A long awaited plan by the European Union to import Caspian gas moved forward this week as construction work began on the Trans Anatolian Natural Gas Pipeline (Tanap) in Turkey.
Tanap is the central link in the EU-backed Southern Gas Corridor, a jigsaw of existing and planned pipelines designed to diversify Caspian energy export routes and reduce European dependence on Russian gas. Initially, the 3,500km SGC network will transport gas from the giant, BP-led Shah Deniz field in offshore Azerbaijan, but could in future draw supplies from other Caspian and central Asian countries and even the Middle East, changing the energy map of the whole region. Read more
By Andrew Foxall of The Henry Jackson Society
Unwilling to go to war with Russia, the west’s main levers for persuading Vladimir Putin to back down over Ukraine are economic sanctions. Their importance was underscored last week, when the US announced new measures against 14 individuals and two entities. While the attention-grabbing name on the US list was Aleksandr Dugin, the academic-turned-policymaker whose musings on ‘Eurasianism’ has led some to refer to him as “Putin’s Brain”, another entity was the little-known Russian National Commercial Bank (RNCB). Read more
** FT News **
* Clear victory for Netanyahu in Israel | Likud party in decisive defeat of centre left opposition
* Chinese workers strike over benefits | Protests rise in China as labour relations grow increasingly fractious amid slowing economy Read more
By Simon Saradzhyan
To hear Vladimir Putin say it, Russia is not at war with Ukraine. “I think that this apocalyptic scenario is highly unlikely, and I hope it never comes to that,” Putin said when asked on Russia’s Defender of the Fatherland Day whether his fellow citizens may “wake up one day to learn we are at war” with Ukraine. It can be inferred that the commander-in-chief of the Russian armed force believes (or wants us to believe) that there will be no war between Russia and Ukraine for as long as Moscow refuses to admit to its involvement in the conflict. But is there such a thing as a declared war any more? And how should other European nations respond if they become the target of an undeclared war? What can be done to prevent repetition of the Ukraine scenario elsewhere in Europe?
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Ukraine’s billionaires are losing their cash, especially those with significant assets in the Donbas, an area that has become a battlefield between pro-Russian rebels and units loyal to Kiev. According to Forbes’ 2015 billionaires list, Rinat Akhmetov, Ukraine’s richest man, has lost as much as $5.8bn over the past year.
The mining, steel-making, energy and heavy engineering units of Akhmetov’s SCM Group have been forced to halt operations or reduce their capacity in territories controlled by separatists or near the front line. The Group’s media, telecommunications and banking businesses are also feeling the effects of the rebellion. Read more
Two neighbouring, Adriatic, former-Yugoslav states, both now members of the EU: one is continuing a remarkable recovery from a banking crisis, the other showing glimmers of a revival after a full six years without growth.
Slovenia’s economy grew by 2.6 per cent last year; Croatia’s shrank by 0.4 per cent. The growth gap between them should narrow this year, with Slovenia’s economy slowing and Croatia’s at last picking up to leave the worst years behind. Croatia will benefit from rising exports and increasing European Union funding, while Slovenia’s export growth slows and an EU cash injection tapers. Nonetheless, as the countries enter the second half of the decade, Slovenia looks likely to set the pace, with its southern neighbour still a laggard. Read more
** FT News **
* Europeans defy US to join China-led bank | France, Germany and Italy follow Britain in signing up to AIIB
* Israelis vote in knife-edge election | Poll seen as referendum on the leadership of three-term Prime Minister Benjamin Netanyahu Read more
By Dominic Jephcott, Vendigital
The Chinese Government’s decision to embark on a fresh round of industry consolidation as part of a move to strengthen state-owned enterprises (SoEs) and increase their global competitiveness has been a long time coming. It is an understandable response to the slowdown in economic growth, over-capacity in many sectors and poor returns on huge capital investments over the last ten years.
The Made in China 2025 initiative, which was outlined last week at the National People’s Congress, is a 10-year plan for transforming the country’s disparate manufacturing sector in order to create a smaller number of large-scale businesses capable of competing internationally in the higher added-value and strategic industries. Calls to address the endemic inefficiencies of China’s SoEs and increase their global competitiveness are nothing new, of course, but this time it seems there is a clear commitment to make sure it happens. Read more
It was a cathartic weekend for Brazilians, as more than a million people took to the streets to show their discontent with the government in scenes not seen since the mass demonstrations that preceded the impeachment of President Fernando Collor de Mello more than a decade ago.
Sadly, any idea that such a “cleansing of the soul” (as they sometimes say in Brazil) would be followed by a fresh optimistic start on Monday quickly evaporated as the central bank’s weekly round of consensus forecasts showed no end to the deepening gloom. Read more
** FT News **
* One million join anti-Rousseff protests | Increasing hardship in Brazil sparks calls for president’s impeachment
* Putin appears in public for first time in 11 days | Vladimir Putin is alive and well. Or, to be more precise, the Russian president has appeared in public for the first time since March 5. Read more
By Anders Heede of BDO
Many emerging markets, especially in sub-Saharan Africa, have seen solid GDP growth in the past decade driven mainly by natural resources. But with falling commodity prices and Chinese demand dwindling, those with overly resource-dependent economies are being caught. Companies seeking to invest in emerging markets should be on the lookout for those countries that have invested in diversifying their economies. That will often mean having Ethiopia on their shortlist. Read more
By Hugo Brennan, Verisk Maplecroft
When the Association of Southeast Asian Nations (ASEAN) launches its economic integration project in December this year, it could provide the region with the impetus to become a key emerging market powerhouse. However, the 10 country grouping needs to overcome several significant hurdles if the proposed ASEAN Economic Community (AEC) is to succeed in freeing up trade and commerce between member states.
Chief among these is ASEAN’s institutional weakness, which is hampering efforts to bring together diverging national interests and counteract economic protectionist sentiment in key members, such as Indonesia. Many countries in the bloc also face difficult political realities on the domestic front which have the potential to divert attention away from the goal of integration. The success of the AEC will hinge on these factors, but whether it prospers or flounders, foreign businesses in the region will face a changing investment landscape that they need to be prepared for. Read more
If there’s one thing that central banks like, it is being independent. But EM central bankers’ decisions are currently being made with the influence of their developed economy counterparts looming large over them.
Many central banks in emerging markets are still in easing mode. The People’s Bank of China cut rates by 25 basis points, effective March 1, while a few days later India made the second of two cuts this year outside its normal meeting cycle. But with the dollar soaring, the Fed apparently still on track to raise rates for the first time in June, and the market’s attention focusing on the large stock of dollar-denominated corporate debt issued by emerging markets, further cuts are likely to get riskier as time goes on. Read more
A Pemex oil rig ©Getty
International oil companies are “polygamous” by nature, says Iván Sandrea, chief executive of Sierra Oil & Gas, the first Mexican exploration company to be formed since the country’s sweeping reform of the sector to open it to private investment.
So one thing the former Statoil executive is not happy about is the government’s insistence that bidders in the two tenders so far launched can belong to only one consortium. “I’ve never seen this in other countries,” he says. Read more
By Paul Shortell
Mexico’s electricity industry appears poised to outperform oil and gas in 2015. Ambitious plans to boost investment and increase production in the hydrocarbons sector, widely consider the poster child for President Enrique Peña Nieto’s wide-ranging economic reforms, have been complicated by the collapse of crude oil prices. State oil company Pemex recently reduced its estimate of investment this year by the oil and gas sector from $35bn to $25bn and may be forced to delay licensing of certain unconventional and offshore blocks. In January, more than 10,000 workers contracted by Pemex lost their jobs as the indebted company undertook new austerity measures.
Though not without its own challenges, the power sector shines by comparison. Read more
What’s the one good thing about Mexico’s consumer confidence being poor? It should help prevent the country’s weakening peso from fuelling inflation.
All eyes are on the peso at the moment, after monetary authorities launched a new intervention programme on Wednesday to try to calm volatility and ensure liquidity as the dollar goes from strength to strength. Read more
The International Monetary Fund will hold discussions in May and make a decision in November on whether to add the Chinese renminbi to the four currencies it uses to value its Special Drawing Right (SDR), the international reserve asset created by the Fund.
China is keen for this to happen, as the deputy governor of its central bank, the People’s Bank of China (PBoC), reiterated at a press conference in Beijing on Thursday. There is a snag: the renminbi is not and may never be a convertible currency, which is a standard pre-requisite of a reserve currency. But as David Lubin of Citi Research argues in a note also published on Thursday, that consideration is likely to be put aside. Read more
** FT News **
* Alibaba deal values Snapchat at $15bn | Chinese ecommerce giant invests $200m in social app
* Blacklist Putin loyalists, says Navalny | Russian opposition tells FT of frustration over sanctions and impact of Nemtsov death Read more
By Olly Buston and Peter Nicholls
Many people think that slavery ended with the demise of the barbaric trans-Atlantic trade 150 years ago. But modern forms of slavery still exist. According to the Global Slavery Index, an estimated 35.8m people are victims of forced labour, human trafficking or debt bondage, more than at any other moment in history. That’s 35.8m people who are more or less completely controlled by another for their use or profit. An astonishing two thirds of these people live in the Brics economies of Brazil, Russia, India and China, with 14m people living in slavery in India alone.
The International Labour Organisation estimates that $150bn of illegal profits are generated each year by the use of modern slavery worldwide. One third is made through forced labour. The reality is that slavery exists in the supply chains of many of the products that we consume. This means consumer pressure has a major role to play in defeating this terrible crime. Read more