Kazakhstan in world news: november to december, 2007

ROME:
Associated Press, December 1, 2007

An international consortium led by Italy’s ENI SpA said Saturday it had signed an agreement with the Kazakh government to finalize a settlement by Dec. 20 over the development of the Kashagan oil field.
The two sides are in a dispute over the buildup of costs and delays in the startup and production at Kazakhstan’s largest field, which has an estimated 4.8 billion metric tons (5.3 billion U.S. tons) of oil.
In a statement, the consortium said it had signed a memorandum of understanding with the Kazakh government establishing the framework of a settlement agreement between the two sides, and set Dec. 20 as the deadline to finalize the terms.
The Kashagan field, discovered in 2000, lies beneath the northern part of the Caspian Sea.
The Kashagan project is scheduled to start commercial production in 2010, delayed from an original 2005 date. Kazakh officials say Kashagan’s total costs have jumped to US$136 billion (92 billion) from an initial estimate of US$57 billion (38.6 billion).
Eni estimates Kashagan, one of the biggest oil discoveries of the past 30 years, will produce 1.5 million barrels of oil a day at its peak output.
The Eni-led consortium also includes U.S.-based Exxon Mobil Corp. and ConocoPhillips, Royal Dutch Shell PLC, France’s Total SA and Japan’s Inpex Corp.

ALMATY, Kazakhstan:
New York Times, October 26, 2007

Opposition Web sites in Kazakhstan were temporarily shut down this week, organizers said, for publishing documents relating to the public battle between the country’s authoritarian leader and his estranged former son-in-law.
The Internet blocking, which lasted three days, was a fresh turn in a bitter and high-stakes conflict between President Nursultan Nazarbayev and Rakhat Aliyev, who until this summer was married to the president’s eldest daughter, Dariga. A criminal trial against Aliyev on charges of abduction and racketeering is expected to begin within days.
Aliyev vigorously denies all the accusations. In interviews this year he has said they were politically contrived and insisted that the principal criminal ring in Kazakhstan was run by Nazarbayev, the former Communist official who portrays himself as a democratic leader but has cleared a constitutional path to become his country’s president for life.
Sergei Duvanov, a well-known journalist here, said access to his Web site, www.inkar.info, and three other sites was denied after they provided transcripts and recordings of what were described as top officials’ telephone conversations about the Aliyev case. The conversations were posted in public chat rooms, presumably by Aliyev or people close to him, they said.
«Rakhat Aliyev is the personal enemy of Nursultan Nazarbayev, and any organization that is somehow suspected of working with Rakhat is now considered Nazarbayev’s enemy,» Duvanov said.
Government officials deny they had any role in the Web site blocking.
Kazakhstan possesses the largest oil reserves in the Caspian basin and hopes to export just under 3 million barrels of crude per day by 2015. It is striving, with the aid of Western public relations firms, to present the image of a business-friendly, West-leaning democracy.
Yet, its critics describe it as an ordinary kleptocracy.
To further burnish the country’s image, the leadership has lobbied intensively to receive in 2009 the rotating chairmanship of the Organization for Security and Cooperation in Europe, a democracy and human rights group that, among other duties, monitors elections in the former Soviet sphere.
The group has never found a Kazakh election to be free and fair, and Kazakhstan, even as it lobbies to be viewed as a democracy, has co-signed a Russian proposal that would sharply curtail the election observers’ activities.
Aliyev was charged in May, while he was still serving as ambassador to Austria, but Austrian officials refused to extradite him to Kazakhstan, saying that he would not receive a fair trial.
Now a free man, but unable to stay in one location for an extended period for security reasons, Aliyev said in an interview last week in Europe that his goal was to expose his former father-in-law and «show Kazakhstan for the corrupt, centralized state that it is.»
«I want to work inside and outside of Kazakhstan,» he said. «The international community should know the real situation and take from Nazarbayev his mask.»
He also claimed that the Kazakh authorities were harassing his family and close associates. The police searched his father’s home, producing about a dozen unregistered rifles and pistols, along with bullets. Aliyev said that the guns were gifts — one from Nazarbayev himself — and that the bullets were planted.

BEREKET, Turkmenistan:
Associated Press, December 1, 2007

Turkmenistan formally opened construction Saturday on a north-south railroad from the border with Kazakhstan to Iran, a project seen as an economic boom for the oil- and gas-rich Caspian Sea region.
President Gurbanguli Berdymukhamedov ceremonially began the construction by laying a section of gilded rail in the northwestern city of Bereket.
The 700-kilometer (420-mile) line will improve Turkmenistan’s connections with Russia via Kazakhstan and to the Persian Gulf coast via Iran.

Kazakhstan seeks settlement on oil field delay
The New York Times December 7, 2007

By David L. Stern Published:
December 7, 2007
ALMATY, Kazakhstan:

Kazakhstan wants either to raise its stake or receive compensation for cost overruns and delays in the Kashagan offshore field, the world’s largest oil find in more than three decades, the Kazakh president, Nursultan Nazarbayev, said Friday.
Nazarbayev, speaking after a regular meeting with foreign investors in the capital, Astana, said he was not seeking to replace Eni of Italy as project operator. That deflated speculation that Kazakhstan wanted the leading role for its own state company, KazMunaiGaz, which is also a consortium member, or to assign it to another company, possibly ExxonMobil.
«There are different ways» of settling the matter, Nazarbayev said, according to Reuters. «Either paying the sum we have set or Kazakhstan raises its participation. There is no discussion about changing the operator.»
Nazarbayev did not state the sum of money.
The Kazakh president struck a conciliatory note, in a possible attempt to dispel fears of that his country was exhibiting more resource nationalism. «Our government is holding talks with everyone to achieve a solution and come to an agreement peacefully,» Nazarbayev said, according to Reuters. «We are not talking about abandoning the contract.»
Information from the talks has dribbled out, mostly from Kazakh officials. Consortium members, for their part, have declined to discuss any details publicly.
The talks have been extended twice and are now in their fifth month. A new deadline to resolve the issue has been set for Dec. 20.
Kazakh authorities raised objections in July after Kashagan’s start-up expenses and overall costs nearly doubled, from $57 billion to a reported $137 billion, and the date for first production was pushed back from 2005 to 2010. Because of the overruns and delays, officials said, the government would have to postpone plans for large development projects and expanding the country’s energy sector.
The Kashagan consortium also includes Royal Dutch Shell, ConocoPhillips, Total of France and Inpex Holdings of Japan. With some 13 billion barrels of estimated recoverable reserves, it is crucial to the West’s aspiration to develop oil suppliers outside the Organization of Petroleum Exporting Countries.
Kazakh authorities initially suspended the project on environmental grounds over the summer. Subsequently, they threatened at different points to fine the consortium $10 billion dollars, replace Eni as operator, or force Eni to share operator duties with KazMunaiGaz, or KMG.
This last week, Kazakh officials announced that all consortium members except ExxonMobil had agreed to reduce their own stake in order to raise KMG’s 8.3 percent share to equal the 18.52 percent of the main consortium partners — Eni, ExxonMobil, Shell and Total. Now, apparently, that is just one of the options.
Consortium members now say privately that they are dissatisfied with Eni’s management, and that they feel the Italian oil multinational was overly optimistic in its cost and development estimates.
In the company’s defense, Eni officials and analysts say that historically high prices for oil have driven up development costs by increasing the demand for support contractors.
The Kashagan field is also considered one of the world’s most logistically and environmentally challenging projects, as it is located in a remote, shallow-water corner of the Caspian Sea, and contains high amounts of hydrogen sulfide, a deadly gas.

China ascendant in new ‘Great Game’ over Central Asian riches
The Associated Press
Published:
December 15, 2007
KHORGOS, Kazakhstan:

The driver of the 18-wheel tractor-trailer from China idling at the Kazakhstan-China border said apples were the cargo he brought to Almaty, Kazakhstan’s booming commercial center.
For Kazakhs, there’s a tart irony in the shipment.
Almaty’s region is where the first apple trees were found and the first apple orchards planted. The city was a center of the Soviet Union’s s fruit industry. Its very name means «Father of Apples.»
In the past few years, Chinese fruit, vegetables, TV sets, T-shirts and tires have flooded markets along the old Silk Road in former Soviet Central Asia. Each day, all along the Chinese border, hundreds of tractor-trailers rattle west.
These goods are the most visible sign of Beijing’s growing power here as China, Russia, the United States and others compete for financial and strategic advantage on the borders of some of the world’s most turbulent countries — Iran, Afghanistan and Pakistan.
It’s a struggle in which China seems to be gaining the upper hand.
At stake are oil, hydropower sources, strategic metals, pipelines, transit routes and access to markets. The chief prize is energy supplies: China needs them, Russia wants to control their distribution, and Western powers want to ensure they are not monopolized by Moscow or Beijing.
Nowhere, perhaps, is China’s presence more starkly evident than at Khorgos, straddling the Kazakh-China border.
On the Kazakh side sits a sleepy village, a mosque and arid steppes where shepherds ride horseback. On the Chinese side sprawls a city, its skyline punctuated by two construction cranes, the skeletons of several large buildings and a massive white arch topped by two scarlet Chinese flags.
Talipzhan Suleimanov, a captain in the Kazakh border service in Khorgos, stood outside his ramshackle post and pointed at the gleaming Chinese city across a dry riverbed.
«This looks like the U.S.-Mexican border,» he said. «We are the Mexicans, because the Chinese are so much more advanced.»
Above all, Moscow wants to preserve its monopoly on distributing Central Asian gas and its major role in other energy sectors. To this end, President Vladimir Putin proposed at an October regional summit in Tehran that all the Caspian Sea states have a veto on any new pipelines crossing the sea bed — apparently so Moscow can block plans to connect Kazakhstan’s and Turkmenistan’s rich oil and gas fields to the west, bypassing Russia.
But Moscow’s dominance of the region’s energy reserves is eroding. Despite Russian pressure, both Kazakhstan and Turkmenistan have welcomed discussion of a trans-Caspian pipeline — and Putin’s proposal was met with silence.
Twice in the past two years, Turkmenistan has signed contracts to ship natural gas west through Russian pipelines — only to turn around a month later and, in effect, promise to ship the same gas east to China.
Beijing is playing a subtler game. It is a customer, not a competitor, for Central Asia’s hydrocarbons and other natural resources. It is playing offense not defense, buying oil companies and expanding its access to Middle Eastern gas and oil through a network of new highways, railroads and pipelines.
In the 1990s, China did relatively little trade with Kazakhstan — Central Asia’s economic motor, an oil- and gas-rich nation of 15.2 million larger than Western Europe. But by 2006, China ranked third behind Germany and Russia in Kazakhstan’s $35.6 billion export market and second after Russia in the nation’s $22 billion import market.
In Khorgos, trucks leave China packed and typically return empty. The road to the border bears the scars of this one-way trade. The lane leading away from China is deeply rutted, the one leading back is smoothly paved.
In 2003, Beijing predicted a 30- to 50-fold increase in its trade with Central Asia within a decade.
China’s growing clout makes many Central Asians anxious.
No one expects China to try to conquer Central Asia by military might. But some fear China may transform these countries into «vassal states» with little power to resist Beijing in conflicts over trade or foreign policy.
The state-owned China National Petroleum Company bought PetroKazakhstan in 2005 for $4.2 billion, then China’s biggest foreign acquisition. In July 2006, the CNPC and Kazakhstan’s Kazmunaigaz completed a $700 million, 597-mile oil pipeline across Kazakhstan to Alashankou in northwest China.
The pipeline, designed to supply up to 15 per cent of China’s oil needs, will serve the major new Chinese refinery in Karamay, to open in 2008. By some estimates, one-sixth of Kazakhstan’s oil production will someday be pumped to China.
«Our industrial production has been going down for years because of the cheap Chinese goods,» said Konstantin Syroezhkin of the Kazakh Center for China Studies. «China is not interested in development of our industries. China has already turned us into an ideal consumer.»
«Economically, China has conquered all markets, but our mentality remains Soviet and we look at Russia for culture,» said Zhukova, the Russian in Kazakhstan whose ancestors helped found Almaty in the 19th century.
Central Asian leaders say that in today’s Great Game, the challenge for them is the same as in the past — to benefit from the competition while ensuring none of the players becomes dominant.

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