Open Letter

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
Paradeplatz 8
Zürich, Switzerland

Mr John C. Dugan
Citigroup Inc.
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
Great Britain

Mrs Adena T. Friedman
NASDAQ
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