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Friday, 15 January 2010

TURKMENISTAN: GAS FLOWS AGAIN TO RUSSIA, WHILE DISCONTENT SIMMERS

Natural gas may be flowing again from Turkmenistan to Russia, but the two countries’ pricing dispute is not over, analysts are predicting.

Turkmen gas exports to Russia resumed January 9 after a nearly nine-month hiatus, due to a pricing dispute. [For background see the Eurasia Insight archive]. http://www.eurasianet.org/departments/news/articles/eav060209b.shtml Under the Turkmen-Russian settlement, the Kremlin-controlled energy giant Gazprom will only buy 30 billion cubic meters (bcm) of gas annually compared to 50 bcm in previous years, and will pay in the region of $250 per thousand cubic meters (tcm), Russian news sources reported.

The interruption in gas supplies caused serious damage to Turkmenistan’s state finances. [For background see the Eurasia Insight archive]. In 2009, Turkmen gas production fell to 38 bcm from 70.5 bcm during the previous year, the Russian daily Kommersant reported on January 11. As a result, Turkmenistan lost "not less than a quarter of its annual Gross Domestic Product, between $7 billion and $10 billion," Michael Korchemkin, the director of the East European Gas Analysis, told Kommersant.

Wall St. WTF: I'm a surrealist and I used to love the Dubai real estate section, now I just read the court reporters. You can't make this stuff up.

It has been rough sledding for the DIFC lately. First NASDAQ abandoned the DIFX project to the DFM. This reduced NASDAQ from a partner in the development of Dubai as a financial center to a passive and very minor shareholder in the DFM. Bourse Dubai still owns substantial stakes in the NASDAQ and the LSE but may be forced to sell them if it can’t roll its’ debt in February. Not much has changed functionally, NASDAQ did not contribute much aside from the brand and the management and though the exchange has launched derivatives they have not realized their potential but symbolically its’ a blow.

Then came the news that Dubai Ports World, the star listing of the DIFX would seek a dual listing in London. It had been a major triumph that the DIFX had been able to play host to the DPW IPO as a single listing. At the time, back in 2007 DPW was the largest IPO in the history of the Gulf States and was also the first privatization for Dubai which, had it been followed by others, might have alleviated or perhaps prevented altogether much of the suffering that is about to befall Dubai. The fact that DPW is also seeking a London listing is a sign of the desperation of Dubai to raise the equity value as well as a sign of the failure of the DIFC.

As tragic as these things are, readers of my blog will know that these issues are not what I consider to be the main issue of within the DIFC, but more on that in a moment.

Arab Stocks Lack Buy ‘Triggers,’ Morgan Stanley Says

Arab stocks lack near-term “triggers” to spur gains and Dubai’s debt restructuring may remain a drag on the market until the second half of 2010, according to Morgan Stanley.

Higher financing costs, potential credit-rating downgrades and a delayed recovery in earnings are “major overhangs” for Arab equities, Michael Wang, an emerging-market strategist in London at Morgan Stanley, wrote in a research note dated yesterday. Investors should wait until “later” in the first half of 2010 to add to holdings, he wrote.

“The immediate crisis in Dubai is over but further debt restructuring and elevated funding costs remain overhangs,” Wang wrote. “Earnings momentum continues to lag other emerging- market regions.”

Inside the Kingdom, By Robert Lacey

As far as the Arabian Gulf is concerned, all our attention of late has been on the spectacular implosion in Dubai. But the fortunes of that flashy, tiny emirate are of minor consequence compared to those of neighbouring Saudi Arabia, the birthplace and centre of Islam, a regional power into which Dubai would fit five hundred and fifty times over, and a country whose discretion shields the enormous influence it has throughout the Muslim world.

We know all about Dubai because the emirate has been forced to face outwards – with next to no oil, it had to enter the international waters of trade and finance, with all the successes and perils that entailed. Next-door, Saudi has always been a much more closed society, fiercely guarding its borders (very limited tourist visas have only been issued since 2004) and even more, its secrets.

Robert Lacey is one of very few to have been able to unlock them, not once but twice. What he reveals is of potentially far greater import than the financial fluctuations that have transfixed the media. In the early 1980s, copies of a book with no cover were surreptitiously passed around in expat circles in Jeddah, Riyadh and Dhahran. Lacey's The Kingdom was banned in Saudi Arabia. Those returning to work there, like my parents, would tear off the outer leaves to bring it in past customs.

Dubai World Said to Plan Standstill Offer Next Week

Dubai World, the state-owned holding company seeking to change the terms of about $22 billion of debt, plans to meet with creditor banks next week to complete a standstill agreement, a banker participating in the talks said.

A date for the meeting hasn’t been set, said the banker, who declined to be identified because the talks are private. A company spokeswoman declined to comment on the negotiations.

Dubai World failed to present a standstill offer in a Dec. 21 meeting with more than 90 lenders because it hadn’t reached agreement on the terms of government support. Three bankers who attended the meeting said at the time that Dubai World would make the offer in early January. Dubai World told lenders it needed more time to let assets recover from a drop in value after the credit crunch, according to the bankers.

RAIL TRAFFIC OFF TO SLOW START IN 2010

Rail traffic continues to show signs of a very tepid economic recovery as carloads and intermodal rail traffic got off to slow starts to the new year. Total carloads were off 12.7% compared to 2008 while intermodal traffic declined 3.6%. The breadth of the weakness continued to narrow, however, as 11 of the 19 commodity groups were up compared to 2008.

This weakness in rail data was best displayed by yesterday’s Railtime Indicators Report from the AAR which showed the weakest annual rail data in over 20 years. While the sequential trend continues to improve there is little doubt that the recovery is still very weak.

Citi's Pandit Must Deliver In 2010: Saudi Prince Alwaleed - FBN

Saudi billionaire and leading Citigroup Inc. (C) investor Prince Alwaleed Bin Talal said 2010 was the year Citi Chief Executive Vikram Pandit had "to deliver" results and that shareholders had already given the U.S. bank two years to turn it around, Fox Business Network reported.

In an interview with Fox Business seen on its Web site Friday, he said: "I don't threaten those CEOs that I meet but I told him that really the market gave you two years leeway but now it's time to deliver. 2010 is for him, the year to make it or break it and he has to deliver."

The prince also said Saudi Arabia's close ties to the United States will continue, and oil was a strong binding factor.

"Saudi Arabia's strategic alliance with the United States will continue and as a derivative of that, the link with the oil between oil and dollars is there," he said, according to FBN. "The bulk of our GDP, the bulk of budget comes from oil and oil is still a dollar based commodity...At the end the Euro is strong but it will never replace the dollar. The United States is down but it's not out."END

Comment: Gulf must not waste crisis lessons

Last year the world economy stared into the abyss. With the right policy response, the worst has been avoided. Gulf Co-operation Council countries have been affected by the global slowdown, but the 2010 outlook appears more promising.

Despite its challenges, the previous year has highlighted some important facts and lessons. First, emerging markets have outperformed. A shift of power from the west to the east is under way. Second, counter-cyclical policies work. Third, no boom is eternal, and recessions also end. All these will have significant implications for the Gulf.

Asia and the GCC outperformed in 2009. Both are likely to continue to do so this year, with growth reaching 7 per cent in Asia and 3.5 per cent in the GCC.