120401

Vol. 4, No. 51, December 4, 2001

Politics

Secretary of State Colin Powell to visit Kazakhstan

State Department publishes background note on Kazakhstan

Kazakhstan reiterates willingness to help in any way in the war on terror

Economy

President meets with US Energy Secretary

Kazakhstan and Russia to coordinate WTO accession

Hurricane confirms deal to purchase CPC stake

POLITICS

Secretary of State Colin Powell to visit Kazakhstan

As part of his eight-day 10-nation trip to Europe and Eurasia on December 3-11, U.S. Secretary of State Colin Powell will visit Kazakhstan, the State Department announced on December 3.

Kazakhstan has been an important partner for the United States in a wide spectrum of spheres, ranging from security to economy and energy, ever since it regained its independence in 1991. It has cooperated with the United States in safely dismantling the weapons of mass destruction it inherited from the Soviet Union, including what was once the fourth-largest nuclear arsenal in the world. The importance of such cooperation, which also includes the elimination of chemical and biological weapons and facilities, can not be overstated.

The U.S. is the largest foreign investor in Kazakhstan, with American companies contributing more than 4 billion dollars in FDI out of 14 billion dollars invested since 1991. The energy is the largest single sphere attracting the bulk of investment. The U.S.-based oil majors such as ChevronTexaco, ExxonMobil, ConocoPhilips and others are playing an important role in developing the vast hydrocarbons reserves of the republic. On November 27, 2001, the 940-mile $2.6 billion pipeline of the Caspian Pipeline consortium with initial capacity of 28 million tons was officially commissioned, providing the first and vital outlet for primarily Kazakhstan's crude to the world markets. President Bush said the CPC was an 'example to the world that the United States, Russia, and Kazakhstan are cooperating to build prosperity and stability in this part of the world". With the recent discovery at Kashagan in Kazakhstan's Caspian offshore sector, reputed to be the largest oil find in the world since Alaska's Prudhoe Bay in 1968, the country is well on its way to becoming the major global energy supplier.

Kazakhstan has strongly condemned the vicious terrorist attacks of Sept. 11, and has been a steadfast partner of the U.S.-led antiterrorist coalition, committing all the resources it has at its disposal to assist in the fight against global terrorism.

As Kazakhstan approaches its 10th anniversary of independence on December 16, and the 10th anniversary of diplomatic relations with the U.S. on Dec. 26, the visit of the highest ranking member of the Bush Administration to the largest Central Asian nation will become an occasion both to discuss the cooperation in the current antiterrorist effort and to look back over the decade of cooperation and charter its future path.

State Department publishes background note on Kazakhstan (available at www.state.gov)

"The United States was the first country to recognize Kazakhstan, on December 25, 1991, and opened its embassy in Almaty in January 1992. In the 10 years since Kazakhstan's independence, the two countries have developed a wide-ranging bilateral relationship", said the Department in its background note on Kazakhstan issued on the eve of Secretary Powell's trip.

"U.S.-Kazakhstani cooperation in security and nonproliferation has been a cornerstone of the relationship. Kazakhstan showed leadership when it renounced nuclear weapons in 1993", said the Department. In 1994, Kazakhstan transferred over a half ton of weapons-grade uranium to the U.S., and in 1995 Kazakhstan removed its last nuclear warheads. Over the past 5 years Kazakhstan, with U.S. assistance, completed the sealing of 181 nuclear test tunnels. Under the Cooperative Threat Reduction program, the U.S. spent $78 million to assist Kazakhstan in eliminating START related systems such as ICBM silo launchers, strategic heavy bombers, and liquid rocket fuel storage facilities.

"Kazakhstan's military participates in the U.S.'s International Military Education and Training program, Foreign Military Financing, as well as NATO's Partnership for Peace program. The U.S. Central Command conducts 30 military-to-military engagement events every year in Kazakhstan", ranging from information exchanges to military exercises.

The report underlines Kazakhstan's record in reforming its economy, saying "the U.S. supports Kazakhstan's transition to a market economy, fully integrated into the world trade system. Since 1993, the U. S. Agency for International Development (USAID) has administered more than $273 million in technical assistance programs in Kazakhstan".

In 2000, Kazakhstan's economy grew sharply, aided by increased prices on world markets for Kazakhstan's leading exports--oil, metals and grain. GDP grew 9.6% in 2000, up from 1.7% in 1999. The government is predicting GDP growth of about 10% in 2001, as well. Oil and gas is the leading economic sector. Production in 2001 has been growing at roughly 20%, on target to meet the government's forecast of 40.1 million tons of oil (800,000 barrels/day). The increased economic growth also led to a turn-around in government finances, with the budget moving from a cash deficit of 3.7% of GDP in 1999 to 0.1% surplus in 2000. Kazakhstan's stronger budget position and strong export earnings earned it credit ratings upgrades from Moody's, S&P, and Fitch IBCA during 2001.

Kazakhstan's monetary policy has been well-managed. Inflation has stayed under control, registering 9.8% in 2000, and appears likely to be under 10% in 2001. Because of its strong economic performance and financial health, Kazakhstan became the first former Soviet republic to repay all of its debt to the IMF by paying back $400 million in 2000; 7 years ahead of schedule. Overall foreign debt is about $12.5 billion, $4 billion of which is owed by the government. This amounts to 69% of GDP, well within manageable levels.

Kazakhstan instituted an ambitious pension reform program in 1998. By July 2001, Kazakhstanis had contributed more than $1 billion to their own personal pension accounts, most of which is managed by the private sector. The Kazakhstani banking system is developing rapidly, and its capitalization now exceeds $1 billion.

"Kazakhstan has made progress in creating a favorable investment climate although concerns, such as vague and contradictory laws, remain. A U.S.-Kazakhstan Bilateral Investment Treaty and a Treaty on the Avoidance of Dual Taxation have been in place since 1994 and 1996, respectively.

Kazakhstan has been determined to be in full compliance with the Jackson-Vanik amendment to the 1974 Trade Act and does not need an annual waiver in order to receive MFN treatment. Bilateral trade was worth $488 million in 2000".

The note stresses Kazakhstan's "potential to be a world-class oil exporter in the medium term" and strong business ties between the two countries, saying "American companies have invested more than $5 billion in Kazakhstan since 1993. These companies are concentrated particularly in the oil and gas, business services, telecommunications, and electrical energy sectors".

Kazakhstan reiterates willingness to help in any way in the war on terror

Speaking in Moscow on November 29, President Nursultan Nazarbayev reiterated Kazakhstan's willingness to host United States or other allied troops involved in the war in Afghanistan at Kazakhstan bases. "As we have declared before, we will support the [anti-terrorist] operation with any means available," Nazarbayev told reporters at a press conference.

The president noted, that despite repeated offers of assistance, no state has yet to make an official request for use of Kazakhstan military bases or airfields. If such a request were to arise, however, "Kazakhstan will consider it with all due respect," Mr. Nazarbayev said.

ECONOMY

President meets U.S. Energy Secretary

On November 29 President Nursultan Nazarbayev met with U.S. Secretary of Energy Spencer Abraham. Abraham was in Moscow to meet with Russian officials regarding US-Russian cooperation in the energy sector, while Nazarbayev was in the Russian capital for last week's CIS summit.

At their meeting, which took place at the Kazakhstan embassy, Nazarbayev and Abraham discussed the prospects for continued American investment into the Kazakhstan oil and gas sector.

Kazakhstan and Russia to coordinate WTO accession

Kazakhstan and Russia plan to work together to coordinate a simultaneous entry into the World Trade Organization, Kazakhstan President Nursultan Nazarbayev and his Russian counterpart Vladimir Putin announced in a joint statement on November 30. The two heads of state further insisted that WTO entry will not hamper the development of the Eurasian Economic Community free trade bloc (formerly the CIS Customs Union: Kazakhstan, Russia, Belarus, Kyrgyzstan and Tajikistan).

Hurricane confirms deal to purchase CPC stake

Canadian-based Hurricane Hydrocarbons, the operator of the Kumkol oil field in Kazakhstan's Kyzylorda region, is finalizing legal procedures to purchase a 1.75% stake in the Caspian Pipeline Consortium from Amoco Production, a unit of British Petroleum. Legal procedures will be finalized later in December.

Hurricane and Amoco Production signed a contract for the purchase of the CPC stake on October 26, 2001. Ownership of the stake will allow Hurricane to export 3 million tons of oil per year via the CPC's new Tengiz-Novorossiisk pipeline at special shareholder tariffs.

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News Bulletin of the Embassy of the Republic of Kazakhstan

(Compiled from own sources and various agencies' reports)

Contact persons: Roman Vassilenko, Aibek Nurbalin

Tel.: (202) 232- 5488 ext. 104, 115

Fax: (202) 232- 5845