KAZAKH SCANDALS THROW SPOTLIGHT ON DEMOCRACY
4/28/02
A Eurasianet Partner Post from Transitions Online

Allegations of corruption at all levels dominated the Kazakh news this week. In a scandal that raises numerous questions about the role of U.S. oil companies in the region, and how Washington’s interests in oil and democratization co-exist, the governor of the Kazakh National Bank came out on 17 April in support of President Nursultan Nazarbaev's decision to divert more than $1 billion into a secret national oil fund.

That same day, the country’s interior minister criticized his own ministry’s efforts to stamp out corruption, saying that it was chasing little fish. He went on to say that corruption is endemic within the police; 541 policemen were sacked for abuse of office in 2001. His statements came just days after the former Kazakh transportation minister, Ablay Myrzakhmetov, announced plans to take the Prosecutor General's Office to court on corruption charges.

Indeed, corruption has been the keyword in Kazakhstan over the past month. In late March, the government said suspicion of embezzlement was the reason it had tried to arrest two leading members of the opposition. Mukhtar Abliyazov was seized on 27 March, and Ghalymzhan Zhaqiyanov only managed to evade police by entering the French embassy in Almaty, the Kazakh capital, on 29 March.

Claiming the charges were trumped up, and being used to justify political repression, the opposition called a protest rally. The rally was to have been covered live by the independent television station, TAN TV, a station Abliyazov had helped set up. But before its cameras could roll, its offices were attacked by unidentified gunmen. On 28 March, the attackers opened fire, destroying broadcasting equipment.

Like Zhaqiyanov, Abliyazov was a founding member of the Democratic Choice for Kazakhstan (DVK), which was established last November. The attempt to arrest Zhaqiyanov came several days after his trip to Paris, where he visited Akezhan Kazhegeldin, the leader of a large Kazakh opposition movement, and four days after Kazhegeldin, a former prime minister, had issued a three-point plan to push through democratization in Kazakhstan. In September 2001, Kazhegeldin was sentenced in absentia to 10 years hard labor for corruption. The opposition said the trial was a farce.

On 16 April, at a forum of political parties, a representative of the Kazhegeldin movement, Forum of Democratic Forces (FDS), argued that the current crisis in Kazakhstan is part of a broader crisis in authority. Representatives of the government said it is part of the country's maturing political process.

On 29 March, President Nursultan Nazarbaev unveiled a plan to create a commission to oversee corruption cases.

But within days, the government found itself defending how it used oil revenues. One of the three priorities created by Kazhegeldin was the creation of a People’s Oil Fund that would be used to prevent the current leadership of Kazakhstan from siphoning off oil revenues. On 4 April, the relatively new prime minister, Imangali Tasmagambetov, admitted to parliament that the Kazakh authorities had created a secret fund in which to park revenues from the sale of a 20 percent stake in the Tengiz oilfield, and indicated that the president could have foreign bank accounts in his name. The National Oil Fund held $1 billion. [For More Information See the Eurasia Insight Archive].

Tasmagambetov tried to defend the fund (it had, he said, helped to keep Kazakhstan’s finances stable), and deflect accusations being hurled at Kazhegeldin, under whose premiership the fund was allegedly established.

On 17 April, the governor of the Kazakh National Bank, Grigorii Marchenko, insisted that the creation of a secret fund "was the right decision from the economic point of view," according to Interfax-Kazakhstan. However, why money allegedly used to pay off pension arrears and shore up the budget was transferred to a secret account in Switzerland is unclear. Some residual sums were then sent back to Kazakhstan into a fund managed by the central bank. Money was last returned to the central bank on 15 April. The Swiss authorities have frozen the bank accounts supposedly held by Nazarbaev. The president maintains, however, that he has no bank accounts abroad. Nonetheless, Eurasianet reports that he is trying to persuade the Swiss government to unfreeze the accounts.

Kazhegeldin called on international oil giants with interests in Kazakhstan to support the creation of a People’s Oil Fund. However, as From The Wilderness pointed out in an article called “The Elephant in the Living Room," U.S. oil giants are heavily implicated in the scandal over secret funds. The Tengiz oil field is now majority-owned by ExxonMobil and Chevron. Following an article by Seymour Hersh in the July 2001 issue of The New Yorker, ExxonMobil has been implicated by two grand juries in the United States over its dealings with Nazarbaev and alleged breaches of sanctions on Iran.

In the article, “The Price of Oil,” Hersh wrote, "Mobil participants in the Tengiz negotiations worried constantly about the possibility of payments going astray. [The Mobil executive] Don Voelte told me that the company was concerned that the purchase payments it was sending the Kazakh government via Swiss banks might be diverted for personal use by the Kazakh leaders."

Mobil also stands accused of swapping oil with Iran as a means of getting oil from the Tengiz field onto world markets in 1997. This would have contravened the 1996 Iran Trade Sanctions Act. Kazakhstan is currently working on building a pipeline that would lead westward and bypass Iran.

In July 2001, the U.S. government task force on energy issues, headed by Vice President Dick Cheney, urged its government agencies to “deepen their commercial dialogue” with Kazakhstan. On 27 February 2002, U.S. courts asked the U.S. Department of Energy to release the minutes of certain meetings. On 13 March, President George Bush refused to turn over the notes. This case, just like the Enron bankruptcy, raises tricky political questions for the Republican establishment about funds ExxonMobil donated to the party and its senior figures, including U.S. Attorney General John Ashcroft.

Compiled by TOL

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