July 20, 2018

Trump slams currency manipulation by Brussels & Beijing

The US, which is currently doing well, should preserve its right to recover what was lost through such practices as illegal currency manipulation and trade deals that were not profitable for the US, the president tweeted.

The latest attack by Trump comes amid escalating trade disputes between the US and its trading partners.

Shortly after taking office, Trump withdrew from the Trans-Pacific Partnership (TPP), which he said would steal millions of jobs from Americans, while the North American Free Trade Agreement (NAFTA), signed by Canada, Mexico, and the United States, is currently being renegotiated.

Trump has also pledged to narrow the US’ trade deficit with China. He accused Beijing of stealing intellectual property, manipulating the yuan, and exposing illegal export subsidy practices. Last month, the White House slapped tariffs on $34 billion of Chinese products, which China met with retaliatory duties on US goods.

Trump has also targeted steel and aluminum exports from the EU and has threatened to tax European cars sold on the American market.

The US dollar weakened against the euro, yen and yuan after the president’s tweets. The dollar index, which measures the greenback against a basket of global currencies, was off nearly 0.5 percent before the stock market opened in New York.

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Trump says US ready to tax all Chinese imports should need arise

So far, the countries have exchanged levies on mutual imports worth of $34 billion. US export duties on Chinese products came into force on July 6 with China retaliating hours later.

“I’m ready to go to 500,” Donald Trump said in an interview with CNBC, stressing that he is ready to tax every Chinese product imported to the US if it is necessary.

Chinese consumers ready to boycott American goods if trade war escalates

Last year, the dollar amount of US exports from China totaled $505.5 billion, according to Census Bureau data. The number is much bigger than the $129.9 billion the US exported to China the same year.

“I’m not doing this for politics, I’m doing this to do the right thing for our country,” the president told the agency. “We have been ripped off by China for a long time.”

Previously, economists noted that Beijing wouldn’t be able to emerge the winner in the tit-for-tat game of export tariffs because of the significant trade imbalance. According to some analysts, China could take some other steps to tackle the US trade attack, including cutting US investments, rejecting the country’s oil and gas, dumping the US state debt, as well as devaluing the yuan.

US is “being taken advantage of” on many fronts, including trade and monetary policy, according to Trump, who stressed that he had not introduced the tariffs out of any ill will towards Beijing.

“I don’t want them to be scared. I want them to do well,” the agency quotes the president as saying. “I really like President Xi a lot, but it was very unfair.”

American stock futures took a dive on Friday following the president’s comments. Dow Jones was down 130 points in pre-market trading.

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Russia set to wean economy off US dollar as Washington ratchets up sanctions

The main part of the reforms is a plan to reduce the use of the US dollar in foreign trade transactions in favor of national currencies, according to the news outlet. Russia has recently slashed its ownership of US Treasuries to a 11-year low of $14.5 billion, falling from the list of top holders of US debt.

The great dollar dump: Russia liquidates US Treasury holdings

“The sale of the US Treasury bonds has two main reasons. First, the Ministry of Finance dumps the notes because it works on the anti-sanction legislation. The second reason is a decrease in the value of US Treasuries as their yield grows,” Ivan Kapustiansky, leading analyst of Forex Optimum told RT.

It is not clear yet what will become an alternative to the dollar, he added. “Most likely it will become a currency of a country that Russia seeks to boost trade and build long-term friendly relations with,” Kapustiansky added.

The second part of the finance ministry’s plan is to promote companies sanctioned by the US on the local market. The ministry also seeks to reduce imports from unfriendly countries; it has not yet been specified whether it will be tariffs, quotas or import bans. Procurements of state-owned companies will be made confidential to protect them from sanctions.

Kapustiansky says dumping the dollar will only be a first step in the hard work of protecting the Russian economy from sanctions. “To a large extent, avoiding the dollar will not save Russia from further sanctions pressure and its consequences. The main issue is not the currency or the gold reserves, but the pressure on the partners of Russia. When Washington begins imposing sanctions on Russian partners, they face the question whether to sacrifice their partnership with Russia or risk losing the large US market,” he said.

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Going green: China’s shift to natural gas will send coal prices crashing

According to the plan, within three years coal consumption across 82 China’s cities will be slashed by up to 10 percent against the numbers fixed in 2016. Beijing is set to transfer housing and utilities infrastructure and the power supply sector from coal to gas.

The move will definitely lead to a drop in global prices for coal by 2020-2021, according to Director of the Center for Economic Forecasting at Gazprombank Airat Khalikov, as quoted by Russian business daily Vedomosti.

All roads lead to China: Russian gas from Arctic Siberia to flow east at full capacity

Average price for coal was hovering at around $103 per ton in the first six months of the current year. After the reduction of coal consumption by China, which is the world’s number one consumer and producer of the fossil fuel, global prices will drop to $52–69 per ton, media reports.

Last year, China imported some 188.3 million tons of bituminous coal, coal bricks and rolls, 2.7 percent more against the previous year, according to the country’s customs statistics. Costs of imports grew by 60.8 percent to $18.57 billion with the average price per ton reaching $99.

Australia became China’s number one coal supplier, exporting 79.91 million tons to the country in 2017, boosting revenues by 75.8 percent to $9.87 billion. Indonesia sold 35.28 million tons of coal to China, earned $2.47 billion – 20.9 percent more than in 2016. Exports of coal from Russia increased by 36.3 percent to 25.31 million tons, while export revenue grew by 99.2 percent to $2.23 billion.

The average price of coal from Australia totaled $124 per ton, Indonesia sold coal to China at $70 per ton, while Russian coal cost the country $88 per ton. China also imported 3.17 million tons of coal from the US at an average price of $143 per ton.

China’s move towards curbing coal consumption is reportedly in response to environmental concerns and a declining coal industry in the country. China, the world’s second-biggest natural gas buyer, is expected to account for at least a quarter of all global gas consumption growth between 2015 and 2040, the US Energy Information Administration says.

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When parents quarrel: Brussels levies Ukrainian metals imports amid EU-US trade spat

On Wednesday, the EU announced provisional safeguard measures concerning imports of a number of steel products that kicked off on Thursday. It came as a retaliation against the recently imposed US tariffs on steel and aluminum.

Ukraine severs economic agreement with its biggest trade partner Russia

The provisional measures concern 23 steel product categories and were imposed against all countries, with the exception of some developing countries with limited exports to the EU. These measures can remain in place for a maximum of 200 days, the European Commission said.

Ukraine, which has decided to estrange itself from Russia and other CIS countries to boost ties with Europe, was also hit with the recent tariffs from Brussels. Ukraine’s economy ministry has said 11 types of steel products from the country have been affected. 17 types of other Ukrainian metal products are being investigated, but so far their supplies are not limited.

“The Ministry of Economic Development together with Ukrainian producers… defends the position that the EU does not have sufficient grounds for initiating an investigation in accordance with the requirements of the WTO, also taking into account the current state of development of the metallurgical branch of the EU,” the Ukrainian ministry said in a statement. Kiev wants to prove that under the EU-Ukraine association agreement, it has special relations with Brussels.

Ukraine insists that its association agreement with the EU provides for the creation of a free trade zone without barriers. Kiev is asking for a “compensatory mechanism”.

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Chinese consumers ready to boycott American goods if trade war escalates

The recent study carried out by FT Confidential Research shows that 54 percent of respondents across 300 Chinese cities would “probably” or “definitely” reject US-branded goods “in the event of a trade war.” Only 13 percent among 2,000 of those surveyed said they are not ready to boycott products from the US. The other 33 percent either don’t buy US-branded produce or expressed uncertainty on the issue.

© Johannes EiseleChinese refiner dumps US crude in favor of dollarless imports of Iranian oil

The study shows that the Chinese, who are likely to shy away from US products, mostly live outside big cities, are aged up to 29 and are mainly on lower middle incomes. The research was conducted within a 13-day period, mostly before the US decision to slap China’s exports worth $34 billion with 25 percent tariffs came into force. The step prompted an immediate mirror response from Beijing. However, China reportedly declined to call for the boycotting of US consumer goods.

“The Chinese authorities haven’t done anything like they did with Japan and South Korean goods in the past,” Kent Kedl, senior partner in the Shanghai office at risk consultancy Control Risks, told the media. He said fear of a backlash is deterring Beijing from such a move.

Last year, Chinese state-controlled media openly called for rejecting goods and services from South Korea after the country allowed the US to base its anti-missile system there. South Korea suffered losses of nearly 7 billion dollars, as tourists from China preferred to stay away.

At the same time, sales of South Korean vehicles in China saw a dramatic decline. In 2012, Chinese authorities launched a boycott against Japan due to a territorial dispute over eight small islands in the East China Sea. The step saw sales of Japanese cars in China plummet by 32 percent over a 12-month period.

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All roads lead to China: Russian gas from Arctic & Siberia to flow east at full capacity

“Supplies via the ‘Eastern Route’ are expected to start by the end of next year, initial volumes are 5 billion cubic meters, which will reach 38 billion cubic meters per year by 2024,” the CNPC representative said on Thursday.

One of the world’s longest gas pipelines, the Power of Siberia, aims to deliver Russian natural gas to China. It is one of the major projects between the two countries and analysts say it could help Russia become one of China’s main providers of natural gas as demand in the country increases.

The 3,000km (1,900 mile) pipeline will be longer than the distance between Moscow and London. The deal on the eastern route took more than a decade to negotiate. In May 2014, Gazprom and CNPC signed a $400-billion, 30-year framework to deliver 38 billion cubic meters of Russian gas to China annually. In 2017, Gazprom invested 158.8 billion rubles ($2.6 billion) in the project. This year it plans to invest another 218 billion rubles ($3.47 billion).

Putin opens Russia’s $27bn Arctic LNG plant

According to a report by the US Energy Information Administration, the world’s second-biggest natural gas importer, China, will account for at least a quarter of all global natural gas consumption growth between 2015 and 2040.

Russia’s Arctic region will also be a major source of gas to China. On Thursday, CEO of Russian gas producer Novatek Leonid Mikhelson announced that the second stage of the Yamal liquefied natural gas (LNG) plant will be launched in early August. According to him, Yamal LNG is being implemented ahead of schedule and at the beginning of next year the project will be launched at full capacity.

The controlling stake in the enterprise belongs to Russian energy major Novatek. Some 20 percent each is owned by France’s Total, and China’s CNPC, and the remaining 9.9 percent belongs to the China-based Silk Road Fund. Costing $27 billion, the plant will have three production lines and a total capacity of 16.5 million tons of LNG per year. Total and CNPC will purchase LNG on a long-term basis.

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Who actually benefits from sanctions on Iran?

Moreover, in a briefing on June 26, a senior State Department official was quite firm that the US doesn’t anticipate offering any extensions or waivers to that timeline. This statement created a feeling of emergency, and oil prices jumped by more than 3.5 percent. Iranian Oil Minister Bijan Zanganeh also blamed President Trump’s actions for the high oil prices during an interview with CNN. Ultimately, the price hike serves the interest of oil-dependent economies like Saudi Arabia, Russia and Iraq, especially since they can serve as substitutes for Iranian oil.

Trump calls Germany slave to Russian gas but is US overly dependent on Russian oil?

Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) and in May 2018 exported about 2.7 million barrels per day (bpd) of crude oil. China, one of its biggest customers imported almost 27 percent of total Iranian exports, followed by India with 16 percent, South Korea with 10 percent, Japan with 7 percent and Turkey with 10 percent. Considering that Iranian exports dropped to about 1-1.5 million bpd during the 2013-2015 period of strong economic sanctions (from around 2.5 million bpd in 2011 to some 1 million bpd at the end of 2013), depending on how many countries follow the White House’s call for sanctions today, we might expect Iranian exports to fall by between 200,000 bpd and 1 million bpd.

This shortfall would cause countries in the region to have to look to other suppliers to fill in the gap. For example, abstaining from Iranian oil would leave Turkey at the mercy of Russia.

In 2017, Turkey imported 24.9 million tons of crude oil in total, mainly from Iran (almost 50 percent) and the rest from Iraq, Russia, Kuwait and Saudi Arabia. Considering the fact that Iraq, the other potential oil supplier that can substitute Iranian oil, represents a more volatile and risky choice. If Turkey goes ahead and implements the restrictions demanded by the US, Russia will ultimately supply more than 60 percent of Turkey’s oil, in addition to already supplying the majority of its natural gas.

The downfall of US nuclear power

Once we add into this mix the ongoing Akkuyu nuclear power plant project that will be built and operated by Russian State Nuclear Energy Agency Rosatom, we end with a Turkey that risks finding itself almost entirely tied to Russia – a complication for its NATO obligations, if nothing else. Taking into consideration those circumstances, on June 29 Turkish Economy Minister Nihat Zeybekci said that “the decisions taken by the US are not binding for us. Of course, we will follow the United Nations on its decision. Other than this, we will only follow our own national interests.”

Another winner if US sanctions are adopted widely would be Saudi Arabia. A drastic reduction of Iran’s oil exports (for example, by more than one million bpd) would likely boost Saudi production to numbers not seen since the late 1960s, in an attempt to fulfill market demands.

For its part, South Korea announced that they will end Iranian crude imports by the end of July, halting all shipments. According to Bloomberg, that leaves Iran with few options other than convincing China, its biggest customer, to buy more Iranian oil. This could create an unbalanced relationship between two countries, forcing Iran to be become over-reliant and dependant on China. This unequal relationship could be positive for China, as it might make it the biggest single buyer of Iran’s crude, giving it powerful leverage over the Iranian economy as a whole.

This article was originally published on Oilprice.com

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Trump calls Germany slave to Russian gas but is US overly dependent on Russian oil?

“They will be getting between 60 and 70 percent of their energy from Russia and a new pipeline,” he said.

President Trump’s point was that Germany’s purchases of Russian natural gas were making Russia richer, and that this posed a concern for NATO. He later took to Twitter to complain “What good is NATO if Germany is paying Russia billions of dollars for gas and energy?”

PBS News Hour argues that the President’s numbers are incorrect in any case. The story notes that Trump was referring to the Nord Stream 2 Pipeline that is being built between Russia and Germany, but:

“Trump’s assertion that the pipeline will provide 60 to 70 percent of Germany’s energy is incorrect. While Russia will be able to increase the amount of natural gas it sells to Germany through the pipeline, Russian gas will only provide a sliver of the overall energy Germany needs. Germany’s energy comes from a diverse mix of oil, coal and renewables. Less than one fifth of the country’s power is powered by natural gas; at the moment, just 9 percent of the country’s power is generated by Russian gas.”

Germany is a captive of Russia – Trump

This led me to wonder, by comparison, what percentage of US oil imports are being provided by Russia. US reliance of Russian crude oil has fallen since peaking at 624,000 barrels per day in 2011. However, in 2017 the US still imported 384,000 barrels per day of crude oil and products from Russia.

Incidentally, assuming $50 per barrel for those barrels means the US spent about $7 billion on Russian oil in 2017.

Total US imports in 2017 were 10.075 million barrels per day. The Russian contribution was then about 3.8 percent of US, certainly not in the range of Germany’s reliance on Russian natural gas.

Russia was the 6th most important supplier of US crude oil in 2017. The US reliance on foreign crude in 2017 was higher for imports from Canada (39.9 percent), Saudi Arabia (9.4 percent), Mexico (6.8 percent), Venezuela (6.7 percent), and Iraq (6.0 percent).

Overall, OPEC provided 33.3 percent of US crude oil and finished products in 2017. We are certainly making OPEC richer with our crude purchases to the tune of about $60 billion last year. I can’t say whether this poses a problem for NATO.

This article was originally published on Oilprice.com

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French wineries urge govt to stop killing ‘the soul of France’ with health warnings on wine

In an attempt to stop the measure, 64 major French wine producers, including Domaine de la Romanée-Conti, Yquem, Cheval Blanc, Petrus, Pol Roger and Roederer Champagne houses, have written an open letter, published by the French daily Le Figaro. The proposals to mark the bottles with two-centimeter-wide red tags were sent to industry officials last month.

Global wine production falls to 60-year low as harsh weather hits European vintage

“Every day, our cellars, our domains and chateaus, our winemaking landscapes are welcoming thousands of travelers coming to discover this France, bosom of the art de vivre that is the envy of the world and where wine plays a leading role,” the letter reads.

The changes, proposed by France’s health minister Agnes Buzyn, are aimed at warning female consumers against drinking any wine during pregnancy and reminding young customers that wine is illegal to drink if under 18-years-old.

The current rules oblige French vintners to put messages advising zero alcohol consumption during pregnancy but there is no legal minimum size or rules on color, and do not require a warning against underage drinking.

The health ministry is planning to push the draft into law “by the end of the year”, according to The Telegraph. The step was reportedly triggered by data from the National Institute for Health and Medical Research, which revealed that 25 percent of pregnant women in France keep on drinking alcohol. At the same time, the government is trying to struggle with the phenomenon of teenage binge drinking.

According to the wine producers, the health ministry just wants to “spread fear.” The wineries see the measure as inefficient, urging the government to spend more on campaigns inspiring safe wine drinking.

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