Squaring circles: EU and Britain plot next Brexit chapter

People pass a Union flag flying on the Houses of Parliament in London. Britain and the EU have reached a historic deal on Brexit divorce terms, but Brussels swiftly warned that even harder talks lie ahead on a future relationship after the split. (AFP)
Updated 10 December 2017

Squaring circles: EU and Britain plot next Brexit chapter

BRUSSELS: The European Commission and the British government let out an audible sigh of relief on reaching Friday’s historic Brexit divorce terms deal.
Yet numerous questions remain on the future trade relationship between the EU 27 and the bloc’s departing member as the discussions now move on to a new phase at a Dec. 14-15 Brussels summit.
The EU’s chief Brexit negotiator Michel Barnier warned “there is still work to be done” to “consolidate” the progress made to date.
The preamble to the 15-page divorce deal published after British Prime Minister Theresa May’s morning dash for talks with European Commission President Jean-Claude Juncker illustrates the still precarious nature of the deal.
“Under the caveat that nothing is agreed until everything is agreed, the joint commitments set out below in this joint report shall be reflected in the Withdrawal Agreement in full detail,” said the introduction to the text.
The conclusion notes that the deal is conditional on “an overall agreement under Article 50 on the UK’s withdrawal, taking into account the framework for the future relationship, including an agreement as early as possible in 2018 on transitional arrangements.”
Even Friday’s deal itself leaves elements open to question surrounding the thorny issue of the Irish border post-Brexit, along with the size of Britain’s divorce bill and the protection of expats’ rights.
The deal is clear on guaranteeing the post-Brexit rights of Britons already living in the bloc and of their EU counterparts based in Britain with family members able to claim residence.
But there is no mention, for example, of future spouses.
“We demand before we can give green light to the withdrawal agreement, that ... the future free movement and residence of UK citizens will also be guaranteed and this in all 27 Member States,” said Guy Verhofstadt, leader of the liberals group in the European Parliament.
It is not yet clear if British expats will be able to retain their full current rights when they move to another EU country.
Regarding citizens rights, the divorce bill text indicates Britain will bring forward a bill to incorporate them into UK law.
On adoption, the bill’s provisions in relation to citizens’ rights “will prevail over inconsistent or incompatible legislation, unless Parliament expressly repeals this Act in future.”
But it is not clear what will happen if Westminster actually one day repeals the bill.
“Any change by UK parliament to citizens’ rights will be very visible and can only happen via express repeal of treaty,” was how Stefaan de Rynck, a member of the EU negotiating team, commented on Twitter.
There are also elements of ambiguity as to the exact size of the divorce bill, despite the methodology having been agreed to determine how deep Britain must delve into its pockets.
“We cannot calculate exactly the sums in question — all these figures will fluctuate,” said Barnier, although unofficial EU estimations are in the order of €60 billion ($70 billion).
Britain puts the sum at between €40 and €45 billion, though that does not include items such as an EU-guaranteed loan for Ukraine, which could generate costs for all current EU members — Britain included.
Then there is the issue of the border between Northern Ireland and the Republic of Ireland, which almost scuppered the deal over concerns in the North that Britain was headed for a deal entailing a “hard” border separating the former from the rest of the UK.
In the agreement, the UK said it “remains committed to protecting North-South cooperation and to its guarantee of avoiding a hard border” between the two.
Britain said if that was not possible, it would propose “specific solutions to address the unique circumstances of the island of Ireland,” including alignment with the Internal Market and the Customs Union rules, while respecting the terms of the Northern Ireland peace agreement.
EU President Donald Tusk has already warned that “the most difficult challenge is still ahead.”
And Jonathan Powell, chief of staff to former British prime minister Tony Blair, suggests squaring the circle may prove a tall order.
“The language on ‘full alignment’ means different things to different people,” Powell told the Financial Times.
“A series of contradictory undertakings have been given and a new separate strand of negotiation on Ireland opened in the next stage.”
— Reuters

China tariff threat could be a boon for Gulf oil exports

Updated 18 June 2018

China tariff threat could be a boon for Gulf oil exports

  • Tariffs proposed for crude oil, coal and other energy projects.
  • China is the largest Asian customer for US crude.

LONDON: Gulf oil producers may benefit from China’s threat to impose import tariffs on US crude and other energy products, as key exporters meet to discuss production increases later this week.

China, one of the largest buyers of US crude oil surprised many late last week when it announced plans to tax such imports, as part of retaliatory measures following the decision by US President Donald Trump to impose $50 billion worth of tariffs on a variety of US goods.

The announcement comes as China looks for a different oil supply mix ahead of likely reductions in its imports from Venezuela and Iran.

Carsten Fritsch, a commodities analyst with Commerzbank, said that while China’s reduction of imports of Iranian crude should not be overestimated, the decline of production from Venezuela left the country with no choice but to seek alternative sources of oil.

“The US could could have been an alternative supplier but of course that won’t be the case if a 25 percent import tariff comes into effect,” Fritsch told Arab News.

“Some of the Arabian Gulf countries might have an advantage in plugging the gap, given the similarity of the crude types, and the same shipping lanes that would be used.”

China is currently the largest Asian customer for US crude; imports rose to 3.89 million metric tons in the first quarter of the year, compared with just 443,000 metric tons for the year ago period, according to figures from S&P Global Platts, with the US’s market share rising to 3.5 percent at the end of March.

American crude has proved competitive for China; the US benchmark WTI averaged a $1.83 per barrel discount to oil from the North Sea Forties on a delivered basis into China in May, and a 74 cents per barrel discount to Abu Dhabi’s Murban crude, according to S&P Global Platts calculations.

But China is likely to find it easier to replace US crude imports than US producers will to get new customers, according to Thomson Reuters commentator Clyde Russell.

“It’s not hard to imagine a scenario in which China encourages Saudi Arabia and Russia, the world’s top oil exporters and partners in the agreement to restrict output, to pump more crude,” said Russell yesterday.

“China would then buy the additional Saudi and Russian output, using it to replace cargoes from the US, and even from Iran, assuming the renewed US sanctions against Iran force Beijing to curtail imports.”

The prospect of restrictions on US oil come ahead of a meeting of OPEC and other oil producers in Vienna later this week, with an increase in oil production seen as increasingly likely following the eradication of oversupply and the recovery of prices.

Oil prices were up around 1.5 percent yesterday afternoon, on reports from Bloomberg that producers were considering increasing output by between 300-600,000 barrels per day, compared with a 1.5 million barrel per day initially sought by Russia.

In addition to tariffs on oil, China has also threatened imports on other energy sources, notably coal, in a bid to hurt Trump politically as well as economically.

“Coal miners count among Trump’s most vocal backers, but if China does stop buying US coking coal, it may force producers to accept lower prices from other buyers in order to move cargoes,” said Russell.

“The Chinese have probably calculated that they can take the pain from a trade conflict longer than Trump can, or at least longer than the US. economy, companies and workers will be prepared to tolerate.”