American-Uzbekistan Chamber of Commerce
Week in Review:
June 8, 2012 - June 15, 2012

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In This Issue:
MIGA Supports LUKOIL Gas Development in Uzbekistan
Uzbek President, U.S. Deputy Secretary of State discuss situation in Afghanistan
WB Urges Developing Countries to Strengthen Domestic Fundamentals, to Weather Global Economic Turmoil
Petrovietnam to explore new block in Ustyurt region

Established in 1993, the American-Uzbekistan Chamber of Commerce (AUCC) is a private, non-profit trade association representing interests of U.S. businesses ranging in size from small private enterprises to large, multinational corporations conducting business in Uzbekistan.

Our Mission: To advocate the views of the business community to ensure that private sector positions are considered during the development of key policies that impact American businesses and the future of U.S.-Uzbekistan relations.

Our Objective: To serve the needs of its members by strengthening commercial relations between the United States and Uzbekistan.
The Multilateral Investment Guarantee Agency (MIGA)-the political risk insurance arm of the World Bank Group-announced today it is supporting a gas development project in Uzbekistan expected to have a significant positive impact on the economy. MIGA issued an investment guarantee of $119.5 million to BNP Paribas (Suisse) SA of Switzerland-acting as a political risk guarantee agent for a consortium of banks-to cover a non-shareholder loan to LUKOIL Overseas Uzbekistan Ltd. for the upstream gas development of the Khauzak-Shady Block and the Kandym Field Group. Other banks in the consortium include Crédit Agricole Corporate and Investment Bank and the Korean Development Bank.

The project has an important demonstration effect for foreign investors in Uzbekistan, especially given the country's need to attract foreign direct investment to improve the economy. MIGA's support for this project in a remote and relatively poor region of Uzbekistan validates the company's efforts to meet international best practice with respect to the governance, environmental, and social impacts of oil and gas projects.

"We have witnessed first-hand the attention this project has received, mainly for its ability to enable a consortium of international banks to provide project finance in Uzbekistan for the first time," said Abir Burgul, MIGA's senior underwriter who worked on the transaction.

Oktay Movsumov, Head of Project and Structured Finance, OAO LUKOIL noted, "Without multilateral organizations' involvement in this project, we would have been hard-pressed to find financing. Indeed, it was the synergies among MIGA, the Asian Development Bank, the Islamic Development Bank, and then the consortium  of commercial banks that enabled project finance of this magnitude and importance for the country."

"From our perspective, MIGA's participation was critical as the availability of political risk insurance was a condition for the commercial banks' participation," said Nicolas Jobert, Director of BNP Paribas Suisse.

The project is required to comply with MIGA's performance standards on social and environmental sustainability. In addition, LUKOIL has prepared a biodiversity action plan pertaining to activities near an important wetland area, Lake Dengizkul. Once the Kandym project is completed, it will be a major employer, foreign exchange earner, and source of revenue for the Uzbek economy. 

President of Uzbekistan Islam Karimov on Tuesday received the first deputy U.S. Secretary of State William Burns, who arrived in Tashkent on a working visit, the Uzbekistan National News Agency (UzA) reported.

During the talks both sides considered the state and future directions of cooperation, the most urgent issues of bilateral relations and exchanged views on regional and international issues, stabilising the situation in Afghanistan, as well as other topics of mutual interest.

President Karimov noted the growing dynamics and gradual strengthening of the multifaceted Uzbek-American partnership.

He said the visit of Deputy U.S. Secretary of State is an illustration of the growing dynamics of bilateral relations and cooperation between the countries on a growing number of issues and problems that Uzbekistan and the U.S. have to solve together.

Karimov said that Central Asia holds a special position in relation to the problems that occur in Afghanistan and the situation in the world and the region is changing so fast that consultations are necessary and useful both for the USA, and Uzbekistan.

Burns confirmed the interest of U.S. leadership in the further expansion of ties with Uzbekistan in the political and economic and humanitarian fields.

Regular contacts between the foreign ministries, expansion of inter-parliamentary relations and the multifaceted dialogue of state structures and civil society of both countries give a complex nature to the relations. The same day, Burns held talks at the Ministry of Foreign Affairs of Uzbekistan.

According to the press service of the Ministry of Foreign Affairs, the sides discussed the practical issues of the implementation of Uzbek-US agreements in political, economic, cultural and humanitarian fields.

According to U.S. sources, Burns also plans to meet in Tashkent with civilian representatives with whom he will discuss issues of regional economic integration, bilateral trade and investment ties, as well as the importance of strengthening democratic institutions and the status of human rights.

From Tashkent the representative of the U.S. Department of State will travel to Kabul where he will head the U.S. delegation at the Heart of Asia conference and meet with representatives of other U.S. partners and regional authorities in Afghanistan.
Developing countries should prepare for a long period of volatility in the global economy by re-emphasizing medium-term development strategies, while preparing for tougher times, says the World Bank in the newly-released Global Economic Prospects (GEP), June 2012.
A resurgence of tensions in high-income Europe has eroded the gains made during the first four months of this year, which saw a rebound in economic activity in both developing and advanced countries and an easing of risk aversion among investors. Since May 1st, increased market jitters have spread. Developing and high-income country stock markets have lost some 7 percent, giving up two-thirds of the gains generated over the preceding four months. Most industrial commodity prices are down, with crude and copper prices down by 19 and 14 percent, respectively, while developing country currencies have lost value against the US dollar, as international capital fled to safe-haven assets, such as German and U.S. government bonds [Read more here]

Regional Highlights  

Notwithstanding the economic downturn in the Euro Area in the fourth quarter of 2011, developing Europe and Central Asia posted strong (5.6 percent) growth in 2011, driven by robust domestic demand and good harvests in countries such as Russia, Romania and Turkey. However, severe weather conditions in early 2012, capacity constraints in some countries, deleveraging by European banks, and the renewed turmoil in high-income Europe are projected to slow regional GDP growth to 3.3 percent this year, before a modest recovery begins with growth firming to 4.1 and 4.4 percent in each of 2013 and 2014.
Petrovietnam Exploration & Production (PVEP, Vietnam) will carry out geologic exploration at Molabaur investment block of Ustyurt region of Uzbekistan with the cost of US$61.6 million in 2012-2017.

President of Uzbekistan Islam Karimov approved an agreement between Uzbekneftegaz national holding company and PVEP on conducting geologic exploration within five years at Molabaur investment block with the area of 3,600 km.

After the foreign investor fully implements its obligation on the agreement and opening of commercial oil and gas fields, the sides will hold negotiations on signing of product-sharing agreement in established order.

The project operator is Kossor Operating Company LLC, which conducts geologic exploration in Kossor block in Ustyurt region.

Petrovietnam and Uzbekneftegaz signed agreement on main principles of geologic exploration within five years at Kossor investment block in Ustyurt region in February 2010.

The American-Uzbekistan
Chamber of Commerce
1300 I Street, N.W.,
Suite 720W
Washington, DC 20005
phone: 202.509.3744