The Central Bank of Kazakhstan’s governor, Kairat Kelimbetov, tantalizingly announced once again that it intends to move away from its currency peg to the dollar and move towards what it called an “inflation targeting” method, implying a switch to a floating exchange rate regime. Bloomberg conducted an extensive interview with Kelimbetov where he explicitly stated that “we are moving from a fixed exchange rate to a more flexible exchange rate, but this is a three-to-five year agenda.”

Kelimbetov also dodged the question of whether the tenge is overvalued compared to the dollar, and flat out did not answer about a comparison with the ruble. Most other CIS countries devalued their currencies thanks to the decline in oil prices and the simultaneous devaluation of the ruble. Kelimbetov said that the February 2014 devaluation of 19% was a bit of a “fortuitous overshoot” that provided a cushion against oil prices and the ruble.

The currency has come under consistent pressure this year to devalue, despite authorities’ reassurance that they would not allow a one-step devaluation, most banks are preparing for a 30% drop in the value of the tenge against the dollar in the near future. The devaluation plans were derailed by the announcement of an early presidential election this past April, as well as several national solidarity holidays, which would have been completely ruined by social protests.

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News Briefs:

• FMC Technologies, an American oil and gas equipment firm, has been selected as the subsea systems provider for well clusters in the Shah Deniz Stage 2 natural gas project being operated by BP Petroelum in Azerbaijan. The project is projected to be one of the largest natural gas fields under development currently, but its viability and customer base depends largely on the construction of three pipelines – the first of which is South Caucasus Pipeline (SCPX) extending from Azerbaijan to Georgia, the Trans-Anatolian Pipeline (TANAP) which will stretch across Turkey, and the Trans-Adriatic pipeline which will stretch from Greece and Albania to terminate in Italy.

• The only Russian lawmaker to oppose the annexation of Crimea, Duma representative Ilya Ponomaryov, has been charged with embezzlement, according to a new report by a state committee investigating corruption called the Federal Investigative committee. Ponomaryov fled to the US in April after being stripped of his parliamentary immunity from prosecution in April.

• Russian President Vladimir Putin and US President Barack Obama have spoken for the first time in over 4 months. Apparently Putin initiated the dialogue, and the issues discussed ranged from the Islamic State in Syria and the Iran nuclear deal. However, Obama focused the discussion on Ukraine, urging Putin to abide by the Minsk II Accords and a deal was made to have Deputy Foreign Minister Grigory Karasin to speak with Victoria Nuland, assistant secretary of state, about the fulfillment of the Minsk accords.

• Russian President Vladimir Putin has vowed to continue military modernization efforts during a June 25 meeting with military academy graduates, but went on to say that Moscow has no aggressive intentions towards any nation and will seek to “settle any disputes exclusively by political means with respect to international law and interests of other nations.” The Russian modernization budget is set at some 22 trillion rubles to be spend through 2020 (roughly $400 billion dollars).

• Uzbek law enforcement officials have seized and burned some 1.4 tons of heroin and opium narcotics bound for distribution in Russia and Europe from growing fields in Afghanistan. The narcotics superhighway through Central Asia from Afghanistan has been increasing in recent years, as last year farmers had their largest crop ever of opium and few efforts by the ISAF, international groups, or the Afghan National Army have been able to restrict its growth.

• As US Secretary of State John Kerry returns to Vienna today for the final round of negotiations between the P5+1 Powers and the Iranian government before the June 30 deadline, the US State Department has issued its own proclamation, stating that sanctions will remain in place regardless of any nuclear deal brokered this weekend due to human rights violations. The guarantor of this arrangement is Tom Malinowski, the US assistant secretary of state for democracy, human rights, and labor – a statement which could severely jeopardize the ability of US negotiators to negotiate in good faith.

• Another US political development will have repercussions for Eurasia, in this case, it is Congress’s lack of approval for the renewal of the US Import-Export Bank, the United States’ export credit agency, which guarantees credit for firms exporting to foreign markets and has been described by opponents as “crony capitalism.” US industrial OEM’s like Boeing and John Deere will face a much tougher export market without credit support, and it will affect the use of US equipment for oil and gas operations in Russia, earth moving and construction in Kazakhstan, and in particular, agricultural equipment for Ukraine. It isn’t clear if purchasing countries will substitute financing.

• The final delineation of maritime borders will be decided by the Caspian Sea status convention during the next summit in Astana 2016, according to Kazakh Foreign Minister Yerlan Idrisov, who spoke during a Senate session yesterday and would allow for the littoral states (Azerbaijan, Turkmenistan, Iran, Russia, and Kazakhstan) to explore their offshore reserves of oil and gas. Russian Deputy Foreign Minister Grigory Karasin said that he expressed optimism that the legal work on the Caspian would be completed during this upcoming summit as well.