Kazakh bankers push for democracy, discretely

By bne IntelliNews October 30, 2006

Christopher Pala in Almaty -

Bankers in Kazakhstan are playing a key role in efforts to get the authoritarian government to loosen its grip over the country. Discretely, of course.

Bankers are not usually known as a subversive class, but in Kazakhstan, where they have played a key modernizing role, they have come to constitute the backbone of the opposition to President Nursultan Nazarbayev.

Of all the sectors of the economy, banking is considered to be the most transparent, efficient and Western-oriented, rated on a par with Eastern European counties.

The opposition is not focused on his economic policies – the booming economy is reasonably well managed, and spectacularly so by regional standards – but on the business practices of the president's relatives. The recent murder of two key opposition leaders has brought this tension to new heights.

President Nazarbayev

Following the murder of the opposition's brainiest figure, Altynbek Sarsenbayuli, on February 13, the presidents of six of the country's leading banks along with 13 other company presidents signed a petition expressing outrage and calling for the arrest not only of the killers, but of those who ordered the killing.

One of the bank presidents explained that the subtext of the petition was a reference to the death three months earlier of Zamanbek Nurkadilov, another opposition leader, who was found dead in his home – known to be closely watched by 14 government cameras and several policemen – with two non-lethal bullet wounds to the chest and one to the head.

The verdict of suicide was widely derided and even Grigory Marchenko, Kazakhstan's most respected banker and Euromoney's 2003 Central Bank Governor of the Year, called it "baloney."

Nurkadilov, a popular former mayor of Almaty who was once close to Nazarbayev, had joined the opposition a year earlier. He not only accused his mentor of corruption, but he repeatedly and publicly threatened to disclose compromising documents backing up his claims. At the time of his death, Nurkadilov was a board member of For a Just Kazakhstan, the campaign organization for the opposition's candidate to run against Nazarbayev. Though he was very active in the campaign, the campaign's real leaders were Sarsenbayuli, who was 43 at the time of his killing, and Oraz Jandosov, 45.

Bright young things

Sarsenbayuli and Jandosov had been part of a generation of bright young leaders whom Nazarbayev had brought into the government shortly after independence from Russia in 1991 to replace the sclerotic communist leadership and help drive the country toward a market economy. Sarsenbayuli had been information minister for nine years, but after fighting a losing war with Dariga Nazarbayeva, the president's eldest daughter, over control of state television, he became chairman of the Security Council. Jandosov, meanwhile, worked at the Central Bank, ending up at its governor and implementing key reforms in the late 1990s that Marchenko continued.

During those years, the opposition was confined to nostalgic communists, Russian and Kazakh nationalists, and a tiny pro-democracy movement. Inside the government, Sarsenbayuli, Jandosov and other reformers pressed Nazarbayev to implement the democratic reforms he had always promised would go hand in hand with the transition to a free market, but were told to be patient.

The modern-day opposition appeared in November 2001, when Mukhtar Ablyazov, who created Bank Turan Alem, now the country's second-largest, accused Dariga Nazarbayeva's husband, Rakhat Aliyev, of using his position as effective head of the KNB, the successor agency of the KGB, to take over Turan Alem.

Businessmen had complained in private that Aliyev's tenure at the KNB, which followed a stint as head of the notoriously corrupt and rapacious tax police, had seen unparalleled use of the agency's coercive powers for the acquisition of private businesses. These allegations were reported in the tiny opposition press here, but ignored in the mainstream press where self-censorship is the rule.

A group of prominent Kazakhs approached Nazarbayev and called on him to fire his son-in-law from his KNB job. They included Nurzhan Subkhanberdin, the founder of Kazkommertsbank, the country's largest bank, as well as Jandosov and Sarsenbayuli.

At Kazkommertsbank, Subkhanberdin had pioneered Western business methods emphasizing a "hire-the-best-and-delegate" approach that contrasted with a Kazakh culture of "the boss decides everything," which prizes loyalty over competence.

"I argued with him," Sarsenbayuli recalled in an interview a month before his slaying, "that these abuses came from a system of too-centralized authority, and that we needed to create some checks and balances so these abuses would not happen any more."

Nazarbayev gave in and fired Aliyev, but when he rehired him soon afterwards as deputy head of his security detail, the reformers decided to create a party called Democratic Choice of Kazakhstan (Sarsenbayev did not join and stayed in government). They saw it as a party of loyal opposition within the government that, unlike the other opposition parties, would not call for Nazarbayev's resignation, but would seek to enlist his support in creating viable democratic institutions.

To their surprise, Nazarbayev had them all fired, including Jandosov, who was then deputy prime minister.

The wilderness years

Aliyev was eventually packed off as ambassador to Vienna, while in 2002 two members of the party, Ablyasov, the banker, and Galimzhan Zhakyanov, a reformist provincial governor, were jailed on corruption charges that were widely seen, inside and outside of Kazakhstan, as politically motivated. As a result, Sarsenbayuli quit the government and joined the opposition party.

Nazarbayev, on a trip to the Netherlands that year, insisted his country, which is consistently ranked among the most corrupt in the world by Transparency International, was fighting corruption and cited the jailing of Ablyazov and Zhakyanov as proof.

That year, the heads of the country's banks signed a declaration promising that they would stay out of politics and refrain from funding the opposition.

In the fall of 2004, Sarsenbayuli took back his old post as information minister, temporarily leaving the co-chairmanship of the opposition party prior to parliamentary elections that the president assured him would be free and fair, and would likely increase the opposition representation.

However, after the election resulted in a complete shutout of the opposition, Sarsenbayuli resigned again, and so did Zharmakhan Tuyakbay, a former prosecutor known for his integrity who had just been re-elected and become the speaker of the lower house of parliament. Both called for democratic reforms.

In December 2005, Nazarbayev, at 65, sought a third seven-year term. Opinion polls predicted he would win by 60%-70%. Tuyakbay, with the discreet support of the business community, became the pro-democracy opposition's candidate and the polls indicated he would win about 20% of the vote.

Again, Nazarbayev promised that the election would be the fairest ever, yet the official result showed he won over 91% of the vote. Yermukhamet Yertisbayev, who later became information minister, said the additional margin came "because the president's opponents saw that he was so popular and decided to stay home that day." The Organization for Security and Cooperation in Europe, or OSCE, reported that 42% of the vote-counting places were non-transparent, and said Kazakhstan had failed to uphold the democratic practices it had promised to observe when it joined the organisation.

The extra margin of victory raised many eyebrows and presented Western governments with a dilemma that one European diplomat put this way: "What do you with a man who steals an election that was already his?" Most Kazakhs shrugged.

Death is no laughing matter

However, there were no jokes when the bodies of Sarsenbayuli, his driver and his bodyguard were found in an apple orchard outside Almaty. They were lying face down in the snow, two of them with their hands tied. All had been shot once in the back and once in the back of the head; there was no sign of a struggle, leading Sarsenbayuli's friends to suggest they may have been drugged. The killing, in a gangland-style unprecedented in Kazakhstan, sent shock waves though the country, far deeper than Nurkadilov's "suicide" or any better-than-expected election results.

Two days later, the country's leading bankers and business leaders published a petition suggesting that a second implausible verdict, like Nurkadilov's "suicide," would simply not do.

"This was a challenge to the whole society," said Kazkommertsbank President Nina Jussupova, one of the signatories, in an interview.

Marchenko, who now runs Halyk Bank, the country's third-largest bank, owned by Nazarbayev's son-in-law Timur Kulibayev, said: "It's simply horrible, like death squads in Latin America, and the business community doesn't take it lightly."

Kazakhstan, unlike Russia, has no tradition of either political or business killings.

"Here if you had business problems, there were boundaries people were not willing to cross," Marchenko said. "The business elite is very thin in Kazakhstan, and if somehow there was killings and retaliation, within a couple of years there wouldn't be many people left. It's hugely important to prevent something like that from happening again, there should be swift punishment."

Yet within two weeks, the case was effectively closed. The authorities said five Special Forces agents from an elite KNB unit called "the Lions" had confessed to having kidnapped, but not killed, the three victims, and been paid by the alleged contractor and killer, Ruslan Ibragimov, a wealthy businessman.

A few days later, they said Ibragimov had been hired by Yerzhan Utembayev, who is the chief of staff of Senate President Nurtay Abykayev, the president's closest friend and ally. After his arrest, Utembayev confessed he ordered the killing – which he allegedly financed by taking out a $60,000 bank loan – because he had been slighted by an article written two years earlier by Sarsenbayuli that had not named him, according to the authorities.

According to a senior World Bank official who asked not to be identified, Utembayev is a mild-mannered economist, rather pro-reform, "a very smart guy" who once wrote "excellent" speeches for Nazarbayev and served as deputy prime minister for economic affairs, a job traditionally given to technocrats.

There is broad scepticism that Utembayev hired the killers. "I think whoever ordered the killing would have been in a position to control the investigation," said Yevgeny Zhovtis, director of the International Bureau of Human Rights. "And he would have ties to the 'Lions.' Utembayev didn't have either, and his motive seems ridiculous. This is simply not a credible story."

A few days later, an anonymous text was circulated charging that it was Aliyev, the son-in-law whose alleged abuses led to the creation of the modern opposition in the first place, who hired Ibragimov, the contractor.

Aliyev replied in a piece published in his wife's weekly, Karavan, that those "allegations are lies and probably are part of a general plan, of which the assassination was only the first link." He called the accusation "a thoroughly prepared action aiming at the destabilization of our society."

The chairman of the foreign affairs committee of the lower house of parliament and a member of the president's political party, Serik Abdrakhmanov, then broke ranks with his compliant colleagues.

"Mr. President," he wrote in an open letter, "this has to be said openly: your entourage is alienating you from your people and truth. We won't be able to ensure peace and stability in our society with lies."

Today, there is no dominant theory as to why Sarsenbayuli was killed or by whom. "There is a general understanding of disbelief, both in the banking community and in the general public," said Timur Issatayev, president of ATF bank. "But I don't know of any plan to do anything about it."

On August 31, a court sentenced 10 men in the murder. Utembayev, the former Senate chief if staff, got 20 years. Ibragimov, the alleged contractor, was sentenced to die, though Kazakhstan has a moratorium on the death penalty. Eight others, including the five from the Lions unit, received terms of up to 20 years.

And in Kazakhstan’s banking elite, the feeling is that whoever ordered the murders succeeded in their primary goal: to intimidate anyone who might want to challenge the Nazarbayev regime.

Send comments to: Christopher Pala

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.