Tuesday, February 10, 2009

Daily Sources 2/10

1. Tony Barber at the Financial Times reports that relations between EU member states are fraying given the latest bid for comparative advantage by one of its own--France's 6 billion aid package to its car industry. Mirek Topolanek, Czech prime minister and current president of the EU, reportedly said:
"If the member states continue to prefer an individualistic and protectionist approach, and if they choose to continue breaking the stability and growth pact rules, then there is a big danger of watering down the whole project."
Sarkozy had also called on French car makers to shut manufacturing plants in Eastern Europe and step up production at home. Worth reading in full. Eurointelligence reports that Le Monde has an article on Franco-German maneuvering at the Munich conference:
"... Merkel and Sarkozy met to discuss the crisis, and agreed, with Topolanek, to hold a crisis summit at the end of the month. The German apparently believe that the worst of the crisis will not come until the autumn (which is when they hold federal elections!), while the French are relatively more optimistic, believing that the crisis will end in the summer. Mr Sarkozy still favours a euro area head of government meeting, which Merkel strictly rejects. She does not want to come under pressure to authorise fiscal transfers as she heads into an election campaign. The article also says that Paris believes that the recession will be followed by a strong recovery with an upsurge in inflation, and that Paris wants the ECB to tolerate that increase in inflation, which is not acceptable for Germany."
2. Lukanyo Mnyanda at Bloomberg reports that French industrial production fell by 1.8% in December from November. In Italy, industrial production fell by 2.5% in December from November.

3. Alan Cowell at the New York Times reports that president Sarkozy of France made an unannounced visit to Baghdad today, as part of a trip to the Middle East which includes Oman, Bahrain and Kuwait.
"'We say to French companies that the time has come to return to Iraq,' Mr. Sarkozy told a news conference, according to Reuters."
4. Thomas Erdbrink at the Washington Post reports that Iranian president Mahmoud Ahmadinejad told a crowd celebrating the revolution's 30 year anniversary that
"The new US government has announced that it wants to create change and follow the path of talks. ... These talks should be held in a fair atmosphere in which there is mutual respect."
("Mutual respect" is a motif of Iranian rhetoric vis a vis the US, right up there with "Death to America.") That said, the language suggests that Tehran is open to the notion of direct talks, which is obviously in the interests of both nations. Erdbrink quotes Mohammad Marandi, head of the North American studies department at the University of Tehran, as saying,
"Iran can help the US in Iraq, Afghanistan. Pakistan is unraveling, Iran also wants security and stability in those nations. The fact that they now work separately makes it impossible to get things done."
The implication is that Iran is already trying to help stabilize the situation in both of its neighbors, but the lack of coordination and mutual suspicion is an unbridgeable complication. Though the Iranians publicly suggest that the US can gain more from them than the reverse, clearly serious instability in two neighboring countries is a much more pressing concern for Tehran than Washington, DC. The direct exposure to the mercy of events as they unfold in one is about to be seriously limited. So time is likely tight in the Iranian calculation, given a strong inclination by the current administration to unwind our military engagement in the region as quickly as possible. That said, as I have pointed out in a long analysis in April (Law and Revolution in Iran), the government's raison d'etre is that it represents a rebellion against colonial influences, for which you can read the US. Or, in the words of Ayatollah Ahmad Jannati, head of the Guardian Council:
"If pro-American tendencies come to power in Iran we have to say goodbye to everything. After all, anti-Americanism is among the main features of our Islamic state."
The Guardian Council is an assembly of twelve clerics and jurists appointed by the Supreme Leader who have the power to vet laws and election candidates.

5. Shimon Peres, the president of Israel, has an opinion piece in the Washington Post which rejects a single state solution, establishing that a two state solution is the only politically acceptable outcome for Israel. Peres argues that it is not only the only feasible solution, but also "within reach."
"The one-state solution has enough intrinsic flaws to render it no solution at all. From Israel's perspective, it is not possible for the Jewish people to accept an arrangement that signifies the end of the existence of a Jewish state. From the Palestinians' perspective, they should not be denied the opportunity to take their national destiny into their own hands."
Peres refers to Gaddafi's op ed in the Post on January 22 advocating a single state solution, or Isratine (see Daily Sources 1/22 #7), and, although he rejects the solution proffered, does welcome Gaddafi's premise that the Jews deserve a homeland. Worth reading in full.

6. Rama Lakshmi and Shaiq Hussain at the Washington Post report that the Pakistani cabinet's defense committee yesterday registered the Mumbai attacks as a crime with the police, but released a statement saying that, "without substantial evidence from India it will be exceedingly difficult to complete the investigation and proceed with the case." The defense committee also signaled that Islamabad has rejected New Delhi's demand that the suspects be extradited to India.

7. Bettina Wassener at the New York Times reports that Temasek Holdings, Singapore's sovereign wealth fund, announced today that the total value of its investment portfolio fell by 31%, or about $39 billion, between March and November last year. "Temasek’s portfolio was worth 127 billion Singapore dollars, or $85 billion, at the end of November."

8. Allan Cullison at the Wall Street Journal yesterday reported that the IMF is likely to suspend payments to Ukraine as Kiev is failing to meet the terms of the agreement.
"Faced with a cash shortage, Kiev is passing the hat around to global powers. Talks were held in Moscow last week over a $5 billion loan to help plug Ukraine's budget deficit.

Ukraine Prime Minister Yulia Tymoshenko said her government also sent letters to the US, European Union, China and Japan, and that 'Russia is ready to help with the credit agreement's signing.'

President Viktor Yushchenko criticized the talks with Moscow. 'It's a dangerous policy and poses a threat to Ukraine's national interests,' he said."
9. Steven Bodzin at Bloomberg reports that US refiner NuStar Energy LP told the media that PdVSA has canceled shipments of 1.2 million barrels of Boscan crude to its Texas refinery in February and March so as to comply with OPEC imposed supply cuts.
"Venezuela said it has cut daily output by 364,000 barrels since September to 3.01 million barrels, putting it in full compliance with the OPEC cuts. Bloomberg estimates that Venezuela reduced output by 210,000 barrels a day in the period to 2.15 million barrels. "
Boscan is an extremely heavy and sour crude with an APIº10.1 (just APIº0.1 lighter than water) and 5.4% sulfur by weight requiring very complicated refineries to produce profitable cuts of more expensive petroleum products.

10. Mark Shenk at Bloomberg reports that the EIA reduced its forecast of global oil demand to 84.7 mb/d for 2009, down 1.17 mb/d from projected global demand for 2008.

11. The University of Maryland's Program on International Policy Attitudes released the findings of a survey of perceptions of countries worldwide on February 5.

"Public opinion in Russia relative to public opinion in Europe and the US seems to be polarizing. Americans and Europeans have both grown more negative toward Russia, and Russians have become more negative toward the US, the EU, and less positive toward Germany and the UK (but not France). Russia's military action against Georgia and increasing limitations on civil rights may be affecting American and European attitudes, and US and European criticism of Russia may be affecting Russian attitudes. [Note that the polling was done before Russia's cut-off of natural gas supplies to Ukraine and parts of Europe.]

To some extent this polarizing trend seems to be appearing in relations between China and the West as well. Europeans have become more negative toward China, while the Chinese have become more negative toward the US (negative views have risen from 46% to 58%), the EU (16% to 28%), and France (positive views dropped from 64% to 44%--perhaps in reaction to French demonstrations regarding the Tibet issue).

However, Chinese views of the UK have grown more positive (rising from 56% to 67%), as have views of Germany (58% to 65%). And Americans have not grown more negative toward China, with negative views essentially unchanged at 52 per cent.

The US for the first time since 2005 has surpassed Russia in positive ratings (an average of 40% for the US as compared to 30% for Russia), but their negative ratings are similar as are the number of countries giving them predominantly positive or negative ratings."
Long, but well worth reading.

12. William Branigin and Michael D. Shear at the Washington Post report that the US Senate passed a $819 billion economic stimulus bill. $819 billion is 5.7% of 2008 GDP (of $14.264 trillion.) The vote was 61 to 37, with GOP Senators Susan Collins (ME), Olympia Snow (ME), and Arlen Specter (PA) joining with Democrats and Independents to pass the measure. Meanwhile, Edmund L. Andrews and Stephen Labaton at the New York Time report on Secretary Geithner's outline of a new plan to marshal as much as $2 trillion in public, Federal Reserve, and private funds in defense of the financial sector's stability.

13. Rebecca Wilder at News N Economics reports that spreads on non-financial commercial paper are returning to normal.
"The spread is returning to normal levels, indicating that investor confidence is returning - at least in nonfinancial paper. This is a good thing, especially since the Fed has unwound 22% of its holding of commercial paper since 1/14/09, when it held $334.6 billion of the commercial paper market."
14. Joe Carroll at Bloomberg has a useful article on why charter rates for deepwater drilling rigs have not been particularly hit by the financial crisis or the current glut of crude. The upshot is that it is punitively expensive to simply cancel an ongoing charter and it will take some time for contracts already in place to unwind.
"All of Transocean’s most-sophisticated rigs are booked until at least mid 2010, with some committed through November 2016. The company had a $41.1 billion backlog of orders as of Sept. 30."
Anadarko indicated that it could make a 10% profit on deepwater fields when oil is at $30/b.

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