FEB. 25 2015 (The Conway Bulletin) – Kazakh president Nursultan Nazarbayev called an early presidential election for April 26. Pro-Nazarbayev groups have been asking for an election in order to underline his authority as Kazakhstan deals with a tough economic climate.
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(News report from Issue No. 221, published on March 4 2015)
MARCH 2 2015 (The Conway Bulletin) – The collapse in oil prices forced Max Petroleum, a British-Kazakh oil and gas company, to suspend trading on the London AIM stock exchange.
In a statement, Max Petroleum said it was in negotiations to restructure its debt with Sberbank and other creditors.
“If current negotiations are unsuccessful, or if other events outside the control of the Company require that the Company ceases trading while such negotiations are ongoing, then the consequences will be negative for all stakeholders in the Company,” the company statement said.
Last month Max Petroleum squarely blamed the slump in global oil prices for its problems which wiped out profit margins and deterred potential investors.
The Max Petroleum’s troubles are a microcosm of the problems facing Kazakhstan-orientated companies trying to weather an economic downturn linked to the oil price drop and the turmoil in Russia’s sanction-hit economy.
Almaty-based confectionery plant Rakhat, which South Korea’s LOTTE bought in 2013/2014 in a multi-million dollar deal, also said that it had had to lay off 500 of its 3,800 workers. It blamed unfair competition from cheaper Russian sweets.
Once feted as one of Kazakhstan’s most famous companies outside the extractive industries, Rakhat is now trying to eke its way out of the economic storm — just like most other Kazakh companies.
Max Petroleum, listed on the LSE since 2005, is a small Kazakhstan oil producer with an output of around 200,000 tonnes of oil a year.
In August 2014, AGR Energy, linked to the prominent Assaubayev family, made a deal to buy 51% of Max Petroleum for £37m ($62m), promising to embark on a significant investment to revitalise the company. The slump in oil prices, though, appears to have deterred AGR Energy from follow through with the deal and the promised investment.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 221, published on March 4 2015)
FEB. 27 2015 (The Conway Bulletin) – Armenia’s economy grew by 3.4% in 2014, lower than the expected 5.2%, the country’s statistics office said quoting preliminary data (Feb. 27). The economies of Central Asia and the South Caucasus suffered from a general downturn in the second half of last year due to falling oil prices and problems in Russia’s economy.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 221, published on March 4 2015)
FEB. 25 2015 (The Conway Bulletin) – Armenia has asked Russia not to raise the price it pays for gas despite a drop in the value of its dram currency, media reported quoting the head of the Public Services Regulatory Commission (PSRC) Robert Nazaryan.
Russia’s Gazprom owns the gas distribution system in Armenia and can, therefore, dictate the price that Armenians pay for their gas.
The worry for officials in Armenia is that the dram lost around 15% of its value against the US dollar at the end of last year. Energy prices are set in US dollars, making it more expensive for people in Armenia to buy.
“In this connection at this moment the Armenian side is conducting negotiations with the Russian side for the natural gas price not to be raised because of the dram-dollar fluctuations,” media quoted Mr Nazaryan as saying.
Russia dominates Armenia’s economy and by asking Gazprom to keep the cost of gas consistent, Mr Nazaryan is effectively asking for a subsidy. If Gazprom agrees, Armenia will fall further under the control of the Kremlin.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 221, published on March 4 2015)
FEB. 26 2015 (The Conway Bulletin) – Bidzina Ivanishvili, Georgia’s former PM and its richest and arguably most powerful man, accused Central Bank chief Giorgi Kadagidze of not doing enough to protect the country from the economic downturn enveloping the region.
Inflation is rising in Georgia, the lari currency is falling in value and businesses are worried. This has all heaped pressure on the 34-year-old Mr Kadagidze, who has been in the top job at the Central Bank since 2009.
Mr Ivanishvili’s intervention will pile on more pressure.
“The Governor of the NBG (National Bank of Georgia), Giorgi Kadagidze, who was appointed by the previous government, led us with his inactivity and incorrect actions to the lari crisis,” he said in a statement released through an NGO he has set up.
A fall in oil prices and economic turmoil in Russia have triggered inflation across Central Asia and the South Caucasus.
Some economic experts argue that Georgia’s Central Bank could have done more to dampen the inflation; others have said the government is merely looking for a scapegoat and that Mr Ivanishvili’s intervention is destabilising.
Vakhtang Charaia, director of the Center for Analysis and Forecast at Tbilisi State University, said: “Ivanishvili’s statement could lead to political instability, which in turn would negatively affect Georgia’s investment climate.”
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(News report from Issue No. 221, published on March 4 2015)
FEB. 20 2015 (The Conway Bulletin) — The growing financial crisis in Kazakhstan has now hit the country’s sovereign wealth fund, Samruk-Kazyna.
Umirzak Shukeyev, head of the fund, said the plan was to look to borrow up to $2.5b to refinance its debt.
“If conditions on external markets are attractive enough for us, we will tap foreign markets, although right now we see that the situation in the internal market is more favourable for us to borrow,” he said.
Regardless, Samruk-Kazyna’s insistence that it will need to borrow cash to restructure its debts is an important admission that the financial crisis is growing.
Like its neighbours, the slowdown in Russia’s sanction-hit economy and the drop in the price of oil has hit Kazakhstan hard.
Samruk-Kazyna holds about $100b in assets, roughly half Kazakhstan’s GDP, and manages about 500 companies.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 220, published on Feb. 25 2015)
FEB. 19 2015 (The Conway Bulletin) — In its annual report, the Toronto-based Centerra Gold said that its Kumtor mine in eastern Kyrgyzstan produced 10% less gold in 2014 than it did in 2013.
Kumtor is not only important to Centerra Gold, which also has other assets, but is also vital to the economic health of Kyrgyzstan. It is the country’s largest single asset and contributes around 10% of its total GDP.
Already reeling from the fallout from Russia’s sanction-hit economic slowdown, the news from Centerra Gold that, although expected, gold production at Kumtor had fallen will be a another big blow to Kyrgyzstan.
Centerra Gold said gold production in 2014 was around 620,000 ounces, down from 690,000 ounces.
Kumtor has been a headache over the past few years. Kyrgyzstan wants to assume more control over the gold mine, while Centerra Gold has been fighting to retain its share.
Strikes and protests caused part of the drop in production at Kumtor.
Centerra Gold CEO, Ian Atkinson said of negotiations with the Kyrgyz government over Kumtor ownership: “We are in the process of negotiating the definitive agreements to implement the restructuring as described in the Heads of Agreement signed on January 18, 2014 and are continuing discussions with the Kyrgyz Government in this regard.”
Kyrgyzstan wants to swap its 32.7% stake in Centerra Gold for a 50:50 joint venture in Kumtor directly.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 220, published on Feb. 25 2015)
FEB. 21 2015 (The Conway Bulletin) — Azerbaijan’s Central Bank cut the value of its manat currency overnight by a third in response to the falling value of the Russian rouble and the collapse in oil prices.
Many analysts said that a devaluation was long overdue although none expected such a sharp correction.
And, as a Bulletin correspondent reports from Azerbaijan, the devaluation has angered and frustrated local people. Ordinary people have watched as the value of their savings has plummeted, inflation has soared and economic growth rates have been cut.
This is the major risk that the Central Asian and South Caucasus economies run when trying to deal with an increasingly nasty economic downturn that has enveloped the region. They need to adjust their monetary policies while still retaining the trust of their populations.
Part of the problem has been the speed with which the economic downturn has hit the region.
Most Central Banks in Central Asia and the South Caucasus have allowed their currencies to depreciate slowly although Turkmenistan, and now Azerbaijan, have opted for a sudden devaluation this year.
Kazakhstan is still resisting another correction — it cut the value of its tenge currency by 20% last year — but it must now only be a matter of time before it succumbs.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 220, published on Feb. 25 2015
FEB. 18 2015 (The Conway Bulletin) — Kazakh president Nursultan Nazarbayev ordered work on the Almaty Metro system to stop because of a shortage of funds, media reported. The first phase of Almaty’s metro was unveiled in 2011 but high costs and low passenger numbers have combined with a drop in government funds to delay a planned extension.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 220, published on Feb. 25 2015)
FEB. 24 2015 (The Conway Bulletin) — Kyrgyzstan’s Central Bank left its key interest rate unchanged at 11% despite inflationary pressure from a devaluing currency and falling remittances from workers based in Russia. In February, Kyrgyzstan’s inflation was measured at 10.9%.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 220, published on Feb. 25 2015)
