Archives for December 2015

“Benchmark crude approached seven-year lows in early December after OPEC opted to continue producing at will to defend market share. Unrelenting oversupply in world markets had already weakened benchmarks during November. ICE Brent was last trading at $39.77/bbl with NYMEX WTI several dollars lower at $36.87/bbl,” the agency said in its report published on Friday.

Russian oil firms prepared for fight with OPEC – Energy Minister

“OPEC crude output edged 50,000 barrels per day higher in November to 31.73 million barrels per day. Record production from Iraq and higher supply from Kuwait offset losses from African members,“ the report added.

The agency admits the Saudi-led policy of dumping oil and cutting prices seems to be working, taking a toll on non-OPEC supply.

Production from outside OPEC will contract by 600,000 barrels a day next year, compared with a surge of 2.4 million a day in 2014, the IEA predicts.

“US light tight oil – the driver of non-OPEC growth – shifts into contraction. As companies make further spending cuts in reaction to sub-$50/bbl oil, the impact on supplies – both from non-OPEC and OPEC – will be even more pronounced in the longer term,” the agency said.

The world’s crude demand growth will slow to 1.2 million bpd in 2016, down from a five-year peak of 1.8 million reached in 2015, as the boost from cheap fuel prices wears off, the IEA added.

Brent crude has lost almost two-thirds of its value since July 2014 and was trading at $39.170 per barrel in London on 10:28am GMT on Friday.

Article source: https://www.rt.com/business/325596-global-oil-glut-iea/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Even if the Kingdom creates more private sector jobs for its citizens, there would still be a shortfall of 1.5 million jobs by 2030, according to the report from McKinsey called Saudi Arabia beyond oil: The investment and productivity transformation.

Unemployment is one of the critical challenges that could affect Saudi Arabia’s oil and financial resources, states the report.

“The country can no longer rely on oil revenue and public spending for growth, in the face of a changing global energy market and a demographic transition that will significantly increase the number of working-age Saudis by 2030.”

At least 4.5 million new working-age Saudis are expected to enter the labor market in fifteen years. That requires the country to create three times the number of jobs it provided during the 2003-2013 oil boom.

“More than half the Kingdom’s population is younger than 25, and by 2030 the number of Saudis aged 15 years and over will likely increase by about six million,” McKinsey said.

It also said the number of elderly who require healthcare and support is also expected to increase over that period of time. The report presumes that would put further strain on the country’s finances.

By 2030, Saudi Arabia could accumulate a debt of about 140 percent of the country’s GDP as a result of unemployment and the pressure from weak oil prices.

Saudi Arabia is currently facing a budget deficit for the first time since 2009. It comes on the back of sliding crude prices, with oil sales accounting for almost 80 percent of the country’s revenues.

There have been reports that companies working on infrastructure projects in Saudi Arabia haven’t been paid for six months or more as the country is trying to cut the cost of contracts in order to save cash. Analysts said such delays would negatively affect the employment rate.

In its regional economic outlook, the International Monetary Fund warned in October that Saudi Arabia might go bankrupt within the next five years if the government maintains its current policies. It urged that the country needs to adjust spending.

Article source: https://www.rt.com/business/325499-saudi-unemployment-poverty-report/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Italy’s debt burden now at record high 132% of GDP

The so-called voluntary disclosure program which ended in November was introduced as the last chance for tax dodgers to declare income and taxable assets hidden abroad.

As a result the tax authorities got 130,000 voluntary declarations, Italy’s Treasury said in a statement Wednesday. The undeclared assets yielded €4 billion in taxes and penalties, it added.

About 70 percent of the hidden funds were stored in Switzerland, followed by Monaco, the Bahamas, Singapore and Luxembourg. The statement said more than a quarter of the disclosed sum will be repatriated to Italy. The amnesty allowed tax dodgers to keep the money abroad as long as it was declared in Italy.

The authorities warned that those who didn’t take advantage of the amnesty risk eight years in jail if they are caught. In addition, the government inked a number of deals to exchange tax information with offshore hubs popular with Italians.

READ MORE: Italy to add drug trafficking, prostitution to GDP figures

The economy ministry praised the voluntary cooperation scheme as a success, saying the “era of banking secrecy is over.”

“The voluntary disclosure changes the relationship between the taxpayers and the state,” said Deputy Finance Minister Luigi Casero. “Many were skeptical when we launched it, but results in numbers and participation proved them wrong.”

The disclosed money could be of an additional help for the Italian government which estimates the annual losses due to tax evasion exceed €90 billion. The government wants to meet its €27- €30 billion budget targets despite Italy’s economy slowdown and a €2.2 trillion debt. It also aims to reduce its budget deficit to 2.6 percent of GDP this year from last year’s level of three percent.

Article source: https://www.rt.com/business/325458-italy-tax-dodgers-amnesty/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The IMF intends to provide further funding to Ukraine despite guidelines not to lend to countries that default on debt owed to other states.

IMF allows lending to countries with arrears; Russia prepares to go to court over Ukraine debt

Ukraine’s default may be declared as early as December 20, if Kiev fails to repay its $3 billion debt to Russia or refuses to accept the restructuring terms offered by Moscow.

But on Tuesday the IMF’s board of directors voted to allow lending to countries that have outstanding arrears to official creditors. Moscow has criticized the IMF policy change, with President Vladimir Putin ordering the Finance Ministry to sue Ukraine if Kiev fails to pay.

“We are concerned that changing this policy in the context of Ukraine’s politically charged restructuring may raise questions as to the impartiality of an institution that plays a critical role in addressing international financial stability,” Russian Finance Minister Anton Siluanov wrote in a Financial Times opinion piece.

Kiev is reluctant to pay as it claims the Eurobonds purchased by Russia were a private and not a government loan granted to President Viktor Yanukovich in 2013. The IMF has recognized Ukraine’s debt to Russia as an official sovereign liability.

“In addition to refusing to treat Russia’s claim as an official credit, Ukraine has contractually committed in its new private-sector bonds not to repay Russia’s claim in accordance with its terms, and not to offer Russia an alternative having a value even equal to the package offered to private sector creditors,” Siluanov added.

The International Monetary Fund and the World Bank were created in 1944 at a conference in Bretton Woods, New Hampshire, and are now based in Washington.

Article source: https://www.rt.com/business/325412-siluanov-imf-impartiality-ukraine-debt/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

When asked during a Wednesday radio interview, if showing good will implies allowing Kiev not to pay its sovereign debts, the ambassador was ambiguous.

Putin orders Finance Ministry to sue Ukraine over unpaid debt

“No, you have to pay the debts. Of course. But sometimes, like good friends, sometimes we have to write off. Therefore, we have made the proposal and agreed to write off 20 percent of Ukraine’s debts. I personally think that it would also be good will from Russia to follow the example of the EU and the US,” Usackas told Vesti FM.

In November, Moscow offered Kiev a three-year installment plan that included no payment this year, and three €1 billion payments in 2016, 2017 and 2018. In exchange for the offer, Russian President Vladimir Putin demanded guarantees from the US, the EU and international financial organizations. Russian Finance Minister Anton Siluanov said this week Ukraine’s Western partners have refused to provide such guarantees.

IMF allows lending to countries with arrears; Russia prepares to go to court over Ukraine debt

Commenting, Usackas said the EU and the US have made a 20 percent debt write-off and postponed the payout date by four years and that Russia hasn’t agreed to those terms.

The interviewer asked why the International Monetary Fund so easily changed its lending rules for Ukraine and promised to continue bankrolling Kiev despite the possible non-payment of sovereign debt to Russia, and why Greece, as an EU member, doesn’t get the same privilege.

“This is our business,” replied the EU ambassador, adding that the loans given to Greece are much bigger.

Ukraine’s debt to Russia is due December 20. Moscow has warned Kiev it will file a lawsuit if it fails to pay after a 10-day grace period expires.

Article source: https://www.rt.com/business/325407-russia-ukraine-good-friend-eu/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Putin’s order followed the Finance Minister’s Wednesday report on the debt repayment situation. Siluanov told the President about the refusal of the US to give guarantees on future payments of Ukrainian sovereign debt.

READ MORE: US won’t guarantee Ukraine’s debt, Russia to sue if Kiev doesn’t pay up by late December

“It is strange. If they are so confident in the country’s solvency for the next year, then they could somehow participate during the last four years to share the risks,” said Putin.

“Fine. File the lawsuit,” he added.

Siluanov told reporters that Russia would apply to the courts if Kiev fails to make the debt repayment within a 10-day grace period after the December 20 deadline.

On Tuesday the International Monetary Fund (IMF) agreed to change its policy on lending to countries in arrears to other governments. Ukraine is one of those, because it is asking for financial aid while owing money to Russia.

READ MORE: IMF to change its lending rules for Ukraine – WSJ

Previous IMF guidelines on lending to such countries were relatively strict, stating that “the IMF doesn’t lend to countries that are not making a good faith effort to eliminate their arrears with creditors.”

Siluanov called that decision “precipitated and preconceived.” According to the Finance Minister, Russia has asked the IMF to help solve the situation with Ukraine’s debt, but was told to “engage in negotiations [with Kiev] along with commercial creditors.”

Ukraine’s sovereign debt to Russia dates back to a deal between President Vladimir Putin and former Ukrainian President Viktor Yanukovich that was struck in 2013 and envisaged Moscow buying $15 billion worth of Ukrainian bonds. Russia bought $3 billion worth in December 20, 2013, and the debt is supposed to be repaid by December 20, 2015.

In November, Russian President Vladimir Putin offered Kiev a three-year installment plan to pay back, but no official answer to the proposal has been received.

Article source: https://www.rt.com/business/325232-russia-putin-sues-ukraine-debt/?utm_source=rss&utm_medium=rss&utm_campaign=RSS