Plans for Russia-Iran wheat deal stall over financing stalemate

Harvest time in Siberia. (Reuters)
Updated 09 September 2018
0

Plans for Russia-Iran wheat deal stall over financing stalemate

MOSCOW: Plans for a deal under which Russia and Kazakhstan are to supply wheat to Iran have stalled as “no progress” has been made in its financing, the secretary general of the Iran Federation of Food Industry Associations said.

Talks on the deal began six months ago. It would see Russia and Kazakhstan supplying wheat to Iranian flour millers, who in turn would supply flour to Iraq — a market dominated by Turkey.

“The Iranian side had its condition – if you would like to realize such agreement, you need to finance it. There has been no progress in this process so far,” Kaveh Zargaran told Reuters on the sidelines of a grains conference in Moscow this week.

Under the deal, Russia would supply around 100,000 tons of wheat per month to Iranian private millers, who are not allowed to use domestic wheat for flour exports.

Iran was one of the largest markets for Russian wheat until it slashed purchases in 2016 amid Tehran’s self-sufficiency drive.

According to Zargaran, Brazil has recently suggested a credit line of $1.2 billion for trade development with Iran, and “Russia also can do the same for Iran as financing is very common in the world.” 

Iran’s currency has lost about two-thirds of its value this year, hitting a record low earlier this week of 150,000 rial to the dollar. Its already weak economy, troubled by difficulties at local banks, has been hit by the reimposition of US sanctions.

“We have agreed with many countries to continue our banking relationship,” Zargaran said when asked if banking channels will remain open for Iran, including its humanitarian needs if any, after early November.

“We all have very good friends in the region, which are also under sanctions – Iran, Turkey and Russia,” he added.


Saudi Arabia, four other Gulf states to enter key JP Morgan bond indexes

Updated 26 September 2018
0

Saudi Arabia, four other Gulf states to enter key JP Morgan bond indexes

  • The indexes are key performance benchmarks for international investors in emerging market debt
  • Membership in them can help a country sell bonds and reduce its borrowing costs

DUBAI: Saudi Arabia and four other Gulf states will enter JP Morgan’s emerging market government bond indexes next year, a move likely to lure billions of dollars of new foreign investment into their debt, according to a JP Morgan statement sent to investors.
The indexes are key performance benchmarks for international investors in emerging market debt, so membership in them can help a country sell bonds and reduce its borrowing costs.
Sovereign and quasi-sovereign debt issuers from Saudi Arabia, Qatar, the United Arab Emirates, Bahrain and Kuwait will become eligible for the EMBI Global Diversified (EMBIGD), EMBI Global (EMBIG) and EURO-EMBIG indexes, according to the statement, which was seen by Reuters on Wednesday.
Their entry will be phased in between Jan. 31 and Sept. 30. Both conventional bonds and sukuk, or Islamic bonds, will be eligible for inclusion in indexes, but sukuk will need to have a credit rating from at least one of the three major rating agencies to be included.
JP Morgan’s decision follows a surge of debt issuance from the Gulf Arab region in the past few years, as low oil prices force most countries to fund part of their state spending in the international debt markets.
Saudi Arabia, Bahrain, Kuwait, Oman and Qatar have issued a quarter of all new debt sold by emerging market countries in each of the last three years.
The inclusion of Gulf Cooperation Council countries in the indexes will leave them representing around 11.2 percent of JP Morgan’s EMBI Global Diversified and EMBI Global series, the statement said.
“It is estimated that around $360 billion of assets under management are benchmarked against the EMBIG family, with the EMBIG diversified at around $300 billion,” said Zeina Rizk, director of fixed income asset management at Arqaam Capital in Dubai.
Rizk estimated this would translate into about $30 billion of inflows into the five countries’ debt.
“Those inflows are not going to come on day one, but the tailwind resulting from the inclusion headline, coupled with pegged currencies, strong oil prices, a relative immunity from trade wars and high credit quality, leads us to the view that the GCC has better value than the rest of emerging markets.”
The minimum size for inclusion in the indexes is $500 million, and during the inclusion process, instruments will need to have a maturity date beyond March 2022, the statement said.