Mr James Dimon
JPMorgan Chase Chairman and Chief Executive Officer
270 Park Avenue
New York City, United States
Mr Urs Rohner
Credit Suisse Group AG Chairman of the Board of Directors
Mr John C. Dugan
Chairman 388–390 Greenwich St.
New York City, United States
Mr Lloyd Blankfein Goldman Sachs Senior Chairman 200 West Street, Manhattan, New York City, United States
Mr Andrey L. Kostin
JSC VTB Bank
President and Chairman of the Management Board
43, ul. Vorontsovskaya, Moscow, Russia
Mr Axel A. Weber UBS Group AG Chairman Bahnhofstrasse 45 Zürich, Switzerland
Mr Bennett Astana International Exchange
Chief Executive Officer 55/19 Mangilik El st., block C 3.4. Astana, Kazakhstan
Mr David Schwimmer London Stock Exchange Group
Chief Executive Officer
10 Paternoster Square
London EC4M 7LS
Mrs Adena T. Friedman
President and CEO
One Liberty Plaza, 165 Broadway
New York City, United States
Charles LI Xiaojia HKEX Group
Executive Director, Chief Executive Two Exchange Square, 8 Connaught Place, Central, Hong Kong
Date: 22nd of May 2019
Dear Sir or Madam,
On April 30, 2019, the Moscow newspaper Kommersant published an interview with Mr Almasadam Satkaliyev, Managing Director of the Kazakh state fund Samruk-Kazyna. In the interview, Satkaliyev stated that the companies which you manage intend to act as consultants or participate in the forthcoming privatisation of Kazakh national companies belonging to the Samruk-Kazyna fund.
We consider it our duty to warn you and your clients about the huge financial and political risks to your companies associated with such an undertaking. The future governments and legislators of Kazakhstan, elected in free and fair elections, will not guarantee that contracts signed with the corrupt, authoritarian regime of Nursultan Nazarbayev’s appointees will be honoured.
Over the course of three decades, Kazakhstan’s economy has been plundered by members of Nazarbayev’s family, the oligarchs close to them and government officials. International corruption scandals have been ongoing for decades. According to independent foreign experts, the illegal removal of capital from Kazakhstan over the past 15 years has exceeded USD 160 billion.
Nazarbayev, now retired, hopes to exploit the political weakness of the current President Kassym-Jomart Tokayev – whom Nazarbayev himself appointed – to hand over state assets in mining, oil production, telecommunications, energy and transport to foreign investors. With the help of privatisation, any traces of criminal activity in the management of national companies and the enrichment of government officials are to be covered up.
For many years, these assets have been brutally exploited by management companies appointed to handle the country’s natural wealth. An independent audit will reveal huge wastage, the depletion of productive assets and secret transfers to foreign accounts for the purpose of embezzlement.
To give an example, international investigative journalists found more than USD 400 million in a single bank account belonging to Sauat Mynbayev, the former Minister of Oil and Natural Resources, Minister of Finance and Chairman of the Board of Directors of the national oil company KazMunaiGas. Investors planning to participate in the privatisation of companies including KazMunaiGas will have to weigh up with
the utmost care the legal and reputational risks associated with holding any shares in the company.
If your clients participate in the sale of assets belonging to the Samruk-Kazyna fund, they will acquire “mandatory business partners” – the relatives of Nazarbayev and those close to him, who for years have been stealing from these enterprises and the state treasury, accumulating funds for themselves in foreign banks. New investors will be forced to pay bribes, sign contracts with contractors at inflated prices and go along with forged and false declarations made under oath, in so doing helping the criminals to launder their proceeds.
The Kazakhgate scandal, in which US oil companies were forced to pay bribes of at least USD 140 million to President Nazarbayev and his Prime Minister Nurlan Balgimbayev, is well known. The Swiss authorities froze the funds in the bank accounts of companies belonging to Nazarbayev and Balgimbayev and donated the money to charity. The criminal trial, held in the Court for the Southern District of New York, resulted in a prison sentence and a fine for Mobil Vice-President Bryan Williams III.
The Swiss corporation Glencore was twice forced to pay bribes totalling more than USD 300 million in order to become main shareholder of the mining company Kazzinc. Glencore also had to manipulate prices in transactions with a company belonging to Bulat Utemuratov, who for many years managed the financial affairs of Nazarbayev.
These crimes will without doubt be investigated by the freely elected parliament of post-Nazarbayev Kazakhstan. Not only Kazakh citizens will be held accountable, but also Glencore, which sought to secure non-market advantages over other global zinc producers in this manner.
Similarly, the Swedish-Finnish telecommunications group Telia Sonera will be held accountable for the hundreds of millions of dollars in bribes given subtly to President Nazarbayev’s son-in-law Timur Kulibayev and the former Prime Minister Karim Massimov. The latter now heads the KNB (political police), which breaks up demonstrations, arrests politicians and blocks the Internet in Kazakhstan.
Telia Sonera is listed on the New York Stock Exchange, so the investigation into this case is being conducted by the US authorities. The company has already paid the US authorities roughly one billion dollars in fines for involvement in similar corruption cases in Uzbekistan, where the recipient of the bribe was not the son-in-law but the daughter of Uzbek President Karimov. The change of power in Tashkent made it possible for the criminal investigation and the arrest of Karimov’s daughter to take place. There is no doubt that the change of power in Astana will have the same consequences.
The process of political transformation in Kazakhstan will result in any dubious investment agreements being annulled. In international arbitration, Kazakhstan’s claims will be recognized as legitimate in the case of transactions where bribery of government officials is found to have taken place.
Consider, if you will, the unfortunate experience of ENRC and Kazakhmys when they were listed on the London Stock Exchange. Both companies left the stock exchange, leaving good-faith investors with nothing but disappointment.
Both Kazakh national companies failed to meet the criteria of transparency and efficiency set by the stock exchange. This was because the foreign investors in ENRC and Kazakhmys accepted Nazarbayev himself and his associates as secret partners. The Kazakh elite satisfied their insatiable appetites at the expense of the shareholders.
Until Nazarbayev himself, his family and his oligarchs put a safe distance between themselves and state property, we would not advise anyone to invest in these assets.
Similarly, the real story of Kazatomprom’s transactions with Russian, Canadian and Chinese companies should be studied carefully. Under the cover of complete secrecy, it was not the uranium that was enriched so much as the company’s top managers and “shadow” owners – above all, the former director of Kazatomprom, the former Energy Minister Vladimir Shkolnik and his family. Investigative journalists from international organisations are certain to shine a spotlight on this radioactive topic.
In conclusion, we would like to say that Kazakh society is deeply interested in cooperating with Western corporations. Kazakhstan will be a country of great opportunities for foreign investors in the near future. But before that can happen, the Kazakh nation must get their house in order.
Thank you for your understanding.
Ermurat Bapi (Almaty), Chairman of the All-National Social Democratic Party Aqiqat/Truth
Lira Baysetova (Geneva), journalist and human rights activist, winner of the Economist magazine Freedom of the Press Award
Akezhan Kazhegeldin (London), Prime Minister of Kazakhstan (1994–1997)
Serik Medetbekov (Dresden), Head at Foreign office of opposition of Kazakhstan
Roslana Taukina (Almaty), politician and journalist