TEXT-Excerpts of Kazakh president's interview with Reuters

ASTANA, March 28 (Reuters) - Kazakh President Nursultan Nazarbayev fielded questions from Reuters on Friday on issues ranging from his possible successor to domestic banking problems, democracy and relations with NATO.

Below are key excerpts from the interview, conducted at the Akorda presidential palace in the Kazakh capital Astana.

ON SUCCESSION

I would like to clarify this nonsense that the first president, that is me, can stay in power for an unlimited number of terms. That does not mean I will be here forever. After a five year period I will have to take part in an election in 2012. And if the people give me their support, I can stay. But I have been in this job for so many years and after all I might hand it over to the next generation, so to say, when I see that we need new, fresh people and so on. This is an electoral process.

WHO IS POTENTIAL SUCCESSOR?

We have a lot of them here. ... I think I should not give any names now to avoid upsetting anyone.

ON DEMOCRACY

I would like to create a democracy like in America but where can I find enough Americans for that in Kazakhstan? (laughs) Our general goal is to build a free civic society and a market social economy. We are moving towards this step by step. Look, you know without me, we have never had liberal traditions here, just never. Last century, the century before, under (Russian) tsarism, under Soviet rule, we have never had a liberal economy. We started doing this 15 years ago for the first time.

No country around Kazakhstan can be called a real democracy. ... I think we have made the best progress in this short period of time in this respect. Our goal is to move forward. Democracy does not take root in an impoverished country.

How many attempts have been made to instil U.S.-type democracy in African countries? And look at what it has led to: ... tribal warfare.

ON BANKING

Of course it (global liquidity crisis) has had an impact on Kazakhstan but not to the extent we need to talk about it as much as they do elsewhere.On the one hand we think it's a blessing that it happened here now so we can think realistically, understand where we are and understand how much we need to spend.

Using this opportunity we will modernise the banking sector and set new rules. On the other hand, our private banks are capable of repaying their debt themselves. The government has not supported our banks like in other countries by spending billions. But we have helped individuals who have taken out mortgage credits and have not completed their houses. The government has extended credits to them on the agreement that the money will be returned. ... We have essentially spent a billion dollars on this so far. The position is not getting worse, it is getting better this year.

Of course if a global recession happens ... it will be dangerous for the entire global economy, and of course for us as well. More dangerous of course is if a global economic fall leads to lower consumption of our oil and gas and mineral resources and lower prices. It will not be very good for countries like Russia and us.

The government has not extended a single kopeck to support banks' liquidity itself. And the banks themselves did not need it. Of course they wanted us to boost their liquidity using state money but we will not do this. They have to deal with it themselves. ... Of course this limits their lending abilities in our economy.

ON ECONOMY

We have created an attractive, open and free market economy in our country. The main goal of our work has been based on the following principle: economic matters first, and only then politics.

ON WESTERN RATINGS AGENCIES

I think there was a big lack of objectivity there (in their response to Kazakh banking problems). They did not take into account that Kazakhstan has big gold and foreign exchange reserves, that we are an energy-supplying country and that energy prices are booming at the moment. So giving Kazakhstan such an estimate and cutting our banks' credit ratings was not objective.

ON NATO

I have never thought and do not think that NATO poses a threat to Kazakhstan in any way. On the opposite, I think the entire European Union is very interested in Kazakhstan, so things remain fine here, so we continue to supply it with oil and gas, metals, fertilisers, you name it. That's why the question of any country joining NATO or any other organisation is a sovereign right of independent states. Why do I have to deal with it? Frankly I am not interested in all this and I am not worried. If some countries at some point decide they need to be there, that's their issue. Not so long ago I discussed this matter with (Ukrainian President Viktor) Yushchenko when he was here on a visit. He said: 'We are doing this because we are concerned about our independence'. ... I don't think it's the only way. If it is the only way, which would completely spoil relations with Russia who is actually economically a strategic partner, then it's their right.

We have very good relations now (with NATO). We are working together with NATO ... on technological and scientific cooperation, training our officers ... we take part in military exercises. We want to cooperate with NATO, gain NATO experience, so it takes part in modernising our armed forces and training our officers.

WILL KAZAKHSTAN BUY NATO MILITARY HARDWARE?

At the moment we do not have that necessity. If of course we need to buy arms we will spend money only on modern weaponry. There is no politics in this.

We are linked to Russian technology but we are creating our own enterprises as well. As for new equipment, we'll see and spend our money on the best and most modern. If we see that is better in NATO countries, we will of course buy there.

FOREIGN RELATIONS

The Soviet Union guaranteed its security by building up its weapons base. But all those weapons did not save the Soviet Union from collapse. We think Kazakh diplomacy ... has helped us maintain friendly relations with neighbours, while domestic stability is being supported by people's growing prosperity and political stability. ... To prosper one needs more friends. We do not have any conflict situations with any of our neighbours.

KASHAGAN AND ENERGY

First of all, Kazakhstan has no desire to nationalise any assets like in Latin America. We will stick to contracts we have signed. ... It (Kashagan) is not a trend, it's a one-off case. In any case, any country has to defend its interests. ... It's not about politics. That (Kashagan deal) was a friendly solution to the question.

Now when the government has money, and the national oil company is growing, of course it will try to invest its money in our Kazakh domestic resources. Again, this will happen based on contracts and our legislation.

We have not set any goal to do so (increase role in Kashagan). We will jointly work with all the companies that work there.

...If investors break their contracts themselves, and Kazakhstan sees that the country is losing out on something with regard to a certain contract ... then we'll say: 'Dear friends, either pay us compensation or give us shares back to compensate for the money we lost'. Kazakhstan does not want to nationalise or take anything away from anyone. (Reporting by Michael Stott, Maria Golovnina and Anastasia Onegina, editing by Mary Gabriel)