May 26, 2018

Crisis looming over global economy without free trade

Russian President Vladimir Putin warned about the deepest crisis the global economy has ever seen, if protectionism prevails. “The system of multilateral cooperation, which took years to build, is no longer allowed to evolve. It is being broken in a very crude way. Breaking the rules is becoming the new rule,” he said.

Seeking alternatives to US dollar dominance in global finance on day one of SPIEF 2018

The methods for breaking the rules are trade tariffs, technical standards and subsidies, as well as unilateral sanctions, according to Putin. “The ability to impose sanctions arbitrarily and with no control fosters a temptation to use such restrictive tools again and again, right and left, in every case, regardless of political loyalty, talks about solidarity, past agreements and long cooperation,” the Russian president said.

International Monetary Fund (IMF) chief Christine Lagarde said trade barriers can slow down global growth, which is expected to reach 3.9 percent this year. “There are darkening clouds from the risk of a retreat from global trade and multilateral cooperation,” she said. Lagarde warned there are no winners in a trade war, and “protectionism hurts the poor especially hard.”

Longtime US ally France is seeking to make Europe’s economy more independent, according to President Emmanuel Macron. “We must work to boost cross-investments and to achieve financial independence of Europe. It is necessary, if we want to reach our strategic goals, to achieve individual and autonomous financing of these projects and strategies. It is necessary to separate some spheres from geopolitical ones, from politicization,” Macron said at the Forum.

Washington uses sanctions to push its gas to Europe – Germany’s largest energy company

“We seek European sovereignty, and I think that, in order to achieve it, we need to start with self-sufficiency and sovereignty in the area of financing,” Macron added.The French president also said that he supports measures to compensate the European companies that may suffer from US sanctions on Iran.

The world’s second-largest economy, China, is also seeking to avoid trade wars. “As far as the trade war between China and the United States is concerned, consultations between the two countries are underway … We should avoid a trade war because nobody will win,” Vice President Wang Qishan said Friday.

Japanese Prime Minister Shinzo Abe said trade disputes should be resolved through the World Trade Organization. “I think it is necessary to pay attention to trade in general, in a comprehensive manner, and to act within the framework of the WTO regulations. We are talking about this inside the country, and we also call on the American partners to do this,” Abe said. The PM pointed out that Japan is against the raising of tariffs on steel imports to the US, adding that this could affect US consumers.

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High reserves & low debt make Russian economy strong in hard times – IMF

“Russia has put in place an admirable macroeconomic framework—saving for a rainy day, letting the exchange rate float, introducing inflation targeting, and shoring up the banking system,” she said.

“As a result, it was able to weather tough times well, and today it has virtually no fiscal deficit, a solid current account balance, and very little debt.”

Putin warns of financial crisis the world ‘has not yet seen’

To achieve more, Russia should increase productivity, diversify its economy from oil and gas, boost investment in healthcare and education, as well as reducing market concentration, and integrating more into the global economy, Lagarde said.

As for the global economic outlook, Lagarde said the IMF is optimistic. Last year, global growth was 3.8 percent, the fastest since 2011, and it is likely to surge to 3.9 percent this year. “Once again, the momentum is broad-based, encompassing the United States, Europe, Japan, China, Russia, and many other emerging market and developing countries,” she said.

But there is bad news, too. “The not-so-good news is that there is a risk of storms in the forecast. Global debt is at a record high—public and private debt together has reached $164 trillion, or 225 percent of global GDP,” Lagarde said.

“Financial stability is also looking fragile, due to high debt and rising financial market volatility—especially from the increasing risk of capital flow reversals in emerging markets. And there are darkening clouds from the risk of a retreat from global trade and multilateral cooperation,” she added.

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Putin trolls Macron over ‘huge’ French investments in Russia

“Finland’s Fortum invested €6 billion in Russia, while the whole of France invested €15 billion,” Putin said jokingly. Moments earlier, the French President boasted about the figure, proudly stating his country was second among Russia’s foreign direct investors.

France signs contracts for €1bn direct investment to Russia

According to Putin, the Finnish energy firm was an example that the Russian economy is open to foreign investment, pointing out that the company was given access to sensitive objects in Siberia.

The Russian president said France is an old and reliable partner of Russia, as well as Germany. “We very much count on the fact that our French friends, companies will develop in Russia, will receive income and profit.”

Putin also noted that Russian-French business ties are diversified since the countries work in many spheres from space to pharmaceuticals. But Russia’s leading economic partner is now China, not France or Germany, Putin pointed out.

“Trade with Europe was worth $450 billion once, now it has fallen by half. With China, trade is going to reach $100 billion soon,” the president said.

Macron, who spoke before Putin at SPIEF, said that France wants to become the largest direct investor in Russia. “The source of motivation is that our French enterprises now employ 170,000 Russian citizens,” he said. The French president added that, in the last 10 years, no French company quit the Russian market despite the troubles in the Russian economy, it is a “strong signal”.

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Putin warns of financial crisis the world ‘has not yet seen’

The Russian president spoke out against the growing trend of using unilateral restrictions to achieve economic advantage, as he addressed guests of the St. Petersburg International Economic Forum (SPIEF) on Friday.

“The system of multilateral cooperation, which took years to build, is no longer allowed to evolve. It is being broken in a very crude way. Breaking the rules is becoming the new rule,” he said.

Washington uses sanctions to push its gas to Europe – Germany’s largest energy company

In addition to traditional forms of protectionism such as trade tariffs, technical standards and subsidies, nations are increasingly using new ways to undermine their competition, like unilateral economic sanctions. And nations which thought they would never be targeted by such measures for political reasons are now being proved wrong, Putin said.

“The ability to impose sanctions arbitrarily and with no control fosters a temptation to use such restrictive tools again and again, right and left, in every case, regardless of political loyalty, talks about solidarity, past agreements and long cooperation,” he said.

Putin called for a change of course, for free trade to be defended, and for rules-based regulation of the global economy, which would alleviate the chaos resulting from the rapid technological transformations arising from the development of digital technology.

“The disregard for existing norms and a loss of trust may combine with the unpredictability and turbulence of the colossal change. These factors may lead to a systemic crisis, which the world has not seen yet,” he said.

He stressed that there is a need for transparent universal rules as well as an inclusive mechanism, which would allow those rules to be amended in a way that would be accepted by the international community.

“We don’t need trade wars today or even temporary trade ceasefires. We need a comprehensive trade peace,” the president stressed.

“Competition, clash of interests, has always been, is, and will always be, of course. But we must be respectful towards each other. The ability to resolve differences through honest competition rather than by restricting competition is the source of progress,” Putin added.

The speech comes amid turbulent times for the global economy, in which the nationalist policies of US President Donald Trump have pitted America against other nations which his administration believes to be enjoying unfair advantages in trade. Trump has threatened China, European nations, Canada, and Mexico with trade restrictions, demanding the perceived misbalances be fixed.

The US has also intensified its use of economic sanctions, targeting Russia, Iran, North Korea, and other nations with various punitive measures.

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No sign of Russia’s isolation at opening of St. Petersburg International Economic Forum

French President Emmanuel Macron, Japanese Prime Minister Shinzo Abe, the head of the International Monetary Fund (IMF) Christine Lagarde, Chinese Vice President Wang Qishan, as well as US Ambassador Jon Huntsman are among those attending.

Sanctions forgotten in St. Petersburg as Putin attracts global big-hitters to his hometown

SPIEF 2018 has become a key business platform, where Russian corporations and investors across the world can sign new contracts and agree on potential joint projects in Russia and abroad.

Russian President Vladimir Putin met President Macron, who led the biggest delegation of French businesses intent on doing business in Russia despite EU and US sanctions against the country.

According to the French embassy in Russia, French businesses will sign up to 20 contracts and cooperation agreements by the end of the forum. This year, President of Movement of Enterprises of France (MEDEF) Pierre Gattaz and Chairman of MEDEF International Frederic Sanchez are reportedly heading the biggest foreign delegation at SPIEF with a total of 170 representatives from 60 companies.

During the first day of the forum, Russian natural gas producer Novatek agreed to sell its 10 percent stake in the Arctic LNG 2 project to France’s energy company Total. The overall price tag for the project is set at about $25.5 billion with its annual capacity expected to reach 18 million tons of liquefied natural gas after the plant is launched in 2023. The deal is set to be sealed as soon as next year.

Meanwhile, France’s Dalkia Group has clinched a cooperation deal with the Russian Direct Investment Fund (RDIF). The parties are planning to jointly develop energy saving solutions such as high-efficiency systems and resource consumption optimization.

Putin on cyberwarfare: Action causes reaction, you don’t like reaction – let’s talk rules

Russian state telecom corporation Rostelecom and Finnish telecommunications multinational Nokia have agreed to create a joint venture to work out solutions for various markets of innovative technologies.

South Korea’s Samsung Electronics and Russian retail chain Magnit signed a memorandum of understanding in the field of digital transformation. The companies will collaborate to develop innovative technologies for Russia’s retail industry.

At the same time, Russia’s Vnesheconombank (VEB) and India’s Srei Infrastructure Finance Limited said they would launch Viman Capital, a joint Russian-Indian private equity fund for innovation and technology. The fund will back Russian and Indian tech companies at global markets, primarily in BRICS countries, the Eurasian Economic Union and ASEAN.

The Asian Infrastructure Investment Bank (AIIB) will reportedly participate in the potential projects of Russia’s new infrastructural fund, which will be created next year. The fund will be focused on railroads, ports, airports.

Russia’s leading companies in the transport industry signed an agreement to establish the Digital Transportation and Logistics (DTL) association. The companies included Russian Railways, Aeroflot, Russian Highways, RT-Invest Transport Systems, ZachitaInfo Trans, Glosav and Delovye Linii. DTL will become the key part of Ministry of Transportation’s “Digital Economy” program. Its key task will be the establishment and development of the united multi-modal digital and logistics domain in Russia based on native solutions and software.

Russia-Germany business ties remain solid despite sanctions – German trade lobby

The US multinational consumer goods corporation Procter Gamble has sealed a deal on creating one of the biggest logistics centers in Europe in Russia’s southern region of Tula, while the British consulting and advisory firm EY pledged to attract investors to the Western region of Kaliningrad, as well as to exploit its local firms on global markets.

Russian aerospace and defense firm, United Aircraft Corporation, has signed an agreement on supplies of eight Sukhoi Su-30SM fighter aircraft to the air force of neighboring Kazakhstan. The Eurasian Development Bank and state-run Russian Railways have signed a cooperation agreement on the Moscow-Kazan high-speed railway project.

Among other notable deals sealed during the first day of SPIEF were agreements between Russian telecommunications company VimpelCom and Chinese telecommunications and networking equipment multinational Huawei, which also agreed on cooperation with Russian state-owned Sberbank. The state lender’s insurance subsidiary also clinched a deal with the US technology giant IBM to use artificial intelligence for treatment of oncological diseases.

Russian technology company MaximaTelecom and an Indian provider of satellite communication systems and services TechnoSatComm have agreed on strategic partnership to create public a WiFi net in Deli’s metro system.

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Russia-Germany business ties remain solid despite sanctions – German trade lobby

“The foundations of German and Russian economic relations are solid even in the time of sanctions and low oil and gas prices. Last year, we saw high German private investment in the Russian economy of €1.6 billion,”  the chairman of the German-Russian Chamber of Commerce Matthias Schepp said.

Washington uses sanctions to push its gas to Europe – Germany’s largest energy company

These are not only car manufacturers, which invest heavily in Russia, but also medium-sized businesses and family, he said. Germany’s business lobby has criticized EU sanctions against Russia, arguing that German companies will end up the losers, since Moscow can’t be fully isolated.

“If German and American companies face hurdles while working in Russia, Asian businesses, especially Chinese firms, will gradually fill the vacant niche,” Schepp warned in April. “It is not currently clear what impact the closer cooperation between the ‘Russian bear’ and the ‘Chinese dragon’ in the long term may have on Western interests.”

In 2017, Germany and Russia grew significantly for the first time in five years. German exports to Russia increased to €25.9 billion ($31.9 billion) in 2017, while imports from Russia grew to €31.4 billion ($38.7 billion) in the same year. The figures represent a 20.2 percent rise in exports and an 18.7 percent growth in imports, according to the German Federal Statistical Office data from March.

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Seeking alternatives to US dollar dominance in global finance on day one of SPIEF 2018

Veteran investor Jim Rogers has noted that the US currency will likely lose its leadership status in the next decade.

“Dollar is going to be higher than now because the turmoil is coming. Then, it is going to be overpriced and people will look around and say, ‘America’s got the largest debt in the history of the world. It’s printing money as fast as it can,’” the investor said at the Valdai Club’s discussion session, held as part of SPIEF.

Russia ready to ditch dollar in favor of euro in foreign trade – finance minister

The alternative is coming from Brazil, Russia, China, India, Iran and other developing countries, according to Rogers, who said these states have enough power to compete with the dollar.

Russian Finance Minister Anton Siluanov suggested the euro could substitute the dollar in Russia’s foreign trade if Brussels takes a stand against Washington’s latest sanctions against Moscow. “As we see, restrictions imposed by the American partners are of an extraterritorial nature. The possibility of switching from the US dollar to the euro in settlements depends on Europe’s stance toward Washington’s position,” said Siluanov, who is also Russia’s first deputy prime minister. The minister added that the Chinese yuan, Indian rupee, and Russian ruble can also play a greater role in trade.

The need for more ruble-yuan settlements comes as trade between Russia and China grows. Xu Sitao, chief economist with Deloitte China, told RT that China has become the largest export market for Russia since 2017, accounting for roughly 12-13 percent of Russian exports.

“As I said earlier, Russia and China are very complementary. China is moving away from dirty energy coal, so I do expect further collaboration between our countries, I’m quite optimistic,” he said. Both Moscow and Beijing have repeatedly stressed they don’t need other currencies for bilateral trade.

Russia’s St. Petersburg International Economic Forum, one of the world’s key economic discussion platforms, opened on Thursday. This year, about 40 world leaders, including French President Emmanuel Macron, are attending the event. SPIEF 2018 will also welcome leading investment funds from 20 countries with total assets of more than $13.5 trillion.

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US sanctions can cut Iran’s oil sales abroad by half – BP boss

“The withdrawal of the United States from the agreement seems to be the beginning of the negotiation. It would impact Iranian oil sales between 300,000 and 1 million barrels per day, that’s sort of the range of estimates there,” Dudley told Sputnik news agency on the sidelines of the forum.

Europe moves to protect its firms working in Iran from US sanctions

Iran’s crude oil exports reached a record 2.617 million bpd in April, according to its oil ministry’s news service Shana, as Tehran sought to ramp up sales ahead of new US sanctions. However, just a month before, Iran sold 1.94 million pbd. So, if Dudley’s forecast comes true, Iran will lose roughly a half of its oil sales abroad.

The head of BP did not specify which countries will buy less Iranian oil, but Tehran’s traditional customers are China, India, South Korea, and Japan, which bought 60 percent of Iranian oil in April. China and India alone imported around 1.4 million bpd of Iranian oil in April, according to Shana.

Worries about Iranian exports have pushed crude oil to highest levels since 2014 this month. Brent oil surged above $80 per barrel, while the US WTI peaked at $72 this week. Iran is the fifth largest oil producer in the world and the third largest in OPEC.

Iranian Oil Minister Bijan Zangane has said the country’s sales will be unaffected if Europe doesn’t join the US sanctions. “Tehran’s oil exports will remain unchanged if the Iran nuclear deal is salvaged by the EU following the US withdrawal from the multinational accord,” Zangane told reporters after his meeting with EU Energy Chief Miguel Arias Canete in Tehran.

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Russian central bank boasts of alternative to SWIFT as ready-made defense against US sanctions

“There are risks in using the global financial networks, the global financial system, of which Russia is a part,” the Central Bank of Russia’s governor, Elvira Nabiullina, said at the St. Petersburg International Economic Forum (SPIEF).

“Therefore, since back in 2014, we have been developing our own systems, including a payments system. Inside Russia we have created a system for transferring financial data, which is similar to SWIFT.”

Russia won’t be cut off from SWIFT international bank transfer services

Society for Worldwide Interbank Financial Telecommunication (SWIFT), is the financial network that provides high-value cross-border transfers for its members across the world. The Belgium-based cooperative supports most interbank messages, connecting over 11,000 financial institutions in more than 200 countries and territories.

The probable cut off from SWIFT entered Russia’s political agenda as early as in 2014. Back then, Washington and Brussels imposed the first round of anti-Russian sanctions over the country’s alleged involvement in the Ukraine crisis and the reunification with Crimea.

Though SWIFT itself fended off the talks about the exclusion of Russia from the network, several state corporations, including Rosneft and Rostec, have pledged to use the country’s analogue of the global interbank cash transfer service.

SWIFT has a precedent of disconnecting a sanctioned state from the network. In 2012, SWIFT cut off Iran amid international penalties against the country, leaving Tehran no chance to access billions of dollars in revenue.

“This system is already operational and it allows, inside Russia, to transfer financial data,” Nabiullina said. The governor called the domestically developed network an “absolutely similar, competing system” that allows Russia to nullify risks at least inside the country.

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Gazprom agrees to reduce natural gas prices for Eastern & Central Europe

Gazprom will have to ease its hold on the European market, said Vestager, giving consumers “an effective tool to make sure that the price they pay is competitive.”

The Commission’s decision comes after three years of legal action. It means Gazprom will have to remove restrictions on customers to resell gas across borders and improve gas flows to members like Bulgaria and the Baltic nations.

In April 2015, the Commission sent a ‘statement of objections’ to Gazprom, claiming the company breached EU antitrust rules by pursuing an overall strategy to partition gas markets along national borders in its eight member states (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia).

“All companies doing business in Europe have to respect European rules on competition, no matter where they are from… Our decision provides a tailor-made rulebook for Gazprom’s future conduct,” said Vestager.

If the Russian company breaks any of the obligations, the EU could impose a fine of up to ten percent of the company’s global turnover.

Gazprom’s deputy chairman of the management board, Aleksandr Medvedev, said the company is satisfied with the commission’s decision and will comply with the requirements.

“We are satisfied with the decision on the settlement of the antimonopoly investigation, which the European Commission reported today,” Medvedev said on the sidelines of St. Petersburg Economic Forum.

“We have always confirmed our intention to fairly cooperate in order to find a constructive mutually acceptable solution within the framework of the established procedure,” he said.

According to Medvedev, “the decision taken today is the most acceptable outcome for the functioning of the European gas market as a whole.” Gazprom has always complied with the requirements of the “applicable provisions of EU competition law and confirms its commitment to respect them in the future,” he added.

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