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Landslide Blocks Main Trans-Caucasus Road, CIS Boosts Food Exports to Russia

Plus, Armenia in offer to house refugee Yazidis and Lithuania signs a landmark gas deal.

by Ky Krauthamer, Barbara Frye, and Anders Ryehauge 22 August 2014

1. Landslide cuts key Caucasus highway


The second deadly landslide in three months has blocked traffic on the only operating road between Georgia and Russia and disrupted Russian gas supplies to Armenia.


One person has been found dead and another was missing today, a day after the landslide in the Darial Gorge struck the mountain highway near the Kazbegi Larsi border crossing, Democracy and Freedom Watch reports.


Georgia_border1_350Map by TOL / Google Maps


Long traffic jams formed on both sides of the border 21 August, Democracy and Freedom Watch reported earlier. The slide damaged a pipeline carrying Russian gas to Armenia, forcing it to be shut down. After meeting his Armenian counterpart during a two-day visit to Yerevan, Georgian Prime Minister Irakli Garibashvili said it would take two or three days to repair the pipeline, Armenpress reports.


A landslide in the same area in May also closed the pipeline for several days. About 90 percent of Armenia’s natural gas comes through the pipeline.


Georgian officials believe both slides are related to the Devdoraki glacier on Mount Kazbek, Democracy and Freedom Watch writes. Officials said this week’s landslide was triggered by heavy rain on the night of 20-21 August.


2. Russian food sanctions mean windfalls for ex-Soviet neighbors


Several Commonwealth of Independent States members are looking to take advantage of Russia’s ban on Western food with big increases in their own food exports as Moscow eases barriers to entry.


Tajikistani farmers may benefit most as the country foresees a 500 percent rise in fruit and vegetable exports to Russia, The Times of Central Asia reports.


The Agriculture Ministry is preparing a number of measures to increase exports of farm products, a spokesman told the website last week. Local farmers have already increased exports to Russia 13.6 percent in the first two quarters of 2014, to $50 million.


Russian sanctions on Western foods have opened up a major opportunity for Kyrgyzstan. Russia lifted all prohibitions on fruit and vegetable imports from the country last week. A Kyrgyzstani official said the country could also export meat and dairy products provided the Russia-led Customs Union lifted a ban on such products.


Armenia, another close Russian trade partner, is also hoping to capitalize on the sanctions. Agriculture Minister Sergo Karapetian expects a “drastic increase” in exports of wine, juice, water, fruit, vegetables, and other foods, reports.


“We should take advantage of the established favorable conditions to the extent possible,” he said.


Uzbekistan, which already sends 80 percent of its exported fruits and vegetables to the Russian market, will try to double agricultural exports by 2016, an Agriculture Ministry official said earlier this month, UZnews reported.


Moscow acknowledges the pain its sanctions are causing. The government has set aside 50 billion rubles ($1.4 billion) for subsidies to keep food on store shelves, and tens of billions more may be needed in the medium term, Agriculture Minister Nikolai Fyodorov said 20 August, EUobserver reports.


3. Lithuania signs landmark LNG deal with Norway’s Statoil


Lithuania’s deal to purchase liquefied natural gas (LNG) from Norway will free the country from the “political” pricing policies of Russia’s Gazprom, President Dalia Grybauskaite said 21 August.


Lithuanian gas company Litgas and Norway’s Statoil signed a preliminary agreement 21 August valued at 2.5 billion to 3 billion litas ($960 million to $1.2 billion), the Balkan News Service reports.


norwegian_tanker_350A Norwegian LNG tanker. Photo by Hannes Grobe / Wikimedia Commons


The five-year deal calls for Statoil to supply 540 million cubic meters of gas a year through a planned LNG facility at Klaipeda, Platts reports. Work on the floating facility is due to begin at the end of the year. Lithuania consumes about 3 billion cubic meters of gas annually, according to Platts.


Lithuania, which now buys all its gas from Gazprom, has been working on several fronts to wean itself from the Kremlin-controlled company. In May Gazprom agreed to reduce Lithuania’s price by about 20 percent after Vilnius repeatedly called for a review of its tariffs, which are among the highest in Europe. In June the Lithuanian competition authority levied a fine of nearly $50 million on Gazprom for hindering competition.


Also on 21 August, Lithuania and Poland requested EU funding for up to 75 percent of a new gas link between the countries, Reuters reports.


Saulius Bilys, general manager of the Lithuanian gas distributor Amber Grid, said the two countries’ joint application for EU support was “an important step into the implementation of the project aimed to integrate the isolated gas markets of the Baltic states into the EU gas market.”


Poland, also heavily dependent on Gazprom, also plans to diversify its energy supply by importing LNG, Reuters writes.


4. New Hungarian bank legislation spurs court challenges, ECB warning


Banks in Hungary are lining up for court challenges to a new law requiring them to refund to borrowers some charges on foreign currency-denominated loans, the Budapest Business Journal reports, as the European Central Bank warns the measure could destabilize the country’s financial industry.


Varga 100Mihaly Varga
At issue is a law passed last month that forces banks to repay revenues they made via the exchange rate spread – the difference between the rate applied when disbursing the loans and the one used to calculate repayments. The country’s supreme court deemed such fees illegal in June.


The first of more than 30 challenges to the law will be heard today, from a domestic savings bank, with the Hungarian unit of Belgium's KBC up on 25 August. The court will make its ruling within 30 days, according to the Budapest Business Journal.


The National Bank of Hungary put the possible price tag to banks at 900 billion forints ($3.82 billion), Reuters reports.


The European Central Bank said making the measure retroactive could “put a significant strain on the banking sector” and could force banks in Hungary to seek cash infusions from their foreign parents, leading to “cross-border spillover effects on banking groups.”


Hungary’s banking scene is dominated by foreign names, including Austria's Erste and Raiffeisen, Italy's Intesa, and Belgium's KBC.


Last month Hungarian Economy Minister Mihaly Varga pooh-poohed concerns about the law, which also requires banks to refund revenues from interest rate or fee hikes, Reuters reported at the time, citing local media.


The fee refunds are the first part of the Hungarian government’s plan to roll back the costs to borrowers of foreign-currency loans, which were popular before the financial crisis but have since become prohibitively expensive to repay. Since August 2008 the forint has shrunk in value against the Swiss franc, in which most of the loans were taken out, falling from 144 per franc to 255, according to calculations on the Oanda currency exchange website.


The government is also planning to force banks to convert the foreign-currency loans to forints and take a loss on the plummeting exchange rate.


5. Iraq reportedly rejects Karabakh refuge for Yazidis


Armenia’s offer to accept Yazidi refugees from Iraq has not gone well either in the Caucasus or the Middle East.


The plight of thousands of refugees stranded on a mountain in Iraq, and reports of mass killings and forced conversions by adherents of the Islamic State, has thrust the obscure Yazidi people into the world’s consciousness.


Armenia’s offer was controversial because it promised to house the refugees in the disputed Nagorno-Karabakh territory claimed by Azerbaijan.


Iraq rejected the proposal, Turkey-based World Bulletin reported 21 August, saying it violates Azerbaijan’s sovereignty, after Baku said Yerevan’s proposal would be in breach of international law.


Although most Yazidis live in the Middle East, small communities also exist in the South Caucasus. In Armenia they constitute the largest minority, some 40,000 to 60,000 strong.


Explaining Nagorno-Karabakh’s outreach to the beleaguered Yazidis, a spokesman for the region’s de facto leader, Bako Sahakian, said, “The Yazidis are the only people who have become an integral part of the Armenian people.” But he did not elaborate on how the refugees would be provided for, reports, citing Radio Free Europe’s Armenian service.


Yazidis practice a religion which incorporates elements of Christianity, Islam, and Zoroastrianism. They speak a Kurdish language, although many Armenian Yazidis claim to be a separate ethnicity.

Ky Krauthamer is a senior editor at TOL. Barbara Frye is TOL's managing editor. Anders Ryehauge is a TOL editorial intern.
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