Author Archives: admin

Technip quits Azerbaijan

JAN. 22 2016 (The Conway Bulletin) — French oil service company Technip Maritime Overseas quit Azerbaijan. It didn’t give an explanation about why it had quit Azerbaijan but the collapse in global oil prices could well be the root cause. The company, which has operated in Azerbaijan since 1993, maintains regional headquarters in Turkmenistan and Kazakhstan. Last year it won a consulting contract with TAP, a gas pipeline that will bring gas from Azerbaijan to Italy.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

ICC investigates war crime in Georgia-Russia war

JAN. 27 2016 (The Conway Bulletin) – The Hague-based International Criminal Court (ICC) officially launched an investigation into alleged war crimes during an eight day war in August 2008 between Georgia and Russia. Georgia, a signatory of the treaty which set up the ICC, said it would comply with the investigation. The ICC’s investigation has the potential to damage recently improved Georgia- Russia relations.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Azerbaijan makes easy visa for Middle East

JAN. 26 2016 (The Conway Bulletin) – Azerbaijan has made it easier for citizens of Qatar, Oman, Saudi Arabia, Bahrain, Kuwait, Japan, China, South Korea, Malaysia, and Singapore to obtain visas by making them available on arrival at airports. Azerbaijan’s foreign ministry said the country wants to promote tourist visits and business relations. In 2010, Azerbaijan scrapped visas- on-arrival for most Western countries.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Helicopter crash kills 5 in southern Kazakhstan

JAN. 28 2016 (The Conway Bulletin) – A helicopter carrying a sick child to hospital crashed in a canyon in southern Kazakhstan killing all five people aboard, media reported quoting the Kazakh emergency services. It was unclear what caused the crash. Kazakhstan has a poor safety record for helicopters. A few days earlier another two-person helicopter had also crashed in southern Kazakhstan.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Critics say the Kyrgyz-Russian Fund is failing

BISHKEK, JAN. 26 2016 (The Conway Bulletin) — Businesses, company owners and lobby groups in Kyrgyzstan have criticised the Kyrgyz- Russian Investment Fund, launched with great fanfare in 2014 ahead of Kyrgyzstan’s entry into the Kremlin- led Eurasian Economic Union, as ineffective.

The criticism will sting as it comes after Russia withdrew support for a $2b hydropower project in Kyrgyzstan. It also underlines the Kremlin’s waning influence in Central Asia.

“The Kyrgyz-Russian Investment Fund does not have enough resources to keep the economy stable, as it cannot substitute a drop in remittances which used to come from Kyrgyz labour migrants in Russia and

revenues from re-exporting Chinese goods through Kyrgyzstan,” Uluk Kydyrbayev, head of the National Alliance of Business Associations lobby group, told The Bulletin.

An anti-crisis plan presented by the government on Jan. 26, which placed the Fund at its core, triggered an outpouring of frustration by businesses.

The Kyrgyz-Russian Investment Fund measures around $500m and was supposed to act as source of cheap credit for Kygyz businesses. At least some of this cash, though, has been used to bail-out mortgage holders who have seen their debts spiral with the devaluation of the som against the US dollar.

Like the rest of the region Kyrgyzstan is trying to navigate its way through a worsening economic crisis. One of the consequences is a fall in remittances from Russia.

Tilek Toktogaziyev, head of an organic food company, said that the Kyrgyz-Russian Fund had been a failure and had favoured big business over small business.

“The credits are only given to big companies who have break-even activities in past three years and have been present in the market for a long time,” he said.

He said the lowest credit the Fund gives is $3m. To win this loan, the company owner also has to make a contribution of 20%.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Zenith ramps up exploration in Azerbaijan

JAN. 27 2016 (The Conway Bulletin) — Toronto-listed Zenith Energy created a subsidiary called Zenith Aran Oil to explore three fields in central Azerbaijan. Current production is low, 350 barrels/day, but the company says the fields have a larger potential. Zenith said the decision to form a subsidiary is “indicative of both Zenith’s long term commitment to Azerbaijan and plans to exclusively focus on the recently acquired fields.”

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

IMF flies to Azerbaijan for talks on $4b loan

JAN. 27 2016, BAKU (The Conway Bulletin) — An IMF delegation flew to Baku for meetings with Azerbaijan’s government over a potential loan to buffer it against a financial storm that now threatens to seriously damage its economy.

The FT newspaper reported that the the loan could hit $4b, although an IMF statement later dodged giving specific numbers.

“An IMF team will be in Baku during Jan. 28 – Feb. 4 for a fact- finding staff visit at the authorities’ request. The team will discuss areas for technical assistance and assess possible financing needs,” it said in a statement.

Azerbaijan’s finance minister, Samir Sharifov, though, played down reports of a loan.

He instead said that Azerbaijan was going to raise $2b by selling debt for the Southern Caucasus Gas Corridor Company, which manages various pipelines, and pipeline projects, running from the Caspian Sea to Europe.

“There is no urgent need for a loan, but we can raise loans to support the economy amid low oil prices,” Mr Sharifov told journalists in Baku of talks with the IMF.

If Azerbaijan did take an IMF loan it would be the first emergency loan given to a sovereign state during this current financial downturn. Taking an IMF loan would also dent Azerbaijan’s pride. Fuelled by high oil prices its economy has boomed over the past 15 years. The government has invested heavily in promoting its reputation as a bridge between the East and West, building grandiose towers and sponsoring major sports events.

But the government has failed to shift Azerbaijan from a petro-econ- omy to a more dynamic economy with several income streams. Instead, Azerbaijan still receives around 95% of its export revenue from oil sales.

And with oil prices at around 12- year-lows this has begun to hurt.

The government has slashed spending, inflation is soaring and jobs are melting away. The manat currency has dropped a third in value in the past month and frustrated ordinary people are beginning to speak out and protest against the government.

A Conway Bulletin correspondent in Baku said people in the streets were increasingly referring to the current economic downturn as a “crisis”.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Azerbaijan Central Bank closes banks which fail capital stress test

JAN. 27 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank stripped six banks of their licences because they failed to meet newly imposed minimum capital requirements, a strong signal that the authorities want to weed out weaker banks to try to fend off a deepening financial crisis.

The six banks — Ganja Bank, Bank of Azerbaijan, United Credit Bank, NBC Bank, Caucasian Development Bank and Atrabank — all lost their licences in the past 10 days. This leaves just over 30 banks operating in Azerbaijan.

“Banks that don’t meet requirements and have major shortcomings can’t operate in Azerbaijan,” President Ilham Aliyev said in a televised statement, hinting at more closures.

In mid-2012, Azerbaijan’s Central Bank increased by five times the minimum capital requirements for commercial banks from 10m manat to 50m manat (then around $64m, now $31.3m). The deadline for all banks in the country to comply with the new requirements was first set for 2013 and then delayed to end-2015.

For banks, one way to avoid closure and improve financial health is to unite. AGBank and DemirBank signed a protocol to merge last week and Pasha Bank, Kapital Bank and Atabank are in talks to create a single lender, according to Bloomberg.

Last week, ratings agency Moody’s downgraded several of the biggest banks in Azerbaijan, a direct consequence of the negative impact of the manat depreciation. Three of Azerbaijan’s top-10 banks, Xalq Bank, Bank of Baku and Unibank, were among the lenders on Moody’s radar.

With the Azerbaijani manat falling by 35% since Dec. 21, this is a particularly tough time for Azerbaijan’s banking sector and for ordinary people. The IMF has also flown into Baku to potentially offer a loan.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Georgian lari hits all-time low

JAN. 22 2016 (The Conway Bulletin) – The Georgian currency, the lari, hit an all-time low of 2.47/$1, despite various interventions by the Central Bank to prop it up. Its previous low had been set in 1999, providing context for just how much value currencies in the South Caucasus and Central Asia have lost. The lari is down around 25% from a year earlier.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Business comment: Tough times for banks

JAN. 29 2016 (The Conway Bulletin) — Government policies towards the banking sector are key to survival during tough economic times.

In this new downturn, which has already lasted longer than the 2008/9 Financial Crisis, commodity prices have collapsed, hitting oil- exporting countries.

Kazakhstan and Azerbaijan have been among the hardest-hit economies in the South Caucasus and Central Asia.

In mid-2014, Kazakhstan planned to restructure its banking sector by imposing greater capital requirements. The Central Bank wanted the country’s banks to

increase their capital from 10b to 100b tenge ($54m to $543m at the time).

But in August 2015 the Central Bank abandoned the tenge peg to the US dollar, allowing it to fall sharply.

This relieved pressure on its currency but knocked plans to increase capital requirements for banks.

Bank deposits in Kazakhstan are now insured by the government. If the Central Bank had pushed forward with its new capitalisation plan after ditching the tenge-US dollar peg it would have meant that smaller banks would have had to close. The government would then have been under pressure to repay customers who had lost savings. Kazakh officials dodged this by scrapping the plan.

Azerbaijan, by contrast, has pushed ahead with increasing capital requirements at banks despite a 35% fall in its currency over the past month. This has forced small banks to close and larger banks to merge.

All this before introducing universal insurance on deposits. Until now, only savers with up to 30,000 manat ($18,400) were insured.

Time will tell which of the two strategies pays off.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)