A Window Into a First Family's Oil Holdings

Aliyev
Guy Chazan at The Wall Street Journal breaks an excellent story today on the Kazakhstan first family's ownerships in the oil business. For years, the biggest guessing game on the Caspian Sea has been which fields and companies are controlled by the various first families, as sharing with those on high is usually the only way to do an oil deal in the region.

An important factor to understanding how the Caspian really works is to know the first families' business relationships, particularly in the oil industry.

In the story, Chazan helps to explain the subject by opening a window into a field of extremely heavy crude called MangistauMunaiGaz, or MMG.

Here are the first two paragraphs: A family dustup in energy-rich Kazakhstan has turned one of the country's largest oil companies into a potential takeover target, attracting interest from some of the biggest players in the global oil industry. MangistauMunaiGaz, or MMG, has been in play since a dispute earlier this year between Rakhat Aliyev and his former father-in-law, Nursultan Nazarbayev, the country's autocratic president, according to people familiar with the situation. Read story

Steve's comment: In Almaty, the most important fact for those wishing to conduct oil business is that nothing substantial can be done without a nod from Timur Kulibayev, the husband of Nazarbayev's second daughter-in-law, Dinara. Kulibayev owns shares in oil fields, and those he does not own he holds sway over through his influence in the state oil company, KazMunaiGas.

As for MMG specifically, the assumption of oilmen in Almaty and investment bankers in the West has always been that it was controlled by the first family. They controlled either 60% or a full 90% of the field. Though the field produces a low-grade crude, those political links gave the field a certain gravitas.

But was that majority stake controlled by Aliyev, the rough-hewn husband of first daughter Dariga Nazarbayeva, or was it surrogates of the president himself? Perhaps a combination of the two? That was not known publicly, and the western bankers and accountants inside the deal were not talking.

That MMG has gone on the sales block is the best confirmation yet, however, that Aliyev is at least a partner. He has been in trouble for a long time, but a few months ago it reached a head with accusations that he ordered the kidnapping of two executives of Nurbank, which he controlled. Nazarbayev ordered him arrested, and Dariga divorced him.

Ever since then, the oil community has waited for word that MMG was on sale. Now it is.

That fact may be mere burlesque, since it does not shed light on other privately held oilfields in Kazakhstan.

Still, since the self-exiled Aliyev has turned into a political opponent of Nazarbayev, one wonders how the proceeds of the sale will be paid. The president no doubt would not want to put billions of dollars to the use of a much-motivated opponent.