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| World Marketplace |
Central Casting
Richard Pomfret
03/01/2007
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Kazakhstan president and former Soviet strongman Nursultan Nazarbayev
seems determined to have the Western world hear more positive news about his
country. He would like diplomats and investors to know that Kazakhstan, the
world’s ninth-largest country in area, is no longer the Soviet backwater
portrayed by Hollywood mockumentaries.
TOP VIEW
Kazakhstan has emerged as the dominant economy among the five Central Asian republics, but investors must keep a watchful eye on how the country’s aggressive president, a former Soviet strongman, handles the power he is gaining
on the world stage. |
Nazarbayev has made state visits to
the White House and to Downing Street; President Bush has referred to Kazakhstan
as a “steadfast partner in the international war on terrorism.”
Nazarbayev’s efforts to portray the country as a nation of moderate Muslims
(which, for the most part, it is), and his budding friendships with both Bush
and Tony Blair have everything to do with an effort to pull away from the
influence of Russia and emerge as the dominant player in the resource-rich part
of Central Asia that was once part of the Soviet Union. The region is now a
strategic neighbor of Russia, China, Afghanistan, Iran and Pakistan.
Oil has
made Kazakhstan the most affluent nation in the area. The U.S. State Department
forecasts that it will be among the world’s top 10 crude producers by 2015;
Nazarbayev ambitiously predicts it will be among the top five by 2011. This
is a country that has seen its economy grow by roughly 75 percent over the past
seven years; granted, seven years ago, its economy showed negative growth. Now
the nation seems to be stretching its legs and preparing to step onto the global
playing field. Representative of its long-range goals, city fathers in
Kazakhstan’s former capital, Almaty, recently announced plans to bid for the
2018 Winter Olympic Games. The city earlier made a bid to host the 2014 Winter
Olympics, but the seemingly farfetched proposal failed in early rounds of the
selection process. However, Almaty did win the contest to host the Winter Asian
Games in 2011. Kazakhstan now hopes to prove its capacity to accommodate both
the Olympics and a general influx of tourists. The national Ministry of Tourism,
established in 2006, plans to offer tax incentives to investors in this
sector.
When Graft Was King
Investors should keep an eye on two significant events
this year that will do more to color the world’s perception of Kazakhstan as the
regional power, and, by extension, the region at large, as a place to do
business than anything else since the country declared independence on December
16, 1991.
| Engineers have discovered the Kashagan oilfield in the northern Caspian Sea, the
world’s largest new find in the past 30 years. |
The first is the trial of James Giffen, the culmination of the
largest foreign bribery case ever brought against a U.S. citizen. Giffen, a
lawyer and investment banker, was a major power broker in the 1990s, when he
served as an advisor to Nazarbayev. At one time, U.S.-based oil companies could
not get into Kazakhstan without going through him. Giffen currently stands
accused by U.S. authorities of violating the Foreign Corrupt Practices Act for
allegedly moving more than $78 million in bribes from Amoco, Mobil, Phillips
Petroleum and Texaco to Nazarbayev and the head of the oil ministry in exchange
for rights to develop oil fields. The trial in federal court in New York has
been postponed several times, but most recently was scheduled to begin in
February (after this issue of Worth went to press).
Giffen’s lawyers plan to
mount a “public authority” defense, claiming that the CIA, State Department and
the White House sent him to Kazakhstan on intelligence missions, encouraging him
to establish close financial ties with Kazakh officials. Giffen’s friend, Bryan
Williams, a Mobil vice president before the merger with Exxon, was sentenced in
2003 to 46 months in prison on a charge of tax evasion that stems from not
declaring a $7 million payment he received from Giffen for allegedly brokering
various Kazakh oil deals.
The case would be just another bribery trial
except that it names Nazarbayev as an unindicted coconspirator. Though few
observers expect the president to actually be prosecuted, the incident serves as
a dramatic reminder of the country’s recent past, particularly the time period
between the mid-1990s to 2000, when power brokers in Kazakhstan essentially saw
foreigners and their companies as golden geese to exploit.
Today, investors
will find a country that is a safer place to do business than it was just five
years ago, mainly due to the fact that the government has stopped capriciously
reneging on deals. Bribery appears less blatant than it did a few years ago, and
Kazakhstan fares better than its Central Asian neighbors on Transparency International’s 2005 list of most corrupt nations.
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