Austrian firm in footwear JV

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Vega Marketing GmbH of Austria plans to set up a holding company in Uzbekistan that will merge three footwear companies in which it holds stakes, Vega’s President Peter Schmidt told the press at the recent launch of the Uzbek-Austrian footwear plant Delta-Invest in Tashkent. According to Interfax reports, the joint venture will have the capacity to turn out 200,000 pairs of women’s shoes a year. The plant’s cost is USD 4.28 million and was financed by its founders and a loan from the Uzbek bank Asaka. Delta Invest was formed by the chief municipality investment department in Tashkent (44 percent), Vega Marketing GmbH (35 percent), Poiabzalchi (11 percent) and Kimesintez (10 percent). The holding company will consist of Delta-Invest, Yangi-Vega and Vico, which produces specialised footwear.

Agrokeramika ends plant project

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Uzbek-Italian joint venture Agrokeramika has opened a USD 5.89 million plant in Tashkent to produce facing tile, a source in the Tashkent investment committee, a founder of the joint venture, was quoted as saying by Interfax. The plant has the capacity to produce 600,000 square metres of facing tile a year. He said 90 percent of the raw material used at the plant would be local, which will keep the product cost low. Agrokeramika expects to produce 60,000 square metres of facing tile by the end of this year and has signed contracts with local builders for that amount. The company will eventually export about 50 percent of the facing tile it produces, mainly to countries in Central Asia. Italy’s Welko Industrial Spa, the Tashkent investment committee and Binokurilish founded Agrokeramika with charter capital of USD 2.2 million.

Astana secures payment liabilities to IMF

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Despite an unfavourable forecast five years ago concerning economic growth in the Kazakh republic, this year’s figures have proved otherwise. Addressing the “Implementation of the Kazakhstan Development Strategy to 2030 – the successful experience of development in Asia” forum, Minister of Economy and Budget Planning Kairat Kelimbetov underlined that the republic’s growth had been made visible. According to him, one of main reasons of this was a determination of the course of the strategic development.


Kelimbetov brought some indicators to confirm the facts. Thus in 2001 GDP growth was less than 13 percent. “It is the highest indicator for the years of independence,” Kelimbetov noted, quoted by the Almaty Herald daily. The results of 2002 expect growth at the level of nine percent. Production growth is taking place in all branches of economy. Inflation rates will likely decline in 2002 up to six percent.


“The sustainable rate of KZT, growth of international reserves is kept. We ensure pre-schedule repayment of our liabilities to the International Monetary Fund,” the minister emphasised in his address to the forum. A significant event in the economy was the formation of the National Fund. Today its volumes exceed USD 1.8 billion. International reserves of Kazakhstan in aggregate with National Fund’s means currently make nearly USD five billion.


The size of governmental debt relative to GDP in 2001 reached 17.5 percent and shall decrease to 16 percent this year. As a result of measures undertaken the deposits of residents in banking system in dollar equivalent have grown from USD 962 million up to USD 3.4 billion. Moreover, the specific weight of short- and long-term credits in economy exceeded 50 percent. Assets of accumulate pension funds in dollar equivalent are USD 1.45 billion.


In general it should be noted that the taxation-budget policy of the state these years was directed for stimulation of economic growth and diversification of economy.

US-Uzbek trade ties on good course, to develop further

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US Deputy Secretary of Commerce for market access and compliance William Lash recently lead an American delegation to the capital of Uzbekistan where he held a series of meeting at a number of Uzbek ministries and agencies.


During a meeting held at the Macroeconomics and Statistics Ministry, the guests underlined that the expanding trade would develop, and that the countries had the legal basis necessary for this.


According to local reports, cited by BBC, over 70 percent of the publicly-owned facilities have gone private thanks to the favourable climate that is being created in Uzbekistan for denationalisation and privatisation to progress, and for small- and medium-sized enterprises to develop. Naturally such developments bear fruit contributing to market relations.


Further to the visit, a meeting at the State Property Committee discussed prospects for cooperation with the US Commerce Department in this area.
In the course of talks at the Agency for Foreign Economic Relations, it was mentioned that in Uzbekistan today there were over 300 firms with US capital, and that some 50 US companies had offices there. The general view was that every opportunity is being taken to increase the figure.
As well as holding discussions on how to develop all-round ties further, the two parties praised the two nations’ joint actions to combat international terrorism, drug addiction and other ills associated with these; and their ambitious efforts towards tighter security in the region. The sides also underlined that the countries would continue to cooperate in the area in the future as well.


During a series of talks, agreements were reached to develop a whole range of programmes aimed at improving the business climate in the country.
This, in turn, will contribute to an inflow of investment, thereby helping the progress of economic reforms.


According to statistics, last year’s trade was about USD 293 million, while its volume in the first nine months of this year topped USD 295 million.
Commenting on his two-day trip across the country, the US official described it as fruitful in terms of the ongoing dialogue between the two countries and commented that “Uzbekistan is a friend of the USA.”

Case Corp clinches tractor supplier deal for Ashgabat

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The government of Turkmenistan has signed a contract valued at USD 8.3 million with the US-based Case Corporation for the supply of 70 CASE MX-240 tractors equipped with Kverneland LD-100-300 ploughs. Consult International Ltd., Case’s office in Turkmenistan, will supply half of this equipment to the association Turkmenselkhoztekhnika before January 15, 2003, and the rest will be supplied a month later, the government administration was quoted as saying by Interfax. The equipment will be paid for out of Turkmenistan’s currency reserve. Under a special decree issued by the president of Turkmenistan, Turkmenselkhoztekhnika is to pay for the tractors in full between 2008 and 2013 in the local currency. “The supplier and recipient of the equipment are exempt from paying customs duties and certification duties,” the source said.

Tajikistan trade deficit grows

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Tajikistan had a trade deficit of USD 12.7 million in the first 10 months of 2002, the country’s State Statistics Committee announced. Foreign trade increased by 6.8 percent year-on-year to USD 1.1949 billion. Exports grew 10.2 percent to USD 591.1 million, of which 72.6 percent or USD 428.9 million to countries from outside the CIS. Imports were up 3.6 percent to USD 603.8 million, of which 75.6 percent or USD 456.3 million from the CIS. Aluminium accounted for 55 percent of Tajikistan’s exports. In the 10 months, Tajikistan exported 250,600 tonnes of aluminium, which was 23,800 tonnes more than in the same period of 2001. Cotton-fibre exports came to 95,700 tonnes, or 14.4 percent of total exports and 80.8 percent more than in the first 10 months of 2001.

Phase 2 of investment climate development ends

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The second stage on improving the investment climate in Kyrgyzstan has come to an end, according to press secretary of the state agency on management of state properties and attracting direct investments, Tatiana Naganitsina. Naganitsina requested all ministries and departments of the country finish the implementation of the second stage of investment matrix and proceed to the next one. Therefore, the state agency on management of state properties and attracting direct investments has already fulfilled the work on implementation of the second investment matrix, which is included in several articles. First of all, the agency worked out a new law “On attracting direct investments” and was submitted for consideration to the parliamentarian deputies. A mechanism of analysing comparative advantages for each regions of Kyrgyzstan has been worked out too including conditions of highways, communications, development of infrastructure and others which naturally can attract major investing interest.

State budget surplus 1.1% of GDP

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The Tajik state budget surplus in the first nine months of the year amounted to 23.878 million somoni or 1.1 percent of GDP, a source in the republic’s Finance Ministry was quoted as saying by Interfax. In the same period last year the budget had a deficit of 1.1 percent of GDP. Budget revenue in the first nine months amounted to 369.44 million somoni or 17 percent of GDP. Budget spending amounted to 345.566 million somoni or 15.9 percent of GDP against 16 percent of GDP in the same period last year. Meanwhile, Tajikistan’s gross domestic product grew 10 percent year-on-year in the first 10 months of 2002 to 2.594 billion somoni in current prices. Industrial output rose 7.7 percent to 1.929 billion somoni, while consumer goods output fell 0.2 percent to 516.4 million somoni, the State Statistics Committee told Interfax.

KNB opens new branch in Batken

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The Kyrgyz National Bank’s office has opened in the Batken province. According to the press service of the bank, the new office will help increase and improve banking services, support further development of commercial banks’ branch networks and other financial and credit institution in the Batken province. The office will consider and take a decision to give licences to exchange offices in the province.

Turkmen resolution on stricter payment discipline

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Turkmen President Saparmurad Niyazov has already started realising his former decision to reinforce payment discipline in his country and provide for the timely payment of foreign loans, as reported in our previous issue.


To this effect, the president signed a resolution to regulate foreign currency operations at Turkmen banks early last week. From now on, all of Turkmenistan’s banks can hold correspondent, deposit, investment and other operations in foreign currency outside the country only via correspondent accounts in the central bank or the State Bank for Foreign Economic Affairs in coordination with the central bank, the resolution said, cited by Interfax.
Meanwhile, the central bank will open credit lines with a two percent annual interest in Turkmen correspondent banks for the Turkmenobakhyzmat (Agricultural Machinery) Association and the Water Ministry if the two do not have sufficient funds to pay foreign loans. The debt will be paid in equal instalments within five years starting in 2008.


Niyazov has instructed the central bank to allow delayed payments for two organisations on loans from the republican foreign currency reserve. Payments for the Turkmengallaonumleri Bread Organisation’s USD 1.7 million loan has been delayed till 2008. After that, the organisation should pay the debt in equal instalments within two years. The Water Ministry’s loan payments (USD 41.2 million) have been delayed till 2008 whilst its overdue interest debt (USD 1.72 million) has been written off. A rate for the Water Ministry’s deductions to the accumulative account in the central bank has been set in order to provide for the payment of overdue debt on loan.

US, Kyrgyz military bonds under review: Myers

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US General Chairman of the Joint Chiefs of Staff Richard Myers recently visited the capital of Kyrgyzstan where he discussed prospects for bilateral US-Kyrgyz military cooperation with President Askar Akayev, as disclosed by the press centre of the US embassy in the Kyrgyz republic.


Issues of further development of the Kyrgyz-American cooperation became the subject of discussion between the president and his official US guest. According to the press service of the head of the state, the sides discussed the current political situation in Central Asia and Afghanistan. Akaev said that Kyrgyzstan was ready to continue its help in rebuilding Afghanistan and the fight against the international terrorism. After the meeting General Myers visited the military base in the airport “Manas” near to Bishkek. The aim of General Myers’s visit to Kyrgyzstan was to study current situation at the international military base during the winter preparations.


Washington has praised the country’s actions, which aim to support the anti-terrorist coalition’s forces.

EBRD report favourable for Bishkek, economy revamp urged

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“The European Bank for Reconstruction and Development will continue to help the Kyrgyz Republic build on its clear improvements in macro-economic performance and its progress towards implementation of the principles of multi-party democracy, pluralism and market economy,” a bank official release announced recently. The bank’s new strategy for the Kyrgyz Republic cautions, however, that further improvements to the investment environment are essential.


The Kyrgyz Republic must pay particular attention to the privatisation procedure of the remaining state shareholdings, corporate governance and strengthening of the financial sector, the bank said. Enhanced cooperation with neighbouring countries and reduced regional trade restrictions are vital for the Kyrgyz Republic to attract investment and further advance its economic performance.


The EBRD strategy for the next two years is to concentrate its efforts on support for small- and medium-sized enterprises, the development of the financial sector, and attracting investment to key natural resources projects. Through policy dialogue with the government, the EBRD will help develop and improve transparency, governance and the investment climate.


In the context of the high public indebtedness of the country, the EBRD will respect the government’s commitment to budget restraint by focusing on the private sector where there is no need for sovereign financing or guarantees.


Adding to the private-sector projects that the EBRD has co-financed – Kumtor gold mine, Hyatt-Regency Hotel, Demir Kyrgyz International Bank, and the Kyrgyz Investment and Credit Bank (KICB) – the bank recently launched the Micro and Small Enterprise Finance Facility and the Trade Facilitation Programme, for Kyrgyz commercial banks, as well as five investments in local SMEs via its Direct Equity Fund (DIF) programme.


EBRD has signed 21 investments in the Kyrgyz Republic with a total commitment of 174.5 million Euro. Five projects are in the public sector, with one aimed at the modernisation of the telecommunications network, two focusing on upgrading parts of the electricity transmission network, and two in the agribusiness sector.

LUKoil considers Murmansk pipeline expedient

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Russian oil major LUKoil considers it expedient to build an oil pipeline with a capacity of not more than 60 million tonnes of oil per year as part of a project in Murmansk, LUKoil President Vagit Alekperov told a press conference in Nizhny Novgorod. LUKoil is ready to guarantee supplies of 20 million tonnes per year as part of this project. Alekperov noted that the company considers the Murmansk project to be a major component of the development of the Timan-Pechora oil province. As part of this project it is planned to supply 15 million tonnes of oil per year from Timan-Pechora and another five million tonnes may be supplied from Komi republic or Western Siberia, Interfax quoted him as saying. Alekperov also said that preliminary agreement has been reached on guaranteed supplies by YUKOS and Sibneft. He added that Tyumen Oil Company has also expressed interest in the project. Concrete guaranteed supplies from each of the companies have not yet been established, he said. The LUKoil president also said that one option is to build a pipeline to the Priob field. Earlier, LUKoil Vice President Leonid Fedun said that the cost of a new export terminal in Murmansk and a 930-mile pipeline would amount to USD 1.5 billion. This project may be implemented not earlier than 2005. He said that Russian oil companies agreed to invite a Western consultant to prepare a feasibility study for the project by mid-2003. LUKoil has approached Transneft with a proposal to consider the possibility of building a large export complex near Murmansk. In particular, it is planned to build a pipeline to Murmansk and a deep-water terminal with a capacity of 30-50 million tonnes of crude per year.

Russia, Vietnam mull Vietros liquidation

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Issues concerning the liquidation of the Vietros Petroleum joint venture, which was set up to build an oil refinery in Vietnam, will be considered in late December at a regular session of the Russian-Vietnamese Inter-Governmental Commission on Trade and Economic Cooperation, Russian Deputy Prime Minister Viktor Khristenko said. According to the deputy premier, the meeting will be held in Vietnam. Khristenko reported that the possibility of liquidating Vietros had been raised by the Vietnamese party. “Our response will come a little later,” said Khristenko, adding that the Russian side will finalise its decision on the issue before the upcoming session of the intergovernmental commission.

Rosneft to drill 2 wells in Caspian Sea

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Rosneft President Sergei Bogdanchikov and Kazakh Prime Minister Imangali Tasmagambetov discussed potential for the development of oil and gas fields in the Caspian Sea at a meeting, the Kazakh government said in a press release. The president of the Russian oil company noted during the meeting that in 2003 it is planned to drill two wells at the Kurmangazy field in the Caspian. A business plan for this project has already been drawn up. As part of its implementation, the Kazakh Energy and Mineral Resource Ministry together with the national oil and gas company KazMunaiGaz are agreeing a schedule for the signing of documents and a budget of the project for 2003.

Sibneft ups crude output by 27.6%

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Russian oil major Sibneft produced 21.42 million tonnes of crude in the first 10 months of 2002, up 27.6 percent year-on-year. Output totalled 2.438 million tonnes in October, up from 1.899 million tonnes the previous year. Exports reached 8.72 million tonnes in January-October 2002, up 45.5 percent year-on-year.

70% growth potential in Sakhalin-1 investment

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Investment in the Sakhalin-1 project in 2003 is planned at USD 1.2 billion, which is 70 percent higher than the planned level in 2002, ExxonMobil Vice President Larry Smith told a press conference in Yuzhno-Sakhalinsk. He said that a meeting of the authorised state body for the Sakhalin-1 project would be held in the first half of December, at which a budget for next year will be confirmed.


Smith also said that ExxonMobil proposes to start drilling a directional well at the Chaivo field in the first quarter, in addition to the construction of an onshore complex to process hydrocarbons from this field and also a pipeline from Chaivo and the Odoptu field to the port of De Kastri, stretching a total of 367 kilometres.


Work is currently underway at the Chaivo field to build the 9,000 horsepower Yastreb onshore drilling unit. When drilling the well, the pipes will be laid horizontally and not vertically.


The international consortium, Parker Drilling Company won a tender for the installation and operation of the Yastreb. Sakhalin-1 involves the development of the Arkutun-Dagi, Odoptu and Chaivo fields off the north coast of Sakhalin.


Meanwhile, the supervisory council for the Sakhalin-2 project, which met in London, has confirmed a budget for the project for 2003 of USD 1.722 billion, which is 64 percent more than planned spending in 2002, Margarita Tsoi, press secretary tot he Sakhalin governor, told a press briefing.


She said that it is planned to spend USD 800 million on the construction of gas infrastructure for the development of the Lunskoye gas field.

Shkolnik: CPC activity should be regulated

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The activity of the Caspian Pipeline Consortium (CPC, which operates a pipeline from the Tengiz field in western Kazakhstan to the Russian port of Novorossiisk) should be regulated by the agreement on the setting up of this consortium, Kazakh Energy and Natural Resource Minister Vladimir Shkolnik told a press conference.


“Everything concerning the CPC should be resolved in accordance with the agreement on the consortium (between shareholders),” the minister noted, in response to a question on the Kazakh position regarding a proposal from the Russian Federal Energy Commission to include the Russian section of the CPC pipeline on the natural monopoly register. “Kazakhstan has not received the commission’s proposal regarding the CPC. This is an internal Russian affair,” Interfax quoted Shkolnik as saying.


The Federal Energy Commission considers that many provisions in the CPC shareholders’ agreement contradict current Russian legislation, and were passed by the government in violation of this legislation.


Kazakhstan, the minister stressed, “is strictly observing” all the points in the agreement on setting up the consortium. “This agreements sets down procedures for reaching decisions on price formation and on other issues. Major decisions are reached based on agreement by all participants in the consortium. This is the Kazakh position,” he stressed.


Meanwhile, a number of CPC shareholders have spoken out against including the pipeline in the register, saying that that the agreement to set up the consortium has international status and is therefore not subject to Russian federal law. The Federal Energy Commission is challenging the international status of the agreement and considers it to be an agreement between companies.


Earlier CPC Director General Ian McDonald said the consortium’s documents contain a clear directive that the CPC is not subject to inclusion in the natural monopoly register. He said the law on the natural monopolies was already in force in December 1996 when the CPC shareholders’ agreement was signed and in April 1997 when a Russian government resolution was issued, giving CPC the right to independently set tariffs and establish access to the pipeline. “No changes have been made in the law since these documents were published,” he said.


Russia has 24 percent participation in the Caspian Pipeline Consortium, Kazakhstan – 19 percent, Oman – seven percent, and another 50 percent of the consortium is divided between Chevron Caspian Pipeline Consortium Co. (15 percent), Mobil Caspian Pipeline Co (7.5 percent), Oryx Caspian Pipeline LLC (1.75 percent), Russian-US joint venture LUKArco BV (12.5 percent), Russian-British joint venture Rosneft-Shell Caspian Ventures Ltd. (7.5 percent), Italian Agip International (NA) NV (two percent), British BG Overseas Holdings Ltd. (two percent) and Kazakhstan Pipeline Ventures LLC (1.75 percent).


CPC began operating the 1,510-kilometre pipeline in October 2001. The first stage of the pipeline has a capacity of 28.2 million tonnes of oil per year, which will gradually increase to 67 million tonnes per year.

SOCAR considers Gazprom proposal

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Russian gas monopoly offers to supply 1 bcm of gas in 2003


Azeri state oil company SOCAR is considering a proposal from Russia’s Gazprom on the supply of one billion cubic metres of gas in 2003. Interfax quoted SOCAR President Natik Aliyev as telling journalists that this issue was discussed during a visit by a Gazexport delegation to Baku, headed by the company’s Director General Alexander Medvedyev.


At the moment only Itera is supplying gas to Azerbaijan and, under an agreement signed with SOCAR that is valid until 2004, supplies the former Soviet republic with four billion cubic metres of gas per year.


According to Aliyev, Azerigaz has approached the Azeri government with a proposal to buy additional gas next year. At the moment, he said, the commercial proposals from the Russian gas monopoly are being studied. “I think that if a sale agreement is signed for 2003, that this volume will not exceed one billion cubic metres,” he said.


Gazprom officially informed Itera on November 18 that Itera supplies of gas to Azerbaijan, Kazakhstan and Ukraine would be restricted from November 19 due to debt owned by Itera for gas transportation and storage services which, according to Gazprom, amounts to about USD 100 million.


Later Gazprom decided not to restrict supplies to Azerbaijan and Kazakhstan until negotiations with Itera are wound up and the amount of the debt is confirmed. Supplies to Ukraine will be restricted only slightly.

Chechnya fields yield over 1 mln tn of oil

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A total of 1.041 million tonnes of oil have been extracted from oilfields in Chechnya since the start of 2002. “In addition, Chechen oil workers have extracted over 60 million cubic metres of natural gas and 112 million cubic metres of associated gas,” said the press secretary of the Grozneftegaz oil and gas company, Namrudi Kharachoyev. The company expects profits from the sale of hydrocarbons extracted in Chechen territory to reach nearly two billion rubles, he said. “To be more precise, we expect profits to total 1.935 billion rubles. About 1.5 billion rubles will remain at the company’s disposal after tax and will finance the development of this industry,” Kharachoyev said. The cost of oil extraction from Chechen oilfields is slightly over 1,100 rubles per tonne, Kharachoyev said. “This is an acceptable figure compared to average Russian figures,” he said. The taxes paid by the company go to the consolidated budget of the Chechen republic and finance restoration programmes.

LG to invest in Tatarstan

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South Korean company LG will be investing USD 50-USD 70 million or more in petrochemicals giant Nizhnekamskneftekhim (Tatarstan), Nizhnekamskneftekhim Director General Vladimir Busygin said during a working visit to the Khanty-Mansiisk autonomous district. Interfax quoted Busygin as saying the company has signed a protocol of intent, offered specific proposals and set up a working group. The exact amount of investment remains to be seen, he said. “LG and we are looking over the question of building a second line for processing seven million tonnes of oil. There is the matter of processing oil with high sulphur content, that is, oil extracted in the Republic of Tatarstan,” Busygin said. LG processes around 30 million tonnes of oil a year at its own refineries. Shareholders in Nizhnekamskneftekhim are Tatarstan’s state committee for managing state property with 35.2 percent of the stock, Nizhnekamskneftekhim and Co (15.63 percent), Tataro-American Investment and Finance (10.04 percent), the depository company NIKoil (7.27 percent) and Tatneftekhiminvest Holding (3 percent).

Gazprom to raise output…

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Russian gas monopoly Gazprom plans to produce 521 billion cubic metres of gas in 2002, 1.8 percent more than the 512 billion cubic metres it achieved in 2001. The Russian gas giant plans to sustain output of at least 530 billion cubic metres in 2003-2011, Pyotr Bakayev, the Gazprom securities chief, said at a presentation of the company’s bonds in St Petersburg. “At current levels of extraction, we have enough reserves to last 50 years,” Bakayev said. He forecast that supplies to Western and Eastern Europe would rise from 126.9 billion cubic metres in 2001 to 130 billion cubic metres this year, and exports to the CIS and Baltic States from 39.6 billion cubic metres to 42.9 billion cubic metres.

…signs memorandum with Pakistan

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Gazprom and the Pakistani Oil and Natural Resources Ministry have signed in Islamabad a memorandum on working together to build a gas pipeline running from Iran to India over Pakistani soil. Gazprom said that at issue is running pipeline along the shelf. The memorandum also envisions cooperation in the field of prospecting for hydrocarbon resources in Pakistan and Russian specialists being involved in a programme for changing vehicular transport in the country over to the use of liquefied gas. Gazprom plans to have similar agreements with Iran and India soon.

Delta Hess to dump Salyan Oil shares

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Delta Hess, a joint Saudi-US company, plans to sell its 20 percent stake in Salyan Oil Ltd., (SOL), which develops the Kursangi and Karabagli oilfields. China National Petroleum Corporation (CNPC) will probably acquire the stake, Dobycha nefti i gaza na sushe, a structure of Azeri state oil company SOCAR. SOL will make a decision on the sale at a board meeting in mid-December.

75% Slavneft stake to be sold on December 18

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A 74.95 percent stake in oil company Slavneft will be sold at auction on December 18, Russian Federal Property Fund Chairman Vladimir Malin told a press conference. The starting price for the shares has been set at USD 1.7 billion. Bids will be accepted from November 16 to December 15. The deadline for price proposals is December 17 and the results of the auction will be announced on December 18.


Successive bids must be increased by USD 20 million, Malin noted. The auction is open in terms of the submission of proposals and its participants, he said. Each bidder will put down a retainer of 450 million rubles.


According to a government resolution, the money from the sale of Slavneft shares should be transferred to the federal budget by February 15 2003. “Once the payment is made, the block will be transferred to the winner and a deal will be made in mid-February,” Malin said.


Proceeds from the sale will be the largest contribution to the Russian budget in the history of privatisation, he said. The sale of the company’s 74.95 percent stake as one lot will result in a “concentration of the owner” and maximize budget revenues from the deal, Deputy Property Relations Minister Alexander Braverman told the news conference. Originally, only 5.74 percent of the company’s shares were to be sold in 2003, but the cabinet decided to invite bidders for the state’s entire stake in the company, he said. All major Russian oil companies will bid for the Slavneft shares.

LUKoil backs out of Azeri- Chirag-Guneshli project

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Russian oil major LUKoil is selling its share in the Azeri-Chirag-Guneshli project in the Azeri sector of the Caspian Sea to a large Japanese company for more than USD 1.25 billion. LUKoil said the two companies had signed a list of principal terms for the bargain which are not compulsory. LUKoil holds a 10 percent stake in the project, which is based on a production sharing agreement, an 11.11 percent stake in a joint operations programme, and shares in other assets linked to the project.


LUKoil said in a press release the deal with the Japanese company needed consent from Azeri state oil company SOCAR and the other members of the consortium formed for the project before it can take effect. The release also said the bargain was part of an asset optimisation programme and that this programme was part of a plan to restructure LUKoil announced by the company’s President, Vagit Alekperov, in April this year.
According to the release, LUKoil is considering reducing its participation in projects where the company is not the operator and instead using its capital for highly effective purchases in Russia, including via privatisation schemes.


The operator of the Azeri-Chirag-Guneshli project is British Petroleum, which holds a 34.13 percent stake in the consortium. Excluding LUKoil, the other members are SOCAR (10 percent), Statoil (8.56 percent), Unocal (10.28 percent), ExxonMobil (8 percent), TRAO (6.75 percent), Devon (5.62 percent), Itochu (3.92 percent), and Delta Hess (2.72 percent).


Meanwhile, LUKoil’s announcement “has caused no anxiety” in Azerbaijan, Azeri Prime Minister Artur Rasizade said. “This step has caused no anxiety in Baku. It isn’t the withdrawal of Russia, it’s that of a private company,” Rasizade told reporters in Baku. Rasizade said the “contract of the century” would be put into practice regardless of whether LUKoil was involved or not, because “it is a world level project.”


“I think that by selling its share LUKoil is pursuing commercial ends. We can’t keep them by force, as it’s a private affair of the Russian company,” he said.


At the same time, LUKoil considers Azerbaijan one of its strategic regions and is thinking of increasing its investment in the country. LUKoil and Norway’s Statoil are planning to develop the Yalamo-Samur block in the Russian part of the Caspian Sea under a production-sharing agreement (PSA), LUKoil Vice President Leonid Fedoun said. A joint working group for preparing the agreement has already been set up, he said.


The companies are not looking for other investors for this project, Fedoun noted. “The two companies are quite enough for this,” he said. Fedoun noted that Statoil has built up unique experience in drilling very deep deposits. Five to 800 metres of water lie over the Yalamo-Samur site, he noted. “The Norwegian company has the necessary technology for this work, having collected it for decades, so Statoil is for us an ideal partner in this particular project,” he said.


Aside from that, LUKoil plans for next year include beginning to bore the first hole at Yalama (D-222) in the Azeri part of the Caspian. The company is an operator (60 percent) of this project, the implementation of which is being done under PSA conditions. This past July, Russia’s Federationn Council approved a bill tha envisions putting the promising Yalamo-Samur block under PSA. Probable reserves are 500 million tonnes of fuel equivalent, and LUKoil is licensed to work it. It is thought that capital investment in developing the Yalamo-Samur oilfield will come to more than USD 5.5 billion. The government will receive around USD 11 billion over 25 years after drilling begins under the PSA.


Statoil is part of three oil and gas projects in the Azeri sector of the Caspian: Azeri-Chirag-Guneshli (8.5633 percent), Shah Deniz (25.5 percent) and Araz-Alov-Sharg (15 percent).

EBRD Chastises Some ex-Soviet Bloc States

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The European Bank for Reconstruction and Development in its latest report has chastised Belarus, Turkmenistan and Uzbekistan for failing to secure the necessary political reforms. According to the bank, not only are these three states the worst performers in terms of economic reform, but they don’t even “maintain the political reform achieved in the former Soviet Union.”


EBRD said its forthcoming annual meeting will take place in Uzbekistan. Despite some boos as to the country of choice, Mr. Willem Buiter, the bank’s chief economist and a former member of the Bank of England’s monetary policy committee, told The Guardian that the Central Asian state was selected to relay the message that like with all other countries active with the EBRD, Uzbekistan must realise that “progress towards a market economy and a more open political system are necessary conditions for sustainable development.” Another problem is that poverty has risen in several former Soviet republics. The increase is due to the countries’ switch to market-driven economies. Mr. Buiter said. However, he underlined that “there is no alternative (to reform), there is no going back.” (718)

Questioning Investors, Highway Work

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Transparency is a tough issue to deal with when it comes to privatisation and business transactions. While some governments excel at ensuring clear-cut and sure deals, others may at times sway and fail to guarantee transparency. A recent, controversial case in Italy emerged when legislators urged the country’s transport and infrastructure minister to explain how mobsters supposedly clinched public deals for highway construction. The upshot was the arrests of 37 people, and surprising or not, some were public officials and investors. Inquiries have been launched into the activities of another 80 people.


Local press said the Calabria-based mafia, known by the locals as ‘ndrangheta, clinched three percent of the multimillion dollar deals for the construction of the highway that passed “through their territory.” Included in this scandal is the A3 autostrada, connecting the Calabria region, located at the southwest tip of the “boot,” with Salerno, located just south of Naples.


Once the suspects were apprehended, officials put a freeze on the development of the 56-kilometre stretch of the highway in Calabria. Reason disclosed was that officials were concerned that the work was not being carried out appropriately.


Based on the investigators’ report, these suspects had succeeded in collecting bribes from subcontracting out some of the contracts awarded to firms close to them. But that’s not all. Another problem was that companies were taking kickbacks instead of actually doing what they were hired to do; i.e., oversee the development of the highway to ensure the work was being done correctly. The reports said some of the people arrested were key officials of ANAS, the Italian agency overseeing highway maintenance and construction. They were charged with failing to carry out the proper checks and failing to ensure that no company was in cahoots with any group involved in organised crime.


Time and time again we have been privy to how prosecutors in the south of the country have launched investigations into the alleged activities of “dirty” politicians and investors who clinch deals with mobsters to obtain public contracts. It seems that Transport and Infrastructure Minister Pietro Lunardi has a lot on his plate. One can only wonder if the answers he offers will be able to placate the legislators. (719)

Lukashenko’s Dashed Hopes

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As the United States announced that it would deny entry to Mr. Alexander Lukashenko and other top Belarussian officials, thereby showing solidarity with the European Union, which issued such a ban earlier, the Belarussian President decided to pay a visit to his country’s friendly neighbour, Russia, and discuss integration issues.


But what Mr. Lukashenko failed to do is convince Russian President Vladimir Vladimirovich that the union should be political as well as economic. Vladimir Vladimirovich said the union would be under his terms dispersing Mr. Lukashenko’s hopes of ever becoming president of a new unified state. However, Vladimir Vladimirovich said that, despite arguments, Russia’s relations with Belarus are developing “fairly well” in many areas, including the introduction of a unified currency and cooperation in the energy sector. For his part, Mr. Lukashenko said he would like to take advantage of the presence of members of the press to touch upon several issues. “A number of both Belarussian and Russian media outlets have made accusations that Belarus is seeking to change its foreign policies and is currently orienting itself towards the West. Belarus and Russia are like one other and build their relations regardless of what the heads of state wish, and their relations are dependent upon objective reasons. Our people are close, and the changing of Belarus’s foreign policy and its rejection of Russia is just out of the question,” he said even though nobody could accuse him of moving Belarus closer to the west. On the contrary, he has driven his country into diplomatic isolation.


Mr. Lukashenko also commented on statements made by certain media outlets that Russia seems to be “giving up” on Belarus under pressure from the West. “Of course, we have become weaker to some extent after the break-up of the USSR. Politics requires negotiations and even compromises. But both Russians and Belarussians view Belarus as the land that they will never give up. We have dealt with this hullabaloo quite calmly. They are trying to put us at loggerheads and (put a stop to) the development of the processes that we have initiated together,” he said. But despite Mr. Lukashenko’s assurances that things are the same between Russia and Belarus, what is increasingly clear is that Moscow views Mr. Lukashenko as an embarrassment and is less enthusiastic about his unification plan. At the same time, Vladimir Vladimirovich wants to maintain good relations with Belarus given its geographic position and the closeness of the Slavic people. (720)