DEC. 29 (The Conway Bulletin) — Inflation in Azerbaijan should measure between 6% and 8% in 2018, the Central Bank said. In the past couple of years, inflation in Azerbaijan has been measured in the double digits as the economy fights a sharp economic downturn and a currency devaluation that wiped 50% off the value of the manat in 2015/16.
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— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin
>> The region’s economies and Uzbekistan’s regeneration under Mirziyoyev are the standout features of 2017, writes James Kilner
JAN 5 (The Conway Bulletin) — For Central Asia and the South Caucasus, 2017 was a year of recovery. There have been the usual rounds of elections, generally predictable and cementing the incumbent powers in Georgia, Armenia and Kyrgyzstan, but economics, and not politics, caught the eye and the bigger headlines in 2017.
The economic stupor that had hung over the region since oil prices collapsed in 2014 and Russia’s economy fell into a recession, was finally thrown off. If, at the start of the year, the green shoots of recovery looked tentative, by October they were coming out into full bloom.
Most countries were posting decent economic growth figures and double-digit inflation, a real worry, has been neatly sidestepped.
Special mention here must go to Georgia which has posted exceptionally strong economic results, pushed on by a spurt in tourism and investment.
There have been some serious economic exceptions, though. Azerbaijan’s economy still shrunk and its banking sector looked as shaky as ever. International Bank of Azerbaijan defaulted on its debt repayments and several smaller banks have had their licenses revoked. Tajikistan also looks increasingly fragile and Turkmenistan, while the information stream coming out of the country is as beguiling as ever, looks like it may have been holed below the waterline. Watch out, in 2018, for a serious fracture in Turkmenistan.
As well as a recovery period for the region’s economies, 2017 was also a year of recovery for Uzbekistan’s political structures and their relationships with society. This will go down as the year that Uzbek President Shavkat Mirziyoyev made it clear that he was determined to pursue a reformist agenda after taking over from the authoritarian and brutal Islam Karimov in September 2016.
He devalued the official exchange rate of the Uzbek soum, took thousands of people off blacklists linked to Islamic extremists, reigned in the power of the secret service, encouraged traders to export to neighbouring countries and signed deals with the rest of the region over borders and commerce that his predecessor had spurned.
There is still much to do in Uzbekistan, and some people grumble about the lack of genuine democratic values and the slow pace of human rights progress, but Pres. Mirziyoyev is laying the foundation for a better future for Uzbeks.
If the Conway Bulletin had a ‘Person of the Year’ prize, Mirziyoyev would be a worthy winner.
>> Next week – the first in a 2-part series on what to look out for in 2018
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— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin
DEC. 23 (The Conway Bulletin) — Azerbaijan’s financial watchdog declared DemirBank, a mid-sized lender part-owned by the EBRD and the Dutch development fund FMO, unfit to trade after bad debt swamped it and its capitalisation ratio level dropped.
Azerbaijan’s banking sector has been flooded with bad debt since a 2014 fall in the price of oil triggered a currency devaluation and a recession. In 2017 its biggest bank, International Bank of Azerbaijan, defaulted on its debt.
The failure of Demirbank shows that part-ownership of a bank by major financial institutions doesn’t guarantee survival. The EBRD owned a 25% stake in Demirbank, and had been considering an increase, and FMO owned a 10% stake.
In March, Fitch, the rating agency, had warned that smaller Azerbaijani banks were vulnerable because of a surge in non-performing loans. It said that the proportion of non-performing loans on banks’ debt books had reached 21% up from 12% in 2015.
Demirbank’s licence to trade was withdrawn on Dec. 23 by Azerbaijan’s Financial Markets Supervision Chamber, a decision upheld by an appeal court four days later.
People who had deposits at the bank will be eligible for compensation from a state fund.
Demirbank had deposits of just over 100m manat ($59m) from 55,000 depositors.
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— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin
SEPT. 21 (The Bulletin) — Azerbaijan agreed to lend Iran $500m to complete a railway line between Rasht and Astara, north Iran, that it deems essential for a North-South Transport Corridor that should, according to the plan, transport products from India to Russia by sea and rail. The rehabilitation of relations between Azerbaijan and Iran have been key to getting this project off the ground.
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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.
— Copyright the Central Asia & South Caucasus Bulletin 2017
SEPT. 21 (The Bulletin) — In a blog post after being released from a prison in Azerbaijan, Russian-Israeli travel blogger Alexander Lapshin accused Georgia of colluding with the Azerbaijani authorities in handing over information about his movements. Mr Lapshin had been jailed this year for crossing into the disputed region of Nagorno-Karabakh. Azerbaijani business, including state-owned oil and gas company Socar, invest heavily in Georgia. Georgia has previously been accused of colluding with Azerbaijan in sharing intelligence and handing over dissidents.
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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.
— Copyright the Central Asia & South Caucasus Bulletin 2017
SEPT. 19 (The Bulletin) — Leyla Mustafayeva, the wife of the imprisoned Azerbaijani journalist Afgan Mukhtarli, accused the authorities in Georgia of continuing to spy on her and her family. Mr Mukhtarli is being held in detention in Baku after he was abducted outside his home in Tbilisi in May. The Georgian authorities have denied that they collaborated with their Azerbaijani counterparts.
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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.
— Copyright the Central Asia & South Caucasus Bulletin 2017
BAKU/SEPT. 19 (The Bulletin) — Azerbaijani media said that The European Bank for Reconstruction and Development (EBRD) was potentially interested in buying a stake in its largest bank, the International Bank of Azerbaijan (IBA).
Suma Chakrabarti, the EBRD’s president, was in Baku earlier in the month, although he doggedly denied the EBRD’s interest in IBA.
“I was there last week, we spoke to Azerbaijani President Ilham Aliyev, we said we would be happy to help in restructuring and refocusing of this bank,” he was quoted as saying.
The speculation has been triggered by comments from senior government officials who said that they wanted to sell off chunks of IBA, which restructured $3.3b of debt earlier this year, in 2018.
Azerbaijan’s government effectively bailed out IBA this year by increasing its stake in the bank, which dominates the Azerbaijani banking market, to 76.7% from 55%. Azerbaijan’s economy has been particularly badly hit by a fall in the price of oil since mid-2014 and has fallen into a recession.
Bad loans at banks have also multiplied and in May, Moody’s the ratings agency, said that the government had spent 18% of its GDP on propping up its banking sector.
The EBRD has a history of intervening in the financial sector in Central Asia and the South Caucasus. Earlier this year it agreed to increase its stake in Azerbaijan’s Unibank to help it stave off bankruptcy.
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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.
— Copyright the Central Asia & South Caucasus Bulletin 2017
SEPT. 19 (The Bulletin) — Armenia’s foreign minister Eduard Nalbandian said that the government may be willing to surrender slices of disputed land around the region of Nagorno-Karabakh, which Armenian-backed separatists control, in return for a lasting peace-deal. The proposal, made during a speech to diaspora in Yerevan was roundly criticised by the Armenian media. Azerbaijan has not responded to the suggestions that were heavily label as ‘hypothetical’.
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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.
— Copyright the Central Asia & South Caucasus Bulletin 2017
SEPT. 18 (The Bulletin) — A court in Azerbaijan sentenced journalist Alcin Ismayilli to nine years in prison for extortion and abuse of office, offences he denies. Critics of Azerbaijani President Ilham Aliyev have said that he has waged a systematic campaign against critical media.
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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.
— Copyright the Central Asia & South Caucasus Bulletin 2017
SEPT. 16 (The Bulletin) — Azerbaijan increased exports of non-oil products in the first eight months of the year by 30%, deputy economy minister Sahil Babayev was quoted by media as saying at a press conference. He said that agriculture exports had increased by 37% and industrial products by 25.4%. Azerbaijan has been looking to increase the status of non-oil products in its economy.
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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.
— Copyright the Central Asia & South Caucasus Bulletin 2017