Putin bans Russian oil exports to countries that impose price cap

Putin bans Russian oil exports to countries that impose price cap
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Updated 27 December 2022

Putin bans Russian oil exports to countries that impose price cap

Putin bans Russian oil exports to countries that impose price cap
  • G7, EU, and Australia agreed this month to a $60-per-barrel price cap on Russian seaborne crude oil effective from Dec. 5

MOSCOW: President Vladimir Putin on Tuesday delivered Russia’s long-awaited response to a Western price cap, signing a decree that bans the supply of crude oil and oil products from Feb. 1 for five months to nations that abide by the cap.
The Group of Seven major powers, the European Union and Australia agreed this month to a $60-per-barrel price cap on Russian seaborne crude oil effective from Dec. 5 over Moscow’s “special military operation” in Ukraine.
The cap is close to the current price for Russian oil, but well beneath the windfall price Russia was able to sell for this year and that helped offset the impact of financial sanctions on Moscow.
Russia is the world’s second largest oil exporter after Saudi Arabia, and a major disruption to its sales would have far reaching consequences for global energy supplies.
The decree, published on a government portal and the Kremlin website, was presented as a direct response to “actions that are unfriendly and contradictory to international law by the United States and foreign states and international organizations joining them.”
“Deliveries of Russian oil and oil products to foreign entities and individuals are banned, on the condition that in the contracts for these supplies, the use of a maximum price fixing mechanism is directly or indirectly envisaged,” the decree stated, referring specifically to the United States and other foreign states that have imposed the price cap.
“The established ban applies to all stages of supply up to the end buyer.”
The decree, which includes a clause that allows for Putin to overrule the ban in special cases, stated: “This...comes into force on Feb. 1, 2023, and applies until July 1, 2023.”
Crude oil exports will be banned from Feb. 1, but the date for the oil products ban will be determined by the Russian government and could be after Feb. 1.
Wider deficit
The price cap, unseen even in the times of the Cold War between the West and the Soviet Union, is aimed at crippling Russian state coffers and Moscow’s military efforts in Ukraine.
Some analysts have said that the cap will have little immediate impact on the oil revenues that Moscow is currently earning.
However, Finance Minister Anton Siluanov said on Tuesday that Russia’s budget deficit could be wider than the planned 2 percent of GDP in 2023, with the oil price cap squeezing export income, an extra fiscal hurdle for Moscow as it spends heavily on its military campaign in Ukraine.
Russia has been promising to respond officially for weeks, and the eventual decree largely established what officials had already said publicly.
The G7 price cap allows non-EU countries to continue importing seaborne Russian crude oil, but it will prohibit shipping, insurance and re-insurance companies from handling cargoes of Russian crude around the globe, unless it is being sold for less than the price cap.
EU countries have separately implemented an embargo that prohibits them from purchasing seaborne Russian oil.
Russian Urals oil traded above $56 per barrel on Tuesday, below the price cap level.
Brent crude oil moved a little higher on the news and was up 1.4 percent at $85.1 by 1743 GMT.

‘Place the burden’ on wealthy segments of society, IMF tells Pakistan

‘Place the burden’ on wealthy segments of society, IMF tells Pakistan
Updated 14 sec ago

‘Place the burden’ on wealthy segments of society, IMF tells Pakistan

‘Place the burden’ on wealthy segments of society, IMF tells Pakistan
  • Pakistan and IMF struck $3 billion bailout deal earlier this year
  • Reforms linked to bailout have already fueled annual inflation

KARACHI: Pakistan needs to “place the burden” on wealthy segments of society and ensure that the rich pay taxes and the poor are protected, an IMF spokeswoman said in a press briefing on Thursday.

The International Monetary Fund and Pakistan struck a staff-level agreement for the provision on $3 billion in bailout funds under a stand-by arrangement (SBA) earlier this year, giving the South Asian economy a much-awaited respite as it teetered on the brink of default.

Reforms linked to the bailout, including an easing of import restrictions and a demand that subsidies be removed, have already fueled annual inflation, which rose to a record 38.0 percent in May. Interest rates have also risen, and the rupee hit all-time lows. Last month the currency fell 6.2 percent though it has sharply recovered in September amid a crackdown on illegal foreign exchange trade in grey and black markets by security agencies.

The August data from Pakistan’s statistics bureau showed a slight easing from July’s 28.3 percent inflation rate, but food inflation remained elevated at 38.5 percent.

“Place the burden on the wealthy segments of society. It’s important … that the rich pay their taxes, tax to GDP ratio in Pakistan is very, very low and that the poor are protected in society. The poor and the vulnerable members of society are protected,” IMF spokeswoman Julie Kozack told reporters in Washington, when asked about IMF reforms linked to the bailout.

She said the objectives of the program were to “provide a policy anchor” to Pakistan to address domestic and external imbalances and a framework for financial support from other donors, multilateral and bilateral partners, including fresh financing and rollovers of debt coming due.

“Policy efforts center on the implementation of the fiscal year 2024 budget, appropriate monetary policy aimed at bringing inflation down, and continued reforms to improve the viability of the energy sector,” Kozack said.

“All of these reforms are ultimately aimed at paving the way for higher, more inclusive and more resilient growth. To support social development and climate resilience, the program envisages plans to strengthen public financial management, tax administration efforts, and to better prioritize public investment. And all of this is being done with support from partners including not only the IMF but also the World Bank and the Asian Development Bank.”

FX clampdown boosts Pakistani rupee 6.1 percent to become September’s top currency

FX clampdown boosts Pakistani rupee 6.1 percent to become September’s top currency
Updated 6 min 50 sec ago

FX clampdown boosts Pakistani rupee 6.1 percent to become September’s top currency

FX clampdown boosts Pakistani rupee 6.1 percent to become September’s top currency
  • September’s gains have almost made up for all of the rupee’s losses in August
  • Gains technically make rupee the best-performing currency in the world this month

KARACHI: Pakistan’s rupee has gained 6.1 percent against the dollar so far in September, following an official clampdown on illegal foreign exchange trade in grey and black markets by security agencies.

September’s gains have almost made up for all of the rupee’s losses in August and technically make it the best-performing currency in the world this month. The rupee hit a record low of 307.1 against the dollar on Sept. 5 but has made a sharp recovery since the country’s financial regulator and security agencies began taking action the next day to curb black market operations.

The Pakistani rupee closed 0.3 percent up in the interbank market at 287.8 per dollar on Thursday.

The crackdown on black market operators against the informal market resulted in tens of millions of dollars pouring back into Pakistan’s interbank and open markets, dealers said.

“The government’s stern administrative action against the unlawful foreign exchange dealers and hoarders in commodity markets is stabilizing the exchange rate, providing a respite to the imported inflation and easing out commodity prices,” the Finance Ministry said in its monthly report.

“The rupee has indeed performed well but this data does not reflect the sharp depreciation preceding this performance. Pakistan’s currency has been one of the worst-performing in recent years,” said Fahad Rauf, Head of Research at Ismail Iqbal Securities.

A market-determined exchange rate is a key condition for Pakistan receiving a $3 billion bailout loan from the International Monetary Fund (IMF) that was agreed in July to help avert a sovereign default.

Rauf added that the recent performance of the rupee is more of a recovery than an actual out-performance. He said the reserves situation is still far from comfortable.

On Thursday, Pakistan’s reserves clocked in at $7.637 billion, enough for less than two months’ worth of imports.

The report added that inflation is anticipated to remain high in the coming month, hovering around 29-31 percent due to an upward adjustment in energy tariffs and a major increase in fuel prices.

Lucid marks green milestone as it opens first global facility in Jeddah

Lucid marks green milestone as it opens first global facility in Jeddah
Updated 28 September 2023

Lucid marks green milestone as it opens first global facility in Jeddah

Lucid marks green milestone as it opens first global facility in Jeddah

JEDDAH: Lucid Group celebrated the official opening of its first international car manufacturing facility in Saudi Arabia on Wednesday. Situated in King Abdullah Economic City, the new facility is not only poised to serve the local market but also has its sights set on future exports. 

In an interview with Arab News, Faisal Sultan, vice president and managing director for Middle East at Lucid Group, noted that the facility’s opening marks the start of their production operations and positions them to fulfill their recently signed agreement with the Saudi government.

The agreement involves purchasing up to 100,000 vehicles over a decade, with an initial commitment of 50,000 vehicles and an option for an additional 50,000 over the same period. 

Speaking about why Lucid ventured into electric car manufacturing in a country with a strong oil-based economy, Sultan said that Saudi Arabia was chosen for its strategic location and the ongoing transformative changes taking place within the country. 

“With Vision 2030, Saudi Arabia is transforming from only oil dependency and going into industries, tourism, healthcare, IT, and AI. So, those things all resonate with our policy. We are also in the business of transforming the mode of transportation, the luxury aspects, and trying to get customers to contribute to our sustainability,” he said.   

Sultan added that sustainability is the core policy of Vision 2030. “That was the main reason, but the other reason is the strategic location of KAEC, being on the Red Sea, giving us the opportunity to manufacture cars here, not just for local markets, but in the future to export them out through the Red Sea,” he explained.   

Held at KAEC, the inauguration event had some high-profile participants including Minister of Investment Khalid Al-Falih, Minister of Industry and Mineral Resources Bandar Alkhorayef, and Governor of the Kingdom’s Public Investment Fund Yasir Al-Rumayyan, along with the US Ambassador to the Kingdom, Michael Alan Ratney, and Lucid Group leadership. 

Aligning with green initiative 

Al-Falih highlighted that Lucid Motors’ establishment aligns with Saudi Arabia’s Vision 2030, the Saudi Green Initiative, and the country’s commitment to sustainability and net-zero emissions.  

He noted the global shift towards electric vehicles, emphasizing the importance of preserving the environment. 

“Off all cars sold globally last year, EVs saw a 65 percent increase year on year, compared to a 7 percent decline for internal combustion engine cars. This rapid growth in EV sales is a testament to humanity’s dedication to preserving our planet and ensuring a safer, healthier future for generations to come,” Al-Falih said.   

Furthermore, he added, through the inauguration of this facility, Saudi Arabia sends a message to the world, affirming its commitment to fostering innovation, investing in groundbreaking technologies, and spearheading environmentally sustainable advancements. 

This commitment extends beyond KAEC to NEOM, home to the world’s largest green hydrogen project, and Red Sea Global, where the first off-grid, all-renewable energy system will power operations. 

“We are laying the foundation for a future that prioritizes environmental consciousness right here in our own land,” the minister further added.   

Meanwhile, Sultan recalled Saudi Arabia’s announcement of the SGI, aimed at ensuring that 30 percent of cars sold in the country are EVs, underlining the nation’s belief in the global necessity for such a shift. 

He observed that there is a significant global shift as consumers increasingly embrace electric vehicles.  

“I think for Saudi Arabia to take that bold step and to also start putting the infrastructure and the companies like Lucid being present within the country producing cars will definitely help achieve those goals for the country and also help us create the demand that is really needed to get the electric vehicles on the road,” he said.  

Sultan added that a greater presence of electric vehicles on the road would unquestionably lead to reduced emissions, cleaner air, and a healthier environment for future generations. 

Manufacturing hub 

Al-Falih affirmed that this step would position the Kingdom as a regional manufacturing hub for the broader green economy. He added that Lucid’s presence would serve as a nucleus, unlocking the value chain of the EV industry and giving rise to spin-off effects and additional investment opportunities.   

Lucid’s presence in Saudi Arabia is expected to generate over 4,000 direct jobs, potential exports exceeding $117 billion, and a gross domestic product impact of nearly $50 billion.  

The facility aims to promote homegrown Saudi talent and provide expert skill development training. The company also highlighted that, through an agreement with the Human Resources Development Fund, it anticipates employing hundreds of Saudi nationals in the initial years and ultimately expanding the workforce into the thousands. 

For his part, Alkhorayef said in his speech: “We are quite determined to a complete cluster that will help different downstream and upstream industries, downstream chemical, and metals. We are also resolved to allow Saudi Arabia to become a global player in EVs, batteries, and so on.”   

He added that they are working very closely with Lucid, Ceer, and PIF to ensure Saudi Arabia becomes a hub of innovation.   

The industry minister also underscored that the occasion signifies not only the establishment of the facility but also a demonstration of the genuinely favorable investment environment in Saudi Arabia. 

In his speech, Ratney stated: “This partnership will deliver the world’s most advanced electric vehicles to a global market. It will inspire increased adoption of electric vehicle technologies globally and contribute to the development of the Kingdom’s own human capital.” 

He also emphasized that the timing is perfect for such a partnership, noting, “In fact, Lucid estimates that the first manufacturing plant in Saudi Arabia could generate $3.4 billion in value over the next 15 years, aligning Saudi investment and talent with US engineering, R&D, and manufacturing.” 

Charging stations  

Saudi Arabia is also investing in building a robust charging infrastructure for electric vehicles, with Lucid providing technical knowledge and support for smart charging infrastructure. 

Sultan said that Lucid itself provides its customers with a charger for their home that can actually charge the vehicle within a few hours.   

“But it is only when you are traveling from one city, like Riyadh to Jeddah, you will need to have the public infrastructure charging. So, we want to make sure that our customers have that through the discussions that we have with the government entities and the private sector,” he explained.   

The Lucid executive revealed that they have plans to export outside Saudi Arabia once their facility is fully operational.   

He stated that their strategy had been to export vehicles from Saudi Arabia upon reaching full capacity at manufacturing plant AMP-2, aiming to assemble 150,000 mid-sized platform vehicles.

Sultan mentioned technological partnerships, such as the one with Aston Martin, as part of Lucid’s long-term vision for electric mobility in Saudi Arabia.   

“We will continue to look for deals like that. I think Lucid technology is something that is very far advanced than some of our competitors. And we want to make sure that this technology is used for the greater humankind’s betterment,” he said.  

Sultan added that their goal is to increase the production of EVs and contribute wherever possible, be it through their own vehicles or technology partnerships, to get more electric cars on the road. 

He concluded by stating that they have already assembled about 51 cars in the new facility and are “ready" for further production. Sultan noted that their current annual production capacity at the assembly plant is 5,000 vehicles, but this capacity will significantly increase once the full complex in Jeddah is completed, reaching a total of 155,000 vehicles. 

Economic durability key to environmental sustainability, Saudi minister tells UN World Tourism Day gathering

Economic durability key to environmental sustainability, Saudi minister tells UN World Tourism Day gathering
Updated 28 September 2023

Economic durability key to environmental sustainability, Saudi minister tells UN World Tourism Day gathering

Economic durability key to environmental sustainability, Saudi minister tells UN World Tourism Day gathering

RIYADH: Environmental sustainability can only be delivered if a country has a strong and stable economy, stated the Saudi minister of investment during a panel discussion at the UN World Tourism Day 2023 event in Riyadh. 

Khalid Al-Falih stressed that his role as minister entails ensuring financial agreements are closely connected to environmentally friendly practices. 

This means investments made “in the fuel of the future” in smart cities and mobility are sustainable, he said, adding that they should “give the tourists a sense of comfort that they are undertaking a journey, a vacation, a holiday and along the way they are benefiting the environment and not harming it.”

He stated that the tourism sector is undergoing a significant definition and development process in the Kingdom, emphasizing that this is relevant to the region and the broader Middle East. 

“With the leadership of (UN World Tourism Organization) Secretary General Zurab (Pololikashvili), Saudi Arabia is helping define the future of tourism in a sustainable way,” Al-Falih noted. 

He added: “It is important that tourism becomes counter and actually helps through the connectivity that we create between institutions, technologies and people.”

These connections are expected to be crucial in promoting eco-friendly practices and outcomes. 

During a roundtable, Pololikashvili discussed the dynamic changes in the Kingdom’s investments, infrastructures, and regulations, opening new opportunities, especially in hosting international events. 

“The country was totally closed to international travelers, and now here you see people coming from Argentina, Chile, Japan, and from all over the world. Almost 20 African ministers are here,” Pololikashvili said. 

He continued: “Nobody could imagine (this) five years ago. So, these are the steps. There’s a longer vision. It’s not only the year 2030. Many more things will happen here.” 

Pololikashvili emphasized that the government and the minister of tourism are striving to increase the number of international visitors, making it their top priority.

Citing data from the International Air Transport Association, Gloria Guevara Manzo, chief special adviser at the Saudi Ministry of Tourism, stated that the Kingdom had 4.5 billion passengers before the pandemic.

“This year, we are going to achieve 94 percent of that, and the reality is going to double,” Manzo continued. 

However, she added: “For that, you need to have the technology, and for that you need to have the cooperation of the government and of course the private sector.” 

Furthermore, in alignment with Vision 2030 objectives, the nation is undergoing a remarkable transformation towards openness, diversity, and sustainability, stated Basmah Al-Mayman,  Middle East regional director at the UNWTO, in an interview with Arab News on the sidelines of the event. 

Al-Mayman noted that this goal serves as a model of inspiration to the world. 

However, she told Arab News: “One main challenge that was facing the tourism sector in the Kingdom was the women working in the sector in our conservative society.” 

Al-Mayman added: “Nowadays, the situation has changed a lot as women have become more visible in the workforce and community, contributing more to the economy and development of the Kingdom. This is creating an outstanding shift in attitudes and behavior that will appeal on an international stage.” 

Moreover, the UN official underscored the importance of establishing a robust institutional framework for the tourism sector through a close collaboration between the public and private sectors. 

This involves creating regulations that define the roles and responsibilities of the private sector within the tourism industry and fostering an environment that encourages investment in travel. 

“In fact, the future of tourism is dependent on building strong partnerships with the private sector. It is now more important than ever to enable and empower the private sector,” she explained. 

Al-Mayman went on to say: “This new framework for collaboration with the private sector and relevant government entities will improve the quality of services in the tourism sector and promote Saudi Arabia as one of the top five global destinations.” 

The two-day event concluded Thursday as CEOs and leaders delivered keynote comments, while panel discussions focused on three UNWTO essential themes: people, planet, and prosperity. 

Saudi Arabia will hand over the chair to Georgia, who will host the event next year.

UAE, Egypt central banks enter into currency swap 

UAE, Egypt central banks enter into currency swap 
Updated 28 September 2023

UAE, Egypt central banks enter into currency swap 

UAE, Egypt central banks enter into currency swap 

RIYADH: Financial trade between the UAE and Egypt is expected to surge after the monetary authorities of the two nations signed a currency swap agreement. 

The countries’ respective central banks formalized an arrangement between the UAE dirham and the Egyptian pound, according to a press statement. 

The deal, signed by Central Bank of the UAE Gov. Khaled Mohamed Balama and his Egyptian counterpart Gov. Hassan Abdullah, allows for the exchange of local currencies between the two institutions with a nominal size of up to 5 billion dirhams ($1.36 billion) and 42 billion Egyptian pounds. 

A currency swap agreement is a legally binding contract between two parties that outlines the terms and conditions under which they will exchange currencies and make periodic interest payments.  

Commenting on the agreement, Balama expressed that it reflects the strong relationship between the countries and provides an opportunity to promote cooperation while developing their respective economic and financial markets. 

“In line with the efforts of the UAE and Egypt’s leadership to collaborate more broadly across multiple areas, the CBUAE is keen to deepen its cooperation with the CBE (Central Bank of Egypt) to achieve common interests, positively impact the trade, investment, and financial sectors, and enhance financial stability,” Balama added. 

Furthermore, Abdullah noted that the move was in support of the “continued robust relations” between the UAE and Egypt.

He added he was confident the move will “bolster cooperation between both financial sectors in their respective currencies.” 

A day before signing the deal, Abdullah met with his Chinese counterpart Pan Gongsheng in Beijing, where the two heads discussed various topics intending to enhance economic and financial cooperation between the countries. 

A currency swap agreement was among the most prominent subjects examined, intending to improve the partnership between nations.

The discussions also included the Egyptian government’s plan to issue panda bonds denominated in Chinese yuan.

Additionally, the officials encouraged Chinese and Egyptian banks to establish a presence in each other’s county to enhance financial integration between economies.