🔹Oil prices hit 7-month highs amid an expected extension of a voluntary production cut by Saudi Arabia 🇸🇦 of 1 million bpd into October and Russia 🇷🇺cutting exports by 300,000 bpd in September, following a 500,000 bpd cut in August. China's 🇨🇳 manufacturing activity unexpectedly expanded in August.

🔹The price of Russia’s flagship crude grade, Urals, averaged $74 per barrel in August, way above the G7/EU price cap of $60 as Western shippers find alternative shipping insurance providers for Urals cargo and Russia's shadow fleet 🚢 continue to deliver oil bypassing the price cap.

🔹Russia has been exploiting a loophole in the oil price cap by selling their crude to India 🇮🇳 at below the price cap, but overcharged for shipping costs (since shipping costs are not included in this price ceiling).

🔹The oil price cap is evidently failing as President Putin recently signed into law amendments in the tax code in the energy sector which will narrow the discount of Urals crude to Brent to $20 per barrel 🛢 from September from a $25 discount. Russia also raised its oil export levy to $21.40 per ton started on September 1, the highest level this year, with the previous oil export duty being $16.90 per ton.

🔹Moscow is unlikely to give in to the mandate discounted price in the foreseeable future. The EU 🇪🇺 will now be challenged to increase oil imports from countries without discounts, leaving Europe to face the surge in oil prices for the short term at least.

🔹The IEA reported Russia's revenue from oil exports for July hit the highest level 📈 in 2023 (up by $2.5 billion to $15.3 billion). The US's 🇺🇸 Strategic Petroleum Reserve (SPR) is still sitting at a near 40-year low of 349.5 million barrels.

🔹EU 🇪🇺 imports of Russian liquefied natural gas (LNG) were up 40% between January and July 2023. The EU is set to import record volumes of LNG🚢 from Russia 🇷🇺 this year, despite claims of cutting reliance on Russian energy. In the first 7 months of 2023, Belgium 🇧🇪 and Spain were the second and third-biggest buyers of Russian LNG behind China 🇨🇳. For this period, Russian LNG accounted for 21.6mn cubic metres (cm), or 16%, of the EU’s total 133.5mn cm of LNG imports.

🔹In that period, EU’s purchases of Russian LNG were worth $5.75 billion (5.29 billion euros). Spain is bought up 18% and the EU 52% of Russia’s LNG exports. Spain's 🇪🇸 Energy Minister T. Ribera ironically said Russian LNG should be part of EU talks on sanctions. The jump comes from a low base as the EU did not import significant amounts of LNG before Feb. 2022 due to its reliance on piped gas from Russia.

🔹The EU 🇪🇺 have worked so hard to wean themselves off piped Russian gas only to replace it with more expensive shipped equivalent from the US, Russia and others. EU officials have pointed to an overall effort to phase out Russian fossil fuels by 2027. EU energy ministers plan to ban Russian and Belarusian 🇧🇾 co.' s booking capacity on EU LNG infrastructure in an effort to find a legal way to prevent imports.

🔹The EU also banned Russian entities from storing gas in the bloc and prohibited most new investments in the Russian energy sector. Spot LNG prices have fallen significantly since last summer. As of last month, prices cooled by nearly 83% compared to 2022. The EU's gas storage tanks are nearly 92% full.

🔹However, market uncertainties, including the risk of strikes at LNG hubs in Australia 🇦🇺, or a spike in industrial demand can ignite volatility in European gas markets. A full energy crisis last year was avoided after LNG imports to Europe ballooned from 80 bcm in 2021 to 130 bcm in 2022, more or less replacing all the missing Russian gas.

🔹The prices of Vietnam's 🇻🇳 exported rice (the world's third-largest exporter after India and Thailand) remain the highest in the world, with 5% broken rice reaching US$638 per tonne, following India's 🇮🇳 recent ban on its largest rice export category (non-basmati white rice). At the Mekong Delta known as Vietnam's rice bowl, where 90% of the nation’s rice exports are grown, farmers said they can barely keep up with the demand.

🔹 Last month, India has imposed a 20% duty on exports of parboiled rice with immediate effect. Rice prices in key exporting countries have climbed around 20% since India's export ban. They have made an exemption for friendly countries, with export quotas of non-basmati white rice to Bhutan 🇧🇹, Mauritius 🇲🇺and Singapore 🇸🇬.

🔹Rice🌾 prices soared to the highest in almost 15 years in Asia on mounting concerns over global supplies as dry weather (drier conditions with the onset of El Nino) threatens production in Thailand.

🔹Last week, the Philippines 🇵🇭 (world's second-largest rice importer) imposed a price cap on retail rice due to soaring food inflation. Indonesia is looking to import rice from Cambodia 🇰🇭 and Myanmar 🇲🇲 to top up gov't stocks. Myanmar plans to temporarily restrict rice exports to control rising domestic prices. In July, The UAE banned rice exports and re-exports for four months.

🔹Earlier this year, Thailand 🇹🇭 saw strong demand & a strengthening Thai currency has also helped to push up dollar-denominated rice prices. In September 2022, India banned exports of broken rice and imposed a 20% duty on exports of various grades of rice. This came after planting areas of the crop declined by 13% due to heatwaves and drought. China 🇨🇳 is virtually self-sufficient in rice. Imports of rice only account for 3% of the nation's total demand.

Video source - CNA

The de-industrialisation of Germany 🇩🇪- Part 10:

🔹The HCOB Flash Germany Composite PMI Output Index - which gauges activity in the manufacturing and services sectors -fell to 44.7 in August, from 48.5 in July, the lowest level since May 2020.

🔹German Chamber of Commerce and Industry Survey -
52% of co.'s say the 'green' energy transition has a negative impact on their own business.
32% of industrial co.'s plan relocation of capacities abroad or reduction of production in Germany.

🔹 Mail order retailer 📦, Klingel GmbH (Bell group) declares bankruptcy after 100 years in operation.

🔹German industrial 🏭 production weakened further in July, with energy-intensive industry approaching again the low, set in Dec. 2022.

🔹50,600 businesses closed down in H1 2023, an increase 📈 of 12.4% compared to H1 2022. In balance, there has been an increase in new start-ups. The number of corporate insolvencies rose 23.8% in July compared to July '22.

🔹 The outflow of capital from Germany since 2013 has exceeded $600 billion, with almost half of that happening in the last two years.

🔹Allensbach Survey -
58% of business executives said that Germany has passed its zenith.
76% of managers believe that concerns are justified over de-industrialization.

🔹 The ifo Business Climate Index (July 2023) has fallen 📉 for the third month in a row.

🔹The number of company bankruptcies in EU 🇪🇺 countries in Q2 2023 increased by 8.4% compared to Q1, reaching the highest level measured since 2015, when data began to be collected.

Previous parts on the de-industrialisation of Germany 🇩🇪:

💠 Part 9 - Aug. '23

💠 Part 8 - Jun. '23

💠 Part 7 - May '23

💠 Part 6 - Mar '23

💠 Part 5 - Feb. '23

💠 Part 4 - Jan. '23

💠 Part 2 and Part 3 - Nov. '22

💠 Part 1 - Oct. '22

Video source - AfD Clips

Gold Update:

🔹 China 🇨🇳 added to its gold reserves for a 10th straight month, as it tries to diversify away from the US dollar. The PBOC reserves rose by 930,000 troy oz. in August with total reserves at 2,165 tons officially (True estimates may be closer to 5,029 tonnes). This is the longest buying spree by the PBOC since Sept. 2019 and before that the last wave of inflows was in late 2016.

🔹 Around the world, institutions added 55 tonnes of the yellow metal to their reserves last month. The National Bank of Poland 🇵🇱 in July, purchased 22 tonnes, taking the institution’s total reserves to 299 tonnes. The Central Bank of Türkiye 🇹🇷 also added an extra 17 tonnes of gold to its reserves.

🔹Egypt 🇪🇬 ranked fifth in the Arab world after its gold reserves rose by 24% to reach 125.8 tons in first half of 2023. Belarus, under Western sanctions had its gold and foreign currency reserves went up by $17.7 million (or 0.2%) in August.

🔹Both the Iranian 🇮🇷 state and private citizens appear to have been turning to gold recently, after May's demand for gold coins and bars by Iranians had jumped dramatically, with investment soaring to 13 tons over the first months of 2023 – 26 percent more than the 10 ton five-year quarterly average.

🔹 An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia 🇷🇺. These developments have spooked the West. The IMF recently demanded that the gov't of Ghana 🇬🇭 make full disclosure of it's ongoing gold for oil trade deals if it wants the IMF to fulfil a $3 billion Extended Credit Facility programme.

Video source - GoldSilver

Highlights from the 8th Eastern Economic Forum (EEF), held on 10–13 Sept. 2023 in Vladivostok, Russia 🇷🇺. Delegations from 53 countries along with 300 companies from China attended to strengthen ties and investment opportunities, with a main focus on Russia's Far East.

🔹Foreign Affairs:

Russia pushes for Mongolia 🇲🇳 to become a full-fledged member of the SCO. Laos 🇱🇦 Vice President Pany Yathotou expresses gratitude to Russia for its assistance since 2018 in locating and eliminating unexploded mines left over from the Vietnam War. Russia is working towards abolishing visa requirements for a number of Asian countries. Russia issued more than 600,000 entry visas in the first eight months of 2023, which is twice as many as in the same period of 2022.

🔹Finance/ Economy:

Russia is working on launching MIR payment cards in Thailand 🇹🇭. Projects with investments of more than $2.07 billion USD are planned on Russky Island in Russia’s Primorsky Territory. Payments by small and mid-sized businesses in yuan soared six-fold in the first 7 months of 2023.

🔹Infrastructure/Development:

Russian nuclear Rosatom and China's 🇨🇳 LS Group, will cooperate on a hydrogen plant project in Sakhalin. High-speed motorways will be built via Siberia and the Far East to the Pacific in an integrated 'Russia' transport corridor. Copper concentrate production started at Udokan, Russia's largest undeveloped copper deposit as an EEF milestone.

🔹Trade:

X5 Group to launch a multi-temperature wholesale and distribution logistics hub in Khabarovsk, 30 km from the China–Russia border. Russia Post plans to open a logistics co. in the UAE 🇦🇪. Trade turnover between Russia and the Asia-Pacific region surged 13.7% in 2022 and has jumped another 18.3% to date in 2023.

🔹Lithuania 🇱🇹 will confiscate Russian cars upon entry of it's borders except those using the Kaliningrad transit. Estonia 🇪🇪 is considering a proposal to re-register or confiscate cars with Russian license plates already within its borders. Latvia 🇱🇻 declares it can exercise confiscation of vehicles at the border in some cases.

🔹The European Commission 🇪🇺 issued guidelines to ban (with cases including confiscation) vehicles 🚗 🚛 (both private & commercial) with Russian license plates entering EU member states. The guidelines also include a ban on items such as razor blades, deodorants, soap, clothing etc. , but also items that could have a military application, like pneumatic tires, radio systems and electric generators.

🔹Estonia intends to be the first in the EU 🇪🇺 to 'legalise' the confiscation of sanctioned Russian assets. Despite the EU's ban, Russia will not introduce retaliatory restrictions for EU citizens. The EU is reportedly planning to siphon off profits accrued by more than €200 billion of frozen Russian Central Bank assets.

🔹EU states are considering Italy's anti-mafia type laws as a concept to confiscate sanctioned Russian assets. EU officials are fixed on legalizing illegality by confiscating private property outside the framework of a criminal trial. The EU has been looking into the 'legal' options (non-existent) to confiscate Russia’s 🇷🇺 assets frozen under sanctions.

🔹The EU's action undermines ‘Lex Mercatoria’ (Latin – ‘Merchant Law’). The autonomous legal order ⚖️ of international economic relations for trade & rules for settling disputes. The West has now destroyed, how money & currencies function in relationship to trade & private property rights.

Video- Daniel Ferrie - European Commission spokesperson.

🔹 Japan 🇯🇵 - The yen's significant devaluation against the US dollar 💵 is eroding the purchasing power of Japanese residents, pushing them to invest in gold. Buying of yen-denominated gold at the nation’s largest dealer has driven the price of the yellow metal above the ¥10,000 per gram level. Gold prices have shot up 📈 about 70% over the past three and a half years from under ¥5,900 yen in January 2020.

🔹 This reflects the dramatic collapse in the value of the yen 💴, which recently passed ¥147 against the US dollar. The BoJ bought a record 135 trillion yen ($1 trillion) in gov't bonds in fiscal 2022 as it tried to keep interest rates low. Still, interest rates continued to rise, forcing the BOJ to raise the target ceiling for the yield on 10-year gov't bonds. Investors sold government bonds, leading to a spike in interest rates.

🔹 The BOJ owned more than 50% of outstanding Japanese gov't bonds as of the end of 2022. In a strange twist, Japanese investors bought the most overseas bonds since March 2020, in early September 2023. Maybe Japanese banks bought U.S. 🇺🇸 long-term treasuries amid the idea that rate rises are close to over?

🔹 The BoJ's ultra-low interest rate policy has failed to boost the world’s third-largest economy in a sustainable way, sending inflation toward a 40-year high. Japanese investors sold a record amount of overseas debt last year as local yields rose on speculation that the BOJ would normalize policy.

🔹The IMF proposed to the BoJ to allow for more flexibility in long-term Japanese gov't bond yields that have been kept at depressed levels amid the "costly" side-effects of prolonged monetary easing. In Jan. 2023, the 🇯🇵 BOJ made massive unscheduled bond purchases after it announced a widening of the range in which the 10-year yield can trade to about 0.5% from 0.25%.

Video source - Sean Foo

🔹Director of the Office of China's 🇨🇳 Foreign Affairs Commission and Foreign Minister (FM) Wang Yi visited Russia during Sept. 18-21 on invitation from the Russian Security Council Secretary N. Patrushev. He is taking part in the 18th round of Russian-Chinese strategic security consultations. Secretary of the Mongolian 🇲🇳 National Security Council J. Enkhbayar was also present at one of the consultations.

🔹Russian 🇷🇺 FM S. Lavrov informed his visiting Chinese counterpart, about the results of North Korean leader Kim Jong Un’s visit to Russia. Minister Yi informed his Russian counterpart, about topics talked with US 🇺🇸National Security Adviser J. Sullivan. Russia's Security Council and FM Yi exchanged views about Washington's creation of new blocs and dividing lines in the Asia-Pacific region, as well as the strengthening of NATO's presence in Asia and the Pacific, which is aimed at undermining the established security system in the region.

🔹Russian President V. Putin will visit China in October for the Belt and Road Forum. China and Russia will strengthen security cooperation in response to the current challenges. Russia hopes for coordinated efforts by both countries at the upcoming Asia Pacific Economic Cooperation summit. Both countries have already achieved positive results from successfully coordinating policies with the states of the Global South.

🔹Beijing and Moscow are pursuing an independent foreign policy and their cooperation is not aimed against other countries. According to Prof. Guo Xinning, China 🇨🇳and Russia 🇷🇺may promote closer cooperation between the Shanghai Cooperation Organization and the Collective Security Treaty Organization.

🔹Ukraine 🇺🇦 filed a complaint at the World Trade Organization against Hungary 🇭🇺, Poland 🇵🇱and Slovakia 🇸🇰 who is keeping their borders closed to importing Ukrainian grain after an EU 🇪🇺 restriction expired on Sept. 15 which previously allowed these countries to ban domestic sales of Ukrainian wheat, maize, rapeseed and sunflower seeds. They however are allowing transit of Ukrainian grain.

🔹Previously, Poland, Bulgaria 🇧🇬, Hungary, Romania 🇷🇴 and Slovakia had signed off on a joint declaration regarding the ban’s extension until at least the end of 2023. Post Sept. 15th, Bulgaria and Romania is allowing Ukrainian grain imports again due to Kiev's plan to start “legal measures” such as a 30-day licensing system, to avoid new surges in grain exports.

🔹Now, Croatia 🇭🇷 has joined Poland, Hungary and Slovakia, with PM Andrej Plenkovic referring to importing Ukrainian grain: "is cheaper than ours, which would mean our farmers are in trouble”. Slovakia's agriculture minister, Jozef Bires, said Ukraine had “no legal basis” for the WTO complaint. Poland’s minister for European Union affairs, Szymon Szynkowski vel Sek, said Ukraine was hurting itself with the WTO move. Ukraine threatens to consider retaliatory trade restrictions.

🔹Logistical bottlenecks mean large quantities of Ukrainian grains 🌾, have ended up in central European states, hitting prices and sales of local farmers 🚜. The termination of the Black Sea grain deal increases the pressure on the land transport of agricultural products in Europe and can aggravate tension between Ukraine and its neighbours.

Video Source - TVS News Poland

🔹Russia 🇷🇺 (the world’s single biggest seaborne exporter of diesel-type fuel for 2023) temporarily banned exports of diesel in a bid to stabilize domestic supplies, driving European prices higher in already tight global fuel markets. The country shipped more than 1 million barrels a day during January to mid-September, with Türkiye 🇹🇷, Brazil 🇧🇷 and Saudi Arabia 🇸🇦 being among the main destinations.

🔹Diesel ⛽️prices in Europe jumped on concern the measure will aggravate global shortages. The global refining system will struggle to replace those lost Russian volumes at a time when global diesel inventories are already at low levels. Despite the US & EU ban on importing Russian diesel directly, any shrinking in global oil supply, absent demand shrinking too, will drive energy prices up.

🔹Rising diesel prices coinciding with a rally in oil prices, is fanning fears that inflation could surge again in Europe, US and UK. In northwest Europe, the premium of benchmark diesel futures to crude oil, (ICE Gasoil crack) climbed 4.51% higher on the day of the announcement.

🔹Kremlin spokesperson D. Peskov said, "It was necessary to regulate this market against the background of harvesting work 🚜, agricultural processes... the ordinary consumer, not only the wholesale, but also the retail market". As for gasoline, exchange prices for Ai-92 grade in the European part of Russia have fallen by more than🔻20% since Sept. 18 and prices for AI-95 by 🔻22%.

🔹There are a number of factors behind this diesel market supply tightness, including OPEC+ 🛢supply cuts, recovering air travel, limited refining 🏭 capacity growth, and in Europe, the struggle of being able to fully replace Russian middle distillates after the EU ban came into effect in February.

Photo sources: Commodity Insights Oil & Bloomberg

Copper Update: (N.B. Correlation sign between copper price fall and weakening economic activity world-wide).

🔹Declining prices in the spot market for copper have pushed the spread between the spot price and the price of futures traded on the London Metals Exchange (LME) 🇬🇧 for delivery three months out to its widest level since 1994 (photo). Inventories have piled up at LME warehouses around the world due to falling demand in the Chinese 🇨🇳 economy and a rising USD 💵 index (since July). Prices are around $8,102 a metric ton, the lowest since May.

(Reference note: In June 2023, copper available to the market in LME approved warehouses fell to the lowest 📉 level since October 2021.)

🔹Commodity trader Glencore bought at least 5,000 metric tons of Russian copper routed through Türkiye to Italy 🇮🇹 in July without breaching sanctions. UK and EU 🇪🇺 sanctions were placed on executives of the Russian 🇷🇺 copper co. UMMC but not the company itself. After Glencore's trade in July, the US 🇺🇸 has now sanctioned UMMC. Imports of Russian copper by Türkiye 🇹🇷has nearly tripled in the first 7 months of 2023.

🔹Output from the world’s biggest copper supplier 🇵🇪 after Chile this year jumped 20% through July from the same period in 2022 as mines recovered from blockades. Peru’s recovery from protests triggered by last year’s ouster of former President Pedro Castillo is helping replenish global stockpiles of the metal.

🔹Fraudsters have robbed Europe’s largest copper producer of €185 million worth of the metal. Germany’s 🇩🇪Aurubis found that it had paid inflated invoices for shipments of scrap metal and other inputs, based on samples that had been manipulated to show a much higher copper content than turned out to be the case.

🔹Panama’s 🇵🇦 construction workers’ union blocked highways yesterday to demand that lawmakers reject a copper mining contract with a Canadian 🇨🇦 miner. Workers claim the contract grants the co. control of land, air and maritime space.

🔹Indonesia 🇮🇩 has launched a National Task Force to promote local-currency transactions (LCT). "Bank Indonesia is confident that the National LCT Task Force will be an effective coordination forum to strengthen policy synergy between government ministries and agencies in an effort to increase the use of local currencies in bilateral transactions between Indonesia and major trading partners," ——Governor of Bank Indonesia, Perry Warjiyo.

🔹Indonesia's confidence in the National LCT Task Force isn’t just about currency; it’s about forging stronger, more independent bilateral ties with global trading partners. The gov't and Bank Negara Malaysia 🇲🇾 will continue to expand the Local Currency Settlement Framework (LCSF) cooperation with Indonesia.

🔹Meanwhile, new revelations reveal that the US's 🇺🇸 National Endowment for Democracy (NED), a notorious CIA front, is laying the foundations for a color revolution in Indonesia 🇮🇩under the aegis of “democracy promotion.” The NED is covertly encouraging and bankrolling the activism of opposition parties and trade unions while cementing its graduates of NED training programs ahead of the Feb. 2024 presidential elections. Some of the same tactics the NED employed in Ukraine's 🇺🇦 Maidan 2014 coup.

🔹Last month, Vietnam 🇻🇳 joined ASEAN members Indonesia, Malaysia, Thailand 🇹🇭, the Philippines 🇵🇭 and Singapore 🇸🇬 to establish cross-border payments mechanisms through the Regional Payment Connectivity initiative.

🔹Indonesia plans to use local currencies in bilateral trade with India 🇮🇳. In May, South Korea 🇰🇷 and Indonesia signed a MoU to cooperate on promoting the use of their currencies for bilateral transactions. The Bank of Indonesia is working on its own domestic card payment system as part of a strategy to reduce dependency on foreign systems and protect transactions from geopolitical fallout.

Video source - SEA Today News

🔹State-run China 🇨🇳 National Petroleum Corp., is negotiating with Russia 🇷🇺 to finalise the price of gas supply under the proposed Power of Siberia-2 pipeline amid expectations that a deal could emerge as early as this year if the parties agree. This year, Russia expects to sell gas to China at an average of $297.3 per 1,000 cubic meters, while the remaining clients in Europe 🇪🇺 and Türkiye 🇹🇷 will pay an average of $500.6.

🔹The heads of Russian energy giants Gazprom and Rosneft, Alexei Miller and Igor Sechin, will accompany President Vladimir Putin to China next month. The Power of Siberia-2 pipeline, would traverse Mongolia 🇲🇳 and have an annual capacity of 50 bcm.

🔹The delivered cost of Power of Siberia 2 is expected to be cheaper than most new LNG imports in the northern and central coastal demand centers in China. From Russia's side, Western Siberia gas is already developed with low breakeven cost to Gazprom and a shorter route via Mongolia that lower the project cost.

🔹Russian companies supplied 3.27 billion cubic meters of gas to China via pipelines and in LNG 🚢 form in July 2023, setting an all-time record for trade between the two countries. Gazprom supplied nearly 2 bcm of gas to China via the Power of Siberia pipeline, and LNG exports added another 1.3 bcm via around 15 consignments.

🔹China's natural gas demand this year is expected to grow by 8% from 2022. Imports of Russian piped gas had jumped 54% over the course of 2022, as Russia continues to make deliveries through the Power of Siberia which is expected to reach full capacity of 38 bcm annually by 2027.

🔹The billionaire chair and founder of China’s 🇨🇳 Evergrande Group is being investigated and under police surveillance over suspected “illegal crimes,”. Trading of Evergrande shares were halted on the Hong Kong 🇭🇰 Stock Exchange today, 26th Sept., amid mounting concern over the company's plan to restructure and fend off the looming specter of liquidation. Last week, police detained staff of Evergrande’s wealth management unit after the co. failed to repay investors.

🔹It marks another low for the firm which was declared to be in default in 2021 after missing a crucial repayment deadline, triggering China's current real estate 🏢 market crisis. With more than $300 billion in liabilities - roughly the size of Finland's GDP- Evergrande is the face of a debt crisis in China's property sector.

🔹In 2020, Beijing 🇨🇳 brought in new rules to control the amount owed by big real estate developers. The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat. Now it is struggling to meet the interest payments on its debts. This uncertainty has seen Evergrande's shares lose more than 🔻99% of their value in the past three years.

There are several reasons why Evergrande's problems are serious.

🔸Many people bought property from Evergrande even before building work began. They have paid deposits and could potentially lose that money if it goes bust.

🔸Firms doing business with Evergrande, including construction and design firms and materials suppliers are at risk of incurring major losses, which could force them into bankruptcy.

🔸If Evergrande defaults, banks and other lenders may be forced to lend less, which can lead to a credit crunch.

Video source - Reuters

🔹The Central Bank of Egypt 🇪🇬, and the Central Bank of the UAE 🇦🇪have established a bilateral currency swap agreement valued at approximately $1.4 billion. Up to 5 billion dirhams and 42 billion Egyptian pounds would be allowed for exchange. The deal is part of Egypt's efforts to find solutions for its ongoing economic challenges and crisis.

🔹Egypt 🇪🇬is battling its worst foreign currency squeeze in years. The country has devalued the pound three times since early 2022, allowing it to lose almost half its value against the USD 💵. The IMF is urging Egyptian authorities to permit greater flexibility in the country's currency before providing additional funding as part of a $3 billion rescue program.

🔹The UAE and Egypt (both new BRICS members) are now also part of a BRICS research group looking into potential agreements on a basket of local currencies and payment systems so BRICS nations can pay each other based on a set of solutions comparing currency rates. Note that the UAE (new member) and Egypt are also dialogue partners of the Shanghai Cooperation Organisation.

🔹The UAE 🇦🇪 offloaded $4 billion worth of US 🇺🇸 treasury bonds in June, making it the second consecutive month the country sold US government debt.The UAE and India 🇮🇳 recently signed an agreement that focuses on creating a Local Currency Settlement System, promoting bilateral transactions using the Rupee-Dirham.

🔹Previously, Russia's 🇷🇺largest oil producer Rosneft and Indian refiners agreed to use the Asia-focused Dubai 🇦🇪 oil 🛢 price benchmark. India have begun paying for this oil in UAE dirhams instead of USD.

🔹Slovakia’s populist former prime minister, Robert Fico, who campaigned on a pledge to end military aid to Ukraine, had his SMER-SSD Party winning the most seats in the country's elections (42 of 150 seats). With no party winning a majority of seats, a coalition gov't will need to be formed. The liberal, pro-western PS Party finished second with 32 seats.

🔹In third is the Hlas Party, a spin-off from SMER-SSD Party in 2018 with 27 seats. The pro western PS Party is aiming to get Hlas to form a coalition with them to prevent Fico and his party from being in gov't. However, analysts said Slovakia’s new ruling coalition would most likely be formed by Smer, Hlas and the nationalist, Slovak National Party (SNS), which would have a slim but functioning majority of 81 seats.

🔹Fico opposes EU sanctions on Russia, questions whether Ukraine can force out the invading Russian troops and wants to block Ukraine from joining NATO. He proposes that instead of sending arms to Kyiv, the EU and the U.S. should use their influence to force Russia and Ukraine to strike a compromise peace deal.

🔹Ukraine 🇺🇦 filed a complaint at the World Trade Organization against Slovakia 🇸🇰 along with Hungary & Poland who are keeping their borders closed to importing Ukrainian grain. Slovakia 🇸🇰, along with the Czech Republic, Hungary, and Croatia have managed to remain exempted from the EU embargo on Russian oil coming into their respective countries via the southern branch of the Druzbha pipeline.

Video source - Al Jazeera

🔹Leading West African cocoa producers Ghana 🇬🇭 & Ivory Coast 🇨🇮 face an uphill battle to comply with a new EU regulation preventing commodity imports linked to forest loss. The EU's De-forestation Regulation (EUDR) came into force in June 2023 with an 18-month transition for companies. Ambassadors from 17 countries have described the EUDR as an "inherently discriminatory and punitive unilateral benchmarking system. The EU's law disregards these countries' efforts to balance nature conservation with people's livelihoods.

🔹The EU 🇪🇺 did not make clear who should pay for carbon credits to offset any de-forestation, which is turning out to look like the producers from mostly poorer countries should bear the costs to be able to export into the EU. In Ghana, farmers don't get their fair share of profits because cocoa beans are not sold at the true market value. These regions need better infrastructure to for better market access and reducing losses. If the EU wanted only ethical cocoa entering Europe, then investment is a better solution than carbon credits.

🔹Even worse, Africa have historically fetched lower carbon credit prices, currently averaging less than $10 per tonne compared to over $100 in other countries. One of the better environmental solutions the Ghanaian 🇬🇭 gov't have started is for farmers to plant shade trees 🌳 to reduce the heat on the ground and increase production; they also learn how to prune effectively and apply other sustainable farming techniques.

🔹Cocoa prices have soared 47% in the past year due to El Nino, disease and other factors. Multinational chocolate🍫 makers ($130 billion in annual profits) have done everything possible to pay extremely low prices for the raw cocoa beans from Africa, only to have an a massive profit margin for the final product. To begin to counteract this, Africans are reviewing a feasibility study on establishing an African Cocoa Exchange.

Video source - African Stream

🔹Data from SWIFT (global messaging service for financial transactions) - The use of the euro 💶 has collapsed in the past nine months. It’s share in transactions dropped from 38% in January to 23.2% at the end of August, which is the lowest level recorded in, at least, twelve years. The euro has given up all the gains it made against the dollar from December 2022 to July 2023. Since mid-July, the common currency has lost nearly 8% against the dollar.

🔹Meanwhile, the European Bank 🇪🇺 for Reconstruction and Development Chief Economist Beata Javorcik warns that Russia's 🇷🇺 increase in the usage of the Chinese yuan is coming at the expense of the US dollar 💵. She continued that third countries who are not enforcing sanctions on Russia are using swap lines with the People’s Bank of China 🇨🇳.

🔹Payments using the US dollar (via SWIFT only) is climbing however at the cost of the fall in euro usage. One possibility, is Europe using USD for commodities in international markets instead of euros. The US dollar’s share of international payments via the SWIFT system hit 48% in August, the highest level since such data began being gathered. (This amidst USD denominated forex reserves in many countries in decline?).

🔹Note, de-dollarization is happening outside the SWIFT system with Russia's SPFS, China's CIPS and India's SFMS systems leading the way. In addition countries in the global south are conducting bi-lateral swaps in local currencies. Most recently BRICS+ members, UAE 🇦🇪& Egypt 🇪🇬have done so. ASEAN members Vietnam 🇻🇳, Indonesia 🇮🇩, Malaysia 🇲🇾, Thailand 🇹🇭, the Philippines 🇵🇭 and Singapore 🇸🇬 are establishing cross-border payments mechanisms using local currencies.

🔹The OPEC+ ministerial panel made no changes to the group's oil output policy (of previous cuts), and Saudi Arabia 🇸🇦 said it would continue with a voluntary cut of 1 million bpd until the end of 2023, while Russia 🇷🇺would keep a 300,000 bpd voluntary export curb until the end of December.

🔹The US 🇺🇸 Strategic Petroleum Reserve (SPR) fell by 300,000 barrels last week, with the SPR inventory still sitting at a near 40-year low of 351.3 million barrels. The Energy Department has already been forced to scrap plans to buy oil to refill the SPR due to high prices. In case of an emergency the US has 17 days of supply in the SPR.

🔹Russia’s oil and gas revenues increased 📈 by 15% from August to $7.4 billion in September, due to higher budget proceeds from the extraction tax and export duties. Imports of Russian crude oil to India 🇮🇳last month posted a substantial increase of 80% on the year, after a dip over the summer.

🔹Russia is not selling crude under the $60 price cap mechanism introduced by the G7 and EU 🇪🇺. Russian Urals crude 🛢 traded at around $83 per barrel in September, $23 over the imposed price cap. India bought Russian Urals crude at discount, $20 over the price cap.

🔹Russian seaborne oil exports soared 24% (based on weekly sales) to a three-month high in the week up to October 1. Crude oil exports from Venezuela 🇻🇪 last month topped 800,000 barrels daily, which was the second-highest monthly export rate since the start of the year.

🔹Iraq 🇮🇶 will ban cash withdrawals and transactions in U.S dollars as of Jan. 1 2024 in the latest push to curb the "misuse of its hard currency reserves" through evasion of U.S. sanctions on Iran 🇮🇷 and Syria 🇸🇾. The move aims to stamp out the "illicit use" of some 50% of the $10 billion that Iraq imports in cash from the Federal Reserve Bank of New York (FRB-NY) each year. The country has been facing USD 💵 shortages for a long time.

🔹It's also part of a broader push to de-dollarize an economy that has seen the greenback preferred over local notes by a population weary of recurring wars and crises following the 2003 U.S. 🇺🇸 invasion. Dollars deposited in 2024 could only be withdrawn in local currency at the official rate of 1,320. The parallel market rate of the Iraqi dinar sat at 1,560 on Oct. 5th 2023. The ban would only apply to accounts receiving transfers from abroad.

🔹Iraq's regulation of wire transfers is set up with authorities in the U.S., where Iraq's $120 billion in reserves from oil 🛢 sales are held. Many local banks have already been limiting dollar cash withdrawals in the past months. Iraq is seeking a special shipment of $1 billion in cash from the FRB-NY, but U.S. officials have withheld approval.

🔹Iraqi 🇮🇶 officials with ties to powerful militias deeply involved in dollar transactions have denounced new restrictions imposed by Washington, calling them an infringement on Iraqi sovereignty. The FRB-NY has also blacklisted several Iraqi banks suspected of money laundering and carrying out suspicious transactions.

🔹The Gulf War in 1991, followed by harsh UN 🇺🇳-imposed economic sanctions and the US-led invasion in 2003, caused a substantial devaluation of the Iraqi dinar. As a result, Iraqis have turned to the US dollar for a wide range of transactions.

Video source - FirstPost