ARMENIA COMMERCIAL NEWS SUMMARY:

UNCLAS SECTION 01 OF 02 YEREVAN 000147 SIPDIS COMMERCE FOR 3150 COMMERCE FOR 4201/ITA/IEP/OEERIS/BISNIS EMBASSIES - PLEASE PASS FCS DEPT FOR EUR/CACEN, EB/CBA PASS TDA, OPIC, EXIM E.O. 12958: N/A TAGS: ECON ETRD KTDB BBSR BEXP AM SUBJECT: ARMENIA COMMERCIAL NEWS SUMMARY: JANUARY 2006 -------------- SUMMARY -------------- ¶1. This cable summarizes press reporting on commercial developments in Armenia for January 2006. Major headlines include: -- Armenian Central Bank establishes a new Unified Financial Control Body; -- World Bank (WB) approves second Poverty Reduction Support Credit for Armenia; --Global Gold acquires gold and uranium exploration property; -- Cascade Bank, CJSC, finalizes acquisition of Emporiki Bank - Georgia S.A.; -- December 2005 Economic Data. END SUMMARY. -------------- CENTRAL BANK ESTABLISHES UNIFIED CONTROL BODY -------------- ¶2. The Armenian Central Bank's Unified Financial Control Body officially began operations on January 1, 2006. According to Chairman of the Central Bank Tigran Sargsyan, the new body would oversee all segments of the financial market including banks, non-banking financial institutions, insurance companies and the local stock exchange (replacing the recently dissolved Securities Commission). The Central Bank notes that having unified oversight would make it easier for financial institutions to comply with regulations. Sargsyan told the press that the new body would have fifty staff members including many former Securities Commission employees. -------------- -------------- WB APPROVES SECOND POVERTY REDUCTION SUPPORT CREDIT -------------- -------------- ¶3. On 19 January, the World Bank approved a second Poverty Reduction Support Credit (PRSC) for Armenia worth USD 20 million. According to a World Bank press release, the Dutch Government had agreed to provide an additional EURO 4.7 million co-financing grant for this project. The project is designed to assist the government with implementation of its Poverty Reduction Strategy Program (PRSP),and has four themes: consolidating macroeconomic discipline and strengthening governance; sharpening competition and entrenching property rights; addressing social and environmental risks; and supporting the rural economy. The World Bank loan has an annual interest rate of 0.75 percent and was made on standard International Development Association (IDA) terms. -------------- -------------- GLOBAL GOLD ACQUIRES URANIUM EXPLORATION PROPERTY -------------- -------------- ¶4. On January 25, Connecticut-based Global Gold Corporation (GGC) announced the acquisition of a 27 square kilometer gold and uranium exploration property in northeastern Armenia. Under a share purchase agreement, GGC issued 100,000 shares of common stock in exchange for an 80 percent stake in Athelea Investments, the Armenian company that had exploration rights for the site which is located in the Gegharkunik Province near the village of Getik. According to Global Gold Mining Regional Director Ashot Boghossisan, previous research at the site indicated that there might be exploitable gold and uranium deposits on the property. The GGC now has a three-year exploration and drilling license which will allow the company to better assess the viability of these deposits. If the exploration proves successful, GGC plans to begin a full-scale mining operation in the area. Global Gold currently operates a number of gold and polymetallic mines in northeastern and southern Armenia. -------------- -------------- CASCADE BANK, CJSC AQUIRES EMPORIKI BANK - GEORGIA -------------- -------------- ¶5. Cascade Bank, CJSC, a subsidiary of Cascade Capital Holdings, CJSC, purchased Emporiki Bank Georgia in late December 2005. While the financial details of the deal are not yet publicly available, a Cascade press release quotes General Director of Cascade Bank Levon Levonyan as saying "with this acquisition, Cascade Bank will further strengthen its positions in the financial markets in Georgia and Armenia, and actively promote cross border financial solutions for regional and international businesses." Cascade Capital Holding was established in Armenia in 2004 by the Cafesjian Family Foundation. In addition to Cascade Bank, the holding company includes: Cascade Credit, supporting trade finance facilitation and leasing; Cascade Investments, offering a broad range of private and corporate wealth management programs; and Cascade Insurance, providing comprehensive Life and Non-Life insurance protection to individual and corporate clients. -------------- DECEMBER 2005 ECONOMIC DATA -------------- ¶6. According to the preliminary data from the National Statistical Service, Armenia's real GDP from January to December 2005 grew by 13.9 percent year-on-year to USD 4.9 billion. Industrial production totaled USD 1,422 million, showing an increase of 7.5 percent compared to the same period last year. Gross agricultural output for the year 2005 grew by 11.2 percent compared to 2004, and amounted to USD 933 million. The highest growth rate was in the construction sector which grew by 34.2 percent compared to 2004 and was valued at USD 931 million. Foreign trade turnover reached USD 2,718 million, with imports of USD 1,768 million and exports of USD 950 million. The average USD/AMD exchange rate was 457.69. EVANS