Archives for December 2016

India braces for large protests after rupee banknote ban

Eighty percent of the world’s diamonds are cut and polished in India, where the industry employs a million people. The short supply of cash has severely affected the operations.

Indian Prime Minister Narendra Modi last month withdrew the 500 and 1,000 rupee notes (about $7.35, $14.7) from circulation, turning 86 percent of the cash in the country to paper. The dramatic measure was said to fight tax evasion and corruption.

Indians were given until December 30 to swap their old bills for new ones.

Almost all of India’s transactions are in cash and many people don’t have a bank account.

The liquidity crunch has badly hit consumer demand for diamond jewelry in India, which is the world’s third-biggest market.

Demand for precious stones in India usually picks up in the winter wedding season. This year sales were plunging as nearly two-thirds of jewelry is usually purchased with cash.

Traders also complain lack of money damages their operations. “The market is frozen. We don’t have cash to buy diamonds,” said trader Kalpesh Savaliya who’s been in the jewelry business for 25 years.

Experts say the disruption could lead to cheaper polished stones on the market, with a temporary glut and lower prices at wholesale and store level.

Indians google money laundering after Modi declares war on cash

“During the cash crunch, diamonds are one of the last things people want to buy. At least for the next six months demand will remain weak,” Praveenshankar Pandya, head of India’s Gem Jewellery Export Promotion Council (GJEPC) told Reuters.

As for the higher-value jewelry business, it will be protected because cutting and polishing are also done in Israel, Belgium and by bigger Indian companies that rely on bank transactions.

“The knock-on effect of Indian demonetizations has meant a reduction in the price of lower quality diamonds,” said Tobias Kormind, managing director of 77 Diamonds, an online jewelry retailer based in London. “As a result, we’ve seen an increase in demand for those kinds of diamonds as our clients have snapped up these favorable deals.”

India’s rough diamond imports grew by more than 30 percent between April and November, GJEPC data showed. Exports of cut and polished diamonds rose 12.2 percent.

Article source: https://www.rt.com/business/371942-global-diamond-india-cash/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Tehran gets cut-price Boeing deal

This week the currency has dropped to 41,600 rials to the dollar, its lowest point ever, further extending the gap with the official government rate fixed at 32,300.

The slide has accelerated since the victory of Donald Trump in the US election. He has pledged to renegotiate the Iranian nuclear deal with world powers. At the same time, the country’s economy has not yet seen the benefits of sanctions being lifted.

“Surely this negatively impacts people’s lives. Lots of foreign goods are imported into our country and many of the things people need come from abroad. It also has a very negative psychological effect on the people,” said a Tehran resident as quoted by CNBC.

The rial has seen a fall from around 9,200 to 41,600 to the dollar over the last decade, a depreciation of nearly 450 percent. Much of the collapse came in 2012 when the US banned the world’s banks from taking part in deals with Iran, and the European Union imposed its oil embargo.

According to the 2015 nuclear accord, international sanctions against the Islamic Republic were lifted in return for the country limiting its enrichment of uranium. Since then, Iran has sharply increased crude output aiming to recoup market share lost over the years.

Removing some of the restrictions hasn’t given a free hand to international banks to work with Iran’s currency, with payments being delayed, according to the authorities.

READ MORE: Iran says US sanctions violate nuclear deal, demands meeting of world powers

That means harder times for average Iranians. “This is tragic to me. I have lost 20 percent of my purchasing power with this exchange rate because all prices are going up harshly,” said Ahmad Heidari, a 64-year-old retiree, as quoted by CNBC.

Tehran has manipulated the currency market to cover budget deficits, using the difference between the lower government exchange rate and the higher market exchange rate to gain rials from oil sales.

The measure known as arbitrage might spring to action, according to Hassan Salimi, the head of the Investment Group of Iran’s Chamber of Commerce.

“The government believed that it could sell a barrel of oil from $65 to $70 in 2017, but now it is certain that the price of oil will stay around $50. Therefore, to make up for the deficit, it has increased the exchange rate,” Salimi said.

Article source: https://www.rt.com/business/371941-iran-rial-all-time-low/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Crimean energy bridge completed from mainland Russia

“This is another very important step for the development of Crimea in the long term. The supplies of Russian gas to the Crimean peninsula will allow us to develop its economy as a whole and will also help to meet the social needs of the Crimea and Sevastopol,” said Russian President Vladimir Putin.

The pipeline stretches 358.7 kilometers across Lake Tuzla and the Kerch Strait, with an additional 27.3-kilometer spur to Simferopol.

According to Putin, the pipeline will provide gas for two 470 megawatts (MW) power stations, which will be built by 2018.

In the next four years, Russia will build or reconstruct over 2,500 kilometers of cross-country gas pipelines and build eight gas pumping stations in the Crimea.

Crimea consumes up to 1,300 MW of electricity. Previously 800 MW was supplied by Ukraine. Now the region can meet its own energy demands. With the announced new power stations the peninsula will be able to generate up to 2,000 megawatts, which exceeds demand.

Ukraine’s gas monopoly to demand $2.6bn from Russia for Crimean assets

In November 2015, Crimean authorities had to declare a state of emergency after all four Ukrainian power lines providing electricity to the peninsula were blown up, causing a total blackout. This urged the Kremlin to speed up building an independent energy system for the region.

Providing power to Crimea is a part of a bigger project to unite the peninsula with mainland Russia. Moscow expects to open a 19-kilometer long bridge to bypass Ukraine in 2018.

The bridge will have a four-lane highway and two-track railroad, capable of handling up to 40,000 vehicles and dozens of trains a day to the peninsula over the Kerch Strait.

Crimea’s only land border is with Ukraine, but currently, regular passenger and cargo deliveries are organized by direct flights and ferries from ports in southern Russia.

Article source: https://www.rt.com/business/371937-putin-crimea-gas-russia/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Maintaining stable growth won’t be easy for China in 2017, Xinhua said, “given persistently weak external demand, ongoing deleveraging and capacity-reduction pressure, and a slowing property sector.”

But unlike other countries, China has the flexibility to beat off sharp economic decline as it restructures its economy toward consumption and services, according to the agency.

Statistics showed China’s GDP witnessed a 6.7 percent increase in all three quarters of 2016. The country’s industrial development, consumption, and investment maintained stable growth in October- November, with a rapid rise in the service industry.

Despite experts’ concerns, Chinese officials are confident in the country’s economy, saying the positive trends of this year will continue into next year.

This month Chinese President Xi Jinping voiced his confidence the country will achieve its major economic targets.

China’s Alibaba back on US counterfeit blacklist

If China’s GDP growth comes in line with the government’s official full-year target, it will account for 1.2 percentage points of global GDP growth, economist Stephen Roach told the China Daily.

According to the IMF which expects only a 3.1 percent global growth this year, China would contribute over a third of the world’s growth. The IMF says China is the primary source of export demand for over 100 economies, which account for about 80 percent of global GDP.

The Chinese media has warned that at times of growing protectionist sentiment around the world trading partners would only have access to China’s home market if similar access was given by them.

Analysts say the future of Chinese trade will become more apparent when US President-elect Donald Trump enters the White House. The presidency of Trump, who’s known for his protectionist views, may hit US-China trade which brought Beijing $367.11 billion last year.

Trump has warned China about possible sanctions for depreciating its currency, and thus hitting American manufacturers. Last week he appointed economist Peter Navarro, an outspoken critic of China, as the head of a new US trade body.

Article source: https://www.rt.com/business/371916-china-growth-global-economy/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

From Renaissance to rescue for the world’s oldest bank

Last week, Rome approved a €20 billion fund to rescue the country’s embattled banking sector shortly after the world’s oldest lender failed to raise capital from investors through a share sale. Monte dei Paschi is drowning in €28 billion of bad loans, only managed to raise €2.5 billion.

On Friday, the bank had officially asked the ECB for a precautionary recapitalization.

A precautionary recapitalization is a mechanism of state aid to a struggling bank, which is still financially sound. The intervention means a modest bail-in of investors with the government able to purchase shares or bonds at market terms authorized by the EU in Brussels.

Following the request by Monte dei Paschi, the ECB recalculated the capital it thought the lender needed on the basis of the EU large bank stress test earlier this year.

According to the ECB, Italy’s third-largest lender was solvent, but the bank’s liquidity position had rapidly deteriorated between the end of November and December 21.

“The bank has quickly started talks with the competent authorities to understand the methodologies underlying the ECB’s calculations and introduce the measures for a precautionary recapitalization,” Monte dei Paschi said in its statement.

READ MORE: Italy to spend €20bn to bolster shaky banking sector

Shares of Monte dei Paschi have been suspended from trading on the Italian stock market until the full details of the bank’s recapitalization are available.

The bank’s shares are down almost 86 percent for the year.

Article source: https://www.rt.com/business/371914-ecb-monte-paschi-billions-shortfall/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Trump taps ex-Goldman partner for top Treasury job, billionaire Ross to head Commerce

According to the paper, Ross told Cypriot financiers they should strike during this “period of confusion” to take business away from the City. Brexit is a “God-given opportunity” for Britain’s competitors like Frankfurt and Dublin, he said.

The daily says Ross made the remarks before the US presidential election and being picked by Trump.

“I recommend that Cyprus should adopt and immediately announce even more liberal financial service policies than it already has so that it can try to take advantage of the inevitable relocations that will occur during the period of confusion,” Ross said, according to The Times.

As commerce secretary, Ross will be among those to negotiate a trade deal with the UK if it triggers Article 50 to leave the EU.

The British Labour party said Ross’ words are a warning that other economies will try to profit from Brexit.

“Wilbur Ross’ comments are a stark reminder that the trade deals Britain will agree in future will not depend on goodwill from our partners, but on their own shrewd political and economic calculations,” Barry Gardiner, Shadow Secretary of State for International Trade told The Times.

“Theresa May’s government has failed to articulate a coherent vision of what kind of economy Brexit Britain will be. This makes us weak and vulnerable in the eyes of others,” he added.

According to the article, Ross has also called Brexit the “most expensive divorce proceeding in the history of the world.”

The 79-year old billionaire investor plans to step down as vice chairman of Bank of Cyprus. The private equity firm WL Ross Co. he sold a decade ago is under no obligation to sell its 1.6 percent stake in the lender.

Ross has endorsed the “Trump trade doctrine”, according to which any new trade must narrow the US trade deficit, boost manufacturing and support growth. The UK has a trade surplus with the US.

Article source: https://www.rt.com/business/371908-brexit-trump-wilbur-ross/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

UK seeks transitional trade deal with EU to avoid Brexit ‘cliff edge’

“I don’t think it makes sense for us to pretend we should remain in the single market and I think there are real question marks about whether it makes sense to remain in the customs union,” King said in an interview with BBC’s Radio 4.

The former banker said Britain’s exit from the European Union could undermine the government’s ability to sign trade deals with countries outside the block.

Britain’s Prime Minister Theresa May and Trade Secretary Liam Fox recently said they wanted to agree on new trade agreements with non-EU countries as soon as possible after Brexit and have already started informal talks with some of them.

Britain would be better off economically completely out of the EU single market, King suggested.

“Being out of what is a pretty unsuccessful European Union – particularly in the economic sense – gives us opportunities as well as obviously great political difficulties.”

Among the opportunities Brexit could provide, King named a chance to rework the system of agriculture subsidies, and to revise the relationship with the Republic of Ireland. The Irish border will be the only EU-UK land border after Brexit.

“I think the challenges we face mean it’s not a bed of roses, no one should pretend that, but equally it is not the end of the world, and there are some real opportunities that arise from the fact of Brexit we might take,” he said.

The former Bank of England’s head added the government should outline its policies on immigration “sooner rather than later” and that it would be a mistake to put the issue into the “basket” to be negotiated once Article 50 is triggered.

Prime Minister May plans to trigger Article 50 of the EU’s Lisbon Treaty by the end of March, beginning the two-year withdrawal period.

Article source: https://www.rt.com/business/371855-eu-uk-trade-deals/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

An unnamed fund from the Middle East is the most likely potential purchaser, according to two sources cited by the daily. Another person close to the matter says Mubadala, an Abu Dhabi government sovereign wealth fund, is interested in acquiring Rosneft’s shares.

19.5% of Russian oil giant Rosneft sold in ‘biggest privatization deal of 2016’

Earlier this month, the natural resource trader Glencore International and a Qatari sovereign wealth fund acquired 19.5 percent of the company for €10.5 billion ($11.3 billion).

The partners became the third-largest stakeholder in the business with over 50 per cent still belonging to the state-owned oil transportation agency Rosneftegaz, while another 19.75 percent is owned by BP.

Rosneft negotiated with more than 30 companies, sovereign wealth funds and financial institutions from Europe, Americas, Middle East and Asia before selling the stake to the Glencore-Qatar consortium, according to the company’s CEO Igor Sechin.

Rosneft stock has become very attractive to investors, according to the newspaper’s sources. The oil major has recently changed its dividend policy. The company has promised to disburse 35 percent of net profit in dividend to its shareholders instead of 25 percent.

Moreover, oil prices continue to rise after the Organization of the Petroleum Exporting Countries, and non-OPEC oil producers reached a deal to cap output.

The package owned by the consortium may go up in price due to the changed market environment, the sources told Vedomosti. Although Rosneftegaz won’t make any money from the re-sale of the stake, the deal could reportedly boost the capitalization of Rosneft.

READ MORE: US sanctions against Russia should be relaxed next year – Bloomberg poll

Investors have expressed interest in Russian energy firms, particularly in Rosneft and Gazprom, according to analysts at Morgan Stanley. The bank said that apart from attractive prices for crude and high dividends, the results of the US presidential election have stoked investor interest. Some experts believe the sanctions against Russia could be eased after Donald Trump enters office.

Article source: https://www.rt.com/business/371853-rosneft-sell-shares-arabic-fund/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Putin sees Russian economy returning to growth

This year the Russian currency has strengthened 17 percent against the dollar, only marginally beaten by Brazilian real which gained over 17 percent.

The ruble had a tough first month of the year when oil dipped to $27 per barrel. At the time, the currency hit an all-time low of 82 against the dollar. With crude prices stabilizing, it rebounded to 60.40 in December. On Monday, it was trading at 60.80 against the dollar and 63.60 against the euro, both close to eighteen-month highs.

“We see foreigners are actively entering the ruble market and buying ruble-denominated bonds this year, given the positive trend of strengthening of the ruble and taking into account good yields of such bonds,” said Russian Finance Minister Anton Siluanov on Friday.

Since the beginning of the year, the proportion of foreign buyers of Russian federal loan bonds (the so-called OFZ) has grown by over five percent to almost 27 percent.

The Russian stock markets have shown a good performance, too. The ruble-trade MICEX index is up 24 percent this year, hitting many record highs. The dollar-denominated RTS index has been even more successful gaining 49 percent since January.

According to many analysts, Donald Trump’s election as US president is also a significant opportunity for investment in Russia, as Moscow-Washington ties are predicted to improve under Trump’s presidency.

While the incumbent President Barack Obama called Russia “a smaller and weaker country,” Trump’s rhetoric has been much softer. The nomination of ExxonMobil CEO Rex Tillerson as secretary of state is seen as a big positive for improving the relationship. Tillerson is reportedly on good terms with Kremlin insiders from the time his company operated in Russia before sanctions.

Article source: https://www.rt.com/business/371851-russian-ruble-currency-investment/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Tehran threatens clawbacks if Washington scuttles Boeing deal

It is the first deal between Iran and an American aircraft maker in almost forty years. The new planes will help Iran modernize and expand its aging commercial aircraft fleet after decades of international sanctions. National carrier IranAir operates some of the world’s oldest airliners.

“Boeing has announced that its IranAir contract is worth $16.6 billion. However, considering the nature of our order and its choice possibilities, the purchase contract for 80 Boeing aircraft is worth about 50 percent of that amount,” Iran’s Deputy Transport Minister Asghar Fakhrieh-Kashan was quoted by IRNA news agency.

The deal is an excellent opportunity for Boeing which wanted to close the transaction before the year-end so it could be included in its order book. This month the company announced it is cutting production of the 777 long-haul jet due to a drop in demand.

Last week Fakhrieh-Kashan said Tehran would make an initial payment of about $226 million for the first 15 Boeing planes but didn’t provide any details on the timing.

READ MORE: Iran seals $17bn contract with Boeing in first deal in 40yrs

Iranian officials have warned of clawbacks if the multibillion-dollar deal with Boeing is scuttled by Donald Trump’s incoming administration.

On Thursday, Boeing’s European rival Airbus also sealed a deal with the Islamic Republic. The contract to sell 100 jets to IranAir will be worth $18-$20 billion at list price, but the head of IranAir has been quoted as saying the value of the contract would not exceed $10 billion.

According to the Iranian Transport Minister, IranAir may also consider an option to buy 20 more aircraft from the European maker of regional turboprops ATR. That would be in addition to a planned firm order of 20 planes.

“The final round of talks will be held with ATR representatives (next) week, and we expect the IranAir contract to be signed… in the following week,” Fakhrieh-Kashan said on Sunday.

He added that the purchase of 20 planes has been already finalized and the contract was worth less than $500 million.

Article source: https://www.rt.com/business/371826-iran-boeing-deal-payment/?utm_source=rss&utm_medium=rss&utm_campaign=RSS