1. Turkey to increase investment in Kyrgyz economy

BISHKEK (TCA) – Kyrgyzstan considers Turkey to be one of its main foreign partners and Kyrgyz-Turkish relations appear to be steadily developing, especially in the areas of trade and economic cooperation, education and culture. This was highlighted in a speech by Kyrgyz President Kurmanbek Bakiyev at the Kyrgyz-Turkish Business Forum, held on May 27 in Bishkek. The forum was attended by about 300 representatives from Kyrgyz and Turkish business circles.

Turkey has the capacity to invest more in the economy of Kyrgyzstan , stressed the President of the Turkish Republic Abdullah Gul. This was Abdullah Gul’s first visit to Kyrgyzstan as the President of Turkey. Before this, he visited Kyrgyzstan as the Turkish Minister of Foreign Affairs.

Kyrgyzstan’s investment potential

Big Turkish companies are going to pay more attention to Kyrgyzstan , according to Abdullah Gul. The Turkish President spoke about both the big investment potential of Kyrgyzstan and the Government’s efforts to improve the business climate in the country. The essential condition for economic development is political stability, and Kyrgyzstan has established it, Gul said.

Turkish investors could share their experience with the Kyrgyz side in the construction of small and medium-sized hydro power plants, as well as in the tourism, mining, agriculture and communications sectors.

Turkey ranks among the top five countries with major investments in the economy of Kyrgyzstan .

Increasing trade and economic relations with Turkey remains a priority for Kyrgyzstan , President Bakiyev stressed.

About ten thousand students in Kyrgyzstan are educated in institutions which were established with the assistance of Turkey .

In May 2009, the volume of Turkish investments totaled $209 million. In Kyrgyzstan , there are more than one hundred Turkish firms. They are working in various sectors of economy, such as banking, construction, production of plastic windows and doors, production of furniture and trade.

Trade

Turkey is one of Kyrgyzstan ’s major trading partners. Kyrgyzstan exports 25 percent of its total volume of exported vegetables and fruits to Turkey , Kyrgyzstan Prime Minister Igor Chudinov said. In addition to this, Kyrgyzstan sells Turkey wool yarn and cotton fiber. Kyrgyzstan exports 15 percent of the woolen yarn it produces and 10 percent of its cotton fiber to Turkey .

In 2008, trade turnover between the two countries amounted to $239 million, whereas in 2004 it was $88 million. In 2008, the volume of Turkey ’s import to Kyrgyzstan amounted to $191 million.

Both sides noted that trade turnover between the two countries does not correspond to the great potential of their relationship. The trade turnover between Kyrgyzstan and Turkey should be increased to $500 million or $1 billion, said the Turkey ’s Industry and Trade Minister Nihat Ergun. Kyrgyzstan , meanwhile, has to develop a sound legal framework and implement all relevant arrangements.

Turkey and Kyrgyzstan discussed the possibility of concluding an agreement on free trade.

Collaboration

The Kyrgyz government will do its best to attract Turkish businessmen to invest in the country, said Kyrgyzstan First Vice Prime Minister Omurbek Babanov at the meeting with Turkish businessmen. Currently, negotiations on the establishment of a major joint airline are being held between Turkey and Kyrgyzstan , Babanov added.

Turkish businessmen are ready to expand their business in Kyrgyzstan , but they currently express reservations concerning the lack of preferences for certain taxes.

Turkish entrepreneurs have made a number of suggestions to the Kyrgyz authorities on how they may be able to make improvements. In particular, they asked to reduce the sales tax. Currently, the sales tax is 2.5 percent, while for imported goods it is 1.5 percent. This situation does not stimulate the manufacturing works and does not support local investors, believe the businessmen.

Energy, communications, agriculture, tourism and mining are priority sectors for investments in Kyrgyzstan , stressed the Kyrgyz Prime Minister Igor Chudinov. He urged Turkish businessmen to establish enterprises related to the processing of agricultural products. The development of the halal industry in Kyrgyzstan would help to find new markets in the countries with Muslim population, said the Prime Minister.

Energy

Through developing energy projects, Kyrgyzstan could become one of the largest suppliers of electricity in the region, Chudinov believes.

The Kyrgyz side presented information on projects in hydropower, building small and medium-sized hydroelectric power stations that might be interesting for the Turkish investors.

Kyrgyzstan is ready to present 90 projects on building small hydropower stations to Turkish entrepreneurs, said the Kyrgyz Prime Minister. He raised the idea of Turkish investment in the CASA-1000 project, which would help to deliver electricity from Central Asia to South Asia .

Turkish entrepreneurs expressed interest in projects in the energy sector of Kyrgyzstan .

“We are ready to assist Kyrgyzstan in the development of feasibility studies and in the design and implementation of hydro-power station projects,” President Gul said.

Negotiations

As a result of the Kyrgyz-Turkish negotiations, the Joint Declaration has been signed. The document reflects the intention of the two states to develop close cooperation in various areas.

The two countries expressed their intention to accelerate the implementation of joint projects in transport and communications, energy, mining, banking, finance and agriculture. The implementation of joint projects will continue through privatization and tenders, as well as solving the problems faced by Turkish companies.

Turkey welcomes Kyrgyzstan determination to resolve water and energy issues in line with constructive cooperation for mutual benefit, says the Joint Declaration.

In Kyrgyzstan , the telecommunications and financial sectors also have good prospects for cooperation, said Turkish President Abdullah Gul. Several Turkish banks have expressed an interest in working in Kyrgyzstan , while commercial banks with Turkish capital currently working in Kyrgyzstan intend to develop their presence in the country and increase their lending activity.

Conducting business meetings between representatives of both countries enhance trade and economic relations between the two states.

2. Kazakhstan’s Shakespearian neo-capitalist drama:

ALMATY (TCA) — It looked almost too good to be true. A stable, improving world sales market for the product, a domestic state-controlled industrial conglomerate working together with foreign partners in harmony and unhindered by the turmoil that frequently bedevils the oil and gas industry. But though recent hikes in oil and gas prices make uranium look competitive once more, Kazakhstan ’s strong position as a leading world producer has come under pressure by what some see as an economic clean-up in the crisis-ridden country and others call political turmoil.

Getting things done in a country where industrial dynamics still leave much to be desired is a remarkable gift, but the manner of doing things also counts. Both blessed and cursed with an extravert personality, Mr. Mukhtar Dzhakishev is a man who made no secrets of his thoughts, a risky trait for a private entrepreneur and outright dangerous for someone in charge of a state-held enterprise. The cloak-and-dagger version of the circumstances surrounding KazAtomProm’s now ousted leadership has been fuelled by an interview given by one of Dzhakishev’s peers on the board to Kazakhstan ’s daily Vremya. The head of the company’s treasury department refers to a “business vendetta” inflicted by a contractor for power supplies headed by “influential people,” who are supposed to have become “offended” during the tender selection procedures. Another element contributing to conspiracy theories has been Dzhakishev’s close relations with ousted banker Mukhtar Ablyazov of the now majority-nationalized Bank TuranAlem who, like Dzhakishev, is facing charges of embezzlement.

News reports’ suggestions

Equity markets would quite possibly have shrugged off the affair were it not for the high stakes put into Kazakhstan ’s important uranium sector by foreign investors and operators. The country’s uranium reserves are currently second in the world to Australia and once the little explored north of the country has been assessed, Kazakhstan could well be at the very top of the list. Overall production of U308, the ready-made principal ingredient of atomic fuel, is poised to increase to 11,900 tonnes in 2009, up from 6,637 tonnes in 2007 and 8,521 tonnes in 2008. By 2020, Kazakhstan is set to contribute an impressive 45,000 tonnes of U308 to an overall global output of 70,000 tonnes. It also helps that China , the world’s fastest-growing market, is located just next door.

KazAtomProm has attracted partners of name and fame, including Areva of France, Cameco of Canada, Russia ’s RosAtomProm and China ’s CGNPC Uranium Reserves Corporation. Yet, news of the arrest of Dzhakishev and six of his peers on the board sent jitters through capital markets. Uranium One’s stock plunged by 30 percent within hours from 3.29 Canadian dollars to C$2.03 following news reports’ suggestions that its predecessor and current property, UrAsia, had been involved in a multi-million kickback during the original sales of KazAtomProm’s uranium mines.

Murky privatization processes

The bottom-line of the row could perhaps be explained by the structure of UrAsia’s takeover by Uranium One. Often, a corporate buyout is carried out in a single operation which includes all assets and liabilities. Non-core assets tend to be sold afterwards with the new corporate owner doing all he can to write off, or at least write down, redundant liabilities. In the case of UrAsia’s corporate purchase, the same procedure appears to have been followed. But how the former obtained corporate authority over the assets from its previous owners remains less clear. Murky privatization processes dating from earlier times haunt the former Soviet Union and seem to be at the origin of the present situation.

In a press release dated May 27, Uranium One tried to clarify its position: “Uranium One’s Kazakh assets were acquired in November 2005 from a group of Kazakh investors by UrAsia Energy Ltd., which became a subsidiary of Uranium One in April 2007,” the text reads. “UrAsia paid full value for these assets, including $75 million for its 30 percent interest in Kyzylkum, which operates the Khorassan uranium project, and $350 million for its 70 percent interest in the Betpak Dala joint venture, which operates the Akdala and South Inkai mines.” In other words: if there have been any kickbacks as Kazakh authorities indicate, neither UrAsia nor Uranium One has any involvement in them.

Continuing downward trend

Whether these slumps in stock prices, pointed at by news reports, are only explicable by incidents such as the one concerning Kazakhstan , remains to be seen - market watchers are, however, tending to suggest it. “Global portfolio flows indicate that among mining stocks, listed uranium names have been in strong demand over the past few months, third among mining subsectors only to specialist miners of nickel and zinc. One catalyst has come by way of spot uranium prices, moving up over the past month or so, reversing a longer term downward trend,” a report by Johannesburg-based Mineweb dated May 11 this year reads.

“Uranium prices moved up from around 10 dollars per pound some ten years ago, to a peak of $136 a pound in late June 2007, and then fell and fell, to recent multi-year lows around $40 a pound but have since picked up to around $44 a pound.”

Upward-bound sales income is thereby explained as a strong stock value engine these days. Yet a slightly closer look at the figures over the last two-and-a-half years or so might suggest the opposite to be true. Gross sales prices realized by Uranium One roughly correspond to international market price indicators so far, which have failed to follow the overall pick-up in oil prices into the current year (see table) and, though to lesser proportions than natural gas, by and large follow the latter’s continuing downward trend. According to the Uranium One’s first quarterly report in 2009, one pound of uranium base, which is the main half-fabricate ready to be converted into nuclear fuel, brought in $49 on average, set against a production cost price of $17 per pound (one tonne = approx. 2,600 pound ) given the relatively low content of the element U in most of the ore found in Kazakhstan’s soil.

‘Increase in sales volumes’

In all, price stability on the world markets looks rather far-fetched these days. Whereas, in the first three months of the current year, all of Uranium One’s operations (see table) brought in almost double the amount in sales revenue they did in the same period of 2008 (from $22.5 million to $43 million), this was purely thanks to boosts in productivity (from 283,300 to 880,600 pound ) and to an important extent offset by a price drop from $79 to $49 per pound. “Earnings from mine operations were $15.9 million during the first quarter of 2009, a 2 percent decrease over earnings from mine operations of $16.3 million during the first quarter of 2008, primarily due to the decrease in the average realized sales price offsetting the increase in sales volumes,” the company’s quarterly report reads.

Nevertheless, Uranium One, which these days derives well over half of its income from its newly acquired operations in Kazakhstan , appears to have significantly improved its corporate performance over the course of time. Losses suffered in the first quarter of 2008 have been turned into profit in the first three months of the current year. This seems to have been by and large due to savings in “general and administrative” expenditure which, according to the company’s most recent quarterly report, have included “stock option and restricted share expense” meant to limit the effects of pumping money into Kazakhstan on investors’ exposure and thereby on stock prices. Another element that appears to have helped is the appreciation of the US dollar, on which Uranium One heavily bet since the beginning of its operations in Central Asia , which turned losses topping $2.6 million in the first quarter of 2008 into an impressive gain of close to $70.5 million in the first three months of this year.

Disregard for inconveniences

The company’s overall production outlook for the upcoming period suggests that building up production and processing capacity remains top of the agenda, with “attributable production” seen at 3.5 million pounds through the current year and 5.6 million pounds in 2010. A sulphuric acid plant, which supplies the agent needed for processing ore, is under construction and should be completed by next winter.

The boost in output is mainly due to the opening of two new mines in which Uranium One participates. The Khorassan mine was opened in late April this year, while the Yuzhd Inka mine, opened earlier, started commercial production at the beginning of this year, with first quarter output coming close to a quarter of a million pounds. All sites are located in the uranium-rich deep south of Kazakhstan –the country’s core agricultural province, also haunted by climatic instability - flooding in spring, drought in summer, erosion and desertification. Disregard for the environment in Soviet times has resulted in considerable contamination by radioactive agents – something western investors are expected to correct. In all: commercial and ecological controversies are amply available, and political intrigues are the last port of call.

3. Karimov: from Rio to Khanabad

TASHKENT (TCA) — President of Uzbekistan Islam Karimov has returned from a three-day “fruitful” official visit to Brazil last week, where he signed a number of agreements with his Brazilian counterpart Luiz Inacio Lula da Silva on expanding cooperation in a number of areas. The two leaders signed documents relating to the development of technology, economic and trade relations, cultural exchanges, agriculture and tourism.

While Government spokesmen and state media have been eager to underline the success of the trip, other media outlets have been more interested in the recent turmoil in the Fergana Valley region where reported clashes in Khanabad and a suicide bombing in Andijan on May 26 killed one police officer and injured several others. Sources report that immediately upon his return, the President made a secret visit to the region, although he has yet to comment on the events.

State-owned newspapers have paid considerable attention to President Karimov’s visit to Brazil , highlighting the important role that both of the countries have to play as regional leaders. As one state-owned Tashkent newspaper reported, “ Uzbekistan and Brazil both have a very important position in their regions. Our country put forward the initiative to develop a Central Asian regional market. Uzbekistan came up with the initiative of making Central Asia a zone free from Nuclear Armaments. And Uzbekistan and Brazil support the restructuring on the United Nations, expanding its role and significance in solving international problems and supporting the principles of a multipolar balance of power. The leaders of the two countries are united in their approach to the mitigation of such threats as terrorism, extremism, narco-business, transnational organized crime, and support greater international cooperation in the fight against these threats.”

The newspaper went on to note that “ Uzbekistan could become a bridge, linking Brazil not only with the other countries in Central Asia , but with all of the countries of the CIS.” The Uzbek authorities intend to do this through a transcontinental intermodal logistics centre in the town of Novoi , which is currently run in collaboration with South Korea .

Brazilian media reported that the two countries’ government officials had signed agreements on cooperation and Brazilian investment in Uzbekistan ’s textile, leather and shoe industries. Brazil also showed interest in the Uzbek farming industry and will send a delegation to discuss joint projects in Uzbekistan later this year.

Brazilian President Luiz Inacio Lula da Silva said in his welcome address that the Uzbek president’s first visit to Brazil “opened a new page in relations between the two countries”.

Other news agencies, however, have been perplexed by President Karimov’s failure to comment on the political situation in his country. As Karimov flew to Brazil on May 26, portions of the Ferghana Valley were under lockdown conditions following the violent confrontation in Khanabad, a major crossing point on Uzbekistan ’s frontier with Kyrgyzstan , and a suicide bombing the city of Andijan . Security troops and police were out in force not only in Khanabad and in Andijan but also in major cities throughout the Uzbek portion of the Ferghana Valley.

The official Uzbek news agency UzA reported that a suicide bomber detonated himself on Fitrat Street in central Andijan on the afternoon of May 26. The blast killed at least one police officer and wounded multiple bystanders. No group immediately claimed responsibility for the explosion.

While some claim that the failure of Karimov to cancel his visit to Brazil is proof that the situation in the Ferghana Valley is under control, media outlets have found it difficult to gain access to information to confirm reports. Some local sources report that mobile telephone and land line connections are being blocked to prevent the flow of information from the Andijan region, and the details surrounding the events are as yet uncertain.

(ferghana.ru, uznews.net, UzA, Eurasia.net)

4. Ashgabat may sue Russia for ‘vacuum-bomb’ pipe blast

MOSCOW/ASHGABAT (TCA) — Turkmenistan has threatened to take Russia to court over April’s gas pipeline explosion, RIA news agency reported, escalating a dispute that has severed a vital energy link through Russia to Europe .

Turkmenistan blames Russia for blowing up the pipeline, which carries more than half of its most valuable export, by cutting the gas flows without enough warning.

"When you shut off the flows, you get what is called a vacuum-bomb effect," Odek Odekov, head of Turkmen state geological institute Turkmengeologia, told reporters during an energy conference in Paris, RIA reported.

"The system has to be prepared for a shut-off three days in advance, and Russia did it in the course of one day," he said.

While Russia ’s gas export monopoly Gazprom denies any wrongdoing, it is no secret that the current arrangement was less than profitable for them.

Speaking at a press conference in Chelyabinsk on June 1, Gazprom deputy Chief Executive Valery Golubev suggested that Turkmenistan limit the volume of deliveries of natural gas, bought by the Russian side, or lower the price, reports RIA Novosti.

“We have suggested that we limit the volume of gas deliveries, given that Turkmen gas is currently sold at the same price as on the European market. If, therefore, Europe is not currently buying gas at that price, then there is no market anywhere for gas at your price: we need to look either at the price or at the volume,” said Golubev.

According to him, Ukraine , the main buyer of Turkmen gas, has reduced consumption by 40 percent, or by 22 billion cubic metres, and many European countries have also reduced their consumption.

“I think that in the near future, work will continue. We will manage to find sensible and mutually-profitable interests,” added Golubev.

Whether these problems will be solved outside of court remains to be seen. News agencies report that Odekov is not ruling out the idea of bringing a case before the international courts of arbitration, should the two sides fail to reach an agreement on the payment of damages for the incident.

Gazprom declined to comment on Odekov’s remarks. Turkmen government officials in Ashgabat declined to elaborate.

Odekov said Turkmenistan has been forced to shut off 195 gas production fields as 92 percent of its exports to Russia remained suspended, Platts news agency reported. The rest is flowing through another link via Kazakhstan to Russia .

Turkmenistan is therefore losing between $800 million and $1 billion per month in export revenues, said Mikhail Korchemkin, director of East European Gas Analysis. " Turkmenistan has every right to demand this money," he said.

U.S. pushes for bypassing Russia

Due to a sharp drop in demand for gas in Europe, Russia no longer needs to buy Turkmen gas, because it can meet European demand more profitably by selling its own.

For the short term, therefore, analysts said the explosion played into Russia ’s hands by halting imports from Turkmenistan .

Korchemkin estimated that Gazprom is getting an additional $330 million-$450 million per month in net profits out of this situation, while the Russian budget is getting an extra $300 million-$400 million in customs duties.

In the longer term, however, Moscow will have to deal with the anger of an important energy partner, which has begun looking to the West for other consumers and pipeline routes.

In Ashgabat on May 28, a top U.S. trade official voiced renewed support for two pipeline projects that would bypass Russia to bring Turkmen gas directly to Europe .

"Alternate export routes such as Nabucco or the trans-Caspian pipeline will enhance Turkmenistan ’s independence and sovereignty by strengthening the country’s ability to reach consumers," the U.S. Secretary of State’s Special Envoy for Eurasian Energy Richard Morningstar told Reuters ahead of a meeting with Turkmen President Gurbanguly Berdymukhammedov.

After the row with Russia , Berdymukhammedov has spoken out about the need to diversify gas exports.

Russia, keen to maintain control over the region’s gas flows, is ploughing ahead with its own pipeline project in the region, South Stream.

"But South Stream does not open any new markets for Turkmenistan , because Russia would remain its only consumer. Nabucco, however, opens up all of Europe ," Korchemkin sai(Reuters, Ferghana.ru)

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