Category Archives: Uncategorised

Georgia is the best route, says Iran

JUNE 28 2016 (The Conway Bulletin) — Iran’s oil refining and distribution company said that it views Georgia as the best route to send its various petroleum products to Europe. Iran and Georgia have developed increasingly close economic and business relations over the past few years and there is now relatively high number of Iranian businesses and nationals living in Tbilisi. They had viewed Georgia as a potential route around sanctions.

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(News report from Issue No. 287, published on July 1 2016)

Brexit knocks economies in Kazakhstan & Georgia

JUNE 30 2016 (The Conway Bulletin) — Brexit, Britain’s vote to leave the EU in a referendum on June 23, pushed down stock markets, commodities and currencies worldwide, including in South Caucasus and Central Asia where politicians and business leaders warned of problems ahead.

Kazakhstan was hit by both currency instability and the sudden drop in oil prices, which fell below the $50/barrel threshold it had recovered to earlier this year after the rout of 2014 and 2015.

Uzakbai Karabalin, Kazakhstan’s former oil minister and now deputy chairman of the oil and gas lobby group KAZENERGY, said the government will have to revise down the baseline for oil prices in the national budget this year.

“[Brexit] has already affected oil prices,” he said. “The first response was a decline. Now the economic base price is $50/barrel.”

Previously, the government had said the baseline for this year could have grown to $60/barrel, so a drop to $50/barrel is a pessimistic assessment of the impact of Brexit.

Georgia, less impacted by low oil prices, felt the Brexit effect on its currency, the lari. The lari has fallen by 4.5% since June 23 and Dimitry Kumsishvili, the economy minister, blamed the Brexit result.

“This is most likely a one-off that is directly connected to the UK’s decision to quit the European Union. Of course, this immediately affects our currency,” Mr Kumsishvili said.

He warned that the impact of Brexit had only just started to feed through into the world’s economy and that more economic shocks in the region were likely.

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(News report from Issue No. 287, published on July 1 2016)

Kazakhstan wins UN Security Council seat

ALMATY, JUNE 28 2016 (The Conway Bulletin) — The UN General Assembly elected Kazakhstan to hold a non- permanent seat at the UN Security Council, with 138 votes in favour out of 193, a major PR coup for President Nursultan Nazarbayev who coveted the position and ordered a sustained campaign to win it.

And Mr Nazarbayev quickly hailed the news as a success.

“Kazakhstan’s election as a non- permanent member of the UN Security Council is a historic achievement. This is not only our country’s success but that of the entire sub-region of Central Asia,” he said.

Kazakhstan will hold the seat at the 15-member Security Council for two years, from Jan. 1 2017. It is the first country in Central Asia to hold the position. Azerbaijan held anon- permanent seat at the UN Security Council in 2012/13.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Lithuania refuses Shalabaev extradition for Kazakhstan

JUNE 28 2016 (The Conway Bulletin) – In a snub to the Kazakh government, a court in Lithuania said that it won’t order the government to detain and extradite the brother-in- law of Mukhtar Ablyazov, the billionaire former opposition leader. Syrym Shalabayev is the brother of Ablyazov’s wife. He was given asylum in Lithuania. Ablyazov is in French custody fighting extradition charges to Kazakhstan for allegedly stealing $5b when he was chairman of BTA Bank.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Kazakh Air Astana starts flights to Iran

JUNE 30 2016 (The Conway Bulletin) – Kazakhstan’s flagship carrier Air Astana said it started direct flights to Iran, after it had delayed starting the route in May. From June 30, Air Astana will fly three times a week between Almaty and Tehran. Kazakhstan and Iran have tried to boost business ties since western countries lifted sanctions on Iran in January.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Azerbaijan focused Anglo Asian aims to cash in on gold price rise

JUNE 29 2016 (The Conway Bulletin) – Looking to cash in on a spike in gold prices triggered by Brexit, Azerbaijan- focused miner Anglo Asian said it would sell the remainder of its 2016 production as futures.

Gold prices have risen 5% in the past week because of thinning confidence linked to Britain’s referendum last week which voted unexpectedly to leave the European Union, in a so-called Brexit, triggering a wave of uncertainty across the world.

The Anglo Asian deal fixed a price corridor of $1,200-$1,426/ounce for their future gold production for the next six months.

Reza Vaziri, Anglo Asian’s CEO, said that the deal, which could secure between $21.6m and $25.7m, will be beneficial for the company, which has had to cope with low gold prices over the past few months. It accumulated debt over the past few months which it now has to pay off.

“This is a win-win transaction for us,” Mr Vaziri said.

“Whilst protecting the downside in the current volatile gold market over the coming six months given Anglo Asian’s debt service payments, we also enjoy considerable exposure to any further increase in the price of gold during this period.”

Spot gold prices closed at $1,321.9/ounce on June 30 compared to $1,257.6/ounce on June 23.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Currencies: Kazakhstan’s tenge, Azerbaijan’s manat

JULY 1 2016 (The Conway Bulletin) – Since mid-2014, a strong US dollar and downward pressures on oil prices have hit economies across Central Asia and the South Caucasus.

Currencies in the region suffered and, despite all the efforts from Central Banks to keep the exchange rate steady by intervening in the market, the fall was inevitable.

Compared to two years ago, all currencies have lost between 15% to 50% of their value. Oil exporting countries (in green in the graph) have fared worse than oil importing countries (pictured in red).

The Kazakh and Azerbaijani Central Banks decided to abandon the currency peg to the US dollar in 2015, causing a plunge in the value of the tenge and the manat. In 2015, these two were among the worst-performing cur- rencies in the world, not just the region.

Oil importers have acted in the opposite direction. In Georgia and Kyrgyzstan, currencies stabilised in the second half of 2015 and Central Banks have tightly controlled exchange rates since.

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(News report from Issue No. 287, published on July 1 2016)

Business comment: Big Projects

JUNE 29 2016 (The Conway Bulletin) – Azerbaijan may resume its dream of building a mega petrochemical processing complex in an effort to revive its oil and gas sector. This alone is good news for the economy of Azerbaijan, which is poised to see its GDP shrink this year for the first time in two decades.

The intent of SOCAR, the state-owned energy company, is to salvage the project, which it had effectively abandoned in February, after its initial investors had either pulled out or stalled financing.

This is the effect of sustained low oil prices. Besides shying away from upstream exploration and production for costly fields, oil and gas companies have also been forced to rethink their plans for downstream processing facilities.

The project initially included an oil refinery, for a total cost of $16.5b. After scrapping parts of the complex, including the refinery, and downsizing the gas processing facility, the project’s price tag fell to around $4b, a cost that Chinese and Russo- Italian ventures, the new potential investors, now deem feasible.

This is a common problem. Big projects have had to face both the doubts of investors in a low oil price era and the protests of locals, who would rather see resources allocated to combating the enduring crisis.

In January, South Korea’s LG pulled out of a project to build a $4.2b petrochemical plant in Kazakhstan, Russia fled an investment to build a $2b hydropower project in Kyrgyzstan, and Azerbaijan seemed to have abandoned hopes for its project.

As oil prices timidly pick up again, Azerbaijan’s announcement that the project might still see the light could potentially lure investors, who had kept themselves at arm’s length from the rather toxic market it had become in the past two years.

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(News report from Issue No. 287, published on July 1 2016)

Armenia’s CB cuts interest rates

JUNE 28 2016 (The Conway Bulletin) — Armenia’s Central Bank cut its key interest rate to 7.5% from 7.75% because of continued deflationary pressure on its economy. Armenia’s interest rate is now at its lowest level for 18 months. It had aggressively increased its interest rate to prop up its currency. Now prices are falling and the economy is slowing, forcing the Central Bank to try to stimulate business and economy activity.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Editorial: Military conscription

JULY 1 2016 (The Conway Bulletin) — Georgia’s decision to scrap conscription for its army comes as no surprise. It has been moving in this direction for some time. The Georgian army is a modern Western army that has fought battles in Iraq and Afghanistan alongside members of NATO, a club it longs to join.

What is more critical is the timing of the announcement and the way it was delivered. Tina Khidasheli, Georgia’s defence minister, took it upon herself to cancel conscription from 2017. She sidestepped a debate in parliament and also presidential permission. It was a unilateral decision.

Ms Khidasheli is a member of the Republican Party, part of the Georgian Dream coalition government. The Republican Party, though, has said that it will fight a parliamentary election in October outside the government coalition. The problem with this approach, though, is that while it sets the Republican party apart it has to improve its polling, hovering around 1%.

The decision to scrap conscription in the Georgian army is a historic first for Central Asia and the South Caucasus. The timing, though, should perhaps be seen against the backdrop of an unpredictable election.

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(Editorial from Issue No. 287, published on July 1 2016)