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Azerbaijan, the most stable country in the South Caucasus

Dimitris Giannakopoulos

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Welcome to the Caspian Daily, where you will find the 10 most important things you need to know on Caspian Sea Region. We appreciate ideas, reports, news and interesting articles. Send along to Caspian[at]moderndiplomacy.eu or on Twitter: @DGiannakopoulos

1Azerbaijan is the most stable country in the South Caucasus in terms of stability in domestic and foreign policy, economic power and the ability to resist extremism, says a report published by Minchenko Consulting. The report mentions that the collapse of the USSR gave birth to six armed conflicts, the majority of which still remain unsettled. “The South Caucasus is the only region in the post-Soviet area where some of the states do not have diplomatic relations. There are no diplomatic relations between Azerbaijan and Armenia, Georgia and Russia, Armenia and Turkey,” says the report.Azerbaijan is mentioned as the most stable country among the three South Caucasian countries in terms of stability in domestic and foreign policy, economic power and the ability to resist extremism. Azerbaijan comes first thanks to its monolithic political system and strong economy.

2Russia’s Defense Ministry broadcasting channel, Zvezda-TV, reports that Moscow has plans to start building new early warning radar stations in Azerbijan and near the Arctic Circle. The radar stations are meant to provide long-distance monitoring of airspace. Construction of the Voronezh-DM radar will start at Azerbaijan’s Soviet-era Qabala military complex in 2017 and is scheduled to be completed during 2019. The new radar will replace old Soviet radar system Daryal, which Russia stopped using in December 2012 due to differences with Baku over the Qabala lease fee.

3Some 234 trains have been launched via the China-Europe-China railway route through Kazakhstan for the first seven months of 2015, which is almost three times more than in the same period of last year, Kazakhstan Temir Zholy (Railway of Kazakhstan) said.”As of 2015, the number of organized container trains is expected to increase up to 510 or more than 40,000 containers, which is almost 40 times more than in 2011,” a statement said.”Kazakhstan Temir Zholy is actively working to implement the transit-transport potential of the country in three main vectors: East-West (China-Europe-China), TRACECA (China, Turkey, the Caucasus); North-South (China, Russia, India, Gulf countries),” a statement said. “Great success in this area was observed in transcontinental transportation via the China-Europe-China route.” The container transportation via this route increased, mainly due to redirecting the cargo flow from marine transport to railway transport.

4Kazakhstan Power Market Outlook To 2025. This report elaborates Kazakhstans power market structure and provides historical and forecast numbers for generation, capacity and consumption up to 2025. Detailed analysis of the Kazakhstan power markets regulatory structure, import and export trends, competitive landscape and power projects at various stages of the supply chain is provided. The report also gives a snapshot of the power sector in Kazakhstan on broad parameters of macroeconomics, supply security, generation infrastructure, transmission infrastructure, degree of competition, regulatory scenario and future potential. Financial performance of the leading power companies is also analyzed in the report. [Market Research Reports]

5Turkmenistan has seen a 7.8-percent GDP growth in oil and gas condensate production in the January-July 2015 period. This data was announced at a meeting of the Turkmen Cabinet of Ministers, which summarized the results from various sectors of the national economy for the first seven months of the current year. It was also noted that the country’s GDP growth was at the level of 8.7 percent, including an industrial sector growth rate of about 4.4 percent, 12.6 percent in the construction sector, 13 percent in trade, and 12.2 percent in agricultural production. The volume of investments from all financing resources amounted to 27.7 billion manat, representing a 7.9 percent growth from that of the same period in 2014.

6How Much Pressure Will Iran Put On Oil Prices? “According to Robin Mills, Head of Consulting at Manaar Energy, the anticipation of the Iranian deal has already caused prices to fall and further falls will depend on the pace of the increase in Iranian exports.“Iranian exports will increase somewhat ahead of the formal confirmation of lifting sanctions, about 6 months after the approval of the deal by the U.S. and Iran (which itself takes 3 months from signing), but the return of ~1 million bpd of Iranian exports will depress prices by $5-10 per barrel. In the long term, growing production from Iran will help keep prices moderate,” stated Mills to Oilprice” source: investing.com

7Central Asian Cities: Between Demography and Politics. “We live in a rapidly urbanizing world, where city populations are growing in across the globe at an impressive rate. In 1950, 28.8 percent of the world’s population lived in cities, in 1975 – this figure was 37.2 percent and in 2000 – 45.0 percent, while more recently, in 2009, it exceeded 50 percent. This trend is also apparent in the post-Soviet space, chiefly in Central Asia. In 1959, city-dwellers accounted for 38.5 percent of the population, whereas in 2014 this figure had risen to 47.6 percent, with the population increasing from 8.9 to 32.1 million. According to UN forecasts, by 2050 the region is to become home to 82 million people, with 45 million or 55 percent residing in cities. The fastest increase takes place in major cities, which are gradually becoming into megalopolises, and this gives rise to a range of political challenges for Central Asian states” Artem Dankov for RIAC.

8Kazakhstan’s Mining Fiscal Regime. Kazakhstan has significant fossil fuel reserves, and mineral and metal deposits. It produces a variety of mineral resources such as coal, uranium, lead, zinc, tungsten, molybdenum, borates, phosphorite, copper, potassium and cadmium. The fiscal regime report covers mining industry of Kazakhstan which is governed by the Ministry of Industry and New Technology and Ministry of Environmental Protection. The Law of Subsoil and Subsoil Use is the main regulating law for mining activities in the country. The report outlines governing bodies, governing laws, licenses, rights, obligations and key fiscal terms which includes upfront payments and taxes on subsurface usage, land tax, vehicle tax, deductions, depreciation, loss carry forward, withholding taxes and value added tax (VAT) [Research and Markets]

9Three-day consultations of heads of customs services of the participating countries of international transport project North-South, including Azerbaijan, will start in Delhi tomorrow. Indian ambassador to Russia Pundi Srinivasan Raghavan has informed today that the parties are actively working on launching this project as it will halve the costs on the delivery of goods. Transport corridor from Nava Sheva (Mumbai, India) through Bandar Abbas (Iran) to Astrakhan (Russia) and Baku (Azerbaijan) is expected to reduce much the time of transporting cargo from India to the regions of Central Asia and Russia. Currently, an important issue in the running of transport corridor North-South is the completion of railway line Qazvin-Rasht-Astara with length of 375 km.

10Kazakhstan, Azerbaijan, Kyrgyzstan and Turkey agreed to create a common Turkic-speaking channel.Memo was signed during the first meeting of the ministers in the sphere of information and media council of cooperation in Astana. The channel will broadcast in the language of the member-states which signed a memo on its creation.

Journalist, specialized in Middle East, Russia & FSU, Terrorism and Security issues. Founder and Editor-in-chief of the Modern Diplomacy magazine. follow @DGiannakopoulos

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After stalling last year, renewable power capacity additions to hit double-digit growth in 2019

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After stalling last year, global capacity additions of renewable power are set to bounce back with double-digit growth in 2019, driven by solar PV’s strong performance, according to the International Energy Agency.

The IEA expects renewable capacity additions to grow by almost 12% this year, the fastest pace since 2015, to reach almost 200 GW, mostly thanks to solar PV and wind. Global solar PV additions are expected to increase by over 17%.

Last year was the first time since 2001 that growth in renewable power capacity failed to accelerate year on year, largely due to a Chinese government policy change. This highlights the critical role of governments for the deployment of renewables and the need to avoid sudden policy changes that can result in strong market volatility.

Renewables have a major part to play in curbing global emissions and providing universal access to affordable, secure, sustainable and modern energy. Renewable capacity additions need to grow by more than 300 GW on average each year between 2018 and 2030 to reach the goals of the Paris Agreement, according to the IEA’s Sustainable Development Scenario.

“These latest numbers give us many reasons to celebrate: Renewable electricity additions are now growing at their fastest pace in four years after a disappointing 2018,” said Dr Fatih Birol, the IEA’s Executive Director. “We are witnessing a drastic decline in the cost of solar power together with strong growth in onshore wind. And offshore wind is showing encouraging signs.”

“These technologies are the mainstays of the world’s efforts to tackle climate change, reduce air pollution and provide energy access to all,” Dr Birol said. “The stark difference between this year’s trend and last year’s demonstrates the critical ability of government policies to change the trajectory we are on.”

The cost of solar PV has plunged more than 80% since 2010, making the technology increasingly competitive in many countries. The IEA estimates that global solar PV capacity additions will increase to almost 115 GW this year, despite a slight decline in China, the world’s largest market. This is set to be the first year that solar PV additions have surpassed 100 GW and the third year in a row that they account for more than half of global renewable additions.

The softness in the Chinese solar PV market is being offset by faster expansion in the European Union, led by Spain; a new installations boom in Vietnam as developers rush to complete projects before incentive cuts; and faster growth in India and the United States. Japanese solar PV developers are also expediting the commissioning of projects to meet deadlines for higher incentives.

The pace of acceleration in the Chinese solar PV market remains the biggest uncertainty for the IEA’s 2019 estimates. China’s policy transition from feed-in tariffs to competitive auctions resulted in relatively slow solar PV deployment in the first half of 2019. But installations in the second half of the year are expected to accelerate with the completion of the first projects linked to large-scale auctions and the emergence of projects that rely far less on incentives to compete with other power sources.

The rebound in renewables is also supported by higher onshore wind growth, which is expected to rise 15% to 53 GW, the largest increase since record deployment in 2015. In the United States, project developers have accelerated deployment before the phase-out of federal production tax credits. In China, lower curtailment levels have unlocked additional growth in several provinces this year, enabling faster expansion.

Offshore wind growth is expected to be stable at around 5 GW in 2019, led by the European Union and China.

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Liquidity Crisis Weighs on An Already Strangled Palestinian Economy

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Palestinian Authority (PA) faces a financing gap that could exceed US$1.8 billion for 2019 driven by declining aid flows and the unresolved transfer of taxes and import duties collected by Israel on behalf of the PA (clearance revenues), according to a new report released today by the World Bank. 

The report highlights the financing gap that has forced the PA to accumulate debt from domestic banks, and build up arrears to employees, suppliers and the public pension fund, creating large liquidity challenges for the economy. The Palestinian economic monitoring report will be presented to the Ad Hoc Liaison Committee (AHLC) on September 26, 2019 in New York, a policy-level meeting for development assistance to the Palestinian people.

“The outlook for the Palestinian territories is worrisome as drivers of growth are diminishing and the severe liquidity squeeze has started to affect the PA’s ability to fulfill its responsibilities of paying its civil servants and providing public services,” said Kanthan Shankar, World Bank Country Director for West Bank and Gaza. “With the right actions and collaboration between the parties, the situation could be reversed and bring relief to the Palestinian people, its economy and living standards.”

Overall revenue received in the first half of 2019 was half the amount in the same period last year mainly due to a 68 percent drop in clearance revenues. The PA has rejected the transfers of all clearance revenues due to deductions by Israel of US$138 million per year. As a result, the PA has taken a number of steps to cope with the loss of liquidity including fully using its borrowing capacity from domestic banks and paying only 60 percent of salaries to its employees while protecting those that make NIS2,000 per month (US$ 550) and below.

The retroactive transfer of fuel taxes made by the Government of Israel in August 2019 is expected to enable the PA to manage till the end of 2019 with reduced spending, while continuing to accrue arrears to employees, and private sector suppliers. Transferring to the PA the responsibility for fuel taxes that comprise about a third of total clearance revenues would be a partial help, but a more comprehensive agreement needs to be reached covering the mechanism and nature of Israeli deductions from clearance revenues going forward. 

Growth in the Palestinian territories is estimated at 1.3 percent in 2019. This forecast is largely due to a slight improvement in Gaza of 1.8 percent growth, after a dramatic 7 percent decline in 2018. Reflecting the liquidity squeeze, growth in the West Bank is expected to slow in 2019 to the lowest level over the last five years at 1.2 percent.  As the PA, businesses and households exhaust their options for coping with the liquidity crisis, a recession is forecasted for subsequent years in the absence of an agreement that restores the normal flow of these revenues.

 “While the regular flow of clearance revenues is an immediate priority, for sustained economic expansion, steps need to be taken to reduce access and trade barriers. Work also needs to be done to enhance the business environment for Palestinian businesses. Coordinated efforts and support by all parties could offer better economic prospects for Palestinians,” added Shankar.

Progress can be made by expanding the pilot of door to door transport (a single movement of cargo on one mode of transport) through the West Bank crossings; completing the negotiations over electricity purchases between Palestinian and Israeli electricity companies; and revising the dual use goods system. Internally, reforms to improve the business climate are critical, including finalizing the revised Companies Law before the end of the year; and completing the institutional reform at the Palestine Land Authority to improve the efficiency and transparency of land administration. 

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New Study Offers Pathways to Climate-Smart Transport

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A two-volume study laying out a pathway to a low-carbon and climate-resilient transport sector in Vietnam was released at a workshop on Addressing Climate Change in Transport, held in Hanoi today.

This analytical work comes at a critical time when the Government of Vietnam is updating its Nationally Determined Contribution on reducing carbon emissions and set out its next medium-term public investment plan for 2021-2025.

“A resilient transport system is critical to the continued success of Vietnam’s economy, which relies heavily on external trade and seamless connectivity,” said Ousmane Dione, World Bank Country Director for Vietnam. “We hope that the findings and recommendations of this new report will help Vietnam in its efforts to achieve a resilient and sustainable transport sector.

The first volume demonstrates that by employing a mix of diverse policies and investments, Vietnam can reduce its carbon emissions in the transport sector up to 9 percent with only domestic resources by 2030, and 15-20 percent by mobilizing international support and private sector participation.

Currently, the transport sector contributes about 10.8 percent of the total CO2 emissions. In a business-as-usual scenario, these emissions are projected to grow at an annual rate of 6-7% to nearly 70 million tons CO2e. The most cost-effective measures to boost the resilience of the transport sector include shifting traffic from roads to inland waterways and coastal transport, deploying stricter vehicle fuel economy standards, and promoting electric mobility.

The second volume provides a methodological framework to analyze critical and vulnerable points of the transport network, and presents a strong economic case for investing in building the climate resilience of Vietnam’s transport networks. A vulnerability assessment looks at the potential impact of different hazards on the transport corridor or network, and the criticality assessment considers such questions as which links and routes along transport networks are the most critical for the unimpeded flow of transport across a particular transport network.

The study identifies systemic critical issues and hazard-specific, high-risk locations in Vietnam’s transport network. Considering climate change, it is estimated that 20 percent of the network is most critical in terms of its exposure to future disaster risks. Meanwhile, road failures can result in very high daily losses of up to US$1.9 million per day, while railway failures can result in losses as high as US$2.6 million per day.

To prepare for the increasing intensity and frequency of extreme hazards due to climate change, it is imperative to make investments to overhaul existing road assets to higher climate-resilient design standards.

Given the vulnerability of land-based transport, a shift to waterborne transport offers a good resilience strategy. A 10-percent shift in that direction could reduce climate risks by 25 percent, according to the report.

This report is a collaborative effort among the Vietnamese Ministry of Transport, the World Bank and Deutsche Gesellschaft für InternationaleZusammenarbeit GmbH (German Development Cooperation GIZ) under the commission by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU). It is sponsored by the Australian Government through the Australia-World Bank Group Strategic Partnership in Vietnam – Phase 2 (ABP2) program.

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