Archives for May 2016

Saudi Arabia unveils plan to wean economy off oil

“You can have an OPEC without Saudi Arabia, which just isn’t much of an OPEC,” said the analyst, adding that the death of the oil cartel had been foretold long ago.

READ MORE: Moody’s downgrades Saudi Arabia

The Saudi long-term plan aims to minimize the kingdom’s reliance on oil revenue, easing the necessity to manage prices. The potential privatization of Saudi Aramco will make the country the only member of the group without full ownership of its national energy company.

“Saudi Aramco, and the presumption that there’s going to be a much higher degree of autonomy within Saudi Arabia – means there’s no real role for OPEC,” said Citigroup’s Kleinman.

The country’s relationship with OPEC may also be revamped by the first change of energy ministers in two decades.

“The main take-away from Saudi Vision 2030 is that there’s just no role for OPEC,” the expert noted.

OPEC is dead, says Rosneft

Earlier this month, the CEO of Russia’s Rosneft Igor Sechin said OPEC had practically stopped existing as a united organization, able to dictate its will on the market.

“The 1970s, when the larger Middle East producers could determine the global oil market by creating cartel structures such as OPEC, should be forgotten,” said Sechin.

The group failed to come to an agreement on production cuts when oil prices began plunging. Gulf States led by Saudi Arabia refused to freeze output, choosing to compete for market share instead. While Venezuela, Algeria, Angola and Ecuador favored supply cuts.

The next OPEC meeting is scheduled for June 2 at its headquarters in Vienna.

Article source: https://www.rt.com/business/344212-saudi-arabia-no-opec/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Kremlin to issue first post-sanctions Eurobonds

The 10-year dollar-denominated bonds offer benchmark yields of 4.65-4.9 percent, according to RIA Novosti. The bank in charge of the placement is VTB Capital.

The placement was scheduled for Monday, but the bond sale continued on Tuesday to attract more investors from Asia.

The raised funds will not be used for purposes that violate the US and the EU sanctions, said a banking source. Reportedly, the money will be used to pay off Russia’s sovereign debt with the rest going to the central bank’s foreign currency reserves.

On Monday, Russia launched its first sovereign debt offering since the Ukraine crisis broke out in 2014.

The Kremlin turned to VTB Capital after nearly 25 Western banks refused to participate in the bond placement under pressure from Washington and Brussels.

However, analysts have noted that it’s not illegal to place Russia sovereign bonds under the sanctions regime. “It’s only illegal if the proceeds are used to fund a sanctioned entity,” Morgan Lewis partner Bruce Johnston told the Financial Times.

“I could sell the bond just to American investors if I wanted to. There are enough people there who hate the government and want to make money,” a senior Russian banker told the media.

Last week, Russian Finance Minister Anton Siluanov said that getting access to foreign capital isn’t crucial, and the ministry can attract these funds on the local market.

“We will find sources to finance the budget deficit in the Russian financial market. It’s only $3 billion. I recall that in previous years we went with much higher borrowing,” said the minister in an interview with Rossiya 24 TV channel.

Article source: https://www.rt.com/business/344207-russia-eurobonds-demand-sanctions/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Bangladesh heist hackers compromised SWIFT software – report

Messaging services provided by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) are used by about 11,000 financial institutions from more than 200 countries. The network, allows lenders to process billions of dollars daily, and is considered the backbone of international banking.   

A five-point plant is expected to be revealed by company CEO Gottfried Leibbrand at a financial services conference in Brussels in a few days time.

“I think it will prove to be a watershed event for the banking industry. Cyber risk has been the main thing to keep me awake at night,” the CEO is due to say, according to a draft of his speech obtained by the Financial Times.

In February, cyber thieves stole $81 million from the central bank of Bangladesh, using stolen credentials from Bangladesh Bank computers to log into the SWIFT system, according to research by British defense contractor BAE Systems. Attackers attempted to transfer nearly $1 billion out of the bank’s account with the US Federal Reserve.

SWIFT secure messaging service that underpins international banking said it plans to launch a new five-point plan security program 1/2

— Bangladesh Today (@Bangladesh2day) May 24, 2016

Following the incident, SWIFT released a security update for the software used by the financial institutions on the network.

In January, Vietnam’s Tien Phong Bank stopped an attempted cyber-attack aimed at transferring more than $1.1 million. The hackers used a technique similar to the Bangladesh heist.

Last year, Wells Fargo in the US approved transfers of $12 million from Banco del Austro in Ecuador after getting requests via the secure messaging system. Both banks believe the money was stolen by hackers.

To restore the banking industry’s faith in SWIFT, the Belgium-based firm plans to provide tighter guidelines for auditors and regulators to check if a bank’s SWIFT security procedures are good enough.

READ MORE: SWIFT admits international bank transfer system was hacked

SWIFT wants to improve information sharing among members, to increase the use of software spotting fraudulent payments and to toughen up the network’s security procedures.

Article source: https://www.rt.com/business/344185-swift-security-plan-hackers/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“There’s an improvement in business regulation in Russia… Efforts have been made over the past two years to simplify business regulations. We see it through statistics,” she told RIA Novosti on the sidelines of Doing Business with BRICS conference in Washington.

Russian economy may return to growth by end of 2017 – EBRD president

According to Ramalho, processes such as tax payments have become easier and faster. “It’s too early to say how those improvements are reflected in the country’s economic data but they could facilitate job and start-ups growth,” she said.

READ MORE: Foreign investors welcome in Russia – PM Medvedev

The economic slowdown in Russia may end in the next 18 months, according to the President of the European Bank for Reconstruction and Development (EBRD) Suma Chakrabarti. The economy is “going through tough times” because of Western sanctions and the falling oil price, he said, adding that the economic slowdown could soon change to growth.

READ MORE: Russia regains foreign investor interest

In March, Russian Prime Minister Dmitry Medvedev welcomed foreign investors to the country; saying that despite the challenging economic environment Russia is open for business and intends to provide a comfortable investment climate for businesses involved in the country’s major projects. He added the country is maintaining investor interest, with the value of direct investment into the economy from the Asia-Pacific region at about $10 billion.

Article source: https://www.rt.com/business/344180-business-climate-russia-bank/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Some European banks staying away from Russian bonds

“The issue is carried out in compliance with the program of external borrowing, in accordance with the budget law for the current year,” the ministry said.

The government is offering a yield of 4.65-4.90 percent, according to two banking sources cited by Reuters.

The placement of a 10-year dollar-denominated Eurobond will be arranged by VTB Capital, a unit of Russia’s state-run VTB, which is subject to Western sanctions.

Last week, bank chairman Andrey Kostin said Moscow is able to place the obligations avoiding foreign lender participation.

The size of the placement wasn’t revealed, but the government has previously planned to raise up to $3 billion to cover the fiscal deficit.

According to Russian Finance Minister Anton Siluanov, getting access to foreign investment is not crucial to the Russian budget. 

“We will find sources for financing the budget deficit in the Russian financial market. It’s only $3 billion. I recall that in previous years we went with much higher borrowing,” said the minister in an interview with Rossiya 24 TV channel last week.

Russia plans 10-year Eurobond, may sell as early as today. Russia Eurobonds will not violate US and EU sanctions.

— Russian Market (@russian_market) May 23, 2016

Earlier this year, Washington and Brussels urged major European and American financial institutions to stay away from potentially lucrative Russian bond deals, calling them politically risky and capable of undermining the sanctions regime.

Sources say Russia is placing a Eurobond – RTRS
Quite a lot of interest in Eurobonds from various Sovereigns this past week.

— LSFI (@LSFixedIncome) May 23, 2016

The ministry invited 25 Western investment banks and three Russian lenders to take up the offer, as organizing a bond placement is not expressly forbidden by the sanctions. Scared by the regulators’ warnings Western financial institutions decided not to bid.

READ MORE: Washington warns top banks to stay away from Russian bonds

Yields on the existing Eurobonds placed by Russia rose slightly after the announcement. Russia’s 2023 dollar Eurobond was yielding 4.04 percent, up from 3.96 percent at the beginning of the day.

Article source: https://www.rt.com/business/344097-russia-eurobond-finance-ministry/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Berlin eases objections on Greek debt relief deal

The government hopes to incorporate an extra €1.8 billion in revenue and get the next tranche of much-needed bailout funds to pay IMF loans, bonds held by the ECB coming due in July, and decreasing state debt.

Greece’s European creditors are expected to disburse €11 billion ($12.3 billion) following an assessment of the country’s third bailout program. Under the terms of the bailout deal agreed last year, the international lenders will provide as much as €86 billion in aid.

“Greeks have already paid a lot, but this is probably the first time the possibility of these sacrifices being the last is so evident,” said Prime Minister Alexis Tsipras to Parliament before the vote. The PM expects the country’s economy to grow three percent next year.

The reforms involve new taxes on alcohol, tobacco, fuel, internet usage, cars, hotel stays, as well as an increase in the basic value-added tax rate from 23 to 24 percent.

The measures also aim to free up the sale of non-performing loans owned by Greek banks and to establish a privatization fund controlling the country’s assets. The fund, controlled by the country’s creditors, is expected to ease the sale of public companies.

The bill was supported by 153 members of the Syriza-coalition with 145 MPs voting against. The step came ahead of a Eurogroup meeting on Tuesday that is expected to unlock another tranche of money for debt-ridden Greece.

Under its current deal with the European Union, Athens is to bring in a primary budget surplus to 3.5 percent of gross domestic product (GDP) by 2018.

READ MORE: Berlin eases objections on Greek debt relief deal

Earlier this month, the Greek parliament passed reforms of the pension and income tax systems to save Athens another €3.6 billion.

The unpopular reforms have resulted in protests across the country. Thousands gathered outside the parliament building in Athens on Sunday to rally against the measures. Transport workers staged a 48-hour-strike in protest of the new tax hikes.

Article source: https://www.rt.com/business/344076-greece-austerity-measures-bailout/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russia boosts oil exports on higher crude prices

Russia has long wanted Urals to become an independent benchmark for its oil exports to match Brent and WTI. This is the first time a foreign investor has openly shown interest in Russian crude contracts, the media reports, quoting a protocol from the Russia-China intergovernmental commission for energy meeting at the end of May.

According to the document, Beijing is interested not only in futures trading, but also in using the quotes for determining the price of long-term oil contracts.

At the moment, Russian crude is linked to the North Sea benchmark Brent prices at a discount. At present, this discount is about $2.50 from the barrel price for Brent. If such discount is cut to $0.50, Russian oil exporters could boost revenues by at least $600 million per year.

The St. Petersburg Exchange (SPIMEX) Vice President Mikhail Temnichenko has confirmed Beijing’s interest and said the bidding mechanism is scheduled to begin in November.

Chinese companies are using the quotes, based on Dubai and Brent prices in their oil imports, and a Russian benchmark could be interesting for them, the director of investment firm Small Letters Vitaly Kryukov told Kommersant.

“The Chinese are buying a lot of Russian oil; they are shareholders in a number of fields. Working with them would be a great help,” Kryukov said. The analyst added the key factor now is the volume of trading, as at a low volume the instrument won’t be liquid.

In June, Russian President Vladimir Putin is visiting China, where he’s expected to sign a large number of energy agreements, Russian Deputy Foreign Minister Igor Morgulov said Monday.

“Energy deals will … be signed. I wouldn’t want to anticipate anything as the documents are currently being finalized, but they will be,” Morgulov told RIA Novosti.

Article source: https://www.rt.com/business/344069-china-urals-oil-export-putin/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

China overtakes Germany as Russia’s top crude consumer

In March, China bought 4.65 million tons of oil from Russia.

Russia, Saudi Arabia and Angola were China’s three major oil suppliers last month.

April imports from Saudi Arabia fell by 22 percent year-on-year to 4.12 million tons. In March, China imported 3.98 million tons of oil from the country.

China increased year-on-year oil imports from Angola last month by 39 percent to 3.98 million tons. Imports from Iran in April fell by 5.1 percent yoy to 2.76 million tons.

An International Energy Agency report showed that at the end of 2015 Russia overtook Saudi Arabia as the biggest crude exporter to China.

Russian exports to China have more than doubled over the past five years, up by 550,000 barrels a day. Moscow and Beijing have significantly increased energy cooperation, with a wide range of multibillion dollar projects.

China ups oil imports from Russia

Russian oil transport monopoly Transneft’s Vice-President Sergey Andropov said in March that China is ready to import 27 million tons of Russian crude this year via the Eastern Siberia-Pacific Ocean (ESPO) pipeline. Supplies to China through the ESPO pipeline started in 2011 after Rosneft, Transneft and China National Petroleum Corporation (CNPC) signed contracts two years earlier. Currently five million tons of crude are supplied through the pipeline annually, and this is expected to rise to 15 million tons a year.

Experts say Chinese imports of Russian oil are likely to stay high over the coming years due to long-term crude supply contracts and rising demand from the world’s second biggest oil consumer.

Article source: https://www.rt.com/business/344060-china-russia-oil-imports/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The acquisition of Monsanto “would be a compelling opportunity to create a global agriculture leader, while reinforcing Bayer as a life science company with a deepened position in a long-term growth industry,” Bayer said in a statement.

The Bayer and Monsanto merger sparked hundreds of protest rallies worldwide.

Thousands of protesters in many European cities marched to show their disgust toward the US biotech behemoth, condemning the sale of the herbicide RoundUp, which has been accused of causing cancer in humans, and the development of genetically-modified crops.

Monsanto positions have been weakening over the recent month following the merger development on the GMO and chemical market. Last August, Monsanto failed to acquire its rival, Switzerland’s Syngenta, for about $46.2 billion, after the European company was bought by ChemChina for reported $44 billion.

GMO-free zone: Germany tells EU it bans genetically modified crops cultivation

Another merger in the industry, the $130 billion deal joining Dow and DuPont, has made Monsanto’s position weaker in the market, paving the way for its negotiations with the German chemical producers Bayer and BASF.

“This transaction would create a leading integrated agriculture platform with a broad product portfolio,” Bayer said in a statement, adding that the US pesticides and fertilizers producer is a “perfect match” for the German company’s agricultural business and promises “innovative solutions” for farmers.

Last October, Germany opted out of cultivating GMO crops on its territory, informing the European Commission of the move and in the process joining Poland, France, Scotland and several other member states.

The German Agriculture Ministry has notified the European Commission that the country will not allow the growth of GMO crops on its territory.

Article source: https://www.rt.com/business/344046-bayer-buying-monsanto-offer/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Damascus wants Russia to develop Syrian oil

According to Novak, Lukoil, Gazprom Neft and Zarubezhneft are among the companies invited as they have experience of work abroad and can invest in projects.

“Syria has asked our companies to participate in rebuilding oil and gas projects, infrastructure development, and pipeline construction,” Novak told journalists, adding the companies are currently studying the proposals.

Syria has already asked Russia to participate in exploring and developing oil and gas on land and offshore. Russia was invited to upgrade the Baniyas refinery and construct a refinery with Iran and Venezuela.

Damascus and Moscow have signed nearly a billion dollars worth of agreements to rebuild the war-torn country, said Syrian Prime Minister Wael Nader Halqi. That followed Syrian President Bashar Assad’s invitation to Russian companies to participate in rebuilding homes in Syria.

Russia signs contracts worth $950mn for Syria reconstruction

The two countries intend to develop energy, trade, finance and other sectors of the economy.

READ MORE: Syrians want Russian business help to rebuild country – Assad

Halqi also said Russian companies will be given priority in rebuilding country following the civil war. According to him, many Russian companies are already operating in Syria, including those engaged in offshore exploration.

In February, Gazprom CEO Aleksey Miller discussed with the Syrian ambassador prospects for cooperation after the country manages to stabilize from its civil war. Russian businesses have energy contracts in Syria that were signed before the crisis worth $1.6 billion.

Article source: https://www.rt.com/business/343783-syria-energy-companies-infrastructure/?utm_source=rss&utm_medium=rss&utm_campaign=RSS