OCT. 23 2015 (The Conway Bulletin) – The Kazakh Senate extended a deadline to repatriate capital that has been offshored by one year to Dec. 31, 2016. Analysts said this was a response to a poor recovery rate. The Kazakh Central Bank has made attracting capital back to Kazakhstan one of its key policies.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 27 2015 (The Conway Bulletin) – On a trip to Baku, Montenegro PM Milo Dukanovic signed bilateral customs deals. Anti- corruption lobbyists have queried improved relations between Azerbaijan and Montenegro. Companies linked to the Azerbaijani state have invested heavily in Montenegro’s tourism sector.
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(News report from Issue No. 254, published on Oct. 30 2015)
ALMATY, OCT. 27 2015 (The Conway Bulletin) — The Kazakh government is considering levying a heavy fine against Karachaganak, Kazakhstan’s largest gas field, worrying observers who said this could mean a revival of resource nationalism.
According to sources quoted by Bloomberg News, the Kazakh government is likely to impose a penalty against the consortium operating Karachaganak for as much as $2b, in an attempt to earn quick cash for its crisis-hit state budget.
The sources, described as being familiar with the project, said the fine was for failing to meet contractual obligations.
A $2b fine would be the largest-ever penalty imposed on an energy consortium in Kazakhstan, exceeding a 2014 fine on Kashagan of $737m and a 2007 claim on Tengiz for $609m. British BG Group and Italian Eni own 29.5% each. Chevron and Lukoil are the smaller shareholders with 18% and 13.5% respectively. State-owned Kazmunaigas bought a 10% stake in the project in 2012, after a two-year tax dispute.
BG Group, Eni, Kazmunaigas and the Kazakh government all declined to comment.
The Bloomberg story hinted at resource nationalism, said Lawrence Markowitz, professor of Political Science at Rowan University.
“Contestation between Kazakhstan’s government and multinational corporations centres on contracts and this could be a case of a government using fines and penalties to be more predatory on the wealth these deposits generate,” Mr Markowitz told the Bulletin.
Other observers said Kazakhstan may be positioning itself ahead of a contract renegotiation.
“There is certainly pressure in Kazakhstan to change the Production Sharing Agreement contracts signed in the 1990s, because they were too generous for foreign companies,” said Nygmet Ibadildin, professor of Energy Policy at KIMEP University.
Shell agreed to buy BG earlier this year but speculation has mounted that Kazakhstan could exercise its preemptive rights to jump in and buy BG’s share.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 26 2015 (The Conway Bulletin) — Intergas Central Asia said it would buy back $270m of its outstanding Eurobonds due in 2017, media reported. Intergas is a subsidiary of Kazakhstan’s state owned pipeline company KazTransGas. Analysts said the buyback was positive for Intergas as it reduced its exposure to Kazakh banks.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 23 2015 (The Conway Bulletin) — Japan’s Sumitomo Corporation will build a $300m power plant in Turkmenistan, a significant move for relations between the countries and the Turkmen gas sector.
Sumitomo and state-owned Turkmengaz signed a deal on a new, 400 megawatt gas-fired thermal power plant to be built in the north of the country.
The deal was signed during Japanese PM Shinzo Abe’s visit to Turkmenistan. In total, Japan committed over $18b for various investments in energy and infrastructure projects in Turkmenistan, strengthening economic and diplomatic ties between Tokyo and Ashgabat.
Another Japanese company, Mitsubishi Hitachi Power Systems will provide the gas turbines for the new plant, which is expected to be completed by 2018.
The new plant will allow Turkmenistan to improve its electricity grid, boosting power generation in the north of the country, far removed from the gas-producing regions in the south. Demand for electricity is growing in Turkmenistan.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 28 2015 (The Conway Bulletin) – Highlighting increasingly good relations between Georgia and Iran, Georgian energy minister Kakha Kaladze said he would travel to Tehran next month to meet his Iranian counterparts. Georgia needs to increase the amount of gas it imports to meet demand.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 23 2015 (The Conway Bulletin) – A new round of talks between Russia and Georgia aimed at normalising relations between the two countries will begin in mid-November in Prague, media reported. The talks have been important in improving ties since a 2008 war.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 27 2015 (The Conway Bulletin) -Tajikistan has increased coal output by 22% in the first nine months of 2015, compared to the same period last year. Coal production stands at 858,000 tonnes. Coal burning power stations are important for electricity generation and household heating.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 30 2015 (The Conway Bulletin) — In this current regional economic crisis, when currencies are stable it has to be positive.
The US Federal Reserve Bank kept interest rates unchanged, giving some more breathing room to currencies across Central Asia and the South Caucasus.
This was one of the first stable weeks for currencies in the region after heavy turbulence shook, ravished even, the markets.
The three free-floating currencies followed a similar pattern this week, weakening only marginally.
The Kazakh tenge lost just 0.5% of its value against the US dollar, ending at 279.2/$1 on Friday. The Kyrgyz som followed suit losing 0.7% of its value at 69.4/$1. The Georgian lari was stable at 2.39/$1.
In Tajikistan, the Central Bank said the somoni lost 30% of its value in the year to Sept. 2015. On Friday, it was stable at 6.62/$1.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 27 2015 (The Conway Bulletin) — Remittances from Russia to Central Asia and the South Caucasus keep falling, a major problem for countries which are heavily reliant on cash sent back by workers in Russia. Think Tajikistan and Kyrgyzstan in particular.
Fresh data from the Russian Central Bank shows a fall of 12% in Q3 2015 compared to the same period last year for all countries in our region, except Georgia, which lies outside the Russian data.
For Kyrgyzstan and Tajikistan, remittances from migrant workers are vital, accounting for around half of their GDP. Uzbekistan and Armenia are also heavily reliant on money transfers from Russia.
Remittances to Kazakhstan and Kyrgyzstan showed a first sign of recovery in Q3, although their overall balance for 2015 remains negative, compared to 2014. According to the Kyrgyz Central Bank, the value of remittances this year has dropped by around $400m to $1b.
Similarly, Tajikistan and Uzbekistan have lost as much as 35% of their remittances in the first nine months of 2015.
From rock bottom, it can only get better. Figures from the next two quarters will likely show a growth in the value of remittances, because the benchmark they will be measured against is the nadir of the crisis of last winter.
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(News report from Issue No. 254, published on Oct. 30 2015)