Archive for November 2010
OSCE Summit starts in Astana, Kazakhstan’s showpiece capital, today. The Astana Summit on December 1-2 marks the first summit since OSCE’s last meeting in Istanbul in 1999. Kazakhstan is especially proud given that it is the first former Soviet republic to chair the 56-nation body.
Russian President Dmitry Medvedev, German Chancellor Angela Merkel and European Council President Herman Van Rompuy are expected in Astana. The leaders of Azerbaijan and Armenia are also expected to attend, and may discuss brokering a peace deal for the breakaway region of Nagorno-Karabakh. According to Gazeta.kz, a total of 28 heads of states have confirmed their participation in the summit as well as representatives of 33 international and regional organizations such as the United Nations, Shanghai Cooperation Organization, Organization of the Islamic Conference and Eurasian Economic Community.
The OSCE says it aims to address urgent problems such as terrorism and trafficking of drugs, weapons and people, as well as protracted conflicts in the Eurasian region and Afghanistan, reports Reuters.
Kazakhstan · OSCE · Russia · security
23
Mixed Results for Russian and CIS IPOs in 2010
No comments · Posted by Adrian in Uncategorized
$5.58 billion raised to date, despite weak demand and underperforming share prices
Russia and CIS IPO issuers and investors should “proceed with an abundance of caution” according to The PBN Company’s latest analysis of its IPO Tracker for Russia/CIS (www.pbnipotracker.com).
“Results of 14 IPOs from Russia and Ukraine in 2010 have been a mixed bag at best,” said Peter B. Necarsulmer, Chairman & CEO of The PBN Company (www.pbnco.com), the financial and strategic communications firm specializing in the former Soviet Union. “While a total of $5.58 billion has been raised so far this year, many of these new listings have underperformed in terms of generating demand, hitting financial targets and maintaining share prices.”
A total of 11 Russian companies have gone public in 2010, five in the first half of the year and six in H2 2010. Three Ukrainian companies, all from the agricultural sector, have also gone to the equity capital markets. Russian companies took 95% of the total money raised. There were no IPOs from companies based in other CIS countries.
agriculture · CIS · Digital Sky Technologies · finance · Hong Kong · IPO · Kazakhstan · Mining & Metallurgy · oil & gas · PBN · Russia · UC Rusal · Ukraine
Russian Energy Minister Sergei Shmatko said on Monday at a conference with EU officials in Brussels that Europe was cultivating “too much” of an alternative energy policy, and that Russia could provide them with “good and economically viable” reserves. Russian energy supplies to Europe may face significant reductions over the next decade, as the 27-nation EU is keen to have 20 percent of its energy consumption derive from renewable fuels.
Gazprom supplies approximately a quarter of the EU’s natural gas consumption, and represents the company’s largest market for revenue. According to Gazprom CEO Alexei Miller, the price of gas exported to the EU is ten times higher than gas sold on the domestic market. Russia and its state gas monopoly Gazprom have a legitimate reason to voice serious concerns over a diversifying European energy market. Supplying the West is essential for Gazprom’s continued success, and Russia’s economy as a whole. Nonetheless, important discussions and agreements need to take place between both the EU and Russia. Shmatko recognized the uncertain relationship by saying, “I think we have to say unfortunately that in the area of energy, if you look at the situation between Russia and the EU partners, there’s a certain lack of trust here and there.”
The “gas wars” between Ukraine and Russia in the past have led the EU to seek a more stable and diversified energy market, albeit at likely higher costs. “We of course understand that this is a fair approach by the EU to minimize any external risks,” said Shmatko. “However, we would still like to point out that any diversification means additional costs to you.” A noticeable decrease in European natural gas consumption has wreaked havoc on Russia’s resource-dominant economy. The Great Recession and the ensuing plunge in world energy demands contributed to last year’s painful 8% economic contraction, a situation the Kremlin does not want to see happen again. Mutual dependency – Russian gas sales to Europe and European imports of Russian gas – is a tenuous balance in the energy security relationship. The EU is taking active steps to provide a stronger base for its fuel demands, and Russia and Gazprom would be wise to do the same.
Kazakhstan improved its business regulation the most among the world’s economies in the past year, according to Doing Business 2011: Making a Difference for Entrepreneurs, an annual report recently published by IFC and The World Bank.
During the global financial crisis Kazakhstan significantly improved conditions for starting a business, obtaining construction permits, protecting investors, and trading across borders. As a result, it moved up 15 places in the rankings on the ease of doing business to 59 among 183 economies.
As noted by the World Bank Regional Director in Central Asia Motu Konishi at the press conference held after release of the report, “Kazakhstan has held a large amount of regulatory reforms aimed at easing conditions of doing business in Kazakhstan and making the life of entrepreneurs easier. Realizing its anti-crisis program.” Konishi noted that Kazakhstan not only adequately reacted to all the difficulties brought on by the crisis, but also improved business climate in the country through efforts from key players as well as private and public partnerships.
The government of Kazakhstan plans to increase excise tax on tobacco products by 25% in 2011. According to Mazhilis Deputy, Gulzhan Karagusova, the lawmaking body has expanded the government proposal and added an item allowing to increase excise rates by 25% not only in 2011, but in the next 2 years.
These changes are motivated by the necessity to comply with Article 6 of the Framework Convention of the World Health Organization on tobacco control, as the Kazakhstan’s current pricing policy does not meet the requirements of the convention. It is worth noting, that Kazakhstan has become one of the first CIS countries, which in 2004 acceded to the Framework Convention.
On November 3, the head of Russia’s Agency for Consumer Rights Protection and Human Welfare (Rospotrebnadzor) announced that beginning January 1, 2011, Rospotrebnadzor would ban the sale of deep-frozen chicken as well as its use in the manufacture of processed meat products. The threat of a ban understandably drew intense criticism from countries that export chicken to Russia, primarily the United States. Moreover, it raised the question of U.S. support for Russia’s WTO accession, merely weeks after it was finally negotiated.
Rospotrebnadzor has responded to critics by saying that the proposed ban is nothing new. Back in March 2008, a plan was developed that would restrict the use of frozen chicken in Russia. The first part, implemented in July 2008, outlined a ban on the use of frozen chicken in the manufacture of baby and dietary products. The broader ban currently being discussed is part of that original plan.
agriculture · foreign investment · Russia · U.S. · WTO
Mail.Ru Group, Russia’s leading internet holding company, launched an IPO that raised $912 million on the LSE today as a move to shore up its competitive position against international competitors. According to analysts, this is the first Russian issue this year that was able to place at the top of its price range. This year, Russian IPOs – including Wednesday’s listing of food retailer O’Key – have fallen short of targets.
Yuri Milner and Gregory Finger control more than 50% of Mail.ru with Alisher Usmanov owning 35% of shares and China’s 10cent holding 10%. Formerly known as Digital Sky Technologies (DST), Mail.ru Group’s companies comprise over 70% of page views on the Russian-language internet. For the past couple of years, there have been rumors that DST was planning an IPO. Analysts suggested that it would wait until markets recovered to get a higher valuation, since DST did not urgently need financing.
Meanwhile, DST voraciously expanded. In May 2009, DST invested $200 million in Facebook. Late in 2009, it bought a 1.47% stake in social games start-up Zynga and added 5.13% of social buying site Groupon to its portfolio in April. In July, DST bought instant messenger ICQ from AOL for $187.5 million after CFIUS cleared the deal. That same month, DST announced that it had gained 99.9% ownership of Mail.ru by swapping South Africa’s Naspers’ 39.3% stake in Mail.ru for a 28.7% stake in DST and $388 million in cash. In September, DST changed its name to Mail.ru Group.
Digital Sky Technologies · finance · IPO · Milner · Russia · technology
Next week, the International Energy Agency will release its annual World Energy Outlook report. The FT got a hold of a draft copy, which reveals some interesting insights into the future of Caspian oil and gas production. IEA places renewed attention on Caspian resources due to the “sizable increase in production and exports” set to come online this decade. Notably the region’s share of total global exports will reach 9% by 2035 – “enough to meet almost all the projected import requirements of North America in 2035.” Growth will be driven by Kashagan and Tengiz, two major oil fields in Kazakhstan that are set to come online in 2015 and produce 2 million bpd.
Perhaps the IEA’s biggest assessment is that the Caspian has the “potential to make a significant contribution to ensuring [global] energy security.” This view is optimistic given long-held skepticism that the region is “no Middle East” and that its potential to tip the security of supply/security of demand balance is often overstated. Despite the long-term demand for oil globally, the IEA report paints a bright picture for Kazakhstan, stating that it will emerge as the fourth most important producing nation in the world in terms of additional oil production. (more…)
China · energy · Kazakhstan · oil & gas · Russia · Turkmenistan
3
Russian Police Stage “Masky Show” at Moscow Bank
No comments · Posted by Sam_B in Uncategorized
A prominent bank owned by Russian billionaire Alexander Lebedev was stormed by a contingent of Moscow police officers and investigators the afternoon of November 2, raising concerns from the international community on Russia’s corporate governance. The police burst into the National Reserve Bank donning black facemasks and automatic guns. Lebedev’s spokesman, Artyom Artyomov described the whole ordeal as a “masky show” and completely unnecessary. The term “masky show” refers to flamboyant police raids on businesses during the tumultuous 1990s, where excessive shows of weapons and force by security officials were used to intimidate and scare businessmen. The government had said several years prior that they would no longer carry out these types of operations, said Artyomov.
Lebedev, an outspoken critic of the Kremlin, has been known to belittle government policies through his three newspaper outlets, Novaya Gazeta in Russia and the Independent and the Evening Standard, both in the United Kingdom. Yesterday’s headlines swirling around the Khordokovsky trial and his final statement seem to be an uncanny coincidence. Lebedev represents one of the Kremlin’s foremost iconoclasts, and a flashy gun show by the police in one of his establishments may have been designed to remind him to not stray too far from the good graces of the established order. Khodorkovsky too was and still is highly critical of the Kremlin’s policies, and despite his wealth through Yukos, the Russian government successfully put him out of business. If the former richest man in Russia can be destroyed, there is little doubt the Kremlin could do the same to Lebedev if it wanted.
A spokesperson for the police claimed that the operation was nothing more than part of an ongoing criminal investigation into several “dubious transactions” made in 2008. The masked forces were looking for evidence to support a criminal investigation into Rossiyskiy Kapital, a bank that Lebedev bailed out at the request of the government during the crisis, transferred some $14 million to a shell company before National Reserve Bank took it over.
Kazakhstan’s Prime Minister Karim Massimov has ordered the Ministry of Communication and Information to organize mobile email service for all members of the government. Per the prime minister’s request all ministers are also using iPads as of last week, according to Kapital. In the near future all lawmakers in the parliament, heads of different state agencies and even regional governors are to have such gadgets. In Massimov’s opinion, using tablet computers will allow easier and faster communication between lawmakers and the government.
According to the Minister of Communication and Information Askar Dzhumagaliev, one such gadget costs up to 180,000 tenge ($1,220). Such communication will cost the state budget 36.89 million tenge ($251,000).
Massimov’s vision to have everyone in the top echelon of Kazakhstan’s government connected through high-tech devices fits in with his earlier decrees on setting up personal blogs for all senior state officials and regular videoconferences with regional officials, as well as developing of e-government and working from BlackBerry devices. Clearly, Kazakhstan state officials are taking the page from President Dmitry Medvedev’s modernization agenda. The question of whether it will improve governance is yet to be seen.
