What happens when you raise rates by 2.5 percentage points, within a period of six months, for an economy that might only grow 0.2 per cent this year?
We’re not sure. Read more
Given that Russian subjects are reportedly being force fed a diet of Putin-esque mis-information over the downing of Malaysia Airlines Flight 17, it seems worth noting what strategists employed by Russian investment banks are saying about the threat of deeper sanctions against Russia.
Here’s Charlie Robertson, global chief economist at Renaissance Capital (emphasis ours)… Read more
From the US Treasury’s Office of Foreign Assets Control on Wednesday:
The following transactions by U.S. persons or within the United States involving the persons listed below are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity of these persons (listed below), their property, or their interests in property…
Note that wording carefully. “US persons” could extend beyond the US. Meanwhile “new debt of longer than 90 days maturity” could extend beyond US dollar debt.
Now note whose debt — not all transactions; debt — US banks, US clearing systems, and US investors may be prevented from dealing with accordingly: Read more
Presented without comment.
Gunvor $500m note, due May 2018. Read more
That’s banks’ exposure to Russia by major economy, put together using BIS data by Gilles Moec and team at Deutsche. Click the image to enlarge. Read more
Or, why investors might be less than sanguine about sanctions against Russia.
We could start with the OFZs.
Here to explain why refiners in Asia aren’t getting giddy about the Iran deal are some analysts accompanied by an angry Congress, angry Israel, angry Saudi, OPEC, existing sanctions, such as the ban on exports to the EU, and a large implicit counterfactual – without a deal, sanctions would have tightened further. Read more
What’s happening in the Iranian currency markets at the moment is getting pretty fascinating.
Via Reuters on Wednesday:
IRANIAN RIOT POLICE CLASH WITH DEMONSTRATORS IN TEHRAN OVER RIAL COLLAPSE – WITNESSES
Brussels, 15 March 2012 – Following an EU Council decision, SWIFT is today announcing it has been instructed to discontinue its communications services to Iranian financial institutions that are subject to European sanctions.
The new European Council decision, as confirmed by the Belgian Treasury, prohibits companies such as SWIFT to continue to provide specialised financial messaging services to EU-sanctioned Iranian banks. SWIFT is incorporated under Belgian law and has to comply with this decision as confirmed by its home country government. Read more
The nominees are:
The European Union is moving to ban blacklisted Iranian entities from using a Belgium-based financial communications and clearing system , better known as Swift, in a move that could drastically cut Tehran’s ability to conduct global financial transactions, the Wall Street Journal reports. According to the paper US and European officials believe Iranian companies and banks have been using the system to evade international sanctions. Swift, short for the Society for Worldwide Interbank Financial Telecommunication, oversees the network used by most of the world’s largest banks to conduct financial wire transfers. Both houses of the US Congress have drafted legislation threatening to penalize Swift’s board of directors and owners if they don’t ban the suspect Iranian entities from using its network, the WSJ says. A formal ruling by EU financial regulators on Swift is expected by late February or early March and Swift’s board is expected to comply.
Iran’s Opec representative has told other members of the oil cartel that they will be “held as main culprits” if they raise production to offset US and EU sanctions against Tehran, the FT reports. Saudi Arabia’s oil minister had promised to keep oil flowing to its customers only the day before, but made no direct reference to Iran sanctions, says Reuters. The kingdom could produce 12.5m barrels per day if necessary, up from the current 10m barrels per day, Ali Naimi added. Brent crude for March delivery rose $1 to $111 a barrel early in Monday trading, Bloomberg reports.
Japan wants to keep importing crude oil from Iran despite rising pressure from the US to cooperate in strengthening sanctions against the Islamic Republic, reports the WSJ, citing an unnamed official at Japan’s Ministry of Foreign Affairs. The official reportedly said the country was concerned about the impact on energy prices and the possibility of a fuel shortage affecting rebuilding after the disastrous earthquake and tsunami that hit in March. The comments came a day before the planned meeting between US Treasury Secretary Tim Geithner and Japan’s Finance Minister Jun Azumi. The two ministers plan to meet Thursday morning, with a possible ban on Iranian crude oil and Japan’s currency intervention likely to be on the agenda, which a spokesman at the Ministry of Finance declined to discuss.
Asian economies have started to cut back purchases of Iranian oil as new sanctions on the Middle Eastern producer creep closer, Reuters reports. Chinese buying of Iran’s crude has been cut back by half in the last month, while Japan may also reduce purchases if it reaches an agreement with the United States on a sanctions waiver. However, the Italian government has urged EU states to impose an Iran oil import embargo at a gradual pace, reports the FT. Some 13 per cent of Italy’s oil imports come from Iran. EU, Chinese and Japanese demand accounts for half of Iran’s exports.
Britain will on Thursday join the US in warning that any action by Iran to close the Strait of Hormuz would be “illegal and unsuccessful,” insisting that western navies in the Gulf must ensure the free flow of oil trade, the FT says. The strait is a route for approximately a fifth of the world’s oil. Amid signs that the European Union has now agreed in principle to ban oil imports from Iran this month, Philip Hammond, Britain’s defence secretary, will warn the Iranians that the UK would respond militarily if Tehran tries to close the strait in retaliation over sanctions. The NY Times reports that energy analysts are predicting an increase in oil prices of as much as 50 per cent over a matter of days should the strait be closed down. US officials have stated that the Navy’s Fifth Fleet, which is based in Bahrain, also stands ready to defend the route. Meanwhile in Nigeria, the FT reports, union leaders have called for a nationwide strike from Monday to protest government plans to cut fuel subsidies. “All offices, oil production centres, air and sea ports, fuel stations, markets, banks, among others will be shut down,” the unions said in a joint statement. “We advise Nigerians to stockpile basic needs, especially food and water.”
Danger, danger: Merkozy tape bombs exploding on Monday afternoon.
They have a deal! Read more
Tehran and Beijing are in talks about using a barter system to exchange Iranian oil for Chinese goods and services, the FT says, as US financial sanctions have blocked China from paying at least $20bn for oil imports. The US sanctions against Iran, which make it extremely difficult to conduct dollar-denominated business, mean that China could owe the oil-rich nation as much as $30bn, according to people familiar with the problem. They said the unpaid oil bills had built up over the past two years and the governments, which are in early-stage talks, were looking at how to “offset” the debt.
Reuters published a special report Monday on the Libyan rebels’ efforts to sell oil in spite of the ongoing civil war and high levels of legal uncertainty.
The US announcement on Monday that it was pursuing “targeted sanctions” against Syria heralds a likely shift by western governments towards increasing pressure on Damascus, the FT reports. Although imposing sanctions on leading Syrian officials might have limited practical effect, it marks a big change in the US stance towards Bashar al-Assad, Syria’s president, and is the latest shift in tortured relations with Damascus. The Bush administration classified Syria as an associate member of the “axis of evil” and withdrew its ambassador after the 2005 assassination of Rafiq Hariri, the former prime minister of Lebanon who had crossed swords with Mr Assad. Ties were further tested in 2007 after Israel bombed a hidden Syrian nuclear reactor that western intelligence agencies said was intended as part of a weapons programme.
Reuters’ Jessica Donati and Emma Farge on Wednesday spot some odd goings-on in the Tunisian port of La Skhira:
Oil trading and shipping sources said at least 120,000 tones of gasoline had arrived so far this month at La Skhira for ship-to-ship transfers, a figure that amounts to nearly half of Tunisia’s annual imports. Read more
Coalition forces over Libya are not trying to kill Gaddafi, or to co-ordinate air strikes with the rebels, the Pentagon said on Sunday.
Assuming that’s true… Read more
Lord Mandelson, the former Labour cabinet member, has launched a spirited defence of the previous government’s ties to Libya, reports the FT. Writing in Monday’s FT, the peer says the “denunciation” of those involved with Muammer Gaddafi’s regime has reached “ridiculous lengths” and warns it could backfire and harm British interests. The former business secretary’s comments came as David Cameron, prime minister, criticised Labour’s “dodgy deals with dictators in the desert”. But Lord Mandelson said former prime mininster Tony Blair was right to do business in Libya. Separately, the FT notes that as US and European sanctions take hold, Libya’s African investments – once seen as expensive “white elephant” projects – may be the country’s last unfrozen assets.
Forces loyal to Muammer Gaddafi, the Libyan leader who has already lost control of a swathe of his country, struck against protesters in strategic cities close to the capital Tripoli, which remains a heavily policed bastion of the regime, the FT reports. Eastern Libya has already slipped out of the grip of Colonel Gaddafi, who faces a popular rebellion inspired by the recent revolts that toppled the leaders of Egypt and Tunisia. The Guardian adds that international responses to the crisis are gaining pace — with no-fly zone or sanctions among options being considered. Arab News says Obama condemned Gaddafi’s violent crackdown and will send Hillary Clinton to Geneva for international talks Monday to discuss what actions can be taken to stop the violence.
The US on Monday announced some of its toughest sanctions against North Korea, targeting Pyongyang’s alleged drug trafficking, counterfeiting and military activities, as well as “slush funds” used by the country’s elite, the FT reports. The move includes a new executive order issued by President Barack Obama and sanctions against a North Korean intelligence agency and an office of the Korean Workers party the US Treasury says is involved in the methamphetamines and heroin trades.
A US federal judge on Tuesday criticised Barclays’ $298m ‘sweetheart deal’ with the US authorities authorities to settle charges of facilitating payments that violated sanctions against countries including Cuba and Iran, reports the FT. Emmet Sullivan, US district judge, suggested that regulators were giving banks preferential treatment with settlement options not available to individual defendants facing criminal charges. A full hearing is set for Wednesday. The WSJ notes growing disapproval among the judiciary over the US government’s approach to resolving investigations of top financial institutions.
Barclays has agreed to pay $298m to US authorities to settle investigations relating to transactions that the bank facilitated between countries facing US sanctions including Cuba, Iran, Libya, Sudan and Burma, reports the FT. Barclays is the latest European bank to be hit with such charges. Lloyds, its UK rival, and Credit Suisse have reached similar settlements over the past year. The Telegraph adds that Barclays is understood to have voluntarily disclosed information on the dealings to the authorities.
Tougher sanctions against Iran appear to have halved the country’s petrol imports in July, according to the International Energy Agency, the FT reports. As a result Iran has been forced to pay a 25 per cent premium to market prices for its petrol deliveries as many companies shy away from supplying the country, the western countries’ oil watchdog said on Wednesday.
Sanctions punishing Iran for its nuclear program are deepening the country’s ties with China and handing Russia opportunities to sell more gasoline while hurting suppliers in Europe and India, reports Bloomberg. Iranian Oil Minister Masoud Mir-Kazemi and Chinese officials agreed on Aug 6 that their countries would cooperate more closely in the energy industry, according to Bloomberg, which cited a report from Iran’s government-run Press TV.