Tag Archives: russia

Saudi & Russia Pledge Oil Cooperation Without Agreeing Freeze

Bloomberg, Sep 5, 2016


* Countries have ‘number of tools’ for joint action, Novak says
* Oil pares gains as rapprochement falls short of concrete steps

The world’s top two crude-oil producers pledged to cooperate to stabilize global markets, while failing to announce any specific measures to bolster prices.

“We have a number of tools at our disposal for joint actions,” Russian Energy Minister Alexander Novak said Monday following a meeting with his Saudi counterpart Khalid Al-Falih at the G-20 summit in China. Both agree that an output freeze would be the most constructive instrument, he said.

Despite promise of a “significant” announcement — leading to a 5.5 percent jump in oil prices — no concrete actions were revealed at the joint press briefing in Hangzhou. Al-Falih denied there was any current need to cap production, saying “markets are trending in the right direction.”

Benchmark Brent crude pared gains to trade up 0.9 percent at $47.26 a barrel at 3:45 p.m. in London. Russian President Vladimir Putin said last week he’d like OPEC and Russia to agree on an output freeze, boosting speculation that members of the Organization of Petroleum Exporting Countries and other major producers might strike such an accord at talks this month in Algeria.

“At first appearance it sounds a little bit as new wine in old bottles,” Axel Herlinghaus, senior commodities analyst at DZ Bank AG, said by e-mail. “In the past there was no lack of ambitious announcements, but a lack of decisive follow-up actions.”

Rare Briefing

While Russian-Saudi cooperation is yet to yield firm steps toward steadying the market, a joint press conference between the two oil giants is rare. It shows a growing trust and understanding that collaboration is vital to oil’s recovery, the ministers said.

In a joint statement, the two countries confirmed they’ll hold further talks during the International Energy Forum in Algiers this month. They’ll also coordinate a bilateral working group on oil and gas cooperation in October and meet at the OPEC ministerial summit in Vienna in November.

For a QuickTake explainer on how oil prices are determined, click here.

Potential freeze terms will be discussed in September, Russian news service RIA Novosti reported, citing Novak. Russia would be ready to join an agreement to cap output at the level of any month in the second half, the minister said, while Al-Falih insisted he’ll work with OPEC members to come to a joint understanding on coordination.

“We still cannot shoulder the responsibility alone; we will play the leadership role and we will catalyze others to join in,” Al-Falih said. “We are optimistic that the Algiers meeting would provide a quorum.”

Several OPEC countries voiced their support for the Russian-Saudi pledge to cooperate. The oil ministers of the United Arab Emirates, Kuwait and Qatar welcomed the joint statement, while Algerian Energy Minister Noureddine Bouterfa said it shows producers must reach an accord on output.

“Oil below $50 is not acceptable,” Bouterfa said. “Countries need income to invest, to develop production and industries.”

Russia and Saudi Arabia are considering the possibility of limiting output for three to six months, or maybe longer, RIA Novosti reported, citing Novak.

A freeze proposal was derailed in April over Saudi Arabia’s insistence that Iran participate. Yet the effect of the prolonged slump in crude prices — stuck at half the levels seen two years ago — has pushed oil-market rivals to collaborate.

Iran’s Return

Putin has said oil producers now recognize that Iran, which has mostly restored the output halted during three years of trade restrictions, deserves to complete its return to world markets.

Iran showed Monday that it’s ready to pump more crude, with state-run National Iranian Oil Co. saying the country can raise production to 4 million barrels a day in two to three months from the current daily level of about 3.8 million.

Russia and Saudi Arabia “share the similar view that Iran should be allowed to reach pre-sanctions level,” Novak said Monday, adding that OPEC hasn’t reached a consensus on whether Iran has already reached that level of production.

While Iran ramps up, other producers including Nigeria and Libya have seen supplies disrupted in 2016 while U.S. output has declined, helping push up oil 70 percent from the 12-year lows reached in January.

Supply and demand will come “more or less into balance this year,” Al-Falih said. A “coordinated, appropriate, collective decision on production would help bring that balance.”


Russian central bank slashes key rate for first time in almost a year

RT, Jun 10, 2016

The building of the Central Bank of Russia in Neglinnaya Street in Moscow © Natalia Seliverstova

The Central Bank of Russia has cut its key interest rate by 0.5 percentage points to 10.5 percent per annum. The last time the regulator cut rates was in July 2015.

“The Board of Directors notes the positive trends of more stable inflation, decreased inflation expectations and inflation risks against the backdrop of imminent growth recovery in the economy. Slowing inflation allows more certain reliance on sustainable inflation reduction to less than five percent in May 2017 and the four percent target in late 2017, taking into account the decision just made and the retention moderately tight monetary policy,” said the Central Bank in a statement.

The Bank of Russia will consider the possibility of a further reduction in the key rate by assessing inflation risks.

Analysts and economists, polled by Russian business daily RBC had been divided on whether the Central Bank would cut key rates, 15 of 32 had predicted the key rate would remain unchanged.

According to VEB bank analyst Oleg Zasov, slowing inflation and the improving financial situation favor a rate cut, but the Central Bank is worried current oil prices are not stable and is also expecting action from the US Fed.

In December 2014, the interest rate was hiked to 17 percent in an attempt to stop ruble speculation and cap inflation. The 6.5 percent increase, which took most by surprise, was the sharpest rate rise since the 1998 crisis.

The Russian ruble traded stable on Friday’s news of the rate cut, gaining slightly on the US dollar and the euro.


Russia to get access to citizens’ financial information in 80 countries

RT, May 12, 2016

© Charles Platiau


Russia’s Federal Tax Service has signed an international agreement on the automatic exchange of financial information. It will make the authorities’ job easier, as they won’t have to send requests to get information on the transactions of citizens abroad.

“In 2018, Russia will join the system of automatic exchange of tax information between tax authorities of different countries. This will allow us to obtain data on the financial accounts of taxpayers from more than 80 jurisdictions, including so-called offshores. [On Thursday], the Federal Tax Service signed the corresponding agreement, which will leave less room for tax fraud,” said tax chief Mikhail Mishustin.

The first exchange of information for Russia will take place in 2018, providing access to financial transactions by Russian citizens abroad in 2017. Such exchange will be fully automated and be built on the OECD platform.

The agreement has been signed by over 100 jurisdictions, including popular offshores like Panama, the British Virgin Islands and Belize.

On July 1, the Russian amnesty on capital expires. Before that date, taxpayers who declare their foreign assets and bank accounts will be exempt from sanctions by the state for non-payment of taxes.

Last week the government said, “Russia’s accession to the international automatic information exchange system will provide an important tool for reducing the shadow economy and countering the use of illegal schemes for the expatriation of profit from the country.”

The new agreement is expected to help Russia deal with the problem of capital outflow. Last year, capital flight amounted to $56.9 billion, down from $153 billion in 2014.


Russia calls Saudi bluff after Riyadh threatens to boost oil output

RT, Apr 20, 2016

A dealer lays a playing card on the table at the World Series of Poker Europe competition at the Empire Casino in London © Luke MacGregor

The Russian Energy Ministry says it’s ready to increase oil production and exports should Saudi Arabia go through with its threat to boost output after the failure of the Doha talks.

Russia’s oil output may reach 540 million tons this year, Deputy Energy Minister Kirill Molodtsov told reporters.  “And why not? It’s absolutely possible,” he said.

According to the Russian Energy Ministry, crude exports to countries outside the former Soviet republics could grow by more than four percent to 255 million metric tons this year, or 5.11 million barrels a day. That would add an extra 300,000 barrels a day to international markets.

The talks by major oil producers to cap production failed after Saudi Arabia, Qatar and the United Arab Emirates said they wouldn’t agree to a deal unless Iran was included. Tehran said well ahead of the meeting that it wants to ramp up output to pre-sanctions levels of four million barrels per day and did not show up for the talks.

Saudi Arabia is pressuring Iran to stop increasing oil production as the two countries spar over market share. Iran has been trying to regain European oil market share by undercutting at the expense of the Saudis.

Saudi Prince Mohammed Bin Salman warned the kingdom could immediately increase output by more than a million barrels a day (or about 10 percent) to 11.5 million. “If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door,” he said in an interview with Bloomberg News.

In February, Moscow and Riyadh reached a preliminary agreement to keep oil production at January levels.

Following the breakdown of the freeze talks, Russian Energy Minister Aleksandr Novak told reporters that the “door is not closed” to future cap talks, but “Russia won’t be as optimistic as before.”

“How can Iran be the reason for the talks’ failure, when it wasn’t even here?” said Novak after the meeting. “We believe the presence of countries responsible for 75 percent of the world’s output here was sufficient.”

According to Novak, an agreement to freeze output may be irrelevant within months, “maybe even by June” because of market factors. “The balance of supply and demand will be restored as a result of lower prices and lower investment,” Novak said on Wednesday.


Russia & China seeking to dominate gold trade

RT, Apr 19, 2016

© Pavel Lisitsyn

The Bank of Russia and the People’s Bank of China want to create a joint platform that would unite gold trading by the world’s two biggest gold buying countries.

“BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets,” First Deputy Governor of the Russian Central Bank Sergey Shvetsov told TASS.

China is the world’s largest gold producer. Last year it produced 490 tons. Russia is third after Australia with about 295 tons produced last year. Overall, the countries make up 25 percent of the world gold production.

At the same time, the central banks of Russia and China are the world’s biggest gold buyers. Since the end of 2008 the gold reserves of China have nearly tripled – from 600 to 1,762 tons.

The Central Bank of Russia bought 356,000 ounces of gold in February becoming the largest buyer of the precious metal among the world’s central banks, business daily Vedomosti reported, quoting IMF data. Russia currently has 1,415 tons of gold.

Among the countries with the largest gold reserves, China is fifth and Russia is sixth after the US, Germany, Italy and France.