Category Archives: Central Asia & South Caucasus News

Azerbaijan budget airline to fly to Moscow

FEB. 16 2017 (The Conway Bulletin) — AZALJet the budget airline belonging to Azerbaijan Airlines, known as AZAL, will start flying to Moscow’s Vnukovo airport from Ganja and Gabala, two Azerbaijani regional towns, media reported, a move that may be aimed at migrant workers as much as businessmen or tourists. AZALjet was founded in March 2016 and links Baku mainly to capitals of former Soviet states but also to many of Turkey’s biggest cities.

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(News report from Issue No. 317, published on Feb.17 2017)

Comment: Central Banks face mess of their own making, says Kilner

FEB. 17 2017 (The Conway Bulletin) — First came the oil price collapse, then remittance flows started stagnating and (some) currencies (think of the tenge and the Azerbaijani manat) halved. Now the debt mountain, or perhaps debt tsunami is a better description, looms large, threatening to drown the countries of Central Asia and the South Caucasus.

Kazakhstan is the latest to propose a major bailout of its banking sector. Finance minister Bakhyt Sultanov said on Feb. 13 that the government would potentially use $6.3b to prop up banks listing under the weight of bad loans. The Tajik government is in talks with the IMF to borrow cash to help prop up its banking sector and in Azerbaijan the government has been, as quietly as possible, buying up chunks of the biggest bank. It now owns more than 76% of the International Bank of Azerbaijan, allowing it to smooth out its debt crisis without attracting too much attention.

Ratings agencies and analysts have been warning of this denouement.

As long ago as December 2015, Standard & Poorsratings agency said: “Medium-term prospects for Kazakhstan’s banking system have deteriorated in 2015 due to lower oil prices, the economic slowdown (especially in non-extractive sectors) and the weaker tenge.”

And that prediction has been borne out.

The frustration is that we have been here before. In the Global Financial Crisis of 2008/9 bad debt built up in banks in Kazakhstan forcing the government to step in. It bought out BTA Bank, at the time one of the country’s biggest lenders, and a handful of smaller banks. It was expensive but staved off disaster and the Kazakh government pledged not to find itself in a similar position again.

The government finally offloaded BTA bank to pro-government businessmen in 2014/15 and proposed to impose rules and regulations that would require its banks to bulk up their capital and refrain from handing out loans, mainly mortgages, to people unworthy of them.

Clearly, the Kazakh Central Bank and other regulators across the region, have failed. Certainly they have not been helped by the sharp currency devaluation that made US dollar-denominated mortgages unserviceable.

Better macro-economic policies, tighter rules on lending and a more clear-headed approach to dealing with problems would surely have put the Central Banks in better positions than they now find themselves. Governments in the region are once again having to buy themselves out of trouble.

By James Kilner, Editor, The Conway Bulletin.

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(News report from Issue No. 317, published on Feb.17 2017)

Armenia sends aid to Syria

FEB. 13 2017 (The Conway Bulletin) — Armenia sent a second batch of humanitarian aid, mainly canned food, to Syria, the RFE/RL website reported. The aid was sent through the Russian military base in Syria. The food bore inscriptions in Arabic and Armenian which said: “With warm wishes for peace from Armenia to the brotherly people of Syria!” Tens of thousands of ethnic Armenians, mainly living in Aleppo, have fled the civil war.

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(News report from Issue No. 317, published on Feb.17 2017)

Armenia’s first president to stand in election

FEB. 15 2017 (The Conway Bulletin) — Levon Ter-Petrosyan, Armenia’s first post-Soviet president between 1991 and 1998, confirmed that he will head a party list for the Armenian National Congress (ANC)-People’s Party of Armenia alliance at parliamentary elections in April. Mr Ter-Petrosyan, 71, cuts a controversial figure. He still commands support from loyalists and considers current president Serzh Sargsyan to be his great opponent. In 2008, he was blamed with whipping up anti- government sentiment amongst a crowd that ended with clashes with police and the death of at least 15 protesters.

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(News report from Issue No. 317, published on Feb.17 2017)f

Oil output in Kazakhstan beats forecast

FEB. 13 2017 (The Conway Bulletin) — Kanat Bozumbayev, the Kazakh energy minister, told media that in 2016 Kazakhstan produced 78m tonnes of oil, beating an initial forecast of 75.5m tonnes. This is important because the government had been forecasting a drop in production because companies were throttling back output under the pressure of poor prices.

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(News report from Issue No. 317, published on Feb.17 2017)

Azerbaijan’s SOFAZ invests in Japan property fund

FEB. 13 2017 (The Conway Bulletin) — SOFAZ, Azerbaijan’s $35b oil wealth fund, has invested $100m into Redwood Japan Logistics Fund II which invests in property across East Asia and Australia. SOFAZ has been diversifying its investments over the past few years, often into property. Hurt by the steep drop in value of its energy exports, Azerbaijan’s government has been challenging SOFAZ to take more risk to boost profit.

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(News report from Issue No. 317, published on Feb.17 2017)

Iran considers setting up bank in Azerbaijan

FEB. 16 2017 (The Conway Bulletin) — Iran’s state-owned Bank Melli is considering spinning off its branches in Azerbaijan into an independent bank, Valiollah Seif, the Iranian Central Bank chief, told the Trend news agency.

If a new Iran-owned bank does emerge in Azerbaijan, it will mark a major watershed in relations between the two countries. These relations have improved markedly over the past couple of years, since Hassan Rouhani became Iran’s president in 2013. Under Mr Rouhani’s predecessor, Mahmoud Ahmadinejad, war had at times appeared likely.

In the interview, Mr Seif also said that he had held talks with this counterparts in Azerbaijan to set up a joint bank run by the two neighbours.

Azerbaijan’s banking sector has been roiled by an economic down- turn linked to a collapse in oil prices and it is likely that any move by Iran to set up a fully-owned bank in Azerbaijan will be driven by politics as much as by economics.

ENDS

(News report from Issue No. 317, published on Feb.17 2017)

Kazakh oil project to double oil output

FEB. 13 2017 (The Conway Bulletin) — The Kashagan oil project in the Kazakh sector of the Caspian Sea will double oil production to 370,000 barrels of oil per day by the end of 2017, the North Caspian Operating Company consortium developing the project said in a statement. Kashagan is the Great White Hope of Kazakhstan’s oil industry. It started commercial production at the end of last year, three years behind schedule because pipes running from the mainland to the field were found to be leaky and needed to be repaired.

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(News report from Issue No. 317, published on Feb.17 2017)f

Azerbaijan orders new locomotives

FEB. 15 2017 (The Conway Bulletin) — Azerbaijan has ordered 50 locomotives from French rail manufacturer Alstom for 276m euros, media reported quoting an Azerbaijani railways spokesperson. The loan for the locomotives was supplied by a consortium of French and British banks. The new locomotives will run along the Baku-Tbilisi-Kars railway that will be completed later this year.

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(News report from Issue No. 317, published on Feb.17 2017)

Kazakh special forces kill Islamists

FEB. 11 2017 (The Conway Bulletin) — Kazakh special forces killed six alleged Islamic extremists and arrested 15 more in raids in January in Almaty, media reported quoting the interior ministry. The ministry said they also found arms caches, including grenades. Central Asian countries have been on alert to counter a perceived growth in recruitment by Islamic extremists.

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(News report from Issue No. 317, published on Feb.17 2017)