Gulf states follow US rate rise at risk of hitting borrowing

The UAE central bank raised its benchmark short-term borrowing rate to 1.5 percent. (Reuters)
Updated 14 December 2017
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Gulf states follow US rate rise at risk of hitting borrowing

DUBAI: The Gulf’s dollar-pegged economies have followed a US interest rate hike to maintain the value of their currencies but at the risk of denting efforts to stimulate their flagging economies.
Saudi Arabia, the UAE, Qatar and Bahrain all raised their key benchmark interest rates by 25 basis points after the move by the US Federal Reserve late on Wednesday.
Only Kuwait, whose dinar is pegged to a broader basket of currencies, held out, as it battles to boost its economy which is forecast by the International Monetary Fund to shrink by 2.1 percent this year.
The Saudi central bank said it was raising one of its benchmark rates to 1.5 percent although that was counterbalanced by a government announcement of $19.2 billion in stimulus funds for the private sector.
The kingdom reported a negative inflation rate in October and economic forecasts say the region’s largest economy is likely to shrink this year.
The UAE central bank raised its benchmark short-term borrowing rate to 1.5 percent while Bahrain raised its key rate to 1.75 percent and Qatar raised its to 2.5 percent.
The Kuwaiti central bank kept its main discount rate at 2.75 percent. There was no immediate word from Oman.
Raising interest rates is a tool normally used to cool heating economies and check inflation but the Gulf states are suffering from the reverse problem — economic contraction and deflation.
Gulf oil exporters have been hit hard by the slump in world prices for crude, which provided a major part of their finances.
Huge budget deficits have forced them to cut public spending and seek to restructure their economies away from oil.
They have all been keen to boost lending to expand their private sectors.


Eni issues fraud complaint over suspect Iraqi shipment

Updated 18 July 2019
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Eni issues fraud complaint over suspect Iraqi shipment

  • Italian oil multinational asks if rejected tanker cargo contained Iranian crude targeted by US sanctions

LONDON: Eni has filed a fraud complaint against its former head of oil trading over a suspect Iraqi crude oil shipment, amid concerns inside the Italian oil major that the failed delivery may have included Iranian crude targeted by US sanctions.

In the filing to the Milan prosecutor’s office, Eni accused its former head of trading and operations, Alessandro Des Dorides, of misleading all parties to the deal and hiding the role of a small Italian oil trading firm, Napag.

Two other senior employees were either demoted or suspended as a result of the failed shipment, sources said.

Eni said it had suspended dealings with Napag in February over a separate investigation by Milan prosecutors into suspected obstruction of justice by members of Eni’s former legal team.

Eni said that it fired Des Dorides at the end of May, after he had been in his job about six months, for what it said was an unrelated petrochemical deal with Napag in 2018.

Napag did not respond to an emailed request for comment or answer phone calls.

Des Dorides did not respond to several requests for comment from Reuters via email or LinkedIn. Reuters could not locate legal representation for him.

Eni also declined to comment. Eni said it “does not comment on ongoing investigations and internal due processes.”

The crude arrived aboard the White Moon tanker at the end of May for offloading at the Milazzo refinery in Sicily, which is part-owned by Eni. The Italian oil major, which produces oil in Iraq and is a regular buyer of Iraqi crude, was solely responsible for the cargo.

However, Eni said it rejected the delivery because it did not match the Iraqi Basra Light crude it expected from its counterparty, the Dubai-based trading arm of Nigerian firm Oando.

After sitting offshore for three weeks, the White Moon sailed back to the Gulf. The tanker manager did not respond to a request for comment.

Two sources at Eni said the White Moon’s 1 million barrel cargo created panic within the company over fears the crude could be, at least partially, Iranian.

Handling Iranian oil would have breached sanctions the US reimposed or extended last year after quitting a nuclear deal between Iran and world powers.

Washington aims to reduce Iran’s exports to zero and force the Islamic Republic to renegotiate that nuclear deal, curb its missile program and modify its behavior in the Middle East.

Iran has called on other parties to the accord to shield it from the effects of US sanctions and has sought to circumvent US restrictions by selling more of its oil undercover.

Following the rejection of the White Moon shipment in June, the head of the Italian Senate Industry Committee wrote to Eni Chief Executive Claudio Descalzi to clarify the origin of an oil cargo labelled as coming from Iraq, the head of the committee said.

The head of the committee declined to comment to Reuters on the oil’s possible origins.

Eni said it bought the crude from Nigerian firm Oando, who in turn bought the oil from the London branch of Italy’s Napag.

Oando said it took back the cargo from Eni, but declined to comment further on the origins of the cargo as it was “in the middle of a resolution” over the rejected oil. Oando said the terms of the deal were “normal for the trading industry.”

Italian prosecutors cannot legally comment on any investigation unless there is an exceptional circumstance.

Trading sources familiar with the deal said the offer terms for the crude should have raised alarms internally even before its arrival off Sicily. The offer was at a significant discount to typical Iraqi trades, was paid for in euros and was from a firm that is new to the region, they said. Physical oil is commonly traded in dollars.

Eni said that the mismatch in the crude’s chemical composition “coupled with other red flags led to the decision to terminate the transaction.”

The oil loaded onto the White Moon came via two ship-to-ship transfers that makes the origin harder to track, sources said.

The crude bought from Oando was loaded onto the White Moon from another vessel, the New Prosperity, but that vessel itself had been loaded with oil from a third tanker, the Abyss.

The Abyss makes regular voyages through the Mideast Gulf with its transponder switched off for days at a time, according to Refinitiv Eikon ship tracking. The transponder was switched off between April 24 and May 3 when it transferred oil to the New Prosperity.