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The Debt Crisis Is Mounting For Oil Economies

The Debt Crisis Is Mounting For Oil Economies

Dubai. Abu Dhabi. Bahrain. And, of course, Saudi Arabia. The two emirates this year issued debt for the first time in years. So did Bahrain. Saudi Arabia stepped up its debt issuance. The moves are typical for the oil-dependent Gulf economies. When the going is good, the money flows. When oil prices crash, they issue debt to keep going until prices recover. This time, there is a problem. Nobody knows if prices will recover.

In August, Abu Dhabi announced plans for what Bloomberg called the longest bond ever issued by a Gulf government. The 50-year debt stood at $5 billion, and its issuance was completed in early September. The bond was oversubscribed as proof of the wealthiest Emirate’s continued good reputation among investors.

Dubai, another emirate, said it was preparing to issue debt for the first time since 2014 at the end of August. Despite the fact the UAE economy is relatively diversified when compared to other Gulf oil producers, it too suffered a hard blow from the latest oil price crash and needed to replenish its reserves urgently. Dubai raised $2 billion on international bond markets last week. Like Abu Dhabi’s bond, Dubai’s was oversubscribed.

Oversubscription is certainly a good sign. It means investors trust that the issuer of the debt is solid. But can the Gulf economies remain solid by issuing bond after bond with oil prices set to recover a lot more slowly than previously expected? Or could this crisis be the final straw that tips them into actual reforms?

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

The Mystery Of Dubai’s Vaporized Gold: The Plot Thickens

The Mystery Of Dubai’s Vaporized Gold: The Plot Thickens

Earlier this week, we told a fascinating story about an unprecedented, multi-year smuggling ring involving Turkey, Iran, and Dubai (as well as China, Russia and countless other nations) which saw corruption reaching to the very top of the political and financial establishment: from president Erdogan in Turkey, to one of Turkey’s richest people, Iran-born Riza Sarraf, to Sheikh Sultan Bin Khalifa Al Nahyan, the son of the ruler of Abu Dhabi and one of the world’s richest people. The smuggled object in question was gold, billions of dollars worth of gold.

The focus of the story was the previously unknown Dubai gold trading house, Gold.AE, until recently managed by one Mohammed Abu-Alhaj, which as we showed was the primary conduit by which Turkish physical gold found its way “legally” in Dubai, from where it subsequently left for Iran but not before pocketing millions in “commissions.”

As we reported, Gold.AE – a subsidiary of Gold Holding, the largest gold-focused investment holding company headquartered in Dubai – and the company perhaps best known for launching gold ATMs in the Emirates back in 2010…

… announced a few days ago that it had suddenly and unexpectedly gone out of business, after an inquiry by minority shareholders announced that the entire old “management team abruptly resigned with no notice” and that “there had been substantial withdrawals from the company’s account to the personal accounts of some of the management and the majority shareholders.”

In other words, the company which was used as a cover for billions in gold transactions over the last several years in the Turkey-Iran gold smuggling trade, was suddenly not only insolvent but had been thoroughly plundered of all its holdings, including a thorough plundering of client accounts.

Think the Corzining of MF Global, only on steroids, goes to Dubai.

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

Exclusive: “And It’s Gone… It’s All Gone” – The One Gold Scandal That Goes To The Very Top

Exclusive: “And It’s Gone… It’s All Gone” – The One Gold Scandal That Goes To The Very Top

Long before Turkey was flagrantly arming and funding the CIA-created “terrorist organization” known as ISIS, there was another, far more elaborate way in which Turkey was flaunting international sanctions against an ostracized state – in this case Iran – which involved an epic gold smuggling triangle of Hollywood-thriller proportions, all made possible thanks to the United Arab Emirate city of Dubai.

Best known known for its luxury shopping, ultramodern architecture including the world’s tallest building, a lively nightlife scene, and a facade of openness and decorum, what Dubai is less known for is its unprecedented seedy underbelly of corruption and untouched criminality among the handful of billionaire oligarchs, princes, sheiks and sultans, who quietly dominate the local (and global) power and financial structure.

But first, a little history.

It may seem like a distant memory now, but just a few short years ago, instead of a close ally of Barack Obama, Iran was a pariah state subject to international financial sanctions due to its nuclear program development, one which Israel had repeatedly (and famously) threatened would attack preemptively to prevent Iran from obtaining a nuclear weapon.

Iran, of course, had no choice but to find ways to keep its economy going, and in order to circumvent these sanctions, it resorted to the oldest form of trade known to man: gold. 

This, in itself, is not surprising. What is surprising is how and with whom Iran collaborated to breach the international embargo in order to obtain this valuable and much needed gold, which it could then barter with other countries – notably those along the Pacific Rim – in exchange for any and all needed products and services.

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

Gulf Markets Melting Down: Saudi Arabia Plunges 7%, Dubai Sold

Gulf Markets Melting Down: Saudi Arabia Plunges 7%, Dubai Sold

Following the end of a horrible week for petroleum importers (not to mention shale producers) despite WTI briefly dipping under $40 (wasn’t this supposed to be great news for the US economy?) we have the start of a just as ugly week for the Persian Gulf oil exporters, whose Sunday market open can be described as a continuation of last week’s broad risk carnage, and where Saudi Arabia, until recently the region’s best performing market, is now down 10% for the year and down 30% compared to 12 months ago.

Appropriately enough following our overnight article lamenting the death of the Petrodollar, the WSJ opens with a description of “stock markets in the petrodollar-dependent Persian Gulf tumbled Sunday to multi-month lows, spooked by sharply lower oil prices and a global equities selloff on growing concerns about China’s economy.”

Some examples:

Saudi Arabia, the Middle East’s biggest market, led the regionwide decline to finish the day nearly 7% lower. Dubai stocks dropped by a similar percentage, while regional peers Abu Dhabi and Doha’s markets both fell 5% each to extend recent losses.

Dubai stocks lost 7% to end at 3451.48, while its neighbor in the United Arab Emirates, Abu Dhabi’s market, dropped 5% to 4286.49. Qatar’s main stocks benchmark finished down 5.3% at 10,750. The Gulf stock markets are open for trading Sunday through Thursday.

Investors took a lead from Saudi Arabia, the region’s biggest economy. Its stocks closed 6.9% lower at 7463.32 after Fitch Ratings on Friday downgraded its outlook for the kingdom to negative from stable because of weaker oil prices.

The Saudi economy is heavily dependent on oil, which accounts for 90% of fiscal revenues, 80% of current account revenues and 40% of the gross domestic product, analysts at Fitch noted.

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

 

Japan Expands, Extends Oil Storage Lease Contract With Abu Dhabi – Bloomberg

Japan Expands, Extends Oil Storage Lease Contract With Abu Dhabi – Bloomberg.

Japan expanded and extended for three years a lease that allows Abu Dhabi to store crude oil in the Asian country.

Abu Dhabi’s leased capacity at the Kiire terminal in Kagoshima prefecture, in southwestern Japan, will rise to 1 million kiloliters (6.3 million barrels), Atsushi Taketani, director of the Japanese trade ministry’s petroleum refining and reserve division, said in an interview. The storage project was started at about 600,000 kiloliters in 2009, according to the ministry.

Japan last year agreed to extend a similar contract with Saudi Arabia that lets the kingdom store crude in tanks in Okinawa. In exchange for providing capacity to two of its biggest oil suppliers, Japan has priority for buying the stored crude in the event of an emergency, according to the ministry.

Vice Minister of Economy, Trade and Industry Yosuke Takagi and Hamad Al Hurr Al Suwaidi, a member of the Supreme Petroleum Council, signed a memorandum of understanding to extend the lease on Nov. 9 in Abu Dhabi, capital of the United Arab Emirates, Taketani said.

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

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