Tuesday, November 11, 2008

Daily Sources 11/11

1. Stephen Castle at the New York Times reports that the European Union announced yesterday that it will resume strategic partnership talks with Russia after having postponed them on August 1st in response to the Georgia crisis. 26 out of 27 Union countries agreed to resume the talks, the dissenter was Lithuania. "Among the issues expected to be discussed when talks resume are energy, trade, and cooperation on security and combating terrorism." French President Sarkozy will meet with Russian President Medvedev on Friday in Nice in preparation for the G20 summit in Washington on Saturday, November 15.

2. Laura Cochrane and Emma O'Brien at Bloomberg report that concerns regarding the weakening of the ruble have driven a steep fall in the Russian stock markets.
"Bank Rossii widened its range on the ruble against a basket of dollars and euros by 30 kopeks (1 cent) to increase the currency's ``flexibility'' and lifted its benchmark refinancing rate to 12 percent from 11 percent to arrest outflows, according to separate statements after the stock market closed. The Micex Index plunged 13 percent, the biggest decline worldwide, and won't open tomorrow, spokeswoman Anna Cheryomushkina said."
Russia has used 19% of its currency reserves since August to stem the flow out of rubles into the dollar and euro. Kremlin officials are concerned that if oil falls below $50/b it will trigger a further collapse in the ruble exchange rate.

3. Anna Shiryaevskaya at Platts reports that "Russia, Qatar and Iran plan to discuss the implementation of the South Pars project at a second round of talks in the Qatari capital Doha on Wednesday, Gazprom said in a statement Tuesday." Difficulty in developing South Pars has perennially dogged Iran's natural gas plans, including decisions as to gas injection into oil fields, exports to Pakistan and India, and power generation. (It was argued recently that if the current plans are not implemented in time that Iran will face a major heating crisis this Winter.)

4. Eric Watkins at the Oil & Gas Journal reports that Turkey's future gas demand is a major obstacle to the planned Nabucco pipeline.
"Nabucco's gas needs appear increasingly to be in conflict with those of its main transit country, Turkey, which also needs to find new sources of gas both to meet increasing demand and to reduce dependence on Russia."
Nabucco would potentially transport 30 billion cubic meters/year through Turkey to Austria, via Bulgaria, Romania and Hungary.
"With a view to securing gas supplies for the line, the EU has already signed agreements with Turkmenistan, Azerbaijan, Kazakhstan, and Ukraine to help develop their reserves. The EU also is eyeing Egypt and Iraq as possible future suppliers."
5. Winnie Lee at Platts reports that Xinhua carried the story Tuesday that on Monday Iraqi Oil Minister Hussein al-Shahristani signed the oil services contract to develop the al-Ahdab oil field with CNPC president Jiang Jiemin. Al-Ahdab is located in the central Wasit province and is expected to produce more than 110 kb/d. Most of the oil is slated for use by the al-Zubaydiya power plant in Wasit; the surplus is slated for export--to China. Production is expected to start in three years time at 25 kb/d and the contract is for 20 years. CNPC will receive 4% of production (4.4 kb/d), but no equity. The field contains 225 million barrels of recoverable reserves.

6. Justin Fox at the Curious Capitalist argues that the markets are discounting the Chinese stimulus plan as mostly more of the same. Infrastructure spending has increased at an average annual rate of 20% over the last 30 years. The question, it seems, is whether the $586 billion will be monies on top of expected infrastructure spending or the total. That and whether Beijing will be able to stimulate consumer spending.

7. Randall W. Forsyth at Barron's argues that the growing yield curve on US Treasuries may be a sign the markets are anticipating a default. The climbing yield curve--which is now as much as 2.5%--is accompanied by increasing cost of insuring against default. That is, CDSs insuring against default on US Treasuries are becoming more expensive. Forsyth calls it unthinkable that the US would default on its debt obligations. However, many state governments in the US defaulted on their debts in the 1830s despite grave warnings, especially from England, as to it ruining American credit-worthiness forever. His article is well-worth reading in its entirety.(h/t Jesse's Café Américain) For a libertarian take on the desirability of default, with which I take issue but still find interesting, see Jeffrey Rogers Hummel's post on the History News Network.

8. Platts reports that MEND is threatening a new oil war--operation "Hurricane Obama"--should the Nigerian Joint Task Force carry out attacks on MEND positions. MEND says it is in possession of plans for such an attack and would respond by targeting
"the oil industry in a way never done before which will in turn make the Nigerian governments 2009 budget projections based on oil revenue an economic disaster."
MEND says it is assured of a "landslide victory."

9. Scott MacLeod has a very interesting post on the response in the Middle East to Obama's selection of Rahm Emmanuel for chief of staff. Emmanuel's father apparently is connected to Irgun Zvai Leumi, one of the terrorist or freedom fighter groups--depending on your point of view--that operated in Palestine during the British mandate. This is obviously contentious material; I would point out that past affiliation with, say, the IRA by an Irish American would not necessarily be an definite indicator of foreign policy positions today. But it would indicate a strong family and emotional tie to the country in question.
"The Arab News in Jeddah, whose editorials are a good reflection of the Arab mainstream, did an astounding somersault on Friday. Just the previous day, the paper hailed the 'symbol of hope and change' in the U.S., saying Obama's historic election 'threatens the cosy Washington consensus. We are, therefore, embarking on exciting times.' After hearing of Emanuel's appointment, the paper headlined its next editorial 'Don't pin much hope on Obama.' Arab expectations, the paper warned, 'are likely to be dashed, generating a great deal of pain and resentment...The new team may turn out to be as pro-Israeli as the one it is replacing.'"
The post, though controversial, is well-worth reading. I think it is plain that the choice of Emmanuel will be reassuring to many Jewish Americans who were worried that Obama's presidency would represent a turning away from Israel--and thus a politically savvy move domestically. However, the story that an Isreali diplomat worried that Emmanuel might be more problematic for Israel given that his familiarity with Hebrew and its history will make it difficult to "pull the wool over his eyes" is likely to raise eyebrows here, given the inference that Israeli diplomats make a habit of pulling the wool over DC's eyes!

In a related post, Tony Karon at Time writes on how Obama's win will affect upcoming elections in Israel, Iran, Iraq, and Afghanistan. Karon argues that Isreali voters might be inclined to swing right towards Netanyahu given fears about a nuclear Iran. On the other hand, he argues that voters in Iran might decide to move leftwards from Ahmadinejad, given that his inflammatory rhetoric would undermine attempts at detente. He also argues that Obama's election, and the commitment to a near term withdrawal, may exacerbate sectarian conflicts in Iraq, because he believes elections tend to stoke division in tribally organized societies. On balance, however, he thinks it would shore up support for al-Maliki, who would be the man who managed the American withdrawal. Worth reading in full.

10. Gareth Porter at The Raw Story reports that:
"The International Atomic Energy Agency (IAEA) has obtained evidence suggesting that documents which have been described as technical studies for a secret Iranian nuclear weapons-related research program may have been fabricated."
If so, the forgery will further undermine the case for confrontation with Iran over its nuclear program. However, it seems to me that American credibility will still be renewed come January 20.

11. Eric Watkins at the Oil & Gas Journal reported yesterday that Daewoo has suspended their exploration effort in the Bay of Bengal under pressure from the Bangladeshi government. Delegations from Mayanmar and Bangladesh are scheduled to meet in Dacca Nov 16-7 to discuss the maritime boundary dispute.

12. John Kingston at the Barrel gives a roster of major hydrocarbon projects that have been postponed in the last few weeks due to the fall in the price of crude. Given flat non-OPEC production capacity additions over the last five years some analysts are worrying about a spike in price by the second half of 2009.

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