Pressure for a devaluation of Kazakhstan’s beleaguered currency is building as the country adjusts to weaker oil prices and a crumbling Russian rouble, analysts said.
Futures markets are pricing in a sharp depreciation, with the 6-month forward contract trading at over 225 tenge per US dollar – almost 40 tenge above the official fluctuation corridor of 170 to 188 tenge per US dollar. The 12-month contract changes hands at 240 tenge per US dollar.
The mounting pressure on the tenge is echoed in other oil-rich post-Soviet states. Azerbaijan is planning to abandon its currency peg to the dollar as the oil price tumble strains its energy-dependent economy, the central bank governor told the Financial Times. Read more
As anyone who has tried to drive across Almaty at 6pm knows, Kazakhstan’s financial capital is no sleepy city on the steppe.
Car ownership in Almaty city and the surrounding region has soared on the back of Kazakhstan’s growing oil wealth, rising from 617,000 in 2007 to 936,000 in 2011. At rush hour, police regulate the number of vehicles entering the city and traffic on the glitzy Al-Farabi avenue grinds to a halt.
On Tuesday the Kazakh government will attempt to address the gridlock, launching a roadshow in London for tender to build a ring road around the city. Read more
By Gavin Bowring, Asean Confidential
Kazakhstan announced last week a major government reshuffle, streamlining its ministries from 17 to 12. Most significant was the creation of a new Ministry of National Economy, merging a number of different agencies and oversight bodies under one roof to improve efficiency, and a revamped Ministry of Energy that follows President Nazarbayev’s reported criticism of the country’s energy sector as being “in disarray”. Read more
“When eating an elephant, take one bite at a time”, US Army officer and Vietnam veteran Creighton Abrams once said.
In his new book, The Rise of the New East, Ben Simpfendorfer does just that. His elephant is “The East”, the group of almost 50 emerging markets ranging from Turkey to China that is home to well over half of the world population.
Simpfendorfer gives his topic a thorough treatment. While his insights seem logical and intuitive, taken together they give an impressive oversight of into key trends shaping the region. beyondbrics noted five insights that particularly stood out. Read more
Lukoil has agreed to sell its stake in several oil projects in Kazakhstan to Sinopec for $1.2bn, in the latest of a string of Chinese investments in the country’s energy sector. The Russian company – the country’s largest private-sector oil producer – said the purpose of the sale was to “optimize Lukoil’s overseas hydrocarbon asset portfolio”.
But the deal is also symbolic of China’s rapid expansion in Central Asia, part of Russia’s traditional “sphere of influence”. Read more
Kazakh tenge slumps by over 18 per cent in morning trade
By Claire Nutall of bne in Astana
Kazakhstan became the latest emerging market to succumb to competitive devaluation pressures as the Tenge plummeted against the US dollar on Tuesday, following Astana’s decision to allow a 19 per cent depreciation to shore up the country’s export competitiveness. Read more
Merger this way
Two of Kazakhstan’s largest banks are merging to create Central Asia’s largest lender. The $1bn deal will return the stricken BTA Bank to private sector ownership five years after it was nationalised in a government bail-out.
Kazakhstan’s banks were once a darling of western investors, but the financial crisis led to a string of writedowns and defaults that damaged the country’s image among international investors. Read more
Something strange is happening in Kazakhstan. Over 12 per cent of consumer loans are non-performing and yet the banks are dishing out more consumer credit than ever.
Lending increased 37 per cent between July 2011 and November last year. It was over four times greater in November 2013 than at the beginning of 2006. Read more
Scheme of the ESPO oil pipeline route | Source: Centre for Eastern Studies
Rosneft’s plans to step up oil deliveries to China will strain Russia’s new eastern oriented export pipelines to the limit. A preliminary deal struck on Monday will see Kazakhstan come to the rescue shipping oil on Rosneft’s behalf through its own pipeline to the Chinese frontier.
It’s a set back for Transneft, but the Russian state oil pipeline monopoly will probably have to lump it. Read more
Martchenko: out the door
By Clare Nuttall of bne
Grigory Marchenko has been replaced by former deputy prime minister Kairat Kelimbetov as governor of the National Bank of Kazakhstan (NBK). The sudden move, announced on October 1, comes four years into the second term of the respected Marchenko, and just ahead of the central bank’s takeover of the country’s pension assets.
A statement from the presidential press office said Marchenko has been relieved of his post at the bank for “family reasons”. No further explanations were offered for the dismissal of Marchenko, who returned to the post for a second time in 2009 during the depths of the recent financial crisis. Read more
A big day for big oil and an even bigger one for Kazakhstan. After twelve years work and $49bn of investment, an international group led by Eni has finally turned on the tap at Kashagan, launching test production at the giant Caspian Sea field.
The Eni-led North Caspian Operating Company began test production at Kashagan on Wednesday, marking the end of more than a decade of delays and cost overruns at Kazakhstan’s flagship oil field. Read more
Xi Jinping of China and Nursultan Nazarbayev of Kazakhstan in Astana, Sept 7, 2013.
By Usen Suleimen of the Kazakh foreign ministry and Xiaojiang Yu of Hong Kong Baptist University
The visit of Xi Jinping, China’s president, to Kazakhstan last weekend and the signing of $30bn of new agreements is another symbol of the growing closeness between two of the world’s largest countries. It is a relationship built on mutual challenges, geographic proximity and energy, as China increasingly looks to central Asia to power its growing economy.
But these links have also raised alarm bells in the west. Read more
Xi Jinping, China’s president, wound up a two-day official visit to Turkmenistan on Wednesday night by bagging a package of natural gas deals that will strengthen China’s grip on central Asia’s energy resources. He has since arrived in St Petersburg where, as well as attending the G20 summit, he’s expected to be talking gas co-operation again – this time with Russia’s Gazprom.
Gazprom is eager to clinch a long-delayed gas contract with China that would open up a vast new export market on Russia’s eastern flank. But after his success in Turkmenistan, Xi may decide to play hard to get. Read more
Champagne corks may be popping in Astana following the arrest of Mukhtar Ablyazov, the fugitive former chairman of Kazakhstan’s BTA Bank and opposition leader in France on Wednesday. However, as the Kazakh authorities know only too well, the financial problems at BTA, and indeed many other Kazakh banks, are no laughing matter.
Kazakhstan’s banks are staggering under 3.7 trillion Tenge ($23.9bn) of bad debts that account for almost one third of their combined credit portfolios, according to a study released by Kursiv, the Kazakh business daily this week. Read more
So, Kazakhstan has restated its intention to issue a $1bn eurobond, Reuters reported on Monday. The oil-rich nation has been talking about this for years but has been reluctant to pay interest for money when it is flush with cash already.
When the issue was last mooted in May, analysts said Kazakhstan could have expected to pay about 3 per cent a year, on a par with Russia. Perhaps the government has been prompted to get moving on a deal by Ben Bernanke‘s suggestion that the days of easy money may be drawing to an end. Read more
Kazakhstan seems to have overcome its initial doubts and has decided to increase its stake in the giant Kashagan oil field.
So, ConocoPhillips will not be selling its 8.4 per cent stake in the offshore Caspian Sea project to India’s ONGC Videsh as planned since last year. Instead, as announced on Tuesday, Kazakhstan will use its pre-emption rights and put the stake in the hands of state-controlled KazMunaiGas (KMG). The price? $5bn, same as India would have paid. Read more
There has been an ugly twist in the long running feud between Nursultan Nazarbayev (pictured) and Mukhtar Ablyazov, the fugitive former chairman of Kazakhstan’s BTA Bank.
If it was not for the involvement of the Italian police and a modern jet plane, this disturbing story would sound as if it came straight out of the ancient annals of warring central Asian Khans. Read more
By Claire Nuttall of bne
A campaign against plans by the Kazakh government to overhaul the pension system is gathering pace, in a rare instance of public discontent in the autocratic Central Asian state.
The campaign began last month after labour minister Serik Abdenov (pictured) became a figure of fun after unsuccessfully trying to defend plans to increase the retirement age for women from 58 to 63 at a public meeting in the industrial town of Temirtau. Read more
Another strand is playing out in the saga over Kazakh oil and gas: the government in Astana has decided against increasing its stake in the enormous Kashagan oil field as ConocoPhillips exits the project.
None of the other international majors involved appear willing to increase their exposure to what is turning out to be the world’s most expensive oil development, ever. That leaves Kazakhstan to play India and China off against each other for access to Kashagan’s vast oil reserves. Read more
When KazMunaiGas muscled into the Karachaganak oil and gas field in 2011, international oil majors had no choice but to dilute their shares in the hugely profitable project to make way for Kazakhstan’s state oil company. At the time it was understood that KMG’s participation would clear the way for Kazakhstan to sanction the third phase of Karachaganak’s development and allow production to surge at the field. That now appears to be have been optimistic: in a surprise move this week, KMG said the expansion plan had been put on ice. Read more