----

----

| [X] | QUARTERLY      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|-----|---------------------------------------------------------------------------------------------|

| [      ] | TRANSITION      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|----------|----------------------------------------------------------------------------------------------|

| Delaware | 20-5588710 |
|----------|------------|

| (State      or Other Jurisdiction of      | (I.R.S.      Employer I.D. No.) |
|-------------------------------------------|---------------------------------|
|  incorporation      or organization) |                            |

----

| PART      I — FINANCIAL INFORMATION                                                                                                                            |                |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|
|                                                                                                                                                                 |                |
|      Item      1.  Unaudited Consolidated Financial Statements                                                                    |                |
|                                                                                                                                                                 |                |
|           Consolidated      Balance Sheet as of June 30, 2008 and December 31,                                     | 2-3                 |
|                                                                                                                                                                 |                |
|           Consolidated      Statements of Operations for the Three and Six  Month      Period            |                |
|            Ended      June 30, 2008 and 2007                                                                  |    4 |
|                                                                                                                                                                 |                |
|           Consolidated      Statements of Cash Flows for Six  Months Ended June      30,  2008 |                |
|            and      2007                                                                                      |    5 |
|                                                                                                                                                                 |                |
|           Notes      to Consolidated Financial Statements                                                          |  6-35          |
|                                                                                                                                                                 |                |
|      Item      2.  Managements’ Discussion and Analysis of Financial      Condition                                         |                |
|            and      Results of Operations                                                                     | 36-39               |
|                                                                                                                                                                 |                |
|           Risk      Factors That May Affect Future Results                                                         | 40-44               |
|                                                                                                                                                                 |                |
|      Item      3.  Quantitative and Qualitative Disclosures about Market      Risk                                                | 45                  |
|                                                                                                                                                                 |                |
|      Item      4.  Controls and Procedures                                                                                        | 45                  |
|                                                                                                                                                                 |                |
| PART      II — OTHER INFORMATION                                                                                                                               |                |
|                                                                                                                                                                 |                |
|      Item      1.  Legal Proceedings                                                                                              | 46                  |
|                                                                                                                                                                 |                |
|      Item      2.  Unregistered Sales of Equity Securities                                                                        | 46                  |
|                                                                                                                                                                 |                |
|      Item      3.  Default Upon Senior Securities                                                                                 | 46                  |
|                                                                                                                                                                 |                |
|      Item      4.  Submission of Matters to a Vote of Security      Holders                                                       | 46                  |
|                                                                                                                                                                 |                |
|      Item      5.  Other Information                                                                                              | 46                  |
|                                                                                                                                                                 |                |
|      Item      6.  Exhibits                                                                                                       | 46                  |
|                                                                                                                                                                 |                |
|      Signatures                                                                                                                             | 47                  |

----

|                                       |
|--------------------------------------------|
| Caspian      International Oil Corporation |
| Consolidated      Balance Sheets           |

|                                          |   |   |   |   | As      of June 30,      2008 |   |       | As      of December 31,      2007 |   |
|-----------------------------------------------|--------|--------|--------|--------|------------------------------------|--------|------------|----------------------------------------|--------|
|                                          |   | Note   |   |   | USD(unaudited)                     |   |       | USD                                    |   |
|                                          |   |   |   |   |                               |   |       |                                   |   |
| ASSETS                                        |   |   |   |   |                               |   |       |                                   |   |
|                                          |   |   |   |   |                               |   |       |                                   |   |
| Current      assets                           |   |   |   |   |                               |   |       |                                   |   |
| Cash                                          |   |   | 5      |   |                               |   | 30,649     |                                   |   |   | 125,031 |   |
| Accounts      receivable, net                 |   |   | 6      |   |                               |   | 5,123,576  |                                   |   |   | 5,560,069 |   |
| Inventories                                   |   |   | 7      |   |                               |   | 1,083,710  |                                   |   |   | 1,475,137 |   |
| Deferred      income tax assets               |   |   | 19     |   |                               |   | 1,045,518  |                                   |   |   | 1,393,167 |   |
|                                          |   |   |   |   |                               |   |       |                                   |   |   |   |   |
| Total      current assets                     |   |   |   |   |                               |   | 7,283,453  |                                   |   |   | 8,553,404 |   |
|                                          |   |   |   |   |                               |   |       |                                   |   |   |   |   |
| Non-current      assets                       |   |   |   |   |                               |   |       |                                   |   |   |   |   |
| Investments,      equity method               |   |   | 8      |   |                               |   | 143,563    |                                   |   |   | 49,875 |   |
| Oil      exploration assets, full cost method |   |   | 9      |   |                               |   | 6,660,107  |                                   |   |   | 5,358,615 |   |
| Property,      plant and equipment            |   |   | 10     |   |                               |   | 17,247,304 |                                   |   |   | 18,996,417 |   |
| Intangible      assets                        |   |   | 11     |   |                               |   | 135,529    |                                   |   |   | 164,747 |   |
| Restricted      cash                          |   |   |   |   |                               |   | 30,062     |                                   |   |   | 441 |   |
|                                          |   |   |   |   |                               |   |       |                                   |   |   |   |   |
| Total      non-current assets                 |   |   |   |   |                               |   | 24,216,565 |                                   |   |   | 24,570,095 |   |
|                                          |   |   |   |   |                               |   |       |                                   |   |   |   |   |
| TOTAL      ASSETS                             |   |   |   |   |                               |   | 31,500,018 |                                   |   |   | 33,123,499 |   |

----

|                                       |
|--------------------------------------------|
| Caspian      International Oil Corporation |
| Consolidated      Balance Sheets           |

|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|------------|----------------------------------|--------|
|                                                                                                                      |   |   |   |   | As of June 30,      2008 |   |       | As of      December31,      2007 |   |
|                                                                                                                      |   | Note   |   |   | USD(unaudited)                |   |       | USD                              |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                                                                           |   |   |   |   |                          |   |       |                             |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |
| Current      liabilities                                                                                                  |   |   |   |   |                          |   |       |                             |   |
| Accounts      payable and other liabilities                                                                               |   |   | 12     |   |                          |   | 6,913,835  |                             |   |   | 5,961,857 |   |
| Short-term      loans                                                                                                     |   |   | 13     |   |                          |   | 2,255,946  |                             |   |   | 5,306,085 |   |
| Taxes      payable                                                                                                        |   |   | 14     |   |                          |   | 1,464,903  |                             |   |   | 1,888,837 |   |
| Dividends      payable prior to reverse merger                                                                            |   |   |   |   |                          |   | 31,785     |                             |   |   | 310,241 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Total      current liabilities                                                                                            |   |   |   |   |                          |   | 10,666,469 |                             |   |   | 13,467,020 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Non-current      liabilities                                                                                              |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Long-term      loans                                                                                                      |   |   | 13     |   |                          |   | 14,527,355 |                             |   |   | 12,729,082 |   |
| Deferred      income tax liabilities                                                                                      |   |   | 19     |   |                          |   | 2,194,219  |                             |   |   | 2,368,487 |   |
| Obligation      for historical reimbursement                                                                              |   |   | 15     |   |                          |   | 3,270,256  |                             |   |   | 3,151,916 |   |
| Asset      retirement obligations                                                                                         |   |   | 16     |   |                          |   | 197,171    |                             |   |   | 190,032 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Total      non-current liabilities                                                                                        |   |   |   |   |                          |   | 20,189,001 |                             |   |   | 18,439,517 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Total      liabilities                                                                                                    |   |   |   |   |                          |   | 30,855,470 |                             |   |   | 31,906,537 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Minority      interest                                                                                                    |   |   |   |   |                          |   | 304,427    |                             |   |   | 277,772 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Stockholders’      equity                                                                                           |   |   | 17     |   |                          |   |       |                             |   |   |   |   |
| Common      stock, $ 0.001 par value – authorized 200,000,000 shares; issued and      outstanding 62,757,028 shares |   |   |   |   |                          |   | 62,757     |                             |   |   | 62,757 |   |
| Additional      paid-in capital                                                                                           |   |   |   |   |                          |   | 3,821,850  |                             |   |   | 3,822,375 |   |
| Accumulated      other comprehensive income                                                                               |   |   |   |   |                          |   | 422,575    |                             |   |   | 402,989 |   |
| Accumulated      deficit                                                                                                  |   |   |   |   |                          |   | (3,967,061 | )                                |   |   | (3,348,931 | ) |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| Total      stockholders’ equity                                                                                     |   |   |   |   |                          |   | 340,121    |                             |   |   | 939,190 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                     |   |   |   |   |                          |   | 31,500,018 |                             |   |   | 33,123,499 |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |
|                                                                                                                      |   |   |   |   |                          |   |       |                             |   |   |   |   |

----

|                                       |
|--------------------------------------------|
| Caspian      International Oil Corporation |
| Consolidated      Statements of Operations |

|                                                         |   |   |   |   | For      the three |    |       | For      the three |   |     | For      the six   |   |   | For      the six   |       |
|--------------------------------------------------------------|--------|--------|--------|--------|--------------------|---------|------------|--------------------|--------|----------|--------------------|--------|--------|--------------------|------------|
|                                                         |   |   |   |   | months      ended  |    |       | months      ended  |   |     | months      ended  |   |   | months      ended  |       |
|                                                         |   |   |   |   | June      30, 2008 |    |       | June      30, 2007 |   |     | June      30, 2008 |   |   | June      30, 2007 |       |
|                                                         |   | Note   |   |   | USD                |    |       | USD                |   |     | USD                |   |   | USD                |       |
| Revenues                                                     |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |
| Sales                                                        |   |   | 18     |   |               |    | 6,382,468  |               |   |     | 2,852,566          |   |   |               | 11,980,326 |   |   |   | 5,693,535 |   |
|                                                         |   |   |   |   |               |    | 6,382,468  |               |   |     | 2,852,566          |   |   |               | 11,980,326 |   |   |   | 5,693,535 |   |
| Expenses                                                     |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Production      and operating expenses                       |   |   |   |   |               |    | (4,301,617 | )                  |   |     | (2,388,158         | )      |   |               | (8,798,703 | ) |   |   | (6,524,891 | ) |
| General      and administrative expenses                     |   |   |   |   |               |    | (1,472,996 | )                  |   |     | (1,206,585         | )      |   |               | (2,659,157 | ) |   |   | (2,482,011 | ) |
| Accretion      expenses                                      |   |   |   |   |               |    | (63,312    | )                  |   |     | (58,816            | )      |   |               | (125,479   | ) |   |   | (116,564 | ) |
| Gain/(loss)      from disposal of fixed assets               |   |   |   |   |               |    | 8,044      |               |   |     | (2,290             | )      |   |               | (732       | ) |   |   | (5,725 | ) |
| Income/(loss)      from operating activities                 |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
|                                                         |   |   |   |   |               | 552,587 |       |               |   | (803,283 | )                  |   |   | 396,255            |       |   |   | 3,435,656 | ) |
|                                                         |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Share      of profits of associates                          |   |   | 8      |   |               |    | 76,357     |               |   |     | (10,813            | )      |   |               | 94,026     |   |   |   | 18,699 |   |
| Interest      expense                                        |   |   |   |   |               |    | (389,626   | )                  |   |     | (256,690           | )      |   |               | (839,398   | ) |   |   | (415,446 | ) |
| Foreign      currency exchange gain/(loss), net              |   |   |   |   |               |    | (38,499    | )                  |   |     | 64,294             |   |   |               | (91,956    | ) |   |   | 305,110 |   |
| Other      non-operating income, net                         |   |   |   |   |               |    | 20,966     |               |   |     | (1,243             | )      |   |               | 20,966     |   |   |   | 95,875 |   |
|                                                         |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Income/(loss)      before income taxes and minority interest |   |   |   |   |               |    | 221,785    |               |   |     | (1,007,735         | )      |   |               | (420,107   | ) |   |   | (3,431,418 | ) |
|                                                         |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Income      tax benefit/(expense)                            |   |   | 19     |   |               |    | (204,126   | )                  |   |     | 42,363             |   |   |               | (176,952   | ) |   |   | 548,781 |   |
|                                                         |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Minority      interest                                       |   |   |   |   |               |    | (24,168    | )                  |   |     | 5,091              |   |   |               | (21,071    | ) |   |   | 66,508 |   |
|                                                         |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Net      income/(loss)                                       |   |   |   |   |               |    | (6,509     | )                  |   |     | (960,281           | )      |   |               | (618,130   | ) |   |   | (2,816,129 | ) |
|                                                         |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Other      comprehensive income:                             |   |   |   |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Foreign      currency translation adjustment                 |   |   |   |   |               |    | 8,682      |               |   |     | (105,091           | )      |   |               | 19,586     |   |   |   | 212,180 |   |
| Comprehensive      income/(loss)                             |   |   |   |   |               |    | 2,173      |               |   |     | (1,065,372         | )      |   |               | (598,544   | ) |   |   | (2,603,949 | ) |
| Basic      and diluted earnings/(loss) per share             |   |   | 20     |   |               |    |       |               |   |     |               |   |   |               |       |   |   |   |   |   |
| Basic      and diluted                                       |   |   |   |   |               |    | (0.0001    | )                  |   |     | (0.02              | )      |   |               | (0.01      | ) |   |   | (0.04 | ) |

----

|                                            |   |   |
|-------------------------------------------------|--------|--------|
| Caspian      International      Oil Corporation |
| Consolidated      Statements of Cash Flows      |

|                                                               |   | For      six months endedJune      30, 2008USD |       |   | For      six months endedJune      30, 2007USD |
|--------------------------------------------------------------------|--------|------------------------------------------------|------------|--------|------------------------------------------------|
| Operating      activities:                                         |   |                                           |       |   |                                           |
| Net      income/(loss)                                             |   |                                           | (618,130   | )      |                                           |   | (2,816,129 | ) |
| Adjustments      for non-cash items:                               |   |                                           |       |   |                                           |   |
| Depreciation,      depletion and amortization                      |   |                                           | 1,876,105  |   |                                           |   | 1,320,973 |   |
| Stock-based      compensation                                      |   |                                           | 36,354     |   |                                           |   | 364,290 |   |
| Investment      income                                             |   |                                           | (94,026    | )      |                                           |   | (18,699 | ) |
| Accretion      expenses                                            |   |                                           | 125,479    |   |                                           |   | 116,564 |   |
| Minority      interest                                             |   |                                           | 21,071     |   |                                           |   | 66,508 |   |
| Impairment      loss on fixed assets                               |   |                                           | 732        |   |                                           |   | 6,022 |   |
| Foreign      exchange difference on long-term obligations          |   |                                           | 50,501     |   |                                           |   | (179,580 | ) |
| Deferred      income taxes                                         |   |                                           | 176,952    |   |                                           |   | (548,781 | ) |
| Changes      in assets and liabilities                             |   |                                           |       |   |                                           |   |
| Accounts      receivable                                           |   |                                           | (58,877    | )      |                                           |   | (240,718 | ) |
| Inventories                                                        |   |                                           | 447,972    |   |                                           |   | 90,638 |   |
| Accounts      and taxes payable and other liabilities              |   |                                           | (800,878   | )      |                                           |   | 412,717 |   |
| Net      cash ( used in)/ provided by operating activities         |   |                                           | 1,163,255  |   |                                           |   | (1,426,195 | ) |
| Investing      activities:                                         |   |                                           |       |   |                                           |   |
| Acquisition      of property, plant and equipment                  |   |                                           | (151,113   | )      |                                           |   | (1,128,691 | ) |
| Proceeds      from disposal of property, plant and equipment       |   |                                           | 12,920     |   |                                           |   | 11,724 |   |
| Acquisition      of intangible assets                              |   |                                           | (16,836    | )      |                                           |   | 1,388 |   |
| Decrease      of accounts receivable (financial aid)               |   |                                           | 616,977    |   |                                           |   | - |   |
| Increase      in accounts receivable (financial aid)               |   |                                           | (495,506   | )      |                                           |   | - |   |
| Acquisition      of oil exploration assets                         |   |                                           | (1,327,548 | )      |                                           |   | (1,355,686 | ) |
| Restricted      cash                                               |   |                                           | -29,620    |   |                                           |   |
| Net      cash used in investing activities                         |   |                                           | (1,390,726 | )      |                                           |   | (2,471,265 | ) |
| Financing      activities:                                         |   |                                           |       |   |                                           |   |
| Increase      in accounts payable (financial aid)                  |   |                                           | 1,849,534  |   |                                           |   | 865,699 |   |
| Proceeds      from loans                                           |   |                                           | 1,874,826  |   |                                           |   | 4,740,845 |   |
| Proceeds      from common stock                                    |   |                                           | -          |   |                                           |   | 200 |   |
| Decrease      of accounts payable (financial aid)                  |   |                                           | (207,039   | )      |                                           |   | (510,538 | ) |
| Repayment      of loans                                            |   |                                           | (3,103,814 | )      |                                           |   | (1,127,534 | ) |
| Distribution      by subsidiary for period prior to reverse merger |   |                                           | (277,297   | )      |                                           |   | (44,143 | ) |
| Net      cash provided by/(used in) financing activities           |   |                                           | 136,210    |   |                                           |   | 3,924,529 |   |
|                                                               |   |                                           |       |   |                                           |   |
| Effect      of exchange rates on cash                              |   |                                           | (3,121     | )      |                                           |   | (151,818 | ) |
| Net      increase (decrease) in cash and cash equivalents          |   |                                           | (94,382    | )      |                                           |   | (124,749 | ) |
| Cash      and cash equivalents at beginning of the period          |   |                                           | 125,031    |   |                                           |   | 238,900 |   |
| Cash      and cash equivalents at end of the period (Note 5)       |   |                                           | 30,649     |   |                                           |   | 114,151 |   |
| Supplemental      information                                      |   |                                           |       |   |                                           |   |
| Interest      paid                                                 |   |                                           | 839,398    |   |                                           |   | 415,446 |   |
| Oil      and gas assets purchased as accounts payable              |   |                                           | 16,563     |   |                                           |   | 2,662,958 |   |
|                                                               |   |                                           |       |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| (b) | Kazakhstan      business environment |
|-----|--------------------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 2 | Basis      of preparation |
|---|---------------------------|

|  (a) | Statement      of compliance |
|-----------|------------------------------|

| (b) | Principles      of consolidation |
|-----|----------------------------------|

| (c) | Accounting      records |
|-----|-------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 2 | Basis      of preparation (continued) |
|---|---------------------------------------|

|  (d) | Functional      and reporting currency |
|-----------|----------------------------------------|

| (e) | Convertibility      of the Kazakhstan Tenge (KZT) |
|-----|---------------------------------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies |
|---|--------------------------------------|

| (a) | Use      of estimates |
|-----|-----------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies (continued) |
|---|--------------------------------------------------|

| (b) | Cash |
|-----|------|

| (c) | Receivables |
|-----|-------------|

|  (d) | Inventories |
|-----------|-------------|

| (e) | Oil      exploration and production assets |
|-----|--------------------------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies (continued) |
|---|--------------------------------------------------|

| (e) | Oil      exploration assets (continued) |
|-----|-----------------------------------------|

| (f) | Property,      plant and equipment |
|-----|------------------------------------|

| (g) | Intangible      assets |
|-----|------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies (continued) |
|---|--------------------------------------------------|

| (h) | Impairment |
|-----|------------|

| (i) | Restricted      cash |
|-----|----------------------|

| (j) | Trade      and other payables |
|-----|-------------------------------|

| (k) | Asset      retirement obligations |
|-----|-----------------------------------|

| (l) | Income      taxes |
|-----|-------------------|

|  (m) | Revenue      recognition |
|-----------|--------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies (continued) |
|---|--------------------------------------------------|

| (m) | Revenue      recognition (continued) |
|-----|--------------------------------------|

|  (n) | Rental      income |
|-----------|--------------------|

| (o) | Minority      interest |
|-----|------------------------|

| (p) | Earnings      per share |
|-----|-------------------------|

| (q) | Segment      reporting |
|-----|------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies (continued) |
|---|--------------------------------------------------|

| (q) | Segment      reporting (continued) |
|-----|------------------------------------|

| (r) | Contingencies |
|-----|---------------|

| (s) | Recent      accounting pronouncements |
|-----|---------------------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies (continued) |
|---|--------------------------------------------------|

| (s) | Recent      accounting pronouncements(continued) |
|-----|--------------------------------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 3 | Significant      accounting policies (continued) |
|---|--------------------------------------------------|

| (t) | Share-Based      Compensation |
|-----|-------------------------------|

|                          |   | Shares |    |
|-------------------------------|--------|--------|---------|
|                          |   | Common |    |   | Stock |   |
|                          |   | Stock  |    |   | Options |   |
| Balance      at Dec. 31, 2007 |   |   | 150,000 |   |   |   | 800,000 |   |
|                          |   |   |    |   |   |   |   |   |
| 2008      Awards              |   |   | 0       |   |   |   | 0 |   |
|                          |   |   |    |   |   |   |   |   |
| 2008      Cancellations       |   |   | 0       |   |   |   | ( 191,667 | ) |
|                          |   |   |    |   |   |   |   |   |
| Balance      at June 30, 2008 |   |   | 150,000 |   |   |   | 608,333 |   |

| Expected      Dividend Yield | 0.0% |
|------------------------------|------|
| Risk      Free Interest Rate | 5.0% |
| Expected      life (years)   | 1.5  |
| Volatility                   | 110% |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 4 | Acquisition      of subsidiaries |
|---|----------------------------------|

|                                      |   |                          |   |   |                             |   |
|-------------------------------------------|--------|-------------------------------|--------|--------|----------------------------------|--------|
|                                      |   | As of June 30,      2008 |   |   | As      of December31,      2007 |   |
|                                      |   | USD                           |   |   | USD                              |   |
|                                      |   |                          |   |   |                             |   |
| Cash       held in bank - KZT        |   |                          | 16,266 |   |                             |   | 58,026 |   |
| Cash      held in bank - other currencies |   |                          | 764    |   |                             |   | 25,879 |   |
| Petty      cash                           |   |                          | 13,619 |   |                             |   | 41,126 |   |
|                                      |   |                          |   |   |                             |   |   |   |
|                                      |   |                          | 30,649 |   |                             |   | 125,031 |   |

----

| Caspian      International Oil Corporation          |
|-----------------------------------------------------|
| Notes      to the Consolidated Financial Statements |
|                                                |

|                                      |   |                          |      |   |                             |   |
|-------------------------------------------|--------|-------------------------------|-----------|--------|----------------------------------|--------|
|                                      |   | As of June 30,      2008 |      |   | As      of December31,      2007 |   |
|                                      |   | USD                           |      |   | USD                              |   |
|                                      |   |                          |      |   |                             |   |
| Trade      receivables                    |   |                          | 4,082,478 |   |                             |   | 4,074,138 |   |
| Financial      aid to related parties     |   |                          | 425,362   |   |                             |   | 531,468 |   |
| Advances      paid                        |   |                          | 197,913   |   |                             |   | 378,471 |   |
| Taxes      prepaid                        |   |                          | 94,832    |   |                             |   | 73,325 |   |
| Receivables      from employees           |   |                          | 107,172   |   |                             |   | 277,939 |   |
| Loan      receivable from employee        |   |                          | 139,222   |   |                             |   | 50,183 |   |
| Deferred      expenses                    |   |                          | 158,013   |   |                             |   | 284,970 |   |
| Other      receivables                    |   |                          | -         |   |                             |   | 248 |   |
|                                      |   |                          | 5,204,992 |   |                             |   | 5,670,742 |   |
|                                      |   |                          |      |   |                             |   |   |   |
| Less      allowance for doubtful accounts |   |                          | (81,416   | )      |                             |   | (110,673 | ) |
|                                      |   |                          |      |   |                             |   |   |   |
|                                      |   |                          | 5,123,576 |   |                             |   | 5,560,069 |   |

|                                                                |   |                                       |    |   |                                       |   |
|---------------------------------------------------------------------|--------|--------------------------------------------|---------|--------|--------------------------------------------|--------|
|                                                                |   | For      six monthsended      June 30,2008 |    |   | For      six monthsended      June 30,2007 |   |
|                                                                |   | USD                                        |    |   | USD                                        |   |
|                                                                |   |                                       |    |   |                                       |   |
| Allowance      for doubtful accounts at the beginning of the period |   |                                       | 110,673 |   |                                       |   | 150,529 |   |
| Additions      charged to impairment loss                           |   |                                       | 42,839  |   |                                       |   | - |   |
| Recovery      of bad debt allowance                                 |   |                                       | (71,744 | )      |                                       |   | - |   |
| Foreign      currency translation adjustment                        |   |                                       | (352    | )      |                                       |   | 6,289 |   |
|                                                                |   |                                       |    |   |                                       |   |   |   |
| Allowance      for doubtful accounts at the end of the period       |   |                                       | 81,416  |   |                                       |   | 156,818 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 7 | Inventories |
|---|-------------|

|                 |   |                          |      |   |                             |   |
|----------------------|--------|-------------------------------|-----------|--------|----------------------------------|--------|
|                 |   | As of June 30,      2008 |      |   | As      of December31,      2007 |   |
|                 |   | USD                           |      |   | USD                              |   |
|                 |   |                          |      |   |                             |   |
| Spare      parts     |   |                          | 812,306   |   |                             |   | 1,225,004 |   |
| Other      materials |   |                          | 271,404   |   |                             |   | 250,133 |   |
|                 |   |                          |      |   |                             |   |   |   |
|                 |   |                          | 1,083,710 |   |                             |   | 1,475,137 |   |

| 8 | Investments |
|---|-------------|

| 9 | Oil      exploration assets |
|---|-----------------------------|

|                            |   |                         |      |   |                            |   |
|---------------------------------|--------|------------------------------|-----------|--------|---------------------------------|--------|
|                            |   | As ofJune       30,2008 |      |   | As      ofDecember      31,2007 |   |
|                            |   | USD                          |      |   | USD                             |   |
|                            |   |                         |      |   |                            |   |
| Oil      exploration assets     |   |                         |      |   |                            |   |
| Evaluated                       |   |                         | 2,151,215 |   |                            |   | 1,730,833 |   |
| Unevaluated                     |   |                         | 4,508,892 |   |                            |   | 3,627,782 |   |
| Less      accumulated depletion |   |                         | -         |   |                            |   | - |   |
|                            |   |                         |      |   |                            |   |   |   |
|                            |   |                         | 6,660,107 |   |                            |   | 5,358,615 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 10    Property,      plant and equipment |   |   |   |   |   |   |
|--------------------------------------------------------------|--------|--------|--------|--------|--------|--------|

|                                     |   | As of June 30,      2008 |        |   | As      of December31,      2007 |   |
|------------------------------------------|--------|-------------------------------|-------------|--------|----------------------------------|--------|
|                                     |   | USD                           |        |   | USD                              |   |
|                                     |   |                          |        |   |                             |   |
| Machinery      and equipment             |   |                          | 30,603,749  |   |                             |   | 30,754,402 |   |
| Vehicles                                 |   |                          | 1,949,656   |   |                             |   | 1,950,909 |   |
| Land      and buildings                  |   |                          | 1,827       |   |                             |   | 1,834 |   |
| Other      property, plant and equipment |   |                          | 327,559     |   |                             |   | 225,748 |   |
|                                     |   |                          | 32,882,791  |   |                             |   | 32,932,893 |   |
|                                     |   |                          |        |   |                             |   |   |   |
| Less      accumulated depreciation       |   |                          | (15,635,487 | )      |                             |   | (13,936,476 | ) |
|                                     |   |                          |        |   |                             |   |   |   |
|                                     |   |                          | 17,247,304  |   |                             |   | 18,996,417 |   |

| 11 | Intangible      assets |
|----|------------------------|

|                               |   |                          |     |   |                         |   |
|------------------------------------|--------|-------------------------------|----------|--------|------------------------------|--------|
|                               |   | As of June 30,      2008 |     |   | As      of December 31, 2007 |   |
|                               |   | USD                           |     |   | USD                          |   |
| Program      software              |   |                          | 613,309  |   |                         |   | 597,091 |   |
|                               |   |                          |     |   |                         |   |   |   |
| Less      accumulated amortization |   |                          | (477,780 | )      |                         |   | (432,344 | ) |
|                               |   |                          |     |   |                         |   |   |   |
|                               |   |                          | 135,529  |   |                         |   | 164,747 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 12 | Accounts      payable and other liabilities |
|----|---------------------------------------------|

|                                                                                   |   |                          |      |   |                             |   |
|----------------------------------------------------------------------------------------|--------|-------------------------------|-----------|--------|----------------------------------|--------|
|                                                                                   |   | As of June 30,      2008 |      |   | As      of December31,      2007 |   |
|                                                                                   |   | USD                           |      |   | USD                              |   |
|                                                                                   |   |                          |      |   |                             |   |
| Trade      accounts payable                                                            |   |                          | 1,704,096 |   |                             |   | 2,518,301 |   |
| Payables      to employees                                                             |   |                          | 1,422,371 |   |                             |   | 1,685,385 |   |
| Advances      received                                                                 |   |                          | 62,211    |   |                             |   | 168,429 |   |
| Financial      aid from related parties                                                |   |                          | 2,035,925 |   |                             |   | 396,559 |   |
| Payable      to related parties                                                        |   |                          | 173,807   |   |                             |   | 160,622 |   |
| Payables      to pension fund stipulated by the law of the Republic of      Kazakhstan |   |                          | 416,961   |   |                             |   | 245,004 |   |
| Interest      payable                                                                  |   |                          | 609,142   |   |                             |   | 644,140 |   |
| Vacation      provision                                                                |   |                          | 92,331    |   |                             |   | 92,677 |   |
| Other      payables                                                                    |   |                          | 396,991   |   |                             |   | 50,740 |   |
|                                                                                   |   |                          |      |   |                             |   |   |   |
|                                                                                   |   |                          | 6,913,835 |   |                             |   | 5,961,857 |   |

| 13 | Loans |
|----|-------|

|                                              |   |                          |       |   |                             |   |
|---------------------------------------------------|--------|-------------------------------|------------|--------|----------------------------------|--------|
|                                              |   | As of June 30,      2008 |       |   | As      of December30,      2007 |   |
|                                              |   | USD                           |       |   | USD                              |   |
|                                              |   |                          |       |   |                             |   |
| Bank      TuranAlem:                              |   |                          |       |   |                             |   |
| KZT      – fixed from  15% to 16% |   |                          | 6,160,935  |   |                             |   | 7,131,780 |   |
| USD      – at Libor + 5.65%                 |   |                          | 9,785,284  |   |                             |   | 10,406,525 |   |
|                                              |   |                          | 15,946,219 |   |                             |   | 17,538,305 |   |
| Shareholder                                       |   |                          |       |   |                             |   |   |   |
| USD      – fixed at 4.00%                   |   |                          | 116,862    |   |                             |   | 116,862 |   |
|                                              |   |                          | 116,862    |   |                             |   | 116,862 |   |
| Shareholder                                       |   |                          |       |   |                             |   |   |   |
| USD      - fixed at 6.00%                         |   |                          | 687,060    |   |                             |   | 350,000 |   |
|                                              |   |                          | 687,060    |   |                             |   | 350,000 |   |
| Other                                             |   |                          |       |   |                             |   |   |   |
| USD                                               |   |                          | 33,160     |   |                             |   | 30,000 |   |
|                                              |   |                          | 33,160     |   |                             |   | 30,000 |   |
|                                              |   |                          |       |   |                             |   |   |   |
|                                              |   |                          | 16,783,301 |   |                             |   | 18,035,167 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 13 | Loans      (continued) |
|----|------------------------|

|                  |   |   |       |   |   |   |
|-----------------------|--------|--------|------------|--------|--------|--------|
| Short-term      loans |   |   | 2,255,946  |   |   |   | 5,306,085 |   |
| Long-term      loans  |   |   | 14,527,355 |   |   |   | 12,729,082 |   |
| Total      loans      |   |   | 16,783,301 |   |   |   | 18,035,167 |   |

| Company  | Loanagreement# | Date issued              | Date      expires       | Purpose      ofloan        | Interestrate | Balance      as ofJune      30, 2008,USD |
|----------|----------------|--------------------------|-------------------------|----------------------------|--------------|------------------------------------------|
| Dank     | 63             | May      2007            | March      2012         | Equipment                  | 9.23%        | 4,249,357                                |
|     | 59             | April      2005          | June      2010          | Equipment                  | 11.03%       | 2,821,650                                |
|     | 62             | May      2007            | May      2009           | Equipment                  | 11.76%       | 797,175                                  |
|     | 94-1           | May      2007            | May      2010           | Equipment                  | 12.90%       | 819,300                                  |
|     | 94-2           | August      2008         | August      2010        | Equipment                  | 12.96%       | 327,720                                  |
|     | 110            | June      2007           | June      2010          | Equipment                  | 13.20%       | 375,000                                  |
|     | 131-1          | August      2007         | August      2010        | Equipment                  | 13.01%       | 131,461                                  |
|     | 198            | May      2008            | November      2008      | Working      capital       | 16.00%       | 350,000                                  |
|     | 682            | March      2007          | March      2012         | Equipment                  | 15.00%       | 160,401                                  |
|     | 755            | April      2007          | March      2012         | Equipment                  | 15.00%       | 311,777                                  |
|     | 810            | April      2007          | March      2012         | Equipment                  | 15.00%       | 233,833                                  |
|     | 876            | April      2007          | March      2012         | Equipment                  | 15.00%       | 233,833                                  |
|     | 1257           | June      2007           | March      2012         | Equipment                  | 15.00%       | 194,099                                  |
|     | 136            | April      2008          | October      2008       | Working      capital       | 16.00%       | 579,710                                  |
|     | 2146           |  December      2007 | November      2008      |  Working      capital | 16.00%       | 240,166                                  |
|     | 81             |  March      2008    |  October      2008 |  Working      capital | 16.00%       | 258,937                                  |
| Kor-Tazh | 747            | April      2007          | March      2012         | Develop      oil field     | 15%          | 371,623                                  |
|     | 1012           | May      2007            | March      2012         | Develop      oil field     | 15%          | 267,609                                  |
|     | 1116           | May      2007            | March      2012         | Develop      oil field     | 15%          | 1,144,179                                |
|     | 1466           | July      2007           | March      2012         | Develop      oil field     | 15%          | 404,941                                  |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 13 | Loans      (continued) |
|----|------------------------|

|   | 1973 | October      2007 | March      2012 | Develop      oil field | 15% | 1,010,352 |
|--------|------|-------------------|-----------------|------------------------|-----|-----------|
|   | 1468 | July      2007    | March      2012 | Develop      oil field | 15% | 135,000   |
|   | 1576 | July      2007    | March      2012 | Develop      oil field | 15% | 400,000   |

| 14 | Taxes      Payable |
|----|--------------------|

|                     |   |                          |      |   |                             |   |
|--------------------------|--------|-------------------------------|-----------|--------|----------------------------------|--------|
|                     |   | As of June 30,      2008 |      |   | As      of December31,      2007 |   |
|                     |   | USD                           |      |   | USD                              |   |
| Income      tax          |   |                          | 614,617   |   |                             |   | 649,202 |   |
| Personal      income tax |   |                          | 373,447   |   |                             |   | 341,087 |   |
| Social      tax          |   |                          | 221,971   |   |                             |   | 288,313 |   |
| VAT      payable         |   |                          | 136,751   |   |                             |   | 431,798 |   |
| Vehicle      tax         |   |                          | 13,480    |   |                             |   | 7,944 |   |
| Property      tax        |   |                          | 41,666    |   |                             |   | 111,344 |   |
| Other      taxes         |   |                          | 62,971    |   |                             |   | 59,149 |   |
|                     |   |                          |      |   |                             |   |   |   |
|                     |   |                          | 1,464,903 |   |                             |   | 1,888,837 |   |

| 15 | Obligation      for historical reimbursement |
|----|----------------------------------------------|

|                                                                 |   | As of June 30,      2008 |      |   | As      of December31,      2007 |   |
|----------------------------------------------------------------------|--------|-------------------------------|-----------|--------|----------------------------------|--------|
|                                                                 |   | USD                           |      |   | USD                              |   |
|                                                                 |   |                          |      |   |                             |   |
| Obligation      for historical reimbursement as of December 31, 2007 |   |                          | 3,151,916 |   |                             |   | 2,927,930 |   |
| Accretion      expense                                               |   |                          | 118,340   |   |                             |   | 223,986 |   |
|                                                                 |   |                          |      |   |                             |   |   |   |
| Obligation      for historical reimbursement as of June 30, 2008     |   |                          | 3,270,256 |   |                             |   | 3,151,916 |   |

----

|                                               |
|----------------------------------------------------|
| Caspian      International Oil Corporation         |
| Notes      to the Consolidated FinancialStatements |

| 15 | Obligation      for historical reimbursement(continued) |
|----|---------------------------------------------------------|

| 16 | Asset      retirement obligations |
|----|-----------------------------------|

|                                                     |   | As of June30,      2008 |    |   | As      of December31,      2007 |   |
|----------------------------------------------------------|--------|-------------------------|---------|--------|----------------------------------|--------|
|                                                     |   | USD                     |    |   | USD                              |   |
|                                                     |   |                    |    |   |                             |   |
| Asset      retirement obligation as of December 31, 2007 |   |                    | 190,032 |   |                             |   | 176,535 |   |
| Accretion      expense                                   |   |                    | 7,139   |   |                             |   | 13,497 |   |
|                                                     |   |                    |    |   |                             |   |   |   |
| Asset      retirement obligation as of June 30, 2008     |   |                    | 197,171 |   |                             |   | 190,032 |   |

| 17 | Stockholders’      equity |
|----|---------------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 17 | Stockholders’      equity (continued) |
|----|---------------------------------------------|

|                                             |        |                  |   |
|--------------------------------------------------|-------------|-----------------------|--------|
|                                             |        | Weighted      Average |
|                                             | Options     | Exercise              | Fair   |
|                                             | Outstanding | Price                 | Value  |
| Balance      ,12/31/2007                         | 950,000     | 0.66                  | 0.34   |
|                                             |        |                  |   |
| Awards      in six months 2008                   | 0           |                  |   |
|                                             |        |                  |   |
| Cancellations  in      six months 2008 | (191,667)   | 0.70                  | 0.27   |
|                                             |        |                  |   |
| Balance,      6/30/2008                          | 758,333     | 0.65                  | 0.36   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 18 | Revenue |
|----|---------|

|                                               |   | For      six months ended June 30,2008 |       |   | For      six months ended June 30,2007 |   |
|----------------------------------------------------|--------|----------------------------------------|------------|--------|----------------------------------------|--------|
|                                               |   | USD                                    |       |   | USD                                    |   |
|                                               |   |                                   |       |   |                                   |   |
| Samek      International                           |   |                                   | 6,234,216  |   |                                   |   | 2,723,583 |   |
| Adai      Petroleum                                |   |                                   | 2,654,478  |   |                                   |   | - |   |
| Alga      Caspi Gas                                |   |                                   | 1,416,352  |   |                                   |   | - |   |
| Sagiz      Petroleum                               |   |                                   | -          |   |                                   |   | 1,379,204 |   |
| Anako                                              |   |                                   | 1,012,658  |   |                                   |   | - |   |
| Institute      of electrical and physical problems |   |                                   | -          |   |                                   |   | 664,582 |   |
| Other      customers                               |   |                                   | 662,622    |   |                                   |   | 926,166 |   |
|                                               |   |                                   |       |   |                                   |   |   |   |
| Total      revenue                                 |   |                                   | 11,980,326 |   |                                   |   | 5,693,535 |   |

|                                |   |                                          |     |   |                                          |   |   |                                        |   |   |                                        |   |
|-------------------------------------|--------|-----------------------------------------------|----------|--------|-----------------------------------------------|--------|--------|---------------------------------------------|--------|--------|---------------------------------------------|--------|
|                                |   | For      the three months ended June 30, 2008 |     |   | For      the three months ended June 30, 2007 |   |   | For      the six months ended June 30, 2008 |   |   | For      the six months ended June 30, 2007 |   |
|                                |   | USD                                           |     |   | USD                                           |   |   | USD                                         |   |   | USD                                         |   |
|                                |   |                                          |     |   |                                          |   |   |                                        |   |   |                                        |   |
| Current      tax (expense)/benefit  |   |                                          | -        |   |                                          |   | -      |                                        |   |   | -                                           |   |   |   | - |   |
| Deferred      tax (expense)/benefit |   |                                          | (204,126 | )      |                                          |   | 42,363 |                                        |   |   | (176,952                                    | )      |   |   | 548,781 |   |
|                                |   |                                          |     |   |                                          |   |   |                                        |   |   |                                        |   |   |   |   |   |
|                                |   |                                          | (204,126 | )      |                                          |   | 42,363 |                                        |   |   | (176,952                                    | )      |   |   | 548,781 |   |

----

| Caspian      International Oil Corporation          |
|-----------------------------------------------------|
| Notes      to the Consolidated Financial Statements |
|                                                |

|                                         |   | For      the three months ended June 30, 2008 |     |   | For      the three months ended June 30, 2007 |   |       | For      the six months ended June 30, 2008 |   |   | For      the six months ended June 30, 2007 |   |
|----------------------------------------------|--------|-----------------------------------------------|----------|--------|-----------------------------------------------|--------|------------|---------------------------------------------|--------|--------|---------------------------------------------|--------|
|                                         |   | USD                                           |     |   | USD                                           |   |       | USD                                         |   |   | USD                                         |   |
| Income/(loss)      before income taxes       |   |                                          | 221,785  |   |                                          |   | (1,007,735 | )                                           |   |   | (420,107                                    | )      |   |   | (3,431,418 | ) |
| Expected      tax (provision)/benefit        |   |                                          | (66,536  | )      |                                          |   | 302,321    |                                        |   |   | 126,032                                     |   |   |   | 1,029,425 |   |
| Add      tax effect of:                      |   |                                          |     |   |                                          |   |       |                                        |   |   |                                        |   |   |   |   |   |
|    Permanent      differences |   |                                          | (137,590 | )      |                                          |   | (259,958   | )                                           |   |   | (302,984                                    | )      |   |   | (480,644 | ) |
|                                         |   |                                          | (204,126 | )      |                                          |   | 42,363     |                                        |   |   | (176,952                                    | )      |   |   | 548,781 |   |

|                                                   |   | As      of June 30,2008 |       |   | As      of December 31, 2007 |   |
|--------------------------------------------------------|--------|-------------------------|------------|--------|------------------------------|--------|
|                                                   |   | USD                     |       |   | USD                          |   |
| Deferred      tax assets:                              |   |                    |       |   |                         |   |
| Accrued      tax liabilities                           |   |                    | 85,319     |   |                         |   | 122,892 |   |
| Accrued      vacation provision                        |   |                    | 44,122     |   |                         |   | 31,413 |   |
| Deferred      tax related to oil properties            |   |                    | 1,177,962  |   |                         |   | 779,402 |   |
| Tax      losses carried forward                        |   |                    | 916,077    |   |                         |   | 1,238,862 |   |
|                                                   |   |                    | 2,223,480  |   |                         |   | 2,172,569 |   |
|                                                   |   |                    |       |   |                         |   |   |   |
|      Valuation      allowance |   |                    | (1,177,962 | )      |                         |   | (779,402 | ) |
|                                                   |   |                    | 1,045,518  |   |                         |   | 1,393,167 |   |
| Deferred      tax liabilities:                         |   |                    |       |   |                         |   |   |   |
| Fixed      assets and intangible assets                |   |                    | 2,194,219  |   |                         |   | 2,368,487 |   |
|                                                   |   |                    | 2,194,219  |   |                         |   | 2,368,487 |   |
|                                                   |   |                    |       |   |                         |   |   |   |
| Net      deferred tax liability                        |   |                    | 1,148,701  |   |                         |   | 975,320 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

|                                         |   | Deferred      Tax AssetsAs      of June 30,2008 |      |   | Deferred      Tax LiabilitiesAs      of June 30,2008 |   |
|----------------------------------------------|--------|-------------------------------------------------|-----------|--------|------------------------------------------------------|--------|
|                                         |   | USD                                             |      |   | USD                                                  |   |
|  At      the beginning of the year      |   |                                            | 1,393,167 |   |                                                 |   | 2,368,487 |   |
| Charge      recognized in income             |   |                                            | (342,457  | )      |                                                 |   | (165,505 | ) |
| Foreign      currency translation adjustment |   |                                            | (5,192    | )      |                                                 |   | (8,763 | ) |
|                                         |   |                                            |      |   |                                                 |   |   |   |
| At      the end of the period                |   |                                            | 1,045,518 |   |                                                 |   | 2,194,219 |   |

|                                                                     |   |                                        |       |   |                                         |   |       |                                     |   |   |                                           |   |
|--------------------------------------------------------------------------|--------|---------------------------------------------|------------|--------|----------------------------------------------|--------|------------|------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                                     |   | Forthree      months endedJune30,      2008 |       |   | For three months      endedJune30,      2007 |   |       | Forsixmonths      endedJune30,      2008 |   |   | Forsix months      endedJune30,      2007 |   |
|                                                                     |   | USD                                         |       |   | USD                                          |   |       | USD                                      |   |   | USD                                            |   |
|                                                                     |   |                                        |       |   |                                         |   |       |                                     |   |   |                                           |   |
| Net      profit/(loss) attributable to ordinary shareholders             |   |                                        | (6,509     | )      |                                         |   | (960,281   | )                                        |   |   | (618,130                                       | )      |   |   | (2,816,129 | ) |
|                                                                     |   |                                        |       |   |                                         |   |       |                                     |   |   |                                           |   |   |   |   |   |
| Weighted      average number of outstanding common shares                |   |                                        | 62,757,028 |   |                                         |   | 62,991,753 |                                     |   |   | 62,757,028                                     |   |   |   | 62,647,592 |   |
| Weighted      average number of outstanding common shares after dilution |   |                                        | 62,757,028 |   |                                         |   | 62,991,753 |                                     |   |   | 62,757,028                                     |   |   |   | 62,647,592 |   |
|                                                                     |   |                                        |       |   |                                         |   |       |                                     |   |   |                                           |   |   |   |   |   |
|                                                                     |   |                                        |       |   |                                         |   |       |                                     |   |   |                                           |   |   |   |   |   |
| Basic      and diluted earnings per share                                |   |                                        | (0.0001    | )      |                                         |   | (0.02      | )                                   |   |   | (0.01                                          | )      |   |   | (0.04 | ) |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

|                                                |   |                                   |       |   |                                   |   |      |                                   |   |   |                                   |   |
|-----------------------------------------------------|--------|----------------------------------------|------------|--------|----------------------------------------|--------|-----------|----------------------------------------|--------|--------|----------------------------------------|--------|
| Business      segments                              |   | Oil      field services                |       |   | Oil      field Development             |   |      | Eliminations                           |   |   | Consolidated                           |   |
| USD                                                 |   | For      six months ended June 30,2008 |       |   | For      six months ended June 30,2008 |   |      | For      six months ended June 30,2008 |   |   | For      six months ended June 30,2008 |   |
| Revenues                                            |   |                                   |       |   |                                   |   |      |                                   |   |   |                                   |   |
| Sales      to third parties                         |   |                                   | 11,980,326 |   |                                   |   | -         |                                   |   |   | -                                      |   |   |   | 11,980,326 |   |
| Inter-segment      sales                            |   |                                   | -          |   |                                   |   | -         |                                   |   |   | -                                      |   |   |   | - |   |
| Total      sales                                    |   |                                   | 11,980,326 |   |                                   |   | -         |                                   |   |   | -                                      |   |   |   | 11,980,326 |   |
| Expenses                                            |   |                                   |       |   |                                   |   |      |                                   |   |   |                                   |   |   |   |   |   |
| Share      of profit of associates                  |   |                                   | 94,026     |   |                                   |   | -         |                                   |   |   | -                                      |   |   |   | 94,026 |   |
| Production      and operating expenses              |   |                                   | (8,798,703 | )      |                                   |   | -         |                                   |   |   | -                                      |   |   |   | (8,798,703 | ) |
| General      and administrative expenses, operating |   |                                   | (1,809,996 | )      |                                   |   | (340,761  | )                                      |   |   | -                                      |   |   |   | (2,150,757 | ) |
| General      and administrative expenses, corporate |   |                                   | (254,200   | )      |                                   |   | (254,200  | )                                      |   |   | -                                      |   |   |   | (508,400 | ) |
| Accretion      expenses                             |   |                                   | -          |   |                                   |   | (125,479  | )                                      |   |   | -                                      |   |   |   | (125,479 | ) |
| Interest      expense                               |   |                                   | (839,398   | )      |                                   |   | -         |                                   |   |   | -                                      |   |   |   | (839,398 | ) |
| Foreign      currency exchange gain, net            |   |                                   | (76,817    | )      |                                   |   | (15,139   | )                                      |   |   | -                                      |   |   |   | (91,956 | ) |
| Other      non-operating income, net                |   |                                   | 20,325     |   |                                   |   | (91       | )                                      |   |   | -                                      |   |   |   | 20,234 |   |
| Income      tax expense                             |   |                                   | (176,952   | )      |                                   |   | -         |                                   |   |   | -                                      |   |   |   | (176,952 | ) |
| Net      income/(loss)                              |   |                                   | 138,611    |   |                                   |   | (735,670  | )                                      |   |   | (21,071                                | )      |   |   | (618,130 | ) |
| Total      assets                                   |   |                                   | 26,870,913 |   |                                   |   | 9,895,851 |                                   |   |   | (5,266,746                             | )      |   |   | 31,500,018 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

|                                     |   |                                       |       |   |                                       |   |      |                                       |   |   |                                       |   |
|------------------------------------------|--------|--------------------------------------------|------------|--------|--------------------------------------------|--------|-----------|--------------------------------------------|--------|--------|--------------------------------------------|--------|
| Business      segments                   |   | Oil      field services                    |       |   | Oil      fieldDevelopment                  |   |      | Eliminations                               |   |   | Consolidated                               |   |
| USD                                      |   | For      the six months ended June 30,2007 |       |   | For      the six months ended June 30,2007 |   |      | For      the six months ended June 30,2007 |   |   | For      the six months ended June 30,2007 |   |
| Revenues                                 |   |                                       |       |   |                                       |   |      |                                       |   |   |                                       |   |
| Sales      to third parties              |   |                                       | 5,693,535  |   |                                       |   | -         |                                       |   |   | -                                          |   |   |   | 5,693,535 |   |
| Inter-segment      sales                 |   |                                       | 1,344,568  |   |                                       |   | -         |                                       |   |   | (1,344,568                                 | )      |   |   | - |   |
| Total      sales                         |   |                                       | 7,038,103  |   |                                       |   | -         |                                       |   |   | (1,344,568                                 | )      |   |   | 5,693,535 |   |
| Expenses                                 |   |                                       |       |   |                                       |   |      |                                       |   |   |                                       |   |   |   |   |   |
| Investment      income                   |   |                                       | 18,699     |   |                                       |   | -         |                                       |   |   | -                                          |   |   |   | 18,699 |   |
| Production      and operating expenses   |   |                                       | (7,775,853 | )      |                                       |   | -         |                                       |   |   | 1,250,962                                  |   |   |   | (6,524,891 | ) |
| General      and administrative expenses |   |                                       | (2,187,742 | )      |                                       |   | (294,269  | )                                          |   |   | -                                          |   |   |   | (2,482,011 | ) |
| Accretion      expenses                  |   |                                       | -          |   |                                       |   | (116,564  | )                                          |   |   | -                                          |   |   |   | (116,564 | ) |
| Interest      expense                    |   |                                       | (366,600   | )      |                                       |   | (48,846   | )                                          |   |   | -                                          |   |   |   | (415,446 | ) |
| Foreign      currency exchange gain, net |   |                                       | 187,140    |   |                                       |   | 117,970   |                                       |   |   |                                       |   |   |   | 305,110 |   |
| Other      non-operating income, net     |   |                                       | 90,150     |   |                                       |   | -         |                                       |   |   | -                                          |   |   |   | 90,150 |   |
| Income      tax (expense)/benefit        |   |                                       | 548,781    |   |                                       |   | -         |                                       |   |   | -                                          |   |   |   | 548,781 |   |
| Net      income/(loss)                   |   |                                       | (2,433,124 | )      |                                       |   | (355,907  | )                                          |   |   | (27,098                                    | )      |   |   | (2,816,129 | ) |
| Total      assets                        |   |                                       | 24,551,355 |   |                                       |   | 5,677,652 |                                       |   |   | (4,534,527                                 | )      |   |   | 25,694,480 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 22 | Commitments      and Contingencies |
|----|------------------------------------|

|                                                                      |   | Payments      Due By Period |       |
|---------------------------------------------------------------------------|--------|-----------------------------|------------|
| Contractual      obligations                                              |   | Total                       |       |   | Less      than 1 year |   |   | 1-3      years |   |   | 4-5      years |   |   | After      5 years |   |
| Capital      Expenditure   Commitment                      |   | $                           | 11,265,472 |   |   | $ | 565,472 |   |   | $ | 7,400,000 |   |   | $ | 300,000 |   |   | $ | 3,000,000 |   |
| Historical      cost Due to the Government of   Kazakhstan |   | $                           | 6,267,860  |   |   |   | - |   |   | $ | 417,860 |   |   | $ | 835,700 |   |   | $ | 5,014,300 |   |
| Social      sphere development commitment                                 |   | $                           | 792,000    |   |   | $ | 42,000 |   |   | $ | 126,000 |   |   | $ | 85,000 |   |   | $ | 539,000 |   |
| Obligation      to finance professional training                          |   | $                           | 121,555    |   |   | $ | 6,555 |   |   | $ | 79,000 |   |   | $ | 5,000 |   |   | $ | 31,000 |   |
|  Asset      retirement obligation                                    |   | $                           | 216,000    |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 216,000 |   |
|  Loans                                                               |   | $                           | 16,783,301 |   |   | $ | 5,395,553 |   |   | $ | 8,450,690 |   |   | $ | 2,900,930 |   |   | $ | 36,128 |   |
| Interest      expense                                                     |   | $                           | 4,326,569  |   |   | $ | 2,175,707 |   |   | $ | 1,685,749 |   |   | $ | 420,181 |   |   | $ | 44,932 |   |
|     Total                                             |   | $                           | 39,772,757 |   |   | $ | 8,185,287 |   |   | $ | 18,159,299 |   |   | $ | 4,546,811 |   |   | $ | 8,881,360 |   |

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 22 | Commitments      and Contingencies (continued) |
|----|------------------------------------------------|

| 23         Post balance sheet events |
|-----------------------------------------------------|

|   | a) | a      parent company and itssubsidiaries; |
|--------|----|--------------------------------------------|

|   | b) | subsidiaries      of a common parent; |
|--------|----|---------------------------------------|

----

|                                                |
|-----------------------------------------------------|
| Caspian      International Oil Corporation          |
| Notes      to the Consolidated Financial Statements |
|                                                |

| 24 | Related      party transactions (continued) |
|----|---------------------------------------------|

|   | c) | an      enterprise and trusts for the benefit of employees, such as pension and      profit-sharing trusts that are  managed by or under the trusteeship      of the enterprise’s management; |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d) | an      enterprise and its principal owners, management, or members of their      immediate families; and |
|--------|----|-----------------------------------------------------------------------------------------------------------|

|   | e) | affiliates. |
|--------|----|-------------|

|   | · | “PGDS  Services”      LLP – is a 100% subsidiary of Dank LLP, which is Variable Interest      Entity; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | “Kazpromgeiphysics”      JSC – Janseitov Nurlan is one of the shareholders of the      company; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | “Batyr”      LLP – Janseitov Nurlan is one of the shareholders of the      company; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | “Nurtobe”      LLP – Bergaliyev Timur is a Director of the  company; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | “Turksibstroy”      LLP – Bergaliyev Timur used to be a Director of the    company; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | “City      lux” LLP – Bergaliyev Timur is a founder and Director of the      company; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | “Caspian      Logging” LLP – related party of “Kazpromgeophysics”  LLP. |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|                                           |   |                                          |    |   |                                          |   |    |                                            |   |   |                                                  |   |
|------------------------------------------------|--------|-----------------------------------------------|---------|--------|-----------------------------------------------|--------|---------|-------------------------------------------------|--------|--------|-------------------------------------------------------|--------|
|                                           |   | For      three months ended June30,      2008 |    |   | For      three months ended June30,      2007 |   |    | For      sixmonths      ended June30,      2008 |   |   | For      six months      ended June30,      2007 |   |
|                                           |   | USD                                           |    |   | USD                                           |   |    | USD                                             |   |   | USD                                                   |   |
| Salaries      and bonuses                      |   |                                          | 164,114 |   |                                          |   | 176,208 |                                            |   |   | 338,198                                               |   |   |   | 351,273 |   |
| Other      long-term service benefits provided |   |                                          |    |   |                                          |   | -       |                                            |   |   |                                                  |   |   |   | - |   |
| Termination      benefits                      |   |                                          |    |   |                                          |   | -       |                                            |   |   |                                                  |   |   |   | - |   |
|                                           |   |                                          | 164,114 |   |                                          |   | 176,208 |                                            |   |   | 338,198                                               |   |   |   | 351,273 |   |

----

|                                               |
|----------------------------------------------------|
| Caspian      International Oil Corporation         |
| Notes      to the Consolidated FinancialStatements |

| 24 | Related      party transactions (continued) |
|----|---------------------------------------------|

|                                            |                                      |   |                                      |   |                                           |   |                                              |
|-------------------------------------------------|-------------------------------------------|--------|-------------------------------------------|--------|------------------------------------------------|--------|---------------------------------------------------|
| USD                                             | Transaction      value                    |   | Transaction      value                    |   | Transaction      value                         |   | Transaction      value                            |
|                                            | For      three months ended June 30, 2008 |   | For      three months ended June 30, 2007 |   | For      sixmonthsended      June30,      2008 |   | For      six monthsended      March 31, 2007 |
| Services      provided:                         |                                      |   |                                      |   |                                           |   |                                              |
|   Other      related parties          |                                      |   |                                      |   |                                           |   |                                              |
|   “PGD      Services” LLP | 76,357                                    |   | (10,813)                                  |   | 94,026                                         |   | 18,699                                            |

| Cost      of services purchased:                            |      |   |     |   |      |   |    |
|-------------------------------------------------------------|-----------|--------|----------|--------|-----------|--------|---------|
|   Other      related parties                      |      |   |     |   |      |   |    |
|   “PGD      Services” LLP             | -         |   | -        |   | -         |   | 11,991  |
|   “Batyr”      Ltd                    | 77,816    |   | 67,309   |   | 142,534   |   | 134,642 |
|                                                        | 154,173   |   | (56,496) |   | 236,560   |   | 165,332 |
|                                                        |      |   |     |   |      |   |    |
| Financial      aid received:                                |      |   |     |   |      |   |    |
|   Shareholder                                     |      |   |     |   |      |   |    |
|   Timur      Bergaliyev                           | 1,545,704 |   | 548,519  |   | 1,849,534 |   | 561,193 |
|   Other      related parties                      |      |   |     |   |      |   |    |
|   “Kazpromgeophysics”      JSC        | 293,484   |   | 180,408  |   | 492,753   |   | 304,507 |
|   “Caspian      Logging Services” LLP | 124,224   |   |     |   | 124,224   |   |    |
|                                                        | 1,963,412 |   | 728,927  |   | 2,466,511 |   | 865,700 |
|  Financial      aid paid:                              |      |   |     |   |      |   |    |
|    Shareholder                               |      |   |     |   |      |   |    |
|    Timur      Bergaliyev                     | -         |   | 303,126  |   | -         |   | 303,126 |
| Other      related parties                                  |      |   |     |   |      |   |    |
|   “Batyr”      Ltd                    | -         |   | 24,708   |   | -         |   | 24,708  |
|   “Kazpromgeophysics”      JSC        | 500,523   |   | -        |   | 699,792   |   | -       |
|   “Caspian      Logging Services” LLP | -         |   | -        |   | -         |   | 32,026  |
|   Other                                           | 2,753     |   |     |   | 2,753     |   |    |
|                                                        | 503,276   |   | 327,834  |   | 702,545   |   | 359,860 |

----

|                                               |
|----------------------------------------------------|
| Caspian      International Oil Corporation         |
| Notes      to the Consolidated FinancialStatements |

| 24 | Related      party transactions (continued) |
|----|---------------------------------------------|

|                                                                    |   | Outstanding      balance As      of June 30, 2008 |      |   | Outstanding      balance As of      December 31, 2007 |   |
|-------------------------------------------------------------------------|--------|--------------------------------------------------------|-----------|--------|-----------------------------------------------------------------|--------|
| Financial      aid received:                                            |   |                                                   |      |   |                                                            |   |
|   Shareholder                                                 |   |                                                   |      |   |                                                            |   |
|   Timur      Bergaliyev, payable                              |   |                                                   | 2,001,971 |   |                                                            |   | 155,498 |   |
|   “Kazpromgeophysics”      JSC                    |   |                                                   | 9,109     |   |                                                            |   | 241,061 |   |
|   “Batyr”      Ltd                                |   |                                                   | 24,845    |   |                                                            |   | - |   |
|                                                                    |   |                                                   | 2,035,925 |   |                                                            |   | 396,559 |   |
| Finacial      aid paid:                                                 |   |                                                   |      |   |                                                            |   |   |   |
|   Other      related parties                                  |   |                                                   |      |   |                                                            |   |   |   |
|   “Caspian      Logging Services” LLP, receivable |   |                                                   | 157,350   |   |                                                            |   | 282,627 |   |
|   “Turksibstroy”      LLP, receivable             |   |                                                   | 217,640   |   |                                                            |   | 216,921 |   |
|   “City      Lux” LLP                             |   |                                                   | 31,801    |   |                                                            |   | 31,920 |   |
|     “Nurtobe”      LLP                  |   |                                                   | 2,462     |   |                                                            |   | - |   |
|     Others                                          |   |                                                   | 16,109    |   |                                                            |   | - |   |
|                                                                    |   |                                                   | 425,362   |   |                                                            |   | 531,468 |   |
| Payable      to related parties:                                        |   |                                                   |      |   |                                                            |   |   |   |
|   “PGD      Services” LLP                         |   |                                                   | 156,015   |   |                                                            |   | 156,600 |   |
|   “Nurtobe”      LLP                              |   |                                                   | 17,792    |   |                                                            |   | 4,022 |   |
|                                                                    |   |                                                   | 173,807   |   |                                                            |   | 160,622 |   |
|                                                                    |   |                                                   |      |   |                                                            |   |   |   |
| Loans      Received:                                                    |   |                                                   |      |   |                                                            |   |   |   |
|     Shareholder,      payable                       |   |                                                   | 803,922   |   |                                                            |   | 466,862 |   |
|                                                                    |   |                                                   | 803,922   |   |                                                            |   | 466,862 |   |

----

| ITEM      2. | MANAGEMENT’S      DISCUSSION AND ANALYSIS |
|--------------|-------------------------------------------------|

| Ø | It      will be necessary for us to incur substantial debt in order to fully      implement our business plan.  If the results of our operations      are insufficient to allow us to service our debt, the value of our      business will be significantlyimpaired. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø | The      success of our oil field services business will depend on our ability to      overcome strong competition, much of which is better funded than we      are. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø | The      success of our exploration business will depend on factors over which      management will have little control, including the results of exploration,      world oil prices, and policies of the government of      Kazakhstan. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Contractual      |   |   |       |   | Less      than |   |      |      |   |   | Over      |   |   |    |      |
|------------------|--------|--------|------------|--------|----------------|--------|-----------|-----------|--------|--------|-----------|--------|--------|---------|-----------|
| Obligation       |   | Total  |       |   | 1 year         |   |      | 1-3 Years |   |   | 4-5 years |   |   | 5 years |      |
|             |   |   |       |   |           |   |      |      |   |   |      |   |   |    |      |
| BTA-Dank         |   | $      | 12,212,513 |   |           | $      | 4,021,101 |      |   | $      | 6,275,178 |   |   | $       | 1,880,106 |   |   | $ | 36,128 |   |
|             |   |   |       |   |           |   |      |      |   |   |      |   |   |    |      |   |   |   |   |   |
| BTA-Kor-Tazh     |   | $      | 3,733,706  |   |           | $      | 687,392   |      |   | $      | 2,025,490 |   |   | $       | 1,020,824 |   |   |   | - |   |
|             |   |   |       |   |           |   |      |      |   |   |      |   |   |    |      |   |   |   |   |   |
| Total      BTA   |   | $      | 15,946,219 |   |           | $      | 4,708,493 |      |   | $      | 8,300,668 |   |   | $       | 2,900,930 |   |   | $ | 36,128 |   |
|             |   |   |       |   |           |   |      |      |   |   |      |   |   |    |      |   |   |   |   |   |
| Other            |   | $      | 837,082    |   |           | $      | 687,060   |      |   | $      | 150,022   |   |   |    | -         |   |   |   | - |   |
|             |   |   |       |   |           |   |      |      |   |   |      |   |   |    |      |   |   |   |   |   |
| Total      Loans |   | $      | 16,783,301 |   |           | $      | 5,395,553 |      |   | $      | 8,450,690 |   |   | $       | 2,900,930 |   |   | $ | 36,128 |   |
|             |   |   |       |   |           |   |      |      |   |   |      |   |   |    |      |   |   |   |   |   |
| Interest         |   | $      | 4,326,569  |   |           | $      | 2,175,707 |      |   | $      | 1,685,749 |   |   | $       | 420,181   |   |   | $ | 44.932 |   |

----

|                                                           |   |  Six      months endedJune      30, 2008 |          |   |  Six months      ended June      30, 2007 |   |
|----------------------------------------------------------------|--------|-----------------------------------------------|---------------|--------|----------------------------------------------------------|--------|
| Net      Cash :                                                |   |                                          |          |   |                                                     |   |
| (Used      in)/ provided by operating activities               |   | $                                             | 1,163,255     |   |                                                     | $      | (1,426,195 | ) |
| (Used      in)/ investing activities                           |   | $                                             | (1,390,726    | )      |                                                     | $      | (2,471,265 | ) |
| Provided      by/ (used in) financing activities               |   | $                                             | 136,210       |   |                                                     | $      | 3,924,529 |   |
|                                                           |   |                                          |          |   |                                                     |   |   |   |
| NET      INCREASE ( DECREASE) IN CASHAND      CASH EQUIVALENTS |   | $                                             | (      94,382 | )      |                                                     | $      | (124,749 | ) |

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| · | worldwide      economic conditions; |
|--------|-------------------------------------|

| · | changes      in global supply and demand for oil and natural  gas; |
|--------|--------------------------------------------------------------------|

| · | the      level of production of the Organization of Petroleum Exporting      Countries; |
|--------|-----------------------------------------------------------------------------------------|

| · | the      level of production of non-OPECcountries; |
|--------|----------------------------------------------------|

| · | political      conditions, including embargoes, affective oil and gas      production; |
|--------|----------------------------------------------------------------------------------------|

| · | global      petroleum inventories; and |
|--------|----------------------------------------|

| · | advances      in exploration and productiontechniques. |
|--------|--------------------------------------------------------|

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| ITEM      3 | QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK |
|-------------|----------------------------------------------------------------|

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|       31.1 | Rule      13a-14(a) Certification – CEO |
|------------------------------------------|-----------------------------------------------|

|       31.2 | Rule      13a-14(a) Certification – CFO |
|------------------------------------------|-----------------------------------------------|
|                                     |                                          |
| 32                                  | Rule      13a-14(b) Certification             |

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|                                  | CASPIAN      INTERNATIONAL OIL CORPORATION |
|---------------------------------------|--------------------------------------------|
|                                  |                                       |
| Date:  August      14, 2008 | By:                                        | /s/ Nurlan      Janseitov |
|                                  |                                       | Nurlan      Janseitov, Chief Executive Officer |
|                                  |                                       |   |
|                                  | By:                                        | /s/ David      Fulton |
|                                  |                                       | David      Fulton, Chief Financial Officer |

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