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In Unprecedented Clash, EU Rejects Italy’s Budget, Paves Way For Sanctions

Yields on Italian government bonds fell on Wednesday morning as the euro climbed following reports that Italy’s ruling coalition might be open to reviewing its budget plan. Though the Italian government swiftly denied the reports about being open to changes in its plan, the moves in the euro and yields persisted, as analysts said they didn’t appear to be news driven.

The spread between the 10-year BTP and 10-year German bund tightened to tightening as much as 16 basis points to 309 basis points.

Italy

Italy

Italian bank shares also eased off their highs of the session after the denials, but remained 2% higher on the day after sinking to two-year lows on Tuesday.

And in other signs that the confrontation between Italy and Europe is heading toward a precipice, the European Union confirmed Wednesday morning that it would officially reject Italy’s budget plan, an unprecedented move that will likely lead to billions of euros in fines being levied against Rome for violating the bloc’s budget rules.

The Italian government calls for an expansion of the country’s budget deficit to 2.4% of GDP to finance tax cuts, expanded pension benefits and other handouts to unemployed and desperate Italians.

“Our analysis today suggests that the debt doesn’t respect our budget rules. We conclude that opening a proceeding against excessive spending based n the debt is then justified,” the EU said, according to ANSA.

The Italian plan represents a “particularly grave disrespect” of EU budget rules, particularly the recommendation from the meeting of EU ecofin ministers last July 13. The statement confirms Brussels’ previous analysis.

Italy

European Commission Vice President Valdis Dombrovskis said Italy’s aggressive spending would eventually have a negative impact on growth.

…click on the above link to read the rest of the article…

Nord Stream 2 Could Still Be Derailed By U.S. Sanctions

Nord Stream 2 Could Still Be Derailed By U.S. Sanctions

Nord Stream

The potential for more tensions in relations between the U.S. and Russia continue to mount. Late last week, U.S. Energy Secretary Rick Perry said that Washington could still impose sanctions related to the building of the controversial Nord Stream 2 pipeline, which would bring Russian gas directly to Germany under the Baltic Sea. Perry made his comments in Warsaw as the Trump administration tries to convince EU members to sign LNG deals with U.S. producers to offset over reliance on Russian pipeline gas.

On Thursday, Polish state-run gas firm PGNiG signed a long-term LNG deal with U.S.-based Cheniere Marketing International. Poland has been fervent in its resistance to the Nord Stream 2 pipeline as well as working to reduce its reliance on geopolitically charged Russian gas. Moscow, for its part, has cut gas supply to Europe in the past during cold winter months to exert its influence in the region.

Warsaw and Washington also signed on Thursday a joint declaration on enhanced energy security cooperation. “This is also a clear signal that the U.S. strongly supports a pro-Poland and pro-Europe energy security policy,” Perry said. “Energy security in turn requires energy diversity. That is the reason we oppose the Nord Stream 2 project which would further increase the dangerous energy dependence many European nations have on the Russian federation,” he added.

Poland consumes around 17 billion cubic meters of gas annually, more than half of which comes from Russian energy giant Gazprom under a long-term deal that expires in 2022. However, Poland has said that it would not renew the gas supply deal, making the country race against time to replace the contract with new gas volumes.

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Washington’s Sanctions Machine

Washington’s Sanctions Machine

Washington’s Sanctions Machine

Perhaps it is Donald Trump’s business background that leads him to believe that if you inflict enough economic pain on someone they will ultimately surrender and agree to do whatever you want. Though that approach might well work in New York real estate, it is not a certain path to success in international relations since countries are not as vulnerable to pressure as are individual investors or developers.

Washington’s latest foray into the world of sanctions, directed against China, is astonishing even when considering the low bar that has been set by previous presidents going back to Bill Clinton. Beijing has already been pushing back over US sanctions imposed last week on its government-run Equipment Development Department of the Chinese Central Military Commission and its director Li Shangfu for “engaging in significant transactions” with a Russian weapons manufacturer that is on a list of US sanctioned companies. The transactions included purchases of Russian Su-35 combat aircraft as well as equipment related to the advanced S-400 surface-to-air missile system. The sanctions include a ban on the director entering the United States and blocks all of his property or bank accounts within the US as well as freezing all local assets of the Equipment Development Department.

More important, the sanctions also forbid conducting any transactions that go through the US financial system. It is the most powerful weapon Washington has at its disposal, but it is being challenged as numerous countries are working to find ways around it. Currently however, as most international transactions are conducted in dollars and pass through American banks that means that it will be impossible for the Chinese government to make weapons purchases from many foreign sources. If foreign banks attempt to collaborate with China to evade the restrictions, they too will be sanctioned.

…click on the above link to read the rest of the article…

Iran Sanctions Could Backfire On U.S. Drillers

Iran Sanctions Could Backfire On U.S. Drillers

gas well

The United States is upping the ante in its effort to sanction Iran, and its efforts may further complicate its ongoing trade war with China and affect the flow of oil worldwide.

On August 16, the head of the new Iran Action Group, Brian Hook, announced that the U.S. would sanction any country that purchased oil from Iran after the November 4 deadline. China has shown no indication that it plans to cooperate with the U.S., and Hook did not rule out imposing secondary sanctions on China if it continues its purchases of Iranian oil.

While other importers of Iranian crude, including Japan and South Korea, had scaled back their purchases, China has actually increased its imports from Iran.

In August China announced a round of tariffs on U.S. goods, including some oil products, though it exempted U.S. crude from the list.

Nevertheless, Chinese imports of U.S. energy products has been on the decline. A ship-tracking report noted that not a single U.S. tanker has departed for China in August. Should the U.S.-Chinese trade war worsen, China may turn towards alternative sources of energy, including Russia or Iran. That would be a real blow to U.S. energy suppliers like Cheniere Energy Inc., which ships LNG to China.

China is the second-largest market for U.S. energy goods. In May it averaged 427,000 bpd of U.S. imports, surpassing Canada, which imported 289,000 bpd, according to the EIA.

Right now, Chinese importers like Unipec have adopted a “wait and see” attitude towards buying US crude, despite the fact that it was left off the Chinese government’s tariff list.

For China, the situation may involve choosing between Iran and the U.S. American energy products have been attractive for Chinese importers, but the geopolitical advantages of cozying up to Tehran may outweigh the economic benefits of sticking with U.S. crude.

…click on the above link to read the rest of the article…

US Sanctions Foster Emergence of Multipolar World

US Sanctions Foster Emergence of Multipolar World

US Sanctions Foster Emergence of Multipolar World

Russia, Iran, China, and now Turkey are in the same boat, as all have become the target of US sanctions. But none of those nations has bowed under the pressure. Russia had foreseen the developments in advance and took timely measures to protect itself. The Turkish national currency, the lira, is plummeting now that Washington has introduced sanctions as well as tariffs on steel and aluminum, in an attempt to compel Ankara to turn over a detained American pastor. Turkish President Erdogan said it was time for Turkey to seek “new friends,” and Turkey is planning to issue yuan-denominated bonds to diversify its foreign borrowing instruments. On Aug. 11, President Erdogan said Turkey was ready to begin using local currencies in its trade with Russia, China, Iran, Ukraine, and the EU nations of the eurozone.

The recent BRICS summit reaffirmed Ankara’s commitment to the Contingent Reserve Arrangement (CRA) that is geared toward de-dollarizing its member states’ economies, and the agreement to quickly launch a Local Currency Bond Fund gives that policy teeth. Turkey has also expressed its desire to join BRICS.

Ankara is gradually moving toward membership in the Shanghai Cooperation Organization (SCO). It has been accepted as a dialog partner of that organization. Last year Turkey became a dialog partner with ASEAN. On Aug. 1, the first ASEAN-Turkey Trilateral Ministerial Meeting was held in Singapore, bringing together Turkish Foreign Minister Mevlüt ÇavuşoğluASEAN Secretary General Dato Lim Jock Hoi, and Singaporean Foreign Minister Vivian Balakrishnan, who is serving as the 2018 ASEAN term chairman. The event took place under the auspices of the 51st ASEAN Foreign Ministers’ Meeting that attracted foreign ministers and top diplomats from 30 countries.

Ankara is mulling over a free-trade area (FTA) agreement with the Eurasian Union. This cooperation between Ankara and the EAEU has a promising future.

…click on the above link to read the rest of the article…

Trump Blasts “Anyone Trading With Iran Will Not Be Trading With The U.S.”

At one minute after midnight, the first round of renewed U.S. sanctions on Iran took effect, and in one of his earliest tweets since the presidential campaign, at 5:30am EDT, a sleepless Trump blasted out the “official” US position on countries that ignore his just imposed sanctions: “The Iran sanctions have officially been cast. These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level” Trump tweeted.

In a warning to China, India, Russia, Turkey and many other nations which have said they will defy Trump’s sanctions and continue to import Iran oil, Trump warned that “Anyone doing business with Iran will NOT be doing business with the United States.”

Then, pulling a page out of a John Lennon album, Trump explained “I am asking for WORLD PEACE, nothing less!


The Iran sanctions have officially been cast. These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!


As a reminder, on Tuesday, following an executive order signed by Trump, the U.S. imposed new restrictions intended to stop the purchase of dollar banknotes by Iran, prevent the government from trading gold and other precious metals and block the nation from selling or acquiring various industrial metals. The measures, which took effect at midnight in Washington, also targeted the auto industry and banned imports of Persian carpets and pistachios to the U.S.

There were some signs Trump’s aggressive policy was already working. Yesterday, Iran’s President Hassan Rouhani, under rising economic and political pressure, spurned President Donald Trump’s suggestion for talks with “no preconditions.”

…click on the above link to read the rest of the article…

Trump Warns Allies “Risk Severe Consequences” If They Violate Iran Sanctions

With the hours ticking by ahead of Washington’s re-imposition of a slew of economic sanctions on Iran, President Trump has just released a statement confirming the narrative he would prefer Americans believe.

Just hours after the European Union issued a statement Monday ahead of when renewed US sanctions are set to snap back against Iran after midnight US Eastern time, saying it “deeply regrets” the sanctions and will take immediate action to protect European companies still doing business with Iran.

Trump makes it clear that any violation (among America’s allies) will not be tolerated…

“The Trump Administration intends to fully enforce the sanctions reimposed against Iran, and those who fail to wind down activities with Iran risk severe consequences.

The first set of sanctions will hit at the Iranian financial system, including Iranian government purchases of US dollars and its gold trade and government bond sales. The US’ dominant role in the world’s financial system means it has been able to pressure countries and companies into compliance, though China remains a key holdout.

“The JCPOA, a horrible, one-sided deal, failed to achieve the fundamental objective of blocking all paths to an Iranian nuclear bomb,” Trump said Monday, defining that its policy as applying “maximum economic pressure on the Iranian regime.”

The US denies it is seeking regime change, but rather aims to “modify the regime’s behavior,” according to an administration official.

A US administration official said the Iranian government was using financial resources freed up by the nuclear deal “to spread human misery.” The US was seeking now to address the “totality of the Iranian threat” in the Middle East.

“None of this needs to happen,” an official said on sanctions. Trump is willing to meet the Iranian leadership “any time” for talks,” the official noted.

…click on the above link to read the rest of the article…

Russia’s Foresight Stands It in Good Stead

Russia’s Foresight Stands It in Good Stead

Russia’s Foresight Stands It in Good Stead

Charles Maurice de Talleyrand, the famous French diplomat who served as foreign minister for Napoleon, said “The art of statesmanship is to foresee the inevitable and to expedite its occurrence.”

Moscow realized that the US would continue its efforts to strangle Russia economically to make countermeasures inevitable. The Russian government expedited the occurrence by taking steps to lessen the dependence on Washington, including selling off US treasury bills. The ability to foresee the worst scenario and take timely measures to prevent it pays off.

The recent events show Moscow did the right thing at the right time. Just a few months ago, it got rid of US dollars to increase gold reserves. It has taken measures to become almost immune to Western sanctions with no fiscal deficit, a solid current account balance, and very little debt.

On August 2, a bill was introduced in the US Senate to impose “crushing” sanctions on Moscow to include restrictions on new Russian sovereign debt transactions, energy and oil projects and Russian uranium imports, and new sanctions on political figures and businessmen. One package follows another to no avail as the country is well prepared for it with no “soft underbelly” left. There are more steps planned over Russia’s alleged violations of sanctions against North Korea. The vicious circle is unstoppable but the impact has been minimized.

The US has recently imposed sanctions of Turkish top officials. The well-calculated move not only damaged the bilateral relationship but also made the Turkish lira plunge to an all-time low. The currency has fallen by over 40 percent since 2016.

Meanwhile, the US is preparing new sanctions to hit its NATO ally, including what the administration calls “large sanctions’ or “designation packages” to assault Turkey’s economy dependent on foreign investments.

…click on the above link to read the rest of the article…

Trump Firmly In the Twilight Zone: Threatens Nord Stream 2 With Sanctions

Trump’s vise on the EU started with steel, progressed to cars, then to Iran, and now to a gas pipeline vital to the EU.

The story of the day, not discussed in mainstream media, involves Nord Stream 2, a gas pipeline between Russia and the EU. The feature image is from Gazprom.

Gazprom says “The new pipeline, similar to the one in operation, will establish a direct link between Gazprom and the European consumers. It will also ensure a highly reliable supply of Russian gas to Europe.”

Some suggest the EU is unwise to depend on Russia. That is nonsense. Why?

Free trade stops wars!

Regardless, it is the EU’s decision to make, not Trump’s, and the deal is already underway.

Gazprom, Partners Invest €4.8 Billion Nord Stream 2 Construction

Believe that? Why not? There is no dispute from the EU.

My point is the investment.

Russia’s gas producer Gazprom and its Nord Stream 2 partners have invested a total of 4.8 bln euro in the project on natural gas pipeline construction as of the end of June, Chief Financial Officer of Nord Stream 2 AG, the operator of the pipeline construction, Paul Corcoran told journalists on Thursday.

“We have received 96% of the pipes, we have concrete coated 55% of those pipes and we mobilized vessels for the pipelines. So we are quite well prepared on track and on time for the project,” CFO added.

The Nord Stream 2 pipeline is expected to come into service at the end of 2019.

Stop It All Says Trump

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America’s Incredible Shrinking Influence

America’s Incredible Shrinking Influence

Just two weeks after President Trump pulled the US from the Iran nuclear agreement, his Secretary of State, Mike Pompeo, issued 12 demands to Iran that could never be satisfied. Pompeo knew his demands would be impossible to meet. They were designed that way. Just like Austria-Hungary’s ultimatum to Serbia in July, 1914, that led to the beginning of World War I. And just like the impossible demands made of Milosevic in 1999 and of Saddam Hussein in 1991 and 2003, and so many other times when Washington wanted war. These impossible demands are tools of war rather than steps toward peace.

Secretary Pompeo raged at Iran. The mainstream news media raged at Iran. Trump raged at Iran. But then a strange thing happened: nothing. The Iranians announced that they remained committed to diplomacy and would continue to uphold their end of the nuclear agreement if the Europeans and other partners were willing to do the same. Iranian and European officials then sought out contacts in defiance of Washington in hopes of preserving mutually-beneficial emerging commercial relations.

Washington responded to the European snub by threatening secondary sanctions on European companies that continued doing business with an Iran that had repeatedly been found in compliance with its end of the bargain. Any independent European relationship with Iran would be punished, Washington threatened. But then, again, very little happened.

Rather than jump on Washington’s bandwagon, German Chancellor Angela Merkel made two trips to Russia in May seeking closer ties and a way forward on Iran.

Russia and China were named as our prime enemies in the latest National Security Strategy for the United States, but both countries stand to benefit from the unilateral US withdrawal from the Iran deal. When the French oil company Total got spooked by Washington threats and pulled out of Iran, a Chinese firm eagerly took its place.

…click on the above link to read the rest of the article…

Sanctioning the World, the US Inadvertently ‘Locks & Launches’ Multipolarism

Sanctioning the World, the US Inadvertently ‘Locks & Launches’ Multipolarism

Sanctioning the World, the US Inadvertently ‘Locks & Launches’ Multipolarism

The commemorative medal had already been cast and published. It depicts profiles of Trump and Jong Un, facing each other, at the 12th June historic meeting – at which Jong Un was supposed to disavow and discard his nuclear armament, irreversibly, and then to accept Trump’s gracious benediction. The meeting now is moot (and, since drafting, has been cancelled, blindsiding both Moon and Abe), leaving in its wake, a frustrated and angry Trump. And, as we prefigured earlier, instead of realising that Team Trump had not been listening adequately to what Jong Un was signalling, Trump now blames Xi for upsetting ‘the deal’ from being struck.

China’s Global Times makes the point:

“The US unilaterally demands prompt peninsular denuclearization before it provides compensation to Pyongyang. China will not oppose such a deal between the US and North Korea. However, can Washington achieve it? Pyongyang has just given an answer … It would be OK if Washington pressures Pyongyang to gain an edge in negotiations, but Washington should think twice about the possibility of pushing the Korean Peninsula back to fierce antagonism.

It is clear from China’s perspective that the US has overestimated its weight in forcing North Korea to accept its demands. The US has forgotten the awkward situation it was in last year when it could not stop North Korea’s nuclear and missile tests, and the difficulty of taking military action against North Korea.

The US has always believed it was duped by North Korea, which is, in fact, far from correct. The US was responsible for the aborted peninsula resolutions, multiple times.”

Irritated too, by harsh comments made by ‘trade hawks’ on the lack of tangible result in trade negotiations with China (Steve Bannon, for example, told Bloomberg that Trump “changed the dynamic regarding China –

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Russia Finance Minister: We Are Ready To Ditch The Dollar In Favor Of The Euro

In a testament to the success of the latest Trump sanctions against Russia, overnight Russian aluminum giant Rusal announced that its chief executive, Aleksandra Buriko, and half of its managerial board resigned to make sure the firm avoids U.S. sanctions against its founder, billionaire oligarch, Oleg Deripaska. The mass resignations were part of “the efforts that have been made by the management of the group to protect the interests of the company and its shareholders” since the sanctions were imposed last month, Rusal said in a May 24 statement.

Buriko resigned after the U.S. Treasury’s Office of Foreign Assets Control (OFAC) announced new punitive measures against Russia in early April in response to Russia’s “malign” activities around the world. The latest round of sanctions primarily targeted Russian oligarchs close to President Vladimir Putin, especially Oleg Deripaska – who had previously been interviewed by Robert Mueller – prompting Rusal shares to tumble while the price of aluminum soared.

That said, Rusal is not out of the woods yet, and earlier today Bloomberg reported that Deripaska had asked the Russian government to buy aluminum for state reserves, in other words engage in an indirect bailout of the state’s largest aluminum producer, although the Kremlin hasn’t made a decision yet. Furthermore, Rusal which is facing significant debt maturities in the coming months, has applied for state support to Promsvyazbank, and a decision is pending.

The common theme here is that Trump’s sanctions against Russia – with which he is supposedly colluding – not only work, but are very effective in achieving their goal. And they do so though the biggest weapon the US has: access to the world’s reserve currency, because with one phone call to SWIFT, Trump can lock out an entire nation.

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Oil Market Volatility Set To Soar This Month

Oil Market Volatility Set To Soar This Month

Oil Industry

After two months of an almost uninterrupted increase, crude oil is set for even more volatility on a string of political events that could see it either touch US$80 or even higher by the end of June or, conversely, slump to deep lows again.

President Donald Trump will start unwinding the string today as he announced his decision on the Iran deal. The prevailing analyst opinion is that economic sanctions will be reinstated within the next couple of months.

While this would be naturally bullish for oil prices, some analysts note that the effect of the sanctions has already been factored into prices, so any immediate impact will be limited. What’s more, CNBC reported recently, that the effect of U.S. sanctions against Iran on the country’s international shipments of crude will also be limited: China and India are unlikely to reduce their intake of Iranian crude as are other buyers, who were previously on the U.S.’ side with regard to the sanctions.

All in all, analysts estimate that new sanctions could remove between 300,000 bpd and 500,000 bpd of Iranian crude from international markets, which compares with 1-1.5 million bpd removed from the market under the initial round of U.S. sanctions under President Obama, who had a lot more support from Western Europe.

That said, there will unquestionably be an effect on prices from Trump’s announcement. This effect could be amplified later in May, when Venezuela holds its presidential elections. The vote scheduled for May 20, and there is little doubt that Washington will question the legality of the outcome.

Venezuela’s oil industry—like its economy—is in shambles, with production down by 50 percent since its peak in the early 2000s to 1.55 million bpd, data from Bloomberg suggests.

…click on the above link to read the rest of the article…

WTI Tops $70 For First Time Since Nov 2014 As Iran Deal Deadline Looms

With the Iran Deal looking increasingly fragile, front-month WTI futures have just traded above $70 for the first time since Nov 2014.

$70 just happens to be the 50% retracement from the Aug 2013 highs to the Feb 2016 lows…

As OilPrice.com’s Tsvetana Paraskova notes, US President Donald Trump has another week to decide whether to waive the sanctions against Iran. Expectations that he would not waive the sanctions this time around have supported the price of oil over the past month, with Brent briefly breaching above $75 to its highest price level since November 2014.

Analysts are still struggling to quantify the impact of possible fresh sanctions on Iran and prices are expected to be volatile as the deadline for President Trump’s decision is getting closer.

The month of May could be a very important one for oil prices with geopolitical risks stacked and too close to call. Apart from the Iran sanctions waiver, the market will be looking to the Venezuela presidential election that socialist leader Nicolas Maduro has scheduled for May 20.

“The geopolitical landscape will therefore remain tense and price conditions volatile,” Stephen Brennock, an analyst at PVM Oil Associates, told Platts on Friday.

Commenting on the Iran sanctions waiver, Commerzbank analysts said in a note:

“This will be the main issue preoccupying the oil market, with fundamental factors such as stock levels and production data taking a backseat until this has been resolved”.

Even more worrisome, as OilPrice.com’s Kent Moors writes, is that Trump walking away from the deal, and possibly re-imposing sanctions on Iran could throw the oil market into chaos.

An agreement is an agreement, or so it’s said.

Tensions are skyrocketing after Israeli Prime Minister Netanyahu’s claim that Iran has violated the Joint Comprehensive Plan of Action (JCPOA) agreement.

 

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Pompeo Lands In Saudi, Immediately Calls For New Iran Sanctions

Well that didn’t take long.

Just two days after being sworn in as US Secretary of State, former CIA Director Mike Pompeo arrived in Saudi Arabia on Saturday on a hastily-arranged visit to the Middle East to reinvigorate support for new sanctions against Iran.

As Reuters reports, the visit to Riyadh, Jerusalem and Amman comes as President Trump is set to decide whether to pull out of the 2015 nuclear deal with Iran that is still supported by European powers.

“We are urging nations around the world to sanction any individuals and entities associated with Iran’s missile program, and it has also been a big part of discussions with Europeans,” Brian Hook, a senior policy advisor traveling with Pompeo, told reporters.

“Iran’s missiles prolong war and suffering in the Middle East, they threaten our security and economic interests and they especially threaten Saudi Arabia and Israel,” he added.

Following Macron’s earlier-in-the-week efforts to persuade Trump not to kill the Iran deal, Pompeo told a news conference:

“There’s been no decision, so the team is working and I am sure we will have lots of conversations to deliver what the president has made clear.”

In Riyadh, Pompeo was greeted on the tarmac by Saudi Foreign Minister Adel al-Jubeir. He is expected to meet Saudi Crown Prince Mohammed bin Salman and King Salman during the visit.

But as Patrick Coburn writes at Counterpunch.org, as the Trump administration begins to berate Iran once again, their options may be more limited than many believe.

A crisis in relations between the US and Iran – which has the potential to produce a military confrontation in the Middle East – is building rapidly in the expectation that President Donald Trump will withdraw the US from the Iran nuclear deal in just over two weeks’ time.

…click on the above link to read the rest of the article…

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