea – the largest oil find in the last thirty years – anticipated future demand for both logistics and marine services in the area is massive.”

News Bulletin of the Embassy of the Republic of Kazakhstan
Contact person: Zhanbolat Ussenov
Tel.: 202-232-5488 ext 104; Fax: 202-232-5845
E-mail: zhan@kazakhembus.com