Kazakhstan continues to feel the consequences of both a prolonged slump in global oil prices and China’s devaluation of the yuang. The drop in oil prices to below $50/ a barrel has led Sino-Kazakh drilling company Velikaya Stena to lay off more than 200 employees in an effort to cut costs. The layoffs are partially the result of comparatively high labor costs in Kazakhstan, where the central bank has held the tenge relatively close to the dollar, keeping costs up. Analysts of the Kazakh oil and gas sector indicate that Kazakhstan’s economic growth could fall to just over 1% in 2016, as it is unclear where else Astana could look to drive growth.
The Kazakh tenge has experienced difficulties as a result of China’s devaluation of the tenge. A Bloomberg report indicates that the drop is the greatest since 2014 and that the drop in the value of the tenge would adversely affect Kazakhstan’s main trade partners by making their exports less competitive. Kazakhstan’s growth is inextricably linked to the Russian and Chinese economies as well as the price of commodities.
As such, the IMF’s revised estimate that Kazakhstan would grow by 3.25% in 2016 is perhaps questionable as the IMF takes the position that both the Russian economy and the Kazakh energy sector will recover.
Follow us on Twitter: @SteppeDispatch
- Oil is being traded near the lowest prices in more than six years, an article by Bloomberg indicates. The prolonged slump owes itself to a global glut in oil provoked by increased production in many parts of the globe, including in the US. The expected return of Iran to global markets will likely contribute to continued low oil prices making a comeback improbable.
- The Asian Development Bank has expressed interest in working with Turkmenistan on the long-discussed TAPI natural gas pipeline project. ADB Vice President Wencai Zhang recently reaffirmed the interest in a meeting with the Turkmen President Gurbanguly Berdimuhamedov. The ADB hopes to provide technical and financial support for the project in the hopes of bringing the pipeline online by the end of 2016.
- The council of ministers of the self-proclaimed Luthansk People’s Republic announced that they will adopt the ruble beginning on September 1 2015. This is perhaps unsurprising given the rebels’ alleged close affiliation with Russia.
- The Republic of Georgia openly criticized Russia for holding military exercises in Abkhazia and South Ossetia, regions that broke away from Georgia under the auspices of Russia. Georgian President Giorgi Margvelashvili condemned the exercises as “unacceptable.”
- Kazakh state-controlled uranium mining company Kazatomprom announced that production of uranium has increased over the past year. A statement released by the company indicates that the “physical volume” of uranium mining has grown from 5,650 tons between April and June of last year to 5,883 tons this year.