Newly appointed defense minister Imangali Tasmagambetov. (photo: MoD of Kazakhstan)
Kazakhstan President Nursultan Nazarbayev has removed the country's defense minister Serik Akhmetov after only six months in service, replacing him with the current mayor of Astana, Imangali Tasmagambetov. Nazarbayev gave no explanation for the move, but analysts and inside sources seem to suggest two explanations for the reshuffle: Akhmetov's connection to a corruption scandal and Tasmagambetov's ability to steer the military in what is becoming a difficult time.
An analysis on the Kazakhstan news site TengriNews noted that "The fighting in Ukraine has demonstrated the inadequacy of the Ukrainian army, which led the Kazakh leaders to seriously examine the state of its own army.... Being an apt economic manager, Tasmagambetov was chosen to solve the problems in the Ministry [of Defense]." It quotes political analyst Aidos Sarym: “Apparently, there is a need for a person with strong charisma and good organisational abilities to manage the army. Now the army is experiencing very unpleasant processes that suggest that our defenses are very low. It is clear that this very large corporation needs efficient people to deal with it.” Similar theories were promulgated by a number of other experts.
What to get the oligarch who has everything? How about a caviar spa experience on the shores of the Caspian Sea?
Billed as a “black caviar spa for real gourmands,” this is one of the leisure experiences that will be available at the upmarket Kenderli resort in Kazakhstan when it opens its doors in a few years. If immersing your body in a bath of fish eggs is not to your taste, how about “dances with seals?”
These and other once-in-a-lifetime experiences are being touted to lure tourists to a part of Kazakhstan not known for bringing in the holiday hordes: the eastern shores of the Caspian Sea, where, if developers get their way, a high-class resort will soon spring up out of the desert, reports Tengri News.
The development blueprint expects that by 2020 over half a million tourists will be flocking to Kenderli every year, with foreigners making up over half of the projected 642,000 visitors. Russia is considered the most promising market, but the resort will also target holidaymakers from other parts of Central Asia and the former Soviet Union, and visitors from Turkey and the Middle East.
Developers have an ambitious vision for Kenderli as “a superb 21st century tourist coastal resort” that will become the “best” on the Caspian, “the perfect destination for domestic and international tourists, generating wealth for the region and wellbeing for our people.”
With a cold, dark winter inching closer each day in Kyrgyzstan, the government is desperately trying to strike bilateral energy-import agreements with anyone and everyone. But as policymakers go hunting around Central Asia to plug an estimated deficit of over 2 billion kilowatt-hours, prices and political differences are potent sticking points.
Any bilateral deal would require the differential in electricity costs be borne either by the insolvent government, or by ordinary Kyrgyzstanis, who are accustomed to paying $0.015 per kilowatt-hour. That’s far below the cost of production and substantially less than citizens pay in any other Central Asian country.
So Kazakh electricity, which costs around four times as much for Kazakhs, is expensive to most Kyrgyz, although that didn’t stop Astana and Bishkek agreeing to an import deal in principle last week. Tajik electricity is over one-and-a-half times as expensive as the Kyrgyz version and it is doubtful whether a country whose own rural residents spend a lot of time in the dark has any power to spare.
The perfect cure to a Kyrgyz winter of misery, then, could come from gas-rich Turkmenistan.
A BMW 7 Series sedan. Will Kazakhstan's Olympic officials be using official money to buy themselves any of these? It's happened before. (BMW.ru)
The question on some minds in Almaty is not if Kazakhstan’s financial hub will win the right to host the 2022 Winter Olympics, but rather, if Almaty does, who will steal the public funds designated for the Games. After all, few in Almaty were shocked to learn this week that the last time they hosted a big sporting bash, millions of dollars disappeared.
A judge in Almaty has sentenced Aidar Musin, a member of the 2011 Asian Winter Games organizing committee, to over five years in jail for embezzling more than $3 million from the state’s budget for those games, reports TengriNews.
Kazakhstan's financial police had alleged that a company with connections to Musin won a 1.4 billion tenge ($7.3 million) contract to provide a telecommunications system and equipment for a ski-jumping complex in Almaty. More than 600 million tenge ($3.3 million) from that contract disappeared, with Musin using some of this money to buy himself a 2009 model BMW 750 sedan and a 2011 model Mercedes Benz E-250 sedan, the Almaty City Court ruled.
Almaty is one of two finalists in the competition to host the 2022 Winter Olympics. Only Beijing is also still in the running after a gaggle of European cities pulled out, citing low public support for the billions necessary to host the spectacle.
Kazakh officials say they are keen to keep costs for the 2022 Winter Olympics under control by attracting sponsors and advertisers to cover most expenses. The budget is currently around $3.7 billion. But as with any major project in Kazakhstan, it is hard to avoid questions about corruption.
The ruble vs the tenge over the last 12 months. The sharp change in February indicates the first tenge devaluation. Since then, the ruble has continued to slide, again putting pressure on the tenge. xe.com.
As the price of oil falls, and as Russia’s Central Bank struggles to keep the ruble from hitting a new record low each day, Kazakhstan’s currency is facing pressure on two fronts. The major oil producer, whose economy is tightly linked to Russia’s, already sharply devalued the tenge once this year. But facing these new challenges, can the Kazakh National Bank hold its currency stable? And can Kazakhstan keep its books balanced?
Higher output and weaker global demand have pushed the price for benchmark Brent crude to $83 per barrel, its lowest in four years, down 27 percent since June. Oil, Kazakhstan’s chief export, is still above the government’s fiscal breakeven point of $65.5 per barrel, as calculated by the IMF. But it is below $90.6, where Kazakhstan faces a balance of payments deficit that puts further downward pressure on the currency. Moreover, trade with Russia is down 22 percent this year.
Kazakhstan’s “tenge weakened in forward markets last week, responding to a drop in the price of oil and sliding ruble,” Halyk Finance, an Almaty-based investment bank, said in an October 13 note. “The weakening of the Russian ruble and falling oil prices are the main fundamental reasons of the tenge weakening in forward markets.”
Russia is Kazakhstan’s main trading partner. And because of the falling price of oil, and the effect of sanctions the West has imposed on Moscow for meddling in Ukraine, the Russian currency has fallen nearly 20 percent this year. That has put the ruble-tenge exchange rate back where it was just before the tenge devaluation (see chart).
President Nursultan Nazarbayev is in Brussels putting the finishing touches to a landmark agreement with the European Union, cementing ties with Europe even as Astana pushes ahead to join the Russian-led Eurasian Economic Union.
Nazarbayev met Jose Manuel Barroso, president of the European Commission, on October 9, to “confirm the conclusion of negotiations” on the Enhanced Partnership and Cooperation Agreement, the EU said.
The agreement – three years in the making – aims to boost cooperation in around 30 policy areas including trade and foreign and security policy, it said, and will “significantly deepen political and economic ties” between Kazakhstan and the EU (Astana’s largest trade partner and a major consumer of its energy exports).
The agreement is a far weaker deal than the Association Agreement signed by Ukraine this year, but is still the most ambitious deal to be concluded between the EU and any Central Asian state.
It “puts a strong emphasis on democracy and the rule of law, human rights and fundamental freedoms,” the EU stated, although it failed to specify how.
The visit was marred by news that France is investigating possible kickbacks involving a helicopter deal with Kazakhstan, and probing allegations that Nazarbayev put indirect pressure on Brussels to close a bribery case against Kazakhstani oligarchs.
There was also controversy over Kazakhstan’s human rights record.
French investigators are probing suspected kickbacks paid over a lucrative helicopter deal with Kazakhstan, Le Monde has revealed.
The report emerged the day before President Nursultan Nazarbayev heads to Brussels to cement Kazakhstan-European Union ties. Embarrassingly, it alleges the Kazakh president used a €2 billion contract with Marseille-based Eurocopter (since renamed Airbus Helicopter) to pressure Belgium to drop bribery charges against three Kazakhstani oligarchs.
The investigation into the Eurocopter deal (signed in 2010 when Nazarbayev was welcomed to France by Nicolas Sarkozy, then French president) on suspicion of money-laundering, corrupting public officials and receiving stolen goods began in 2012 and has been conducted in the utmost secrecy, Le Monde reported.
Last month two former Sarkozy associates who held top jobs in his administration were arrested on suspicion of involvement in paying kickbacks over the contract, the newspaper said, naming them as Jean-Francois Etienne des Rosaies, a former adviser to Sarkozy, and Nathalie Gonzalez-Prado, a former senior official at the Elysee palace.
The probe was sparked by the appearance of “suspicious funds” (more than €300,000) in the account of Etienne des Rosaies, the report said, adding that two unnamed “intermediaries” and a lawyer had been indicted.
Sarkozy is also “suspected of having put pressure in 2011 on the Belgian Senate,” at Nazarbayev’s request, over a bribery and money-laundering probe involving three Kazakhstani oligarchs as a condition for the helicopter deal going ahead, Le Monde claimed. The report did not name the oligarchs.
The biggest headline to come out of the weekend's Caspian Sea summit in Astrakhan, Russia, was that the five countries along the sea agreed to prevent any outside military presence from the sea. This has been a longstanding goal of the sea's two biggest powers, Russia and Iran, the result of worries that the U.S. and/or NATO would somehow gain a military foothold on the sea via security cooperation programs with Azerbaijan, Kazakhstan, or Turkmenistan.
Russian President Vladimir Putin, summing up the summit's results and formal declaration, said:
The declaration sets out a fundamental principle for guaranteeing stability and security, namely, that only the Caspian littoral states have the right to have their armed forces present on the Caspian. This was the way the situation developed over history, and we do not seek to change it now. In general, only the five Caspian countries that have sovereign rights over the Caspian Sea and its resources will resolve all matters pertaining to the region.
Kazakhstan's chances of hosting the 2022 Winter Olympics took a turn for the better this week as Norway announced it was withdrawing Oslo's bid, leaving only Almaty and Beijing interested in hosting the expensive extravaganza.
Norway pulled out of the race on October 1 citing a lack of public support for the costly venture. This year's Sochi Winter Olympics, in Russia, came in way over budget at $51 billion. The fear of ballooning costs has seen the number of contenders to host the 2022 Games dwindle from six to just two.
With Kazakhstan's economy under pressure from the downturn in close partner Russia, the country’s Olympic Committee will need to carefully watch its budget. So far, Kazakh officials are confident they can keep costs for the Almaty bid down as the city already has much infrastructure required for the Games. It has facilities built for the 2011 Asian Winter Games and is currently splashing out $1 billion on amenities for the 2017 Winter Universiade, which brings together student athletes from around the world.
Kazakh officials see the hosting of high-profile events like the Winter Olympics as great PR. “As government officials we are working hard to attract investments and being in a country recognized all over the world is very good for attracting investments,” Kairat Kelimbetov, chairman of Kazakhstan's National Bank, told TengriNews in August.
From the EBRD report: “The chart shows that Belarus, Armenia and Tajikistan (the latter predominantly through remittance flows) have the highest overall economic exposure to Russia. Such exposures are also significant for the Kyrgyz Republic, Moldova and Ukraine.”
As Russia’s economy goes, Central Asia’s follows. So it is no surprise that the current downward drift in Russia will hurt the region, potentially for years to come. Remittance-dependent countries like Kyrgyzstan and Tajikistan should be especially worried, the European Bank for Reconstruction and Development, a multilateral lender, says in a new report.
In its September regional assessment, the EBRD forecasts growth in Russia will come to a “standstill” in the coming months. Already pronounced, Russia’s economic slump is being exacerbated by the war in Ukraine and Western sanctions. The EBRD said Central Asia, and formerly communist countries more broadly, can expect “significant spill-over effects.”
New sanctions by the EU and U.S., which will dampen growth in Russia, “will negatively affect growth in the Central Asian countries.”
As in 2009, during the financial crisis, migrants and their dependents back home will be the first to feel the pain. Remittances from Russia to Central Asia fell in the first quarter of 2014 compared with the previous year, “for the first time since 2009, primarily due to the slowdown in Russia,” the EBRD said. “Particularly vulnerable are [the] Kyrgyz Republic and Tajikistan, where even a small drop in remittances from Russia is substantive, as remittances make up 29 percent and 49 percent of GDP respectively.”
A fall in remittances “may significantly dampen consumer demand in lower-income countries in the region.”