Bloomberg News

Kazakh Oil Workers Offered Jobs as State Seeks to Stem Protests

December 22, 2011

Dec. 21 (Bloomberg) -- Kazakh officials gave striking oil workers one week to accept job offers arranged by the government in a bid to subdue the worst unrest since the former Soviet republic won independence two decades ago.

Deputy Prime Minister Umirzak Shukeyev met with protesters in the regional capital of Aktau, the local government said in a statement posted on its website today. Companies both in the region and nationwide are ready to provide jobs for fired oil workers, said Shukeyev, head of a commission formed after riots in the country’s biggest oil-producing province. Prior to that, Aktau’s government will provide them with “paid public work.”

The situation in the region bordering the Caspian Sea is “stable and under control of law-enforcement agencies,” the Kazakh Prosecutor General’s Office said in statement e-mailed today. Oil workers at state-owned KazMunaiGaz National Co. units have been striking in Zhanaozen since May over wages.

Clashes in western Kazakhstan spread after the police used arms to suppress unrest in Zhanaozen, where 14 people died in a mass riot during Independence Day celebrations on Dec. 16. The Central Asian state is the second-biggest oil producer in the former Soviet Union following Russia, with output of about 1.6 million barrels a day, about the same as pre-war Libya. It has attracted companies including Exxon Mobil Corp., Royal Dutch Shell Plc, Total SA, Eni SpA and BG Group Plc.

KazMunaiGas Exploration Production, the London-listed unit of the nation’s state energy company, said today output is lower than planned because of power cuts at its Uzen field this month. Production facilities weren’t damaged during the unrest, in which an administrative building was burned and looted.

KazMunaiGas EP fired about 1,300 employees from its two units based in Zhanaozen and Aktau because of their “illegal” action since May, the company said in August.

‘New Libya’

The unrest may turn Kazakhstan into “the new Libya,” Michael Poulsen, an analyst at the Middelfart, Denmark-based consultant, wrote in a report today. “With tighter sanctions openly being discussed on Iran, unrest in other major oil- producing countries is, debt crisis or not, a potential powder keg for oil prices.”

Protesters have been rallying in Aktau in the Mangistau region after riots in Zhanaozen and a clash with police in the town of Shetpe that killed one person Dec. 17.

‘Unprecedented’

The discord is “unprecedented in a country that has enjoyed one of the most stable political environments in the region,” Standard & Poor’s said yesterday. The company left its BBB+ rating unchanged for Kazakhstan, saying that it may reassess its view “if the unrest escalated and became protracted enough to threaten foreign and domestic investment plans at major oil and gas projects.”

Protests over wages and working conditions may spread from oil companies to other industries, said Andrei Chebotarev, head of Alternative, a research institute in Almaty, the country’s commercial capital. Workers in Aktau are demanding revisions to their discharge procedures, which in their opinion were carried out with violations, according to the regional government.

More than 17,000 metal workers of Eurasian Natural Resources Corp., a Kazakh producer jointly owned by three billionaires and the government, yesterday urged the nation to unite around President Nursultan Nazarbayev to help preserve stability, according to a statement e-mailed by the company. Employees of ArcelorMittal’s Kazakh unit also condemned the riots in a Dec. 18 letter, criticizing “statements that disguise the events as a labor fight,”

‘Set a Pattern’

“‘The statements were most likely created by company administrations and labor unions close to them,’’ Chebotarev said. ‘‘We can’t exclude that protests in Zhanaozen may set a pattern for other industries.’’

Prime Minister Karim Massimov and Yermukhambet Yertysbayev, a presidential adviser, yesterday urged the country to stand behind Nazarbayev to defend stability.

Nazarbayev, 71, who has ruled the Central Asian state since 1989 in the Soviet era, won a new five-year term in April with 95.5 percent of the vote. He was named ‘‘leader of the nation’’ last year, giving him the power to dictate policy even after retirement.

Last month, Kazakhstan dissolved Parliament and set an early election for January. The ruling Nur Otan party, headed by Nazarbayev, won all the seats in Parliament in August 2007 legislative elections, which were also unscheduled. The next vote was to be held in mid-2012.

The protests come at the worst possible time for Nazarbayev, said Lilit Gevorgyan, an analyst at IHS Global Insight.

The clashes ‘‘raised questions about the potential risks the country may face when transitioning power’’ to Nazarbayev’s handpicked candidate, Gevorgyan said by e-mail. ‘‘The recent riots will certainly force Nazarbayev to shift his attention from erecting monuments symbolizing his legacy to ensuring that the legacy that survives once he is out of politics.’’

--With assistance from Grant Smith in London. Editors: Paul Abelsky, Torrey Clark

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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