ALMATY - Kazakhstan, one of the world's biggest uranium producers, accused a key industry executive on Wednesday of illegally selling deposits to foreign companies, a move that has alarmed the business community.

The former Soviet republic is home to a fifth of the global uranium reserves and analysts expect Central Asia's biggest economy to become the world's top global producer this year.

Last week, Kazakhstan's KNB, the successor security service to the Soviet-era KGB, arrested Mukhtar Dzhakishev, a long-serving head of state Kazakh uranium producer Kazatomprom, along with seven other executives.

Preliminary results of the investigation show that Mukhtar Dzhakishev and other managers ... squandered state property in the form of Kazakhstan's largest uranium fields by handing them to a number of offshore companies, the KNB said.

The KNB singled out the sale of a 30 percent stake in the Kyzylkum uranium joint venture, which runs the country's largest uranium mine, Khorasan, as an example of an illegal transaction. It said the stake was sold for 15.6 million tenge ($103,700), but did not name the buyer.

Canada's Uranium One owns 30 percent in the venture and a group of Japanese firms own another 40 percent. The rest belongs to Kazatomprom.

Neither Uranium One nor the Japanese group could be reached for comment. A Kazatomprom spokesman said he had no information on the probe.

LETTER OF DEFENSE

The KNB said there were other cases of illegal asset sales in the uranium sector but gave no details.

In a rare public display of unity, a group of Kazakh businessmen, including Kazkommertsbank Chairman Nurzhan Subkhanberdin and construction mogul Serzhan Zhumashev, defended Dzhakishev in an open letter published on the web on Wednesday.

His arrest seems to be inexplicable and negatively affects the country's business climate as Kazakh entrepreneurs no longer feel they are protected by law, the group wrote in the letter addressed to President Nursultan Nazarbayev.

They urged Nazarbayev, who wields sweeping powers in the oil-rich nation, to ensure that the investigation was fair.

Under Dzhakishev, Kazatomprom has expanded aggressively, forming joint ventures with foreign companies to develop uranium fields in exchange for access to foreign markets, and has become one of the top global producers.

Kazatomprom runs two other joint mining projects with Uranium One and has joint ventures with Canada's Cameco, France's Areva and several Japanese, Chinese and Russian firms.

Kazakhstan produced 8,521 tonnes of uranium last year, up from 6,637 in 2007. It plans to raise output to 12,200to 2,300 tonnes this year.

For a FACTBOX on key uranium joint ventures in Kazakhstan, click on [ID:nLR170931] ($1=150.39 Kazakhstan Tenge)

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