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Kazakhstan's Decision Makers - The Caspian Energy Hub - Anvar Saidenov.

The FT on Nov. 21, 2007, quoted the Chairman of the National Bank of Kazakhstan (central bank) Saidenov as announcing a $4 bn stabilisation fund to help the country's economy weather the credit squeeze stemming from the US sub-prime mortgage crisis. The fund, $1 bn of which was to be dispensed in 2007, will be available to commercial banks at favourable interest rates set by the government. It will focus on helping small- and medium-sized businesses and the construction and property sectors, where a prolonged recession could unleash popular discontent.

A liquidity shortage, accompanied by rising inflation and a sudden currency devaluation, had come as a shock after seven years of growth driven by rising oil prices. Saidenov said: "It is like balancing between three very shaky stools all directly and indirectly connected to one another". Construction had been hit particularly hard - companies in the sector were reducing investment after lending from over-leveraged Kazakh banks dried up. Property prices, which has risen 900% in big cities in the previous four years, had begun to fall in some areas. He said: "It is clearly a bubble and it has to burst but we are trying to control the way the burst happens".

Saidenov said state funds will aid the completion of some construction projects, although there will be no 100% bail-out of construction firms. Kazakh banks, facing $12 bn worth of international debt repayments in 2008, can turn to the government for short-term assistance in refinancing loans. Kazakhstan's state mortgage company is also prepared to buy the obligations from struggling banks.

Saidenov said: "The overall message to the banks is they should stand on their own feet. These are difficult times for them and next year (2008) will be difficult too". Kazakh banks were being encouraged to increase their capitalisation by divesting foreign assets and selling shares. Although bond markets will probably be closed to Kazakh banks for a year, some syndicated loans and bilateral deals were still forthcoming from foreign banks.

Arman Dunayev, CEO of the Agency for Regulation and Supervision of the Financial Market, said restrictions on foreign borrowing were to be tightened in January 2008. He said the credit squeeze would provide Kazakh banks with a valuable lesson in risk management, adding: "There have always been crises and always will be". The November 2007 acquisition mid-sized Kazakh bank ATF by Italian bank UniCredit increased public confidence in the banking sector.

Saidenov said the Kazakh currency tenge, which had fallen sharply in August amid a sudden exit of speculative foreign funds prompting the central bank to intervene, appeared to have stabilised. The sale of dollars by oil companies at end-2007 to pay taxes was to buoy the tenge.

Moukhtar Dzhakishev, president of state-owned nuclear power company KazAtomProm (KAP) in November 2007 said his firm had agreed to share its uranium resources with China in exchange for equity in Chinese nuclear power plants in a strategic deal which brought together the world's fastest growing uranium and nuclear power producers. He said: "We will swap shares in uranium production for shares in Chinese atomic facilities... This is the first time China has allowed any foreign company to become a shareholder in its atomic power...enterprises". China National Nuclear Corp and China Nuclear Guangdong Power Corp, China's leading nuclear power firms, would team up to take 49% in a uranium mining venture in Kazakhstan with Kazatomprom retaining 51%. In return, KAP was to take equity in Chinese nuclear fuel processing or electricity generation plants. The deal, a breakthrough for the secretive Chinese nuclear industry, highlighted China's aggressive campaign to Central Asian energy resources (see omt6KazkhExprt-Aug4-08).

Beijing plans to build 40 new nuclear power plants by 2020 to reduce dependence on polluting coal-fired generation. But its uranium reserves, including mines in Xinjiang province near the Kazakh frontier, are declining. Kazakhstan is to more than double its uranium output by 2010, overtaking Canada and Australia to become the world's biggest producer. Uranium prices have surged in the past three years spurred by a worldwide revival in interest in nuclear power as an alternative to high-cost oil. Foreign companies including Areva of France, Canada's Cameco and Japan's Sumitomo have entered uranium mining joint ventures with KAP - which operates a huge, Soviet-built nuclear fuel pellet plant in northern Kazakhstan - but wants to develop more advanced nuclear fuel assembly technology to add value to its uranium business. The company expects eventually to capture about a third of world demand for nuclear reactor fuel.

Dzhakishev said China would be obliged to process uranium produced at Kazakh mines in Kazakhstan and to allow KAP to use its nuclear fuel assembly plants. KAP bought 10% in the US nuclear technology company Westinghouse from Toshiba for $540m in 2007. The partnership mirrors the Chinese deal, by providing Westinghouse with a guaranteed source of uranium and KAP with access to fuel processing technology.

Dzhakishev said KAP's deal with China was "exclusive". China was attracted by the proximity of Kazakh uranium mines. Kazakhstan's "non-super power status" was another advantage, with Astana able to maintain a distance from any international controversy about the politically sensitive nuclear industry. Kazakhstan was a big nuclear weapons producer in the Soviet era, but surrendered its warheads after independence in 1991.

Danial Akhmetov, defence minister since early 2007 after he served as PM from June 2003, in 2006 came under criticism from President Nazarbayev for poor strategic planning, over-spending and other mistakes. He was linked to the country's largest industrial and financial firm, Eurasian Group, which controls much of the Kazakh metal and mining sectors. He was succeeded by Masimov (see down6KazWho-Aug4-08).

Akhmetov, 54, remains loyal to President Nazarbayev. Akhmetov's predecessor as PM was Imangali Tasmagambetov, who resigned on June 12, 2003, after a stand-off with parliament over land reform (see gmt6KazWho-Aug7-06).
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Publication:APS Review Gas Market Trends
Date:Aug 4, 2008
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