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from The Great Debate:

Putin’s already paying dearly for Ukraine – and looks willing to sacrifice much more

Russia's President Vladimir Putin chairs a government meeting at the Novo-Ogaryovo state residence outside Moscow

Russian President Vladimir Putin has adopted a “go it alone” approach throughout the Ukraine crisis and regularly describes his country as “independent” and nonaligned. But Moscow is not as isolated as Putin makes out. The fact that he cannot see this reality -- or chooses to ignore it -- has produced a series of decisions that has seriously undermined Russia’s global role.

For the past two decades, Moscow has viewed its foray into global institutions as a major success. It has increasingly integrated into the global economy.  Those achievements, however, now present Putin with a major dilemma.

In the aftermath of the Soviet Union’s collapse, Russia signed multiple treaties and joined numerous international organizations, including the Council of Europe, the G7 (which became the G8) and the World Trade Organization.

G8 countries leaders attend a working session at the Lough Erne golf resort where the G8 summit is taking place in EnniskillenWhether Russia understood the underlying obligations that accompanied its memberships is unclear. The ink was not yet dry on Russia’s accession to the WTO, for example, when Putin demanded that member countries be allowed to introduce protectionist measures during times of global insecurity.

from Breakingviews:

Gazprom/Ukraine dispute is proxy for Putin’s whims

By Pierre Briançon 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Europe has long been used to the perennial drama of “Ukraine versus Gazprom,” but this year’s version is not your run-of-the-mill gas price dispute. Making good on a longstanding threat, Gazprom has said it will deliver gas to Ukraine only if it has been pre-paid. This comes after the Russian energy group failed to settle a dispute with Naftogaz, its Kiev-backed counterpart, over what it claims are more than $4 billion of overdue bills.

from MacroScope:

Common cause for Washington and Tehran in Iraq?

Iraq is going up in flames and there appears to be no question of the West putting boots back on the ground in contrast to 2003 when the United States and Britain invaded to topple Saddam Hussein and set in train a decade of chaos that has now exploded again.

Iraq's most senior Shi'ite Muslim cleric has urged his followers to take up arms against a full-blown Sunni militant insurgency to topple Shi'ite Prime Minister Nuri al-Maliki. The chances of ISIL militants taking heavily armed Baghdad are slim but that doesn’t mean conflict will not continue and, with Iraqi Kurdish forces seizing control the oil hub of Kirkuk just outside their autonomous enclave in the north, the prospect of the country splitting along sectarian lines is real.

from MacroScope:

Why EU elections can matter

Some interesting action over the weekend: in a foretaste of this week’s EU elections, Greece's leftist, anti-bailout Syriza party performed strongly in the first round of local elections on Sunday, capitalizing on voter anger at ongoing government austerity policies.

If it did even better in the EU polls it could threaten the ruling coalition and tip Greece back into turmoil just as there are signs that it has turned the corner.

from MacroScope:

Ukraine inching back to the brink

Pro-Moscow protesters in eastern Ukraine took up arms in one city and declared a separatist republic in another yesterday and the new build-up of tensions continues this morning.

The Kiev government has launched what it calls “anti-terrorist” operations in the eastern city of Kharkiv and arrested about 70 separatists. Moscow has responded by demanding Kiev stop massing military forces in the south-east of the country.

from Global Investing:

Ukraine and the IMF: a sense of deja vu

The West has just agreed to stump up a load of cash for Ukraine but there is a distinct sense of deja vu around it all.

Let's face it - Ukraine's track record on how it manages ts economy and foreign affairs isn't great. This is the third aid programme Kiev has signed with the International Monetary Fund in a decade and two of them have failed. The IMF has its fingers crossed that this one will not go the way of the past two. Reza Moghadam, the IMF's top European official, tells Reuters in an interview:

from Global Investing:

Oil falls. So does the Russian stock market

Russian equities have had their worst week since early-December, with losses of over 6 percent. But don't look too far for the reason -- world crude futures have fallen to three-month lows around $114 a barrel on worries that U.S. and world economic growth may not be picking up after all.  They too have fallen 6 percent so far this week. Check out the following graphics showing how Russian stocks and its currency move in lock-step with oil prices:

If anything, the falls on Russian assets are outpacing the weakness on global crude oil markets in recent months, possibly because the jitters that caused last December's massive falls have not been entirely overcome. Anti-government demonstrators are no longer hitting the streets but  with President-elect Vladimir Putin to be sworn in next week, fears are the  Kremlin may prefer squeezing more cash from energy companies to implementing the reforms the economy desperately needs.  Latest plans flagged on Thursday  to raise oil and gas extraction taxes would seem to confirm these worries and are hitting energy sector shares -- half the Moscow index.

from Global Investing:

In defence of co-investing with the state

It's hard to avoid state-run companies if you are investing in emerging markets -- after all they make up a third of the main EM equity index, run by MSCI. But should one be avoiding shares in these firms?

Absolutely yes, says John-Paul Smith at Deutsche Bank. Smith sees state influence as the biggest factor dragging down emerging equity performance in the longer term. They will underperform, he says, not just because governments run companies such as Gazprom or the State Bank of India in their own interests (rather than to benefit shareholders)  but also because of their habit of interfering in the broader economy.  Shares in state-owned companies performed well during the crisis, Smith acknowledges, but attributes emerging markets' underperformance since mid-2010 to fears over the state's increasing influence in developing economies. (t

from Global Investing:

Discovering the pleasure of dividends in Russia

American financier J.D. Rockefeller said watching dividends rolling in was the only thing that gave him pleasure. But it is a pleasure which until now has largely bypassed shareholders in most big Russian companies. That might be about to change.

Russian firms,  especially the big commodity producers, are generally seen as poor dividend payers. So dividend yields, the ratio of dividends to the share price,  have been unattractive.

from Summit Notebook:

Note to OPEC: Siberia not Saudi

   An episodic courtship between Russia, the world's second largest oil exporter and its sometime rivals in the OPEC group of oil exporting nations, went cold at the beginning of this year when Russia failed to make good on hints that it might cut output in line with OPEC, dominated by Saudi Arabia and other desert states of the Middle East.     Prices for oil, the economic lifeblood of Russia and OPEC countries alike, had fallen below $40, OPEC argued, and supply cuts had to be made to boost prices and finance investment into the oil industry.     Alexander Medvedev, deputy chief executive of Russian energy giant Gazprom, told this year's Reuters Russia Investment Summit that Russia had an excuse for avoiding the multimillion barrel cuts imposed by OPEC: the Siberian chill .    "It is a very simple explanation for this: We are not in a desert where it's easily to regulate, we are in an extreme situation in Siberia where reserves could be damaged if you up and down your production levels."     If Russia shuts down Siberian wells, its industry members argue, they could seize up forever as they go cold.     And Russia hardly left OPEC hanging, Medvedev argued: The financial crisis took its toll even on Russia's cash rich oil companies: "Actually the supply was substantially lower in the first half of the year."       Medvedev also said he was still struggling to understand where from the rival Nabucco pipeline will get its gas to rival Gazprom on European markets.      "Even at the (Nabucco) signing ceremony I looked at the photos and tried to find any gas supplier and with all my attempts I could not find any. And it looked strange."

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