APRIL 1 2016 (The Conway Bulletin) – In March, consumer prices continued to increase in Kazakhstan, according to the National Statistics Committee. Inflation stood at 0.5% in March alone and the annualised level now stands at 15.7%, its highest since 2009. Analysts have said that inflation in Kazakhstan will continue to climb.
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(News report from Issue No. 275, published on April 8 2016)
ALMATY, APRIL 4 2016 (The Conway Bulletin) — The Kazakh government has filed a $1.6b fine against the consortium that operates the Karachaganak gas condensate field in northern Kazakhstan, Russian energy company Lukoil said, sparking fears about corporate governance and contract sanctity.
If the fine was enforced it would be, by far, the largest-ever penalty imposed on an energy consortium in Kazakhstan
Lukoil said that the lawsuit concerned changes to the profit scheme of Karachaganak’s production sharing agreement contract.
“Lukoil is involved, along with other Karachaganak consortium members, in a dispute with the Republic of Kazakhstan regarding the calculation of both cost recovery and an equity index in accordance with the Karachaganak production sharing agreement. The share of the total fine Lukoil will have to pay is $214m (15.6b roubles),” the company said in a statement.
Essentially, the fine focuses on when exactly the partners at Karachaganak have earned back their initial investments and how the equity stakes are divided. Once Karachaganak has paid back the initial start-up investment it shifts onto a higher tax regime. The Kazakh government wants this to happen soon, especially as it is trying to battle its way through a sharp economic downturn.
None of the other consortium members have commented. They are Eni (29.25% stake), Shell (29.25% through BG), Chevron (18%), Lukoil (13.5%) and state-owned Kazmunaigas (10%).
Analysts say the fine was consist- ent with the government’s practice of pressuring business ventures.
“Kazakhstan’s government has repeatedly tried to exert pressure on and expand its presence in Karachaganak, which is a profitable project. This fine is in line with the government’s strategy of increasing state shares in profitable projects,” said Nygmet Ibadildin, professor of energy policy at KIMEP University.
In 2012, Kazmunaigas bought its 10% stake in Karachaganak for an undisclosed amount. Shortly after this deal, Kazakhstan dropped a two year long $1.2b tax-back claim against the consortium. Many analysts linked the two issues.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 2 2016 (The Conway Bulletin) – Turkmenistan showed off its arsenal of new Chinese-made air defence missiles for the first time, the Eurasianet website reported, confirming for the first time that it had bought weapons from China. The missile deal will irritate Russia which has traditionally had full sway over where its dominions, or past dominions, buy weapons.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 6 2016 (The Conway Bulletin) – The Eurasian Economic Union moved a meeting of its PMs scheduled for April 8 in Yerevan to Moscow because of fighting between Armenia-backed fighters and Azerbaijani forces over the disputed region of Nagorno-Karabakh. Before the meeting was moved, Kazakh PM Karim Massimov had cancelled his trip to Armenia’s capital. The Moscow meeting will now be held on April 13.
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(News report from Issue No. 275, published on April 8 2016)
BISHKEK, APRIL 6 2016 (The Conway Bulletin) — A row over gas debt repayment has shown just how indebted some Kyrgyz companies have become as the entire Central Asia region battles with a deepening economic downturn.
Interglass, which had employed up to 600 people in Tomok in northern Kyrgyzstan, now owes the Kyrgyz subsidiary of Russia’s Gazprom over 1.1b som, or around $16m, for unpaid gas. This is half Gazprom Kyrgyzstan’s total outstanding debt it is owed by its Kyrgyz customers.
Four years ago, Kyrgyz President Almazbek Atambayev had toured Interglass and held it up as an example of Kyrgyz regional enterprise. Now Interglass is struggling to stave off bankruptcy.
Gazprom Kyrgyzstan said that it has tried to negotiate with the glass- making company so that it can pay back its debt in a structured manner but that negotiations had collapsed.
“Taking into account the social importance of the enterprise, in March Gazprom Kyrgyzstan gave Interglass in every opportunity to settle the debt for the supplied gas,” it said in a statement.
It has previously called on the Kyrgyz government to step in to help Interglass pay off its debts and also threatened to turn off the gas to the whole of Kyrgyzstan if it doesn’t pay.
There has been no comment from Interglass or its parent company, the Germany-registered but Bishkek based, Steinert Industries.
For the Kyrgyz government, the row creates a potentially incendiary scenario. It sold off its gas distribu- tion network to Gazprom for a sym- bolic $1 in 2014 in exchange for settling its debt and agreeing to fund much needed investment. It has just renegotiated a cheaper price of gas for ordinary customers but businesses still complain that in the current economic climate Gazprom Kyrgyzstan is overcharging.
The government has said it will step in to help Interglass pay its bill but, so far, there has been little evidence to show that it has achieved any major inroads.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 4 2016, TBILISI (The Conway Bulletin) — The National Forum, previously seen as one of the government’s most loyal junior partners, quit the Georgian Dream-led governing coalition, dealing a major blow to the coalition’s hopes of retaining a majority at a parliamentary election later this year.
The Georgian Dream coalition now has a thin majority in parliament, holding 82 seats out of a total of 150. The National Forum has six MPs. Its decision to quit government came only a few days after the Republican party, also part of the coalition government, said that it would campaign on a separate slate at the parliamentary election.
Korneli Kakachia, director of the local non-partisan think tank the Georgian Institute of Politics, said that recent government policies by the Georgian Dream party had irritated its junior partners.
“This is pretty damaging to the Georgian Dream, as the National Forum were very loyal partners. Their announcement will raise questions with the voters,” he said. “The other parties are still in the coalition, but their support for new laws is not assured. Especially not the recently proposed bill by Georgian Dream to allow the PM to stay in office and run for MP at the same time.”
Under the current legislation, the PM can’t run for election as an MP. The Georgian Dream, though, want to change this as they want current PM Giorgi Kvirikashvili to head their party list.
But splits in the coalition has impacted its popularity with voters. Luka, 32, leaned against his BMW taxi. “If they can’t even keep their coalition together, how can they rule a country?” he said.
Standing next to him, 58-year-old Giorgi nodded his head in agreement. “I voted for them in the last election, but I’m not sure I’ll give them my vote in October,” he said.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 5 2016 (The Conway Bulletin) – Consumption of electricity in Kyrgyzstan was down 23% in March compared to last year, due to warm weather conditions, according to industry data. Total consumption amounted to 881m kWh. Severlektro, the largest distributor, said it delivered 438m kWh, 29% less than in March 2015. Previously an opposition MP had said a drop in electricity consumption showed the extent of the economic downturn.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 3 2016 (The Conway Bulletin) – An Uzbek citizen received a 16-year jail sentence in Uzbekistan for spying for Tajikistan. The televised trial showed the man, Sharifjon Asrorov, confessing the alleged crimes. Tensions between Uzbekistan and Tajikistan continue to be high. Governments in Central Asia use espionage crimes to discredit rival neighbours.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 4 2016 (The Conway Bulletin) – Eriell, a Russian oil service company, and Enesol, a UAE-based renewable energy company, said they have launched a 1.2MW mobile solar station, the first of its kind in the Commonwealth of Independent States to power Lukoil’s upstream operations in Kandym, near the border with Turkmenistan. Eriell is one of Lukoil’s largest suppliers in Uzbekistan.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 5 2016 (The Conway Bulletin) – The Caspian Pipeline Consortium (CPC) which operates a pipeline that pumps oil around the northern shore of the Caspian Sea said it will ship oil from Kashagan in the fourth quarter of the year. The CPC statement gives extra impetus to the Kazakh government assessment that the Kashagan project will be operational by the end of 2016. Kashagan, which was supposed to propel Kazakhstan into the Premier League of oil producers was closed in 2013 for repairs.
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(News report from Issue No. 275, published on April 8 2016)
