Cause and Effect.....
"De-Dollarizing" Russia Pays Down Near-Record $53 Billion In Debt In Third Quarter
Submitted by Tyler Durden on 10/10/2014 17:23 -0400
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.
As Goldman explains, Trade and income improved notably...
The current account balance for Q3 came in at a surplus of US$11.4bn, above consensus expectations of US$8.8bn and up sharply from a small deficit of US$0.7bn in Q3 2013.On our estimates, on a seasonally-adjusted basis, this now puts the current account at 3.8% of GDP, up from a low point of 1% in Q2 2013 and 1.6% for the full-year 2013.The improvement in the current account came from both the trade balance, where imports have contracted (due to slowing domestic demand and the weaker Ruble), and from the income balance.In our view, the latter could be due to either cyclical or structural factors, which are difficult for us to pinpoint, butrisks to our current account balance forecasts nonetheless remain to the upside.
Net private capital outflows stood at US$13bn for the quarter, up slightly from US$10bn in Q3 2013 and similar to the pattern seen in Q2.*RUSSIA 3Q CAPITAL OUTFLOWS SLOW TO $13B VS $23.7B OUTFLOW IN 2Q*RUSSIA HAD $11.6B NET CAPITAL INFLOW IN JUNE: CENTRAL BANKJune was first monthly net inflow since Sept. 2013, according to central bank statement.
And finally - "de-dollarization" accelerates as Russia pays down its foreign debt at the fastest pace since Lehman...
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Funny how oil plunged and Russian de- dollarization picked up !
Why Oil Is Plunging: The Other Part Of The "Secret Deal" Between The US And Saudi Arabia
Submitted by Tyler Durden on 10/10/2014 18:19 -0400
Two weeks ago, we revealed one part of the "Secret Deal" between the US and Saudi Arabia: namely what the US 'brought to the table' as part of its grand alliance strategy in the middle east, which proudly revealed Saudi Arabia to be "aligned" with the US against ISIS, when in reality John Kerry was merely doing Saudi Arabia's will when the WSJ reported that "the process gave the Saudis leverage to extract a fresh U.S. commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority."
What was not clear is what was the other part: what did the Saudis bring to the table, or said otherwise, how exactly it was that Saudi Arabia would compensate the US for bombing the Assad infrastructure until the hated Syrian leader was toppled, creating a power vacuum in his wake that would allow Syria, Qatar, Jordan and/or Turkey to divide the spoils of war as they saw fit.
A glimpse of the answer was provided earlier in the article "The Oil Weapon: A New Way To Wage War", because at the end of the day it is always about oil, and leverage.
The full answer comes courtesy of Anadolu Agency, which explains not only the big picture involving Saudi Arabia and its biggest asset, oil, but also the latest fracturing of OPEC at the behest of Saudi Arabia...
... which however is merely using "the oil weapon" to target the old slash new Cold War foe #1: Vladimir Putin.
Saudi Arabia to pressure Russia, Iran with price of oilSaudi Arabia will force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the President of Saudi Arabia Oil Policies and Strategic Expectations Center.Saudi Arabia plans to sell oil cheap for political reasons, one analyst says.To pressure Iran to limit its nuclear program, and to change Russia's position on Syria, Riyadh will sell oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy,President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The marked decrease in the price of oil in the last three months, to $92 from $115 per barrel, was caused by Saudi Arabia, according to Abanmy.With oil demand declining, the ostensible reason for the price drop is to attract new clients, Abanmy said, but the real reason is political. Saudi Arabia wants to get Iran to limit its nuclear energy expansion, and to make Russia change its position of support for the Assad Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a lower oil price means less money coming in, Abanmy pointed out. The Gulf states will be less affected by the price drop, he added.The Organization of the Petroleum Exporting Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11 other countries that make up the group, won't be able to affect Saudi Arabia's decision, Abanmy maintained.The organization's decisions are only recommendations and are not binding for the member oil producing countries, he explained.
Today's Brent closing price: $90. Russia's oil price budget for the period 2015-2017? $100. Which means much more "forced Brent liquidation" is in the cards in the coming weeks as America's suddenly once again very strategic ally, Saudi Arabia, does everything in its power to break Putin.
A Look Inside The Secret Deal With Saudi Arabia That Unleashed The Syrian Bombing
Submitted by Tyler Durden on 09/25/2014 10:17 -0400
For those to whom the recent US campaign against Syria seems a deja vu of last summer's "near-war" attempt to ouster its president Bashar al-Assad, which was stopped in the last minute due to some very forceful Russian intervention and the near breakout of war in the Mediterranean between US and Russian navies, it is because they are. And as a reminder, just like last year, the biggest wildcard in this, and that, direct intervention into sovereign Syrian territory, or as some would call it invasion or even war, was not the US but Saudi Arabia - recall from August of 2013 - "Meet Saudi Arabia's Bandar bin Sultan: The Puppetmaster Behind The Syrian War." Bin Sultan was officially let go shortly after the 2013 campaign to replace Syria's leadership with a more "amenable" regime failed if not unofficially (see below), but Saudi ambitions over Syria remained.
That much is revealed by the WSJ today in a piece exposing the backdoor dealings that the US conducted with Saudi Arabia to get the "green light" to launch its airstrikes against ISIS, or rather, parts of Iraq and Syria. And, not surprising, it is once again Assad whose fate was the bargaining chip to get the Saudis on the US' side, because in order to launch the incursion into Syrian sovereign territory "took months of behind-the-scenes work by the U.S. and Arab leaders, who agreed on the need to cooperate against Islamic State, but not how or when. The process gave the Saudis leverage to extract a fresh U.S. commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority."
In other words, John Kerry came, saw and promised everything he could, up to and including the missing piece of the puzzle - Syria itself on a silver platter - in order to prevent another diplomatic humiliation.
When Mr. Kerry touched down in Jeddah to meet with King Abdullah on Sept. 11, he didn't know for sure what else the Saudis were prepared to do. The Saudis had informed their American counterparts before the visit that they would be ready to commit air power—but only if they were convinced the Americans were serious about a sustained effort in Syria. The Saudis, for their part, weren't sure how far Mr. Obama would be willing to go, according to diplomats.
Said otherwise, the pound of flesh demanded by Saudi Arabia to "bless" US airstrikes and make them appear as an act of some coalition, is the removal of the Assad regime. Why? So that, as we also explained last year, the holdings of the great Qatar natural gas fields can finally make their way onward to Europe, which incidentally is also America's desire - what better way to punish Putin for his recent actions than by crushing the main leverage the Kremlin has over Europe?
But back to the Saudis and how the deal to bomb Syria was cobbled together:
The Americans knew a lot was riding on a Sept. 11 meeting with the king of Saudi Arabia at his summer palace on the Red Sea.A year earlier, King Abdullah had fumed when President Barack Obama called off strikes against the regime of Syria's Bashar al-Assad. This time, the U.S. needed the king's commitment to support a different Syrian mission—against the extremist group Islamic State—knowing there was little hope of assembling an Arab front without it.At the palace, Secretary of State John Kerry requested assistance up to and including air strikes, according to U.S. and Gulf officials. "We will provide any support you need," the king said.
But only after the Saudis got the abovementioned assurances that Assad will fall. And to do that they would have to strongarm Obama:
Wary of a repeat of Mr. Obama's earlier reversal, the Saudis and United Arab Emirates decided on a strategy aimed at making it harder for Mr. Obama to change course. "Whatever they ask for, you say 'yes,'" an adviser to the Gulf bloc said of its strategy. "The goal was not to give them any reason to slow down or back out."Arab participation in the strikes is of more symbolic than military value. The Americans have taken the lead and have dropped far more bombs than their Arab counterparts. But the show of support from a major Sunni state for a campaign against a Sunni militant group, U.S. officials said, made Mr. Obama comfortable with authorizing a campaign he had previously resisted.
To be sure, so far Obama has refrained from directly bombing Assad, it is only a matter of time: "How the alliance fares will depend on how the two sides reconcile their fundamental differences over Syria and other issues. Saudi leaders and members of the moderate Syrian oppositionare betting the U.S. could eventually be pulled in the direction of strikes supporting moderate rebel fighters against Mr. Assad in addition to Islamic State. U.S. officials say the administration has no intention of bombing Mr. Assad's forces"... for now.
But why is Saudi Arabia so adamant to remove Assad? Here is the WSJ's take:
For the Saudis, Syria had become a critical frontline in the battle for regional influence with Iran, an Assad ally. As Mr. Assad stepped up his domestic crackdown, the king decided to do whatever was needed to bring the Syrian leader down, Arab diplomats say.In the last week of August, a U.S. military and State Department delegation flew to Riyadh to lay the ground for a military program to train the moderate Syrian opposition to fight both the Assad regime and Islamic State—something the Saudis have long requested. The U.S. team wanted permission to use Saudi facilities for the training. Top Saudi ministers, after consulting overnight with the king, agreed and offered to foot much of the bill. Mr. Jubeir went to Capitol Hill to pressed key lawmakers to approve legislation authorizing the training.
And once the US once again folded to Saudi demands to attack another sovereign, it was merely a matter of planning:
Hours before the military campaign was set to begin, U.S. officials held a conference call to discuss final preparations. On the call, military officers raised last-minute questions about whether Qatar would take part and whether the countries would make their actions public.Mr. Kerry was staying in a suite on the 34th floor of New York's Waldorf Astoria hotel, where he was meeting leaders attending United Nations gatherings. He called his Gulf counterparts to make sure they were still onboard. They were.The UAE, which some defense officials refer to as "Little Sparta" because of its outsized military strength, had the most robust role. One of the UAE's pilots was a woman. Two of the F-15 pilots were members of the Saudi royal family, including Prince Khaled bin Salman, son of the crown prince. In the third wave of the initial attack, half of the attack airplanes in the sky were from Arab countries.
The best news for Obama: it is now just a matter of time to recreate the same false flag that the Saudi-US alliance pushed so hard on the world in the summer of 2013 to justify the first attempt to remove Assad, and once again get the "sympathy" public cote behind him, naturally with the support of the US media.
But how does one know it is once again nothing but a stage? The following blurb should explain everything:
Saudi players in attendance for the Sept. 11 meeting included Prince Bandar bin Sultan, who as the king's spymaster last year ran afoul of Mr. Kerry over Syria and Iraq policy. U.S. officials interpreted his presence as a sign the king wanted to make sure the court was united, U.S. officials said.
Actually, his presence is a sign that the same puppetmaster who pulled the strings, and failed, in 2013 to remove Assad, and as noted above was at least officially removed from the stage subsequently, is once again the person in charge of the Syrian campaign, only this time unofficially, and this time has Obama entirely wrapped around his finger.
( Looking at the one year chart , I think one can surmise when the talks got serious ... )
Crude Oil Brent
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Consider timeline for Occupy Central - Hong Kong Democracy Protests....
Timeline of Hong Kong democracy protests
HONG KONG - Here are key dates in the recent development of Hong Kong's pro-democracy movement, leading up to mass protests that brought tens of thousands onto the streets to demand fully free elections:
June 10: Beijing issues a "White Paper" on Hong Kong that -- according to democracy campaigners -- shows that the city's much-cherished freedoms could be revoked at any time.
June 30: 800,000 people vote in favour of greater democratic freedoms than Beijing has proposed in an unofficial referendum organized by the protest group Occupy Central.
August 31: China insists on its right to vet candidates for Hong Kong's next leadership elections in 2017 elections. In response, Occupy Central and other groups vow to embark on an "era of civil disobedience" including mass sit-ins.
September 22: University students begin a week-long boycott of classes.
September 26: Around 150 student protesters storm government headquarters and occupy a courtyard in the complex. Police use pepper spray to repel them. The protesters defend themselves with their now emblematic umbrellas.
September 28: With parts of the government complex besieged, Occupy Central joins the students announcing it has begun its civil disobedience campaign. A major street opposite government headquarters is taken over by protesters.
In response riot officers fire tear gas and crowd numbers swell with many apparently moved to join the protest in anger at the police action.
October 1: Celebrations of Communist China's National Day takes place against a backdrop of noisy pro-democracy protests throughout the city.
October 2: Hong Kong's leader CY Leung rejects protester demands that he resign but offers to send his deputy to talk to demonstrators.
October 3: Student leaders agree to Leung's offer of talks. But chaos later erupts in Mong Kok, a busy working-class shopping district taken over by protesters, when government loyalist thugs attack demonstrators.
October 4: Student leaders call off talks, accusing police of failing to act over violent attacks against them. Tens of thousands gather for a mass peace rally in central Hong Kong in response to the assaults.
October 6: Protest numbers dwindle but demonstrators remain in control of barricades across the city. Protest leaders agree to a resumption of talks.
October 8: Leung comes under pressure over his failure to declare two payments totalling HK$50 million ($6.5 million) from Australian engineering company UGL received while in office.
October 9: Democracy activists vow to ratchet up their campaign, joining with pan-democratic lawmakers who vow to gridlock government committees they control. Talks collapse as government pulls out.
October 10: Protesters announce their intention to remain on Hong Kong's streets for a long term fight as US lawmakers urge President Barack Obama to press their concerns over the lack of democratic development in Hong Kong to Beijing.
10 major outcomes of BRICS summit
Published time: July 21, 2014 10:47
The 6th BRICS summit in Fortaleza, Brazil, has highlighted the increasing role of emerging countries in international affairs and their ability to share strategic interests and approaches while reaching for their development goals.
In my opinion, the top 10 outcomes of the event are:
1. The meeting started the second cycle of BRICS summits. This time it focused on sustainable solutions for inclusive growth. It confirmed common interests in broadening multidimensional cooperation, including mutual trade and investment. With combined GDP around 21% of global volume, 20% of global trade and 11% of accumulated investments, the five countries represent one of the largest markets in the world.
2. The summit highlighted once again that the BRICS countries play an increasingly significant role in international affairs, an example of which was the prevention of an outright military invasion of Syria, as well as the elimination of chemical weapons in that country.
3. The countries are united in their willingness to coordinate their positions and actions on issues of global development and the reform of the global financial and economic architecture, including the IMF. The G20 format offers the five countries a good framework for such cooperation.
4. Decision to create the New Development Bank (NDB) based in Shanghai will contribute to the efforts to eliminate infrastructure gaps and meet sustainable development needs of the BRICS countries and other emerging markets. With initial authorized capital of $100 billion, including $50 billion of equally shared initial subscribed capital, it will become one of the largest multilateral financial development institutions. Importantly, it will be open for other countries to join.
5. Creation of the Contingent Reserve Arrangement, or currency reserve pool, initially sized at $100 billion, will help protect the BRICS countries against short-term liquidity pressures and international financial shocks. Together with the NDB these new instruments will contribute to further co-operation on macroeconomic policies.
6. Other documents, including the Memorandum of Understanding on Cooperation among BRICS Export Credit and Guarantees Agencies, as well as the Cooperation Agreement on Innovation within the BRICS Interbank Cooperation Mechanism, will offer new channels of support for trade and financial ties between the five countries.
7. The BRICS framework now includes more than 20 equally important cooperation formats, including the BRICS Business Council, the BRICS Banking Forum, the BRICS Exchanges Alliance and others, embracing such areas as information security, healthcare, agriculture, science and technology, and others.
8. Russia is actively engaged in the strengthening of the BRICS framework. Among its proposals are the draft Strategy for Multilateral Economic Cooperation and the Roadmap for Investment Cooperation. We are also proposing to establish the BRICS Energy Association, the Fuel Reserve Bank, the BRICS Energy Policy Institute and a training center for experts in metals industries, as well as to widen cooperation in areas of culture and education.
9. Another important topic is the BRICS “outreach” format. Meetings with leaders of different regions add to the Summits’ agenda and make the work more relevant globally.
10. As Russia is taking over the position of the BRICS Chair, the next summit will be held in the city of Ufa in the Republic of Bashkortostan, in July 2015. We are looking forward to working ever more closely with our international partners.
WEDNESDAY, 17 SEPTEMBER 2014
Shanghai Cooperation Challenges the West
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By Oleg Salimov (09/17/2014 issue of the CACI Analyst)
Tajikistan’s capital Dushanbe hosted the Shanghai Cooperation Organization (SCO) summit for two days on September 11-12. The summit concluded Tajikistan’s position in the organization’s rotating chairmanship and handed the duty over to the Russian Federation. The summit was attended by six member states, China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan, and the five observers Afghanistan, India, Iran, Mongolia, and Pakistan. Turkmenistan’s President Gurbanguly Berdimuhammedov attended the summit as a distinguished guest. Economic cooperation and threats to regional security through political instability in Afghanistan, the Middle East, North Africa, and Ukraine were established as the summit’s agenda. The long awaited expansion of the organization by adding India, Pakistan, and possibly Iran as new members became one of the most important announcements of the summit, outlining the SCO’s projects for the upcoming year.
The expansion plans were revealed on the eve of the summit by Russia’s Foreign Minister Sergey Lavrov in the Russian media outlet Rossiyskaya Gazeta. The article referred to Pakistan, India, and Iran as new prospective members of the SCO. Iran has previously applied twice for SCO membership but the outcomes of Iran joining it are highly ambiguous considering the country’s frictions with Israel and the U.S. over its nuclear program. Russia’s recently intensified conflict with Western countries draws it closer to Iran and raises Iran’s hopes for full membership in the SCO. The question remains, however, whether the SCO will be able to manage the regional rivalry between China, India, and Pakistan if the prospective members are in fact accepted.
Lavrov also stressed the potential of using national currencies in financial operations among SCO’s members. The statement is a continuation of Russia’s political initiatives aimed at relinquishing euros and dollars in its financial operations in the wake of the U.S. and EU economic sanctions imposed on Russia for its role in Ukrainian crisis. Earlier, Russia and China, the two major players of SCO, have declared their intention of national currencies turnover in the recently started natural gas delivery project. It is only logical for Russia to employ the SCO’s chairmanship and natural resources leverage to expand the organization through India, Pakistan, and Iran and to denounce euros and dollars when refocusing from Europe to Asia.
The SCO’s memorandum declared several particular steps towards the promotion of national currencies in SCO’s financial system and, as a result, the alienation of euros and dollars. These include increasing members’ financial and banking cooperation in regional trade and economy, and an intensification of efforts in establishing their own Development Fund and Bank of Development. However, it should be noted that the idea of establishing financial institutions within the SCO, such as a Development Fund, was first proposed in 2011 by Kazakhstan and widely supported by Russia as a response to the global financial crisis. At the same time, China offered its own project in the SCO’s Bank of Development. Both were viewed as security measures for the SCO’s members. Russia’s current growing confrontation of with the West amplifies the likelihood that the proposed SCO financial institutions will be implemented.
The SCO’s own financial institutions are also in agreement with Russia’s intent to develop regional automobile transportation infrastructure which will connect Asia with Russia’s Siberia region. The infrastructure linking Asia and Siberia can serve to accelerate regional trade in addition to the Trans-Siberian railroad. Vladimir Putin announced the intent during the previous SCO summit in Bishkek in September 2013, and Lavrov also highlighted the transportation projects as a major SCO interest in his article on SCO expansion. In the Bishkek summit, the SCO’s Interbanking association was seen as the major prospective investor of the project. In light of the latest proposals, if realized, the SCO’s Bank of Development might become a subsequent proprietor of the Asia-Siberia transportation project.
The SCO summit in Dushanbe demonstrated a growing division between the developing and developed worlds in Eurasia. The signs of division can be seen in the summit’s official declaration, the statements of the officials, and the SCO’s narrowing scope of priorities. The SCO unifies a group of regimes that pursue various objectives through a common need for political and economic survival. For example, stated in the summit’s declaration, the determination to establish informational security and fend off informational-communication threats improve the survivability of authoritarian regimes like Tajikistan and Uzbekistan. For Russia and Iran, the SCO is an engine for forging political alliances and economic partnerships. The emerging Asian countries are attracted to the SCO by the opportunity of obtaining cheap energy resources. The cumulative efforts of these countries can create a serious counterbalance to the West.