Category Archives: Uncategorised

International Bank of Azerbaijan and Standard to merge

APRIL 21 2016 (The Conway Bulletin) – Bank Standard and the International Bank of Azerbaijan (IBA) started negotiations to merge their assets, in what could be a major shift in Azerbaijan’s banking sector. IBA is, by far, the largest bank in the country. It controls 60% of all domestic loans. Azerbaijan’s ministry of finance owns 55% in IBA. Bank Standard, owned by AB Standard Group, is said to be close to Azerbaijan’s political elite.

ENDS

(News report from Issue No. 277, published on April 22 2016)

Kazakh oil service firms criticise subsoil law changes

APRIL 21 2016, ALMATY (The Conway Bulletin) – Kazakh oil service companies have said they are concerned about changes in the country’s subsoil law that the government needs to make to comply with WTO and Eurasian Economic Union regulations.

Nurlan Zhumagulov, head of the Union of oil service companies, said the proposed new law could harm local businesses.

“The new code will cut support for domestic producers. It will cancel the conditional inclusion in bids of local goods, workers and services in subsoil contracts,” Mr Zhumagulov told local media.

Local content, an industry code- word for the use of domestic assets and human resources, has been a cornerstone of Kazakhstan’s oil industry. Over the past two decades, with a series of laws, the government had raised the proportion of local workers and service contracts awarded to Kazakh companies in the oil sector.

Now, WTO regulations and the prospect of similar rules in the Eurasian Economic Union might stop subsidies and favouritism, a move cheered by international firms looking to win business in Kazakhstan. They have said that the changes to the subsoil law will make the tender process fairer.

Having negotiated since the mid- 1990s, Kazakhstan finally joined the WTO in November 2015. It requires Kazakhstan to scrap its local content legislation and stop favouring its local companies.

This comes at a tough time for the oil industry. The sharp fall in oil prices, which averaged $51/barrel in 2015, meant that service industry’s revenues fell by 25% last year, accord- ing to Mr Zhumagulov.

But the Asset Issekeshev, minister of industry, appeared to brush aside these concerns

“We are aware of all these questions and they will be resolved in the framework of the new code,” he said.

Spurred on partially by an economic downturn that has hit government revenues, Kazakhstan wants to attract more foreign investment into its extractive sectors.

It has identified its current subsoil laws as a potential weakness and a barrier to entry.

ENDS

(News report from Issue No. 277, published on April 22 2016)

Tajikistan’s TALCO lays off 607 workers

DUSHANBE, APRIL 18 2016, (The Conway Bulletin) — Central Asia’s largest aluminium smelter, TALCO, laid off 607 workers to cut costs, an indication of how a heavy fall in global commodity prices has hit industry in Tajikistan.

TALCO is Tajikistan’s largest factory, its biggest taxpayer and its biggest consumer of electricity. It dominates the Tajik economy so for it to lay off 607 workers cuts deep into the national conscience. TALCO now employs 8,200 workers.

According to a report by the Reuters news agency, foreign consultants had advised the company to cut around 2,000 workers from the workforce to maintain a healthy balance sheet.

The company, however, chose what it described as a “a gentle strategy to optimise costs”.

Aluminium prices, now at $1,530/tonne, are around 25% lower than in August 2014.

Besides having to cope with lower revenues, TALCO is also under the spotlight for unpaid electricity bills to the national distributor Barqi Tojik and is the focus of a parliamentary investigation in Norway over alleged corrupt practices.

The Norwegian investigation involves Norsk Hydro, a government- owned smelter that has done business with TALCO.

Norway’s MPs want to know who the beneficial owner of Talco Management, registered in the British Virgin Islands, is. Talco management controls TALCO in Tajikistan.

ENDS

(News report from Issue No. 277, published on April 22 2016)

War and smiles in Azerbaijani-Armenian disputed territory

SHUSHI/Azerbaijan, APRIL 22 2016 (The Conway Bulletin) — The high mountains, steep cliffs and green landscapes are a pleasure to the eye, but Nagorno Karabakh feels empty, quiet and sad.

From the Armenian border to Shushi, one of the disputed region’s larger towns, several ghost-like settlements hug the road.

Shushi itself is strewn with rubble but not from fighting that sparked earlier this month, the worst since a UN brokered ceasefire was imposed in 1994. This rubble was from fighting in the early 1990s when Christian Armenian-backed fighters took the town from Muslim Azerbaijani soldiers. The abandoned mosques lie testament to that.

Saro Saryan, an ethnic Armenian originally from Baku, brought out a bottle of vodka and insisted that it must be finished before morning was out. He fled Baku in 1990.

His son sat beside him, silent, eyes glued to his iPad. He was back from fighting against Azerbaijani forces.

Saryan, now flush with vodka, chipped in. “I’m extremely proud of my son for volunteering to fight on the front lines. Karabakh is a proud country and we’ll fight till the end for our historical right,” he said.

In contrast to Shushi’s emptiness, the streets of Stepanakert, the Armenian capital of Nagorno-Karabakh, are clean and filled with people. Military convoys rumble past, children ride bikes, a lady walks her dog.

The locals may flash a friendly smile but the stress of war is never far away. “Many families left Karabakh once the conflict resumed, it’s sad. But what can they do?” said 30-year-old Zara.

ENDS

(News report from Issue No. 277, published on April 22 2016)

Business comment: Doha dissappoints

APRIL 22 2016 (The Conway Bulletin) – Energy ministers in Baku and Astana were frustrated last week after a meeting of oil producers in Doha failed to agree to freeze oil production at January 2016 levels. Advocates of capping production had said that this would help oil prices rebound.

But Azerbaijani and Kazakh objectives at the meeting may have been slightly different to those of Saudi Arabia or Russia.

Certainly, they wanted a deal to push up oil prices but they also wanted to use any agreement as a fig leaf to cover up their sinking production levels.

Azerbaijani and Kazakh production and export volumes are too low to influence oil prices directly. They are price takers, not setters. The problem is that their ageing oilfields are simply uneconomical at $40 or even $60/barrel and this has forced producers out of the market.

Azerbaijan and Kazakhstan will continue to “freeze” production, because there’s nothing else they can do. Their production, and consequently their exports, are bound to fall again this year, according to all major forecasting agencies, from OPEC to the IEA and the EIA.

A recent survey of oil experts at PRIX said, for the first time since it started polling, that global oil exports are bound to fall in Q2. Azerbaijan and Kazakhstan will be part of this trend, the quarterly report said.

Had the Doha meeting succeeded, Azerbaijan and Kazakhstan could have hidden falling production figures behind an international agreement.

Now they have to face further oil price volatility, the main outcome of the failed Doha talks, and without a smokescreen to defend their lower output figures.

ENDS

(News report from Issue No. 277, published on April 22 2016)

Editorial: Civil rights in Georgia

APRIL 15 2016 (The Conway Bulletin) – A long battle against an eavesdropping law in Georgia was resolved by the country’s Constitutional Court. It deemed the bill unconstitutional and mandated its amendment within the next 12 months.

The controversial bill, which allowed government security agencies to have unrestricted access to communications across telecom networks, was the focus of a fierce battle between the Parliament, the President and civil society in late 2014.

The political coalitions in the Parliament split during the heated debate on the bill. Ultimately, a thin majority approved the bill.

At the time, President Giorgi Margvelashvili vetoed the bill. Parliament, though, voted to override the presidential veto — dealing a huge blow to Mr Margvelashvili’s authority.

With this final victory for those fighting the bill, Georgia will now have to drop legislation that infringed civil liberties and privacy of its citizens, handing civil society a rare victory over state agencies and giving Mr Margvelashvili his payback.

ENDS

(Editorial from Issue No. 276, published on April 15 2016)

EBRD praises Kazakh economy

APRIL 8 2016 (The Conway Bulletin) – The European Bank for Reconstruction and Development (EBRD) has defended Kazakhstan’s economic record over the past couple of years despite a sharp currency devaluation, rising inflation and thousands of job losses, media reported. Media quoted the EBRD’s chief in Kazakhstan, Janet Hackman, saying that Kazakhstan was not faced with an economic crisis because of steps it had taken recently to join the WTO and move to an inflation targeting monetary policy.

ENDS

(News report from Issue No. 276, published on April 15 2016)

Azerbaijan’s Bank needs more capital, says Fitch

APRIL 13 2016 (The Conway Bulletin) – Ratings agency Fitch said the International Bank of Azerbaijan needs to increase its proposed 500m ($328m) manat capital injection to repair its solvency problems. IBA, which is Azerbaijan’s largest bank, wrote off around 3b manat ($2b) of non-performing loans, but has another 3b manat or more of troubled assets, according to Fitch. A sharp depreciation of the manat last December hit the value of assets in Azerbaijan’s banking sector.

ENDS

(News report from Issue No. 276, published on April 15 2016)

Kazakh mobile operator maintains dividend

APRIL 12 2016 (The Conway Bulletin) – Kcell, Kazakhstan’s largest mobile operator, said it would pay out 50% of its 2015 profits in dividends, disappointing investors and analysts, who expected a higher return. At 117 tenge per GDR ($0.35), this year’s dividend is lower than the $1.54 per GDR it gave out last year. Analysts at Halyk Bank expected the dividend to be around 70% of Kcell’s profits this year. Kcell revenues fell 10% in 2015 as tougher competition and an economic downturn combined to hit sales.

ENDS

(News report from Issue No. 276, published on April 15 2016)

UK company to build a hydropower plant in Georgia

APRIL 14 2016 (The Conway Bulletin) – UK-based investment company Geopower signed an agreement with Georgia’s energy ministry to build a new hydropower plant on the Mtkvari river. The new plant, located near Dzegvi, a village 20km north of Tbilisi, will cost $24m and will have a capacity of 15.7MW. Small hydropower stations are spreading across the South Caucasus to meet the region’s energy needs.

ENDS

(News report from Issue No. 276, published on April 15 2016)