|
October 15, 2009—Volume 6, Issue 189
|
by Vladimir Socor On October 14 in Baku, Azerbaijan’s State Oil Company president Rovnag Abdullayev and Gazprom CEO Aleksei Miller signed an agreement on Azerbaijani gas exports to Russia. The move is a logical follow-up to the June 29 agreement, signed by the same company chiefs––in the presence of Presidents Ilham Alyiev and Dmitry Medvedev in Baku on that occasion––about the main principles of the gas trade between the two countries (see EDM, July 2, 17). This agreement turns Azerbaijan for the first time in history from an importer of Russian gas into an exporter of gas to Russia—albeit with small initial volumes—thanks to growing internal production in Azerbaijan. If understood and handled appropriately by the European Union and Turkey, this event can lend impetus to the E.U.– and U.S.–backed Nabucco pipeline project, notwithstanding European media speculation about Russia pre-empting Nabucco’s Azerbaijani gas supplies. The documents just signed involve a framework agreement for the years 2010 to 2014 and a sale-and-purchase contract for 2010. During this first year Azerbaijan shall export at least 500 million cubic meters (mcm) of gas to Russia through the Baku-Novo Filya pipeline, for use in Russia’s North Caucasus territories. Azerbaijan may increase that export volume during 2010, at its discretion. The gas may originate in any of Azerbaijan’s fields (Trend Capital, Day.Az, October 14). The Russian purchase price is not publicly specified. According to Abdullayev at the signing ceremony, the price-setting formula “suits the Azerbaijani side” – apparently a hint that the price is in line with the anticipated European netback prices for 2010. This had been Baku’s objective all along in the negotiations on its gas price. Under this agreement, the price is said to be adjustable every quarter, pegged to the price of the basket of oil products (APA, Turan, October 14). Miller had proposed to buy Azerbaijani gas at $350 per one thousand cubic meters in the lead-up to the June 29 preliminary agreement. Azerbaijan used to import Russian gas until as recently as 2006 through the old Baku-Novo Filya pipeline, which runs for approximately 200 kilometers along the Caspian Sea coast from the Russian border to Baku. This line will now be used in the reverse mode to carry Azerbaijani gas to Russia. The volume envisaged for 2010 will use only a fraction of this pipeline’s Soviet-era capacity. In addition, Azerbaijan is preparing its own section of the old Mozdok (Russia)-Gazimahomed pipeline, for possible reverse-use as a gas export outlet to Russia (Trend Capital, October 1). Gas extraction in Azerbaijan is set to reach 27 bcm for 2009 (Day.Az, October 8). The rate of increase could have been faster, but has been affected by slowed-down development at the giant Shah Deniz offshore field. That slowdown in turn reflects delays on the Nabucco pipeline project and Turkish government obstructions to a gas agreement with Azerbaijan. These two factors have postponed the opening of Azerbaijan’s gas export route to the West. In this situation, Azerbaijan can only open an export route to Russia while awaiting progress on Nabucco and with Turkey. Meanwhile, Azerbaijan remains committed to the Nabucco project. The government and the State Oil Company are consistently reaffirming Baku’s readiness to supply 7 bcm per year for that pipeline’s first phase. Construction work on Nabucco is now expected to start in 2011, for the first gas to flow by 2015 from Azerbaijan to Europe. Consequently, Baku has set the time-frame of the agreement just signed with Gazprom to expire in 2014, so as to release Azerbaijan from obligations to Gazprom after that year. Miller, however, declared at the signing ceremony explicitly that Russia wants to prolong this agreement after 2015, and for larger volumes of Azerbaijani gas (Interfax, October 14). That would pose risks for Nabucco. The October 14 agreement does not. This agreement, however, reiterates and amplifies certain lessons for the E.U., Turkey, and U.S. that were already implicit in the June 29 preliminary agreement. Azerbaijan’s move can actually help concentrate minds all-around on the Nabucco project, bearing the following considerations in mind. First, the volumes committed to Gazprom are meager and the time-frame does not impinge on the Nabucco project, assuming that Azerbaijan retains the necessary Western support to pursue Azerbaijan’s own Western choice. Awaiting Nabucco’s commissioning, it makes sense for Azerbaijan to use the existing pipeline(s) to Russia for exporting Azerbaijan’s growing surplus of gas during the interim period until 2014. Second, this agreement does not allow Gazprom to compete against Nabucco for Azerbaijani gas. But the situation could change in Russia’s favor, if Turkey’s AKP government insists on its extortionate terms for the purchase of Azerbaijani gas and its transportation through Nabucco. By the same token, Washington and the reshuffled European Commission, now entering a new term of office in Brussels, are being reminded that they need to lift that logjam in Ankara. Third, Baku’s agreement with Gazprom is a reminder to Ankara that Azerbaijan does not totally depend on the Turkish gas market or the Turkish gas transmission route. From Azerbaijan’s standpoint, adding a Russian export outlet—albeit a small one–is an export diversification move, away from Turkey’s perceived monopoly on transportation, which the AKP government seeks to abuse. Azerbaijan can also use the Baku-Astara pipeline to Iran, or swap arrangements with that neighbor country, during the interim period until 2014. Fourth, Baku is successfully resisting Gazprom’s wish to re-export Caspian gas to third countries, at a profit to Russia and at the expense of Caspian producers. Baku has stipulated that its gas shall be used in Russia’s North Caucasus. And if the Russian purchase price is consistent with European netback prices—as envisaged at the time of the June 29 preliminary agreement and, apparently, in the October 14 agreement-–Baku will have achieved a strategic gain. Turkey’s AKP government would place itself in an embarrassing position by insisting on worse terms than Russia has now consented to Azerbaijan. Across the Caspian Sea, Azerbaijan will have set a useful precedent for Turkmenistan to also demand European netback prices from Gazprom. If the cash-strapped Gazprom fails to meet that benchmark, then a part of Turkmen export volumes would become available for the proposed trans-Caspian link to the Nabucco project. –Vladimir Socor |
Category: Business
-
AZERBAIJAN-RUSSIA GAS AGREEMENT AND ITS IMPLICATIONS
-
Turkey’s first lady cooks special meals for Armenian President
ARMENIA
Thu 15 October 2009 | 07:41 GMT
Serzh Sarkisian and Abdullah Gul The first lady of Turkey cooked special meals for Armenian President Serzh Sargsyan, Novosti-Armenia’s correspodent reported from Turkey.Armenian FM Edward Nalbandian told Armenian journalists following the Armenia-Turkey football match that Gul arranged dinner in honor of the Armenian President.
“Special meals cooked by Turkish President’s wife were brought from Ankara in this regard. By doing this, Gul strived to make a reception in honor of the Armenian President more cordial”, said Nalbandian.
Armenian President Serzh Sargsyan has visited Turkey to watch the Armenia-Turkey football match in frames of the 2010 World Cup qualification.
Armenian and Turkish FMs Edward Nalbandian and Ahmed Davutoghlu signed a Protocol on Establishment of Diplomatic Relations and a Protocol on Development of Bilateral Relations in Zurich on October 10. The documents are to be approved by the parliaments of both countries after signing.
/Novosti-Armenia/
-
America: Don’t let your credit card company get away with it!
From:Kaya Atli [kayaatli@yahoo.com]
The credit card companies are at it again! Congress passed a law earlier this year that would put an end to their abusive tactics — including raising interest rates on our card balances for no reason — but the reforms don’t go into effect until February. In the meantime, they’ve been hiking interest rates, adding new fees and doubling our minimum payments.
I just emailed my members of Congress telling them to implement the reforms now — not in another four months. We can’t wait that long for these abuses to stop, especially with the upcoming holiday season.
Join me by going to Consumers Union’s money web site, www.creditcardreform.org, and send an email now. Congress needs to make this law effective immediately — we can’t afford more months of the banks’ tricks with our credit cards.
Thank you!
-
Turkey Receives a Mixed Progress Report
- EUROPE NEWS
- OCTOBER 15, 2009
Turkey Receives a Mixed Progress Report
Text 
By MARC CHAMPION and ADAM COHEN
BRUSSELS — The European Union criticized a tax case against Turkey’s biggest media group as posing a threat to press freedom, but also praised the government’s foreign policies and its overtures to the country’s large Kurdish minority, in a progress report on the country’s EU membership talks.
The $4 billion in fines and penalties that Turkey’s tax authority is demanding from Dogan Yayin Holding AS in two cases, “potentially undermine the economic viability of the Group and therefore affect freedom of the press in practice,” the European Commission said in a mixed annual progress report on Turkey’s bid to join the 27-nation bloc.
Olli Rehn, the commissioner for enlargement, told reporters his team had analyzed the Dogan tax case. “I have asked the Turkish authorities to treat this matter very seriously,” he said. He added that with fines larger than the company’s annual turnover, the case “feels like a political sanction” as well as a fiscal one. Dogan controls about 50% of media outlets in Turkey and has been critical of the government.
Turkey’s government strongly denies that the Dogan case is politically motivated. Officials note the country has a large underground economy and say they are merely pursuing unpaid tax from Dogan and thousands of others.
Turkey’s chief EU negotiator Egemen Bagis welcomed the report, describing it as the most objective to date, in remarks to Turkish media.
The progress report on Turkey was one of three on EU candidate countries, along with Croatia and Macedonia, as well five on ex-Yugoslav nations, including Albania, Serbia and Bosnia Herzegovina, which the EU has agreed should eventually be allowed to join the bloc.
Talks with Croatia are nearing their final phase, the commission said, after the ex-Yugoslav republic resolved a border dispute with neighboring Slovenia. All member states countries have to approve a new member, and Slovenia joined in 2004.
Turkey faces a much tougher road. Eight so-called negotiating chapters have been blocked in a dispute with Cyprus over Turkey’s treatment of the divided island.
The commission praised Turkey’s recent signature of a deal with Armenia to reopen the border between the two countries and establish diplomatic relations. Turkey’s effort to improve relations with the Kurdish authorities in Iraq and with its own Kurdish minority also gained praise from the commission. So, too, did a law passed in June to demine Turkey’s border with Syria, and Turkey’s efforts to mediate in the Middle East.
But EU officials say Turkey’s EU bid isn’t helped by such high-profile cases as Dogan. Turkish authorities levied fines and penalties of 915 million Turkish lira ($633 million) on the Dogan group’s media unit in February, and a further 4.8 billion lira last month. The government on Tuesday put a lien on some of the company’s assets after rejecting collateral it offered to put up while fighting the tax charges.
Write to Marc Champion at marc.champion@wsj.com and Adam Cohen at adam.cohen@dowjones.com
Printed in The Wall Street Journal, page A2
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
-
Ankara must decide
Oct. 12, 2009
THE JERUSALEM POSTWho would have thought – Turkey and Armenia agreeing to normalize political relations. Armenia’s president planning to attend a football match in Turkey. And George Papandreou, the new Greek prime minister, making Turkey the destination of his first trip abroad.These are encouraging examples of how age-old animosities are being relegated to the dustbin of history.Too bad, then, that Ankara appears to be simultaneously doing everything it can to junk its relationship with the Jewish state.On Sunday, in an unprecedented slap in the face, Turkey cancelled joint military exercises that were to have included pilots from Israel and NATO. At first, the Turkish Foreign Ministry lamely denied politics was involved. Then Foreign Minister Ahmet Davutoglu admitted on CNN that only when the “situation in Gaza” is improved could “a new atmosphere in Turkish-Israeli relations” be established.Analysts in Jerusalem suspect the government of Prime Minister Recep Tayyip Erdogan is using the unfortunate civilian deaths during Operation Cast Lead as a pretext for distancing Turkey from Israel – diplomatically, strategically and economically.ORDINARY Israelis find it hard to believe that faced with similar provocations – its population pounded by 8,000 rockets, murderous cross-border incursions, the kidnapping of one of its soldiers, the refusal of the enemy to abide by a cease-fire – the Turkish military would have refrained from taking action to stop the rocket fire and reestablish its deterrence out of fear that in defending its own citizens the lives of enemy civilians would be jeopardized.Indeed, it is debatable whether more Palestinians died at the hands of Israel in the Gaza conflict than Muslim Kurds died in Ankara’s repeated bombardments of northern Iraq (though Turkey insists that the only Kurdish loses were to livestock).Political scientist Efraim Inbar is convinced that Erdogan’s Islamic AKP party places greater value on Turkey’s ties with the Muslim world than on its political and cultural links to the West. Or does Turkey expect to jettison its relationship with Israel, cozy up to Iran and Hamas, and yet maintain strong ties with Washington and Brussels?ISRAEL’S relationship with Turkey has always had its ups and downs. Turkey voted against the 1947 UN Partition Resolution to create two states – Jewish and Arab – in Palestine, but it quickly established diplomatic relations with Israel. In the 1970s, weathering an economic crisis, it began building bridges to the Arab world. By the 1980s, thousands of Turks were working throughout the Middle East. The Iran-Iraq War cemented ties between Turkey and the Arabs when Saudi Arabia began supplying oil to Ankara.Even during periods when the Turkish military was in power, relations with Israel were sometimes sacrificed to persuade the masses that the government had Islamic bona fides. In 1975, Turkey recognized the PLO though the group was then publicly committed to Israel’s destruction. In 1979, Turkey refused to participate in the Eurovision Song Contest because it was being held in Jerusalem. Following the Knesset’s passage, in 1980, of the Basic Law affirming united Jerusalem as the capital of Israel, Ankara closed its consulate in our capital. Turkey even condemned Israel’s 1981 raid on Saddam Hussein’s nuclear reactor.Now, with the AKP in power, relations have deteriorated more systematically. In August 2008, Turkey broke ranks with the West by welcoming Mahmoud Ahmadinejad. Just before the outbreak of the Gaza war, Erdogan became angry at what he felt was his shabby treatment by Ehud Olmert while Turkey was mediating between Jerusalem and Damascus – a factor in his vituperative outbursts against Israel during the conflict.OTTOMAN Turkey sought to hold on to its empire by using pan-Islam to legitimize its rule over the Arabs. But Mustafa Kemal Ataturk founded modern Turkey as Western-oriented, secular and nationalist. Islam was disestablished. The Turkish army performed a watchdog function to protect these ideals. And Israelis knew that no matter what abuse Turkish politicians might heap on Israel, our two militaries continued to cooperate at the strategic level. Is that, too, now over?Turkey is an irreplaceable ally. Israelis want our two countries to enjoy cordial relations despite everything that’s happened. The onus is now on Ankara to make plain that it, too, wants the relationship to continue. It would thereby also be signaling that Turkey wants to be a bridge between Islam and the West – instead of yet another barrier.This article can also be read at https://www.jpost.com/ /servlet/Satellite?cid=1255204781185&pagename=JPArticle%2FShowFull -
China calls time on dollar hegemony
You can date the end of dollar hegemony from China’s decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.
By Ambrose Evans-Pritchard
06 Oct 2009The Chinese yuan: friends take a photo in front of a sculpture of a one-hundred yuan banknote in Beijing Beijing does not need to raise money abroad since it has $2 trillion (£1.26 trillion) in reserves. The sole purpose is to prepare the way for the emergence of the yuan as a full-fledged global currency.
“It’s the tolling of the bell,” said Michael Power from Investec Asset Management. “We are only beginning to grasp the enormity and historical significance of what has happened.”
It is this shift in China and other parts of rising Asia and Latin America that threatens dollar domination, not the pricing of oil contracts. The markets were rattled yesterday by reports – since denied – that China, France, Japan, Russia, and Gulf states were plotting to replace the Greenback as the currency for commodity sales, but it makes little difference whether crude is sold in dollars, euros, or Venetian Ducats.
What matters is where OPEC oil producers and rising export powers choose to invest their surpluses. If they cease to rotate this wealth into US Treasuries, mortgage bonds, and other US assets, the dollar must weaken over time.
“Everybody in the world is massively overweight the US dollar,” said David Bloom, currency chief at HSBC. “As they invest a little here and little there in other currencies, or gold, it slowly erodes the dollar. It is like sterling after World War One. Everybody can see it’s happening.”
“In the US they have near zero rates, external deficits, and public debt sky-rocketing to 100pc of GDP, and on top of that they are printing money. It is the perfect storm for the dollar,” he said.
“The dollar rallied last year because we had a global liquidity crisis, but we think the rules have changed and that it will be very different this time [if there is another market sell-off]” he said.
The self-correcting mechanism in the global currency system has been jammed until now because China and other Asian powers have been holding down their currencies to promote exports. The Gulf oil states are mostly pegged to the dollar, for different reasons.
This strategy has become untenable. It is causing them to import a US monetary policy that is too loose for their economies and likely to fuel unstable bubbles as the global economy recovers.
Lorenzo Bini Smaghi, a board member of the European Central Bank, said China for one needs to bite bullet. “I think the best way is that China starts adopting its own monetary policy and detach itself from the Fed’s policy.”
Beijing has been schizophrenic, grumbling about the eroding value of its estimated $1.6 trillion of reserves held in dollar assets while at the same time perpetuating the structure that causes them to accumulate US assets in the first place – that is to say, by refusing to let the yuan rise at any more than a glacial pace.
For all its talk, China bought a further $25bn of US Treasuries in June and $25bn in July. The weak yuan has helped to keep China’s factories open – and to preserve social order – during the economic crisis, though exports were still down 23pc in August. But this policy is on borrowed time. Reformers in Beijing are already orchestrating a profound shift in China’s economy from export reliance (38pc of GDP) to domestic demand, and they know that keeping the dollar peg too long will ultimately cause them to lose export edge anyway – via the more damaging route of inflation.
For the time being, Europe is bearing the full brunt of Asia’s currency policy. The dollar peg has caused the yuan to slide against the euro, even as China’s trade surplus with the EU grows. It reached €169bn (£156bn) last year. This is starting to provoke protectionist rumblings in Europe, where unemployment is nearing double digits.
ECB governor Guy Quaden said patience is running thin. “The problem is not the exchange rate of the dollar against the euro, but rather the relationship between the dollar and certain Asian currencies, to mention one, the Chinese Yuan. I say no more.”
France’s finance minister Christine Lagarde said at the G7 meeting that the euro had been pushed too high. “We need a rebalancing so that one currency doesn’t take the flak for the others.”
Clearly this is more than a dollar problem. It is a mismatch between the old guard – US, Europe, Japan – and the new powers that require stronger currencies to reflect their dynamism and growing wealth. The longer this goes on, the more havoc it will cause to the global economy.
The new order may look like the 1920s, with four or five global currencies as regional anchors – the yuan, rupee, euro, real – and the dollar first among equals but not hegemon. The US will be better for it.
Telegraph
