Archives for May 2015

Reuters / Fabrizio Bensch

The Group of Seven unwillingness to invite Russia to the upcoming summit is a missed opportunity to resolving crises, according to the heads of two German business lobby groups.

“A G7 meeting with Russia could contribute to solving crises and stir Russia into constructive steps in the Ukraine conflict,” chairman of Germany’s Committee on Eastern Economic relations, Eckhard Cordes told Die Welt am Sonntag newspaper, adding that it’s always better to talk with each other rather than about each other.

Germany’s Committee on Eastern Economic relations represents the interests of about 200 companies with investments in Russia, according to Reuters.

Matthias Platzeck, chairman of the German-Russian Forum business lobby and senior member of the Social Democrats (SPD), also believes it is time for Russia to rejoin the G7.

“The process of disintegration in the Middle East, in Iran, Afghanistan and Syria can only be solved with Russia,” he told the paper, saying that international terrorism can only be fought with data provided by Russia’s secret services.

The summit of G7 countries will be hosted by Germany on June 7-8 at the Elmau castle in Bavaria.

READ MORE: Russia’s seat in G8 ‘hinges’ on resolution of Ukraine conflict – German FM

Russia was expelled from the club last year in protest over Moscow supporting the referendum in Crimea, where the majority of people voted for secession from Ukraine and for joining Russia.

The G7 leaders then refused to participate in the G8 meeting in Sochi. The Group of Seven currently includes Germany, USA, Canada, Japan, France, Britain and Italy.

On April 15 German Foreign Minister Frank-Walter Steinmeier said that the G7 countries do not share the goal of isolating Russia and, on the contrary, would like to see it once again become a part of G8. However, given the situation in Ukraine, it is still impossible, he said.

Moscow reacted by doubting the Group could be effective without it.

“Naturally, the discussion of global issues without Russia’s participation can hardly be effective or lead to any type of action,” Kremlin spokesman Dmitry Peskov said.

Article source: http://rt.com/business/263673-russia-german-businessmen-g7/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Herman Gref, Chief Executive Officer and Chairman of the Board of Sberbank (RIA Novosti/Iliya Pitalev)

Herman Gref, the head of Russia’s largest bank Sberbank, welcomed the introduction of Islamic banking in the country’s traditionally Muslim regions, saying it would help attract capital from Arab countries.

“We will actively promote the development of such a tool as Islamic banking, as it opens up a good opportunity to work with international partners amid sanctions,” said Gref on Friday at a shareholders meeting.

“In circumstances where we have problems with raising funds on the international markets, it is a very important thing,” he said, adding that he had recently held a series of meetings in the Republic of Tatarstan with Arab investors.

Tatarstan is a key Russian region where the idea of Islamic banking is being actively developed. Investors from the Gulf States are ready to inject huge funds in the development of such an alternative financial system in Russia, given a significant demand from the Muslim population.

The rapid growth of the Muslim population in Russia contributes to a sharp increase in demand for Islamic banking tools expected in the coming years, said Samir Tagiyev, manager for business development in the CIS and Europe, the Islamic Corporation for the Development of the Private Sector (ICD), quoted by Vesti Finance.

READ MORE: Record $6bn run on Russia’s biggest bank was planned provocation – chairman

The Islamic financial system has the same tools as the conventional one, but the percentage basis is replaced with the provision of shares in the company, and, hence, income. This means the bank shares all the risks with its borrower. Therefore, lending under Islamic banking is purpose-oriented.

Usury or any other activity that involves receiving interest income is unacceptable in Islam. Financial transactions should be based on a real trade or business and should not be connected with activities prohibited by Sharia law, such as gambling or alcohol.

The Russian government has to elaborate a legal framework that will integrate Islamic banking into Russia’s financial system. If this is done, the volume of Islamic financial assets not only in Russia, but also the countries of Central Asia, could reach $24 billion as early as 2018, according to Vesti Finance.

Article source: http://rt.com/business/263497-islamic-banking-ease-sanctions/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russia’s President Vladimir Putin (L) shakes hands with China’s President Xi Jinping. (Reuters/Alexander Zemlianichenko)

The economic cooperation of China and Russia is not aimed at infringing upon the interests of any other country in the Asia-Pacific region, said Igor Ivanov, ex-foreign minister and President of the Russian Council on International Affairs.

The relations between Moscow and Beijing do not create threats for other states, Ivanov stressed, while speaking on Friday at an international conference Russia and China: New Partnership in a Changing World.

“We see a new type of relations evolving between Russia and China which have no precedent in the history of the cooperation between the great powers,” he said.

READ MORE: Russia, China agree to integrate Eurasian Union, Silk Road, sign deals

“The new partnership is not an alliance between Russia and China against any whatsoever third countries and coalitions, the relations are developing on their own basis and do not give rise to any challenges or threats to neighboring countries or to other great powers,” Ivanov added.

Russia and China are moving towards the formation of a continental partnership that would include cooperation not only within the Eurasian Economic Union (EEU) but also with the Silk Road – an economic project that is supposed to link East Asia and Europe, said Russian Deputy Foreign Minister Igor Morgulov.

“Since 2010, China asserted itself as the first trading partner of Russia,” he said. “I think this will be a long-term trend.”

READ MORE: China and Russia to increase trade to $100bn in 2015

“The first step was the decision to start negotiations between the EEU and China over the agreement on trade and economic cooperation,” he said recalling the agreement signed by the leaders of Russia and China on May 8.

“In fact, we are talking about the formation of a certain continental Eurasian partnership that would include both EEU countries and China,” he added noting that this would bring extremely important prospects for future collaboration.

New Silk Road is about economy, not geopolitics

The China-led New Silk Road project linking Europe and East Asia is aimed at regional development and doesn’t contain any political context, according to Li Yongquan, director of the Institute of Russian, Eastern European and Central Asian Studies of the Chinese Academy of Social Sciences.

“The Silk Road is a purely economic project which has no geopolitical roots,” Yongquan said.

“Implementing an economic project does not involve matters of sovereignty. And this is a very sensitive issue in the post-Soviet space,” he added.

The infrastructure projects in Asia within the Silk Road are not directed against the transit potential of Russia, such as Trans-Siberian Railroad, the Baikal-Amur railway or the Northern Sea Route, Yongquan said adding that at the same time the initiative requires thorough elaboration by the international community.

READ MORE: China to inject $62bn in policy banks to boost ‘New Silk Road’ – report

“There can be certain reasons for concern indeed,” the expert said, noting, however, that “mechanisms of close co-operation existing between us should resolve these issues”.

Beijing’s plan to create a modern Silk Road aims to put the new life into a same-name ancient route and build a transport, energy and trade corridor between Europe and Asia. The infrastructure projects would include railways, highways, oil and gas pipelines, as well as power grids and Internet networks.

Meanwhile, trade between Russia and China was worth $95.3 billion in 2014. The two countries plan to boost trade turnover to $100 billion in 2015 and to $200 billion by 2020, the Chinese Ambassador to Russia Li Hui said earlier in April. Switching to mutual settlements in local currencies, which have already increased by more than 800 percent, will also help stimulate trade.

Article source: http://rt.com/business/263317-china-russia-economic-partnership/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters/Jason Lee

The finance ministers of G7 have supported the inclusion of the yuan in the IMF currency basket. The decision means the yuan has gained international recognition after Beijing was accused of artificially curbing the exchange rate for more than ten years.

However, the issue has to be discussed thoroughly first, said German Finance Minister Wolfgang Schaeuble on Friday concluding the meeting of G7 finance ministers and central bank governors in Dresden.

“We were completely agreed that it is desirable in principle, that the technical conditions must be examined, but there are no politically divergent views on this,” Schaeuble said adding that there still are technical and other issues to be clarified. “We are in full agreement on the goal, but it would not be good to rush it,” he said.

Yuan’s inclusion into the IMF basket would also raise China’s influence at the Fund.

Beijing has been pushing for yuan to gain a solid position in the world financial system and be included in the IMF currency basket that makes up the IMF’s Special Drawing Rights (SDR).

READ MORE: China’s secret gold stockpile may be world’s 2nd biggest

The SDR is a virtual currency that reflects the value of IMF reserves. It is used for lending to countries that undergo financial difficulties.

Article source: http://rt.com/business/263197-yuan-imf-currency-basket/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters/Lucy Nicholson

Outflow from the largest US oil-specific exchange traded fund (USO) reached $1 billion in April-May, Bloomberg says. It is the largest outflow in six years and raises concerns over a further rebound in oil prices.

A total of $368.4 million has been withdrawn from the US Oil Fund this month, following $591.6 million in April, which was the biggest single-month outflow since April 2011, Bloomberg reported on Friday. Total assets are currently down from $3.25 billion since March, standing at $2.28 billion.

“The oil rebound has run out of gas and now you are seeing nervous investors with itchy trigger fingers bailing out of USO. They don’t want to get burned by another drop in oil,” Bloomberg Intelligence analyst Eric Balchunas said.

Investors poured $2.86 billion into the USO in the six months ended March 31 as oil slumped and started to sell when crude turned to growth.They used the 30-percent rebound in oil prices as an opportunity to reap profits.

READ MORE: US oil production growth at record 100-yr high in 2014 – EIA

Oil rebounded from a six-year low in mid-March on speculations that the falling number of drilling rigs will reduce production and ease a supply glut. The number of active rigs in the US currently stands at 802, which is the lowest number since March 4, 2011.

US crude stockpiles that are close to the highest level in 85 years, along with OPEC’s November refusal to cut production, will continue influencing oil prices, according to leading financial service providers Goldman Sachs, Deutsche Bank and Citigroup.

US production climbed to 9.57 million barrels a day last week, the most since 1983, according to Energy Information Administration data. Inventories were 479.4 million, up 86 million from the previous year.

READ MORE: OPEC says global oil glut to persist till 2017 – media

OPEC, the group of 12 Gulf State oil producing nations, has predicted in its long-term strategy report seen by Reuters that supply from non-OPEC countries will continue growing, mainly due to North American shale.

The Organization of Petroleum Exporting Countries is meeting in Vienna on June 5 to discuss output policies. In November, the OPEC oil cartel decided to keep production high and provide no relief to the supply glut, aiming to gain its market share.

WTI futures for July were up 65 cents at $58.33 a barrel by 15:10 MSK on Friday. Brent rose 63 cents to $63.21.

Article source: http://rt.com/business/263037-oil-investors-outflow-price/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

May 29, 2015. Prime Minister Dmitry Medvedev (right) during a meeting with Prime Minister of Vietnam Nguyen Tan Dung on the sidelines of the Eurasian Intergovernmental Council summit in Burabay, Kazakhstan. (RIA Novosti/Ekaterina Shtukina)

The Eurasian Economic Union (EEU) and Vietnam have signed a free trade zone agreement. It became the first international document on creating a free trade zone between the EEU and a third party.

READ MORE: Russia OKs draft deal on free trade between Eurasian Economic Union, Vietnam

The prime ministers of Russia and Vietnam Dmitry Medvedev and Nguyen Tan Dunghave also signed an agreement for Vietnam to provide Russian investors and service distributors with the most favorable treatment.

The EEU will sign free trade zone agreements with other countries, Medvedev said after signing the agreement with Vietnam.

“Around 40 states have opted for holding talks on concluding this kind of agreements on a free trade zone with EEU, and of course we will be thinking this through as carefully as possible, so that those agreements are useful to our countries,” Medvedev said.

READ MORE: Russia ready to consider EEU currency union – prime minister

The free trade zone will save exporters from the EEU about $40-60 million in the first year of its operations, according to the documents prepared for the signing ceremony, TASS reports.

“At the end of transitional periods, the positive effects from lifting customs duties may reach around $55 million-$60 million a year,” the documents added.

Vietnamese companies, in turn, can expect savings of up to $5 million-$10 million a year.

A free trade agreement with Vietnam will enter into force 60 days after it’s ratified in accordance with national legislation in all EEU countries and in Vietnam, according to Andrei Slepnev, minister of trade of the Eurasian Economic Commission (EEC). Slepnev said he hoped all the countries would ratify the agreement during the autumn session.

This was the first such agreement with foreign countries for all EEU members, said Slepnev.

“This shows that we are in a trend of world trade processes. If all today’s world initiatives are implemented, in five or six years up to 60 percent, or, as some experts believe, even up to 80 percent of all world trade will be carried out in a free trade regime compared to 25 percent nowadays,” he said.

Thus, the WTO becomes a necessary but still insufficient condition, as most world trade will go through free trade zones, he said.

“It’s a totally new challenge. We had been in the process of joining the WTO for 18 years, but now I understand that our export ambitions can only be realized if we will fit the concept of a new international trade model,” Slepnev added.

‘Historic act’

Chairman of the Board of the Eurasian Economic Commission Viktor Khristenko called the agreement: “A historic act.”

“The agreement covers not only the preferential regimes, but also the issues of managing intellectual property rights and a number of other areas,” he said.

Trade between the two parties is expected to grow to $10 billion by 2020 from the current $4 billion, he added.

The agreement will also open up ‘good opportunities’ for the EEU entrepreneurs, Slepnev said. They’ll get access to a 90 – million people market, as well as the opportunity to enter the markets of other ASEAN countries and the Asian region as a whole, he added.

The agreement will also open up “good opportunities” for EEU entrepreneurs, Slepnev said. They’ll get access to a 90-million people market, and the opportunity to enter the markets of other ASEAN countries and the Asian region as a whole, he added.

The deal to establish the Eurasian Economic Union (EEU) was signed by the presidents of Russia, Belarus and Kazakhstan on May 29, 2014 in Astana. The EEU, which came into effect on January 1, 2015, is designed to ensure the free movement of goods, services, capital and workforce on its territory. The EEU currently comprises Russia, Belarus, Kazakhstan and Armenia. Ratification procedures are currently under way for Kyrgyzstan to join the trade bloc.

Article source: http://rt.com/business/263101-russia-vietnam-free-trade/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters/Dado Ruvic

This week the ruble has retreated against hard currencies, possibly marking an end to this year’s spectacular rally that made it the world’s best performing currency.

READ MORE: Russian ruble falls as Central Bank restarts currency buying

The ruble had dropped to 52.71 against the dollar and 57.79 against the euro by 11:50am MSK on Friday at the Moscow Exchange, from the 49.8 and 54.8 against the dollar and euro respectively on Monday.

READ MORE: FIFA officials arrested on corruption charges, face extradition to US

Ruble’s reaction on #FIFAarrests. #USDRUB 52.03 pic.twitter.com/G7iG7YZXwh

— *Russian Market (@russian_market) May 27, 2015

Crude oil prices, inherently connected to the ruble rate, have also shown a negative trend this week. Brent Crude is trading at $63.19 per barrel on Friday, losing more than four percent over the week. The drop is linked to reports that Iraq is going to increase its oil shipments to a new record high in June and rumors that OPEC won’t cut the crude output at its meeting on June 5.

READ MORE: Rapid rise of the ruble is over – Bank of Russia

However, Russian experts and authorities have been stressing that the link between the ruble rate and the oil price has weakened. Low oil prices are not a tragedy for Russia, said Russian Finance Minister Anton Siluanov on Friday, speaking at an annual economic forum in Vladimir, Russia.

The ruble became this year’s best performing currency since hitting rock bottom against the dollar on December 16, when it lost more than 20 percent, with one dollar buying 80 rubles.

Article source: http://rt.com/business/263061-ruble-drop-tax-fifa/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The Central Bank of Russia has proposed a discussion about establishing an analogue to the SWIFT global network for transmission of financial information that processes $6 trillion worth of communiqués daily.

READ MORE: Russia gets seat on SWIFT board

The CBR hopes to cut the risks of possible disruptions.

“Seriously speaking, there is no analogue to SWIFT at the moment in the world, it is unique. The only topic that may be of interest to all of us within BRICS is to consider and talk over the possibility of setting up a system that would apply to the BRICS countries, used as a backup,” said Deputy Governor of the Central Bank of the Russian Federation Olga Skorobogatova on Friday.

Russia got seat on the SWIFT board in March, despite numerous threats from the US and its allies to disconnect Russia from the system.

Skorobogatova added that some changes have to be made to the legislative framework of SWIFT, making it resistant to external sanctions and restrictions.

SWIFT is an international system of transmission of financial transactions. It has more than 10,000 of the world’s largest organizations in 210 countries as clients. Every year SWIFT processes about $6 trillion worth of financial messages.

SWIFT is used in Russia by about 600 Russian banks and companies, which account for about 80 percent of payments in the country. Russia is the world’s second biggest SWIFT-user after the United States.

DETAILS TO FOLLOW

Article source: http://rt.com/business/263161-russia-brics-swift-prototype/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

May 29, 2015. Prime Minister Dmitry Medvedev during a meeting with President of Kazakhstan Nursultan Nazarbayev on the sidelines of the CIS Heads of State Summit in Burabay, Kazakhstan. (RIA Novosti/Ekaterina Shtukina)

Russia is ready to draft a currency union with other members of the Eurasian Economic Union (EEU), said Russian Prime Minister Dmitry Medvedev.

READ MORE:Time for Russia Vietnam to think of switching to local currencies – Medvedev

“We could consider the possibility and conditions of launching a monetary union in the long term. We are ready to work out the issue with other colleagues,” said the PM at a session of the Eurasian Intergovernmental Council in Kazakhstan Friday.

More than 40 countries and associations have said they would like to boost trade with the EEU, said Medvedev.

Medvedev stressed that the global economy was facing numerous challenges and said closer cooperation was necessary to address them. All measures should be taken “in coordination, not isolation,” he added.

“It [economic problems – Ed.] affected the state of bilateral trade and investment cooperation, we are obliged to solve these problems within the framework of existing integration mechanisms,” said Medvedev.

The Eurasian Economic Union (EEU) was created in 2015 on the basis of the Customs Union of Russia, Kazakhstan and Belarus. It currently has five members: Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia with Tajikistan as a prospective member.

One of the first attempts to enhance economic cooperation between the former Soviet republics took place in 1999, when Russia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan signed the Agreement on the Customs Union and the Single Economic Space.

India, China, Tunisia, Egypt and Israel have already expressed interest in setting up a free trade zone with the Russian-led EEU, while Vietnam is expected to sign the deal on Friday.

Article source: http://rt.com/business/263125-russia-currency-union-medevedev/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters / Laszlo Balogh

Russia’s Gazprom wants Ukraine’s Naftogaz to pay penalties for taking less than the agreed upon amount of gas in 2014, considering the so-called “take-or-pay” contract signed by the companies.

Gazprom would require Naftogaz of Ukraine to pay $8.197 billion in “take-or-pay” contract penalties, said company head Aleksey Miller at the European Business Congress on Thursday.

Russian natural gas producer also put Ukraine’s total gas debt at almost $29.5 billion.

At the end of 2014 Russia, Ukraine and the EU agreed to put a freeze on the “take-or-pay” principle for five months which means that in the period spanning 1 November 2014 to 31 March 2015, Russia would not impose fines on Ukraine.

However, Gazprom has every right under the contract to fine Naftogaz for failing to provide payments from January 1 to October 31, 2014; there was no such freeze for the period of time spanning January 1 to October 31, 2014.

Naftogaz has reacted by saying it has never paid penalties arising from the “take-or-pay” rule and does not intend to do it in the future. The Ukrainian company claims the “take or pay” condition is not part of the contract.

At the same time the company welcomes the intention of Gazprom to submit their claims to an arbitration court. “Arbitration is the most civilized way to resolve commercial disputes when the parties cannot find a consensus through negotiations,” said the head of Naftogaz Andrei Kobolev, commenting on the statement of his Russian counterpart Aleksey Miller.

READ MORE: Ukraine asks to extend discount on Russian gas until end of year

“The corresponding claim will be addressed to Naftogaz of Ukraine today, the same claim will be directed to the Stockholm arbitration,” said Miller, quoted by RIA.

Miller estimated the total debt of Naftogaz to Gazprom at more than $29 billion. He said $200 million are owed to Gazprom for gas deliveries to the Donetsk and the Lugansk regions in Eastern Ukraine.

Earlier Gazprom filed an action to the Stockholm arbitration against Naftogaz, demanding $18.5 billion for the gas volumes in 2012-2013 that weren’t delivered by Gazprom but had to be paid for by Ukraine under the “take-or-pay” agreement.

In April Miller proposed to extend the freezing of “take-or-pay” during a meeting with Russian President Vladimir Putin, who supported the idea, saying that Ukraine’s overcoming the crisis is in Russia’s interest.

“We currently see that the level of Ukraine’s offtake of Russian gas is extremely low. This is connected with the decline in Ukrainian industry, with the increase in energy prices,” said Miller.

READ MORE: Russian PM seals gas discount for Ukraine of up to 28%

The level of deliveries amounted to slightly more than 14 billion cubic meters of gas in 2014, while they agreed to take 41.6 billion under “take-or-pay,” he added.

“Of course the difference is very large, and we believe it’s possible to support the appeal of our Ukrainian colleagues to extend the freeze on the ‘take-or-pay’ principle,” said Miller.

Ukraine has been reducing the purchases of Russian gas since 2011. In 2011, Naftogaz bought 40 billion cubic meters, in 2013 the volume decreased to 25.8 billion cubic meters of gas and in 2014 it made only 15.3 billion cubic meters.

In April Gazprom and Naftogaz signed an additional agreement on gas deliveries in the second quarter, and the Russian government gave Ukraine a discount on gas supplies at the expense of the export duty rate. On May 23 Ukraine asked Gazprom to extend the discount until the end of 2015.Aliide, Today 2:30 PM

Article source: http://rt.com/business/262893-ukraine-billions-gas-debt/?utm_source=rss&utm_medium=rss&utm_campaign=RSS