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Baku port can become free economic zone

by PPI

Baku International Sea Trade Port can become a free economic zone (FEZ), which would enable to bring about $1 billion of foreign investments, Taleh Ziyadov, the port’s director general, told reporters Jan. 19.

“Our idea is to create not only a transit recovery, but also an economic one around the new Baku port. In global practice, this is achieved through the establishment of free, or special economic zones,” Ziyadov said.

He also said there is a proposal to create a free economic zone around the Alat port, as in Hong Kong or Jebel Ali, adding this will give a momentum to the non-oil sector’s development.

“This proposal is still at the project stage,” he noted.

“A part of the work has already been done. The initial conceptual master plan of the FEZ has been prepared,” Ziyadov said. “Conditions will be created in the port not only for transhipment of cargos, but also for packing and storing them. Creating the FEZ is extremely important from an economic point of view.”

This will allow attracting both domestic and foreign investments, he added.

“As practice shows, the state invests in creation of an appropriate infrastructure, and the rest of the investments are put from abroad by individuals. We believe the creation of a free economic zone here is one of the most important areas for attracting foreign investments in Azerbaijan’s non-oil sector,” Ziyadov added.

“It is difficult to talk about the exact amount of investments, but about $1 billion will be attracted in the first few years,” he added.

By Maksim Tsurkov – Trend.

Removal sanctions off Iran – no game changer for oil prices

by PPI

The return of Iran to the world oil market, following the lifting of the sanctions against the country, will not be a game-changer for prices, Jason Tuvey, Middle East Economist at British economic research and consulting company Capital Economics believes.

“Even if Iran delivers on its ambitious plans to raise output from around 2.9 million barrels per day (bpd) at present to 3.5 million bpd later this year this would be less than half the increase in supply from Iraq over the last year, and it could be offset by the cuts building in non-OPEC supply,” Tuvey said in a report, obtained by Trend.

The international sanctions imposed on Iran with regard to its nuclear program have been removed as the Joint Comprehensive Plan of Action (JCPOA, aka nuclear deal) entered the implementation phase on Jan. 16.

Iranian officials have repeatedly announced that Tehran will increase its current oil export of one million barrels per day by 500,000 barrels as soon as sanctions are removed.

The figure is planed to increase by another 500,000 to two million barrels per day within a six month period at the next step.

Iran’s current oil production is estimated to be around 2.8 million barrels per day (mbpd), of which about one million barrels are exported.

Capital Economics’ analysts expect oil prices to rise from less than $30 per barrel at present to $45 per barrel by the end of this year.

Brent price will average $40 a barrel in 2016 and $50 a barrel in 2017, while WTI price will average $38.54 a barrel this and next year respectively, according to the forecasts of the U.S. Energy Information Administration (EIA).

Brent prices averaged $38 a barrel in December, a $6 a barrel decrease from November, and the lowest monthly average price since June 2004, according to the EIA’s estimates.

Brent crude oil prices averaged $52 a barrel in 2015, down $47 a barrel from the average in 2014.

By Aygun Badalova – Trend.

Central Bank comments on USD rate growth rumors in Azerbaijan

by PPI

Rumors about the US dollar rate’s increasing up to two manats/$1 are groundless, said Elman Rustamov, head of the Central Bank of Azerbaijan (CBA).

He made the remarks during a meeting of the country’s parliament Jan. 19.

Rustamov said the CBA is taking serious measures to stabilize the situation.

“We have increased currency intervention in the market,” he said. “The currency exchange offices, operating outside the banks, created a stir on the market. Over 200 currency exchange offices have been closed, and at present, all transactions, including currency exchange, are being held in banks.”

Rustamov also said the CBA provides the banks with sufficient amount of currency and is able to ensure its liquidity.

“I urge the people to remain calm,” he added. “The stir created after the February devaluation completely broke the logic behind devaluation. There is no reason for panic. Someone says that the dollar rate will be equal to two or five manats, but these claims are groundless.”

3 Freed Americans Leave Iran; U.S. Places New Sanctions

by PPI

VIENNA — With three Americans long held in Iran flying to Europe on Sunday, President Obama urged young Iranians to “pursue a new path” with the West as he imposed modest new sanctions on the country for banned missile tests.

The images of long-delayed freedom and Washington’s double-edged message underscored the uncertainties about the long-term implications of a dizzying 48 hours of diplomacy between Washington and Tehran that yielded a mutual prisoner release. It had hints of a budding era of détente. But there were clearly forces in both capitals arguing against any form of cooperation.

By the end of the weekend, the three Americans — a Washington Post reporter, a former Marine and a pastor — were at an American air base in Germany undergoing medical examinations, almost home after languishing in Iran’s worst prisons. The Iranians, for their part, were trying to adjust to a new world in which they were free to sell their oil around the world, but at prices far lower than they had anticipated, and to reconnect with a global financial system that had been closed off to them while they were expanding their nuclear infrastructure.

And it was unclear how they would spend upward of $100 billion in newly unfrozen funds — on long-delayed social welfare projects, or on the proxy wars that have expanded Iranian influence.

Mr. Obama also announced the resolution of another argument between Tehran and Washington that dates to the Iranian revolution, this one over $400 million in payments for military equipment that the United States sold to the shah of Iran and never delivered when he was overthrown. The Iranians got their money back, with $1.3 billion in interest that had accumulated over 37 years.

But perhaps the most notable part of Mr. Obama’s statement on Sunday was its absence of triumphalism and its warning that problems with Iran over ideology, Syria and regional ambitions were not over.

More at : http://www.nytimes.com/2016/01/18/world/middleeast/three-freed-americans-depart-iran-one-remains-us-officials-say.html?ref=world&_r=0

Top official: Azerbaijan welcomes West’s lifting sanctions on Iran

by PPI

Azerbaijan welcomes West’s lifting sanctions on Iran, which was achieved as a result of talks, read a statement by Novruz Mammadov, deputy head of Azerbaijani presidential administration, chief of the administration’s foreign relations department.

Iran and the P5+1 group of countries (the US, the UK, France, China, Russia and Germany) finalized the Joint Comprehensive Plan of Action (JCPOA aka nuclear deal) in Vienna, on July 14, 2015. Under the JCPOA, limits are put on Iran’s nuclear activities in exchange for the removal of sanctions against the Islamic Republic. Iran and the P5+1 implemented the JCPOA on Jan. 16, which eliminated sanctions on the country, including the restrictions over banking sector, releasing blocked assets abroad, etc.

“Azerbaijan doesn’t see the use of sanctions against countries in international relations for various reasons as a successful and fair step,” said Novruz Mammadov.

“Consequences of sanctions in all cases become a burden for the populations of countries on which they are imposed. This also prevents the interstate and intercivilizational understanding, dialogue and cooperation in modern world, and inevitably creates certain tension,” he added.

Mammadov also said that Azerbaijani President Ilham Aliyev spoke against the use of sanctions on Iran at a briefing in front of the White House during his first official visit to Washington in April 2006.

Russia ceases purchasing Turkmen gas

by PPI

Russian Gazprom Export LLC has officially notified the Turkmengaz State Concern about the pre-term unilateral termination of the purchase-sale contract since January 1, 2016, the Turkmen concern said.

Turkmenistan supplied its gas to Russia via the Central Asia-Center (CAC) pipeline, which was built in the Soviet period and later monopolized by JSC Gazprom. The gas was supplied on the basis of a 25-year contract signed in 2003.

Gazprom was the biggest buyer of Turkmen natural gas until 2009, by acquiring up to 40-42 bcm.

That period Russia was interested in buying cheap Turkmen gas, as it received big dividends by reselling it to the CIS countries and Europe. The Turkmen side has gradually decided to sell natural gas at the reasonable prices of the world market since 2009.

Gazprom Export sharply reduced receiving the Turkmen natural gas in April 2009. According to Ashgabat, this resulted in an explosion on the CAC gas pipeline. Therefore, Turkmen gas supplies were suspended, but resumed in early 2010 in much smaller volumes.

Despite the contractual arrangements, first, the volumes declined up to the level of 10-11 bcm a year for five years. The annual supply volume decreased by 2.5 times and amounted to four bcm in 2015.

Gazprom explained a decrease in the procurement volumes by a decline in demand for Russian gas in Europe and Ukraine. The fixed price on Turkmen gas at $240 per 1,000 cubic meters did not suit the Russian side any more due to the fall in export gas prices in Europe connected to the constantly falling oil prices.

Gazprom filed a suit against Turkmengaz in the Stockholm arbitration court in 2015, demanding to reconsider the contract prices on the gas supply.

After Russia stopped buying gas in early January 2016, Turkmengaz stated its willingness to negotiate with Gazprom Export on a wide range of issues related to the economic ties between the two economic entities.

“The Turkmen enterprises continue cooperating with foreign companies concerning natural gas supply,” the Turkmen state concern said. “They understand that the fundamental partnership principles are the mutual interest and mutual benefit. These important components of cooperation in the gas sector are mainly dependent on the financial and economic situation in the world.”

By Huseyn Hasanov– Trend.

Central Bank: Exchange offices to operate only in hotels and airports

by PPI

Banks will conduct currency exchange operations in their head offices, branches and departments (including exchange offices), as well as payment terminals, Central Bank of Azerbaijan told APA-Economics.

“ For a more effective and quick regulation of exchange operations by commercial banks, strengthen the control on operations, and as a continuation of works on optimization of service networks and operational costs, currency exchange operations in exchange offices have been limited, the exchange offices have been shut down.  Currency exchange operations are only conducted in tourism objects (hotels and airport). The banks have quite a wide infrastructure of service for providing access to banking services to the population, as well as businessmen. The banks operate 914 branches and departments, of which 458 are in the regions”, the bank said.

Iran frees arrested US sailors, releases their photos

by PPI

Iran released the US Navy sailors arrested on Jan. 12 after they drifted into Iranian waters, the Islamic Revolution Guards Corps (IRGC) Public Relations Department said Jan. 13 in a statement.

Earlier the IRGC said it seized two US navy boats with 10 sailors onboard at 16:30 (GMT+3:30) on Jan. 12. The IRGC Navy’s Public Relations Department, in a statement released on Jan. 13, said that the US navy boats entered Iranian territorial waters near Farsi Island in the Persian Gulf illegally.

“The arrested sailors were released in international waters in the Persian Gulf,” read the IRGC statement posted on its official website Jan. 13.

IRGC, which also released the photos of the American sailors, said its boats escorted the US vessels to international waters to release them there.

The IRGC freed the US Navy sailors after it became clear that the American boats entered Iran’s territorial waters “unintentionally.”

According to the IRGC statement, the US sailors apologized and pledged “to not make mistakes again.”

Earlier, the IRGC Navy Commander Rear Admiral Ali Fadavi said Iran’s investigations indicate that the US boats entered Iranian waters due to failure in the navigation systems.
us_navy_sailors_130116_01us_navy_sailors_130116_06us_navy_sailors_130116_10us_navy_sailors_130116_03

By Umid Niayesh – Trend.

Oil, gas companies switch to survival mode as oil prices remain low

by PPI

Additional 22 major projects and seven billion barrels of oil equivalent (boe) of commercial reserves have been deferred in the last six months of 2015 as a result of continuous low oil prices – on top of the 46 developments and 20 billion boe of reserves identified previously, said the Wood Mackenzie’s analysis.

Deepwater projects have been hit hardest, accounting for over half of the total, as companies are forced to rework projects with high breakevens, large capital requirements and high costs, according to the analysis, obtained by Trend.

“Tumbling prices and reduced budgets have forced companies to review and delay Final Investment Decisions (FID) on planned projects, to re-consider the most cost-effective path to commerciality and free-up the capital just to survive at low prices,” Angus Rodger, upstream research analyst for Wood Mackenzie said.

Companies are having to adjust investment strategies to the risk of sustained low prices and this means tougher screening criteria for pre-FID projects, according to Tom Ellacott, vice president of corporate Analysis for Wood Mackenzie.

“We believe that most companies will now be looking for these developments to hit economic hurdle rates at around $60 a barrel,” Ellacott said.

“Tougher capital allocation criteria will give companies the framework to make difficult decisions about restructuring portfolios, optimising pre-FID projects and capturing the full benefits of cost deflation. If a sector or country cannot meet new investment thresholds and compete for capital, operators are now more likely to choose divestment over warehousing a stranded resource,” he said.

By 2021 deferred volumes will reach 1.5 million barrels per day, rising sharply to 2.9 million barrels per day by 2025, according to Rodger.

Wood Mackenzie’s analysis suggests that Canada, Angola, Kazakhstan, Nigeria, Norway and the US are among the countries with the largest inventory of delayed oil projects. This includes oil sands, onshore, shallow-water and deepwater assets in both greenfield and incremental developments.

With oil prices recently falling to their lowest level since 2004, oil and gas companies will be forced to go into survival mode in 2016, according to Ellacott.

“Further project delays and cuts to discretionary investment are highly likely. That said, companies are being forced to re-evaluate how they can profitably develop large, high-cost conventional resources at low prices,” he said.

By Aygun Badalova – Trend.

BP to cut 4,000 more jobs worldwide including in Azerbaijan

by PPI

Hit by the slump in oil prices, British energy giant BP is planning to eliminate 4,000 jobs in its exploration and production units over two years, with the majority of job cuts planned this year.

The retrenchment plans, which is in addition to 4,000 jobs cut last year when BP trimmed its work force to about 80,000, comes as the price of oil dropped to a 12 year-low near $31 a barrel, AzerbaijanNews reports.

“We recently informed staff that we plan to further reduce numbers in our upstream segment by 2017 as we continue to simplify our biness, improve efficiency and reduce costs,” BP spokesman Brett Clanton said in an email. He said the company would not make cuts at the expense of safety, BP’s “number one priority.”

BP’s upstream operations this year will shrink to about 20,000 employees.

After oil prices began dropping from the peak in mid 2014, oil companies have shed more than 250,000 jobs worldwide last year, according to energy recruitment firm Swift Worldwide Resources. In the United States, the oil indtry lost 70,000 jobs, the Federal Reserve estimates.

In the past 12 days of 2016, oil prices have fallen 15 percent after plunging more than one-third in the previo year.

Some of the global analyst and energy think tanks have forecast that the low price scenario would continue in the near future as there is no sign of pick up in demand even as the oversupply situation continues with the Organisation of Petroleum Exporting Countries (OPEC) having decided against any production cuts.

“In an oversupplied market, there is no intrinsic value for crude oil,” Morgan Stanley analysts wrote in a note to clients. Assuming continued dollar appreciation, “$20-to-$25 oil price scenarios are possible simply due to currency,” they wrote.

Besides the low oil price, BP has cutting staff in the recent years as part of an exercise to raise resources through asset sale, downsizing operations, etc, to meet it liabilities arising from the Gulf of Mexico spill in 2010.

In 2015, BP was ordered to pay more than $20 billion in fines to resolve nearly all claims from its Gulf of Mexico oil spill five years ago. As a result, the company’s total pre-tax charge for the spill is now around $53.8 billion.

Last year, BP announced that it would lower its capital expenditure (CAPEX) to between $17-19 billion a year through to 2017. The group’s 2015 CAPEX was also cut by several billion.

BP’s operations in the North Sea, Alaska, Angola, Azerbaijan and the Gulf of Mexico are among areas being considered for job cuts.

Mark Thomas, regional president for BP North Sea, said in a statement that because of toughening market conditions “we need to take specific steps to ensure our business remains competitive and robust.”

No serious problems with gas supply to Georgia – SOCAR

by PPI

Georgia has never had serious problems with gas supply from Azerbaijan, Mahir Mammadov, head of SOCAR Energy Georgia, a subsidiary of Azerbaijan’s state oil company SOCAR, told Trend Jan. 12.

He said various processes that have no impact on the total volume of gas supplies occasionally take place.

“The matter rests in that the gas Georgia receives from Russia for transit is also taken into account when considering importer countries of Georgia,” Mammadov said. “This gas accounts for 10 to 15 percent of the total volume of gas importer countries and a certain correction takes place in case of technical failures or some working processes on Russian or Azerbaijani side.”

“The sides have been working in such a manner for already seven years, and no problems have been observed with deliveries so far,” he added.

He went on to add that Georgia receives gas via three gas pipelines.

“The first one is SOCAR’s Hajigabul-Gardabani gas pipeline, the capacity of gas pumping through which reaches 6.5 million cubic meters per day,” Mammadov said. “The second one is the South Caucasus Baku-Tbilisi-Erzurum gas pipeline, via which Georgia gets gas from the Shah Deniz field in the volume of up to three million cubic meters per day.”

“There is also a pipeline from Russia,” he said. “Gas is transported in normal mode via all the pipelines in compliance with balance and needs of Georgia.”

He went on to add that Azerbaijan is constantly in touch with the Georgian side, holds planned meetings and discusses directions of cooperation.

SOCAR exported 1.25 billion cubic meters of gas to Georgia in January-November 2015.

SOCAR delivers its own gas to Georgia via a pipeline that runs through Azerbaijan’s Gazakh district. The gas pumping capacity via this pipeline nears three billion cubic meters per year.

Azerbaijan is the main gas supplier to Georgia with a share of 77.9 percent of the total volume of gas imports of the country.

By Maksim Tsurkov – Trend.

Iran urges US to apologize for “trespassing” its waters

by PPI

Iranian Foreign Minister Mohammad Javad Zarif has urged the US to apologize for “trespassing” its waters, an Iranian military official said.

“[US Secretary of State John] Kerry called Zarif requesting Iran to release the detained sailors. Zarif took a strong stance, saying that the sailors were in Iran’s waters. Therefore the US must apologize,” Fars news agency quoted the Islamic Revolution Guards Corps (IRGC) Navy Commander Rear Admiral Ali Fadavi as saying Jan 13.

According to Fars, Kerry and Zarif held a phone conversation following the seizure of two American boats as well as 10 sailors onboard by the IRGC.

Fadavi further added that the IRGC’s naval forces will decide on the faith of the sailors as soon as the IRGC’s top hierarchy gives an order.

Iranian armed forces, including IRGC, report directly to Supreme Leader Ayatollah Ali Khamenei.

Although several sources have reported that the crew and vessels would be returned safely and promptly, IRGC spokesperson Brig Gen Ramezan Sharif said reports about releasing the sailors are just speculations and the sailors will be interrogated.

The IRGC Navy’s Public Relations Department, in a statement released on Jan. 13, declared that the US navy boats entered Iranian territorial waters near Farsi Island in the Persian Gulf illegally, the official news portal of the IRGC reported.

The arrested US sailors including one woman are “safe” and are being held in an “appropriate” place, the IRGC announced.

Earlier, Pentagon spokesman Peter Cook said the US military lost contact with two small US boats en route from Kuwait to Bahrain, confirming that the 10 sailors on the boats were in Iranian custody.

By Khalid Kazimov – Trend.

FEATURE 10 Conflicts to Watch in 2016

by PPI

SOFAZ reveals volume of revenues for entire period of its activity

by PPI

The revenues of the State Oil Fund of Azerbaijan (SOFAZ) for the entire period of its activity totaled $124.9 billion, SOFAZ told Trend Dec.29.

The State Oil Fund was created in 1999 and its assets were equal to $271 million that time.

The total expenditures of SOFAZ for the entire period of its activity amounted to $86.3 billion, including transfers to the state budget – $78.4 billion.

“At the same time, for the whole period the extra-budgetary expenditures of the fund due to the difference in the exchange rate of the currencies in the investment portfolio of SOFAZ, amounted to about $5 billion,” said the fund.

As of October 1, 2015, SOFAZ assets reduced by 6.38 percent compared to early 2015 ($37.1 billion) and were estimated at $34.74 billion.

Under SOFAZ’s regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The main goals of the State Oil Fund include: accumulation of resources and the placement of the fund’s assets abroad in order to minimize the negative affect on the economy, the prevention of “Dutch disease” to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

By Maksim Tsurkov – Trend.

Saudi Arabia expels Iran`s ambassador

by PPI

Saudi Arabia in response to protests in front of Saudi Embassy in Tehran decided to terminate the diplomatic relations with Iran, Haber 7 reported.

Saudi Arabia gave Iranian ambassador 24 hours to leave the country.

Iranian protesters against the execution of a Shiite leader by Saudi Arabia raided and set fire to the Saudi Embassy in Tehran late Saturday.

The move came hours after the Saudi Interior Ministry announced that prominent Shiite leader Nimr al-Nimr and 46 other men were executed on terror charges.

Azerbaijani government preparing anti-crisis plan

by PPI

Proposals on the abolishment of some state committees and agencies were made at today’s session of the Azerbaijani parliament.

MP Zahid Oruj noted that the government should reconsider the operations of several committees and agencies in the situation following the devaluation of manat.

MP Gudrat Hasanguliyev protested against the fact that Elman Rustamov, chairman of the Central Bank of Azerbaijan has not been dismissed yet, considering unacceptable the CBA’s statement that it is impossible to apply Nakhchivanbank’s decision by other banks.

“Such an attitude is wrong. The interest rate on loans offered by banks is 30-36 percent. Let them demand loans of at least 370 persons at the previous exchange rate of dollar,” he said.

MP Vahid Ahmedov proposed the repayment of up to AZN 10,000 loans at the previous rate of dollar. “Moreover, it would be better to extend deposit insurance and increase maximum sum of insured deposits from AZN 30,000 to AZN 500,000. This limit must be canceled at banks with high corporate management. We also offer banks to create larger financial banks that may reduce interest rates,” he added.

The Azerbaijani government is preparing a plan of measures to overcome the current difficult economic situation, said Parliament Speaker Ogtay Asadov.

“The plan will be made public soon,” he said.

The speaker also discussed the issue of problem loans, adding that the efforts will be made to solve it in a planned manner.

SOCAR announces gas export volumes to Georgia

by PPI

SOCAR (State Oil Company of Azerbaijan Republic) exported 1.25 billion cubic meters of gas to Georgia in January-November 2015, a source in the company told Trend.

“Since the beginning of 2015, Georgia daily received in average 3.74 million cubic meters of gas,” said the source. “Overall, export indexes are higher than in January-November last year, when 1.1 billion cubic meters of gas were exported,” said the source.

In 2016, SOCAR doesn’t plan to change the volume of gas supplies to Georgia.

“These rates will remain at the same level as in the current year, as the volumes have been agreed upon and slightly vary depending on the needs of Georgia,” said the source.

SOCAR exported 2.15 billion cubic meters of gas to Georgia in 2014, which is by 248.1 million cubic meters (10.5 percent) more than in 2013.

SOCAR delivers its own gas to Georgia via a pipeline that runs through Azerbaijan’s Gazakh district. The gas pumping capacity via this pipeline nears 3 billion cubic meters per year.

Azerbaijani president approves country’s state oil fund’s budget for 2016

by PPI

The budget of the State Oil Fund of Azerbaijan (SOFAZ) for 2016 has been approved by a decree of Azerbaijani President Ilham Aliyev.

SOFAZ revenues for 2016 have been defined at 6.711.564 billion manats, expenditures – 8.181.400 billion manats, according to the approved budget.

In the structure of income, revenues from the sale of profitable oil and gas of Azerbaijan are forecasted in the amount of 6.094.053 billion manats, acre payments – 2.1 million manats, income from oil and gas transit through the territory of Azerbaijan – 12.6 million manats.

In addition, revenues of the fund from the placement and management of assets are provided in the amount of 602.790 million manats, bonuses paid by investors within oil and gas agreements, or in connection with their implementation – 21,000 manats.

Transfers to the state budget of Azerbaijan worth six billion manats will be the largest part in the expenditure structure of the fund.

Expenditures for the improvement of living conditions of refugees are provided in the amount of 90 million manats, expenditures for the reconstruction of the Samur-Absheron irrigation system – 70 million manats, costs within the framework of the Baku-Tbilisi-Kars project construction – 137.622 million manats, costs for financing the state program on education of Azerbaijani youth abroad in 2007-2015 – 36.558 million manats.

In addition, the state oil fund’s budget for next year provides for the expenditures for financing the state’s share in the Southern Gas Corridor projects worth 1.823 billion manats.

Costs of fund management are approved at the level of 24.42 million manats.

SOFAZ was established in 1999 with assets of $271 million.

As of October 1, 2015, SOFAZ assets reduced by 6.38 percent compared to early 2015 ($37.1 billion) and were estimated at $34.74 billion.

Based on SOFAZ’s regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The main goals of the State Oil Fund include: accumulation of resources and the placement of the fund’s assets abroad in order to minimize the negative affect on the economy, the prevention of “Dutch disease” to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

Iran gets $5B credit line from Euler Hermes

by PPI

Iran and credit insurance company Euler Hermes have agreed on opening a credit line worth $5 billion which will be paid in two or three years, Iranian Deputy Minister of Economy Mohammad Khazaei said.

He added that during recent talks with Euler Hermes, Iran vowed to pay previous loan installments which have turned into outstanding debts as a result of sanctions, within one year or as soon as a problem with the lines is raised, Fars news agency reported December 26.

Khazaei further said that a Russian bank has also recently agreed to open a $2-billion line of credit for Iran.

This line of credit will be allocated to two projects in the ministries of transport and energy, Khazaei said.

Expecting the removal of the sanctions, Iran is eyeing foreign investment to rebuild various sectors. However, the Iranian government emphasizes investments that would bring technology and help improve the infrastructure, rather than fill the consumer goods market.

There is a power plant worth $1 billion to be launched in Fars Province, which a European insurance company has agreed to provide with a line of credit, according to the deputy minister of economy.

In another part of his interview, Khazei said that the UK Exchequer has agreed to settle a debt of $3 billion owed by the giant oil company Shell to Iran as soon as sanctions are lifted.

He noted that Iran’s entire debts to international monetary institutes are less than the amount that Shell owes the country.

The sanctions are expected to be lifted within a period of one month as Iran and the group 5+1 (the US, UK, France, Russia, China, and Germany) start implementing their nuclear deal called the Joint Comprehensive Plan of Action (JCPOA).

By Mehdi Sepahvand – Trend.

Russia to continue gas supply through Ukraine after 2019

by PPI

Russian gas supply through Ukraine will continue after 2019, Ukraine’s Minister of Energy and Coal Industry Vladimir Demchishin told Trend.

“Naturally, our [gas transport] system will be used. I have no doubts about that,” said the minister.

He noted that Ukraine’s gas transport system already exists and with the current prices for energy resources, it is very difficult to construct new large infrastructures.

This is while Ukraine’s infrastructure can receive around 100 billion cubic meters of gas, Demchishin added.

Earlier, Russia’s Gazprom company and Energy Ministry announced about the intention to absolutely suspend gas transit to Europe through Ukraine’s territory after 2019 when the current contract expires.

Ukrainian minister noted that even Russian President Vladimir Putin doubts propriety of this step.

Further, Demchishin said that many do not appreciate Ukraine’s possession of gas storages where gas can be pumped in summer and used in winter.

He pointed out that there are no such opportunities in the North Stream, the alternative route for supplying Russian gas to Europe and gas supply from Russia can be insufficient in winter.

Demchishin also went on to add that Ukraine now very actively looks for its gas transmission system operator.

“I’m sure that it will be Europeans, a global consortium that will be interested in this system to work,” he said.

Speaking of gas supplies to Ukraine, the minister said that the main volumes for today come from Europe. For example, less than six billion cubic meters from 14 billion cubic meters of total shipments of gas was purchased in Russia in 2015, he said.

Demchishin said that Ukraine is interested in diversification of gas sources and competition in the gas market. In this sense, gas supplies from Azerbaijan in accordance with the “Southern Gas Corridor” system and further may be promising, he said.

However, it is necessary to implement large infrastructure projects for these supplies, according to Demchishin, but given today’s energy prices, major gas transportation projects are not repaid.

“Therefore, we are primarily interested in resumption of the standard direction through Russia,” the minister said.

In addition, he said that Ukraine quite actively develops the energy saving sphere and is focused on power generation.

“So, I think in two or three years the structure of energy consumption in Ukraine will change radically,” said Demchishin. “The volumes will be different.”

By Elena Kosolapova – Trend.

Why are Turkey and Israel mending fences?

by PPI

Turkey and Israel are making peace not because they like each other but because regional balances require it. Why did Turkey and Israel start taking steps to overcome the crisis? What were the motivations? Let me try to explain.

Geostrategic shifts: We need to go back to March 1, 2013. That day, when four officials of the U.S. administration landed on Amman instructed by President Barack Obama to conduct secret talks with Iran, history had already put Tel Aviv and Ankara in the same basket. It became clear that Israel, who sees Iran as the biggest national security threat, and Turkey, who has historically always been in competition with Teheran, would not play against each other.

That’s why visiting Israel the same month, Obama made Israel’s Prime Minister Binyamin Nethanyahu apologize to Turkey. “Make peace; I am starting an Iran-oriented move in the region; you will need each other,” said Obama that day. Iran’s rising influence in the region was the most important reason for the reconciliation.

The Syrian crisis: In 2013, when it became clear the crisis would evolve with the rise of Iran, the two capitals started their “invisible” relationship. “Turkey sees us as its forbidden love. What it wants is for us to make love but for no one knows about it,” a former Israeli diplomat told me in October 2013. Turkey, who wanted the supremacy of Syria in the hands of the Sunnis who were close to it, and Israel, concerned about the presence of an Iran that had sent Hizbullah and its special forces to Syria to stop the fall of Bashar al-Assad, had started flirting behind the scenes while tension seemed to continue in front of the scenes.

The Russian effect: Why did the invisible cooperation become visible? If one of the reasons is the fact that there is no election for some time on Turkey’s agenda, another reason is Russia.

The fact that Moscow has upset the regional military balance after Turkey took down aRussian plane on Nov. 24 has encouraged Ankara and Tel Aviv to declare their cooperation to the world. Concerned about Russia’s violations, the two capitals most probably thought this would also send a message to Moscow.

Feridun Sinirlioğlu: One name on the Turkish side has played a very important role in the process. His is the best-kept secret in Ankara. Sinirlioğlu, “the strongest foreign ministry undersecretary of the recent past” according to a former Turkish diplomat, was the biggest architect. In the most active days of Ahmet Davutoğlu as foreign minister, a Turkish official told me that Sinirlioğlu “was the person Prime Minister Erdoğan trusted the most in the Foreign Ministry.” Think of his influence under Foreign Minister Mevlüt Çavuşoğlu.

Oil: There is talk of natural gas, which I don’t get. To what degree the natural gas reserves discovered five years ago by Israel in Leviathan is feasible when supply is high in the region; the financial problems faced by U.S.’ Noble, which has the right over the reserves, the legal discussions in Israel, the effect of Egypt’s recent discoveries, etc.

The issue is about oil. Israel is the buyer of the oil that Turkey brings from Northern Iraq bypassing the Baghdad administration.

Washington: The fact that Turkey wants to keep close to the Israeli lobby has speeded reconciliation.

Russia Rearms for a New Era

by PPI

Russia Is Building and
Expanding Bases in the Arctic

Russia is reinvesting in its bases in the Arctic: building new ones, expanding old ones and deploying personnel to operate them. Analysts say Russia’s efforts in the Arctic are driven in part by climate change, as the country seeks to exploit and defend maritime trade routes and oil and natural gas resources in areas made more accessible by melting ice.

Northern military activity since early 2014:

New or updated military bases

Source: Center for Strategic and International Studies

Its Military Budget Has
Been Growing Steadily

Russia has made big increases to its military budget, including a jump of nearly $11 billion from 2014 to 2015. According to Moscow, it is making up for years of disinvestment after the collapse of the Soviet Union. But sanctions from the Ukrainian conflict, dropping oil prices and other financial problems have weakened the Russian economy, and analysts expect military spending to slow.

The New York Times|Source: IHS Jane’s

Large-Scale Military Exercises

Russia has scheduled mobilizations of more than 100,000 troops, as well as unannounced exercises that move thousands of troops with almost no notice. These efforts serve as combat training for the troops and as a show of military strength to the world. They often involve units that control Russia’s nuclear arsenal, calling attention to the country’s nuclear abilities. NATO has responded by expanding its own exercises.

“The image that Russian official sources convey is that they’re preparing for large-scale interstate war,” said Johan Norberg of the Swedish Defense Research Agency. “This is not about peacekeeping or counterinsurgency.”

Full text :http://www.nytimes.com/interactive/2015/12/24/world/asia/russia-arming.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=photo-spot-region®ion=top-news&WT.nav=top-news&_r=0

‘Iran will buy 450 Boeing, Airbus planes’

by PPI

With the prospects for the removal of sanctions against Iran already looming, speculations are already rising that the country will need a much larger aviation fleet to better address what is seen to be a wider flight demand in the near future.

Airways News website reported in an article that experts believe Iran will order 450 new airplanes over the next five years.

It added that 400 of the new planes will be for mainline services, adding that 150 of them will be used for widebody services. The remaining 50 will be used for regional purposes and will be mostly turboprops.

Airways News added that demand for international flights that would require wide body aircraft will specifically rise.

“The deal opens up an entirely new long haul market, with VFR and even business driven traffic to the US,” the aviation news site added.

“There are roughly 700,000 Iranian-Americans [in the US], and Los Angeles (where the largest Iranian expat community in the US lives), New York, Washington D.C., and Houston could all support service to Tehran over the medium to long run.”

Airways News further emphasized that the demand for air trips from Europe and China to Iran will also rise as the country is expected to become a major tourism destination for both regions once the sanctions are lifted.

“[Iran’s] economic growth will push up domestic and regional traffic, particularly amongst tier 2 and tier 3 cities,” the website further added.

“And if the price of oil swings back towards historical norms, then all of these figures will likely have to be pushed up by 20-25%.”

Airways News quoted speculations that Iranian airlines are expected to proceed with revamping their ageing fleet of planes after the removal of the sanctions which is expected to happen in January.

“As far as the new orders go, the airlines will certainly order new generation aircraft like the Boeing 737 MAX, Airbus A320neo, Airbus A350, and Boeing 787. But given that these aircraft don’t have many delivery slots left, you can also expect the carriers to order present generation aircraft like the Boeing 737, Airbus A330, and Boeing 777-300ER, helping fill Airbus/Boeing’s production gaps in the process,” it said.

“And there’s always the outside chance that they throw Boeing a bone and buy some 747-8is…. Even if the economics of the 747-8i are subpar, the symbolism of the Iranians ordering Boeing’s biggest jet might be too big to pass up.”

MP: Azerbaijan will take similar step, if Smith’s bill approved

by PPI

Azerbaijan will take a similar step if the relevant US Committee and Congress approve the bill submitted by Christopher Smith, chairman of the US Helsinki Commission.

The statement came from Ali Huseynli, chairman of the Azerbaijani parliament’s Committee on legal policy and state-building, APA reports.

Huseynli said that the author of the draft resolution Rovshan Rzayev took this step as a board member of the Public Union “Azerbaijani Community of Nagorno-Karabakh”.

Rovshan Rzayev is also the deputy chairman of Azerbaijani parliament’s Committee on legal policy and state-building, said the MP.

According to Huseynli, the Committee supports Rzayev’s initiative, as some circles and congressmen under the influence of the Armenian lobby intensified their activities in the US.

“The Azerbaijani president is taking serious steps to solve the Karabakh conflict and Azerbaijani armed forces have achieved significant success on the frontline,” the MP said.

Unfortunately, at this time, some forces acting under the influence of the Armenian lobby in the US have deliberately begun to create an opinion on an alleged violation of human rights in Azerbaijan, he added. “That is, they are seeking to form an opinion that Armenians cannot live together with Azerbaijanis in Nagorno-Karabakh, because human rights are violated in Azerbaijan.”

The committee chairman mentioned that the US policy in the Middle East particularly  towards Muslims lead to mass violation of human rights in the 21st century. “In this case, how can the US deal with the liberation of Nagorno-Karabakh and protection of the rights of Azerbaijani refugees and internally displaced persons,” said Huseynli.

OPEC expects oil prices to go up to $70/bbl mid-term

by PPI

Growing demand and slower than previously expected non-OPEC supply growth will eliminate the existing oversupply and lead to a more balanced market, which, in turn, will provide support to oil prices, OPEC said in its World Oil Outlook (WOO), published on December 23.

OPEC forecasts oil prices to reach $70 a barrel by 2020.

In the Outlook OPEC Reference Basket (ORB) is assumed to average $55 a barrel during 2015 and to resume an upward trend in both the medium – and long-term. ORB is expected to reach $80 a barrel by 2020.

The price of the ORB in real terms is assumed to rise from more than $70 a barrel in 2020 to $95 a barrel in 2040.

While the average price of the OPEC Reference Basket during the first half of 2014 was over $100 a barrel, it dropped to less than $60 a barrel in December 2014 and has averaged close to $53 a barrel in the first nine months of 2015.

Global oil prices plunged from about $108 in the first half of 2014 to below $40 currently due to glut in markets.

OPEC members failed to reach an agreement on production ceiling on Dec. 4.

By Aygun Badalova – Trend.

President Aliyev: Changing manat’s rate was inevitable

by PPI

Naturally, the decrease in Azerbaijan’s oil revenues negatively affected the country’s national currency, President of Azerbaijan Ilham Aliyev said Dec.23, during the ceremony of awarding athletes and sports experts.

The main reason for changing the exchange rate of manat is the threefold decline in oil prices, said the president, adding that changing manat’s exchange rate was inevitable.

“Throughout the year, we were trying to maximally prevent it and were waiting for the oil prices to stabilize,” said Aliyev.

“When the oil prices stabilized at $50, we somehow calmed down that there will be no need for devaluation,” said the president.

However, currently, the oil price is $36, said Aliyev, adding that the latest decision made by the US on dollar triggers decrease in oil prices.

There are also other geopolitical factors here, he said.

“Personally, I believe that the sharp decline in oil prices has no natural economic grounds,” said Aliyev.

Story still developing

Azerbaijan offers Iran access to Black Sea via railway

by PPI

Azerbaijan has offered Iran to use the North-South transport corridor for transporting cargo to the Black Sea, Trend correspondent reported from Tehran.

The proposal was put forward during the 10th meeting of Iran-Azerbaijan intergovernmental commission on economic, trade and humanitarian cooperation that kicked off in Tehran Dec.21.

Co-chairs of the intergovernmental commission are the Minister of Economy and Industry Shahin Mustafayev from Azerbaijan and Minister of Communications and Information Technology Mahmoud Vaezi from Iran.

During the meeting, the Iranian side has been proposed to use the North-South transport corridor and Azerbaijan’s transport infrastructure for transporting its goods to Russia, as well as to the West – Black Sea – through Azerbaijan and Georgia.

The North-South railway will link Northern Europe with South-Eastern Asia. It will serve as a link between the railways of Iran, Azerbaijan and Russia.

The project envisages construction of a cross-border railway bridge between Iranian and Azerbaijani Astara and 8-kilometers-long branch on Azerbaijan’s territory.

The railway’s capacity will be 1.4 million passengers and 5-7 million tons of cargo per year, according to the preliminary estimates. Moreover, 22 tunnels and 15 bridges will be built along the railway.

At the initial stage, it is planned to transport 6 million tons of cargo via the North-South corridor per year.

Azerbaijan switches to floating manat rate

by PPI

The Central Bank of Azerbaijan switched to the floating rate of manat from Dec.21, 2015.

The decision has been made taking into account the strengthening of long-term shocks in foreign economy in order to equilibrate the balance of payments, keep the foreign exchange reserves in the country at critical level and ensure the competitiveness of national economy on the international arena, said the message from the bank.

Thus, the exchange rate of manat will be formed in accordance with the fundamental factors determining the supply and demand situation on the currency market, according to the decision.

The Central Bank will participate on the currency market (intervention) accordingly.

Meanwhile, the regulator will take complex measures to ensure the security of the population’s deposits and other deposits, improve the deposit insurance system, enhance the financial sustainability, liquidity position and capital of banks.

“Difficult processes in the global economy, latest decisions of leading banks in the world, rise of demand on the energy market, weakening economic growth in big countries which are the main oil producers, as well as global factors have led to over threefold decline in oil prices since June 2014,” said the CBA.

“All these processes affected Azerbaijan as well, which is closely integrated with the global economy processes,” said the message. “As a result, the foreign trade surplus and currency receipts to the country have decreased sharply.”

Taking into account that all these processes put serious pressure on the exchange rate of manat and the country’s currency market, the national currency was devaluated in 2015 and the economy, currency market and the exchange rate of manat were adapted to the oil price of $50-$55, according to the CBA.

However, sharp decline in oil prices in July again enhanced the pressure on the exchange rate of manat and currency market, said the message.

Meanwhile, the continuing devaluation in neighboring countries negatively affected the competitiveness of the national economy on the international arena, said the CBA.

Therefore, it became necessary to bring the currency market and the exchange rate of manat into line with oil prices, said the Central Bank.

By Azad Hasanli – Trend.

Oil market – battle field for Saudi Arabia-US war

by PPI

What we are seeing today in the oil market is no less than war to the death between Saudi Arabia and the North American oil industry, Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS), a Washington based think tank focused on energy security, and a senior adviser to the United States Energy Security Council believes.

“Relying on their deep pockets and 800 billion dollars of cash reserves, the Saudis have taken a calculated risk to keep prices low enough for long enough time for the American drillers to go bust,” Luft told Trend.

“They don’t seem to care that in the process they are ruining the economies of other exporters like Nigeria, Angola, Iran and Venezuela who don’t have such staying power,” he added.

Meanwhile, the world oil prices hit 11-year lows on Monday, December 21. Brent crude was trading down 2 percent at $36.16 a barrel on London’s ICE Futures Europe Exchange for cargoes loading in February. West Texas Intermediate was trading down 1.4 percent at $34.25 a barrel for January cargoes.

Saudi Arabia, by producing 10.25 million barrels per day of oil in the third quarter of 2015, ranks first among OPEC member countries in terms of crude production. The country was the one who pushed OPEC’s strategy shift last year to defend market share rather than cut output to support prices.

Luft believes that the Saudi Arabia’s such strategy is now beginning to work.

“The North American market is showing weakness and most producers are in the red. In the coming 12 months we will begin to see bankruptcies, defaults and consolidations,” he said.

The U.S. Energy Information Administration (EIA) forecasts U.S. crude oil production to decrease through the third quarter of 2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.3 million barrels a day in 2015 and 8.8 million barrels a day in 2016.

Talking about the further dynamics of oil prices, Luft said that the return of Iranian oil can push prices even lower to the 20’s as the market is still well supplied.

There is also a possibility of a peace deal in Libya which can bring additional product to market before long, according to Luft.

“That said there are always other factors at play that can drive prices up, most important of which is escalation of the situation in the Middle East and an irreversible collapse of the peace initiative in Libya and additional takeovers by ISIS [the IS terrorist organization],” Luft said.

 

By Aygun Badalova – Trend.

Direct deliveries of Azerbaijani gas to Greece to begin in 2021

by PPI

Direct deliveries of Azerbaijani gas in the amount of one billion cubic meters to Greece via the Trans Adriatic Pipeline (TAP) will begin in 2021, the Natural Gas Europe portal reported with reference to Kostas Andriosopoulos, senior advisor to the new CEO and the chairman of DEPA Greek Public Gas Corporation SA.

In accordance with the contract between DEPA and Turkish Botas, currently about 700 million cubic meters of Azerbaijani gas are annually re-exported to Greece.

Moreover, DEPA diversifying its gas portfolio will lead to better prices for retail customers – final consumers, Andriosopoulos said.

Having booked one billion cubic meters of capacity in the Trans-Adriatic Pipeline (TAP), he said DEPA has shown its level of commitment to the project.

“It’s part of our portfolio to have long-term contract supply agreements with Gazprom for about 65-67 percent of the quantities that we’re buying today; we have an LNG contract with Sonatrech for about 700 million cubic meters equivalent; and another 700 million cubic meters per year from Botas, which is Azerbaijani gas,” he said.

“If we are talking about the floating storage and regasification unit project (FSRU) in Alexandropolous, alongside the Interconnector Greece-Bulgaria (IGB) and Trans-Adriatic Pipeline (TAP) coming through it, we think that we can definitely enhance the position of the country within the region,” he said.

He went on to add that both the Botas and Sonatrach contracts are expiring in 2021, which offers the opening for gas flows from TAP to fill the bill.

TAP will transport natural gas from the giant Shah Deniz II field in Azerbaijan to Europe.

The approximately 870 km long pipeline will connect with the Trans Anatolian Pipeline (TANAP) at the Turkish-Greek border at Kipoi, cross Greece and Albania and the Adriatic Sea, before coming ashore in Southern Italy.

After closing the deal with Snam, the share distribution in TAP will be as follows: BP – 20 percent, SOCAR – 20 percent, Snam – 20 percent, Fluxys – 19 percent, Enagás – 16 percent, Axpo – five percent.

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