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Prodi juggles roles in Kazakhstan

October 5, 2007

By Guy Dinmore in Rome and Isabel Gorst in Astana

Published: October 5 2007

Romano Prodi, Italy’s prime minister, takes a 200-strong business delegation to Kazakhstan this weekend while facing the tricky task of lobbying for foreign investors without politicising the dispute over the development of the giant Kashagan oilfield by an Italian-led consortium.

Italian officials said on Thursday that Mr Prodi, joined by Emma Bonino, the international trade minister, would put a “strong focus” in their talks with President Nursultan Nazarbayev on Monday on new amendments to the natural resource law.
The amendments, which empower the government to annul or revise contracts damaging Kazakhstan’s economic security, were passed by the Kazakh parliament last week. But they still require the president’s signature to come into force. The timing of parliament’s move raised suspicions it was intended to put pressure on Italy’s Eni and its consortium partners while talks continue over renegotiating the terms of the Kashagan contract. That follows long delays and soaring costs in developing the world’s most expensive energy project.

The new law “could have a wider fall-out in terms of giving cause for concern to foreign investors at large”, even though it was restric ted to natural resources, Ms Bonino told the Financial Times. Italy is still evaluating its legal implications. Ms Bonino said Italy strongly supported Kazakhstan’s early accession to the World Trade Organisation and continuing European Union/Kazakh negotiations. But she reminded Kazakhstan that the WTO membership implied “a more instinctively multilateral approach when considering legislation of this kind”.

Eni, which is 30 per cent state-owned, is in the difficult position of wanting political support over the Caspian project while keeping negotiations limited to financing and management. Italian officials said Eni had not requested that Mr Prodi intervene in the negotiations, although he will visit the Kashagan field on Tuesday. Talks are to resume on Friday in the capital Astana with Eni and its consortium partners, including Shell, ExxonMobil, Conoco Phillips, Total and Inpex of Japan.

Kazakhstan is confident that investors will continue to beat a trail to its door.

Askar Balzhanov, the president of KazMunaigas Exploration and Production, a division of Kazakhstan’s state oil company, said the law would not diminish investor interest. “When Hugo Chávez forcibly buys up foreign oil company interests in Latin America it is all right; so why, when Kazakhstan introduces a civilised legal amendment, does everyone suddenly get worried? “I don’t think the investment climate in Kazakhstan will become less attractive,” he told the Financial Times.

Kazakhstan said this week that most of its complaints about environmental abuse at Kashagan had been settled. That removed an earlier threat by the ministry of ecology to halt work at the oilfield. Sauat Mynbayev, the oil and gas minister, told a conference in Almaty this week he hoped the dispute would be resolved without resort to legal action.

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