Business and finance – Page 2

Ramaphosa calls for closer Asian ties

Deputy President Cyril Ramaphosa told delegates at the Asia-Africa Business Summit in Jakarta, Indonesia on Tuesday that Afro-Asian economic and cultural ties needed to be strengthened.

Ramaphosa said Asia and Africa could collaborate in a number of areas, such as agriculture, News24 reported.

“Because of the diversity of crops cultivated on the continent, Africa has the potential to increase the nutritional value of global food supply more than any other region in the world.

“However, for African farmers to benefit fully from their contribution to global food supply, they need to be more involved in the food value chain – from seed to market.”

Another area for greater collaboration is manufacturing.

“Manufacturing is vitally important to Africa’s economic future as it can contribute substantially to improving growth, reducing unemployment and addressing balance of payment issues.

“With a market of close to 900 million people, Africa has the capacity to become a manufacturing success.”

Africa’s ability to trade is hampered by a lack of physical infrastructure, he said.

“Many African countries – without adequate rail, road and port infrastructure – are unable to productively exploit their abundant natural resources.

“Asian countries – with their skills, capital and technical and engineering expertise – can partner with African countries in developing this critical area.

“Infrastructure development is crucial to the success of the Tripartite Free Trade Agreement, both to connect markets and to generate enough electricity to support the development of manufacturing and other sectors.

“By strengthening South-South cooperation, we can begin a new era in global trade – one that will be driven and sustained by two of the world’s fastest-growing regions,” said Ramaphosa.

China’s yuan joins top five curriencies

China’s yuan has become one of the five most widely used currencies in global payments, an international financial transactions agency announced Wednesday.

The yuan passed the Canadian and Australian dollars in popularity in December, according to the Society for Worldwide Interbank Financial Telecommunication, which provides communications between financial institutions and companies. It said the yuan now ranks behind the dollar, the euro, the British pound and Japanese yen.

The change is an “important milestone,” and confirms the yuan’s transition from an emerging to a “business as usual” currency, said Wim Raymaekers, Swift’s head of banking markets, in a statement.

Beijing has signed agreements with a number of foreign financial centers including London to become hubs for clearing yuan transactions.

The yuan, also known as the renminbi, accounted for 2.17 percent of global payments in December, behind the yen’s share of 2.69, according to Swift. The U.S. dollar’s share is about 45 percent.

Global payments in yuan increased by 20.3 percent in December, outpacing overall payments growth of 14.9 percent, according to Swift.

Source: AP

China ready to help Russia says foreign minister

Chinese Foreign Minister Wang Yi said Monday that China is ready to help Russia overcome its economic difficulties.

Beijing is willing to help Moscow and believes that Russia “has the ability and the wisdom to overcome the current economic difficulties,” the minister was quoted as saying by the South China Morning Post.

Wang did not outline any specific measures, according to the newspaper.

Last week, China’s Minister of Commerce Gao Hucheng stated that China could increase the use of yuan in trade with Russia amid falling ruble rates.

Russia has seen a rapid depreciation of its national currency in recent months due to falling oil prices and sanctions imposed by the West over Moscow’s alleged involvement in the Ukrainian crisis.

Growth in Angola and Nigeria slow on weaker crude

Growth in Angola and Nigeria, the only sub- Saharan African members of Opec, would slow next year because of weaker crude prices, according to Fitch Ratings.

Fitch’s 2015 growth projection for Nigeria was revised down to 5.2 percent from 6.4 percent, Carmen Altenkirch and Richard Fox, sovereign analysts at the ratings company, said in a statement yesterday. Nigeria, along with Angola and Gabon, would also suffer from worsening current account and fiscal balances, they said.

Policymakers in Nigeria have proposed spending cuts and devalued the naira last month amid declining foreign reserves. “Most sub-Saharan African countries are significant oil importers,” they said. “Oil makes up around 20 percent of the import bill in Kenya, Cote d’Ivoire, Seychelles and Ethiopia.”

The rand firmed against the US dollar on Monday, recouping some recent losses after ratings agency Fitch surprised markets by not downgrading its credit view on Africa’s most developed economy.

Fitch said growing current account and budget deficits were restricting growth in South Africa’s economy but maintained its BBB rating, while Standard & Poor’s kept its rating at BBB-, one notch above junk status.

Analysts said this would provide only brief respite as they predicted South Africa’s credit status would be cut in the next six months.

Source: Bloomberg

Why “defeat Russia with cheap oil” strategy is failing

It is an outdated strategy which worked against the USSR, but won’t work against contemporary Russia, for these reasons:

Falling ruble insulates Russia from budgetary problems which might have resulted from falling oil price
US is destroying its own shale industry while leaving Russia’s oil industry intact
Cheap ruble is good for the Russian economy
New trade agreements and sanctions benefit Russia in the long term

As hard as it is to believe – given the strength of the “Russia-is-doomed” meme – Crude oil prices for Russia (in Rubles) are unchanged since February.

This is important as all costs are Ruble denominated while revenues are USD denominated, leaving Russian oil companies’ margins insulated despite the dollar decline in price.

In addition, the Russian government is easing the export taxes which further improve the profitability of Russian oil.

So as US Shale Oil sector is destroyed by its USD costs, it appears Putin’s core energy industry is somewhat insulated… and America’s late-80s “defeat The Soviet Union” playbook is failing.

As Giannis Kolmer explains:

The subject under discussion is whether or not the “clearing” taking place in the oil markets “rhymes” with the events of 1986 that led to fall of the Soviet Union; and the effects of the devaluation of the Ruble, which I strongly believe will be more favorable for Russia, combined with recent trade agreements.

The last time around the US used oil as a tool to combat Russia (at the time the Soviet Union), on a nominal basis Brent underwent a correction from over $30 toward the range of $11-13.5 where it remained until the defeat of the Soviet Union and the withdrawal of the Red Army from Afghanistan in February 1989 after the signing of Geneva Accords in 1988.

While successful this time around the Russian’s via Putin are more than able to cope with an oil rout for the near future.

Already the devaluation of the Russian Rubble means that oil revenues will in fact be more in Rubles than last year since the devaluation is currently wider than the correction of the oil price itself.

In many ways, the Ruble is the thing to watch in terms of timing the bottom. Since intervention is ahead of the correction. From 33 to 63 rubles per dollar, that’s almost a 50% devaluation while the correction of oil prices is just nearing the 50% correction level at 52.5 assuming a peak of $105 per barrel.

So where does intervention stop? $45 on Brent Crude means 40 to 42 for WTI while in the relationship of USD with respect to the RUB that means 70 to 75 or another few billion worth of foreign reserves while revenues from oil in rubles double at the minimum. Also it is important to remember that Russia has very low debt compared with the 80’s and 90’s.

Meanwhile such weakness in oil markets leads to strength in the Natural Gas sector as the aged, inverse correlation between the two (as oil rises NG prices fall and vice versa) combined with winter conditions boost a price, which in itself is stable-NG prices are not in the process of price discovery but rather in the stage of consolidation, after a violent upswing last winter. While since October NG prices have sold off from 4.5 to 3.7 currently, the 20% drop is nothing compared to the drop in WTI.

In the meantime, if 1986 is any indication, the process of price discovery “clears out” when the correction enters the 60% territory or in number terms from 105 to 42 dollar per barrel

So really what all this suggest is that a bounce is to be expected as we head into the winter, however the long term lows suggest that the mid 40’s is where all this end, which coincides with the correction of 86 and a Ruble above 70 per USD.

Anything below 50 is scary for the energy sector, which accounts for a third of capex in a world dominated by buybacks and dividends fueled by cheap financing. But credit markets are already actively taking that option away.

“Widening”, is definitely the word of the week. However, like in Afghanistan in the late 80’s, in the words of Charlie Wilson, the Americans “are fucking up the endgame.”

After spending a few billion along with the Saudi’s fighting a covert war, the Senate committee in charge of the budget did not see fit for the US to spend a few more million to build schools and infrastructure, indirectly enforcing the belief that God helped the Afghan people, (who for the most part were under the age of 20 at a rate of 1 out of three) fight off the Red Army, not the US taxpayer.

This time, after spending billions to make the USA energy independent, at great risk, they are falsely using a vulnerable geopolitical tool as a weapon against a highly formidable opponent. In the game of career politician versus former spy, like in the game of follow the leader, the bets are in favor of the side with less layers of political red tape and influence.

As George R.R. Martin’s King Robert Baratheon stated “which is the bigger number 5 or 1?… One, one army, united behind one leader with one purpose.

This is not a result of problematic markets. It’s a problem of political stupidity.

The question is do you bet on the one leader or on the combination of the Senate, the President, NATO, the Pentagon and all related offensive defensive components in its arsenal.

Source: ZeroHedge

Swiss reject gold reserve increase

Swiss voters rejected two closely watched referendums on Sunday that would have forced the central bank to buy up massive amounts of gold and introduced strict new limits on immigration, in a result that could bolster its economic ties to the European Union.

Proposed by the right-wing Swiss People’s Party out of concern that the Swiss National Bank has already sold too much gold, the measure would have compelled the SNB to boost its gold reserves to 20% from around 8% currently. Switzerland already holds the most gold per capita in the world.

An initial analysis of the voting trend from Swiss broadcaster SRF showed voters were likely to have turned down the “Save our Swiss gold” initiative.

A report from Bloomberg said the measure was voted down by a margin to 78-22.

If Swiss voters had approved the measures, it would have severely complicated policy at a time when the central bank is trying to defend a 1.20 euro cap on the Swiss franc imposed at the height of the euro crisis.

Earlier this month, gold futures went on a wild ride after polling data showed an advantage in favor of votes against measure. Previous polls had shown about an even split among voters.

Swiss were also set to reject a separate initiative that aimed to cut annual immigration by three-quarters from current levels in order to reduce the strain on Switzerland’s natural environment, and a third referendum aimed at scrapping a tax perk for wealthy foreigners was also set to be defeated.

Over the last several months, the price of gold has been declining sharply, with the precious metal currently near mu tli-year lows.

Source: Business Insider

The real reason the Netherlands repatriated its gold

In what could definitely be called a stunning move, the Netherlands has announced it has repatriated in excess of 120 tonnes of gold from the vaults of the Federal Reserve in New York to the Dutch Central Bank in Amsterdam. Officially a move made to rebalance the locations where the gold is being stored, one cannot ignore the fact that the Netherlands only repatriated a large part of the gold which was stored in New York and it did not touch the gold stored in Canada and London.

Additionally, it’s not just ‘some’ gold being brought back home, no, the total amount is 122.47 tonnes or almost 4 million ounces with a market value of $5B. This will reduce the exposure of the Dutch Central Bank to the US financial system as now just 31% of its gold is being stored in the vault of the Fed, coming down from 51%. We have the impression this won’t be the last repatriation as the Dutch Central Bank is keeping its shipping route secret ‘in case more gold needs to be repatriated’.

So what was the main reason why the Netherlands brought the shiny precious metal back home? The central bank wants you to believe it’s just an ordinary decision, but believe it or not, the only reason for this move was to restore the confidence of the public in the Central Bank. By publishing this statement, the Dutch Central Bank basically admits that holding gold increases the public trust in the central bank as an institution, and that’s an statement which should not and cannot be underestimated as it basically means that only physical gold can be trusted and that the gold should be stored inside the country. ‘He who owns the gold makes the rules’ once again seems to be up-and-coming again.

The best place to store your gold is obviously in your own back yard, and it looks like the Netherlands aren’t agreeing with the Germans which also wanted to repatriate most of its gold which was stored in the vaults of the Federal Reserve. However, after bringing just a fraction of its gold back to Berlin, Germany publicly stated it would not repatriate any more gold as it ‘fully trusts the Federal Reserve as an institution’ and ‘the Americans are taking good care of their gold’. That’s obviously a bogus reason as the Fed obviously wasn’t suddenly taking better care of the gold than a year before. It’s also interesting to notice that the Netherlands and Germany used a different approach. Whilst Germany was boasting about its attempt to repatriate the gold, the Netherlands chose the ‘stealth’ way and repatriated it first before announcing it.

This strategy isn’t surprising as the Dutch always have been quite savvy. Keep in mind it was one of the most powerful nations right after the middle ages when the VOC really ruled the world shipping five times more goods to and from Asia than its main competitor in Great Britain. This savvy business mind is still in place and we wouldn’t be surprised if the Netherlands would be the frontrunner in a worldwide move to repatriate gold.

Keeping the German repatriation story in mind, the Netherlands are basically giving the Federal Reserve the finger. Unlike Germany, it does not trust the Federal Reserve more than its own central bank and it prefers to ‘sit’ on the gold in Amsterdam rather than store it in a foreign nation. This is a huge policy shift which cannot be underestimated, especially not if you look at all pieces of the puzzle.

As you know, China is still buying gold like crazy and was recently joined by Russia which has bought more gold every month since the beginning of this year. People were fast to dismiss this increased interest in gold as those were ‘special’ countries. Well, that argument is no longer valid. Germany wanted to repatriate its gold last year (but came under pressure to drop its plan), the Netherlands have now successfully repatriated almost 4 million ounces of gold, and there’s a Swiss referendum which asks the opinion of its citizens to increase the gold holdings once again. It’s unlikely the Swiss will approve this proposal as the latest polls show 38% in favor and 47% against the proposal with approximately 15% undecided voters.

Swiss Gold Referendum

The main takeaway here is not that 47% of the people are against increasing the gold reserves, but that 38% is strongly in favor of backing the Swiss Franc with Gold and an additional 15% might consider it. We are sure that a better explanation of the proposal would reduce the amount of opponents. Additionally, a lot of nay-sayers are voting against the party which proposed the idea and aren’t necessarily against the renewed gold standard.

This gold repatriation isn’t an isolated case. All signs are pointing in the direction that several central banks are now getting increasingly interested to increase their gold holdings and to have the gold inside the country instead of somewhere else. The Dutch repatriation is the first step, but we expect more pieces of the puzzle to fall into place soon. Very soon.

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Petrodollars quit world markets for first time in 18 years

Energy-exporting countries are set to pull their “petrodollars” out of world markets this year for the first time in almost two decades, according to a study by BNP Paribas.

Driven by this year’s drop in oil prices, the shift is likely to cause global market liquidity to fall, the study showed.

Brent crude futures have fallen 23 percent this year, with 2014 promising to be only the second year since 2002 that crude prices will end the year lower than they began it.

This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.

This year, however, the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to BNP Paribas calculations.

Petrodollar recycling peaked at $511 billion in 2006, BNP said.

“At its peak, about $500 billion a year was being recycled back into financial markets. This will be the first year in a long time that energy exporters will be sucking capital out,” said David Spegel, global head of emerging market sovereign and corporate Research at BNP.

In other words, oil exporters are now pulling liquidity out of financial markets rather than putting money in. That could result in higher borrowing costs for governments, companies, and ultimately, consumers as money becomes scarcer.

Spegel acknowledged that the net withdrawal was small. But he added: “What is interesting is they are draining rather than providing capital that is moving global liquidity. If oil prices fall further in coming years, energy producers will need more capital even if just to repay bonds.”

The reversal is largely down to Russia and the rest of the ex-Soviet Union, which BNP estimates have withdrawn $57 billion from world markets.

Russian companies have been shut out of global markets since Western countries imposed sanctions because of the conflict in Ukraine. Those companies are increasingly forced to rely on their own cash reserves or central bank funding to meet external debt repayments.

Barclays Africa shows profits rising

BARCLAYS on Thursday reported its African banking operations showed good profit growth during the third quarter. If sustained, the bank could show earnings slightly above full-year consensus when it reports results for the 2014 financial year.

The UK parent group said Barclays Africa Group showed improvement in bad debts in the South African home loan book and good loan growth in corporate and investment banking.

Barclays said the Africa banking operations grew profits 11% — which was marginally better than the I-Net Bridge consensus of 10.6% — on constant currency basis in the nine months ended last month. The firm reported a profit before tax of £756m for the Africa banking operations.

“Consensus for the full year is 11%. It’s a little bit ahead … There is obviously some corporate lending. I think that’s for infrastructure in the rest of Africa,” PSG Wealth portfolio manager Adrian Cloete said on Thursday.

Out of all the business divisions at Barclays Africa Group, which include retail and business banking, wealth, investment, management and insurance, the corporate banking division had the fastest growth in earnings in the first half of this year and seems it continues to steam ahead.

Barclays Africa Group has indicated it is investing in the corporate and investment banking division and deploying its capability in the rest of Africa.

In the third-quarter update on Thursday Barclays said there were more improvements in the South African mortgage portfolio. The South African operations of Barclays Africa Group have been working on improving the state of its mortgage book.

In the 2012 financial year the operations of Barclays Africa Group in SA reported a decline in earnings hit by bad debts on its mortgage portfolio. In 2011 the bank had underestimated the bad debts on home loans as it lowered its cover for bad debts to 17.1% from 19.1% in 2010. After this misjudgment it upped the nonperforming loans coverage ratio to 28.5% in the 2012 financial year.

With the improvements on the mortgage book, this has been lowered to 26.9% in the first half of the 2014 financial year.

“I think they really cleaned up the book (home loan) and they are taking a lot of action. It seems it’s much better provided for and being managed much better,” Mr Cloete said.

In the third-quarter update Barclays Africa Group said its return on equity had improved in the third quarter compared to 16.1% in the first half, a sign that earnings were growing. Barclays Africa group hopes to grow its return on equity to 18%-20% next year.

Barclays Africa Group shares finished flat at R171 at the end of trade on the JSE on Thursday. The JSE all share index ended down 1% Thursday.

For the year to date, Barclays Africa Group’s shares have so far been the best performer among major banks in SA with the stock rising about 29.3%.

Source: Business Day

China launches World Bank rival

China and India are backing a 21 country $100 billion Asian Infrastructure Investment Bank (AIIB) to challenge to the World Bank and Asian Development Bank.

Memorandum of understanding were signed with 21 Asian countries in Beijing Friday. Australia, Indonesia and South Korea were absent following hidden pressure from Washington.

The development bank was proposed a year ago by Chinese President Xi Jinping, and is to offer financing for infrastructure projects in underdeveloped Asian countries.

Headquartered in Beijing, former chairman of the China International Capital Corp investment bank Jim Liqun, is expected to take a leading role.

The bank will initially be capitalized with $50 billion, most of it contributed by China. The country is planning to increase authorized capital to $100 billion. With that amount the AIIB would be two-thirds the size of the $175 billion Asian Development Bank.

India will be the second largest bank shareholder though Kuwait, Qatar, Mongolia, Kazakhstan, Pakistan, Nepal, Oman, and all the countries of the Association of Southeast Asia, except Indonesia are involved.

Australia, Indonesia and South Korea did not participate following US claims of ‘concerns’ about a rival to Western-dominated multilateral lenders.

Japan, China’s main rival in Asia, which dominates the Asian Development Bank along with the United States, did not attend but had not been expected to do so.

Indonesia refused to participate claiming it needs time to discuss China’s proposal.

The Australian Financial Review said US Secretary of State John Kerry had personally asked Australian Prime Minister Tony Abbott to “steer clear” from joining AIIB.

“Australia has been under pressure from the US for some time to not become a founding member of the bank and it is understood Mr. Kerry put the case directly to the prime minister when the pair met in Jakarta on Monday following the inauguration of Indonesian President Joko Widodo,” the paper said.

South Korea, one of America’s closest allies in Asia, is also prevaricating. Its finance ministry said it spoke with China to request more time to consider details such as the AIIB’s governance and operational principles.

US officials have said they do not want to support an initiative Washington thinks is unlikely to promote good environmental, procurement and human rights standards in the way the World Bank and ADB are required to do.

But Chinese officials are convinced the American opposition is an attempt to contain the global rise of China and its ambition to remain the dominant power in Asia.

“You could think of this as a basketball game in which the US wants to set the duration of the game, the size of the court, the height of the basket and everything else to suit itself,” Wei Jianguo, a former Chinese commerce minister, told the Financial Times.

Matthew Goodman, scholar at the Center for Strategic and International Studies in Washington DC believes the initiatives of a BRICS Bank and AIIB “represent the first serious institutional challenge to the global economic order.”

Chinese Finance Minister Lou Jiwei said the AIIB will set high standards, safeguard policies and improve on bureaucratic, unrealistic and irrelevant policies, according to the Xinhua news agency.

Source: RT

Russia opens Europe’s largest natural gas exchange

Russia launched a new and independent natural gas exchange that will reside in St. Petersburg, and will make the facility the largest market for natural gas trading in all of Europe.

Known as the St. Petersburg International Mercantile Exchange (SPIMEX), this trade facility will allow for international and domestic gas operations to sell their products in Russia and in a centralized location, and will become part of the growing Eurasian Economic Zone that is emerging in the East as global trade moves away from the dollar and away from U.S. hegemony.

The importance of this independent market exchange is that natural gas can work towards a complete separation from oil, which under the current system tends to price both commodities on similar scales and in dollar denominations. It will also open up the market for new buyers who are solely interested in natural gas, and help facilitate a new pricing structure that will allow Russia and other gas producers to eventually remove the energy source from the petro-dollar and from U.S. control over the monetary component in gas trading.

“Russia, the world’s second-largest producer of natural gas, has launched its first auction of natural gas on Friday at the St. Petersburg International Mercantile Exchange (SPIMEX). It will be Europe’s largest natural gas trading post.

The project is intended to create a more competitive market for natural gas prices, which at present are more-or-less tied to oil. Now, independent producers will have access to a broader range of buyers.

The exchange will facilitate up to 35 billion cubic meters of gas annually, with Gazprom, Russia’s largest producer, maintaining the right to sell a half of that, and independent producers the remaining 17.5 billion cubic meters.” – RT

It is interesting to note that the SPIMEX is beginning operations just two days after the tragic and highly suspect death of Total CEO Christophe de Margerie, who was in Russia to discuss energy topics with government and oil industry leaders. And with de Margerie being a staunch advocate of taking oil and energy off the antiquated petro-dollar system, it is very likely Total will be intrinsically involved in this new exchange.

With economic sanctions, and secret oil deals with Middle Eastern producers causing dire financial consequences to Russia’s currency and energy industries, the best way to circumvent external attacks is to simply bypass the recognized market structures and create your own platforms of trade, and in currencies that are beneficial to the well being of your economy. And while it may take some time before natural gas is completely segregated from oil and the petro-dollar, the introduction of the largest natural gas exchange in Europe will eventually allow Russia to establish price discovery for the commodity, and change the way customers are allowed to purchase this crucial form of energy for their natons and industries.

Source: examiner.com

Russia loses an oil ally

Christophe de Margerie’s last act as chief executive officer of Total SA (FP) left no room for doubt about his feelings toward Vladimir Putin’s Russia.

In a Moscow speech hours before the plane crash that took his life two days ago, de Margerie said U.S. and European Union sanctions on the country were “unfair and unproductive,” and that he opposed efforts to render it “isolated from the major global economic and political process.”

Appearing before a receptive audience that included Prime Minister Dmitry Medvedev and a host of Russian executives, he cited his work as co-chair of a Franco-Russian business body alongside Gennady Timchenko — a commodities billionaire who was one of the first targets of U.S. sanctions.

De Margerie’s death removes from the scene a businessman who rarely shied away from geopolitical debates and became one of Russia’s most outspoken allies in its efforts to avoid economic quarantine, willing to say what others only dared think. Although European corporate giants from Siemens AG to Renault SA (RNO) have built close relationships with Russia, most business leaders have preferred to keep their lobbying private to avoid offending governments committed to punishing Putin.

“Christophe was an extraordinary individual who had nurtured his relationships with Russia and many other international players on a person-to-person basis,” said John Hofmeister, former U.S. president of Royal Dutch Shell Plc and now CEO of advocacy group Citizens for Affordable Energy. “The major players in Russia operate at multiple levels of visibility. Christophe was singular in his approach.”

Good Reason

De Margerie, 63, had good reason to oppose efforts to fray Russia’s economic ties with other major economies in the wake of the simmering civil war in the Ukraine. Under his leadership, Total bet big on the world’s largest country by landmass, partnering with OAO Novatek (NVTK) to develop an Arctic gas-export terminal and hunting with OAO Lukoil (LKOD) for so-called tight oil deposits in Siberia.

Since taking over as CEO in 2007, De Margerie repeatedly told audiences at the endless conferences he attended around the world that meeting the growth in global energy demand would be impossible without Russia’s vast reserves.

After buying a stake in Novatek, Russia in 2013 became Total’s biggest source of production after Nigeria, the United Arab Emirates and Norway, providing about 9 percent of its daily oil output.

The CEO made clear his displeasure with sanctions shortly after they were imposed earlier this year. Total made plans in April to raise its stake in Novatek just weeks after the U.S. moved to freeze the assets of Timchenko, the company’s second-largest shareholder.

Business Conclave

In May, de Margerie traveled to the annual St. Petersburg Economic Forum, an annual business conclave convened by Putin and shunned by American executives at the urging of President Barack Obama’s administration.

In a letter expressing his condolences after de Margerie’s death, Lukoil CEO Vagit Alekperov said the Frenchman had “remained an example of honor, steadfastly defending the principles of an honest partnership with Russia.”

De Margerie and Alekperov had signed an agreement to work together in Russia at the St. Petersburg event.

Although other major oil companies have also worked to develop partnerships in Russia, which has the world’s largest proven oil and gas reserves, none has advocated as forcefully against isolation as Total.

De Margerie “said out loud what many didn’t dare,” said Laurence Parisot, former head of France’s employers federation Medef. He was never afraid to criticize anyone, from the president of France down, she said. “One of his exceptional characteristics was that he was very direct, very clear and very frank in all settings.”

Exxon Mobil

BP Plc (BP/) CEO Bob Dudley, whose company owns 20 percent of state-backed oil producer OAO Rosneft (ROSN), in July described sanctions as “a matter for governments to resolve.” Exxon Mobil Corp. (XOM) CEO Rex Tillerson has consistently declined to comment publicly on the measures, which have forced the world’s largest private oil producer to suspend Arctic exploration alongside Rosneft.

“In defending investment in Russia it’s likely de Margerie was driven by an economic rationale which will survive him,” Alex Griffiths, head of natural resources and commodities at Fitch Ratings, said by telephone from London. “A lot of western companies have major stakes in Russia because of the huge reserves there.”

The U.S. and European governments have said Putin is backing separatist rebels in the east of Ukraine, who this week skirmished with the Ukrainian army in and around Donetsk. Putin has denied supporting the militants.

Oil Search

Russia wasn’t the first controversial country that De Margerie, always on the hunt for new sources of oil and gas, sought to do business with even at the risk of political opprobrium. Total was working on developing the giant South Pars natural gas project in Iran until sanctions designed to halt its nuclear program drove the company to pull out in 2009.

This year de Margerie said he’d like to re-enter the country as soon as political conditions allow. He met with Iranian president Hassan Rouhani along with other energy CEOs in Davos, Switzerland.

Total’s press office wasn’t available to comment beyond a statement earlier today that the company’s board would meet in Paris to consider the appointment of a new CEO.

De Margerie and other Total executives “saw the world as a place they should be operating, not their own countries or their own continents,” James Hackett, the former CEO of Anadarko Petroleum (APC) Corp., said today. “He never reverted to a focus on financial engineering as opposed to finding resources.”

Yamal Development

De Margerie’s determination to keep pumping more oil and gas drove him in recent weeks to say he was “doing everything” to keep his signature Russian project on track, the $27 billion Yamal gas development. After U.S. sanctions barred the project from receiving loans in dollars, he said the company and its partners would look to Chinese banks to fill the gap.

Explaining his stance on Russia in May of this year, de Margerie told reporters he believed economic sanctions were an ineffective way to resolve conflicts between countries. Businesses, he argued, could serve as diplomatic intermediaries in political disputes, and “the relationship between politics and companies is a good way to calm things.”

Source: Bloomberg

Russia dumping dollars to protect currency and falling oil prices

As the United States expands its proxy war against Russia and the BRICS nations through a newly discovered secret deal with Saudi Arabia to force down global oil prices, Russia is firing back to this monetary attack against their currency and economy. On Oct. 10, a new report on Russian currency outflows shows that during the third quarter ending in September, the Eurasian state paid off a near record $53 billion in foreign debt, and sold off dollars to use as capital to stabilize their declining currency, and to protect their primary resource industry from the deflation America has caused through the dumping of excess oil into the market supply.

Some of this money was used earlier this week to support the declining Rouble as President Putin authorized the transfer of over $2 billion to be used directly to support the Russian currency. Additionally, the Russian central bank has already authorized funds to be set aside to supplement Russian corporations and oil industries should the need arise for liquidity and capital.

Despite the reassuring narrative from The West that Russia faces “costs” and is increasingly “isolated” due to sanctions for its actions in Ukraine, the most recent data suggests reality is quite different. First, capital outflows slowed dramatically in Q3 (from $23.7 billion in Q2 to $13 billion in Q3) with September seeing capital inflows for the first time since Sept 2013. Second, Russia’s current account surplus was significantly stronger than expected ($11.4 billion vs $8.8 billion expected) driven by increased trade. Third, and perhaps most crucially, Russia paid down a massive $52.8 billion in foreign debt as Putin “de-dollarizes” at near record pace, reducing external debt to the lowest since 2012. – Zerohedge

Russia is not the only Eurasian nation de-dollarizing at a fast pace. Earlier this week as well, long time U.S. economic ally South Korea disseminated that their foreign reserve holdings had grown in the Yuan over the past year, almost doubling its prior total of 13.7% which was the amount they held at the end of 2013. These reserves replace former dollar holdings, and rise a huge red flag that the Far Eastern manufacturing center is quickly moving into the Eurasian Trade camp, and away from Western hegemony.

America’s gambit to force down the price of oil is a ploy the U.S. used in the late 1980’s to destroy the Rouble, and tear down the old Soviet Union’s economy. However, the Russian leadership is not stupid, and have realized for a long time that this was an Achilles Heel in their economic system, and this time, the tables are quickly turning against the U.S. as Russia simply dumps more and more dollars to use as capital to supplement their currency and industry during these short term attacks by the West in their attempt to cripple them monetarily.

Source: Examiner

Game over for Australian coal

China, the world’s top coal importer, will levy import tariffs on the commodity after nearly a decade, in its latest bid to prop up ailing domestic miners who have been buffeted by rising costs and tumbling prices.

The sudden move by China to levy import tariffs of between 3 percent and 6 percent from October 15 is set to hit miners in Australia and Russia – among the top coal exporters into the country.

Traders said Indonesia, the second-biggest shipper of the fuel to China, will be exempt from the tariffs since a free trade agreement between China and the Association of Southeast Asian Nations (ASEAN) means Beijing has promised the signatory nations zero import tariffs for some resources.

A 3 percent import tariff imposed on lignite last year did not include Indonesia.

“China is clearly moving to protect its local miners. Given that the tariff also covers coking coal, Australia, being the top supplier to China, is likely going to be the most affected,” said Serene Lim, an analyst at Standard Chartered.

The Ministry of Finance said in a statement on Thursday that import tariffs for anthracite coal and coking coal will return to 3 percent, while non-coking coal will have an import tax of 6 percent. Briquettes, a fuel manufactured from coal, and other coal-based fuels will see their import tariffs return to 5 percent.

Import taxes for all coals, with the exception of coking coal, was at 6 percent prior to 2005 before they were scrapped in 2007. Coking coal import taxes were set at 3 percent before being abolished in 2005.

News of the tariff lifted China’s thermal coal futures by 1.9 percent to 529.2 yuan ($86.33) a tonne, while China-listed shares in top miners such as Shenhua Energy and China Coal Energy also rose.

Chinese traders were only willing to pay about $65 a tonne for coal with heating value of 5,500 kcal/kg (NAR) on a landed basis before the tariff was announced, against offers of about $66 a tonne by Australians, traders said.

“With the latest tax, Chinese can only offer around $62, which means Australian sellers will need to cut prices by about $3.50-$4 a tonne,” said a senior trader at major international trading house.

“It is game over for Australian coal.”

INTENSE LOBBYING

The latest effort to limit imports comes after nearly a year of intense lobbying by China’s top miners for Beijing to stem the flood of cheap supplies that have inundated the domestic market and dragged local prices to a six-year low.

The China National Coal Association, which had submitted proposals to reduce domestic output, reduce the tax burden and regulate imports, had urged Beijing to act swiftly to support the besieged sector, where 70 percent of the miners were making losses and more than half were owing wages.

On a broader level, the persistent slump in coal prices has put a severe financial strain on coal-dependent provinces such as Inner Mongolia, Shanxi and Shaanxi, which are already struggling with high debts and a weakening property market.

China said last month it will ban the import and local sale of coal with high ash and sulphur content starting from 2015 in a bid to tackle air pollution. But Australian miners were left unscathed by that regulation as the most stringent standards did not apply to power plants.

Separately, trade sources said Beijing has also asked its state-owned power utilities to cut coal imports by as much as 40 million tonnes from September to December, a move that is set to hit imports in the fourth quarter.

China, also the world’s top coal producer and consumer, saw imports rise 13 percent from a year ago to 327.1 million tonnes in 2013, accounting for about 10 percent of the country’s total consumption. (1 US dollar = 6.1299 Chinese yuan)

Source: Reuters