MARCH 15 2016 (The Conway Bulletin) – Kazatomprom, Kazakhstan’s state- owned uranium miner, could take back assets from joint-ventures with some of its foreign partners because they are under performing, Kazakh President Nursultan Nazarbayev said. Kazatomprom’s main partners in the nuclear energy supply chain include France’s Areva, Canada’s Cameco and Japan’s Sumitomo.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 16 2016, ALMATY (The Conway Bulletin) — Nurali Aliyev, grandson of Kazakhstan’s President Nursultan Nazarbayev, quit his position as deputy mayor of Astana to pursue his business goals, a move that draws him away from the succession debate.
His decision came just days before a parliamentary election, in which his mother, President Nursultan Nazarbayev’s eldest daughter Dariga, was standing for re-election.
“I’m looking to work in business development in a financial niche,” media quoted 31-year-old Mr Aliyev as saying. “For many years, before working in the akimat, I was engaged in business.”
Mr Aliyev is the son of Dariga Nazarbayeva and the late Rakhat Aliyev, who was found dead in a Vienna prison in February 2015. He had been charged with the murder of two bankers at Kazakhstan’s Nurbank in 2006.
Prior to being appointed as deputy mayor of Astana in 2014, Mr Aliyev had worked in Kazakhstan’s banking, telecoms and transport sectors.
But it was his shock appointment in December 2014 to one of the Kazakh capital’s most important positions, that threw him into the public limelight and set off rumours that he was being groomed for the top job.
His grandfather, Pres. Nazarbayev, is 75 years old and has said that he is nearing retirement. What he hasn’t done is set out a clear succession schedule.
One of the theories put forward after Mr Aliyev’s appointment as deputy mayor of Astana was that his mother would take over the top job in four or five years time and, effectively, keep the seat warm for her son to take over when he was old enough. The Kazakh constitution states that the minimum age for a president is 40.
Other than citing a preference to resume a business career, Mr Aliyev didn’t say why he was quitting as deputy mayor of Astana.
What his resignation definitely has done, though, is set off renewed Kazakh presidential succession speculation.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 17 2016, ALMATY (The Conway Bulletin) — Kazakhstan’s state-owned electricity company Samruk Energo said it resumed deliveries of electricity to Russia after cross-border trade was suspended in November 2014 due to the sharp depreciation of the rouble against the tenge.
Over the past six months the tenge has lost around 50% of its value, bringing it into equilibrium with the rouble and making cross-border trade viable again. Kazakhstan had stubbornly stuck to a US dollar peg despite a fall in global oil prices and a recession in Russia. It ditched this peg in August.
These electricity trades are important as they are more evidence of a normalisation of trade ties between Kazakhstan and Russia after a series of rows last year which, at their root, were triggered by the currency imbalance. Power supply contracts between Samruk Energo and Inter RAO are denominated in roubles which hit their value for Samruk Energo when the rouble fell heavily against the tenge.
Samruk Energo said it wants to export 1.8b kWh to Russia in 2016, slightly less than it exported in 2014. In 2013 power exports to Russia had been around 2.5b kWh.
The two power stations at Ekibas- tuz, in north-eastern Kazakhstan, will provide the electricity and Samruk Energo said the second unit at Eki- bastuz was also put into operation.
“Free capacity at Ekibastuz GRES- 1 and GRES-2 was allocated to export deliveries,” Almassadam Satkaliyev, Samruk Energo chairman, said in a statement.
The first unit is owned by Samruk Energo and Ekibastuz Holding, controlled by Kazakhmys.
GRES-2, the second unit at Eki- bastuz, is jointly owned by Samruk Energo and Russia’s Inter RAO.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 17 2016 (The Conway Bulletin) – Kazakhstan has not been invited to a meeting in Qatar set for April 17 where major world oil suppliers are due to discuss freezing output levels at their current rates, energy minister Vladimir Shkolnik said. The apparent snub for the FSU’s second biggest oil producer underlines its role as an oil price taker rather than an oil price maker. Oil producing nations are trying to coordinate a response to drag oil prices off record lows.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 18 2016 (The Conway Bulletin) -The economic downturn continues to hit Central Asia and the South Caucasus with British Airways now cancelling its London-Baku service.
But whether BA needs to quit the route altogether is questionable. Airlines keep a diversified portfolio of route because it is near impossible to second guess which routes will be profitable in a few year’s time.
The decision took many by surprise because of the strong presence of British business in Azerbaijan, most notably BP.
As oil prices fell dramatically in the past 20 months, airline companies have rallied on cheap fuel, but have also struggled to maintain links to countries negatively affected by the crisis.
In 2012, British Airways cut its route to Yerevan, the following year it cancelled regular flights to Bishkek and Tbilisi. Last October, the company quit its London-Almaty route.
The crisis, aside from hitting government budgets and people’s wallets, has contributed to cutting off further the region from the West.
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Editorial from Issue No. 272, published on March 18 2016)
MARCH 14 2016 (The Conway Bulletin) – As planned after the announcement of the deal with Olisol, two executives at Guernsey-based Tethys Petroleum will step down. John Bell and Alexander Abramov will now be co-non-executive chairmen. Mr Bell and three other directors said they will not seek re-election at the next general meeting at the end of May.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 17 2016 (The Conway Bulletin) – Kazakhstan’s parliament passed a law which will authorise officials to chemically castrate men convicted of paedophilia, AFP reported. Chemical castration is used in some countries although some human rights groups have criticised it. Without explaining why, Kazakhstan said that cases of paedophilia have doubled in the past four or five years and that it needs to increase the deterrent.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 17 2016 (The Conway Bulletin) – The EBRD said it extended a $39.5m credit line to Majid Al Futtaim, the regional franchisee of French retailer Carrefour, to extend its presence in Georgia. Carrefour already has three stores in Georgia and said it wants to open new ones. Carrefour is also present in Armenia, where it owns one store, Tajikistan and also in Kazakhstan.
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(News report from Issue No. 272, published on March 18 2016)
ALMATY, MARCH 11 2016 (The Conway Bulletin) – In a thinly veiled warning, an official from the Mangistau government in west Kazakhstan said that Ozenmunaigas, a subsidiary of Kazakhstan’s state-owned Kazmunaigas, could start cutting jobs to maintain profitability during the current economic downturn.
Elubai Abilov, representative of the local government, said that the company had not hired new staff since 2014 because it cannot afford to employ new workers.
He then said: “Ozenmunaigas will try to protect every job for its employees.”
Local analysts immediately read these comments as jobs being under threat, although there was no word from Ozenmunaigas itself.
In February, Maksat Ibagarov, Ozenmunaigas’ general director, had said: “We are not planning downsizing or wage cuts, but we are in a difficult situation. To be a profitable company, it is necessary to cut costs and increase oil production.”
Ozenmunaigas operates oil fields near Zhanaozen where riots killed at least 14 people in 2011. Employment is a highly sensitive matter at the company.
Last year, Kazmunaigas wrote off its Ozenmunaigas assets.
Kazmunaigas also said that during the first three quarters of last year Ozenmunaigas operated at a loss, as its average costs were around $65/barrel, while oil prices averaged $55/barrel.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 18 2016 (The Conway Bulletin) – In less than two months, Brent oil prices shot up by around 40%, giving oil companies a boost after months of downward pressure.
According to industry specialists, oil prices should remain within the current corridor of $35-$40/barrel until the end of the year, with an upward outlook (see chart above).
An Asian energy markets expert told The Conway Bulletin confidentially that he believes oil prices might grow back up to three figures by 2020, a long-term bullish statement.
But in the meantime, oil- dependent economies in the South
Caucasus and Central Asia will continue to suffer.
Despite the rebound in oil prices, most of the fields in Azerbaijan and Kazakhstan will operate at a loss this year as well. And there is only a slim chance that the two Central Banks in Baku and Almaty will decide to weaken their currencies further in order to favour the export-oriented sectors of their economy.
Tengizchevroil, the consortium in charge of the Tengiz oil field in Western Kazakhstan has delayed a final investment decision on its expansion project. BP has said its fields in Azerbaijan will not show an increase in production in 2016.
The gas sector will also be impacted by oil prices in the medium term, as gas prices will also shrink, albeit moderately, for Azerbaijan, Turkmenistan and Uzbekistan.
The decline of oil and gas prices has now almost reached its two- year anniversary and exporters will feel an increasingly stronger pressure from importers to give them subsidies and discounts, given the regional economic downturn that is affecting all countries in the region.
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(News report from Issue No. 272, published on March 18 2016)
