August 23, 2012 This is bne's Eurasia daily newsletter, a list of the top stories from the country. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options here: http://businessneweurope.eu/users/subs.php Eurasia TOP STORY 1. Kyrgyzstan’s ruling coalition collapses 2. Army fires on demonstrators in east Tajikistan 3. Gulnora Karimova rumoured to be behind MTS’s problems in Uzbekistan 4. Kazakhstan to support Kyrgyzstan’s Customs Union accession Eurasia Kazakhstan 5. Fitch Assigns Development Bank of Kazakhstan's Islamic Finance Programme, Notes Final 'BBB-' Rating 6. Four Dead in Kazakhstan Helicopter Crash 7. Halyk Bank - dividend policy on heels of state exit 8. MIE below expectations in 1H as Emir Oil development behind schedule Eurasia Other Central Asia 9. Kentor Gold raises US$20.5m in rights issue 10. Kyrgyzstan to conduct environmental audit of Kentor’s Andash project 11. Manas Petroleum sells half of its Petromanas stake 12. Turkmenistan: Dragon Oil – Relatively safe and boring, which is why we like it Eurasia Caucasus 13. Azerbaijan-based banks ranking for assets 14. Azerbaijan-based banks ranking for loan portfolio 15. Construction works in Azerbaijan rise 33% 16. OSCE warns South Ossetia against demolishing Georgian villages 17. Poverty increases in Armenia - Minister Other frontier markets 18. Mongolia News Update – Wednesday, August 22, 2012 19. Oyu Tolgoi ESIA published after long wait --************************************************************ Eurasia TOP STORY --************************************************************ 1. Kyrgyzstan’s ruling coalition collapses bne August 23, 2012 Kyrgyzstan’s ruling coalition collapsed on August 22 after two of its four members pulled out in a revolt triggered by the corruption scandal surrounding a racehorse alleged to have been given to Prime Minister Omurbek Babanov as a bribe. The breakup of the coalition leaves Babanov’s government without a majority in parliament, and an indefinite period of uncertainty for investors is expected while a new government is formed. Coalition member Ata-Meken announced it was quitting the Birimdik coalition on August 22, the day after fellow member Ar-Namys pulled out. This leaves only MPs from Babanov’s Respublika party and the Social Democratic Party of Kyrgyzstan (SDPK) still backing the government, which is not enough for a majority in the 120 member parliament. The coalition’s leader Kanat Isaev announced on August 22 that since the government no longer has a majority in the parliament, it must resign immediately. While Babanov seems reluctant to quit, it is clear that he will have to either resign or face a vote of no confidence, unless he manages to form a new coalition in the next few days. This would be possible if he keeps the SDPK on board and manages to persuade Ata-Zhurt, the only opposition party in the parliament, to join the government but this is unlikely. Respublika - SDPK - Ata-Zhurt was the formation of the first parliamentary coalition after the April 2010 revolution, under Kyrgyzstan’s former prime minister and current president Atambaev. However, the socialist SDPK and nationalist Ata-Zhurt are ideologically opposed, and most SDPK MPs have already indicated they want Babanov out. Ata-Meken, which has turned against the Prime Minister in recent weeks, called for him to leave immediately, instead of serving as acting prime minister while a new coalition is formed. "We, members of the Ata-Meken faction, have to declare our disagreement in principle with the policies of Babanov as the head of the government. We are also convinced that Babanov should not remain the acting prime minister of the republic and should waive his temporary powers immediately,” the party said in a statement cited by 24.kg. Babanov’s government, which was formed in December 2011, has looked shaky for several months. MPs made an attempt to force a vote of no confidence just before parliament broke up for the summer recess in June, but failed to collect enough signatures on a single petition. The trigger for already fragile cross-party coalition’s collapse was a corruption scandal that broke in August 2012, concerning Babanov’s race horse, Islander One. Opposition MPs allege that the horse, which they say is worth up to $1.5m, was a bribe given to Babanov by Serka, a Turkish company carrying out construction work at Bishkek’s Manas International Airport. Babanov, who is one of Kyrgyzstan’s richest businessmen, says he bought the horse himself and it is worth no more than $20,000. However, there are longer-standing issues dividing the coalition, in particular the management of Kyrgyzstan’s economy. Technical problems at the Kumtor gold mine, which accounts for around 12% of GDP, in the first half of 2012 have brought down growth forecasts, with growth of just 1% now expected in 2012. This has dashed hopes of bringing Kyrgyzstan’s budget deficit down to a more manageable level. Other issues include Babanov’s personnel party. Speaking on August 21, Ar-Namys leader Felix Kulov said the decision to quit the coalition was based on Babanov decision to fire officials appointed on the recommendation of his coalition partners, in particular the had of the State Registration Service, Emil Aliev. Kyrgyzstan, which has seen two revolutions in the last seven years, now enters a new phase of political turmoil, as MPs start horse-trading on a new coalition while waiting for Babanov to quit. It took around six weeks of negotiations to agree on the two previous coalition governments formed since the April 2010 revolution, and with no less than three of the five parties represented in parliament needed to form a majority, a similarly lengthy round of negotiations is expected now. --************************************************************ 2. Army fires on demonstrators in east Tajikistan bne August 23, 2012 Government forces opened fire on protestors in Tajikistan’s volatile Gorno Badakhshan region on August 22. In a rare demonstration for the Central Asian country, a crowd of up to 3,000 people gathered in the regional capital Khorog to protest against the killing of former warlord Imumnazar Imumnazarov. The situation in the Gorno Badakhshan autonomous region (GBAO) is reported to be tense following the clashes on August 22, and telephone contact with the rest of Tajikistan has been cut off. The new outbreak of violence dashes hopes that stability has been restored in the region after fighting between government forces and militants in July 2012. Soldiers in Khorog are reported to have mainly fired into the air after demonstrators started to attack local government buildings. However, AP cites witnesses as saying that two of the protestors were shot in the legs. Imumnazarov, who has been wheelchair-bound since injuries sustained during the war, was killed at his home in Khorog early on August 22. Unidentified assailants threw a grenade into his house then opened fire with automatic weapons, Asia-Plus reports. Many Khorog residents are understood to believe that the Tajik government were behind the attack on Imumnazarov, an opposition commander during Tajikistan’s 1992-97 civil war. GBAO was one of the opposition strongholds during the civil war and Imumnazarov and other former warlords remain unofficial rulers of the province. They suspect the Dushanbe has used the assassination of regional security chief Abdullo Nazarov in mid July as the pretext to bring the region more firmly under central control. GBAO residents have also been angered by a recent demand that all men aged between 18 and 45 must report to the army to answer questions about their military backgrounds. Imumnazarov’s death comes a month after the government launched a special operation in GBAO, targeting a militant group headed by another warlord Tolib Ayombekov. Dushanbe sent an additional 3,000 troops to the region, backed by helicopter gunships. After several days of fighting in and around Khorog, the group started to surrender on July 28. Ayombekov surrendered on August 12 and urged his followers to give up their weapons. It then appeared that stability had been restored in GBAO after Tajikistan’s worst outbreak of violence since mid-2010, when government forces fought for several months to put down an insurgency in the Rakhsh Valley, another mountainous region where support for the opposition remains strong. However, Imumnazarov’s murder and the mass protest on August 22 shows that the situation in GBAO has not yet been resolved. Tajikistan’s authoritarian president Emomali Rakhmon has managed to maintain stability in the country since the end of the civil war through a combination of rapid military response to insurgency, and power sharing agreements that give former opposition leaders a voice in regional and national politics. Rakhmon has maintained stability in Tajikistan for the last 15 years, but the country lives under the constant threat of a new outbreak of violence, because of the continuing influence of former warlords in regions such as GBAO and the Rakhsh Valley, and its long and porous border with Afghanistan. But while the government has successfully crushed attempts at armed revolt, mass protests as seen in Khorog on August 22 are a new departure, and Dushanbe will have to find a new way of dealing with the threat of popular unrest and prevent it spreading to the rest of the country. --************************************************************ 3. Gulnora Karimova rumoured to be behind MTS’s problems in Uzbekistan bne August 23, 2012 There is growing speculation that Uzbekistan’s “first daughter” Gulnara Karimova could be behind the suspension of Russian mobile operator Mobile TeleSystems’ (MTS) licence in Uzbekistan. Uznews cites a source at MTS’s Moscow offices as saying that Karimova, the eldest daughter of Uzbekistan’s President Islam Karimov, was ultimately responsible for the seizure of MTS’s Uzbek subsidiary Uzdunrobita.