Friday, September 15, 2006

Nazarbayev’s trip to the U.S.: Another Agenda? (15 days and counting)

President Nazarbayev's son-law and Chairman of KazMunaiGas, Timur Kulibayev

Nazarbayev’s trip to Washington in two weeks will have various agendas, and regardless of what the publicists of Sacha Baron Cohen try to suggest, the issue of Kazakhstan’s image in the upcoming “Borat” film is low on the list. As I posted yesterday, politics and respect are high on the list of topics that will likely come up, including President Nazarbayev’s hopes of getting U.S. support for Kazakhstan’s bid for the Presidency of the Organization for Security and Cooperation in Europe (OSCE). But politics and respect, of course, are not everything.

When China’s President Hu Jintao visited the U.S. in April, it was highly publicized that the Chinese envoy had chosen to start his trip with a visit to Bill Gates in the “House of Microsoft” long before he reached the White House of George Bush. While there are no rumors that Nazarbayev intends to visit the headquarters of Chevron or Halliburton before he steps into the White House, it has been noted that he will visit George Bush the elder in Kennebunkport, Maine after his meetings in the White House. While people close to ex-President Bush had said that this was merely an invitation from an old friend, it is not unlikely that issues related to the business of oil will also be discussed at the Bush retreat by the sea.

A major outstanding question, however, is to what extent the Kazakhstani elite will use its official visit to Washington to pursue business alliances with the U.S. When Nazarbayev visited Putin in Moscow with a large delegation earlier this year, Nazarbayev’s son-in-law and chairman of the state oil and gas company KazMunaiGas (KMG), Timur Kulibayev, was hand in hand with his father-in-law at the Kremlin. The presence of the representative of the Nazarbayev extended family who is most closely associated with the financial and business elite (as well as with the oil industry) at meetings in the Kremlin sent a clear sign about Kazakhstan’s interests in working with Russian businesses, and Lukoil in particular. It is unclear whether the Kazakh financial elite see U.S. businesses as presenting the same opportunities for partnerships. Kulibayev would not likely accompany Nazarbayev on the trip to DC since it would only raise more speculation about Nazarbayev’s desire to manage his succession through members of his own family (the Azeri example). Kulibayev’s representatives, however, could certainly be in the entourage that heads to Washington in the upcoming weeks. And, if they are, it would be a telling sign of the intentions of Kazakhstani businesses (and oil companies in particular) to work closely with counterparts in the U.S.

One reason that this could happen is that Kazakhstan is readying itself for a major public offering of its state oil and gas company, KazMunaiGas, of which Kulibayev is now chairman, on the London stock exchange. Rumors even suggest that the date of the IPO offering could come within a week of Nazarbayev’s arrival in the U.S. While there does not appear to be any need to attract new investors immediately to the KMG IPO (it is expected to be oversubscribed), a positive early showing of the stock would be yet another feather in the cap of Kazakhstan and President Nazarbayev. A good showing by KMG’s IPO could also send a message to Russia, which recently established an IPO of its state oil company, Rosneft, a venture of which many analysts are still skeptical. Incidentally, some of the criticism of the Rosneft IPO has related to its lack of strong established international investors. Some well established U.S. investors in the KMG IPO certainly would not hurt, and it would definitely be more important than achieving concessions on the new “Borat” film.


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