Archive for the ‘Regional News’ Category

Saudi Aramco Oil Facility

Some may have seen recent news reports of Saudi Arabia targeting $100 oil. TradeFlow21 has tweeted (Jan 18th: “Saudi Arabia is not targeting $100 oil.“) a very helpful article on just the subject. Complementing the article, TF21 adds that triple-digit oil prices are not exactly in the Saudi’s or any oil exporting country’s best interest. Reason being is that often times when oil prices are high, they are accompanied by higher prices almost across the board. In volatile times like now, at home in the U.S. and in countries around the world, wages paid to employees that have not kept up with inflation are partially to blame for discontent. Thus, $100-plus oil is not helpful to Saudi Arabia if it in turn must pay higher prices for materials (and services) for the tens and hundreds of billions of dollars of real investments it’s making.

TradeFlow21 — AFGHANISTAN. The recent epochal events taking place in the Middle East and North Africa (collectively referred to as MENA), starting with Tunisia last December, have created a domino effect in the region.  The reverberation of this movement was felt by some of the most secure governments in the two regions, and one by one we have seen masses of repressed people follow the footsteps of the courageous youth of Tunisia.

Some have called this movement the “Arab Spring” or the “Arab Movement,” however, the “Arab Renaissance” is more befitting since for the first time in generations the overwhelming majority is willing to question the powers of authority.  Respective peoples are no longer willing to stand idle and take direction from one ruler or one family of rulers.  For so many years the gap between the have and have-not has grown in the two regions by leaps and bounds, thus making it more difficult, if not impossible, for the average person or family to grow and enjoy the financial security that only a handful have monopolized. Read the rest of this entry »

Bloomberg reports that Citigroup has hired a former U.S. diplomat (financial attache at the U.S. embassy in Baghdad), Dennis Flannery, to head its Iraq division. In February, Citigroup included Iraq among the eleven economies with the most promising growth prospects in coming decades. In addition, February saw Iraq’s oil exports reach their highest level since the U.S. invasion in 2003. Mr. Flannery, who is initially to be based out of Amman, Jordan, had the following comments:

“We are very optimistic about Iraq over the next three to five years.” It will have “considerable wealth” from its oil exports and is poised to invest in the oil and gas industry, power generation and housing to boost growth. “Over the last year, Iraq’s security situation has improved very steadily.” Over a longer period, Citigroup may have “branches, a consumer business, a middle- market business” as well as a “full-service bank in the country.”

See also: IMF: “Iraq has maintained macroeconomic stability under difficult external & internal circumstances…” and Foreigners can own 100% of Iraqi companies, pay 15% flat tax, & take all profits home.

Ed Attwood publishes in ArabianBusiness.com a newspiece on business confidence hitting an all-time high in the Kingdom despite, notably, some skilled labour shortages. This confidence level also comes at a time of heightened regional political turmoil.

Excerpts:

Business confidence in Saudi Arabia’s non-hydrocarbon sector has soared to an all-time high, buoyed by the high oil price, the stable economy, and King Abdullah’s social spending packages, according to new data. The Dun & Bradstreet business optimism index showed that the non-energy segment of the economy is expecting a rise in demand levels in the second quarter of this year. Respondents to the survey said that they were more optimistic about new orders, higher sales volumes, higher selling prices and higher net profits than in the previous quarter. Around 55 percent of respondents in the sector also said that they did not expect any negative factors to affect their operations in the second quarter.

Read the rest of this entry »

An April web exclusive published by Vanity Fair (written by A.A. Gill), “Dubai on Empty,” depicts the emirate in a highly unfavorable light. To invoke the nasty vigor of Gill, it is highly distasteful and reeks as if there’s some unspoken vengeance. Bemoaning a “cautionary tale” of all encompassing greed in Dubai, Gill argues a doomed future for Dubai is a fait accompli. TradeFlow21 does not disagree that there are serious issues to be dealt with, but we urge readers to not be taken in by the bleeding headline and gushing story. As Gill says, “Dubai has been built very fast.” And that’s part of the problem. Too much has happened too fast. Similar to our experiences in China, TradeFlow21 recognizes what many in the Western world have long forgotten, that economic growth, especially the kind we’re witnessing in select economies, is a bumpy ride. Gill claims, “Dubai suffers from gigantism—a national inferiority complex that has to make everything bigger and biggest. This includes their financial crisis.” Are the Western bankers and executives not culpable for some of this hedonism and grandeur? Rather than slam an entire emirate (state), TradeFlow21 seeks to work in practical ways to bridge businesses, students, travelers, and all parties that can help make the world a better place now and for posterity.

Riyad Capital says in their last quarterly report:

In real terms:

• We forecast real GDP growth to increase from 3.8% in 2010 to 5.2% in 2011.
• For the Saudi non-oil private sector,
• We forecast growth to increase from 3.7 percent in 2010 to 5.2% in 2011.
• For the Saudi government budget, we forecast a SR97 billion surplus in 2011. Our spending forecast for 2011 is SR650 billion, a 3.7% increase over 2010 actual spending and 12% above the 2011 budget of SR580 billion, and our revenue forecast is SR746 billion (1.4% over 2010 actual).

We expect Saudi policy rates (SAMA repo and reverse repo rates) to continue mirroring US interest rates and remain essentially unchanged in 2011. Read the rest of this entry »

This week, these are NCB‘s (National Commercial Bank of Saudi Arabia, the largest bank by assets in the Middle East) areas of interest:

Saudi Macro and Equity Market – Robust Steel Demand Continues into 2011

US Macro and Equity Market – 4Q, Prosperous Expectations

Commodity Markets – Copper Prices Push Forward

Read the rest of this entry »

Bartle Bull, founder of Northern Gulf Partners, an Iraq-focused investment bank, tells us in today’s WSJ:

The expected announcement of Iraq’s new government marks the culmination of a remarkable process. The former bully-boy of the Arab neighborhood has become its only functional democracy. What may be the world’s richest resource economy, once the closed shop of a murderous clique, is today wide open for business.

Driven by what many geologists consider the world’s largest oil reserves, Iraq will probably be the world’s biggest crude oil producer within a decade. The country currently ranks second to Saudi Arabia in official reserves, with 143 billion barrels. With much of Iraq’s exploration still to come after a three-decade hiatus, and with Saudi Arabia’s reserves substantially inflated and already in decline, Iraq could take the mantle as No. 1 in fairly short order.

Read the rest of this entry »

Dr Muhammad Al-Jasser, Governor of the Saudi Arabian Monetary Agency, provided recent data on his country’s small and medium enterprises (SMEs) that were presented at a symposium organized by the Institute of Banking in cooperation with the International Financing Corporation at Riyadh. SME trends are critical for monitoring economic health in terms of new company creation and hiring, in addition to identifying areas of economic interest and strength. A recap of SAMA’s SME data follows.

Read the rest of this entry »

The Gulf Daily News reports that Gulf Cooperation Council (GCC) member oil ministers met ahead of a scheduled OPEC meeting and have vowed to continue to achieve oil price stability. While adherence to oil output targets (qutoas) is controversial and is reportedly as low as 50% this year compared to 90% in April 2009, the principals of TradeFlow21 must admit that oil at $80/bbl is desirable compared to the alternatives. In fact, in August, we penned, “Oil at $80 just about right for GCC and not bad for U.S.” We stand by that position, keeping in mind the $147/bbl peak in July 2008 and the $32/bbl trough in December 2008. Furthermore, in a world comprised of a herd of desperate central bankers (unrelenting in their quantitative easing), hungry holders of capital willing to chase seemingly any asset (note broad rallies in equities, debt securities, and commodities), against a backdrop of surreptitious dollar devaluation and open competitive devaluation of rival currencies (not to mention the conundrum in China’s currency, the yuan), we find solace in oil at $80/bbl. Yes there is admitted overcapacity; but there is also the compelling story of peak oil –  real, severe limits for safely and cost-effectively extracting new sources — and the aforementioned unfavorable global macro environment.