Middle East rich are among world’s most generous, report says

On average, wealthy people — those with a net worth of $30 million or more — will donate $29.6 million over the course of their lifetimes. (AFP photo)
Updated 15 December 2016
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Middle East rich are among world’s most generous, report says

DUBAI: Major donations among ultra-high net worth (UHNW) individuals rose to an all-time high last year, growing by 3 percent since 2014, according to a new report on global philanthropy released on Thursday.
On average, UHNW individuals — those with a net worth of $30 million or more — will donate $29.6 million over the course of their lifetimes, with total global UHNW public lifetime giving estimated at $550 billion.
The median gift by major UHNW philanthropists in the Middle East is $5 million, 50 percent higher than in North America, and rising levels of wealth in the region suggest that even larger sums will be directed at positive causes in the coming years.
“Ultra-wealthy individuals in the Middle East give nearly 10 percent of their net worth to philanthropic causes, which does not even account for the substantial Zakat and Sadaqah charitable contributions made anonymously across the region,” said John Hanafin, CEO of Arton Capital in Middle East and North Africa (MENA).
“The trends identified in this report are truly global, with the ultra-wealthy behaving in similar ways whether they are from Shanghai or Zurich or New York, and the Middle Eastern members of this club are no different, which demonstrates the global connectivity of wealth in the modern world.”
His remarks came as the new report — “Changing Philanthropy: Trend Shifts in Ultra Wealthy Giving — revealed that major donors, those UHNW individuals who have donated at least $1 million in their lifetime, are significantly wealthier than their UHNW peers and have an average net worth of nearly $300 million.
The report — commissioned by Arton Capital and produced by Wealth-X — also shows that major donors hold a greater share of their wealth in liquid assets, $85 million on average, and typically donate about half of their cash holdings to charity over a lifetime.
The report focuses on innovations in giving, identifying the trends that are helping to increase the scale of donations and exploring new developments in philanthropy such as impact investing, how “giving back” is becoming integral to the identity of an organization, and analyzing the extent to which the Millennial generation is setting a new philanthropic agenda.
Other findings from the report include:
• Most major donors are self-made – UHNW individuals with self-made fortunes represent nearly 70 percent of major donors and, on average, they are more than twice as wealthy as their UHNW peers.
• Education and health are top causes — education remains by far the most popular philanthropic cause for UHNW individuals, followed by health, with environmental issues increasing in importance.
• Millennials are reshaping philanthropy — the younger generation is ushering in new philanthropic models that combine traditional foundations with profit-making endeavours and social enterprises, and are driving employee-based philanthropy.
• The blurring of corporate and individual philanthropy — UHNW individuals are leveraging the resources at their disposal to maximize their return on giving, aligning the philanthropic strategy of their business with their own personal giving.  
Arton Capital Founder and President Armand Arton said: “At Arton Capital we share the firm belief that the prosperity of one individual, one company, or one nation is interdependent with the prosperity of others.”
He said: “By shifting focus from day-to-day thinking to generation-to-generation planning, wealthy individuals have the power to make a positive impact to some of the world’s most significant challenges.”
The Arton Capital and Wealth-X Philanthropy Report 2016 utilizes Wealth-X’s unique and proprietary UHNW database, the world’s most extensive collection of curated research and intelligence on ultra-high net worth (UNHW) individuals. 
The report also employs the Wealth-X Giving Index, which takes into account participation (the number of gifts made annually) and size (the value of gifts) from the world’s UHNW individuals, based on the Wealth-X UHNW database.


Russian oil industry now self-reliant enough to weather US ‘bill from hell’

Updated 9 min 14 sec ago
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Russian oil industry now self-reliant enough to weather US ‘bill from hell’

  • Western sanctions imposed in 2014 over Russia’s annexation of Crimea have already made it extremely hard for many state oil firms such as Rosneft to borrow abroad
  • Russian gas exporting monopoly Gazprom has maintained its output since 2014 and actually increased exports to Europe to an all-time high in 2017

MOSCOW: Stiff new US sanctions against Russia would only have a limited impact on its oil industry because it has drastically reduced its reliance on Western funding and foreign partnerships and is lessening its dependence on imported technology.
Western sanctions imposed in 2014 over Russia’s annexation of Crimea have already made it extremely hard for many state oil firms such as Rosneft to borrow abroad or use Western technology to develop shale, offshore and Arctic deposits.
While those measures have slowed down a number of challenging oil projects, they have done little to halt the Russian industry’s growth with production near a record high of 11.2 million barrels per day in July — and set to climb further.
Since 2014, the Russian oil industry has effectively halted borrowing from Western institutions, instead relying on its own cash flow and lending from state-owned banks while developing technology to replace services once supplied by Western firms.
Analysts say this is partly why Russian oil stocks have been relatively unscathed since US senators introduced legislation to impose new sanctions on Russia over its interference in US elections and its activities in Syria and Ukraine.
The measures introduced on Aug. 2, dubbed by the senators as the “bill from hell,” include potential curbs on the operations of state-owned Russian banks, restrictions on holding Russian sovereign debt as well as measures against Western involvement in Russian oil and gas projects.
While the rouble has fallen more than 10 percent and Russian banking stocks have slumped 20 percent since the legislation was introduced, shares in Russian oil firms have climbed 2 percent, leaving them 27 percent higher so far in 2018.
“The main driver of the Russian oil industry’s profitability is the oil price denominated in roubles and it is currently posting new records as the rouble is getting weaker. Hence the sanction noise often even has a positive impact on Russian oil stocks,” said Dmitry Marinchenko at Fitch Ratings.

 

The prospects for the latest US sanctions bill are not immediately clear. It would have to pass both the Senate and House of Representatives and then be signed into law by President Donald Trump.
To be sure, Washington could really hurt the Russian oil industry if it introduced Iran-like measures forbidding oil purchases from the country. But given Russia produces more than 11 percent of global crude, such a measure would lead to a major spike in oil prices and hit the US itself hard as it is the world’s largest oil consumer.
Russian gas exporting monopoly Gazprom, for example, has maintained its output since 2014 and actually increased exports to Europe to an all-time high in 2017, securing a 34 percent share of EU markets amid rising demand.
But of all Russian oil and gas companies, it is the only one to have borrowed significant sums from the West — about $5 billion in 2017 and $3 billion in 2018 so far — using Eurobonds and syndicated loans.
What’s more, those amounts are only equivalent to a small proportion of Gazprom’s annual capital spending of $22 billion. The rest of the Russian oil industry invests a similar amount each year as well, mostly without Western funding.
That represents a major departure from the years prior to the sanctions when the lion’s share of Russian oil industry’s borrowing came from Western banks or export-backed facilities with trading houses and major oil companies.
In 2013, for example, a year before the first Western sanctions, Rosneft alone borrowed more than $35 billion from Western institutions to buy smaller rival TNK-BP and to fund its capital spending.
There has been a similar shift in joint ventures between Russian and Western companies.
A decade ago, dozens of projects were planned but the number has shrunk to just a few ventures, which are important but not critical to help Russia maintain its output growth.
US oil giant Exxon Mobil and Italy’s Eni, for example, have dropped plans to help Russia develop offshore fields and US company ConocoPhillips sold out from Russia’s biggest private oil firm Lukoil.
The key remaining ventures involving Western companies are three projects between BP and Rosneft in East and West Siberia and a gas venture between Rosneft and Exxon Mobil on Sakhalin island.
Also on the gas front, Royal Dutch Shell and France’s Total have been considering new liquefied natural gas projects with Gazprom and Novatek, as well as a new pipeline to Europe under the Baltic Sea.
But to put the projects in perspective, the combined cost of all of them is about $50 billion — less than a 10th of the Russian oil industry’s investment program for the next decade.
And if Western institutions are wary of lending to Russia, other countries such as China have been prepared to step in. Novatek and Total, for example, launched the $27 billion Yamal LNG plant this year with Beijing’s financial support.
WEAKEST LINK
The weakest link in the Russian oil industry in the face of sanctions has traditionally been high-end Western technology such as complex drilling, hydraulic fracturing or IT, said Denis Borisov, director of EY’s oil and gas center in Moscow.
Russia’s drilling and oil servicing market is worth about $20 billion a year and the share of the market held by Western service companies has remained fairly steady over the last few years and at about a fifth.
“But the process of replacing foreign equipment with local production has gathered pace,” said Borisov.
Rosneft, which produces 40 percent of Russian oil, has recently tested its own simulated hydraulic fracturing technology — the extraction technique that spurred the boom in US shale oil production.
The technology first came to Russia mainly via major Western oil services firms such as Schlumberger and Halliburton .
Companies such as Schlumberger are still doing a lot of complex drilling work in the Caspian Sea and West Siberia for Lukoil, as well as working on the world’s longest extended reach well for Exxon and Rosneft off the Sakhalin island.
But Fitch’s Marinchenko said the reliance of Russian oil firms on Western technology has declined since 2014 thanks to imports from China and local production of drilling equipment.
Since 2014, Rosneft’s own drilling subsidiary has doubled its market share to 25 percent, meaning the company has become almost self sufficient.
“It is clear that new wide-scale sanctions on technology will not become the start of an end for the Russian oil industry, especially if Europe doesn’t join them,” said Marinchenko. “But it will complicate the development of hard to extract or depleted deposits.”

FACTOID

Ratings agencies, consultants see limited impact from bill / Russian oil firms have reduced borrowing from West / Spending funded by own cash flow, state banks and China / Technology seen as weakest link as dependence significant