September 10, 2014 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. Kazakhstan, Iran to swap oil, boost trade 2. Russian Colonel General claims Central Asia can be used by terrorists to transport nuclear weapons 3. Armenian opposition to challenge new pension scheme at highest court again 4. US, Europe at odds over NATO expansion to Georgia, Ukraine Eurasia Kazakhstan 5. Transition to gas pumps in Kazakhstan complilcated, gasoline deficit remains 6. Almaty to commission new underground stations On the website today 7. Europeís low-cost factory Eurasia Macro 8. Uzbek industrial output exceeds UZS34,650bn in H1 9. Uzbek farming output at UZS15,310bn in H1 10. Georgia attracts FDI worth $416m in H1 11. Kyrgyzstan attracts FDI worth $214m in H1 Eurasia Other Central Asia 12. Uzbekistan: Rattled by Russian Expansionism, Tashkent Looks East 13. Uzbek government to control sale of banks' shares 14. What is the purpose of recent amendments to Uzbek election law? 15. Gazprom to begin exploration of gas fields in Kyrgyzstan by late September 16. Taliban attacks border posts of Turkmenistan 17. New player comes to financial market of Kyrgyzstan ñ Kyrgyz-Swiss bank Eurasia Caucasus 18. NATO Declaration Kicks Up Karabakh Angst 19. US to provide $2.3m in assistance for Armenian judiciary 20. Georgian president urges EU to ratify association agreement in shortest possible time Other frontier markets 21. Mongolia outlines steps to reduce default risks 22. Oyu Tolgoi concentrate thickener rake arms fail again 23. Is Mongolia's mining boom causing Ulan Bator to run out of water? 24. LSE extends partnership with Mongolian stock exchange Eurasia TOP STORY 1. Kazakhstan, Iran to swap oil, boost trade bne September 10, 2014 Kazakhstan and Iran have signed deals to the tune of $0.5bn and agreed to resume oil swap operations during Iranian President Hassan Rohani's visit to Astana on 11 September. Kazakh President Nursultan Nazarbayev expressed the hope that a "successful" solution to Iran's nuclear problem would have a favourable impact on bilateral relations. "We are confident that you will achieve a successful solution to a great problem faced by Iran on the issue of [its] nuclear programme and reach agreement. It's known that this will have an impact on the development of Iran's economy and our bilateral relations," Nazarbayev was quoted as saying by Tengrinews. Kazakhstan and Iran signed agreements worth $500m in the spheres of geology, metallurgy, agriculture, transport and logistics, tourism and production of construction materials, according to the Kazakh Investment and Development Ministry. At a Kazakh-Iranian business forum Investment Fund of Kazakhstan and Iran's Kaveh Flat Glass Co, owned by Kaveh Glass Industry Group, agreed to build a $285m flat glass-producing plant in Kyzylorda Region. The Iranian company will hold a 51% stake in the project and the Kazakh fund 49%. The countries also agreed that they would resume oil swap operations that had been halted during the tenure of Rohani's predecessor Mahmoud Ahmadinejad. Under the scheme, Kazakhstan and other Caspian-littoral states supply oil to northern Iran, while Iran provides the same amount of oil in the Gulf. As a result, the Caspian countries save on transporting oil to global markets and Iran saves on shipping oil from Gulf oil fields to northern refineries. According to the Iran Times newspaper, the swap operations were halted were halted in 2009 because Iran wanted the Caspian suppliers to pay $5-6 per barrels for its services. President Nazarbayev said bilateral trade between Kazakhstan and Iran would reach $1bn this year. It stood at $620m, according to the Kazakh ministry. Nazarbayev hopes that the figure would reach $2bn a year when the Kazakhstan-TurkmenistanIran railway line would start operations this November. Kazakhstan expects the new line to increase exports of Kazakh grain to Iran by 400%. With a capacity of 10m tonnes of freight per year the new lines opens direct links to the Russian and Chinese markets for Iran and to the Gulf countries for Kazakhstan. Iran imported 345,000 tonnes of Kazakh grain in the 2012-2013 marketing year and was expected to import 1.2m tonnes in the 2013-2014 season which ended in June. In order to boost exports, Kazakhstan plans to build a grain terminal on the IranianTurkmen border. In order to encourage bilateral trade, the Kazakh president suggested the establishment of a Kazakh-Iranian trading house and invited Iranian businesses to invest in Kazakhstan. Iran's investment totalled $123.7m between 2005 and March 2014. 2. Russian Colonel General claims Central Asia can be used by terrorists to transport nuclear weapons Tengrinews September 9, 2014 The head of the Anti-Terrorism Center of the Commonwealth of Independent States (CIS ATC), Colonel General of Police Andrey Novikov declared that Kazakhstan, along with other Central Asian countries, may be used by terrorists to transport nuclear weapons, Tengrinews reports citing RIA Novosti. He made the statement at the gathering of heads of security and intelligence agencies of the Commonwealth in Almaty. Read more here: http://en.tengrinews.kz/politics_sub/Russian-Colonel-Generalclaims-Central-Asia-can-be-used-by-terrorists-to-256045/ 3. Armenian opposition to challenge new pension scheme at highest court again ARKA September 9, 2014 Armenian parliamentary minority is going to ask the countryís highest Constitutional Court again to recognize the controversial national retirement plan effected by the government as ëunconstitutiona,lî Artsvik Minasyan from the Armenian Revolutionary Federation (ARF) said today. According to him, the move is being backed by the Prosperous Armenia Party, the Heritage and the Armenian National Congress (ANC). Read more here: http://arka.am/en/news/society/armenian_opposition_to_challenge_new_pension_sc heme_at_highest_court_again/ 4. US, Europe at odds over NATO expansion to Georgia, Ukraine Deutsche Welle September 9, 2014 NATO is only obliged to collectively defend its own member states against attack from outside. Many European politicians must currently be secretly relieved by the existence of the principle. If Ukraine were a member of NATO, the annexation of Crimea in March would have plunged the Western alliance into an immediate military confrontation with Russia. Yet only a few years ago, there was serious discussion about inviting Ukraine and Georgia to join the alliance. At the 2008 NATO summit in Bucharest, the United States, under President George W. Bush, campaigned vehemently in favor. However, several European states - including Germany - had misgivings, because even then they were concerned about the possibility of serious tensions with Russia. Read more here: http://www.dw.de/us-europe-at-odds-over-nato-expansion/a17911204 Eurasia Kazakhstan 5. Transition to gas pumps in Kazakhstan complilcated, gasoline deficit remains Tengrinews September 9, 2014 The ongoing deficit of gasoline has caused a stir in Kazakhstan. Many were wondering how was it possible for the oil and gas producing country to experience the lack thereof. In Uralsk, a city in Kazakhstanís West, fuel deficit was particularly acute with kilometer-long queues forming before major gasoline pumps of the city. One man even staged a solitary protest in front of the Oblast administration building by parking his car at the entrance and leaving a writing on the windshield that said ìNo gasolineî. Read more here: http://en.tengrinews.kz/markets/Transition-to-gas-pumps-inKazakhstan-complilcated-gasoline-deficit-remains-256022/ 6. Almaty to commission new underground stations Bnews.kz September 9, 2014 In Almaty, the completion of construction of the new metro stations "Moscow" and "Sayran" were not shifted and are still planned for the end of the year, BNews.kz reports. Earlier, some media outlets reported that the deadline of the new subway stations moved to a later time. However, the metroís spokesman Aigul Eshmagambetova refutes this information. Construction will be completed in the promised time, but passengers will be able to take advantage of the stations after the test site are completed. Read more here: http://bnews.kz/en/news/post/227280/ On the website today 7. Europeís low-cost factory Clare Nuttall in Bucharest September 9, 2014 Southeast Europe is fast becoming the low-cost manufacturing centre for the Continent, a transformation driven as much by changes to the Chinese economic model as by efforts within countries on the fringes of the EU to attract investors. Workers in countries like Albania, Moldova and Serbia are cheap, well educated and right on the EUís doorstep. Added to the increasing savviness of most governments in the region in how to attract international investors, this has proved to be an attractive proposition for global manufacturers of products from clothes to auto-parts who have been gradually migrating eastwards in a quest to keep costs down. But Southeast Europeís transformation into an emergent manufacturing hub was triggered primarily by changes some 8,000 kilometres away in the industrial heartland of eastern China. Changing demographics are at the root of Chinaís transition away from a low-cost manufacturing location. As the population ages, Chinaís labour surplus is disappearing, creating upward pressure on wages. Concerned that a widening income gap could result in social unrest, Beijing is aiding this process by increase the minimum wage and putting pressure on multinationals to raise salaries. Average wages rose by 8.6% in China in 2013, and are expected to increase by a further 8.8% in 2014, according to the China Daily. The government has announced plans to raise minimum wages by an average of 13% a year until 2015. Read more here: http://www.bne.eu/content/story/europe%E2%80%99s-low-costfactory Eurasia Macro 8. Uzbek industrial output exceeds UZS34,650bn in H1 Uzdaily September 10, 2014 Industrial output of Uzbekistan reached 34.658 trillion soums in January-June 2014, which grew by 8.1% year-on-year, the State Statistics Committee of Uzbekistan said. The increase of labor productivity in industry by 6.3% to January-June 2014 has led to the growth of industrial production. Read more here: http://www.uzdaily.com/articles-id-29128.htm 9. Uzbek farming output at UZS15,310bn in H1 Uzdaily September 10, 2014 In January-June 2014, the gross agricultural output of Uzbekistan made up 15.311 trillion soums, which rose by 6,9% year-on-year, of which output of plant-growing ñ 8.736 trillion soums (+7,1%) and that of animal husbandry ñ 6.575 trillion soums (+6,7%). Plant-growing In January-June 2014 the share of crop production in the total agricultural output was 57.1%. Read more here: http://www.uzdaily.com/articles-id-29127.htm 10. Georgia attracts FDI worth $416m in H1 Civil Georgia September 9, 2014 Foreign direct investment in Georgia in the first half of 2014 was USD 415.8 million, a 9.6% decline over the same period of last year, according to preliminary figures released by the state statistics office, Geostat, on Tuesday. FDI stood at USD 150.5 million in the second quarter of 2014, a 27.6% year-on-year decline, and down from USD 265.3 million in the first three months of this year. Read more here: http://civil.ge/eng/article.php?id=27650 11. Kyrgyzstan attracts FDI worth $214m in H1 24.kg September 10, 2014 Kyrgyzstan received $213.8 million of direct investments for six months, the representative of the National Statistics Committee Victoria Biryukova said today at a press conference. According to her, inflows fell by 38.1 percent. Last year, the Kyrgyz Republic has received $345.5 million. As in the first half of 2013, the bulk of the investment is aimed at exploration, financial intermediation and insurance and manufacturing enterprises. Read more here: http://www.eng.24.kg/economics/172139-news24.html Eurasia Other Central Asia 12. Uzbekistan: Rattled by Russian Expansionism, Tashkent Looks East EurasiaNet.org September 8, 2014 Russiaís aggressive actions toward Ukraine are vexing Central Asian states. First, officials in Kazakhstan were chagrined to hear comments by Russian President Vladimir Putin, who, during a recent town-hall-style meeting with university students, appeared to denigrate Kazakhstani statehood. Now, Uzbek leaders are showing signs of displeasure with Moscow. Read more here: http://www.eurasianet.org/node/69881 13. Uzbek government to control sale of banks' shares AKIpress September 9, 2014 The sale of shares of Uzbek banks will be monitored by the government, Norma website reports. According to the amendments enacted on September 4, 2014, the order of obtaining preliminary permission of the Central Bank for acquisition of more than 20% of shares of banks by a legal entity or an individual in the result of one or several deals will be determined by the Government. Read more here: http://www.akipress.com/news:547300/ 14. What is the purpose of recent amendments to Uzbek election law? Uznews.net September 9, 2014 Recent changes in the administrative code relating to elections and referendums seems to be the first step at retaining Islam Karimov as president after the next election cycle, believes human-rights activist Abdullo Tojiboj-ugli. On September 4, President Islam Karimov signed into law several amendments to the countryís administrative code pertaining to elections. They increased criminal liability for violations associated with elections and referendums. The amendments provide an entirely new chapter in the law outlining criminal consequences for such violations. Read more here: http://www.uznews.net/en/politics/27534-what-is-the-purpose-ofthe-new-election-law 15. Gazprom to begin exploration of gas fields in Kyrgyzstan by late September 24.kg September 9, 2014 Gazprom OJSC will start exploration of gas fields in Kyrgyzstan by late September, the Ministry of Energy and Industry reported after talks with representatives of the Russian company. Gazprom intends to start gas exploration by the end of September. At the same time corresponding agreement will be signed. "The projects exist more than five years, and the work still can't start. But it is necessary to increase the area under survey, because they are relatively small," the company representatives say. Read more here: http://www.eng.24.kg/economics/172124-news24.html 16. Taliban attacks border posts of Turkmenistan AKIpress September 9, 2014 The Taliban carried out a series of attacks and constantly open fire into border posts of Turkmenistan, Turkmen language service of RFE/RL (Radio Azatlyk) reported on September 7. The Radio Azatlyk reports the armed clashes are ongoing for the village of Shah in Faryab Province (north-western Afghanistan bordering Turkmenistan). Read more here: http://www.akipress.com/news:547169/ 17. New player comes to financial market of Kyrgyzstan ñ Kyrgyz-Swiss bank 24.kg September 10, 2014 New player came to the financial market of Kyrgyzstan - the Kyrgyz-Swiss bank, the chairman of its board Shamil Imanaliyev said today at a press conference in 24.kg news agency. According to him, the Kyrgyz-Swiss bank is formed on the basis of "Kyrgyzdyikanbank", which since 1995 has been under the control of the State Agency for the reorganization and restructuring of debts and didn't carry out banking activities. In 2013, it was rehabilitated. The sole owner of the bank is the Swiss company "Petram Finance" JSC. Read more here: http://www.eng.24.kg/economics/172140-news24.html Eurasia Caucasus 18. NATO Declaration Kicks Up Karabakh Angst EurasiaNet.org September 9, 2014 The mention of Nagorno-Karabakh in a declaration issued by NATO members at the conclusion of their recent summit in the United Kingdom has sparked a fresh spat between Armenia and Azerbaijan. The Allies ìremain committed in their support to the territorial integrity, independence, and sovereignty of Armenia, Azerbaijan, Georgia and the Republic of Modlova,î reads the September 5 statement. NATOís reaffirmation of territorial integrity caused chagrin in Armenia, while producing statements of gratitude in Azerbaijan. Armenian forces wrested control of Karabakh from the Azerbaijani military in the early 1990s: the two sides have searched in vain for a political settlement since agreeing to a 1994 ceasefire. Read more here: http://www.eurasianet.org/node/69911 19. US to provide $2.3m in assistance for Armenian judiciary Tert.am September 9, 2014 Armeniaís Minister of Justice Hovhannes Manukyan and US Ambassador to Armenia John Heffern signed on Tuesday an amendment to the Armenia-US intergovernmental letter of agreement on drug control and cooperation in law enforcement. The amendment envisages $2.3m additional aid to a number of programs in Armeniaís judicial system, reports the press service of Armeniaís Ministry of Justice. Read more here: http://www.tert.am/en/news/2014/09/09/usa1/ 20. Georgian president urges EU to ratify association agreement in shortest possible time Trend September 9, 2014 Georgian President Giorgi Margvelashvili met with the European Parliament rapporteur on Georgia, Andrejs Mamikins on Sept.9. They had discussions on the bilateral relations and the process to start following the ratification of the association agreement with the EU, Georgia's presidential administration said. Margvelashvili stressed that the agreement should be ratified by each member state of the EU in the shortest possible time, adding that this is a very important issue for Georgia. Read more here: http://en.trend.az/scaucasus/georgia/2309698.html Other frontier markets 21. Mongolia outlines steps to reduce default risks The Financial Times September 10, 2014 Mongolia is determined to reduce default risks on its international debt by resuming a long-stalled $4.2bn copper mine project by the end of this year, bringing government debt levels to within legal limits and cutting back on welfare payments, a senior government official said. Risks associated with the north Asian country surged in July after Moodyís, the credit rating agency, downgraded its bonds by one rung to B2, a rating that signifies ìhigh credit riskî. The reasons for the downgrade included plunging foreign exchange reserves, expansionary monetary and fiscal policies and an unpredictable environment for foreign direct investment (FDI). Read more here: http://blogs.ft.com/beyond-brics/2014/09/10/mongolia-outlinessteps-to-reduce-default-risks/ 22. Oyu Tolgoi concentrate thickener rake arms fail again Miningweekly.com September 10, 2014 The subsidiary of diversified miner Rio Tinto, Turquoise Hill Resources, on Tuesday reported that the rake arms in one of the Oyu Tolgoi copper/gold mine's two tailings thickeners had failed again. Having started production during last year, output at the massive mine was heavily impacted by post-commissioning issues during the first quarter, including rake blade failures in the tailings thickeners, which caused the shutdown of one production line for about seven weeks. Read more here: http://www.miningweekly.com/article/oyu-tolgoi-concentratethickener-rake-arms-fail-again-2014-09-10 23. Is Mongolia's mining boom causing Ulan Bator to run out of water? Deutsche Welle September 9, 2014 Mongolia's economy has been expanding rapidly. After experiencing a GDP growth rate of 17.5 percent in 2011, the economy grew by 11.7 percent in 2013, easing from 12.4 percent in 2012. The massive development of mineral and coal mining has been largely the driving force behind the swift economic rise of the Central Asian nation. Mongolia - nearly the size of Western Europe - sits on a virtual treasure trove of natural resources estimated at around 1.3 trillion USD. However, according to a recently released report by the Asian Development Bank (ADB) titled "Demand in the Desert: Mongolia's Water-Energy-Mining Nexus," the development of the mining industry is leading to an increase in the demand for water and energy; scarce resources especially in Mongolia's capital and largest city, Ulan Bator. Read more here: http://www.dw.de/is-mongolias-mining-boom-causing-ulan-batorto-run-out-of-water/a-17910293 24. LSE extends partnership with Mongolian stock exchange The Wall Street Transcript September 10, 2014 London Stock Exchange Group (LSEG) and the Government of Mongolia today announced they have signed an extension to their strategic partnership agreement between LSEG and the Mongolian Stock Exchange (MSE). The agreement, signed by Chultem Ulaan, Mongolia Finance Minister and Xavier Rolet, CEO, LSEG, will extend LSEG's partnership with the MSE by a further three years and allow the two companies to build on the progress achieved to date. Read more here: http://www.twst.com/update/78609-london-stock-exchange-plclseg-extends-partnership-with-mongolian-stock-exchange