In Europe, they have published an investigative research on how a Belgian developer was transformed into an oil oligarch. The story looks very much like a fairytale that, nonetheless, ended quickly and the carriage, as it usually happens in such cases, turned into a pumpkin. But something else is interesting here: the cast of characters did not include one of the key players of the entire combination – President Nazarbayev’s son-in-law Timur Kulibayev.
Generally speaking, this story is customary for the states in which “owners” are hired as a cover and the very concept of property rights has mutated into a complex system of trusts registered in different jurisdictions.
Anyway, we have decided to redress the injustice. After all, we are talking about one of the most important players of the Kazakhstan oil market.
Apart from that, we are dealing with that rare case when the Caspian oil fields have fallen into the hands of the national elite. Albeit with the help of a Belgian citizen.
Developer Frank Monstrey became known in the country after he remade the Brussel race course into the National Golf Brussels golf club. And the international community learned his name after he bought the Zhaikmunay oil company in 2004 (aka Nostrum Oil & Gas since 2013).
The transformation of the Belgian developer into the Kazakhstan oilwe was that much more remarkable since Zhaikmunay used to be a special corporation. It was founded in 1997, the period when the Kazakhstan authorities were trying to reserve the country’s natural resources for the national elites. Nurlan Balgimbayev Administration that was in power from October 1997 till October 1997 was one of the vehicles for carrying out this strategy.
In every respect, it was the most important period of the Kazakhstan history when the new elite had managed to show and prove its efficiency. But then, a complete destruction of this new class had begun.
Zhaikmunay and Balgimbayev
Nurlan Balgimbayev was a professional oiler and his career was shaped in the Zhaikneft enterprises. The former Prime Minister began working at the oil refinery office in 1973 as an ordinary operator. He left this place in 1986 as the Chief Engineering Officer.
Later, Nurlan Balgimnbayev was invited to work at the USSR Ministry of the Oil and Gas Industry that was the most important agency for the late Soviet economy. Not only did it make the crucial for the industry decisions but also gathered the most important data on the state of the natural resources in the country in general and on the Caspian oil fields’ prospects in particular. The data was in possession of the Kazakhstan authorities during the preparations and signing of the Caspian oil contracts which allowed them to effectively move the process of the negotiations with the largest international oil companies from the Moscow level to the Kazakhstan level.
Zhaikmunay LLP was founded in March 1997 simultaneously with Nurlan Balgimbayev’s appointment as the President of Kazakhoil NC. KAZAKHOIL NC JSC was founded in April 1997. It was a giant holding that incorporated the shares of practically all Kazakhstan's oil-and-gas enterprises. Zhaikneft was a part of it, too.
In May 1997, the company obtained the license for additional exploration and extraction of crude hydrocarbons at the Chinarevskoye oil field where they had been conducting exploration activities even back in the Soviet times. And as early as October 1997, the company signed the product sharing agreement with the Kazakhstan Government. Thus, the Government, this time, signed the contract not with a large international company (as per usual practice) but with a group of shareholders whose traces got completely lost in the past twenty years and are not mentioned on the corporate website.
Note that it was in October 1997 that Nurlan Balgimbayev who was in charge of a group of young reformers that later became known as “Young Angry Man” was appointed Prime Minister. It was a complicated time, but his government turned out to be most successful for the entire period of Kazakhstan’s independence. The Zhaikmunay project was no less successful as well.
The extraction at the company’s field began as early as October 2000 and was gaining speed ahead of schedule. In 2004, the company started assembling equipment – major pipelines, oil delivery terminals, gas processing plants, power stations, oil wells, and other expensive infrastructural objects.
It was at that moment that the company got a new owner, Belgian developer Frank Monstrey. That same year, former Attorney General of Kazakhstan and Nurlan Balgimbayev’s co-father-in-law Zharmakhan Tuyakbay announced his move to the opposition. He became the mobilizing center for the opposition forces at the 2005 Presidential elections but, eventually, was only able to play the role of Nazarbayev’s sparring partner.
According to article Hidden Belgium: The Strange Case Of Frank Monstrey recently published by a group of anonymous authors on the Open source investigations website, Frank Monstrey performed the role of a front man for Kazakhstan oppositionist politician Mukhtar Ablyazov who was a part of Balgimbayev’s Government and was in charge of the country’s largest private bank.
Supposedly, in 2011, this connection allowed the lucky Belgian investor to list Zhaikmunay’s shares at the London Stock Exchange. It is this fact that, in the authors’ opinion, explains Monstrey’s reverse transformation – in April 2017, he resigns from the Nostrum Oil & Gas plc Board of Directors (the company has been operating in London under this name since 2013). The decision of the High Court of London that imposed restrictions on the operations with Nostrum Oil & Gas’ assets had preceded his resignation.
The authors reach the conclusion that Frank Monstrey fell between the stools having hooked up with the unscrupulous persons. This simple and short story is a classic example of the so called “post-truth”, a version of events that is presented as fact. However, the real story looks a little different. Or, to be more precise, extremely different.
The thing is that, by the time of the actual arrest of Monstrey’s shares, Nostrum had formed a complex balance of different shareholders’ interests. In 2010, 27% of Zhaikmunay’s shares were sold to KazStroyService Group that is controlled by the affiliated structures and partners of Timur Kulibayev, Nursultan Nazarbayev’s son-in-law.
In his 2012 Bloomberg interview, Monstrey (whose affiliated structures at that point controlled 28% of the shares) said that, even though “they (Kulibayev’s people – kz.expert) are not involved in the making of the operative decisions, they still help us to navigate the local landscape”.
Judging by the fact that the company had plenty of the new Pre-Caspian fields on its balance (Rostoshinskoye, Daryinskoye, and Yuzhno-Gremyazhinskoye fields), the partners could navigate the local landscape with much success. Then again, it is unlikely that anyone was doubting it considering Timur Kulibayev’s unofficial title reserved for him in the West – “The Oil Tsar of Kazakhstan”.
Kulibayev’s affiliated structures had bought Zhaikmunay’s blocking stake before the public placement of the shares. After the placement, the price of the shares started steadily going up. The company did not issue new shares to be sold at the stock exchange. The shares were sold by the old (unnamed) owners who, as a result, were not only able to legalize their capital in the West but also earn good money on the price growth.
Note that, by that time, Mukhtar Ablyazov (as well as Nurlan Balgimbayev) were very far from making decisions on distributing the licenses and oil fields.
Timur Kulibayev’s representatives did not comment on their participation in the Zhaikmunay projects. The representatives of Lakshmi Mittal, Kulibayev’s main partner in the KazStroyService corporation, refrain from comments as well. Nonetheless, it is these organizations and people that now control the entire oil extraction project in Kazakhstan’s North-West. And, by the looks of it, they will continue to do so up until 2032. It is until this date that the product sharing agreement (PSA) is going to be in effect.
The PSA regime was once created to attract the technologies and expertise of the international oil companies to the oil industry. They receive a special tax regime that allows to pay a contracted amount to the state budget. Now this entire mechanism is in the hands of Timur Kulibayev’s team.
The published investigative research on the “curious case” of Monstrey is actually a very curious case in itself. Open source investigations calls itself a community of investigators who rely on open sources. Nonetheless, the name of Kulibayev (who is, by the way, the company’s owner) is absent from the said investigation.
No one knows why it was not mentioned. On the other hand, everyone knows full well about the ties of Open source investigations with the “heroes” of another Kazakhstan scandal with the Belgian roots – Kazakhgate. They are telling this story from the point of view of Patokh Shodiyev, an Uzbek oligarch with the Belgian citizenship and the Kazakhstan interests. And they not even trying to conceal this fact.
But in this case, the connection between protecting the interests of the “Eurasian” group and Timur Kulibayev’s interests is particularly remarkable. Does it mean we are witnessing a complete takeover of the Eurasians by Kulibayev’s team? Or is it simply a provision of services? One way or another, we are dealing with a “curious case” of the information protection performed by Akorda in the West.