The Conway Bulletin. Feb. 3 2017 QUALITY INDEPENDENT NEWS REPORTING FROM CENTRAL ASIA & THE SOUTH CAUCASUS SINCE 2010 Issue no. 315 Uzbek president Mirziyoyev Business News: Korea’s Person in the news: wants to redevelop the Aral Kookmin Bank to sell stake in Nazarbayev sacks Sea region – p.3 CenterCredit Bank – p.9 Tasmagambetov European Parliament votes to give Georgia visa-free access

>>Visas for Georgians will be dropped later this month after suspension mechanism is agreed TBILISI -- As expected, the European Parliament voted 553 to 66 in favour of allowing Georgians and Ukrainians visa-free travel to the Schengen Zone, a major victory for Georgia’s pro West foreign policy (Feb. 2). Once the European Parliament and European Council have worked out a mechanism that allows them to quickly suspend visa-free access if needed, Georgians will be able to start travelling to the 26-country Schengen zone and stay for 90 days without applying for a visa. This is expected by the end of February. For Georgia, this is a major >>The former parliament building in central Tbilisi Pic: The Bulletin victory towards greater integration European Union brings tangible “The reality is that this [Georgian with the West. results for every Georgian citizen.” EU accession] is not on the agenda Georgian PM Giorgi Kvirikashvili But, although it is clearly a major for the EU,” he said. “Given the inter- was in Strasbourg for the European achievement for Georgia, it is unlikely nal challenges the EU faces - populist Parliament vote. to bring their ultimate ambition of movements, the Brexit negotiations, “Today is a day of historical sig- joining the European Union any the Greek debt crisis to name just nificance for Georgia,” he said in a closer. three - and the conflict in Ukraine, statement after the vote. “Indeed, Alex Nice, a Central Asia and the last thing the EU needs is to be today marks Georgia’s great success! South Caucasus analyst at the Econ- drawn into is a contentious accession Today’s decision will prove that Geor- omist Intelligence Unit (EIU), process with a country with an unre- gia’s policy on drawing closer to the explained. solved territorial dispute with Russia.” Nazarbayev fires vice-PM Tasmagambetov ALMATY -- In a surprise move, The shift from central govern- Tasmagambetov is popular with ordi- Kazakh president Nursultan ment to the diplomatic corps is a nary Kazakhs and had been touted by Nazarbayev sacked his longtime ally humiliating end to Mr Tamagambe- analysts as a potential successor to Imangali Tasmagambetov as deputy tov’s political career. Mr Nazarbayev as president. PM and sent him to Moscow to be He had been a PM, mayor of both Mr Nazarbayev gave no reason Kazakhstan’s ambassador to Russia Almaty and Astana and also been the for Mr Tasmagambetov’s demotion. (Feb. 3). minister of defence. The 60-year-old >>See The Briefing on page 8 for more THE BRIEFING: P8 >> Tasmagambetov sacked as Kazakhstan’s deputy PM >> The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 9 Person in the news Inside this week’s Bulletin Tasmagambetov sent to KAZAKHSTAN page 7

The Kazakh government admits that Moscow hackers attacked 21 government >>Kazakh President Nursultan Nazarbayev has sent his ally Imangali websites. Tasmagambetov into political exile in Moscow. James Kilner looks at KYRGYZSTAN page 6 Tasmagambetov and why he was once considered a future president. Prosecutors are investigating reports that Until last Friday, Imangali Tasmagabtov had a sparkling CV. He was rescue workers looted a crash site where a considered the consummate Kazakh insider and the man with a hotline to cargo plane ploughed into a village. the president. If Nursultan Nazarbayev, Kazakh president since TAJIKISTAN page 6 independence from the Soviet Union in 1991, wanted something done, he turned to Tasmagabetov, his trusted lieutenant. Russian president Vladimir Putin is to The urbane Tasmagambetov had been the Kazakh PM between 2002 and visit Dushanbe, setting off rumours that 2003; mayor of Almaty between 2004 and 2008; mayor of Astana between Tajikistan is to join the Eurasian 2008 and 2014; defence minister from 2014 until 2016 and then a deputy PM Economic Union. until Feb. 3 2017. In each one of these sensitive positions, Nazarbayev TURKMENISTAN page 4 personally appointed Tasmagambetov. In Kazakhstan's myopic politics, Tasmagambetov had even been talked Turkmenistan positions new surface-to- of as a president-in-waiting and, if he had been given the top job, this would air missiles on its Caspian Sea patrol have come as no major surprise as his career has closely tracked that of boats. Nazarbayev. Now, followers of Kazakhstan’s politics will have to think again. UZBEKISTAN page 3 Tasmagambetov will not be the next Kazakh president. That was made clear on Friday. Kazakh president Shavkat Mirziyoyev says that he wants to invest $2.6b in Instead, he will move to Moscow as the Kazakh ambassador to Russia, a redeveloping the Aral Sea area. diplomatic exile that will undermine his powerbase and take him away from the cauldron of Kazakhstan’s Astana-based politics. AZERBAIJAN page 9 It is a manoeuvre that has served Nazarbayev well. He has dispatched other powerful figures to embassies where they have been forced to watch Pres. Aliyev says that he wants the main action from the sidelines. Azerbaijan to boost its exports of wine. Perhaps Tasmagambetov’s error was to become too powerful and too popular. The 60-year-old had a high profile, bigger GEORGIA page 5 than almost all other Kazakh politicians because of Hundreds of soldiers who lost their jobs in his tenureship of both the Almaty and Astana a round of cost cutting marched through mayoral positions. He was also considered by Tbilisi. ordinary people in Kazakhstan to be one of the most “Kazakh” of the elite, a major advantage in a ARMENIA page 6 country grappling with its newfound nationalism. He was popular and Armenia says its wants to develop closer considered a man who got stuff done. ties with its neighbour Iran, especially on Kazakh politics will move on without military matters. Tasmagambetov. For now. But he is an ambitious man, born into a humble BUSINESS NEWS page 9 household in western Kazakhstan who Nine years after buying it, Korea’s Kookmin still retains a sizable support-base. Don’t Bank confirms that it will sell its stake in write off a comeback for the new Kazakh Kazakhstan’s CenterCredit Bank to a ambassador to Moscow. consortium of Kazakh investors.

The Conway Bulletin. — Independence, integrity, brevity” Editor – James Kilner Reporting coverage in Central Asia and the South Caucasus: The Bulletin has correspondents on retainers in Almaty, Bishkek, Dushanbe and Tbilisi and part-time correspondent in Yerevan. For Azerbaijan, Uzbekistan and Turkmenistan, The Bulletin employs local reporters now based outside their home country to help with coverage. Cross Fell ltd owns The Conway Bulletin. It is registered in England and Wales as company no. 0755115. Our ISSN is 2397-6624.

The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 3 Mirziyoyev pledges to invest $2.6b developing the Aral Sea region >> Investment aimed at regenerating region blighted by Soviet environmental disaster Uzbek President Shavkat Mirziyoyev ordered his government to spend $2.6b developing the area around the Aral Sea, a major investment in a region that was decimated by one of the Soviet Union’s most notorious economic development policies (Jan. 31). Reporting on the decree, RFE/RL said that that the investment would create new jobs and homes as well as improve sanitation and medical serv- ice. The Aral Sea was once the world’s fourth largest inland water but in the 1960s, the Soviets diverted water >>Moynaq used to be known for its fishing industry but now lies 60km from the sea Pic: wiki from the great Syr Darya and Amu damaged relations with neighbours used to house various industries, Darya rivers that flow from the Pamir and also boosted domestic invest- including a plant that canned fish for mountains into the Aral Sea, to irri- ment. export across the Soviet Union. That gate their cotton fields. The Aral Sea Although light on detail, the plan plant and the rest of the town now was, literally starved of water. Since will give Karakalpakstan, the most lies rotting and rusting having been then the Aral Sea has lost 90% of its western and poorest region in abandoned in the 1980s. water and become a watchword for Uzbekistan, a boost. Eeking out a living in Moynaq is man-made environmental disasters. And it needs it. Karakalpakstan’s difficult. One of its main revenue The eye-catching initiative to main city is Nukus, a former secret earners now is from tourists travel- regenerate the region comes at a time city built by the Soviets to house ling from Nukus to walk around and when Mr Mirziyoyev is trying to set workers for their chemical weapons photograph the rusting fishing fleet himself apart from his predecessor, plants. Moynaq, 120km north now marooned 60km from the Aral Islam Karimov, who died in Septem- through the desert, was the main city Sea. It is described as a ships’ grave- ber. He has ordered officials to repair on the Uzbek side of the Aral Sea. It yard.

Freedom House says rights in Central Asia and the South Caucasus worsened in 2016 In its annual report mapping out the region, with a “Partly Free” status. It the Central Asian states used tightly status of just how free people are to also gave this ranking to Armenia and controlled constitutional referen- express themselves, the US-based Kyrgyzstan. The others were ranked dums to extend their rule into the NGO Freedom House said that in “Not Free” with Turkmenistan and future,” Freedom House wrote. 2016 the countries of Central Asia Uzbekistan listed as two of the most The Freedom House assessment and the South Caucasus cracked repressive regimes in the world. of civil rights broadly mirrors the down on civil liberties (Jan. 31). “Apparently unnerved by the assessment of human rights groups Freedom House rates Georgia as repercussions of a lengthy slump in who have been warning of worsening the best place for civil liberties in the oil prices, the rulers of Azerbaijan and conditions in the region. The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 4 gian crew were working privately and were not employees of the Security forces in Azerbaijan killed Georgian military. It’s unclear how four alleged terrorists who had been serious the crews’ injuries are. The Georgia’s economy grew by an esti- incident does highlight the use of mated 2.2% in 2016, the slowest plotting a series of attacks, media reported quoting a government contractors from Georgia and other growth rate since 2009, media parts of the former Soviet Union reported quoting the statistics statement (Jan. 31). Reports did not say where the shootout had taken who were trained to fly Soviet service (Jan. 30). This was a drop planes and helicopters. from 2.9% in 2015 and 4.6% in 2014. place. It is unusual for Azerbaijan to Georgia, like the rest of the region, report a shootout between its secu- has been trying to deal with an eco- rity forces and alleged terrorists. nomic slowdown linked to a reces- Azerbaijan and other countries in sion in Russia and an overly strong the region have been trying to US dollar. deflect a recruitment drive by the Kazakh president Nursultan extremist IS group. Nazarbayev opened the 28th Winter University Olympiad in Almaty, an event that he said was the biggest Kazakhstan’s Central Bank chief sporting event ever held in Kaza- Daniyer Akishev said that he wanted The authorities in Afghanistan have khstan (Jan. 29). The Olympiad is to use state funds to prop up big arrested a Kazakh national on suspi- important to Kazakhstan as a way of banks that are listing under the cion of having links to terrorism, promoting itself on the interna- pressure of an economic downturn media reported quoting the Afghan tional stage. This year it also hosts linked to a drop in oil and gas prices foreign ministry (Jan. 27). Media EXPO-2017 in Astana, an event it and a recession in Russia (Feb. 3). He reports said that the man was from has been planning for years. told a government meeting that the Atyrau and that he had been Central Bank was going to evaluate arrested in the northern part of the quality of the banks’ assets later Afghanistan. Kazakhstan has been trying to dampen an increase in this year. Kazakh president Nursultan recruitment by the radical IS group Nazarbayev made his second tele- but it is rare for Kazakhs to be vised address to the nation in less arrested in Afghanistan for links to than a week in which he promised Islamic extremists. Uzbekistan will set up a new bank to improve the country’s economy called Uzagroexportbank to support (Jan. 31). The speech was short on agriculture and farm exports, media detail and instead sounded like a to- reported (Jan. 30). The new bank is do list. It had been billed as a follow- another signal that new president The Eurasianet website reported up to a speech last week in which Shavkat Mirziyoyev is trying to that Turkmenistan has deployed Mr Nazarbayev said that he wanted boost support for independent busi- new French missile systems on its to increase democratic reforms in nesses. Analysts have previously two new Turkish-made patrol boats Kazakhstan. He did talk about identified agriculture as a way to in the Caspian Sea (Feb. 1). The strengthening cyber security and boost Uzbekistan’s productivity. countries that border the Caspian adopting a new subsoil law. Sea -- Iran, Russia, Kazakhstan, Turkmenistan and Azerbaijan -- are still squabbling over just how to divide it up. Tensions have previ- Georgian President Giorgi Margve- ously flared up. A new law means that all unregis- lashvili amnestied seven former tered mobile phones in Kazakhstan defence ministry employees who will be blocked from July 1 2017 had been imprisoned for seven years (Feb. 2). The authorities say that the in 2014/15 for embezzlement (Jan. new law has been brought in to help Two Soviet-era Mi-24 military heli- 27). The case was high profile and fight potential terrorists but its copters crewed by Georgians and lead to the resignation of Irakli Alas- detractors have said that it has been Belarusians collided on the border ania as minister of defence. Mr Alas- imposed to help the authorities of Rwanda and Uganda, media ania had once been considered a monitor people who oppose the reported (Feb. 1). The Georgian min- high flyer member of the Georgian government more closely. istry of defence said that the Geor- Dream party. The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 5 Hundreds protest in Tbilisi against job cuts by Georgia’s defence ministry >>Hundreds of soldiers and civil servants have lost their jobs since December TBILISI – Since December, Georgia's defence ministry has laid off several hundred civil servants and soldiers, a round of redundancies aimed at mod- ernising the army and reducing costs. The lay-offs have triggered pro- tests including one on Jan. 30 when a few hundred people marched in Tbilisi (Jan. 30). Protesters said 1,750 civil servants and 340 soldiers have lost their jobs without any compensation. Another 209 officers quit their jobs voluntarily. Elguja Urushadze, a former Lieu- tenant Colonel who used to teach at the military academy, told the Bulle- >> Protesters against defence ministry cuts march through Tbilisi Pic:The Bulletin tin that he was fired without any istan. It also has a detachment of and administrative expenses should notice. soldiers supporting an EU mission in make up 50-53% of budget funds." “I served in the Georgian National the Central African Republic. It also said that the reforms will Army since the very first days of its It said that as well as cutting costs, save 32m lari, 5% of the total budget. existence,” he said. “I have been the so-called “Optimisation” process The protesters, though, said they teaching protection from weapons of was needed to bring the Georgian will continue until they are properly mass destruction since 1991. I was on army into line with its NATO allies. compensated for their job losses. a work trip on the 12th of January “In 2016, 67% of the 670m lari David Nemsadze, a retired army when they called me and told me I ($250m) budget funds were calculated officer and now a human rights was removed from office. On the for salaries and social expenses and worker specialising in military affairs papers, my last working day was the only 33% was spent on the military said: “During the layoffs process, the 11th of January.” technique, ammunition and on other working code was violated. The selec- Georgia wants to join NATO and needs,” the defence ministry said. tion process was not transparent at has supported its mission in Afghan- “NATO standards say that payroll all."

Council of Europe investigates alleged bribery by Azerbaijan The Parliamentary Assembly of the a bloc within PACE to boost Azerba- “Whether they prove to be Council of Europe (PACE) ordered an ijan’s reputation and dampen founded or false, such allegations investigation into possible bribing of attempts to sanction its crackdown undermine the Assembly's image and its officials by Azerbaijan (Jan. 27). on human rights. credibility as an institution and, in The allegations focus on Luce Mr Volonte, who is currently turn, the reputation of each and Volonte, an Italian former leader of being investigated in Italy, has denied every one of its members,” it said in the European People’s Party. Anti- the allegations. a statement. corruption activists have accused In a statement, PACE said that the PACE is one of Europe’s most him of taking up to 2.4m euros allegations had damaged its reputa- high profile anti-corruption and pro- between 2012 and 2014 for setting up tion and that it had to act. democracy bodies.

The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 6 have quarrelled for years, since the death in September of Uzbekistan’s Exports from Armenia grew by 20% president Islam Karimov. Russia has complained to Belarus to $1.8b in 2016, the state statistics about the extradition of a Russian- service reported (Jan. 31). Russia Israeli blogger to Azerbaijan, media remains the biggest trade partner reported (Feb. 2). Azerbaijan with total bilateral trade of nearly Reports have appeared in Kyrgyz requested the arrest and extradition $1.4b, compared to China which has media that a cargo plane which of Alexander Lapshin because it said bilateral trade with Armenia of crashed into a village next to Manas that he had visited the breakaway $454m. Bilateral trade with Russia airport last month was carrying region of Nagorno-Karabakh was up by 15%, indicating a general iphones and other electronic illegally. The complaint and ensuing pick up in the economy. equipment in a smuggling operation row could upset Russia-Azerbaijan based at the airport (Feb. 1) relations. Eyewitnesses also told the RFE/RL website that some of the first Georgia sent a platoon of 30 soldiers members of the emergency services to serve under a France-lead looted the crash site. "One Russian President Vladimir Putin is European Union mission in the policeman took off his shirt and due to fly to Dushanbe for a state Central African Republic (Jan. 31). filled it with mobile phones," visit that Russian and Tajik media The Georgians’ main mission is to RFE/RL quoted a young boy as have hinted may coincide with a defend the EU mission’s base. This saying. formal application from Tajikistan is the first deployment of Georgian to join the Kremlin-lead Eurasian soldiers to the Central African Economic Union (EEU) (Jan. 27). Mr Republic for two years. Georgia uses Putin will also travel to Bishkek on its military as an extension of its the same trip which Russian media foreign policy and has sent military said would take place “in the near The UN’s International Labour support to missions linked to the future”. Organisation (ILO) said that EU and NATO, two Western Uzbekistan was making progress in institutions that it wants to join. eradicating child labour from its cotton harvests (Feb. 2). Uzbekistan A second round of talks focused on has come under intense criticism for finding a solution to the war in Syria using school children to pick the have been scheduled for Feb. 6, crop. Several Western fashion Kazakhstan’s foreign ministry said A fire in Tbilisi destroyed the retailers have refused to stock (Feb. 2). The talks, with Turkey, Children’s World and Gold Market products which have been made Russia and Iran as the main shopping centre (Jan. 30). Reports with Uzbek cotton. powerbrokers, are a follow up to said that 31 fire-fighting units talks held last month in Astana. For tackled the blaze, one of the biggest Kazakhstan, the talks are a good in Tbilisi. The shopping mall opportunity to market itself as an covered an area roughly the size of arena for international deal-making. two football pitches. It is still Anti-corruption officials in unclear what caused the fire. Tajikistan opened an investigation into the former mayor of Dushanbe Mahmadsaid Ubaidulloev, RFE/RL Armenian defence minister Vigen reported (Jan. 27). He was sacked Sargsyan travelled to Tehran for a Somon Air, Tajikistan’s national earlier this month. The sacking and meeting with his Iranian airline, has scheduled a first investigation, which focuses on a counterpart Hossein Dehqan in Tajikistan-Uzbekistan flight since new housing scheme, of Mr which both sides pledged to 1992 for Feb. 10, media reported Ubaidulloev may signal the start of a improve their military ties (Jan. 31). (Feb. 1). Regular flights are expected power struggle within the Tajik Neighbours, Armenia and Iran have to start up between Dushanbe and elite. Mr Ubaidulloev had been become increasingly close over the Tashkent on Feb. 20. These flights considered an arch loyalist. Anti- past couple of years, boosting are important as they signify a sea- corruption campaigners have said military, economic and trade change in relations between that Tajikistan is one of the most relations. Tajikistan and Uzbekistan, who corrupt countries in the world. The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 7

Hackers attack Azerbaijani students told not Kazakh to criticise the government websites >>Students have been using Facebook to voice views ALMATY – Hackers attacked 21 Kazakh government websites, the Students at Baku State University tool for people to express themselves ministry of information said, raising have been warned not to criticise and criticise governments in coun- concerns over the state’s cyber Azerbaijani President Ilham Aliyev or tries which have been showing an security. (Jan. 30). the university on social media, a leaked increasingly authoritarian bent. The sites were attacked on Jan. 28. audio recording showed (Jan. 27). Students told The Conway Bulle- The ministry blamed the servers that In the audio recording, released tin that it was fairly standard to hosted the websites but IT expert said on Facebook, the deputy dean of the receive warnings about social media the vulnerability of government faculty of journalism of Baku State use. websites was a well-known problem. University Aytekin Zeynalova threat- Umman Safarov, a third-year In a press statement, the Kazakh ened students for criticising the uni- student at the Faculty of Journalism information ministry said: “These versity administration. at Baku State University, said that he [hacking] cases happened because of “After seeing on social media the was warned not to share posts criti- an absence of control from the criticism of a student my blood pres- cising President Aliyev and the uni- owners of internet resources who did sure increased,” she told a group of versity administration. not update the systems in time, students. “If students break the rules “The vice-Chancellor told me that proper protection, identification of of the discipline, they will receive a while you are studying at Baku State the incident and signing a contract warning and I will reprimand them.” University, you cannot share such with unreliable clients.” A second audio recording was posts otherwise you will be expelled Arman Abdrasilov, a Kazakh cyber leaked a few days later in which Ms from the university,” he said. security expert, said that the hacking Zeynalova again threatened students. Baku State University said in a had been far wider than just the The recordings, and the attitude statement that Ms Zeynalova had government websites. He said that, of Ms Zeynalov, are important admitted that she had handed out the in total, 323 websites had been because they highlight what human warning but media later quoted the attacked. rights have said is a systematic crack- rector of the University, Abel He told The Conway Bulletin that down on free speech in Azerbaijan. Meherremov, as saying that it was a government websites are regularly It also demonstrates just how duty of every student not to criticise attacked but that the government important Facebook has become as a the government. covers the hacks. “Twenty-one sites at once. It says that this is a systematic mistake and links back to the government’s attitude in general. We’ve been Kazakh authorities are raising the [vulnerability] questions for at least three years,” Mr Abdrasilov said. intimidating protesters “Security of the whole system is ALMATY – The authorities in saying. Zhanaozen is the town in equal to the security of its weakest western Kazakhstan are trying to western Kazakhstan where police and part.” intimidate workers into giving up strikers clashed in 2011. At least 15 The next day (Jan.31), Nazarbayev their hunger strikes, the Eurasianet people died. talked about cyber security threats in website reported (Feb. 2). Several hundred oil workers have his annual state-of-the-nation The Eurasianet report quoted been refusing to eat in west Kaza- address. He ordered security services workers as saying that a breakdown khstan in protest over the closure of to boost their various defences. in trust with the authorities was the Confederation of Independent The hacked websites included the pushing them towards a potentially Trade Unions, an umbrella organisa- north Kazakhstan regional violent confrontation. tion, by a court in Shymkent at the government website and the natural “We cannot allow another beginning of the year. The hunger resources department in the Almaty Zhanaozen,” Eurasianet quoted a strikers’ de facto leaders, Amin city government. lawyer for a detained union leader as Yeleusinov, and Nurbek Kushak- The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 8 The Briefing Nazarbayev demotes former ally >>Kazakh President Nursultan Nazarbayev has demoted Imangali Tasmagembetov from deputy PM to ambassador in Moscow. James Kilner, the Bulletin’s editor, explains why this is important. >> >> Yes. All the major policy-making goes on in Astana. Tasmagambetov is now marooned in Moscow away from the centre of power in Kazakhstan. Nazarbayev also has form for sending high-ranking men, who have >> Very. He was considered one of just a handful of their own powerbase that may threaten his plans, into people who could take over from Nursultan exile. In 2014, he sent Aslan Musin to Zagreb to be the Nazarbayev as president. This is a major demotion and Kazakh ambassador there. Musin had previously been has come as a surprise. Like a chess player, Nazarbayev head of the Presidential Administration between 2008 is clearly manoeuvring his pieces so that he can and 2012 and had a strong powerbase in the west of the execute a well-managed and orderly transfer of power. country, where he was from. Last month he said that he wanted to give parliament more power. It was dressed up as a move to increase >> democracy, although most analysts think that this is a red herring and that the real motivator is transition. >> We don’t know the specifics but Tasmagambetov is >> popular with ordinary people. He is seen as being more “Kazakh” than many of the other elite insiders. He also has a high profile. This is partly because he was a >> That’s not exactly clear, although Nazarbayev’s popular mayor of Almaty and Astana. His son-in-law is daughter, Dariga, is being teed up nicely for a major Kenes Rakishev who has been used heavily by the role in government. She has taken on a bigger public Kazakh elite as the frontman for buying up various role and since September 2016 has been a Senator and companies. His latest acquisition was a majority stake the chair of the Senate’s Affairs, Defence, and Security in Kazakhstan’s biggest bank, Kazkommertsbank. Committee. It’s our view that this is a way to prepare and groom Dariga for the top job. Essentially, by >> packing Tasmagambetov off to Moscow, Nazarbayev has dispatched one of her rivals. >> Pretty much. People just wont see or hear of him in >> his new job. He’ll also be away from the political action in Astana which is important. The Brainteaser no.3 This is, possibly, the world’s only quiz dedicated to Central Asia and the South Caucasus. Win a highly-coveted Conway Bulletin branded Parker jotter pen by answering these two questions:

1) What links these capital cities? (Clue: From these 2) Name this well-known building in Central cities, on a clear day, what can you see?) Asia/South Caucasus. Yerevan Bishkek Dushanbe

The answers to Brainteaser no. 2 were: 1) The capital cities were ordered in population size. Tashkent has the biggest population (2.3m); Dushanbe the smallest (780,000). 2) The well-known building was the new Georgian parliament building in Kutaisi. Very disappointingly, as I rate the Bulletin readers highly, there were no winners. (All answers for Brainteaser no. 3 to [email protected]) The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 BUSINESS NEWS The Conway Bulletin. | Feb. 3 2017 | page 9 INSIDE >> Start of CASA-1000 pushed back to 2020 >> IBA drops football sponsorship >> Korea’s Kookmin Bank says will sell stake in Kazakhstan’s CenterCredit >>Bad debt ratio at Kazakhstan’s fifth largest lender had been growing

ALMATY -- After days of rumours, South Korea’s Kookmin Bank confirmed that it would sell its 41.93% stake in Kazakhstan’s CenterCredit Bank to a Kazakh consortium(Feb. 1). The sale will both end an unhappy time in the Kazakh finance sector for Kookmin Bank and also highlight the worsening weaknesses in the Kazakh system. CenterCredit is Kazakhstan’s fourth largest bank by assets. The consortium buying Kookmin’s share is lead by Tsenabank, which is the third largest bank in Kazakhstan. “On the basis of preliminary >>CenterCredit HQ in Almaty >>Wikimapia.org agreements, the Consortium has up CenterCredit Bank in the late And Kazakhstan’s banking sector completed talks with Kookmin on 1980s and made the original deal to has been hit again by a collapse in the the final conditions for the sell a 30% stake in it to Kookmin Bank value of the tenge, low oil prices and Consortium to purchase the stake by in 2008 for $500m. Kookmin Bank a recession in Russia. The proportion the now owned by Kookmin Bank,” have had to write down the value of of non-performing loans has risen. Tsenabank said in a statement. their stake in CenterCredit Bank Last year, the ratings agency Fitch It also said that CenterCredit’s constantly and it has become to be said CenterCredit Bank’s ratings chairman, Bakhytbek Baiseitov, viewed as one of their worst ever were constrained by “high problem would by the 10% stake in the bank deals. Shortly after buying their first loans, low core capital ratios, and now owned by the International stake in the bank, the Global modest core profitability.” It said the Finance Group, part of the World Financial Crisis hit the Kazakh proportion of bad loans in its Bank. finance sector, swamping it with bad portfolio was around 16%. This was Mr Baiseitov is one of the debt, forcing the government to bail one of the highest, with Tsenabank wealthiest men in Kazakhstan. He set out a handful of banks. having a bad debt ratio of around 5%.

Aliyev wants Azerbaijan to boost wine sales Azerbaijan is producing only 20m ously highlighted the potential for of 100m bottles to produce only 20m bottles of wine per year, roughly a growth in the hazelnut sector and bottles of wine?" media quoted him fifth of its capacity, media quoted now appears to have earmarked the as saying. President Ilham Aliyev as saying (Feb. 2). wine-making industry for growth. Georgia, which has a far more Mr Aliyev wants Azerbaijan to “Most of these plants were built in developed wine production and sales diversify away from oil and gas, recent years. Major funds have been system, exports 50m bottles of wine which dominates the economy. The invested in them and modern equip- every year. Most of the growth has economy has taken a hit with the ment installed. How can it be possible come in China and other parts of the collapse in oil prices. He has previ- for plants with a production capacity Far East.

The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 10 create 20,000 jobs, Kazakhstan’s its first store in Almaty. This is labour ministry said in a statement important because analysts have (Jan. 30). Labour minister Birzhan been worried that an economic Nurymbetov said that 18,000 of downturn that has hit the region At a press conference with his those jobs would be given to would hit companies’ plans. Qatari counterpart, Azerbaijani Kazakhs. This job creation is vital in foreign minister Elmar Kazakhstan which has seen mass job Mammadyarov said that the Qatar cuts over the past couple of years airline had agreed to increase the because of the tight economic number of flights to Baku (Jan. 31). conditions. He said that the driving motivator Russian carmaker AvtoVAZ has of the planned flight increase was a started exporting its Lada 4x4 to jump in the number of tourists China from its factory in If any reminder was needed of the travelling to Azerbaijan. Mr Kazakhstan, the life.ru website worsening labour relations in Mammadyarov didn't give any reported quoting an official at the Kazakhstan, it came in the form of a figures to back this up or say how Asia Auto factory in the east Kazakh reported strike at a services many Qatar flights would now city of Ust-Kamenogorsk (Feb. 1). company working at the Tengiz oil operate to Baku. International Asia Auto is one of the biggest car field. Quoting local media, airlines have been increasing their manufacturers in Kazakhstan. The Eurasianet said that 120 employees flights to the South Caucasus. Kazakh car making sector has been at TOO Kentak Kazakhstan hard hit by the economic downturn. Technical Services started a strike in Jan. 27, demanding a 50% pay rise (Jan. 30). Labour relations have been In its full year results, Nostrum Oil increasingly strained since 2011. & Gas, which focuses on Kazakhstan said that it had just beaten its Halyk Bank CEO Umut expected output with an average Shayakhmetova told the Forbes daily output of 40,351/barrels of oil The development of the Shah Deniz Kazakhstan website that for talks on equivalent (boe) compared to an 2 gas project in Azerbaijan is vital for a merger with Kazkommertsbank to anticipated 40,000 boe (Jan. 31). It the development of Georgia’s energy continue, Kazkommertsbank said that the final quarter of the year sector, Mariam Valishvili (Feb. 1). He needed to deal with a pile of bad had been the best with 44,708 boe. said that the construction of the debt it had acquired after taking South Caucasus pipeline that will over BTA Bank in 2014/15 (Jan. 30). A run through Georgia was a priority deal between Halyk Bank, which is The Caspian Pipeline Consortium project for the current government. owned by Kazakh President plans to invest $150m in 2017 in The $20b Shah Deniz is slated to Nursultan Nazarbayev’s son-in-law expanding the capacity of the pump gas from the Caspian Sea to and daughter, would create a pipeline that pumps oil from Europe across Georgia and Turkey banking giant in Kazakhstan that western Kazakhstan around the by 2020. Mr Valishvili ‘s comments will dominate the banking sector. northern tip of the Caspian Sea to highlight just how integrated the Russia’s Black Sea port of region’s economies are. Novorossiysk, its general director Nikolay Gorban told media (Jan. 31). The expansion plan will boost the pipeline’s capacity to 67m tonnes The CEO of Swedish mobile per year, up from 52m tonnes. This operator Telia, Johan Dennelind, is important because CPC is a key H&M, the Swedish fashion retailer, said that he was confident that he export route for Kazakhstan and still intends to open its first store in would be able to sell off the especially for its important Tengiz Kazakhstan despite a fall in profit company’s remaining assets in its field. last year, its CEO Karl-Johan Eurasia region this year (Jan. 27). Persson said during its full-year Interest in Telia’s regional asset results presentation (Jan. 31). Mr which include Azercell, Geocell, Persson said that the rising value of Ucell, Kcell and Tcell have been the US dollar was one of the main light. A corruption scandal in The $36.8b expansion of the Tengiz drivers of the drop in profit. Last Uzbekistan, linked to a 2008 bribe, oil field announced last year will year H&M said that it would open triggered the sale. The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 11 Start of CASA-1000 pushed back to 2020 >>Pakistani official says that delay over awarding converter contract has delayed start date BISHKEK – A delay in handing out a contract to build two converter stations has pushed back the start date of the CASA-1000 project which aims to send electricity generated by hydropower stations in Tajikistan and Kyrgyzstan to Afghanistan and Pakistan (Feb. 1). Pakistan’s Express-Tribune newspaper quoted an unnamed Pakistani official as saying that French engineering company Alstom had asked for more time to put in a bid to build two converter stations. “Four countries that are part of the project – Tajikistan, Kyrgyzstan, >>CASA-1000 is the electricity that will, it is hoped, link South Asia and Central Asia Pic: Pixabay Afghanistan and Pakistan – have 2018. It is backed by the World Bank The value of the tender has not agreed to give relaxation in the and is considered a vital economic been released but the names of the timeframe keeping in view the and strategic link between Central companies bidding for it have been. request of Alstom, which is a credible Asia and South Asia, binding the two They are the US’ GE, Japan’s name and a major supplier of regions together, providing an export Mitsubishi, Germany’s Siemens and converter stations across the world,” product for Tajikistan and Alstom. the newspaper quoted the official as Kyrgyzstan and electricity for For the West the CASA-1000 saying. Pakistan and Afghanistan. project also has major significance as “Now, this project is likely to be The two converter stations are the physical implementation of the ready in 2020.” vital to the CASA-1000 project. One north-south Silk Road trade route CASA-1000 had been due to start will be sited in Tajikistan and the that Hillary Clinton touted in 2011 up either at the end of this year or in other in Pakistan. when she was US Secretary of State.

IBA drops football sponsorship The International Bank of Azerbaijan “In accordance with new strategic At the end of January, the (IBA), majority owned by the goals limitation of the IBA’s sports Azerbaijani government increased its Azerbaijani government, has dropped support will help the bank optimise stake in IBA to 77% from 56% in order sponsorship of a Baku football team its expenses and direct resources to to ensure the stability of the bank, as part of a cost-cutting drive (Jan. 28). the sphere of finance and banking, Azerbaijan’s biggest. Analysts have Dropping sponsorship of Inter which are priority,” IBA chairman been warning for the past 12 months Baku, a top tier team, is another sign Khalid Ahadov said in a statement that an economic downturn was that the tough economic conditions released by the bank. pressuring the banking sector in have hit IBA hard. A few years ago “That will increase the efficiency Azerbaijan. The Central Bank has also such a move would have been of the recovery processes, conducted withdrawn trading licences from unimaginable. with government’s support.” some of the smaller banks. The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017 The Conway Bulletin. | Feb. 3 2017 | page 12 MARKET NEWS >> Kazakh tenge surges to 13 month high >> Analysts upbeat on Bank of Georgia; place on ‘buy’ rating >>

CURRENCIES Kazakh tenge hits highest level since Armenian dram 485/$1 — December 2015

Azerbaijani manat 1.95/$1 ↓ 1% The Kazakh tenge moved to 355 $325.5/$1, its highest value against Georgian lari 2.79/$1 — the US dollar since December 2015. 350 Kazakh tenge 325.5/$1 ↑ 1% The main drivers of this 345 strengthened currency are oil prices Kyrgyz som 69.2/$1 — and a more consistent and credible 340 Tajik somoni 7.9/$1 — economic policy coming out of the Central Bank. 335 Turkmen manat 3.5/$1 — In January last year, the tenge bottomed-out at 381/$1. This was 330 Uzbek sum 3,280/$1 ↓ 0.5% when oil prices were hovering at 325 under $30/barrel, after Iran said it would start exporting oil as soon as 320 US-lead sanctions were lifted, and STOCKS confidence in Kazakhstan’s 315 Centerra Gold C$6.45 ↓ 2.5% economic policies were at an all- Aug. 8 2016 JFeb. 2 2017 time low after a bungled defence >>Kazakh tenge vs US dollar >>CB-Data Central Asia Metals 239p ↑ 1.7% and then a sudden devaluation of Kairat Kelimbetov in November KAZ Minerals 405p ↑ 14.7% the tenge. 2015. It hasn’t been all easy for Now oil prices are back up Akishev, but things are definitely Tethys Petroleum 1.63p ↑ 18% around $55 and Daniyar Akishev is looking up now. This year alone, the heading the Central Bank. He took Nostrum Oil & Gas 460p ↓ 1.5% Kazakh tenge has outperformed its over from the hapless, indecisive regional peers and risen by 3%. Roxi Petroleum 10.13p ↑ 6% Bank of Georgia 2975p ↑ 3.5% Analysts place Bank of Georgia shares Georgia Healthcare 349p — on a ‘buy’ rating TBC Bank 1457p ↓ 2.8% Shares in the Bank of Georgia rose profitability,” the broker said, by more than 50% last year to a peak explaining that it had given Bank of of 380/$1 in mid-December. Since Georgia a ‘buy’ rating. then they have come off the boil It also said that Georgia's COMMODITIES slightly hitting a three-month low macroeconomic outlook looked Oil (Brent) $56.56/b ↑ 0.5% of 312/$1 on Jan. 12. good for Bank of Georgia. Now, though, things appear to be “In addition, we continue to Gold (spot) 1215p ↑ 0.8% picking up again. The Bank of expect Bank of Georgia to benefit Copper $268.5/lb ↑ 0.5% Georgia’s share price measured from underlying Georgian 350/$1 on Feb. 2 and analysts economic growth, supporting the Cotton $76.9/lb ↑ 3.6% predicted more growth. London- core Banking division,” the based brokerage Peel Hunt said Bank brokerage said. of Georgia’s subsidiary Georgia Last month, Georgia's Central Editor’s note: These tables normally measure Healthcare looked good this year Bank chief Giorgi Kadagidze said the weekly change in the price of stocks, and was likely to see profits rise. that Georgia's GDP would grow by commodities and currencies. In this instance “We update our model to more than 4% because of tax cuts, until, though, the data measures the change from Feb. 2 2017, the last previous measure by incorporate the strong growth an infrastructure investment plan the The Conway Bulletin of these prices. expected in Georgia Healthcare's and a free-trade deal with China.

The Conway Bulletin, 1 St Colme Street, Edinburgh, EH3 6AA; +44 (0)131 220 8286 Cross Fell ltd, Copyright © 2017