Cablegate: Kazakhstan: Germans Hyper About Bta Restructuring Mou

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DE RUEHTA #1613/01 2651026
ZNR UUUUU ZZH
O 221026Z SEP 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6318
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE 1954
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RUEKJCS/SECDEF WASHDC 1390
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 2490
RUEHNO/USMISSION USNATO 2804

UNCLAS SECTION 01 OF 02 ASTANA 001613

SENSITIVE
SIPDIS

STATE FOR SCA/CEN (PLEASE PASS TO PARTY AT UNGA)
ALSO FOR EEB/ESC
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E.O. 12958: N/A
TAGS: PGOV PREL ECON EFIN KZ GM UK
SUBJECT: KAZAKHSTAN: GERMANS HYPER ABOUT BTA RESTRUCTURING MOU

1. (U) Sensitive but unclassified. Not for public Internet.

2. (SBU) SUMMARY: Germany is highly concerned that BTA bank is
about to declare bankruptcy, endangering large investments by the
German export credit agency. Our sources in ExIm disagree, and
believe a settlement is in the works. Berlin has asked SCA that
Secretary Clinton express concern to Foreign Minister Saudabayev
during their meeting at UNGA. We suggest this is unnecessary, based
on ExIm's reading of the situation. END SUMMARY.

3. (SBU) On September 21, German Charge d' Affaires in Astana,
Wolfgang Brett, informed EconOff that the London-based negotiations
between BTA bank and its creditor steering committee failed to reach
a debt restructuring agreement. According to the Brett, the German
government and their export credit agency (ECA) Euler Hermes
believed that the absolute failure of negotiations to sign an MOU on
BTA debt restructuring by the September 18 deadline set by the
Financial Supervision Agency (FSA) implied in imminent declaration
of bankruptcy. Fearful of an imminent declaration of bankruptcy,
Brett said that the German Embassy submitted a sharply-worded
non-paper (see text in para five below) to Kazakhstani government
agencies, including the Ministry of Foreign Affairs, the Ministry of
Finance, the National Bank, the FSA, Samruk Kazyna and BTA on
September 18. Brett requested similar action from the U.S. Embassy.
On September 22, Brett informed EconOff that the German MFA in
Berlin had contacted SCA Deputy Assistant Secretary George Krol
directly about the perceived failure of negotiations. According to
Brett, DAS Krol said that Secretary Clinton would raise this issue
during her upcoming meeting with Foreign Minister Saudabayev.

4. (SBU) Well-informed officials at the U.S. Export-Import (ExIm)
Bank, the USDA Credit Programs Division, the Kazakhstani FSA, and
BTA contradict German statements. According to ExIm Bank Asset
Management and Restructuring Officer Katie Janik, the steering
committee members met in London for seven days straight, working 12
hours per day to negotiate an acceptable MOU before the FSA's
September 18 deadline for submission. Working through the night on
Thursday September 17, they created an acceptable MOU. However,
several last-minute changes to the wording of some "non-critical"
passages caused a one day delay in submission, which missed the
deadline. This situation, she believes, may have triggered the
Germans' anxious response. Janik confirmed that the MOU was
eventually signed by all steering committee members, including the
German ECA Euler Hermes, and BTA, and accepted by the FSA for
review. While Janik conceded that the sides have not resolved every
detail of debt restructuring, ExIm Bank considers the negotiations a
success, because the MOU warded off the immediate specter of
bankruptcy and gave all parties more time. The debt restructuring
negotiation process will continue for the next six weeks.

5. (SBU) BEGIN TEXT OF GERMAN EMBASSY NON-PAPER:

The Government of the Federal Republic of Germany is most concerned
to note that the negotiations between the BTA Bank and its creditors
on restructuring did not arrive at a successful conclusion. The
Government of the Federal Republic of Germany fears that this
development may result in most disadvantageous consequences for the
BTA Bank and its creditors, but also for the economic development of
Kazakhstan and for economic relations between Germany and
Kazakhstan.

The Government of the Federal Republic of Germany has followed the
negotiations taking place in London very closely and takes the view
that it is still possible to achieve a fair agreement between the
two sides. However, a prerequisite for this is that the Kazakh side
itself makes a substantial contribution towards the success of the
negotiations.

The Memorandum of Understanding negotiated between the parties and
accepted by the creditor side reflects the progress attained in the
negotiations this week. The Government of the Federal Republic of

ASTANA 00001613 002 OF 002

Germany expects the negotiations between the contracting parties to
be continued on this basis with a desire to find a mutually
acceptable solution.

END TEXT.

6. (SBU) COMMENT: The German ECA Euler Hermes is one of 14 members
of the BTA steering committee that participated in the London-based
negotiations during the week of September 10-17. Of the approximate
$920 million in ECA exposure to the troubled Kazakhstani banking
sector, Euler Hermes accounts for approximately $500 million and
therefore has actively mobilized resources to ensure that all
relevant levels of the Kazakhstani Government remain aware of
Germany's concerns regarding full repayment of trade finance debt.
While the MOU does not signal the successful restructuring of BTA,
it does incorporate additional input by steering committee members
and is widely seen as progress towards the eventual stabilization of
the Kazakhstani banking sector. END COMMENT.

HOAGLAND

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