ALMATY, Oct 4 (THE GLOBE)
�Lord, how often shall my brother sin against me and I forgive him? Up to seven times?�
Jesus said to him, �I do not say to you, up to seven times, but up to seventy times seven.
The Gospel by Matthew. 18 : 21.
We beg our readers� pardon, but we cannot help thinking (even if it is too late) about the dismissal of the President of NOC KazakhOil Nurlan Kapparov. While the official wording was Spartan-like strict and brief (i.e. laconic one): �due to exceeding his authority while settling strategically important issues of the oil and gas industry��, there were a lot of comments and guesses by both Kazakhstan and world�s mass media. Vanity is a deadly sin, and our newspaper is also sinful�
Well, the following are the Seven Deadly Sings of the President of KazakhOil, as we understand:
1) Opposition to the sale of the share of Tengiz
In most mass media (as well as in Mr. Kapparov�s own statements) this reason is supposed to be the main one, sometimes - the only one. We can hardly believe this, at least because this does not comply with the wording of the dismissal: it is not clear what exceeding of authority it was (see above). Nevertheless, let�s discuss this sin first.
Actually, now everybody, who is not lazy, is in opposition to the sale of the state share in Tengiz project. Besides, we know that at the present time the opposition of Mr. Kapparov was constructive enough and included some counteroffers, which allowed to avoid the non-returned transfer of these assets (e.g. transfer of the Kazakhstan share to the trust management for a limited period of time, usage of the share of Tengiz belonging to Kazakhstan as a pledge to receive a credit). (Mr. Kapparov reasonably preferred not to comment these ideas.) Maybe this was the problem. The search for a reasonable alternative (though we do not affirm that the search was successful) was of a greater danger for the initiators of the sale idea, than populist announcements of deputies and the press.
By the way, this issue is still unsettled, maybe it will �disperse� at all. Anyhow,the placement of Eurobonds may cover some holes, and actual approval of the sequestrated budget will soften the sharpness of the immediate requirement in cash money. We do not want to gloat over, but it seems that Mr. Kapparov who as a boxer is obviously weaker than many other persons, was just �open� for a fine fraudulent blow.
2) Trials to include Hurricane
into KazakhOil
As in many other situations, Mr. Kapparov perceived too literally some calls. In this case it was a call for a civilised de-privatisation and correction of mistakes of the previous sale of the state enterprises in Kazakhstan to unqualified investors. Trying to return the Hurricane deposit to the state lap (i.e. to KazakhOil) and to prevent the appearance of a non-state monopolist in the southern Kazakhstan, he started direct negotiations with shareholders of the Canadian company and he was understood. Many common Canadian shareholders of Hurricane are completely ignorant (though they do not want to know) of ruses of the Kazakhstan economy and policy. Everything, which they were interested in, was to return at least a part of their money invested to the company. In general, the compromise was possible. However, it seems that the idea of the merge of Hurricane and Shymkent Oil-Processing Plant (SOPP) under the aegis of KazCommertsbank had stronger supporters. By the way, at the present time this merge is still under threat, though due to different reasons (practically, SOPP has achieved its purpose on monopolisation of the market). As a last resort, �status-quo� will be fixed, this, probably, is not too bad for many people, despite calls for changes, as well as a loud criticism of the activity of Hurricane and monopolistic aspirations of SOPP.
3) Weakening closeness of KazakhOil�s financial activity
The whole range of events were caused (or might be caused) by this deadly sin. Re-registration of the Uzen credit in the amount of US$ 109 million to KazakhOil was supposed to toughen the control for the activity and financial streams of the company from external creditors. Such a situation might have been observed also while utilisation of the Japan credit for reconstruction of the Atyrau OPP. The audit of the company, which was conducted with the participation of external experts also could have revealed something in accountant records of KazakhOil, which is forbidden to know for not only �outside�, but also for �inside� creditors and partners. By the way, one of the practical consequences of allotment of these credits could have been juridical difficulties while selling and privatising assets of KazakhOil, including Tengiz. Creditors give money to a concrete enterprise taking into consideration its funds and potential to repay the debt. Deprivation of an enterprise of its main property (according to evaluations, 25% share of Kazakhstan in Tengiz forms 80% of the real capitalisation of KazakhOil) may raise pretences of existing creditors who take care of their money. Of course, after this it will be possible to forget about the credit rating of KazakhOil and its chances to get loans in the external financial market in future.
Principally, the important decision on the company�s shift to a more open regime of work is a difficult one everywhere in the post-soviet space. For example, in Russia after fast re-distribution of the state property many oil companies wishing to manage international recognition and access to the world financial market, agreed to introduce a highly-transparency and to make their accountant systems compliant with international standards (e.g. LUKoil). Other companies, for example Sidanko, delay this process. Characteristically, many national oil companies of �the third world� and Arabian East, e.g. Petronas (Malaysia) or SONATRAK (Algeria) also do not strive for especial openness. We do not mean corruption in these structures at all; we just mention the fact. By the way, a trial to use the Norwegian ONC �StatOil� which completely complies with the international financial standards (this company is, most probably, an exception among NOCs) as a model for the NOC KazakhOil, played a bad trick with Kapparov. They should have chosen something easier�
4) Legislative stipulation of KazakhOil as a state oil company with 100% state shareholding, which is not a subject to privatisation, in the Law on Oil
There are other persons for sure, for whom the Russian model is closer, as in Russia a significant part of the state shareholding in main enterprises of the oil and gas industry (LUKoil, Gasprom, etc.) have been fast and imperceptibly transferred to private hands (in most cases, the hands were hardly identified). It seems that their opinion was not taken into consideration�
5) Too good (and independent) relations with Russia
Mr. Kapparov was successful enough in the practical realisation of the co-operation with Russian oil companies. Export quotes of transportation of Kazakhstan oil via Russia were significantly increased, good contacts with the Minister of the Russian Ministry of Fuel and Energy Kalyuzhin (and before - with Generalov) were established, new projects on co-operation with LUKoil were being discussed, etc. It seems that this began to trouble American oil companies and some definite circles of the Kazakhstan government, which are traditionally lobbying their interests. Though we do not affirm that Mr. Kapparov was right doing this. Recent abrupt changes in the administration of the Russian oil transport company �Transneft� may reveal all fragility of agreements with the Northern neighbour.
6) Absence of professionalism
In general, this has been never considered a sin in the post-soviet space. Rather just the opposite, the absence of stereotypes of old industrialists (like a sacred belief in the State financing of the industry and paternalistic traditions in respect to tens of non-profile enterprises which were a heavy burden for oil-processing plants), combined with financial management skills are being especially appreciated at the present time. Due to these features Mr. Kapparov and a number of other young heads were appointed to the state post a half and a year ago. Now it seems that the dismissal of Kapparov (as Kaliev�s dismissal before) is another strongest strike against �mlado-Turks�, young managers, who fearlessly rushed from successful trade-purchase enterprises to the big economy (and to the policy, non-depending whether they wanted this or not). Their number is decreasing, and the remained ones have moderated their ambitions and �plans-gromadie� fast. It seems that (as in Russia with Kirienko, Nemtsov, etc.) �a kinder-surprise� was not successful in Kazakhstan.
7) Too good is also bad
Quite good indices of KazakhOil (deductions to the budget, repayment of due salary and the following increase of salaries; the recommence of independent prospecting works in Emba region, peaceful integration of the Atyrau OPP, support of social programs, etc.) in the extremely difficult situation in the world oil market while a unprecedented fall of oil prices at the edge of 1998-1999 seemed quite provocative. Indeed, no miracles happen, and these results were achieved owing to straightening some round ways and more purposeful utilisation of means. However, things, which could be tolerant during the crisis, in better period were not satisfactory. It may be said that the increase of oil prices predetermined Kapparov�s fate. Having somehow realised managerial tasks during the crisis, he �had done his work.� Then other people, who know better how they can distribute super-profits of oil-miners, will come. The degree of attractiveness of the leading post of the oil company (not only of KazakhOil) is directly depending on oil prices. Once the price exceed US$ 20 per barrel, Kapparove�s fate was predetermined. Though, it might happen that the increase of oil prices will play a bad trick with Kazakhstan, having created an illusion of prosperity in the oil industry and delayed serious changes till �better times.�
In conclusion, we want to assure our respectful readers once again that we do not support any side at all. Moreover, most sins of Mr. Kapparov are obvious and unprofessional. At last, the economy of every country is the economy of possible things� It was impossible to imagine anything more absurd than the Kazakhstan �StatOil� (sin # 3).
At the same time, the principal question, whether the National Oil Company is necessary for Kazakhstan and if �yes�, what is required for this, is still urgent. Is it required for a long strategic state participation and control for the oil industry, as it is often being announced? Maybe, it is necessary just as a transitional auxiliary structure on the way to the final distribution of the main oil reserves of Kazakhstan between two categories of proprietors (big trans-national companies and some Kazakhstan trade-financial clans, which often compete with each other and sometimes use different unknown in the world oil market companies as a screen and support groups. It seems that Mr. Kapparov�s main �sin 491� was in his wrong answer to this question, as this answer filled the god�s cup of tolerance (7 x 7 = 490, see the epigraph). Well, he is a young man, and there will be a lot of crisis in the future. Anyhow, Mr. Kapparov�s portrait is still decorating the first page of the web-site of the NOC �KazakhOil� in the world-wide Internet network. Maybe, it will be useful for anything else? THE GLOBE will keep you informed�
All Over the Globe is published by IPA House.
© 1998 IPA House. All Rights Reserved.