Thursday, November 13, 2008

Daily Sources 11/13

1. Nipa Piboontanasawat at Bloomberg reports that industrial production in China rose 8.2% at an annual rate in the month of October. Though that sounds awfully rosy, it appears to be sobering news as no economist predicted that the rate would be that low. It is the smallest gain seen in seven years. Inflation fell to the lowest rate in 17 months. Credit Suisse AG forecast that the economy might expand by 5.8% this quarter, which is way below what analysts estimate is required for political stability because the number of jobs created would be significantly smaller than the number of new entrants into the job market. In a related story, David Philling at the Financial Times points out that statistics emerging from China are not especially trustworthy. Platts reports that Sinopec and PetroChina, China's largest refining firms, are cutting crude throughput in November. The numbers quoted seem rather small in relation to Chinese overall product demand, however.

2. David Jolly at the New York Times reports that the OECD forecast that the developed economies will enter a steep downturn soon. The OECD is a political organization--given that its member states want good news this kind of forecast is especially worrisome. Eurointelligence reports that industrial production was down September 2.4% year over year in the euro area. The decline is the largest seen since 2002. The worst deterioration seen was in Germany at -3.7%.

3. Kate Dourian and Aresu Eqbali at Reuters report that OPEC's Secretary General, Abdalla el-Badri, told the journalists that the organization will meet in Cairo on November 29, well in advance of the originally scheduled meeting in Oran for December 17.

4. Alexander Yershov and Dmitry Zhdannikov at Reuters report that Vladimir Putin has allegedly made it clear to Russian oil producers that they must resume exporting oil. Many companies started selling their crude domestically, as export duties had made international sales unprofitable. This is welcome news in the developed world, though I am guessing it is not driven by the desire to make folks in Brussels and Washington DC more amiable. It does come on the back of the decision by the European Union to resume strategic partnership talks with Moscow yesterday. Perhaps it can be said to represent Russia's determination to leave OPEC with the task of shoring up oil prices. That way, Russia's oil companies gain market share. However, it is more likely that the Kremlin has determined that the oil companies must subsidize the government's effort to weather the financial crisis, even if that means they must operate at a loss for some time. After all, many of them received considerable government aid, in terms of share purchases, last month.

5. In an interesting follow up to the story yesterday on the possible forthcoming Russian, Qatari, and Iranian cooperation in developing South Pars, Dmitry Zhdannikov and Jonathan Gleave at Reuters report that Deputy Prime Minister Alexander Zhukov told Russian news outlets yesterday that Russia was considering taking a 20% stake in Repsol, the private Spanish oil and gas company which was convinced to leaver South Pars under pressure from Washington DC due to fears of Tehran's nuclear program. The story quotes an analyst as suggesting that Gazprom might not be an especially welcome bidder in Madrid. Sarkozy's notion of using European sovereign wealth funds to defend strategic companies may find another taker in Spain going forward.

6. Hashem Kalantari reports that Iranian Oil Minister Gholamhossein Nozari signed a contract for natural gas imports with Turkmenistan today. FGE Energy recently argued that South Pars phases 9-10 needed to be completed this December if the country was to avoid a heating crisis this Winter. It appears this potential difficulty has been obviated.

7. Thomas Erdbrink at the Washington Post reports that Iranian political and military leaders are now sounding wary of talks with Washington now that Obama is the President-elect. (Obama has long telegraphed his willingness to talk to various rogue regimes without preconditions.) As I have noted in earlier posts, there are plenty of elements in Iran who would not be served politically by losing America as an enemy. After all, the real title of the "Supreme Leader" in Iran translates as "Leader of the Revolution". The Iranian Revolution was against the Shah, but the Shah was widely regarded by the clerics as a catspaw for the United States--the "Great Satan." That is, the Revolution was a revolution against the United States. Were there to be a detente, the revolution would lose its raison d'etre.

I think that President-elect Obama is right to indicate that the United States will talk to Tehran without preconditions. But I think he ought to indicate that DC is only interested insofar as Tehran feels there is a point in doing so. Washington shouldn't indicate any need for hurry--Iran is a significant force in the Middle East, but hardly an existential threat to the US or any of its interests.

The people molding policy in Iran have a very weak understanding of the United States. For example, key figures there thought that the powers that be "would not allow" Obama to become President of the United States. Their misunderstanding is exacerbated by an exaggerated sense of their importance on the international stage. Iran is absolutely significant and a critical strategic consideration, but leaders there seem somewhat of the opinion that their decisions are driving world events. This has been true since their determination that they essentially rigged the US election for Reagan by holding the hostages until after he was inaugurated. It will be difficult to conduct a productive bilateral discussion as long as this megalomania persists. The US should do nothing to encourage it.

The article is well-worth reading in full.

8. reports that the King of Saudi Arabia, Abdullah Bin Abdulaziz Al Saud has held meetings with Afghani President Karzai and Pakistani President Asif Ali Zardari to discuss solutions to common problems seen on the Afghan-Pakistan border.

9. Dow Jones reports that Chinese aid of about $500 million promised to Pakistan during Zadari's visit to Beijing last week is due to arrive in Islamabad in the next two to three days. Saudi Arabia also just recently guaranteed crude for 6 months to Pakistan. This comes on top of closer ties between China and Riyadh.

10. The Associated Press reports that Sudanese President has offered a ceasefire in Darfur on Wednesday, including an offer to disarm militias operating in the region. Rebels, distrusting Kartoum's intentions, have refused an immediate ceasefire unless a peace framework is agreed upon.

11. Helen Chernikoff and Patrick Rucker at Reuters report that according to a monthly report by RealtyTrac foreclosure filings have risen by 25% annually in the month of October. "That means one in every 452 U.S. housing units received a foreclosure filing in October, the firm said in its report released on Thursday."

12. Candice Zachariahs at Bloomberg reports that Goldman Sachs expects the Yen to rise 6% against the dollar and 4% against the euro in the next three months. It seems that they expect the dollar to claw some of that back in six months, which may be an indication that they expect deflation to hit the US. On the other hand, it may not mean much as the currency markets are extremely volatile just now. At interbank rates the yen has risen 10% against the dollar since August 1st. The euro has lost 19% against the dollar in that time period.

13. The EIA's This Week in Petroleum showed that crude stocks were flat for the week ended November 7 at 311.9 million barrels, somewhat above the historical average. Gasoline stocks rose 2 million barrels, still at the bottom of the historical average. Distillate stocks were up 600,000 barrels, and are at about the historical average. Analysts had expected a 1.2 million barrel build in crude stocks, a 200,000 barrel build in gasoline, and a 700,000 barrel build in distillates. Taken in isolation it's a somewhat mixed bag, though the large gasoline build combined with flat crude stocks suggests that a lot of gasoline is going unsold, which would suggest that crude prices will fall.


Anonymous said...

Your analysis of Iran's reaction to President-elect Obama is very interesting.

freude bud said...

Thank you.

If you are curious I put up a long post on the nature of the Iranian system in April ... "Law and Revolution in Iran" ...

I tend not to put up such detailed analysis any more.