Caspian: Turkish refinery funding arranged

On 8 May, state oil and gas company Socar said it had concluded a financing agreement with a group of banks to fund the construction of the Star oil refinery at the Turkish port of Aliaga in Izmir province. The contract was signed with five export-import banks from the US, Japan, Spain, Italy and South Korea as well as 15 commercial banks.

The banks will provide $3 billion of funding in the form of 18-year loans. A further $500 million will be offered by Turkey’s Garanti Bankasi as a 15-year loan facility. The latter is also to process all future monetary transactions related to the oil refinery within 15 years after its commissioning. The total cost of the Star project is estimated at $5.7 billion. This means that Socar will still have to provide over $2.2 billion. Construction of the oil refinery is expected to be completed in 2018. The Star oil refinery has been wholly owned by the Azeri state since 19 May when Turkey’s Turcas Petrol sold its 18.5% stake in Socar Turkey Yatirimfor $59.4 million to Rafinery Holding, a local subsidiary of Socar Turkey Energy. The latter now owns 60% of Socar Turkey Yatirim, which owns the refinery project. The other 40% is owned by the State Oil Fund of Azerbaijan. Last May an international consortium comprising Tecnicas Reunidas (Spain), Saipem(Italy), GS Engineering & Construction (South Korea) and Itochu Corporation (Japan) signed with Socar a $3.46 billion engineering, procurement and construction contract.

The Star refinery is projected to have an annual capacity of 10 million tons, 1.66 million tons of which would be naphtha that could go to the Petkimpetrochemical complex. Socar’s share in Petkim currently amounts to 61.32%. Besides naphtha, the new refinery is also expected to produce annually 5.95 million tons of diesel with an ultra-low concentration of sulphur, 500,000 tons of jet fuel, 630,000 tons of petroleum coke and 240,000 tons of liquefied petroleum gas. On 14 May Socar President Rovnag Abdullaev told The Business Year that the total volume of his company’s investments into various business ventures on Turkish soil has amounted to over $20 billion. The Azeri state firm is also active in neighbouring Georgia: as one of the largest taxpayers in the country, it has reportedly invested more than $400 million since 2006.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2014 Menas Associates

Caspian: Tethys in unexpected farm-out

 

Tethys Petroleum is continuing to surprise market-watchers, with an unexpected farm-out of its Kazakh assets to a Chinese oil company owned by a major private equity fund. The company had not hinted it was planning a farm-out, which will help fund its work programme there as well as free up cashflow for expansion elsewhere.

On 1 November Tethys said in a statement that it was selling 50% plus one share of its Kazakh business to SinoHan Oil and Gas Investment, part of Beijing-based HanHong, for $75 million. Tethys will remain the operator for the assets in question and the two sides will have equal representation on the board of the local company. HanHong has assets already in Kazakhstan through other branches – four gold mining licences in which HanHong is an investor or manager – but this is its first foray into the energy sector.

The deal is a boost for Tethys, which has found it something of a challenge to effectively monetise its valuable Kazakh assets, which have 2P reserves of 26 million barrels. Getting oil to market (the domestic market, for now, since the company has not yet acquired an export licence) has taken some time while the Aral Oil Terminal has been expanded. The terminal, with a current loading capacity of 4,200 b/d and a storage capacity of 1,300 b/d, is being significantly expanded to over 12,000b/d, which will cut the need for trucking crude and increase Tethys's production ceiling.

Although the Aral Oil Terminal provides good access to refineries and ports, Tethys is also considering the construction of an oil export pipeline which would almost certainly connect to the Kazakhstan-China oil pipeline (currently undergoing expansion). Although a pipeline depends on an oil export licence, that appears to be just a matter of time, and the SinoHan farmout will give Tethys a cash boost for a pipeline, as well as to fund its ambitious drilling programme for the coming year. The additional cashflow will also be useful for operations in Georgia, the latest addition to Tethys's portfolio.

Although it's a very different beast to the Chinese majors (Tethys has farmed-out to CNPC, and Total, for its Bokhtar PSC in Tajikistan), SinoHan's involvement nevertheless aligns Tethys towards China in terms of oil and gas export. If and when export pipelines for oil and – one day – gas get built from Tethys's contract area, they will almost certainly connect to the existing pipeline network to China.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2013 Menas Associates

Caspian: Azeri Light strengthens on Mediterranean disruption

It seems that Azerbaijan is benefiting from the disruption in other oil producers, notably Libya, as well as the uncertainty caused by the situation in Egypt. Throughout August, protests and labour unrest shut down Libya's two key oil terminals, disrupting exports and helping to strengthen the differential on Azeri Light. On 1 August the price of Azeri Light hit Dated Brent plus $3.95/barrel, the highest since May 2012. Later in August BP attempted to sell a 600,000 barrel cargo at Dated Brent plus $4.75/barrel and found no buyers, however.

 

Azerbaijan's reputation for political stability has been one of its biggest strengths, and with turbulence in other key producers unlikely to end any time soon, the price of Azeri Light is likely to remain high. The government, however, is reportedly taking no chances: according to government sources, it is basing the state budget for 2014 on a price for Azeri Light of under $100/barrel (possibly $90) to serve as a buffer against price volatility. For the past two years the Economy Ministry has based the budget on oil at $100/barrel.

 

In other trading news, there were four loadings of Azeri Light, each of 600,000 barrels, scheduled at Georgia's port of Supsa in August, with five expected in September. Loadings of Azeri Light at Ceyhan were reportedly down this month, by 5,785 b/d compared to July. And ONGC Videsh sold its first cargo of Azeri-Chirag- Guneshli oil since taking over Hess's stake in the project. It sold a cargo of 600,000 barrels for loading at the end of August to Statoil for Dated Brent plus $2.70–3/barrel.

 

For more news and expert analysis about the Caspian region, please see Caspian Focus.

 

© 2013 Menas Associates

Caspian: Oil struck at Zhambyl

Kazakhstan has struck new oil deposits in the Caspian Sea. Recently-appointed Oil Minister Uzakbai Karabalin said on 5 August that workers have located a significant deposit during exploratory work on the Zhambyl structure, being operated by a joint venture between KazMunaiGaz and a Korean consortium led by national player KNOC.

 

Assessment of reserves is ongoing, Karablin said, but “now one can talk about the discovery of a new deposit”, which he called a “joyful development”. The joint venture was established in 2008: Statoil had also been interested but withdrew as part of its Caspian retrenchment plans.

 

The announcement is good news for the Korean consortium as well as for Karabalin, who was appointed last month. Boosting exploration is a priority for the Oil Ministry as well as KMG as part of a plan to dramatically increase the reserves on the national company's balance sheet in the next few years.

 

Karabalin revealed the news at a meeting with President Nursultan Nazarbaev, where he also said that Kazakhstan produced over 40 million tons of crude in the first half of the year.

 

For more news and expert analysis about the Caspian region, please see Caspian Focus.

 

© 2013 Menas Associates

Caspian: Abdenov sacked

Labour and Social Protection Minister Serik Abdenov has been sacked, weeks after he endured a very public egging in a row over pension reform. The young moderniser, who was only appointed in September, was dismissed on 10 June as the controversial pension reform bill was sent back to parliament by a disgruntled Nursultan Nazarbaev. In the interim he has been replaced by his deputy, Tamara Duissenova.

 

The pension reform has become an increasingly divisive issue, attracting outpourings of public anger. At the end of April Abdenov was pelted with eggs by a Communist activist in Almaty after a series of public meetings in which his inability to explain the rise in retirement age (from 58 to 63 for women) had led to anger and scorn. His explanation that "You all have to work, because, my dear countrymen, just because, just because...” attracted ridicule on social media, and despite his otherwise good record he was considered unable to continue effectively.

 

President Nazarbaev had returned the pension reform bill to Parliament three days before, saying that “the government and the National Bank have failed to explain the new pension legislation to the people”. He called for the start of the gradual rise in retirement age to begin at the start of 2018, not next year as planned.

 

Some activists have expressed satisfaction with the president's decision to intervene on behalf of the people. Although there was not massive public opposition, many women's groups in particular did publicly criticise the bill at a number of meetings and events. Analysts have suggested that the president was willing to back down in this case rather than risk provoking further hostility.

 

For more news and expert analysis about the Caspian region, please see Caspian Focus.

 

© 2013 Menas Associates

Caspian: Sofaz confirms Tanap funding

 

The State Oil Fund of Azerbaijan (Sofaz) has confirmed that it will become a shareholder in the Trans-Anatolian Pipeline (Tanap) project. Socar's president Rovnag Abdullaev said at the start of March that although the Azerbaijani state would – as earlier confirmed – retain 51% in the consortium, some of Socar's stake will be taken by Sofaz. The exact proportion has yet to be determined.

It had been widely reported that Sofaz would fund the majority of the pipeline, as it has funded previous large-scale infrastructure projects such as the Baku-Tbilisi-Ceyhan pipeline and the Baku-Tbilisi-Kars railway. Exactly how much Sofaz – as opposed to Socar, Turkish companies or the IOCs taking a stake – will contribute is not yet clear. Tanap is expected to cost $5 billion–7 billion.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2013 Menas Associates

Caspian: Shah Deniz budget set to rise

 

The budget for the second phase of the Shah Deniz project is expected to climb, according to Socar president Rovnag Abdullaev at the end of December. Formerly put at $25 billion, itself an increase on the earlier budget of $16 billion, the new cost for Phase Two is estimated at between $28 billion and $30 billion.

The budget was confirmed by Shah Deniz consortium members (BP, Statoil, Total, Socar, TPAO and National Iranian Oil Company) on 9 January, although a final investment decision is not expected until the second half of the year. In the meantime an initial budget of $6 billion has been allocated for work on infrastructure and platform construction in 2013.

No reason was given for the budget increase beyond the usual inevitabilities of cost overruns. Although some members of the consortium are reportedly weary with the rising cost, there is hope that this year's FID will finally draw a line under the budget.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2013 Menas Associates

Caspian: Socar issues formal invitations for Tanap

 

Socar has formally invited a handful of IOCs to take part in the Trans-Anatolian Pipeline (Tanap), apparently shutting out others (both public and private) that had expressed an interest in joining the project. As previously expected, BP, Statoil and Total were all invited to take some of Socar's 80% stake in the project. (Turkey's state-owned energy companies hold the remaining 20%.) Socar has offered 29% of its stake, ensuring that it retains a majority.

The formal invitation on 8 October suggests that other potential entrants – notably Hungary's OMV and Ukraine – have been kept out of the project, at least for now. In late September Turkey's economy minister Zafer Çaglayan said that OMV “has demanded [an opportunity] to join the Tanap project.” Çaglayan suggested that the company was willing to provide an eye-opening €5.4 billion to Tanap. Although Turkish energy minister Taner Yildiz subsequently welcomed OMV's participation, Baku is the one to make the final decision and it shows no sign of wanting to dilute its stake any further.

Ukraine's President Viktor Yanukovych had affirmed his interest in Tanap as recently as last month, in a meeting with Turkish prime minister Recep Tayyip Erdogan on 14 September. Despite Yanukovych's request, he appears to have been rebuffed. At the time of writing, none of the three companies had responded to Socar's offer but BP, at any rate, is widely considered to be interested.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Government calls for more Caspian development

The government has called for further development of the Caspian shelf's energy wealth, adding to speculation that some new Production Sharing Agreements could be on the cards.

Economy and Development Minister Basimmyrat Hojamammedov said in late August that PSAs are “rapidly developing” in Turkmenistan, and that the government's priority was signing new PSAs on offshore fields. Specifically (and a little unusually given that talks are still underway), he said that negotiations were being held with companies including “Chevron, ExxonMobil, Total, Gas de France, Eni, ConocoPhilips, Midland Oil & Gas, British Petroleum and several companies from the Far East and the Persian Gulf”.

It is hardly a secret that most of these companies are interested in Turkmenistan's reserves: in particular the dogged efforts of Chevron and ExxonMobil to secure an offshore block are a long-running saga in Ashgabat. The decision to flag up the negotiations now could suggest that the government is moving towards signing new deals. However it's significant the news came from the Economy and Development Ministry – something of an outlier on energy policy - rather than the State Agency for Hydrocarbons, the Oil and Gas Ministry, or Baymurad Hojamuhammedov.

President Gurbanguly Berdymuhammedov also called for increased oil and gas development and “cooperation with foreign partners, including the world's leading companies with advanced technologies and know-how.”

Analysts will be keeping a close eye out as to whether this actually leads to any new deals being signed, particularly as conference season approaches. There is no sign that the government is prepared to budge on its refusal to grant PSAs onshore.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Caspian Focus: Nazarbaev slams security services

President Nursultan Nazarbaev has launched a sharp attack on Kazakhstan's security services for failing to prevent the continuing, if sporadic, spate of militant attacks on Kazakh soil. In a rare rebuke on 13 July, he said that he was dissatisfied with the work of law enforcement agencies, particularly the work of the National Security Committee”, the KNB. The president claimed that “people are outraged by the inability of law enforcement officers to prevent these crimes”.

His criticism came after a house near Almaty exploded, leaving eight dead including four children. A police investigation found guns, 'religious literature' and – most alarmingly – police uniforms. There was no indication of who was behind the explosion, which was presumably a premature detonation of bombs under construction.

Nazarbaev's anger is perhaps justified. The wave of attacks carried out under the umbrella of the militant group Jund al-Khilafah (Soldiers of the Caliphate) have apparently caught the police and the KNB on the back foot. The failure of the attacks to cause more casualties says more about the amateurishness of the militants than the skills of the security forces.

Events such as last November's one-man rampage in the southern city of Taraz, which left seven dead, have left the police and KNB looking weak and unprepared. The presence of police uniforms among the material found this month also suggests that the group is becoming more sophisticated.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

China has said that it plans to import around 25bcm of Central Asian gas this year, a major increase in the 2011 figure and proof that China is becoming one of the most important destinations for Caspian gas flows.

The head of PetroChina said on 23 May that estimates for this year's imports through the Central Asia-China pipeline were between 23 and 25bcm, almost all of which will come from Turkmenistan. Although Uzbekistan has pledged 10bcm a year to the pipeline the actual figure has remained extremely low. Last month Uzbektransgas said that unspecified legal issues were delaying the shipment of Uzbek gas through the pipeline, but that it would contribute around 2-4bcm this year. Supplies are expected to increase next year.

The figures are a sharp rise on previously predicted exports to China. Although Ashgabat has been opaque on its own export plans, in April the head of Kazakhstan's KazTransGas said that its southern neighbour was expected to ship 9bcm to China this year. Even allowing for some additional gas from Kazakhstan itself alongside this, the new figure from PetroChina would represent almost a doubling of anticipated exports.

To lock in these imports, Turkmengaz signed an agreement this month with CNPC to boost its gas exports to China up to 65bcm, according to Turkmen TV. The framework cooperation agreement was inked by new Deputy Prime Minister (see below) and state hydrocarbon agency boss Yagshygeldi Kakaev and the chairman of CNPC's board Jiang Jiemin in Beijing on 7 June.

Ramping up to 65bcm would be a major undertaking, and no details were given on the timeframe for the increase or the sources of gas (earlier reports suggested that Chian was aiming for 60bcm from Central Asia as a whole by 2015). At a speech

It marks yet another increase in the scale of Turkmen gas exports to China, suggesting that Beijing's attempt to lock in most of Turkmenistan's upcoming production is bearing fruit. Chinese demand will almost certainly support it: the International Energy Association said that Chinese gas demand is expected to double in the next five years. Central Asian gas is expected to satisfy a sizeable chunk of this. The main constraints are the pace at which China's internal pipeline network can be developed, and the ability of Turkmenistan to bring new gas fields on in time.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

In another sign that Russian-Turkmen relations may be gradually getting back to normal, Russian cellphone company MTS is set to return to Turkmenistan after an enforced absence of eighteen months.

The company was unceremoniously kicked out at the end of 2010 after the Turkmen authorities refused to renew its licence, which began in 2005. No reason was given for the cancellation, which cut off around half the population (MTS had around 85% market share) and forced them to switch to the state-owned provider Altyn Asyr instead. For ordinary Turkmen citizens, the cutoff had a serious effect on business and social life as the state provider was unable to provide the same coverage.

MTS slammed the move as thinly-disguised expropriation, and filed several lawsuits with international arbitration bodies. Nothing appeared to come of them, and the Russian government chose not to intervene in the dispute. The Turkmen government refused to pay any compensation for the sudden shutdown, saying it had followed legal procedures.

Ashgabat's decision to resume the company's licence is equally mysterious. It seems that the government has realised the inability of Altyn Asyr to cope with the influx of customers. Service is expected to be resumed within three to six months.

The story is in some ways a good encapsulation of the government's approach to handling business. Nominal commitment to foreign investment followed by a sudden and unexplained volte-face, based on a serious miscalculation of domestic capabilities. The one bright spot is the government's willingness to walk back on its bad decision.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

An Iranian plan to irrigate its desert cities using water from the Caspian has provoked concern in Russia and has raised questions about Iranian compliance with the Caspian community's self-proclaimed emphasis on equitable usage. The $1.5 billion project was announced by President Mahmoud Ahmadinejad in the northern city of Sari on 16 April. It would involve a desalination plant on the Caspian coast, from which the water would be pumped 140km south to the city of Semnan, which lies east of Tehran.

Around 200 million cubic metres of water would be transferred through the 500km pipeline each year under the first phase – subsequent phases will expand the volume of water supplied to inland cities to 500mcm. Officially, the other Caspian governments have yet to comment – all use desalination plants of their own, albeit on a smaller scale than Iran's new project. However, some Russian commentators drew parallels with the Aral Sea in Central Asia, where decades of Soviet over-irrigation led to an environmental catastrophe and a drastic shrinking of the size of the sea.

The Caspian's ecosystem is already widely recognised as being extremely fragile, and a decline in the water volume – made worse by declining inflows from the Volga river – could have serious effects across the Caspian. This is especially significant given Tehran's repeated insistence that any activity (ie, a Trans-Caspian Pipeline) that could damage the Caspian ecosystem must only be taken with the consent of all five littoral states. If a Caspian summit does get under way this year (see page 8), the other leaders may have some tough questions for Ahmadinejad.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Caspian: Shootout in northern city raises terror fea

A rare clash between security forces and Islamist militants in the northern city of Ganja this month has raised concerns about the threat of terrorism in Azerbaijan. Although much recent attention has focused on Iranian-backed cells, the militants killed and captured in the April operations were referred to as 'Wahabbis', the catch-all term for hardline conservative Sunnis. The government claimed that the group was linked with Al Qa'ida, had trained in Iran, Syria and Pakistan, and had engaged in combat against NATO forces in Afghanistan.

In the Ganja incident, two people – one militant and one member of the security services – were killed when police stormed a house being used by the groups. Some reports suggested that the two died when the militant set off a suicide vest – if true, this would be the first case of a suicide attacker in Azerbaijan (other accounts reported that the militant set off a grenade which killed the two).

Subsequent operations across the country, mainly in the north but also in Baku and Sumgait, rounded up 17 suspects and netted a large cache of explosives and weapons, including assault rifles and a machine gun. The authorities accused them of planning “provocative acts and terrorist attacks with the view of violating socio-political stability”. The dead militant, allegedly the leader of the group, was identified as Vugar Padarov from Zagatala in the north-west, near the border with Russia.

The arms involved, the location, and the purportedly 'Wahabbi' identity of the suspects suggests that the group may be linked to Russia's volatile North Caucasus. Dagestan, just to the north, has steadily become the focal point of the Islamist insurgency there. In August 2008 Azeri and Dagestani security forces fought a group of militants, including Azerbaijani citizens along the border region. The leader of the dead rebels was the 'Emir' of Dagestan, Ilgar Mollachiyev, who was born in Zagatala.

The details of the latest incident suggests that the threat was fairly serious. There is no information on the planned target but state security structures, foreign embassies, and IOC headquarters are all plausible targets. The timing of the sweep, so close to the Eurovision Song Contest in May, has also sparked alarm that the militants were planning a large-scale attack on the contest. Nonetheless the overall scale of the militant threat remains insignificant and the country's security services are fairly well-equipped to cope with it.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Turkmenistan: Striking lucky again with new gas find

Turkmenistan has discovered a potentially major new gas field in the east of the country, the government says, boosting confidence that it can fulfil its ambitious gas contracts with China. The new find is on the Shiringuyy structure in the Bagtyyarlyk contract area, located in Lebap province. Bagtyyarlyk has been jointly developed by Turkmengaz and China National Petroleum Corporation since 2007. Last year the Chinese energy giant announced plans to increase production there from 5.5 billion cubic metres a year to 6.5 billion, a target that this field will go some way to fulfilling.

Preliminary estimates suggest that the find is capable of producing an impressive 1.5 million cubic metres/day. This would make a significant contribution to the Turkmenistan-China pipeline, which is supplied by the Bagtyyarlyk contract area. At the end of last year construction began on a new compressor station to allow Shiringuyy gas to be fed into the pipeline. The station will be complete by 2014 and will be able to process 9bcm of gas every year.

Turkmen media have yet to release details on the production timeframe or the geological conditions of the new field.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

New Trans-Caspian Pipeline talks finish

The latest round of talks on a Trans-Caspian pipeline has concluded, with no concrete results. The negotiations - between the European Commission, Azerbaijan and Turkmenistan - took place in Brussels at the beginning of the month but produced no outcome beyond a confirmation that the talks occurred “in a constructive atmosphere” and “are progressing well”, according to sources speaking to local media. Conclusions “will be found when the time is right”, said a source.

The Turkmen state media service only gave a bland statement on Turkmenistan's “responsible approach to international cooperation in the energy sector." A new discussion will be held next month, again to discuss technical aspects of the pipeline.

Without a political discussion which tackles the elephant in the room – Russian and Iranian opposition – the original June deadline for the completion of talks looks increasingly unlikely.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Kazakhstan: Oil Ministry to go softly on mining companies

Perhaps reflecting the labour movement's growing influence, the Oil and Gas Ministry has announced that wayward mining firms will be fined rather than have their contracts terminated, in a bid to safeguard jobs.

Announcing the decision at the end of November, ministerial secretary Kanatbek Safinov said that, “The termination of contracts will be used as a last measure, as in this case people will lose their jobs.” Instead, the government will prioritise economic sanctions against mining firms which violate their contracts, in accordance with last year's new subsoil law. Closer monitoring of mining companies will be undertaken, according to Safinov, and the termination of contracts is held out as a last resort.

Safinov gave no indication of how the extra monitoring will be carried out, or whether the process of appealing against fines will be toughened up, which may raise a few eyebrows among mining companies. Focusing on the livelihoods of mining employees may be a genuine populist touch, but fining companies rather than terminating contracts – 28 subsoil contracts were cancelled last year – is also undoubtedly a money-spinner for the state coffers.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2011 Menas Associates

Kazakhstan: Parliament to dissolve for early elections

A shake-up of Kazakhstan's moribund political landscape looks to be in the offing. On 10th November, 53 of the 107 members of the lower house of parliament, the Mazhilis – in which President Nursultan Nazarbaev's Nur Otan holds all the seats – sent a formal request to the president to dissolve the legislature and hold early elections.

A parliamentary poll was already scheduled for next August, but that date has now been moved forward to January, according to presidential aides. Officials have said that the date has been moved so that Kazakhstan can focus attention on the economic crisis rather than elections – a fairly thin reason given the lack of real campaigning and competition in Kazakh elections.

It is also being presented as a way for Kazakhstan to develop – at least cosmetically – a multi-party democracy and move away from Nur Otan's total monopoly of parliamentary seats. Under last year's revised election law, the party that comes second automatically enters the Mazhilis, even if it fails to pass the 7 per cent threshold. This would almost certainly mean that Ak Zhol, the pro-business party derided by hardcore opponents of the government as a pseudoopposition, would enter the legislature to provide a superficial dose of debate and competition with Nur Otan.

Presidential officials have actively supported this idea. In the summer, key Nazarbaev aide Yermukhamet Yertysbaev said that he hopes Ak Zhol will become “a worthy sparring partner” for Nur Otan. Ak Zhol's newish leader, Azat Peruashev, was a Nur Otan member until the day before he became opposition leader in July.

There is speculation that the shake-up of parliament is also intended to open up a space for Timur Kulibaev, Nazarbaev's son in law and the closest thing to an heir apparent. Kulibaev has been linked with Ak Zhol, partly through his association with Peruashev. This would allow him to keep a firm hand on the 'opposition' party while maintaining a position of dominance in Nur Otan.

It would also give him an opportunity to inherit a (nominally) multi-party system. Combined with his profile as a fairly youthful technocrat, this would help Kulibaev to present a more modern and democratic face of Kazakhstan. The absence of a clear succession plan is concerning investors, and leading to pressure on Nazarbaev for a clear signal. “No one likes surprises – not least the capital markets,” says one oil executive working in the country.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2011 Menas Associates

Azerbaijan secures Security Council seat

For the first time, Azerbaijan has secured a seat on the UN Security Council for the 2012–13 session, along with Pakistan, Morocco, Guatemala and Togo. After an unusual 17 rounds of voting, Azerbaijan beat Slovenia on 25th October to the coveted seat.

In Baku, the victory is being seen as a major diplomatic coup, and a validation of the country’s attempts to become a significant player on the world stage. It is especially satisfying because arch-rival Armenia withdrew its bid early on. President Ilham Aliev set the tone, saying that Armenia was “forced to admit that they were losing to Azerbaijan and the international community condemns their aggressive policy against Azerbaijan”.

Azerbaijani politicians and analysts have already begun ruminating on the significance of the victory and how Azerbaijan can use the seat to advance its national interests. Naturally the Nagorno-Karabakh conflict will be high on the agenda, and Baku will – at the least – try to prompt the Security Council into making a statement condemning the presence of Armenian forces in the conflict zone. Although its too early to say what else will be a priority by the time Azerbaijan takes its seat, the ongoing international pressure against Iran will probably remain an important issue for the Security Council. Any new vote on sanctions or other forms of pressure will be sensitive for Baku, particularly if their bilateral relationship continues to head into choppy waters.

For more news and expert analysis about the Caspian region, please see Caspian Focus.


© 2011 Menas Associates

New oil minister approved by Majlis

After months of political infighting in Iran over who will head up the oil ministry, a suitable candidate has finally been found: Brigadier General Rustem Ghassemi , a member of the all powerful Revolutionary Guard or Sepah who for the past few years as headed up the Sepah's contracting arm, Khatam Ol Anbia (or Ghorb ), which has benefited from several lucrative gas contracts, including a $2 billion deal to oversee Phases 15 and 16 of the giant South Pars project.

But Khatam's ability to secure any external funding has been made almost impossible by US and EU sanctions, which have designated the company a supporter of weapons proliferation. Ghassemi, who unlike his predecessor Massoud Mirkazemi has some oil industry experience, was nominated by President Mahmoud Ahmadinejad at the end of July to be full-time minister and the following week received the all-clear from the Majlis or parliament. Ahmadinejad, who is desperate to secure control of the oil sector to increase his political clout, in June nominated a close ally Ali Aliabadi , to be caretaker minister. But Aliabadi, who was most recently head of Iran's Olympic Committee, wasnever going to get parliament's approval.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

For more news and expert analysis about Iran, please see Iran Strategic Focus.


© 2011 Menas Associates