without paying the proper taxes face a clampdown by the Kazakh leader.

Nursultan Nazarbayev attacked companies in his country, which is a large oil exporter, for lack of transparency and for covering up their real earnings by exporting goods to their own offshore accounts at deflated prices.

In reports last week, the Kazakh Government revealed that Bermuda was the second biggest buyer of Kazakh exports in the first five months of 2000. The Virgin Islands was second. Official statistics put annual sales to both offshore jurisdictions at $875 million. In first place for exports was neighbouring Russia.

But Mr. Nazarbayev did not name the Bermuda companies to which `exports' were being made.

However, he named and shamed the Kazakh companies involved in what he said was tax dodging.

Exporters face clampdown And for the last two months the Kasakh prosecutor general had been going through the accounts of major firms checking for tax dodging. The results of his inquiry will be revealed on August 20.

The companies Nazarbayev singled out for lack of transparency read like a Who's Who of Kazakh commerce.

He named Eurasian Bank, led by metals magnate Alexander Mashkevich, and Ispat-Karmet, the massive steel complex run by international group Ispat International.

Nazarbayev also named Kazakhmys, the copper giant 42 percent owned by South Korea's Samsung, and US oil group Chevron and Exxon Mobli who both have stakes in part of the country's largest and most successful oil project Tengizchevroil.

Mr. Nazarbayev spoke of discrepancies in taxes paid by different groups.

Kazakh officials say companies are exporting goods to their own offshore accounts at deflated prices to reduce their tax bills.

This week chairman of the board of the Kazakh National Bank, Grigory Machenko, came out in support of the country's leadership to check the amount of taxes paid in Kazakhstan by large businesses.

He said in a report carried by the BBC: "Everybody knows how much Kazakh oil is currently being exported to Bermuda and the Virgin Islands. This is quite unacceptable.'' He added that Kazakhstan should either admit that "it is a banana republic which is in fact allowing itself to be used, or the country's government should establish civilised relations with both major Kazakh and foreign companies which are operating in Kazakhstan using the mechanism of transfer prices.'' According to some experts, revenue loss through unpaid taxes may run as high as $1 billion a year in a country whose GDP runs at only about $15 billion a year.

The wealth of the country is expected to increase dramatically after recent discovery of vast oil deposits off the country's Caspian coast. The new fields are being touted by officials as the world's second largest oil deposit.

Nazarbayev said: "We need to work on getting them to open their secrets, so that every Kazakh knows how much they produce, where they sell, what the world price was, how much profit they made and how much tax they paid on this profit,'' he said last Wednesday.

Last month Nazarbayev was named by Newsweek as a beneficiary of what may have been illegal payments allegedly made by a U.S. businessman under investigation by the FBI. Worries have been expressed by international media that this may hamper the investigation.

And the authorities will be wary of antagonising foreign firms which have bankrolled the economy so far and which will be key to tapping a vast oil deposit discovered off Kazakhstan's Caspian coast.