Category Archives: Uncategorised

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.

ENDS

(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.

ENDS

(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.

ENDS

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

Azerbaijan downgrades plans for processing plant

JUNE 29 2016 (The Conway Bulletin) – In an effort to revive its aspirations to build a mega petrochemical plant, SOCAR, Azerbaijan’s state-owned energy company, said it would cut the capacity of its gas processing section, lowering the cost by a third to $4b.

SOCAR now plans to build a plant with a processing capacity of 10b cubic metres/year, down from 12b cubic metres/year. Downsizing the project would save around $2b, according to the company.

The original plan was much more grandiose. The OGPC petrochemical complex at Sangachal, 55km south of Baku, had at one point included an oil refinery and was quoted for a total of $16.5b. Azerbaijan wanted the project to become the region’s hub for refined products.

Last year, first Japan’s Mitsui, then the Britain-based unit of US’ Fluor Group came forward to participate in the project, but later dropped out.

SOCAR then scrapped plans for the refinery, bringing down costs to around $6b. In February, company representatives said that construction work had been frozen, due to the sustained economic malaise, triggered by low oil prices.

Now, Suleyman Gasimov, SOCAR’s VP for financing, said the company is considering two offers, one from China’s CNPC and one from a Russo-Italian consortium of Gazprombank, Russia’s export credit agency EXIAR and Italy’s credit agency SACE.

“Currently, we think the proposals from CNPC and Russian-Italian partners are the most suitable for us,” Mr Gasimov said.

If Azerbaijan manages to resurrect OGPC, even in a downsized fashion, the project will give a much-needed boost to the country’s economy.

ENDS

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

Kyrgyzstan’s Megacom bid fails

JUNE 17 2016 (The Conway Bulletin) – An auction for Kyrgyzstan’s state- owned Alfa Telecom was declared invalid after failing to receive any bids, a sign that investors find the company unattractive. In May, the government had postponed an earlier auction. Alfa Telecom, which owns the Megacom brand, was nationalised in 2014. The government said that it wants to raise $19b som ($280m) from its sale.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Pope Francis prepares to visit Armenia

JUNE 23 2016 (The Conway Bulletin) – Pope Francis is set to visit Armenia on June 24, a trip that will further strain relations with Azerbaijan and Turkey.

The Vatican has already had to modify the trip, originally planned to include both Armenia and Azerbaijan, after the most serious violence in the disputed of Nagorno-Karabakh region for 20 years broke out in April. The Pope will now only visit Armenia, where he will deliver a liturgy on June 25.

Last year, Pope Francis labelled the mass killings of Armenians in 1915 by Ottoman Turks as a genocide, a diplomatic victory for Armenian lobby groups. The declaration damaged Turkish-Vatican relations. Turkey has denied the genocide.

In the past few years, the Roman Catholic Church has tried to boost ties with Armenian Apostolic Christians.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Iran’s ATA Airlines flies to Azerbaijan

JUNE 17 2016 (The Conway Bulletin) – Iran’s ATA Airlines flew to Azerbaijan for the first time, officially opening the new Tehran-Baku Tabriz route. The new route, which will operate twice weekly, is a sign of the growing importance of transport links between Azerbaijan and Iran. AZAL, Azerbaijan’s national carrier, also operates a direct flight to Tehran.

ENDS

(News report from Issue No. 286, published on June 24 2016)

SCO leaders gather in Uzbekistan for summit

JUNE 23 2016 (The Conway Bulletin) – The presidents of Kazakhstan, Kyrgyzstan and Tajikistan gathered in Tashkent to kick-start the summit of the Shanghai Cooperation Organisation (SCO), together with their colleagues from Russia and China and Uzbek host, President Islam Karimov. The members are set to vote on June 24 to begin the membership process for India and Pakistan, currently observer countries.

ENDS

(News report from Issue No. 286, published on June 24 2016)