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(Bloomberg Opinion) -- The long-threatened U.S. sanctions against Nord Stream 2, Russia’s $10.5 billion natural gas pipeline to Germany, will finally take effect next week, but their timing and design can only slow down the project’s now-certain completion. Even so, Ukraine, the primary injured party from the new pipeline, is grateful for small favors from Washington.The sanctions — crafted by Senators Ted Cruz, Republican of Texas, and Jeanne Shaheen, a New Hampshire Democrat — have been attached to the 2020 National Defense Appropriations Act, which already has been approved by Congress; President Donald Trump has promised to sign it. The State and Treasury Departments will have 60 days to present to Congress a list of vessels involved in the construction of Nord Stream 2 and another Russian pipeline, TurkStream, and of people and firms that provided these ships. Those people and entities will have 30 days to wind down their business or they will be barred from entry to the U.S. and could have their assets frozen.The sanctions come too late to hurt TurkStream, which runs under the Black Sea to the western area of Turkey. The underwater part of the pipeline is complete and even filled with Russian natural gas. Turkish President Recep Tayyip Erdogan has said the pipeline would be operational in early January.Nord Stream 2, a twin pipeline running under the Baltic Sea that allows Russia to avoid shipping gas overland through Ukraine, is another matter. Gazprom, the monopoly exporter of Russian pipeline gas, originally intended to complete it by the end of the year, and still had a chance to do in late October, when the Danish government gave permission to lay pipe in its waters. But inclement weather has played havoc with the construction, and earlier this week, the project’s operating company promised completion “in the coming months.” In late November, Dmitri Kozak, Russia’s deputy prime minister in charge of energy, said Nord Stream 2 would begin operation “in mid-2020.”Even with the effective 90-day grace period allowed by the U.S. sanctions, the last 168 kilometers of each of the two strings of pipe may not be laid by the time the punitive measures kick in. It’s unlikely that Allseas, the Swiss-based contractor now working on Nord Stream 2, will defy the U.S. restrictions if it’s not done in time. Then, Gazprom will need to use the only pipe-laying vessel it owns, the Academician Chersky, to finish the job — a slow and iffy scenario, even if Russian Foreign Minister Sergey Lavrov says Nord Stream 2 won’t be halted. Congress could have been much harsher with its sanctions, though. It could have hit Nord Stream 2’s financial investors, all major European energy companies: Engie SA, Uniper SE, OMV AG, Wintershall Dea GmbH and Royal Dutch Shell Plc. It could have sanctioned Russian debt. It could have made it impossible to import equipment for the construction of Russian pipelines and do repairs and maintenance on them. All of these measures have been considered at various times, but struck down in order to avoid a major confrontation with the European Union and an upheaval in financial markets.As things stand, the punitive measures have the appearance of a vindictive gesture, a nuisance move that won’t change what comes next. Russian President Vladimir Putin’s grand plan of supplying gas both to Europe bypassing Ukraine and to China through the just-opened Power of Siberia pipeline can no longer be scuppered. The likely Nord Stream 2 delay may even be beneficial for Russia, in a way. Competition from Middle Eastern and U.S. liquefied natural gas and warm weather have driven down the price of Russian pipeline gas in Europe. In the three months through September, the average gas price, $169.8 per 1,000 cubic meters, was 18% lower than in the preceding three months and 32% lower than a year before. The last time Gazprom faced such prices was in 2004. Increasing supplies in such a market situation would send prices tumbling even further.No matter how carefully the U.S. sanctions are crafted to spare European allies, Germany is still irritated. On Thursday, German Foreign Minister Heiko Maas tweeted in response to the U.S. measures that “the European energy policy will be decided in Europe, not in the U.S. We fully reject external interference and extraterritorial sanctions.” Theoretically, the European Union could even retaliate by raising duties on American LNG.But the U.S. sanctions, belated, weak and irritating to the German government as they are, still aren’t completely pointless. Ukrainian President Volodymyr Zelenskiy’s office thanked U.S. Congress for them on Thursday, and while Ukraine routinely thanks Western governments for sanctioning Russia, this time there’s a specific reason for the gratitude. Ukraine and Russia are locked in a dispute over the future of Russian gas supplies through Ukraine’s pipeline system. The current contract runs out at the end of the year, and Ukraine wants a long-term agreement to replace it while Russia doesn’t want to commit itself. The possibility of a protracted delay to Nord Stream 2 strengthens the Ukrainian position because it makes Russia nervous, and time is running out for the EU-brokered negotiations if supplies of Russian gas to Europe are to continue without interruption. To contact the author of this story: Leonid Bershidsky at email@example.comTo contact the editor responsible for this story: Tobin Harshaw at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Commodities trader Vitol has signed a 10-year deal with Nigeria Liquefied Natural Gas (NLNG) to buy 500,000 tonnes of LNG per year, ramping up its long-term presence on the market. "The agreement underscores NLNG’s drive...to deliver LNG on a global scale in a low carbon world where gas/LNG will continue to be the preferred complementary energy source alongside renewables," Vitol said in a statement. The deal also helps NLNG remarket volumes from existing production lines at its Bonny Island plant with a number of contracts due to expire.
WASHINGTON/VIENNA, Dec 12 (Reuters) - Underscoring U.S. lawmakers' continuing unhappiness with Russia, a Senate committee on Wednesday advanced legislation seeking to hamper Russian energy pipelines and boosting NATO but delayed voting on a measure nicknamed the "sanctions bill from hell" that would punish Moscow for meddling in the 2016 U.S. election. The Senate Foreign Relations Committee approved four energy bills, including the "Energy Security Cooperation with Allied Partners in Europe Act of 2019," which opposes Russia's Nord Stream 2 pipeline, encourages NATO countries not to buy Russian gas and expedites U.S. natural gas exports.
Ukrainian President Volodymyr Zelenskiy said Ukraine and Russia had "unblocked" the issue of gas transit and the countries' advisers would work on the details of an agreement. Zelenskiy was speaking just after midnight local time on Tuesday morning after meeting Russian President Vladimir Putin at a four-way summit of leaders in Paris. Speaking at the same news conference, Putin said gas for Ukraine would be cheaper if both sides worked together.
MOSCOW/KIEV, Dec 5 (Reuters) - Russia and Ukraine do not plan to hold face-to-face talks on Thursday about a new deal on gas supplies and transit, two sources familiar with the plans said. Ukraine's energy ministry had previously said that the two countries were expected to hold talks either in Vienna or Brussels on that day. Russia has ratcheted up the pressure on Ukraine, saying that Kiev's new proposed tariffs for Russian gas transit to Europe were too high and unacceptable.
(Bloomberg) -- Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union. Sign up here to get it in your inbox every weekday morning.A meeting of euro-area finance ministers in Brussels today had been tipped as the moment to finally break the deadlock on the contentious issue of bank deposit insurance and sign off on reform of the bloc’s bailout fund. Instead, thanks to coalition tensions in Germany and Italy, those ambitions now look uncertain. Failure to agree on a deal could force EU leaders to take some tough decisions when they meet next week, or — more likely — push talks further into the future.What’s HappeningClimate Crisis | The world’s average temperature is rising faster than previously thought. That prospect has united UN Secretary General Antonio Guterres and activists at a climate conference in Madrid, while a meeting of European energy ministers in Brussels today will try to revive efforts to meet the 2030 targets.Fresh Cash | Greece is set to get the green light to receive around 800 million euros in cash for debt relief today after a report by its creditors on its post-bailout progress indicated the country is on track to meet its fiscal and reform targets. But the larger question of whether such funds can be used for investment rather than debt repayment will only be answered in the summer.Laundering Defense | EU finance ministers meeting tomorrow in Brussels will call for a common agency to fight money laundering, in a bid to confront a wave of scandals in the European banking system.NATO Spat | Donald Trump and Emmanuel Macron sparred in front of reporters over Turkey’s future in NATO and other differences, hours after the U.S. president assailed his French counterpart for “ very nasty” comments about the military alliance. Read more on what’s behind Trump’s U-turn on NATO.Balsamic Vinegar | The producers of Italy’s famous Aceto Balsamico di Modena vinegar enjoy an EU-wide protection that allows only them to make the condiment and sell it under that name. It’s now up to the EU’s top court to decide whether others should be prevented from marketing vinegar-based products using just parts of the name, such as “Balsamico” or “Aceto Balsamico.”In Case You Missed ItAnother Hawk | Isabel Schnabel, Germany’s nominee for the ECB’s Executive Board, told EU lawmakers that she would probably have opposed restarting quantitative easing had she been a policy maker in September. That marks an interesting twist in her application to become one of the region’s monetary guardians after she spent the past weeks defending the ECB’s policies in public. Meanwhile, euro-area finance ministers aren’t keen on negative rates.French Reforms | Macron began his presidency in 2017 pledging to send shockwaves through the French economy by making labor cheaper, more flexible and better skilled. Two-and-a-half years later, business leaders in the region with the country’s lowest jobless rate are experiencing both the successes and shortcomings of the president’s ambitions.Tit-for-Tat | Macron’s government said that the EU will retaliate if the U.S. follows through on a threat to hit about $2.4 billion of French products — including sparkling wine and handbags — with tariffs over a dispute over taxing tech companies.Nordic Backlash | Finnish Prime Minister Antti Rinne was forced to step down just six months into his term after a key political ally withdrew its support, once again showing that shutting extreme parties out of the political discourse doesn’t always work.Flight Shame and Sleepers | Romanticized by movies like “Murder on the Orient Express,” sleeper trains had all but disappeared in Europe. Now, some of their magic is being revived, with the help of flight shame.Chart of the DayChinese students far out-stripped peers in every other country in a survey of reading, math and science ability, pointing to a reserve of future economic strength and highlighting the struggle advanced economies face to keep up. The PISA study of 600,000 students in 79 countries shines a light on the difficultly of improving education, sometimes irrespective of the resources that are dedicated to it.Today’s AgendaAll times CET.9 a.m. EU energy ministers meet in Brussels 9:30 a.m. EU top court rules in a challenge by Poland’s largest gas company PGNiG SA over a 2016 decision that it says would broaden Gazprom PJSC’s access to the German Opal gas pipeline 3 p.m. Euro-area finance ministers meet in Brussels to discuss ESM reform, banking union and Greek post-bailout report 3:30 p.m. German Economy Minister Altmaier, French Finance Minister Le Maire speak at automotive suppliers association event in Brussels EU Commission President von der Leyen delivers the College readout of the first meeting of her new team NATO summit concludes in LondonLike the Brussels Edition?Don’t keep it to yourself. Colleagues and friends can sign up here. We also publish the Brexit Bulletin, a daily briefing on the latest on the U.K.’s departure from the EU. For even more: Subscribe to Bloomberg All Access for full global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close.How are we doing? We want to hear what you think about this newsletter. Let our Brussels bureau chief know.\--With assistance from Zoe Schneeweiss, Ewa Krukowska, Nick Rigillo and Alexander Weber.To contact the authors of this story: John Ainger in Brussels at email@example.comViktoria Dendrinou in Brussels at firstname.lastname@example.orgTo contact the editor responsible for this story: Emma Ross-Thomas at email@example.com, Iain RogersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Russian President Vladimir Putin and his Chinese counterpart Xi Jinping on Monday oversaw the launch of a landmark pipeline that will transport natural gas from Siberia to northeast China, an economic and political boost to ties between Moscow and Beijing. The start of gas flows via the Power of Siberia pipeline reflects Moscow's attempts to pivot to the East to try to mitigate pain from Western financial sanctions imposed over its 2014 annexation of Ukraine's Crimea.
(Bloomberg) -- Emerging-market investors were buffeted once again by competing comments over progress in U.S.-China trade talks last week. By the end of the week one fact was clear though -- there was still no deal ahead of the looming Dec. 15 deadline on new tariffs -- and the MSCI Inc.’s gauge of currencies fell for a second week. There is now speculation that phase one of the agreement won’t be completed before the end of the year.The following is a roundup of emerging-markets news and highlights for the week ending Nov. 24.Read here our emerging-market weekly preview, and listen to our weekly podcast, here.Highlights:Trade negotiators from the U.S. and China are making progress in key areas, even as concerns grow that efforts to nail down the first phase of a broader deal are stallingChinese President Xi Jinping said his nation wants to work toward a phase one trade agreement with the U.S. on the “basis of mutual respect and equality,“ his first comments on a partial dealThe near-deal between the U.S. and China that fell apart six months ago is now being used as the benchmark to decide how much tariffs should be rolled back in the initial phase of a broader trade agreement, people familiar with the talks saidU.S. President Donald Trump said in an interview they are “very close” to a deal although unsure if he wants itCNBC reported that officials in Beijing were pessimistic about the chances of reaching a deal with the U.S. Reuters reported the first phase of a U.S.-China trade deal may not be completed before the end of the yearIf a trade deal is difficult to find, it is likely the new U.S. tariffs that go into effect on Dec. 15 will be at least postponed, the South China Morning Post reported, citing unidentified people familiar with the talksThe U.S. Commerce Department has started approving some suppliers’ applications for licenses to do business with China’s Huawei Technologies Co., partially reopening access to one of the biggest buyers of U.S. technologyTrump, touring an Apple Inc. assembly plant in Texas, said he’s “looking at” exempting the iPhone maker from tariffs on goods imported from ChinaTrump said he “protested” U.S. interest rates that he considers too high relative to other developed countries in a meeting on Monday with Federal Reserve Chairman Jerome PowellMany participants saw downside risks to the economic outlook as elevated, “further underscoring the case for a rate cut at this meeting,” according to minutes of the Oct. 29-30 Federal Open Market Committee session released Wednesday in WashingtonChina lowered the cost it charges on short-term open-market operations for the first time since October 2015, trimming the rate on its seven-day reverse repurchase agreements to 2.5% from 2.55%China’s base rate for new corporate bank loans dropped in November, following a series of policy-rate cuts from the central bank aimed at easing liquidity concerns. The one-year loan prime rate was set at 4.15% versus 4.2% in OctoberHouse Speaker Nancy Pelosi and Trade Representative Robert Lighthizer made progress but failed to seal a deal Thursday on the stalled U.S. Mexico Canada free trade agreement, increasing the likelihood the deal won’t get a vote in Congress this yearU.S. envoy Gordon Sondland said Rudy Giuliani -- working at Trump’s direction -- demanded a quid pro quo from Ukraine by holding up a White House meeting unless the country’s leader announced investigations that would benefit Trump politicallyNow that House Democrats have wrapped their last scheduled public hearing on Ukraine they have to decide whether to schedule more, or move to the next step toward impeaching TrumpThe U.S. Senate unanimously passed a bill aimed at supporting protesters in Hong Kong and warning China against a violent suppression of the demonstrations -- drawing a rebuke from Beijing. Pelosi sent Trump legislation supporting Hong Kong protesters, and the president is expected to sign the bill into lawTrump said he stands with Hong Kong, but also wants trade deal. He declined to say if he’ll sign Hong Kong bill amid trade talksChina denounced a Hong Kong court ruling that declared the government’s mask ban unconstitutionalHong Kong residents handed an overwhelming victory to pro-democracy candidates in a vote for local district councils on SundayThe South African Reserve Bank left its repo rate unchanged at 6.50% even after the nation’s annual inflation rate dropped more than forecast to the lowest in almost nine years in OctoberAfter months of speculation and delays, South Africa named Andre de Ruyter as chief executive officer of its debt-crippled state power utility, surprising investors and angering a key unionS&P Global Ratings cut its outlook on the government’s foreign-currency rating of BB to negative, citing slow growthSaudi Aramco’s bankers are seeing sufficient early demand to pull off the state oil giant’s initial public offering just three days after launching the deal, people with knowledge of the matter saidSaudi Arabia’s central bank doubled leverage limits for retail investors looking to buy shares in Aramco, according to people familiar with the matter, part of an effort to boost local demand for what could be the world’s largest initial public offeringA group of opposition legislators in Chile presented a so-called constitutional accusation against President Sebastian Pinera over alleged human rights violations committed by security forces during street marches and riotsInvestors added to emerging-market exchange-traded funds for a sixth week as positive developments in U.S.-China trade talks outweighed deteriorating geopolitical situations in Latin AmericaAsia:China will continue proactive fiscal and prudent monetary policy, Premier Li Keqiang saidThe nation still has room to adjust its fiscal, monetary and real-estate policies if uncertainty over trade with the U.S. generates further downward pressure on the economy, central bank adviser Ma Jun said. China still has room for conventional monetary expansion, former central bank head Zhou Xiaochuan also saidMilitary cost-sharing talks between the U.S. and South Korea broke down over Trump’s demands for a five-fold funding increase, raising new questions about the stability of one of America’s closest alliancesBank of Korea Governor Lee Ju-yeol said society is changing at “a rapid and complicated pace” and central banks also face new challenges including managing monetary policy in a low-growth, low-inflation environment and structural changes following digital innovationSouth Korea’s external debt maturing in 1 year or less fell to $133.8 billion at end-September from $140 billion at the end of JuneEarly trade figures for November show exports could be headed for their smallest monthly decline since AprilTrump urged North Korean leader Kim Jong Un to “act quickly” to get a nuclear deal done, suggesting the two leaders could meet again “soon”Thailand’s economy grew more slowly than expected in the third quarter and the government lowered its full-year forecast as the country deals with the impact of the U.S.-China trade war and a strong currencyThe central bank may lower the 2019 economic growth forecast from 2.8% and it remains concerned about baht strength, Governor Veerathai Santiprabhob saidThe Bank of Thailand’s Monetary Policy Committee remained concerned about baht appreciation against trading partner currencies, as heightened external uncertainties could cause the Thai economy to be more sensitive to greater currency appreciation, according to minutes released from its Nov. 6 meetingIndustry Minister Suriya Juangroongruangkit called on the BOT to do more to curb appreciation in the baht and said its strength has hurt auto exports and the local economy as a wholeThe government will provide more economic stimulus if needed, Finance Minister Uttama Savanayana said. The government is considering measures to bolster the tourism and property sectors, part of its latest efforts to support the economy, Deputy Prime Minister Somkid Jatusripitak saidThe Bank of Thailand is prepared to use monetary policy if economic growth disappoints, its Governor Veerathai Santiprabhob said. He also said “the key rate shouldn’t be negative, as it will create lots of structural problems”The Indian government has kept inflation low, fiscal spending disciplined, and current account deficit manageable to ensure macroeconomic stability, Finance Minister Nirmala Sitharaman saidIndia seized control of a second non-bank lender, stepping up efforts to contain the economic fallout from the nation’s shadow banking crisisThousands of citizens have been swept up in a campaign of mass arrests following a decision by Prime Minister Narendra Modi’s government to end seven decades of autonomy in KashmirIndonesia’s central bank left its key interest rate unchanged at 5% while pumping more liquidity into the financial system to stimulate the economy. Banks’ reserve requirement ratio was cut by 50 basis points, the first such decision since JuneIndonesia’s budget deficit was about 289.1t rupiah ($21 billion) as of October, equal to 1.8% of gross domestic productMalaysian Prime Minister Mahathir Mohamad’s ruling alliance received a setback from voters, losing a parliamentary seat to the main opposition coalition at a by-election for the first timeConsumer prices climbed 1.1% on year in OctoberMalaysia has asked banks to submit pitches to help with a potential Samurai bond saleThe Philippines posted a balance of payments surplus of $163 million in October, wider than the $38 million surplus in SeptemberForeign reserves were revised up to $85.8 billion in October from $85.7 billion reported earlierCentral bank Governor Benjamin Diokno said he’s not in a rush to deliver another reduction in banks’ reserve requirements, adding he has until 2023 to fulfill his promise to bring the ratio to single digitTaiwan’s push for its companies to invest in advanced manufacturing at home after decades of focusing on China is helping off-set the effects of Beijing’s trade war with the U.S., the government saidEMEA:Hungary’s central bank left its monetary policy setup unchanged, ignoring a depreciation in the forint and a surge in core inflation in one of the European Union’s fastest-growing economiesRomanians elected President Klaus Iohannis for a second term as he promised to end years of political chaos and bring normality to one of the European Union’s poorest member-statesA unit of Gazprom PJSC plans to sell the remaining 3.59% of so-called quasi-treasury shares in the Russian gas producer on Thursday in a deal that could be valued at $3.3 billionRussia’s state-owned giants are heeding President Vladimir Putin’s call to cut their reliance on the dollar, but they’ve shown little desire to pay for it. Now the central bank may step in to ease the burdenThe International Monetary Fund said talks over a new loan for Ukraine will continue after a mission from the lender left Kyiv without agreeing on a dealUkraine’s long-term foreign debt rating was affirmed by Moody’s at Caa1 and outlook was raised to positive from stableThe mortgage unit of Poland’s largest lender PKO Bank Polski SA plans another green covered bond offering, following up on its inaugural transaction earlier this yearPoland’s prime minister won a vote of confidence in his cabinet after vowing to build a patriotic welfare state and win a “culture war” to defend traditional Catholic valuesPresident Recep Tayyip Erdogan said he told Trump during their White House meeting that Turkey wouldn’t halt its deployment of a Russian air-defense system, as he downplayed differences between the NATO allies over the dealNigeria’s inflation rate rose to a 17-month high in October as food prices surged. Consumer prices rose 11.6% from a year earlier compared with 11.2% in SeptemberZambia’s central bank raised its key interest rate for a second time this year, bucking a global easing trend, in a bid to support its currency and tame inflationZimbabwe’s central bank halved its key interest rate to 35%, joining the finance ministry in efforts to revive an economy hobbled by years of mismanagementLebanese protesters flocked to the capital Tuesday and forced parliament to postpone its session indefinitely after facing off with the army and anti-riot police, adding to a political storm in the country even as banks reopened after a week-long closureThe political crisis in Lebanon has sent yields on some of its dollar bonds into triple digitsMorocco is targeting its lowest euro-borrowing costs ever as it returns to international debt markets for the first time in five years, taking advantage of robust investor demand for securities denominated in euroThe north African nation’s long-promised plans for an economic restructuring began to take shape as authorities outlined a plan to restructure and unload debt-laden state assets and appointed a growth czarLatin America:Chile’s President Pinera said the government is listening to the demands of protesters, but won’t sink into a populism that would damage the economyThe government and opposition agreed on a package of measures to boost pensions for the poor and cut public transport fares for the elderly, part of efforts to quell a month of demonstrationsAnalysts expect Chile’s economy to shrink this quarter, and they’re trying to figure out if that will stretch into 2020 -- turning it into a recessionGDP grew 3.3% on an annual basis in the third quarter, in line with expectationsChile’s economic activity will face “significant” slumps in October and November, Finance Minister Ignacio Briones saidArgentine President-elect Alberto Fernandez told International Monetary Fund chief Kristalina Georgieva that he has a plan to grow the economy and tackle the nation’s debt as he seeks to renegotiate a record $56 billion credit line with the lenderCountry posted a trade surplus of $1.8 billion in October, while consumer confidence fell 5.5% in NovemberPeru’s economic growth accelerated in the third quarter to its fastest pace this year, boosted by investment in new copper minesGovernment offered to buy dollar- and local-currency bonds and said it will also issue new notes denominated in Peruvian solesBrazil traders have trimmed key rate cut bets as the outlook for growth improves and the local currency drops near to a record lowPresident Jair Bolsonaro said he’d like to see a stronger local currency against the U.S. dollarCentral bank president Roberto Campos Neto didn’t show concern over the currency levelCongress is likely to tackle everything from a byzantine tax system to a government spending cap before July, when local election campaigns redefine legislative priorities, according to Lower House Speaker Rodrigo MaiaThe return of former President Luiz Inacio Lula da Silva to Brazil’s political spotlight is adding another layer of complexity to the government’s ambitious reform program, lawmakers sayBrazil’s and Mexico’s annual inflation rates hovered near multi-year lows in mid-November, bolstering expectations for central banks in both countries to further reduce borrowing costs to support feeble demandThe IMF’s board plans to vote on Mexico’s request to renew its flexible credit line, possibly for less than the current $74 billion, before it expires next weekS&P said there is no reason for an immediate Pemex downgrade and said that the oil company rating will only move if the sovereign doesColombia saw the largest protests in years with labor unions, students and indigenous groups leading a nationwide strike Thursday aimed at the deeply unpopular President Ivan DuqueEcuador’s bonds rallied after the government sent a bill to congress designed to narrow the budget deficit and satisfy requirements of a $4.2 billion agreement with the International Monetary FundA 32-year-old senator from Bolivia’s majority socialist party should be the nation’s president, ousted leader Evo Morales said in an interview\--With assistance from Colleen Goko, Selcuk Gokoluk, Philip Sanders and Paul Wallace.To contact Bloomberg News staff for this story: Yumi Teso in Bangkok at firstname.lastname@example.org;Netty Ismail in Dubai at email@example.com;Aline Oyamada in Sao Paulo at firstname.lastname@example.orgTo contact the editors responsible for this story: Tomoko Yamazaki at email@example.com, Cormac MullenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Emerging market stocks looked set to end the week on a rosy note on Friday as the latest comments from China about finding a resolution to its tariff dispute with the United States lifted hopes that the two sides would reach a trade agreement soon. An index of stocks in the developing world was up 0.2%, having declined for two sessions on a diplomatic row between the world's top two economies after Washington passed a bill supporting protesters in Hong Kong.
Emerging market stocks fell for a second straight session on Thursday, as a diplomatic row between the United States and China sparked fears of a delay to a deal to end a trade war that has dented global growth and unsettled financial markets. An index of developing world stocks was down 0.8%, with trade-sensitive South Korean shares leading declines.
Serbian President Aleksandar Vucic ordered an investigation on Wednesday into a video clip that purportedly shows a Russian intelligence officer handing over money to a Serbian man, in an incident that could strain normally warm bilateral relations. A Bulgaria-based investigative reporter, Christo Grozev, said on his Twitter account at the weekend that the clip, posted on YouTube, showed the assistant military attache at Russia's embassy in Belgrade meeting a Serbian agent in a sting operation.
Emerging market stocks fell on Wednesday as tensions flared again between Washington and Beijing, adding to uncertainty over whether the two sides can end a trade dispute that is one of the biggest risks to global economic growth. At a cabinet meeting on Tuesday, U.S. President Donald Trump said he would raise tariffs again if no trade deal was reached, while Beijing on Wednesday condemned U.S. legislation aimed at protecting human rights in Hong Kong, vowing to take steps to safeguard its sovereignty. "There is a possibility that this is not going to create a barrier to negotiating at least a 'phase one' trade deal, but there is also a risk that the opposite happens, and the market is now focusing on the risk rather than the opportunity," said Cristian Maggio, head of emerging market strategy at TD Securities.
If you want to know who really controls Public Joint Stock Company Gazprom (MCX:GAZP), then you'll have to look at the...
(Bloomberg Opinion) -- Russian President Vladimir Putin’s so-called national projects — spending plans meant to restart economic growth in Russia — appear to be stuck. Surprisingly, money isn’t the problem: There’s cash to fund them, but the Russian bureaucracy won’t spend it, apparently fearing responsibility for bad outcomes.The projects envisage a total outlay of 25.7 trillion rubles ($400 billion) until 2024. They aim to boost Russian quality of life in the broadest sense, from providing better health care and schooling to making Soviet-built cities more livable. Putin has noted his sliding popularity, and he’s out to prove to Russians by the end of his current presidential term, which ends in 2024, that he’s good for more than a muscular foreign policy. But the program, first announced last year, has gotten off to a slow start. Earlier this month, the Accounting Chamber, Russia’s budget watchdog, published a report on the state of federal spending in the first nine months of 2019. According to the document, while total budget spending reached 62.9% of annual allocations (the lowest at this time of year since at least 2010), spending on the 12 national projects, plus a related plan to modernize Russia’s “backbone infrastructure” such as ports and railroads, only reached 52.1% of what’s been earmarked for the year. On some of the projects, in particular the effort to boost Russia’s digital economy, barely any of the available funds have been spent. And the total spending on the procurement part of the projects, as distinct from other forms of spending such as subsidies or transfers to regional authorities, has only reached 14% of the planned amount for the year.Russia regularly fails to spend its entire budget in a given year. At the end of 2018, 778 billion rubles ($12.1 billion) was left over. This year, Accounting Chamber head Alexei Kudrin expects 1 trillion rubles to be left, in large part because of the underspending on the national projects. Kudrin, a former finance minister, is the most prominent of Russia’s “system liberals,” Putin loyalists who favor more progressive government policies. He said this to the Russian parliament on Wednesday:Why aren’t we spending 1 trillion rubles, or 1% of GDP? Of course one can’t say we have too much money and that’s why we can’t spend it. I think it’s because of low-quality government. In 2017, Kudrin and fellow economist Alexander Knobel published a paper arguing that Russia was spending too much money on programs where expenditure is weakly or negatively correlated with economic growth, such as defense and security, and too little on those that drive expansion, such as education. The national projects are at least partly Putin’s response to Kudrin’s and Knobel’s thinking. Kudrin’s statement to parliament implies that bureaucrats simply don’t know how to run growth-friendly projects. It’s more likely, however, that they’re merely scared of spending the allocated money in ways that could land them in trouble. Because the national projects are Putin’s personal plan, they enjoy the attention of the president’s increasingly powerful and well-funded enforcement apparatus. Putin wants to make sure the allocated money won’t be stolen. That, however, is not easily done. As Sergey Aleksashenko, a former deputy central bank governor and now a Putin opponent, tweeted earlier this week, the requirements for spending budgetary funds are written so that they’re “impossible to execute without breaking rules. When an official asks himself if he wants to deal with the prosecutor’s office, the answer is obvious — to hell with these national projects!”A select group of Putin's friends can still profit from government spending. For example, earlier this week, the chief executive of a company owned by Putin’s judo sparring partner Arkady Rotenberg said the government-funded construction of a bridge between mainland Russia and Crimea would be merely a break-even project. But not long ago, Rotenberg sold one of the companies involved in the construction to the state-controlled natural gas producer Gazprom for a reported 75 billion rubles; he’d bought the five firms he merged into that company for 8.3 billion rubles in 2008 — from Gazprom.Of course, not everybody can pull of such schemes. Russian bureaucrats and subsidy recipients are regularly arrested and sentenced for misspending government funds even when they have achieved satisfactory results. Kirill Serebrennikov, a prominent theater director and darling of the Moscow intelligentsia, spent 19 months under house arrest on charges of embezzling government money, though he was able to show videos of the performances for which the funding was used in strict accordance with the contract. He still hasn’t been fully cleared.Earlier this month, the Prosecutor General’s office announced it had found 2,500 different irregularities in the administration of the national projects, mainly involving the distribution of subsidies and procurement. Some of these will end in criminal cases; no wonder the procurement budget was only 14% spent by the end of September.The creeping nationalization of Russia under Putin, and the accompanying empowerment of enforcement agencies, has created a dilemma. There’s not enough private initiative and private investment to boost growth beyond 1% to 2% a year, but not even Putin believes in the efficiency of government spending because of endemic corruption. As a result, government money still goes to players with good enough connections to avoid prosecution, but it’s being withheld elsewhere. Russia’s unique mixture of a grasping state, a graft culture and excessive centralized control continues to keep it from realizing its economic potential.To contact the author of this story: Leonid Bershidsky at firstname.lastname@example.orgTo contact the editor responsible for this story: Tobin Harshaw at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Russian stocks are enjoying a rally eclipsing almost all equity markets worldwide this year, thanks to dividend yields that are more than double those of their developing-country peers.The dollar-denominated RTS Index is up 35%, busting through its pre-2014 sanctions level as worries about potential new political penalties faded. Russian financial stability, currency strength and cheap valuations have also won over investors, with only Greek stocks beating the Moscow benchmark in 2019.“The dividends have been a game changer,” said Swedbank Robur Fonder AB portfolio manager Elena Loven, who sees the rally continuing into next year. Russian stocks “can easily go up another 40%-50% and still be cheap,” she said.Russia’s state-controlled companies have been under pressure to hand back more profits to the Finance Ministry as dividends in recent years, and stock investors are benefiting as a side effect. Gas exporter Gazprom PJSC has gained 64% since the start of 2019 after it boosted payouts. It plans to distribute half of its net income in dividends in future.The dividend spree is spreading to state lenders such as Sberbank PJSC and VTB Bank PJSC.The two banks now have the capital, growth potential and profits to allow a more generous distribution of dividends, said BCS Global Markets analyst Elena Tsareva. “There’s not much growth in the economy or lending, but there are strong dividends and a stable environment.”Out of 23 Russian members of the MSCI Emerging Markets Index, 15 have delivered total returns surpassing the gauge’s average of 14% this year, according to data compiled by Bloomberg.Analysts have increased their Russian earnings estimates since the start of the year, while trimming their projections for emerging-market companies in general.Russia’s stock indexes are loaded with energy companies, a sector that has been staging a recovery in European equity benchmarks. The Stoxx Europe 600 Oil & Gas Index is trading near the highest level since July amid attractive valuations and optimism around U.S.-China trade talks and their positive impact on global growth.Surgutneftegas PJSC’s more than 80% rally this year has inflamed market speculation about the intentions of Russia’s fourth-largest oil producer. Some analysts speculate that it may use part of its cash pile to buy a stake in larger rival Lukoil PJSC. BCS analyst Sergey Suverov has also said the gains may be explained by the possibility of some of the money going to shareholders as increased dividends.(Updates prices.)To contact the reporters on this story: Áine Quinn in Moscow at firstname.lastname@example.org;Filipe Pacheco in Dubai at email@example.comTo contact the editors responsible for this story: Alex Nicholson at firstname.lastname@example.org, John ViljoenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Russian opposition leaders rejoiced at the forced resignation of Bolivian President Evo Morales, while the Russian foreign ministry branded it an “orchestrated coup.” The interest in the drama playing out so far from Moscow is understandable, and not just because Morales had handed lucrative projects to Russian state companies. In 2024, President Vladimir Putin faces the same choice that Morales faced this year — to obey the constitutional term limit or to sweep it aside and try to keep power.Bolivia has a long history of military coups and aborted presidencies. Carlos Mesa, the current opposition leader, resigned after two years as president in 2005 amid mass protests. That paved the way for the first electoral victory of Morales in December of that year. The new president declared that power now belonged to the indigenous people of Bolivia and that the country’s natural resources would be nationalized — a decision that had been backed by a referendum held during Mesa’s presidency but not implemented by him.Morales, who doesn’t have a college degree, has turned out to be the most successful leader in Bolivia’s dolorous history of poverty, strife and military defeat. Poverty declined during his rule.Per-capita economic output, meanwhile, rose faster than the regional average.Morales, however, was an authoritarian ruler who quickly found rapport with the leaders of Cuba and Venezuela — and with the Putin regime in Russia, which finds it easy to do arms and energy business with autocrats. Rosatom Corp., the Russian state nuclear monopoly, got a contract to build a $300 million nuclear center near La Paz, the Bolivian capital, and began negotiating a concession to develop Bolivia’s large lithium reserves. Gazprom PJSC, the Russian state-controlled natural-gas company, has been present in Bolivia since 2010. Russia also has been trying to sell weapons to Bolivia, especially helicopters; Putin himself has tried to talk Morales into it, but actual sales have been held back by Bolivia’s shortage of funds.Bolivia’s constitution has included a two-term limit for presidents since 2009, meaning Morales could serve for three terms because his first one started before the limit took effect. In 2016, he tried to remove the cap but lost a referendum.Morales appeared to accept that he’d have to leave, but in 2017, the country’s constitutional court controversially ruled against the term limit, and he was allowed to run again. Rosatom reportedly even sent a team of Russian election experts to back his campaign and thus protect the Russian state companies’ interests. On Oct. 20, however, Morales was still unable to beat Mesa by the margin he needed to avoid a runoff, and then major vote-counting irregularities became so obvious that mass protests erupted and even Bolivia’s labor unions turned against the president.But Morales only resigned when the military said it wouldn’t crush the protests and urged him to go. Clearly, Bolivian generals have learned the lessons of 2003, when they followed then-President Gonzalo Sanchez de Lozada’s orders to use force against protesters demanding the nationalization of the country’s natural-gas deposits. At least 67 people were killed and some 400 injured; Lozada was sued by the victims’ families in the U.S., where he lives now, but was cleared last year because the judge found the evidence of his culpability insufficient. (Mesa, who served as Lozada’s vice president, had opposed the violence).Morales described the events that forced him to resign as a coup, and his words were echoed not just by Russia, whose contracts in Bolivia are at risk now, but by a roster of international leftists, ranging from U.S. Congresswoman Ilhan Omar to U.K. Labour Party leader Jeremy Corbyn. Putin’s opponents in Russia were, on the contrary, encouraged.Corruption fighter Alexei Navalny tweeted a photo of Morales with Putin, accompanied by this caption: “A corrupt president who was illegally holding on to power through lies and falsifications, has fled the country. For now, just the one on the left.”Leonid Volkov, another leading opposition figure, tweeted, “I really wish we could be like Bolivia.”The jubilation and the envy won’t pass unnoticed in the Kremlin. Putin has more than four years to explore his options for 2024, when his own presidency comes up against a constitutional term limit, but there is no obvious quasi-legitimate scenario that would allow him to stay in the Kremlin. There appears to be no appetite for a risky move to a parliamentary republic, which would make the prime minister’s office the most powerful and allow Putin to get re-elected as many times as he can. And ruling by proxy, as Putin did during Dmitry Medvedev’s presidency between 2008 and 2012, clearly disappointed Putin himself since he moved to undo Medvedev’s feeble attempt at liberalizing the country.The most obvious option is simply to alter the constitution to remove the term limit. But the Morales example shows the pitfalls of this strategy. While he’s respected and his contribution to reducing poverty is widely acknowledged, even his supporters are tired of him after 13 years in power; it’s only natural for people to grow restless without change. When that happens, critical decisions must eventually be taken by the military and the police.In Venezuela, President Nicolas Maduro has managed to keep the military loyal, and he still hasn’t been deposed. In Bolivia, Morales had retained the military’s support throughout his rule because he didn’t demand too much from his enforcers. But when popular protest reached a high point, the generals wouldn’t move against them, and Morales was finished.All this Latin American experience, closely monitored in Moscow because of state companies’ business dealings in the region, will serve to convince Putin that an authoritarian’s natural term limit isn’t the one specified in the constitution. In reality, he can rule until his enforcers decide they can’t afford to follow his orders. That means Putin must keep buying the loyalty of Russia’s vast security apparatus, which is already costing the government about 10% of its non-classified budget. The National Guard, which includes riot police, is slated for big spending increases in the next four years.To contact the author of this story: Leonid Bershidsky at email@example.comTo contact the editor responsible for this story: Jonathan Landman at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
U.S. Secretary of State Mike Pompeo said on Friday NATO must grow and change or risk becoming obsolete, a day after French President Emmanuel Macron said the alliance was dying. German Chancellor Angela Merkel has rejected Macron's comments, in an interview with British weekly The Economist, as "drastic" and Pompeo said on Thursday the alliance was perhaps one of the most important "in all recorded history".
Russian businessman Arkady Rotenberg, who has been under U.S. sanctions since 2014, has sold his gas pipeline construction firm Stroygazmontazh, a spokeswoman said on Thursday. Stroygazmontazh has also been under U.S. sanctions since 2014 because it was owned by Rotenberg, President Vladimir Putin's former judo sparring partner. Rotenberg was among the Russian officials and business executives blacklisted in the aftermath of Russia's annexation of Crimea from Ukraine in March 2014.
(Bloomberg Opinion) -- Nord Stream 2, the controversial Russian natural-gas pipeline project, has received the last permission it needs to close the distance between the Leningrad Region and the Baltic coast of Germany. It’s now probably too late for the U.S. to prevent Russia from finishing the project by the end of this year.Nord Stream 2 is part of Russian President Vladimir Putin’s plan to send natural gas to Europe without needing to go through Ukraine. The new pipeline will be able to carry 55 billion cubic meters of natural gas, more than half of what Russia now pumps through the Ukrainian system, and would mean for Ukraine a loss of $3 billion a year in gas transit revenues. The U.S. would like to prevent this, and also keep relatively cheap Russian gas from becoming an obstacle to increasing exports of U.S. liquefied natural gas to Europe. President Donald Trump has argued that Germany is too dependent on Russian gas, and has repeatedly threatened European companies involved in the project with sanctions.Why the World Worries About Russia’s Natural Gas Pipeline: QuickTakeMeanwhile, Russia has rushed to lay the pipe. On Oct. 1, Gazprom, the Russian gas export champion, said construction was 83% finished, with 2,042 kilometers (1,270 miles) laid across the bottom of the Baltic Sea. There had been a snag, though: For two years, Denmark put off granting permission for the section that was to pass through its territorial waters. On Wednesday, Denmark finally granted it, allowing the pipeline to take the shortest possible route, and Gazprom says that section can be built in five weeks.This is a blow to Ukraine, albeit not a surprise. “We expected it this fall,” Andriy Kobolyev, chief executive officer of Naftogaz, the Ukrainian state company that runs the pipeline system, posted on Facebook. “Denmark’s principled position held back the project for some time, but geopolitical weapons cannot be stopped by means that regulate pure trade relations.”It’s true that Denmark could not have held the fort forever while the U.S. dithered. The recent spat over Trump’s interest in buying Greenland did little to encourage the Danish government to keep dragging its feet.Kobolyev called for Western sanctions as the next step. And in that, he’s supported by some American legislators. Republican Senator Ted Cruz promised to push his colleagues to pass the bill he has proposed with Democratic Senator Jeanne Shaheen, which would impose sanctions on vessels laying the pipeline. That bill, however, is unlikely to delay the construction by much. Although Gazprom has used a Swiss-based contractor, Allseas Group SA, to lay the pipe, it can use its own vessel, the Akademik Cherskiy, for the final stretch. So it’s too late for the U.S. to act. Sanctions against financing the pipeline could have been effective at the stage before European companies — Royal Dutch Shell, Engie, Uniper, OMV and Wintershall — provided what was needed. Sanctions against pipe-laying vehicles could have made a difference before the construction work began. In any case, they could have given Ukraine more time to renegotiate its gas-transit contract with Gazprom, which runs out at the end of this year.A completed Nord Stream 2 will at least help Germany’s plans to stop using coal to generate power by 2038 — plans that cannot rely entirely on renewable energy, at least not until storage technology advances. (Most of the coal that will be replaced, by the way, is Russian coal.)Now Ukraine, backed by the EU, wants a 10-year year contract to pump 40-60 billion cubic meters of natural gas. But Russia insists that any long-term agreement should resolve Ukraine’s billion-dollar legal claims on Gazprom, and for now is likely to agree only to a short-term, placeholder deal. Meanwhile it will keep working on bringing both Nord Stream 2 and the Turkish Stream project, meant to supply gas to southern Europe, to full capacity. To contact the author of this story: Leonid Bershidsky at email@example.comTo contact the editor responsible for this story: Mary Duenwald at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Denmark's decision to approve the Nord Stream 2 gas pipeline, designed by Moscow to bypass Ukraine, strengthens Russia and weakens Europe, Ukrainian President Volodymyr Zelenskiy said on Thursday. Ukraine's fragile economy is at risk of losing billions of dollars in transit fees if Moscow deprives it of Russian gas transit to Europe.