Nazarbayev promises to empower Kazakh parliament · The Azerbaijani authorities close down Qafqaz University because of its links to the Gulenist Movement. GEORGIA page 3 Georgians

ALMATY -- In a televised address tothe nation lasting 9-1/2 minutes,Kazakh President NursultanNazarbayev described how he wantedto bring in a series of reforms thatwould shift power from the presidentto parliament (Jan. 25).

The main proposals focused onhow the government was formed.Currently, Mr Nazarbayev appointsall the key positions in governmentand the state's main agencies. Thiswas a task that he said he wanted tohand over to the PM. He also said thathe wanted parliament to have moresay over social and economic issues.

“The point of the proposedreform is in a serious redistributionof powers and democratisation of thepolitical system as a whole,” he saidduring this address in both Kazakhand Russian with his trademarkformal and deadpan delivery.

The speech, though, was short ondetail and lacked a timeframe for theproposed changes. Although the aimof the speech appears to be to burnish

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Nazarbayev promises toempower Kazakh parliament

Mr Nazarbayev’s credentials as a dem-ocrat and to ease concerns that hedoesn't have a succession plan, themain reaction was derision.

In Almaty, Mikhail, 29, said: “Thisis another imitation and an attemptto shift the responsibility for worsen-ing living conditions.”

And analysts said Mr Nazarbayevappeared eager to disengage fromdifficult social and employment poli-

>>Proposed reforms unveiled in televised address, although analysts and people are sceptical

cies but retain control of dutieslinked to foreign policy and security.

“It's almost like he wants to passoff responsibility for the really hardstuff,” said Bruce Pannier, a CentralAsia analyst at RFE/RL.

Not everybody was downbeat.“That sounds great, nonethelessthese reforms require strengtheningof mass media and freedom ofspeech,” said Galym, 26.

Comment: Nazarbayev’sreforms will make Kazakhstanmore volatile – p.2

The Brainteaser: Test yourknowledge of C.Asia and theS.Caucasus to win a pen – p.8

Business News: Azerbaijanincreases stake in its biggestbank – p.9

Jan. 27 2017 Issue no. 314

>>A screengrab showing Nazarbayev making his address Pic: YouTube

THE BRIEFING: P8 >> Pressure mounts on Georgian energy minister Kakha Kaladze >>

Kyrgyzstan keeps Uzbek activist locked upBISHKEK -- A court in Kyrgyzstanreiterated a life sentence againstethnic Uzbek rights activist AzimjanAskarov for stirring racial tension in thesouth of the country in 2010 (Jan. 24). Kyrgyzstan has been under pres-sure from the United States, the

United Nations and various humanrights groups to free Askarov, but thejudge in the court in Bishkek rejectedthe notion that the original convic-tion had been unsafe. Human rights groups said thedecision had been politically motivated

and that the government was lookingfor scapegoats for ethnic violence in 2010.

Askarov had been arrested in theaftermath of riots in 2010 focused onthe southern city of Osh betweenethnic Kyrgyz and Uzbeks that killedseveral hundred people.

The Conway Bulletin. | Jan 27 2017 | page 9


Inside this week’s Bulletin

KAZAKHSTAN page 7

Students in Astana are complaining thattheir academic term for 2017/18 will bedelayed because of EXPO-2017.

KYRGYZSTAN page 5

Civil society leaders have criticised a moveby the National Security Committee tomonitor Facebook criticism of thegovernment.

TAJIKISTAN page 6

Somon Air, Tajikistan’s biggest airline,will start up flights to regional Russiancities once again.

TURKMENISTAN page 6

Turkmenistan says that it would beprepared to talk to Iran over a disputedunpaid gas bill.

UZBEKISTAN page 6

A presidential decree hints that exitvisas in Uzbekistan, a Soviet relic, maybe scrapped.

AZERBAIJAN page 3

The Azerbaijani authorities close downQafqaz University because of its links tothe Gulenist Movement.

GEORGIA page 3

Georgians line up to swap their US dollarloans into Georgian lari under agovernment-backed scheme.

ARMENIA page 5

Armenia prepares to introduce graphic newpictures on cigarette adverts which showdamage caused by smoking.

BUSINESS NEWS page 9

Kazakh mobile operator Kcell says thatrevenues in 2016 fell by 12.7% because of ageneral economic downturn.

>>Proposed constitutional changes in Kazakhstan will make thecountry more volatile in the longer term as factions within the elitegrapple for control, writes Camila Hagelund.

Nazarbayev announcesconstitutional changes

In an unusual step, Kazakh President Nursultan Nazarbayev took to theairwaves to announce constitutional changes, suggesting theseptuagenarian has fired the starting gun for his succession. Proposedamendments to Kazakhstan’s constitution were received with scepticism bythe Kazakh people; yet they include changes that will prove significant.

Planned limits on presidential power have little immediate impact asNazarbayev’s personal, informal influence determines the rules of the game.However, in the post-Nazarbayev era, formal institutions are likely to playan increasingly influential role.

Nazarbayev is setting the scene for his successor to be less powerful. Thislikely reflects recognition on his part that no individual has the authority orlegitimacy to succeed him as a strongman (or –woman) ruler. While theproposed strengthening of parliament will not result in a multi-partydemocracy, a form of pluralism already exists with elite factions supportingdiffering policies.

Verisk Maplecroft considers intra-elite differences the only plausiblesource of a more competitive political environment in the immediate post-Nazarbayev era, but they equally raise the potential for instability. Elitefactionalism is currently mediated by the president, but with a less powerfulsuccessor facing a potentially more vocal and influential government andparliament, the scene is set for more overt elite clashes.

In the absence of strong state institutions, clashes over policy – or ofpersonalities – risk undermining government stability. A particular causefor concern is therefore Kazakhstan’s weak rule of law, specifically the littleemphasis Nazarbayev put on the importance of the judiciary in refereeingthe balance of power between different branches of government.

A more complex collective system of government would be a step-changein the political landscape for businesses after a quarter of a century of

relative stability. Collective government implies lessclarity around who the power brokers are, particularlyas the system is established and elite jostle for power.

When the time comes, navigating Kazakh politicswill, in all probability, prove challenging. Policy

and political volatility is bound to increasewithout a single power broker tomediate between different factionsof the ruling elite.>>Camilla Hagelund, senior Europe

analyst at risk consultancyVerisk Maplecroft

Comment

The Conway Bulletin. — Independence, integrity, brevity”Editor – James KilnerReporting coverage in Central Asia and the South Caucasus: The Bulletin has correspondents on retainers in Almaty, Bishkek, Dushanbe andTbilisi and part-time correspondent in Yerevan. For Azerbaijan, Uzbekistan and Turkmenistan, The Bulletin employs local reporters now basedoutside their home country to help with coverage. Cross Fell ltd owns The Conway Bulletin. It is registered in England and Wales as companyno. 0755115. Our ISSN is 2397-6624.


The authorities in Azerbaijan haveclosed the Qafqaz University in Bakubecause of its links to the Gulenmovement which key ally Turkeyblames for a failed coup in 2016 (Jan. 20).

The closure of the high-profileuniversity, considered one of the bestin Azerbaijan, follows the shutting of10 high schools linked to Gulen.

Azerbaijan has been the onlycountry in the South Caucasus andCentral Asia region to go out of itsway to accommodate Turkey'sdemands to close institutions linkedto Fethullah Gulen, the Muslim clericwho is now living in exile in theUnited States.

In the 1990s, after the collapse ofthe USSR, Gulenists set up schoolsand universities in the region. Theyare now regarded as some of the best.

Gunel Hacıyeva, a recent graduateof the Qafqaz University, lamented itsclosure.

“Caucasus was the best universityin Azerbaijan. So much experience,

so many people, so many studentshave become victims of the interestsof the authorities of both Turkey andAzerbaijan,” he told the Conway Bul-letin.

The Conway Bulletin. | Jan. 27 2017 | page 3

Azerbaijan closes top university because ofits links to Gulen Movement>> Azerbaijan has enthusiastically gone after people and institutions blamed for Turkey coup

>>Qafqaz University Pic: qu.edu.az

TBILISI - Georgians have been liningup to convert their dollar denomi-nated loans into lari under a so-called “larisation” programme aimedat easing debt burdens after the laricurrency lost 21% of its value in sixmonths (Jan. 25).

The government will administerthe programme jointly with theCentral Bank starting from Jan. 17.It will run for two months.

Giorgi Tsutskiridze, the executivedirector of Association of Banks ofGeorgia, said that people had ini-tially taken out bank loans in USdollars because they have a lowerinterest rate.

“Usually foreign currency loanshave a relatively low annual interest

Georgians line up to swap their US dollarloans for lari in government programme

rate, which is on average 3-4% lessthan loans in lari,” he told TheConway Bulletin.

Since the launch of the pro-gramme last week, 5,000 people haveapplied to switch their loans andaround 250 have already made theswitch. The majority of loans inGeorgia are US dollar-dominated.

Georgian economy has been hit bya strengthening US dollar, a recessionin Russia and weaknesses in its neigh-bouring economies.

Mr Tsutskiridze said the conver-sion of US dollar loans into lari wasnecessary to revive the economy.

“Dedollarisation is a vital strategy.Without rapid economic growth, wewill end up in poverty,” he said.

In order to be eligible for the pro-gramme the loan must be linked toreal estate received before Jan. 1, 2015.

Creditors will convert loans at 20tetri less than the current rate withthe government subsidising the dif-ference.

Not everybody, though, is con-vince that the “larisation” plan is agood one.

“The lari is so devalued nowagainst the dollar that even with thefavourable exchange rate that thegovernment offers, I would end uppaying much more anyway,” saidMerab, a Tbilisi resident who worksin a local grocery store.

“I’d rather just wait and hope forthe lari to stabilise.”

Kazakhstan’s agriculture ministryconfirmed that the H5 flu virus hadbeen found in wild swans in thewest of the country (Jan. 20). A fewdays earlier two dead swans hadbeen found in Atyrau. The H5 strainof bird flu can be passed onto peoplealthough it is not as infectious or asdeadly as the more well-knownH5N1 virus.

Armenia has banned chickenimports from six regions of Iranbecause of an outbreak of bird flu,media reported (Jan. 24). Tradebetween Iran and Armenia hasincreased rapidly over the past fewyears meaning that the ban will hitchicken supplies in Armenia.

Talks in Astana between the forcesof Syrian president Bashar al-Assadand rebels broke up after two dayswith both sides promising to consol-idate a ceasefire (Jan. 24). The deal,overseen by Turkey, Russia and Iran,will be seen as a diplomatic successfor Kazakhstan which hosted thetalks. Kazakh president NursultanNazarbayev wants to build up a rep-utation for Kazakhstan as an agentfor peace.

Armenian PM Karen Karapetyanflew to Moscow for a series of meet-ings, including with Russian PMDmitry Medvedev, designed tounderline just how close relationsbetween the two countries are (Jan.24). Armenia has been compared, bysome analysts as a Russian vassalstate, reliant on it for trade, militaryand energy cooperation. This wasMr Karapetyan’s first visit to Russiaas PM. He has close personal tieswith Russia and previously used towork for Gazprom Armenia.


Highlighting increasingly tight tiesbetween Armenia and Russia, Arme-nian PM Karen Karapetyan orderedhis government to start preparingprocesses that would allow Russiansto enter Armenia on their internalpassports, essentially an ID docu-ment (Jan. 26). This, potentially,opens up Armenia a a holiday desti-nation to the millions of Russianswho don’t hold an internationalpassport. Surrounded by its enemiesTurkey and Azerbaijan, Armenia isreliant on Russia for military, eco-nomic and energy ties.

In a partial victory for Armenia,Denmark’s parliament voted toadopt a resolution that criticised aban in Turkey on using the termgenocide to describe the killing ofhundreds of thousands of ethnicArmenians at the end of World WarII by Ottoman Turks (Jan. 26). Par-liament stopped short of describingthe killings as genocide, saying thatit traditionally didn’t issue judge-ments on historical events. WhileArmenia has pushed hard forforeign governments to recognisethe killings as a genocide, Turkeyhas refuted all allegations of anorganised genocide.

Turkmenistan’s foreign ministerissued a statement complainingabout a press release by Tajikistanwhich said that it wanted to build arailway link to Russia that bypassedTurkmenistan and instead traversedUzbekistan (Jan. 25). The Turkmenstatement said that Tajikistan’spress release had been unethical.Uzbek-Tajik relations haveimproved markedly since the deathin September of former Uzbek dic-tator Islam Karimov. The Turkmendiplomatic note is a reminder theties between Central Asian coun-tries are often strained and frac-tured.

A court in Baku sentenced 17 peopleto up to 20 years in prison for plot-ting to overthrow the governmentand for trafficking (Jan. 26). Themen, 16 of them described asmembers of a group called MuslimUnity, were all arrested in a suburbof Baku in December 2015. Thesuburb was renowned for its piousnature. Police cordoned off the areaduring the arrests which triggered ashootout in which six people werekilled. Rights protesters have calledthe trial a sham and a show trial.

In possibly the biggest massamnesty by a former Soviet state,Uzbekistan pardoned 40,000 pris-oners (Jan. 24). The amnesty focusedon inmates imprisoned for minorcrimes, foreigners, women, youngoffenders and people over the age of60. Human rights groups accuseUzbekistan of locking up politicalprisoners. No notable political pris-oners were released. Central Asiancountries use amnesties to markanniversaries and to release pressureon their prison populations.

A Kazakh national arrested at NewYork’s JFK Airport in 2015 admittedin court to being a sympathiser ofthe radical IS group, US mediareported (Jan. 20). Ahror Saidahme-tov, 21, who was living in New Yorkat the time of his arrest, faces 15years in jail. Kazakhstan and othercountries in the region have beenfighting IS recruitment.

At a press conference in Dushanbe,the Eurasianet website reported thatTajik interior minister Interior Min-ister Ramazon Rahimzoda said thatthe country's security forces hadstopped 36 terrorist attacks in 2016(Jan. 20). No independent analysis ofthe figures was available.




YEREVAN -- The five member statesof the Kremlin-lead Eurasian Eco-nomic Union (EEU) are preparing toact on new rules that will mean theyhave to place graphic warnings aboutsmoking on all cigarette packages.

Lawmakers have heralded themove as an important step towardsdeterring smoking but many peoplein the notoriously hard-smokingformer Soviet Union think it is apointless piece of bureaucratic self-indulgence.

In Yerevan, Armen Manvelyan, 32,drew hard on his cigarette. It wascold, and snow lay on the streets. Likemany Armenian men, he had beensmoking since school. All hisattempts to quit had failed.

“I don’t think people realise that itis dangerous,” he said. “They just findit really hard to stop smoking. Ihaven’t see any awful photos on cig-arette packs yet but surely they arenot going to stop me.”

In Russia the new regulationsregarding cigarette packaging havealready come into force but Armeniahas until November 2017 to enforcethem.

Armenia to introduce graphic smokingdisease pictures on cigarette packets

From then, cigarette packets willcarry photos of smoke-affectedorgans and the names of diseaseslinked to smoking.

Smoking is part of Armenia’s cul-ture. According to AlexanderBazarchian, director of the state'sNational Institute of Health half ofall men smoke and every year 4,000people die of smoking-related diseases.

Mr Bazarchian said that the newEEU directive was important.

“Using photos of smoke-affectedorgans is an internationally proved

practice to reduce the number ofsmokers,” he said.

The Armenian health ministrywelcomed the reforms and there havealready been a number of moves tocut down on the popularity of smok-ing. This has included banning ciga-rette advertising and banningsmoking in many buildings and areas.

Importantly, though, in many res-taurants and bars, where there is nomandatory ban, the air is thick withcigarette smoke. The EEU and Arme-nian officials want to change this.

>>People walk past a kiosk selling cigarettes in Yerevan >>The Bulletin

>>Eurasian Economic Union members will have to introduce the new pictures this year

BISHKEK -- Rights groups and civilsociety leaders in Kyrgyzstan havecriticised the government for movesto monitor Facebook for commentscritical of the president (Jan 25).

The row centres on the KyrgyzNational Security Committee's(GKNB) move to identify andmonitor 45 Facebook users who havecriticised President Almazbek Atam-

bayev. Facebook in Kyrgyzstan is oneof the few mediums ordinary peopleuse to express political opinions.

But Klara Sooronkulova, a formerjudge of the Constitutional Courtwho was sacked in 2015 because of adisagreement with Parliament overthe use of people's biometrics datasaid the move was wrong. “It is inva-sion of privacy and violation of

human rights,” she told The ConwayBulletin.

A Bishkek analyst who preferredto remain anonymous said politicsmay be motivating the clampdown.

“The next presidential electionsare coming [ in October],” he said.“They are taking measures to controlchaos by trying to control who criti-cises the President.”

Kyrgyz civil leaders criticise crackdown onFacebook as an “invasion of human rights”

Opposition MPs in Georgia’sparliament have forced a debate onFeb. 3 on the terms of a new gas dealstruck with Russia at the beginningof the year, piling pressure onenergy minister Kakha Kaladze toreveal details of the newarrangement (Jan. 23). Under thedeal, Georgia will pay for gas fromRussia directly, rather than take a10% cut of the volume that Russiasends to Armenia. Mr Kaladze hasrefused to give out details of thedeal but his opponents have called ita risk to national security.>>See The Briefing on page 8 for more

Georgian president GiorgiMargvelashvili vetoed a bill passedthrough parliament, which isdominated by the Georgian Dreamcoalition that he represents, that hesaid would damage theindependence of the courts (Jan. 24).The proposed bill had focused onchanging the process through whichcourt judges are appointed. MrMargvelashvili and the GeorgianDream have increasingly rowed overgovernance issues.

The leaders of Armenia’s three maingenuine opposition parties -- theRepublican party, Bright Armeniaand Civil Contract -- haveconfirmed that they will fight aparliamentary election set for Aprilas a united opposition bloc (Jan. 24).The bloc is called Yelik, Way Out.Leaders of Yelik said that they are innegotiations with the Heritageparty, the fourth main oppositionparty, for it join too.

The 840km Baku-Tbilisi-Karsrailway link between the Caspian


Sea and central Turkey will becompleted in the next two months,Turkish energy minister AhmetArslan told media (Jan. 22). Theroute is seen as a vital piece ofinfrastructure linking Europe andChina. Mr Arslan said is woulddouble the cargo capacity betweenTurkey and the Caspian Sea andbecome an important part ofChina’s so called “One Belt, OneRoad” trade project.

Uzbekistan’s Foreign MinisterAbdulaziz Kamilov led a delegationto Kabul to sign a trade declarationthat both sides said should liftbilateral trade to $1.5b (Jan. 25). Thedeal highlights improved traderelations between Afghanistan andUzbekistan, something that bothsides have been working towards.

Russia agreed to lift restrictions onTajikistan’s Somon Air flying to theRussian regions after talks inDushanbe (Jan. 27). The routes toKrasnoyarsk, Krasnodar, Ufa andOrenburg by Somon Air are a vitalpart of the transport infrastructurethat allows Tajik migrants to workseasonally across Russia and to sendvital remittances home. The SomonAir flights had been banned sincemid-December after a row betweenthe two countries’ aviation divisions.

The New York-based Human RightsWatch criticised the Kazakhauthorities for arresting two unionleaders on Jan. 20 for allegedlyorganising a hunger strike by oilworkers earlier in the year againstthe closure of a union confederationstructure (Jan. 26). The two unionleaders, Amin Yeleusinov, andNurbek Kushakbayev, have beenplaced in pretrial detention. TheKazakh government wants to reducethe power of the unions, who theyblame for a series of strikes since 2011.

Turkmenistan said that it wasprepared to enter negotiations withIran over a disputed gas bill of $1.8b,although it still retains the right totake the dispute to an internationalcourt (Jan. 26). Turkmenistan cut offgas supplies to Iran last month afteraccusing it of not paying debts itsaid had built up from 2007/8. Therow has surprised observers whohave watched Turkmenistan-Iranrelations improve.

Completion of the $10bTurkmenistan-lead TAPI gaspipeline that will pump gas fromeastern Turkmenistan to Pakistanand India via Afghanistan has beendelayed by a year to 2020, Pakistanimedia said quoting ministry officials(Jan. 26). They said that the delayhad been caused because it hadtaken longer than expected to pulltogether the finance for the project.

Kyrgyz president AlmazbekAtambayev signed into law a decreethat increased fines handed out topeople who swear on the street anddrink in office blocks, mediareported (Jan. 24).Police officers cannow hand out fines of 15,000 som($200) for swearing in public and10,000 som for drinking in theworkplace.

A court in Astana gave BigeldiGabdullin, the 61-year-old editor ofthe Central Asia Monitornewspaper, a five year suspended jailsentence after he pleaded guilty totrying to extort bribes from officials(Jan. 25). Media freedom activistssaid Gabdullin had only avoided ajail sentence because he had beenpressured into admitting guilt.




ALMATY -- Kazakhstan’s ministry ofeducation ordered universities inAstana to start their academic yearfor 2017/18 late because of EXPO-2017 which is scheduled to run fromJune 10 to Sept. 10 (Jan .23).

The education ministry has notexplained why it needed students tobegin their term late but long-termresidents of Astana said it was likelyto be to try and reduce pressure onthe city’s public services and toreduce traffic on its streets.

Many students are unimpressed.“Humanly, it is not normal,” said

Gabit,a student at one of the medicaluniversities in Astana. “It isinconvenient, for us and for thedoctors who teach us since they haveto work after shift. They wereindignant at first but unfortunatelythe decree is already released.”

The education ministry wasunavailable for the comments.

The organisers of EXPO-2017 havebeen planning the event for years.They expect thousands of visitorsfrom all around the world toconverge on Astana, the Kazakhcapital that President NursultanNazarbayev built on the windsweptsteppe in the mid-1990s, for threemonths, testing its services to the limit.

They are also under extra pressurebecause Mr Nazarbayev, keen topromote Kazakhstan, has taken apersonal interest in EXPO-2017.

Didar Sarsenov who lives inAstana said that he could see why thegovernment wanted to delay tens ofthousands of students from returningto the city for their studies.

“On the one side it is the rightthing to do, from the other it is not,”he said. “They must cope with theflow of people. But properorganisation (of EXPO-2017) shouldmean that the study process starts ontime.”

A presidential decree in Uzbekistanappeared to suggest that the hatedexit visas that ordinary Uzbeks needto be able to leave the country may bescrapped (Jan. 24).

If the decree becomes law, it willherald one of the biggest changes inthe way that Uzbekistan is governedand change the power and control theauthorities can impose over people.

The scrapping of exit visas wasjust one section of a long documentwhich focused on relaxing identifica-tion and travel documents. It said

that a decision would be made by thethird quarter of 2017. There was notimetable, though, on when it wouldbe implemented.

Government officials later tried torow back on the prospect of theauthorities relaxing their grip overordinary people.

The US-sponsored Radio FreeEurope/Radio Liberty reported thatits journalists had spoken to severalofficials at the interior ministry whoemphasised that the plan was just aproposal and may not be adopted.

Uzbekistan hints that exitpassports may be scrapped

TBILISI -- Georgia increased its keyinterest rate by 0.25% to 6.75%, itshighest level since September 2016,because it said that inflation wasbeginning to pick up again (Jan. 25).

The data shows that consumerdemand in Georgia is still weak, year-on-year prices rises in Decemberwere measured at 1.8%, but theCentral Bank said that its forecastsshowed inflation rising throughoutthe rest of the year.

“The monetary policy decision isbased on the macroeconomic fore-cast, according to which whiledemand side pressure on prices isweak, inflation is expected to beabove its target rate for the most ofthe 2017,” it said in a statement.

Georgia's inflation target was 5%for 2016 and is 4% for 2017.

Georgia has cut taxes on rein-vested company profit, pledged toinvest an extra 600m lari ($225m) ininfrastructure projects and cut a free-trade deal with China.

Also on Jan. 25, Bloomberg Newspublished an interview with Georgianfinance minister Dimitri Kumsishvili.He said that a blend of tax cuts andspending on infrastructure wouldhelp Georgia’s economy grow bymore than the predicted 4%.

Last year, weighed down by a col-lapse in the value of its currency arecession in Russia and the poor eco-nomic condition of its neighboursAzerbaijan and Armenia, annual GDPgrowth in Georgia measured 2.7%.

Since June 2016, Georgia’s laricurrency has lost 21% of its value. TheGeorgian Central Bank has largelyrefused to buckle to demands tospend wildly to support the lari’svalue and Mr Kumsishvili wasadamant that the best way tostrengthen it was through the econ-omy.

“Strengthening the economy isthe answer for the lari rate, this is themain task,” he told Bloomberg.

Georgian Central Bankraises interest rates>>Near-term inflation means rates have to rise, says C.Bank

EXPO-2017 willdelay start ofuniversity term



Georgia’s difficult gas deal with Russia

>>

>> After a couple of rounds of negotiations in Geneva,Georgian energy minister Kakha Kaladze returned toTbilisi heralding a new gas deal which he said he hadnegotiated with Russia that was better than the previ-ous arrangement. The new arrangement returned to amonetised price that Georgia would pay Russia for gasrather than, under the old deal, take a 10% cut of thevolume that Russia sends to Armenia.

>>

>> That’s exactly the point. Kaladze returned fromGeneva heralding the new deal as a victory for Georgiaover Russia but it could be more of an own goal. Cer-tainly Margvelashvili was immediately critical of thedeal. He may have been playing politics, he has fallenout with his former colleagues in the Georgian Dreamcoalition and often sounds like an independent politi-cian, but his concerns have been parroted by otherstoo.

>>

>> Kaladze was coy with the details of the deal andexactly how much Georgia would now have to pay

This is, possibly, the world’s only quiz dedicated to Central Asia and the South Caucasus. Win ahighly-coveted Conway Bulletin branded mug or pen by answering these two questions:

>>Georgia’s president Giorgi Margvelashvili, and others, has questioned a new gas deal with Russiaheralded by energy minister Kakha Kaladze. James Kilner, the Bulletin’s editor, explains the issues.

The Briefing

Russia for gas but a think-tank called World Experi-ence for Georgia (WEG) said that it would now have topay $185 per 1,000 cubic metres of gas which is morethan Armenia and Germany pay for their gas.

>>

>> Surprisingly little, other than back Kaladze’s state-ment that the price negotiated was a good one. Andthis secrecy could be part of the problem. They havesaid that the actual price negotiated is a commercialsecret, a statement that hasn’t gone down well.

>>

>> The deal does give Georgia more flexibility aboutwhere it sources its gas. It is likely that Azerbaijan’sSocar will be the big winner here with more gas beingsourced from them.

>>

>> He’s come out fighting as he knows that his politi-cal reputation is on the line. Without being any morespecific on the pricing structure agreed with Russia, heaccused Pres. Margvelashvili of being unpatriotic. Thisrow is likely to run and run and may have more farreaching political implications.

1) Why are these capital cities placed in this order?TashkentBakuTbilisiYerevanAshgabatBishkekAstanaDushanbe

2) Name this well-known building in CentralAsia/South Caucasus.

(All answers for Brainteaser Quiz no. 2 to [email protected])

The Brainteaser Quiz no.2

The answers to Brainteaser no. 1 were: 1) The capital cities were ordered from east to west 2) The famous buildingwas the Mausoleum of Khoja Ahmed Yasawi in Turkestan, Kazakhstan. The winner, and now shortly to be the firstowner of a Conway Bulletin pen, was a member of the diplomatic community in Baku.

ALMATY -- Kcell, Kazakhstan’sbiggest mobile operator, felt the fullforce of the regional economicslowdown in 2016 with revenuesfalling 12.7% to 147b tenge ($444m),its lowest since 2009 (Jan. 27).

Kcell’s annual reports areimportant because they provide oneof the few open and accurate insightsinto how Kazakh companies arehandling a sharp economicslowdown triggered by falling oilprices and a recession in Russia.

The company, which is part-owned by the Kazakh governmentand part-owned by Sweden’s Telia,also said that a drop in profit marginhad reduced its overall profit by 41%to just over 31b tenge ($94.5m).

In a statement, Kcell CEO, ArtiOts, admitted that 2016 had beentough.

“2016 was extremely challengingfor Kcell, although at the end of theyear we saw early signs of marketstabilisation,” he said.

“As we move into 2017, there arepositive signs of economic recoveryin Kazakhstan, with an easing inconsumer price inflation and


Revenues at Kcell collapse asmobile users feel economic chill

indications of growth in theeconomy.”

A collapse in the value of thetenge, economic stagnation, joblosses and a fall in vital remittancevalues all hit the Kazakh economy in2016.

The specific improvements thatMr Ots referenced include a boost torevenues from demand for contractphones which has fed through into athird consecutive quarter of revenueincrease.

“We are now seeing a positiveinterconnect balance with revenueexceeding costs and we expect thissituation to continue in 2017,” he said.

The details of Kcell’s financialresults also reflect the turbulence ofthe Kazakh economy, includingrising inflation. Kcell said that costshad risen by 19.2% in 2016 to nearly11b tenge ($33.5m). A spokespersonfor the company said that some ofthis cost increase was triggered by arise in staffing costs at new outlets.

>>Kcell annual revenue >>CB-data

>>Kcell, the biggest mobile operator in Kazakhstan, posts revenues down 12.7%


BUSINESS NEWSINSIDE >> Eurocopter Kazakhstan Engineering says that it has given up helicopter manufacturing >>

Azerbaijan’s government has boughtanother chunk of equity in the coun-try’s largest bank, International Bankof Azerbaijan (IBA), another indicatorthat its banking sector needs prop-ping up to survive (Jan. 27).

IBA issued more shares on Jan. 26,allowing the government to increaseits stake in it to 76.73% from 54.96%.

The share purchase appears to flyin the face of a statement by RufatAslanli, chairman of Azerbaijan’sfinancial supervisory agency who saidin November that the governmentwould privatise IBA in 2017.

The Trend news agency quoted anIBA statement as saying that the gov-ernment stake increase was needed

to shore up the stability of the bankand to protect it from the downturn.

Analysts have been warning thatAzerbaijan’s banking sector is partic-ularly fragile with many borrowersunable to repay loans. Azerbaijan’seconomy shrank by 3.8% last year andits manat currency has halved in value.>>More to follow next week

Azerbaijani government increases IBA stake

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Russia’s Gazprom will buy 12.8bcubic metres of gas fromKazakhstan in 2017 continuing itsstrategy of preferring Kazakh gassuppliers over other regionalcompanies (Jan. 24). Kazmunaigashas boosted its cooperation withGazprom over the past few yearswhile other state companies linkedto Turkmenistan and Uzbekistanhave lost ground.

Kazakhstan’s energy ministry saidthat it had found a new oil and gasfield in the west of the country (Jan.24). The field, known as Ansagan, islocated Zhylyoi region near Atyrau.Officials didn’t give any indicationof the scale of the find but saidinstead that exploration wascontinuing. Kazakhstan’s economyis reliant on oil and gas.

The Britain-based subsidiary of theUS’ Fluor said that it had won atwo-year engineering services dealwith the North Caspian OperatingCompany (NCOC), the consortiumof companies exploiting the giantKashagan oil field in the Kazakhsector of the Caspian Sea (Jan. 24).No value was put on the contractbut it will be a boost to Fluor whichhas developed a strong regionalstrand of work.

Nakamichi Corporation Berhad, aMalaysian independent oilcompany, signed a deal with AktauTransit to invest $146m in two oilfields in west Kazakhstan (Jan. 20).The deal commits the twocompanies to explore the oil fields.

Dutch potato chip manufacturerFarm Frites is considering setting up



a plant in northeast Kazakhstan,Kazakh deputy PM AskarMyrzakhmetov, Kazakh deputy PMand agriculture, said (Jan. 25). FarmFrites supplies frozen potato chipsto restaurants. A deal with KoktemAgricultural services, the company itis negotiating with, would give theKazakh government a boost as it hassaid it wants to diversify away fromoil and gas.

South Korea’s Kookmin Bank islikely to sell its 41.9% stake inKazakhstan’s Bank CenterCreditbecause of mounting losses, Koreannewspapers reported, a blow to thereputation of the Kazakh bankingsector (Jan. 22). Kookmin Bankbought its stake in BankCenterCredit in 2008 for 940b won($800m) but it has written down thevalue of the stake several times sincethen to virtually zero. Kazakh bankshave been under mounting pressureover links to bad debt that have builtup over the past couple of years asits oil-backed economy hasweakened. Bank CenterCredit hasbeen especially vulnerable becauseof its exposure to the mortgagesector which soured after a 50%devaluation of the tenge in 2015.Bank CenterCredit has notconfirmed the reports.

Ending weeks of speculation, HalykBank, owned by the son-in-law anddaughter of Kazakh PresidentNursultan Nazarbayev, said that ithad started talks withKazkommertsbank, the country’sbiggest bank, on merging (Jan. 20). Apotential merger between the twobanks would create a company thatwould dominate the Kazakhbanking sector with a market shareof around 40%. Unnamed sources inNovember 2016 had told Reutersthat a merger between the twobanks was being discussed in secret.

Tajikistan quadrupled its cementproduction in 2016 to 2m tonnesand opened up export routes to itsneighbours, media reported quotingthe ministry of industry (Jan. 25).Chinese investment has built threenew cement-making factories,adding a vital export to Tajikistan’seconomy. Previously Tajikistan hadonly exported to Afghanistan andKyrgyzstan. Now it also exports toUzbekistan.

Russia and Armenia are likely to setup a new airline to fly routesbetween Yerevan and Moscow,Vahan Martirosyan, Armenia'scommunications and technologyminister, was quoted as saying (Jan.26). Armenia has been without anational flag-carrier since 2013when Armavia was declaredbankrupt. The privately-ownedArmenia, a low-cost airline, startedflights last year to Russia.

YanAir, a small Ukrainian airline, isplanning on running flights fromOdessa to Tbilisi and Batumi, mediareported (Jan. 26). The new routeshighlight the increase in air trafficto the South Caucasus. Batumi isbeing developed as Georgia’s maintourist hub.

US car rental company Enterprise,which owns the Enterprise, Alamoand National brands, said it hadmade a franchise deal with Yerevan-based TravelCar (Jan. 26). The dealwill expand the brands to Armeniaand also to neighbouring Georgia.The deal is part of a global drive byEnterprise to spread its businessacross the Middle East and Asia.

Kazakhstan scraps helicoptermanufacturing>>The economic downturn has undermined demand for helicopters at the Astana plant


Socar wants Turkey petrol stations

ALMATY – Eurocopter KazakhstanEngineering, a headline joint-ventureset up in 2011 between KazakhstanEngineering National Company andFrance’s Airbus Helicopters, hasstopped manufacturing helicoptersbecause of the economic slowdown,its CEO, Timur Tilinin, said in aninterview with the pro-governmentAstana Times newspaper (Jan. 24).

The company was licensed tomanufacture the Eurocopter 145, atwin engine utility helicopter thatcan be used as passenger transport orfor search and rescue missions. It cancarry up to nine passengers and twocrew.

Mr Tilinin said that EurocopterKazakhstan Engineering was thebackbone of the Kazakh aviationindustry and that it hadmanufactured 26 Eurocopter 145ssince 2011, eight for the ministry ofdefence and 18 for the ministry ofinterior’s emergency service.

“Unfortunately, due to the(economic) crisis we halted theproject,” he said. “In mid-2015, ECKE

launched a transformation plan tomove from pure manufacturing to,first, becoming the distributor ofAirbus helicopters in all Central Asiaand, second, performingmaintenance of the aircraft. We dothe maintenance of all the helicopterswe have produced.”

Moving from manufacturinghelicopters to being a distributorservice centre will dent the prestigeof the project. It also underlines just

how heavily Kazakhstan has been hitby the economic downturn.

Government agencies, EurocopterKazakhstan Engineering’s onlyclients, have been hard hit.

Part of the distribution processinvolves reassembling helicopterswhich are manufactured in Germanyand then dismantled for export.

Kazakhstan is striving to broadenout its industrial base away from oiland gas.


In an interview with the Turkishnewspaper Sabah, Socar TurkeyEnergy director general ZaurGahramanov said the company wascommitted to opening a chain ofpetrol stations throughout Turkey(Jan. 23).

Socar is bidding to buy the 1,785petrol stations belonging to Austria'sOMV in Turkey. Even if Socar's bidfails it will look to buy up petrol

stations in Turkey. Socar owns theStar Refinery in Izmir. The $6brefinery is due to start production inApril 2018 and is Socar's biggestoverseas investment.

“The acquisition of OMV PetrolOfisi is the most suitable option forSocar, but we have alternatives,” hesaid. “We can launch talks on theacquisition of another company orcreate a new network in Turkey.”

Socar owns a network of petrolstations in Georgia and has beenlooking to expand. The collapse in oiland gas prices since 2014 has forcedAzerbaijan to change its focus todownstream products and services.

OMV bought the petrol stationsbetween 2006 and 2010 for $2.5b.Aramco, Petromium-C consortiumand Vitol are also bidding to buy thepetrol station network.

>>A Eurocopter 145s at the Astana plant Pic: Eurocopter Kazakhstan Engineering



Shares in Kazakhstan-based copperproducer KAZ Minerals pushed upto near a four-year high of 449p onJan. 25 just before bullish 2016results.

In the results, CEO OlegNovachuk also said that outputgrowth will continue in 2017.

“I am pleased that we haveachieved our copper and byproductguidance for 2016, a 73% increase incopper output on the prior year, aswe successfully ramped up Bozshakoland the Aktogay oxide plant,” hesaid. “Our growth will continue in2017 as Bozshakol reaches capacityand we commence production fromsulphide ore at Aktogay.”

Mr Novachuk also said that KAZMinerals’ results had been pushedup by lower-than-expected costs.

The share price of KAZ Mineral,which used to be called Kazakhmysand has been linked closely to theKazakh elite, has nearly quadrupledin a year far out-stripping a 30%increase in copper prices. Forcomparison – at the end of 2015KAZ Minerals’ share pricebottomed out at under 100p.

Stock analysts put the increasedown to KAZ Minerals’ new plantscoming online. Some also indicatedthat they thought there more valuein the stock in 2017 with a buyrating.

Armenian dram 486.17/$1 —

Azerbaijani manat 1.93/$1 ↓ 3%

Georgian lari 2.70/$1 ↓ 1.1%

Kazakh tenge 328.5/$1 ↑ 1.5%

Kyrgyz som 69.3/$1 ↑ 1%

Tajik somoni 7.89/$1 —

Turkmen manat 3.5/$1 —

Uzbek sum 3,265/$1 ↓ 0.5%

CURRENCIES

STOCKS

Editor’s note: These tables normally measurethe weekly change in the price of stocks,commodities and currencies. In this instanceuntil, though, the data measures the changefrom Jan. 26 2017, the last previous measure bythe The Conway Bulletin of these prices.

Since the beginning of September,the Uzbek som has dropped froman official rate of just under3,000/$1 to around 3,265/$1 – a fallin value of nearly 9%.

It’s a tightly managed currencyand, straight away it needs to bepointed out that the unofficial blackmarket rate for the som is around athird cheaper, but this manageddevaluation is still important. IslamKarimov, president of Uzbekistansince 1991, died at the beginning ofSeptember and since then thedevaluation of the som asaccelerated. The graph shows thisinflection point.

New Uzbek president, ShavkatMirziyoyev, gas said that he wantsto promote personal liberties inUzbekistan. This attitude has alsoextended to liberalising currencycontrols and Mr Mirziyoyev has

COMMODITIESOil (Brent) $56.24/b ↑ 1.3%

Gold (spot) 1204.25p ↓ 2.1%

Copper $267.3/lb ↑ 2.4%

Cotton $74.2/lb ↑ 2%

Centerra Gold C$6.56 ↓ 0.7%

Central Asia Metals 235p ↑ 0.9%

KAZ Minerals 440p ↑ 7.3%

Tethys Petroleum 1.38p —

Nostrum Oil & Gas 469.6p ↓ 0.5%

Roxi Petroleum 9.5p ↓ 6%

Bank of Georgia 2872p ↑ 2.6%

Georgia Healthcare 348p ↓ 4.3%

TBC Bank 1500p ↑ 3.4%

MARKET NEWS>> Devaluation in Uzbek som accelerates >> KAZ Minerals hits 4-year high; releases upbeat 2017 forecast >>

Devaluation of the Uzbek som speedsup after Karimov’s death

>>Uzbek som vs US dollar >>CB-Data

KAZ Minerals jumps to 4-year high afterpositive 2016 results

talked about making it easier forordinary Uzbeks and companies totake money out of the country. Hemay also want to reduce the price ofan overvalued som more quicklythan his predecessor.

3,300 Uzbek som/$1

3,000 Uzbek som/$1

2,800 Uzbek som/$1

Jan. 30 2016 Jan. 26 2017

Documents

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