Eurasia Roundup

Bear Market Brief is happy to announce a new feature, the Eurasia Roundup. Compiled by contributor and columnist Nick Trickett, the Roundup will be a twice-monthly rundown of major political and economics news across the Post-Soviet states. It will not, however, include the Baltic States or Mongolia.


In the wake of the Zapad exercises, Lukashenka seems to be making moves in different directions to firm up trade alternatives to Russia. Polish officials were shown the China-led industrial park Great Stone and the two countries are seeking to increase trade from about $2 billion to $4 billion. The initiative comes as Minsk is seeking a new co-operation deal with the EU as talks have stalled with the IMF for a financial package.

To that end, Belarus is hoping to enlist Poland in liberalizing trade ties with the EU. Any such movement would trigger friction with Russia given the two countries’ customs union. In a polite hedge, Belarus signaled its commitment to being a reliable gas supplier to Europe despite its disappointment that Europe spurned past attempts to negotiate an increase of capacity for the Yamal pipeline instead of the Nord Stream project.


Turkish reps were also shown Great Stone in the last two weeks and talks were held hoping to raise Turkish-Belarusian trade turnover from last year’s $460 million to $1 billion by this year’s end. A bilateral working group has been created to reach that goal. Azerbaijan opened its first ever trade house in Minsk in May this year and is hoping to build up trade – a lowly $100 million a year – and Belarus would like to attract Azerbaijani investment into Belarus’ military-industrial complex based off a recent visit by Defense Minister Colonel-General Zakir Hasanov.

Belarus’ Economy Minister Vladimir Zinovsky also claimed at a conference on October 19th that Belarus will implement up to $30 billion in projects in the next 5 years and is most closely watching China, Kazakhstan, and Ukraine to reach its growth targets. It’s quite difficult to imagine anything like that happening without reaching an agreement with the IMF. The country is launching a series of low-key diplomatic initiatives, largely with other Post-Soviet states but also Turkey and China, to buy it breathing room as it negotiates.


Ukraine is bringing a case forward to the WTO regarding Russian limits on Ukrainian imports – namely juice, beer, confectionery, and wallpaper for this specific case – as well as bans on the transit of Ukrainian goods to other states. The news comes as reports show that Ukraine’s trade deficit grew 2.26 times over last year to $4.79 billion. The figures show that exports to the EU are up 27.9% and 17.7% to Russia the first 8 months of 2017, with a 22.8% increase in imports from the EU and 37.2% increase in imports from Russia.

China Harbor Engineering Company (CNEC) is considering participation in a tender to complete works for Odessa’s Yuzhny port. The interest is notable as Ukraine has expressed its hope to increase trade turnover through Kazakhstan’s Aktau port – a trade flow backed by Chinese subsidies – and has launched a small educational initiative between Ukraine and Kazakhstan to exchange expertise on port management. Yuzhny port has so far allocated 3 billion hryvnia for construction in 2018 for relevant work that would improve capacity and efficiency. Yuzhny is a leading indicator for Ukraine’s ability to draw in Trans-Caspian trade. Ukraine has also just launched the 8th round of FTA talks with Turkey, a crucial development to trace to get a pulse on Black Sea trade dynamics in tandem with Belt and Road.

Prime Minister Groysman stated that despite the losses imposed by the economic crisis from 2014-2015, Ukraine has all it needs to hit 5-7% GDP growth by 2019. But the recent dismissal of Mykoliv mayor Oleksandr Senkevych has thrown a wrench in expectations of much-needed decentralization reforms improving the transparency of local governance and more rational use of budget resources. Gennadiy Trukhanov – mayor of Odessa and subject of much scorn for his alleged participation in criminal activity and corruption – had his residence and offices searched soon after Senkevych’s dismissal by Ukraine’s Anti-Corruption Bureau (NABU). When the 2019 election cycle starts in earnest, the fate of Groysman’s rosy predictions will most likely lie with developments at the municipal level.


Moldova’s constitutional court ruled to suspend President Igor Dodon for his refusal to accept a cabinet nominee for Defense Minister multiple times, a bombshell move that many suggest shows the hand of oligarch Vlad Plahotniuc. Whatever the cause, Plahotniuc is poised to further consolidate his power and EU-leaning policies, institutions, and figures are likely to benefit at least in the shorter-term. The redesignation of Moldova’s national language as Romanian rather than Moldovan in its constitution is looking likelier.

The Economy Ministry is aiming to increase exports to the EU, which already accounts for 65% of Moldova’s export total with predictions of 15% future growth in overall trade. The macro-trade patterns are vital given the country’s reliance on agriculture and other cheaper, low-end goods. The IMF revised down GDP growth estimates to 4% for 2017 earlier in October.

The Central Bank cut its key rate to 7% against a 7.6% inflation rate as of September and its supervisory powers were expanded by parliament earlier this month. Chisinau mayor Dorin Chirtoaca remains under house arrest for corruption charges connected to a paid parking scandal. Until a referendum to vote him out takes place, the scandal will continue to cast a permanent media shadow as different groups position with or against Plahotniuc for power and handouts.

Romania’s Transgaz is opening a branch in Chisinau to speed up construction of a gas pipeline from Ungheni. Greater energy integration with Romania is paralleled by an agreement signed by Moldovan PM Pavel Filip and Ukrainian PM Vasily Grosyman for a 2018 roadmap for EU association agreement goals and cooperation controlling the border. Russia has launched military maneuvers in Transnistria in response to Moldova’ approach to the UN for help in removing Russian troops. Transnistria will continue to haunt the country’s investment climate as Plahotniuc and like-minded politicos are likely to push hard on the international stage for an end to Russia’s presence in the breakaway region while working more closely with Ukraine on border control.


President Margvelashvili reluctantly signed a new constitution into law replacing the direct election of presidents with a system of proportional representation in parliament. Georgian Dream (GD) benefited in municipal elections, but many observers assert that they used administrative resources to help achieve desired outcomes. According to a state audit, GD received almost 90% of all political donations. There are serious concerns over related constitutional reforms as GD controlled 116 MPs out of 150 in parliament and was able to override presidential vetoes without reaching consensus with other parties, effectively creating one-party rule.

Georgia’s economy grew 4.7% the first two quarters of this year based on the Ministry of Finance’s outlook. However, FDI figures a down slightly from last year. On the whole, the country’s economic growth is healthy and Bruno Balvanera, the EBRD’s director for the region, has named Georgia the leader of the second wave of economies integrating with the West.

In big news for the region, the Baku-Tbilisi-Kars railway is finally set to get going next week. Current estimates place expected turnover for the route at 50 million tons a year. Georgia’s trade stats show foreign trade turnover up 12.1% year-on-year at $7.56 billion, with exports up 28.3% ($1.94 billion) and imports up 7.4% ($5.62 billion). Exports to EU states are up 18.9% so far this year but the bigger story medium-term is Georgia and China’s free trade agreement and the growing presence of Chinese investments into trading centers. This year, Georgia’s CIS trade is up 31.2%, aided by infrastructure initiatives and Chinese investments in Central Asia.

Georgia and the EU launched high-level dialogue on security issues this month, a development that will take on greater significance based on the latest events in Moldova. The Anaklia Deep Port project – a potential juncture for China’s Silk Road Economic Belt on the Black Sea – is set to commence land works on December 20 this year. Anaklia is very close to the border with the breakaway region Abkhazia and is coming into view for NATO’s security concerns in the Black Sea.


According to Economic Development and Investments Minister Suren Karayan, investments in Armenia grew 36.6% year-on-year to over $1 billion, $328 million of which was FDI. Given that Armenia has just reached a framework agreement with the EU despite its membership in the Eurasian Economic Union, Russian interests – particularly the Metasamor nuclear power plant that the EU would like closed – will be affected, though not immediately. Implementing the deal may prove more difficult than negotiating it and Russia retains many different means of pressuring Armenia.

The IMF forecasts Armenia’s growth at 3.5% for the year and the World Bank forecasts 3.7%, both higher than previous forecasts. A current temporary FTA with Iran via the Eurasian Economic Union will hopefully aid 40 types of Armenian goods and build on Armenia’s reported 11.2% export growth to Iran this year. Questions remain as to whether Armenia can draw in Iranian investment since Iran cares much more about its relationship with Russia and Russia would prefer to maintain Armenia’s dependence, likely vetoing any projects that might meaningfully threaten that dependence. For now, Iran deals are largely talk.

Foreign trade was up 21.7% the first 9 months of 2017: exports by 19.1% to $1.546 billion and imports are up 28.2% to $2.82 billion. There was a rather ludicrous mix-up at a meeting in Yerevan between Russian PM Dmitry Medvedev and Armenian PM Karen Karapetyan whereby their figures for trade turnover growth didn’t line up: Karapetyan claimed 23.5% growth through August this year and Medvedev 30%. Medvedev convinced Karapetyan that Russia’s figures were “better,” but what trade looks like is unclear.  The most recent deal that would dent trade is an increase of 200 million cubic meters to 2.1 billion cubic meters of natural gas bought from Gazprom this year.

VTB is capitalizing its daughter company VTB Armenia up to 1.2 billion rubles amidst Yerevan’s attempts to woo the EU. Further, remittances are up 17.5% for January to August with money transfers from Russia up 16.6% to $642 million and $232.5 million respectively. Russia’s improved economic stability will likely continue to aid money flows.


Azerbaijan has reiterated its commitment to OPEC production cuts, holding its production at the current level of 829,000 barrels a day. In the wake of Baku’s renegotiation of production sharing agreements (PSA) to give SOCAR a bigger role, the Ministry of Finance is aiming to reduce the budget deficit to 44% in 2018. The Ministry predicts revenues to grow to 20.127 billion manat next year and expenditures to reach 20.905 billion manat. Fluctuations in oil prices will continue to have an outsized impact as OPEC works out an exit strategy from production cuts.

SOCAR recently reached a PSA with BP for block D-230 in the Northern Absheron field for a gas play the two firms would split evenly at 50%. The company also has plans to issue at least $50 million in bonds in the next six months on the domestic market. On a more interesting note, the first Azerbaijan-Australia Business Form in Baku produced talk of potential cooperation between SOCAR and Australian natural gas companies. The move would help SOCAR expand into LNG production in the Asia-Pacific.

The EBRD authorized $500 million in financing for the Trans-Anatolian Pipeline, part of the Southern Gas Corridor. Azerbaijan pulled out of the Extractive Industries Transparency Initiative in March, a move that many concerned about the country’s human rights over-estimated in its impact on energy financing (hint: none). But President Aliyev recently announced the creation of a parallel transparency body in Azerbaijan under the purview of the executive.

Projections put Azerbaijan’s exports for 2018 at $13.4 billion, building off of a 30% increase in non-oil exports the first 8 months of 2017. Hundreds of millions of dollars in investments are flowing into the country’s cotton sector, but it’s too soon to talk up effectiveness. In a more interesting development, Pakistani pharma is approaching Azerbaijani firms to create joint ventures. Baku is hoping to expand domestic pharmaceutical production, something Russia will be eyeing closely. These types of initiatives with CIS and South Asian states will likely drive non-oil economic growth in the short-term.


Ashgabat’s decision to increase tariffs on water 25 times over previous rates is the biggest story for the country’s citizens, from $.06 to $1.43 for 10 cubic meters of water. Costs for a month’s worth of childcare at a kindergarten increased 1,000% from 8 manat a month to 80. High-level meetings took place between Turkmenistan and Russia following on the October 2nd signing of a strategic partnership, but they’re unlikely to have an impact on the livelihoods of those struggling with the latest price increases on basic goods.

Reports show that Iran has no interest in allowing Turkmenistan’s gas to transit Iran to the Turkish market. Despite energy tensions, there’s some room for growth as an Iranian expo of Halal products has been announced to take place in Ashgabad next February. Turkmenistan’s Ministry of Foreign Affairs met with a delegation from Afghanistan to discuss regional economic integration, worth watching as U.S. policy either stagnates or develops.


Turkmenistan’s economic prospects depend heavily on changing trade flows in the region. For that reason, talk on multimodal transport around the Caspian is a clear priority for the country’s officials. President Berdymukhamedov congratulated rail workers with the completion of a rail depot in Bereket on Monday. Turkmenistan’s diplomatic corps consistently puts out statements that rail links from Central Asia and Turkmenistan into Iran are a “geopolitical factor,” touting them in the country’s economic initiatives. A Turkmenistani delegation also held a working visit in Dushanbe to discuss transit cooperation and higher-level meetings with Tajikistan going forward.

Turkmenistan is hoping to increase electricity exports to and through Iran, which already stand at 2.87 billion kilowatt-hours. Turkmengas in partnership with Japan’s Kawasaki Heavy Industries Ltd., Haldor Topsoe, and Mitsubishi will begin production of gasoline from natural gas next year. The country has also harvested more than 1 million tons of raw cotton this year. Due to the country’s secretive nature, macroeconomic projections aren’t much use and should only be examined after major energy deals in particular.


Kazakhstan has been dealing with a fuel shortage crisis due to scheduled repairs at two of the country’s three refineries and interruptions in Russian fuel supplies. Despite OPEC-led production cuts, Kazakhstan is planning to increase production at the Kashagan field by 170,000 barrels to 370,000 barrels a day by the end of the year. Kazakhstan signaled preparedness to work with Uzbekistan and Russia to deliver up to 500,000 tons of Russian oil for a new refinery project in Jizzakh that will be completed in 2022. The Caspian Pipeline Consortium completed pipeline capacity expansions in Kazakhstan, laying the groundwork for exports from Kashagan.

Budget revenues for 2017 are 60.8 billion tenge higher than expected, with a 77.9 billion tenge increase in non-oil revenues and a 14.9 billion tenge decrease in oil revenues. The National Bank’s international reserves grew 10.2% since the start of 2017 – $32.5 billion – and the National Fund’s currency assets reached $56.8 billion, putting the country’s overall reserves at roughly $89 billion or 60% of GDP. Astana’s city budget through 2020 has been adopted at a total of 875 billion tenge for the period. However transfers from the republic’s budget will rise from 103.5 billion tenge next year to 272.3 billion tenge by 2020.

Trade between Kazakhstan and EAEU member states grew 31.6% year-on-year reaching $10.856 billion. Exports are up 36.5% – $3.297 billion – and imports up 29.5% – $7.559 billion. But Kazakhstan has begun restricting trade from Kyrgyzstan in a political falling out due to Kyrgyzstani president Atambayev’s accusations that Kazakhstan supported ousted president Bakiyev and was stealing its resource wealth from its people.

Kazakhstan is actively pursuing deeper trade ties with Uzbekistan as president Mirziyayev’s political thaw continues. Turnover stood at $554 million thus far, though border tax revenues are up and the two are mulling joint economic zones. Trade is heavily weighted towards 4Q. Kazakhstan is also doing the same with Azerbaijan as the BTK takes off, with estimates showing turnover up 12-15% and rail cargo at 1.5 million tons or up 146% year-on-year. Trade routes are shifting quickly.


Very cautious optimism about Mirziyayev’s reforms aside, Uzbekistan recently signed a framework agreement with the European Investment Bank (EIB). The EBRD approved a $100 million line of credit for the national bank to launch the bank’s first projects in country. More notable for regional dynamics, Uzbekistan and Iran are warming up to each other in the commercial sphere. Deals worth $25 million for textiles and agricultural products were recently signed, but oil dominated bilateral talks. Uzbekistan is looking for new supplies and Iran’s railways are offering discounts on transportation to compete with Russian oil.

Uzbekistani delegations came to Washington looking for U.S. investment into irrigation and agricultural ventures. Tashkent hosted a business forum on the 20th for Kazakhstani counterparts to come and discuss opportunities. Turkey has also been of keen interest in the country’s search for new partners. Visiting Turkey, Mirziyayev and president Erdogan supported moves to change the visa regime as a business forum was held in Istanbul for Turkish and Uzbekistani firms. Contracts worth an estimated $3.5 billion were signed. Turkish Airlines is starting direct flights to Samarkand, a symbol of growing ties.


Russian investors are still waiting to see how currency reforms and related initiatives pan out before rushing in, despite Mirziyayev’s decision to rent a private jet from Alisher Usmanov, an ethnically Uzbek Russian billionaire. Mirziyayev signed an order ending the state’s cotton monopoly holding company, but no one yet knows what comes next. The monopoly and the regulation of the cotton industry have been effective leading indicators for political power in the past.

Uzbekistan has also voiced support for a free trade zone amongst all CIS countries, citing trade figures placing trade with CIS states up 20% year-on-year in 2017. How it would square with the EAEU remains to be seen. On an odder note, Chinese and Uzbekistani filmmakers are planning to shoot a film about the Silk Road. The film is meant to be a melodrama depicting a family’s life over different epochs along the Silk Road, but speaks to the creeping soft power aspects of China’s infrastructure and trade initiatives in the region.


Former PM Sooronbay Jeenbekov’s election victory dominates recent news. Backed by outgoing president Almazbek Atambayev, Jeenbekov won 54.3% of the votes cast. But an investigation by has shown that Jeenbekov’s campaign with Atambayev’s Social Democratic Party colluded with Atambayev’s government to access voters’ private data. Ebullient praise for the election as a genuine political contest has fallen apart since. Experts noted that Atambayev was nervous either about a loss of power or his own safety post-election before voting took place.

Atambayev’s pre-election rhetoric regarding Kazakhstan has created ongoing trade and political tensions that will likely continue given Jeenbekov’s close ties to Atambayev. Increased scrutiny of shipments from Kyrgyzstan into Kazakhstan is part of a broader structural problem for members of the EAEU: trade spats or wars are commonplace. Kyrgyzstan has approached the WTO over Kazakhstan’s most recent moves slowing down trade.

Kazakhstan estimates that EAEU losses on VAT taxes amount to $1.87 billion. China’s export figures for Kyrgyzstan the first 7 months of 2017 were worth $2.6 billion, whereas Kyrgyzstan’s import figures from China are worth $900 million. It’s difficult to track down data, but re-exports of Chinese goods continue and remain a sore point. Estimates suggest that the EAEU lost $11 billion from its union budget after Kyrgyzstan acceded.

World Bank estimates place annual growth at 3.5%, with more stable economic conditions in Russia driving up remittances and, by extension, domestic demand. 2018 growth is expected to hit 4.2%. Newer trade routes should also aid growth and catch the eye of investors. For example, air cargo volumes between Kyrgyzstan and Turkey are up 48% year-on-year though China air cargo dropped.

Trouble with Kazakhstan won’t have a huge drag effect because trade has been depressed since oil prices collapsed and petroleum products and metals loom largest in their trade turnover. But turnover recovered sharply this year – up 63.4%. That said, price spikes for coal in Kyrgyzstan have been attributed to border delays and consumption has increased, deserving scrutiny going forward.


A business forum in Tashkent kicked off a slow-moving rapprochement built on trade opportunities with Uzbekistan, a welcome development for entrepreneurs and regional observers. The event led to the creation of a joint business council. But the country’s dependence on remittances has caused the somoni to depreciate slower than rising inflation, making imports cheaper and exports more expensive. Aluminum production is down 25.3% through September to 74,300 tons, a 7.7% drop in value terms to $143.8 million. TALCO is a cash cow for Rahmon’s regime and aluminum exports rely tenuously on Glencore, a friend of the Kremlin.

Rahmon has gone out of his way to try and attract investment from Arab states, a move that has triggered some small-scale geopolitical bidding. Saudi Arabia in particular has jumped on tensions with Iran over Iranian money hidden away in Tajikistan and thin-pickings for handouts to provide funding. The U.A.E. has also stepped forward under the aegis of the Arab Economic and Cooperation Forum, a vehicle to improve ties with Central Asian states and Azerbaijan.

Rising gold production has been pivotal for bringing in revenues, but stronger stock market performance makes gold a less attractive buy for investors. Prices are unlikely to rise sustainably anytime soon. The regime raised considerable money by issuing a surprise $500 million 10-year bond at 7.125% annual interest in September. Moody’s has rated Tajikistan’s institutional strength very low amid concerns that the country’s debt will reach 55% of GDP next year, driven in part by debts meant to pay for the Rogun Dam’s construction. Macroeconomic reforms drive concerns until Rogun produces revenues.

Of the $950 million that CIS member states have invested into Tajikistan, it appears that 90% comes from Russia. The country had received a total of $3.1 billion in FDI per its own statistics last year. China continues to tout $6 billion worth of projects proceeding in Tajikistan, but their efficacy remains unclear. Sputnik says Chinese investments have created 160,000 jobs, but a visit by ADB head Takehiko Nakao is a better bet when examining the state of development prospects.

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