Sunday, December 26, 2010

Week 20-26 Dec.: End of the decade…step on the gas!

The last decade saw the growing importance of gas, its export and costs.

Approximately ten years ago the Shah Deniz gas field was discovered. Its reserves (estimations waving from 50 billion cubic meters to twice as much at the early stage of data collecting) were considered relevant to reduce the dependence from Russian and Iranian ones.

Actually, Azerbaijan is pondering delivering up to 1 million cubic meters of gas per year to Iran, if proper infrastructures are available. Part of it would supply the Azeri exclave of Nakhchivan, to meet a demand of approximately 350-500 million cubic meters; the rest would be sold to Iran to supply its Northern regions. Azerbaijan is interested in the exchange gas-for-electricity with Teheran.

Azerbaijani gas (coupling with oil) has a strategic importance for Georgia. Just to recall an episode, back to 2007 the extraction problems in Shah Deniz forced Georgia to buy extra supplies from Russia.
It’s not by chance that SOCAR was awarded in the 2010 Foreign Company nominations in Georgia, where it operates through the subsidiary company SOCAR Energy Georgia and owns the Black Sea Tanker Terminal at the port of Kulevi. The terminal was started in 2000, but started to operate in 2008, after years of financial troubles and among environmental concerns.

And talking about gas related concerns, in late summer it was announced by Andrej Kruglov, deputy chairman of Gazprom, that the tariff of gas in Armenia should rise to 330$-350$ per thousand cubic meters in 2011, doubling its price compared to the previous year.

From the Armenian-Russian gas network springs the new Mayor of the Capital. Karen Karapetyan, who headed all along the decade the Armenian-Russian joint venture ArmRosGazprom, has been the chosen person of the ruling party to replace after a scandal the city’s Mayor Gagik Beglaryan.

The gas business built its own ramifications in the years 2000-2010, not just in the shape of pipelines.

Sunday, December 19, 2010

Week 13-20 Dec.: €conomy/IT & Stormy weather

In November Synopsys, Armenia’s leading software company, was prised by the USA Embassy “for its promotion of U.S. and foreign investment by showcasing Armenia as a potential IT hub, its collaboration with universities on IT training programs […].” Armenia, a landlocked country with limited sources of economic wealth, especially mineral, land, business enterprise (capital, equipment, strong internal market), but a good potential of human resource, could have sound ambitions concerning IT development.

Oscar Wilde once said that “Ambition is the last refuge of failure.” Perhaps. But for the Caucasus as a whole, IT is a huge support and expedient to exit from more than a problem. Georgian government seems to sense it at least to some extent. On the 15th the Georgian Parliament passed with its third and final reading a law on IT Zones in Georgia. The start-up project to turn Georgia into a IT hub is dated back to June, and now, from 1st January 2011, companies operating in Georgia on computer software production, development, design and support, will be exempted from export tax and their profit from exporting services outside Georgia will not be taxed. Exemption will be applied as well to value added tax on exported products and services.

Virtual zones, floating in less virtuous ones? Again, perhaps.
It may be stated that economic transition is taking even more time than political one. For many citizens of South Caucasus the level of life of the Soviet time cannot be regarded as antiquities of the last century, but as a good term of confrontation to their style of life still now. Sometimes even as a standard yet to be re-achieved.

Old problems to be tackled with both old and new solutions.
So, while some places go on with their well rooted economic vocation, some other could adventure through innovative paths.

The first group seems to include Adjara, or Azerbaijan. The former is more and more influenced by the expanding bubble of Turkish economy, being a part of Caucasus which had always a strong connection with Istanbul, however it was called in the past. Turkish Ughersan company is interested a free economic zone in Adjara where the Government has been negotiating with investors on the creation of a free economic zone in Khelvachauri region. Under the agreement, the zone will be constructed in two years.

Azerbaijan keeps its role – first and foremost – of oil exporter, although more and more consistently with the “new world”. According to “SOCAR and China’s Zhen Rong Company have conducted negotiations on bilateral cooperation and signed a memorandum of agreement on export of Azerbaijani oil to China […]. Besides, SOCARs delegation and Thailand’s PTT Company met during the visit to Thailand. […] the sides have signed memorandum on joint utilization of floating oil tank belonging to PTT, near Singapore. This project will increase the productivity of Azerbaijani oil export.”

The second group may collect not only those who cannot rely on a long term and well established connection with a neighbour country with growing economy or on natural resources, but all those that are interested in a new gateways.

And, back to IT, it’s worthy to remember that a gateway in computing means: “hardware and software that connect incompatible networks, allowing information to be passed from one to another”.

Nothing else more needed in the South Caucasus.

Sunday, December 12, 2010

Week 6-12 Dec.: €conomy (&Middle East)

South Caucasus is the link between EuroAsia and Middle East. A very convenient position, although somehow problematic. While Georgia and Armenia claim to be Europeans (sometimes Europeans “abroad”, or neglected, or forgotten, or returnees) Azerbaijan can assert to be meeting point of Europe, Asia and the Middle East. A trump card, if well played.

Who seems to play well is Iran that in autumn did not save energies to reassure old partners and reinvigorate its strategies for new ones. In October Defence Minister Ahmad Vahidi visited Baku to discuss bilateral military cooperation. The speaker of the Parliament, Ali Larijani, expressed his commendation in Yerevan, for the good mutual relations. In November it was Georgia’s turn: direct flights Tbilisi-Tehran&visa-free travel arrangements agreement signed in Tbilisi by the two Ministers of Foreign Affairs.

The Middle East has potentials, in terms of economy.
In 2011 Syria will start importing natural gas from Azerbaijan. According to the agreement signed in November in Baku, Syria will import about 3.5 million cubic meters of gas a day, via Turkey. The pipeline - still under construction – will be a part of the network connecting Syria with Turkey, Iraq, Azerbaijan, Iran, Egypt, Lebanon, Jordan and Europe.
Meanwhile Azerbaijani oil exported via ports in Batumi and Ceyan reached its seasonal picks. According to “On Dec.6-10, the average price on Azeri Light CIF Augusta exported […] was about $92.8 per barrel, or $3 higher than the previous price.”

Armenia may be interested in diversify its investors, not to be too dependant on Russia. In the past Lebanese investments were nearly equal to Russian ones. But according to the statistics for the first semester of 2010, Russian investments make about 70 percent of all foreign investments made in the country. As Russia seems to firmly hold the market of infrastructures, other options may be open to investors who don’t want to challenge the big tycoon.
Armenians confirm their preference for Dubai, for the winter holidays. To meet the travellers’ growing demand, Dubai’s first low cost airline, flydubai, will couple the service offered by Armavia.

The Emirates, Egypt and Jordan will be again the favourite locations for South Caucasian holidaymakers. And money goes on flowing between the Middle East and its northern bridge.

Monday, December 6, 2010

Week 29 Nov. – 5 Dec.: Un-Diplomatic week

It doesn’t really matter…
This seems to be the key message from the South Caucasus diplomatic week, in the days of wikileaks&OSCE Astana summit.

If it’s not an earthquake so far, the wikileaks cables still do matter.
So far nothing really unthinkable came to the surface for the South Caucasus, and the worst part for diplomacy is to see made public reports meant to be secret. Diplomacy itself seems to have lost part of its sacral mystery and to have been degraded more or less to the level of the quality analysis of a decent newspaper, if not to gossips. Nevertheless, in the event that more conspicuous unpredictable pleasantness pops up from the cables, many interested parties are claiming that it’s hard to believe what’s written in them.
“[…] the text looks more like a fable and creates the impression that it is a provocative, which aims to damage relations[…]” thus a Baku official dismisses the info of a negotiation between the Azerbaijan Defense Ministry and the USA Ambassador.

Still, the same interested parties seem to be much more flexible in considering the contents as credible, whenever they can be used at their own purpose. So, no doubts on Armenian side for the liability of the info of the cable of February 25, 2010, when Ambassador Jeffery writes about his talk about the Armenian Protocols ratification with the Turkish Foreign Ministry Undersecretary:
“He warned Congressional passage of an Armenian genocide resolution would ‘complicate’ his government's domestic political calculations regarding ratification. He said if something acceptable to Azerbaijani President Aliyev can found, then ‘we can move’ the protocols forward.”

Believable or not, exploitable or dangerous, the 1167 cables from the USA Embassy in Tbilisi, 1735 from Yerevan, 1569 from Baku, do matter.

The week saw also the first relevant OSCE summit in the last decade.
Not big expectations crowned by not big results, for the three South Caucasus countries. Notwithstanding the commitment of the Kazak Presidency in maximizing this year at the head of OSCE, the only relevant step onwards is the resuming of the IPRM in South Ossezia, which still is a Geneva Discussions’ success, mostly. Basically the Astana Summit gave the floor to everybody to re-confirm what’s been repeated from ages: territorial integrity AND self determination, for Armenia no future for Karabakh in Azerbaijan, for Azerbaijan an unconstructive Armenia approach which may lead to war. Well predictable also the words spoken for the conflict in Georgia.

The Astana summit was not for sure in charge of solving the conflicts, but at least it could have been a good chance to let few unpredictable words drop out of the sub-texts of the bilateral meetings, if any unpredictable word was indeed said… (and before it’s published by wikileaks…).
If not, it can be assumed that the EU Council President Herman Van Rompuy pronounced the following words in vain:

“We still face unresolved, protracted conflicts in the OSCE area. These conflicts remain a threat to our stability and security. In fact, by the very use of words like "unresolved" or "protracted", we risk putting these conflicts into a special "category", beyond hope as it were. We cannot allow that!”
(Full text available at

Another lost chance for a constructive meeting? It does matter.