Putin's oil-rich ally knows which side his blini is buttered

The Irish Times


By Jason Corcoran

Letter from Kazakhstan: A billboard-sized photograph of Russian President Vladimir Putin shaking hands with his Kazakh counterpart, President Nursultan Nazarbayev, looms large over the Caspian Sea resort of Kenderli.

Nazarbayev entertained the Russian leader at his summer retreat on May 12th, in between trilateral energy talks involving their countries and the new Turkmenistan leader, President Gurbanguly Berdymukhammedov. Their get-together coincided with a summit taking place in Poland aimed at reducing energy dependence on Russia.

The three leaders agreed
to construct a pipeline to transport Turkmen natural gas to Russia along the Caspian coastline via Kazakhstan, a deal analysts say eclipses EU plans for a trans-Caspian pipeline bypassing Russia.

Nazarbayev was originally expected to attend the summit in Krakow, but pulled out of it at short notice to host Putin, which makes the caption under the giant image at Kendeli rather apt: "Always together, always forward."

Putin's policy of cultivating Russian oil and gas co-operation in central Asia has been most successful in Kazakhstan, where Russian companies are engaged in key oilfield and pipeline projects.

Kazakhstan's trade with Russia tripled over the past five years to $9 billion last year and Nazarbyev clearly knows which side his blini is buttered.

His summer getaway in the Mangistau region of Kazakhstan is surprisingly modest by
authoritarian leaders' standards but every effort was made to accommodate Putin. A guide at the resort let slip that management had illegally hacked into a satellite network so Putin could watch Russia take on Finland in the ice hockey world championships.

Stepping barefoot, as required, inside Nazarbyev's azure blue and yellow-painted
residence, you are struck by its ordinariness.

Granted, the view of the Caspian Sea from the balcony is breathtaking and guests would be impressed by the indoor pool, gymnasium, sauna, steam room and billiards room in the basement; yet the rooms are decorated almost tastefully without any gold-plated bathroom fittings or flattering portraits venerating Nazarbyev.

Black gold has transformed the world's ninth largest country by landmass. Billions of dollars are pouring into the country's coffers from Caspian oil and gas projects and the effect can be seen 210km down the coast at the seaport
Aktau. A legacy of the Soviet era, Aktau was built in the 1960s to produce uranium and plutonium for the military and the city was a secret and closed to outsiders until the demise of the USSR.

Today, the chemical factories are closed and the nuclear power station no longer functions. The port is the centre for development of the offshore oil industry, and a transport hub for ships crisscrossing the Caspian from Azerbaijan,
Iran and Russia, exporting oil and wheat, and importing cars and machinery for the oilfields.

Downtown, cranes intersect the skyline and the old Soviet apartment blocks have been spruced up and daubed with bright blue paint.

Russians make up about 35 per cent of Kazakhstan's population and monuments to Soviet
war dead are more fondly preserved than in other parts of the former USSR. A statue of a Russian jet fighter, frozen in mid-take-off, stands in front of the five-star Renaissance hotel and there is a whitewashed war memorial which resembles a missile silo opening.

Kazakhstan's wealth is controlled by relatives, friends and associates of Nazarbayev, who doesn't have a fantastic track record of managing the
country's natural resources. His son-in-law, Timur Kulibayev, is a senior executive of the Kazmunaigas parent company.

US banker James Giffin was indicted in 2003 for paying bribes to two high Kazakh officials in exchange for the signing of huge contracts for the sale of Kazakh oil and natural gas to Mobil Oil, Amoco, Texaco and Phillips Petroleum.

Nazarbayev has shown no sign of relinquishing the grip he has established in a series of elections criticised as seriously flawed by democracy watchdogs. Last week, he approved constitutional amendments allowing him to stay in office for
life, a move the opposition condemned as an attempt to establish a personality cult.

Yet western oil executives argue Nazarbayev has taken a leaf out of Putin's book by trying to stamp out corruption and improve the welfare and living standards of his people.

Eddie Walshe, an Irish oil veteran who worked for 35 years in oil and gas at BP and British Gas, was last year appointed as one of three independent non-executive directors to the board of Kazmunaigas before its listing on the London
Stock Exchange. "I was here with British Gas in the 1990s when things were fairly lively. They have a far way to go but the transformation today is unbelievable," said Walshe.