Friday, 20 September 2019

Saudi Aramco: The Company and the State | Al Jazeera English (February 2019)


For the past two years, Saudi Arabia has prepared to place its national oil company on the stock market. Officials talked up the Saudi Aramco initial public offering (IPO) with international exchanges and global banks. It seemed like a great idea that the world's largest oil producing company, valued at $2 trillion, would become the world's largest ever traded stock.

There are many companies in the world which move and shake markets but perhaps no other organization essential to running a country. Aramco is unique and it runs no ordinary country. Saudi Arabia plays a key role in moving global oil prices. The oil market affects everyone on the planet directly or indirectly. Oil prices have developed and destroyed economies – Sudan and Venezuela being the most recent examples. So that company shedding its cloak of secrecy and deciding to go public is a huge deal. Specially for Saudi Arabia which is run by a monarchy and its affairs cannot be publicly evaluated or scrutinized.

The proposed listing of the national champion was a central part of the young Crown Prince Mohammed bin Salman's Vision 2030, a reform drive aimed at restructuring the kingdom's economy and reducing its dependence on oil revenue.

"I think there was a strong case for the IPO and there still is for the selling of a stake of Saudi Aramco and there are lots of reasons for it," explains Jim Krane, an energy researcher at Rice University’s Baker Institute for Public Policy. While Saudi Arabia, like other Gulf states have been trying to move away their economies from oil dependency for years, "the specter of climate action has finally made the Saudis get serious about it. And really the only way to diversify is through Aramco and Aramco is the source of revenues that the Saudi state needs to build other economic sectors."

The Kingdom holds about 16 percent of the world’s oil reserves and is the largest exporter of petroleum among OPEC countries. Nearly half of the country's GDP comes from oil and Aramco itself employs 65,000 people.

The concerns about radical changes in strategy put a spanner in the works for Saudi Aramco's public listing. For the first time in its history, an IPO would bring full public disclosure of Aramco's financial details, a feat that has never been made public.

"Probably the biggest downside is the transparency that would have resulted around Saudi oil reserves," says Krane, a number that doesn't move beyond 260 billion barrels. "If Saudi Aramco would have listed shares on the NYSE or the London stock exchange, the regulators would have forced Saudi Arabia to come clean on all of its reserves, how much of that is proven probable or otherwise."

A lot has changed since Mohammed bin Salman's international public relations drive such as the imprisonment of top Saudi businessmen, the murder of journalist Jamal Khashoggi, the continued war on Yemen, and the Saudi-led blockade on neighbouring Qatar. That has resulted in a flight of capital, reduced foreign investment, increased Saudi borrowing and a halt on Saudi Aramco's IPO.

This is not the first time reforms have been promised in Saudi Arabia. "In many ways, Mohammed bin Salman resembles his grandfather Abdul Aziz al-Saud," according to Chas Freeman, former US Ambassador to Saudi Arabia. The late leader united the country "with tribal marriages...conducted a war in the Saudi south, which took land from Yemen...suppressed religious uprisings and it worked." Whether his grandson's current ambitions will work is "unknown," says Freeman.

Aramco owns the largest refinery in the US, Motiva, and hundreds of facilities across the globe and funds universities, think-tanks, lobbying firms and controls a vast media empire. That money shapes policy and perceptions while also covering up criticism of the kingdom.

Saudi Aramco's failure to launch and a young leader's stumble from one crisis to another are directly linked. There is an urgency to rush into things but also a lack of experience. "That is really like planning for the growth of a nation, not the exit of an IPO," says Chad Brownstein, a hydrocarbon investment analyst and CEO of Rocky Mountain Resources. "And the growth of a nation takes a lot more planning than a couple of months."

Saudi Aramco: The Company and the State examines the reasons behind the ambitious offering, the politics of Saudi oil, the strategic importance of Aramco, a faulty evaluation, the challenges of transparency and what it means for an ambitious Prince's 'Vision 2030'.


Friday, 13 September 2019

The Last Time Banks Did This, They Caused a Financial Crash with Richard Wolff


Banks make their money from depositors by lending to others. Banks lend out almost all the money they have on deposit and this means that there could be a bank panic if a lender can’t retrieve their deposits.

The banks are supposed to hold a percentage of every dollar in reserves, which means they have a large pile of money. What happens if the government wants to stimulate the economy, by telling the banks they can lend out part of their held deposits or all of it? The last time the banks were able to lend out their reserves... we found ourselves in a global financial crash!

Dr. Richard Wolff explains to Thom how all this works.


Thursday, 12 September 2019

Brexit: Singapur an der Themse


ZEIT ONLINE: Auch Boris Johnson erwartet im Falle eines ungeordneten Brexits chaotische Zustände. Doch die nimmt er in Kauf, um ein marktradikales Wirtschaftmodell zu etablieren.

Auch wenn der britische Premier derzeit häufig bekundet, einen No-Deal-Brexit vermeiden zu wollen: Seine Regierung will den klaren Bruch mit der EU. Den würde sie sich einiges kosten lassen. Die Regierungspapiere Yellowhammer zeigen, was dem Land im Fall eines ungeordneten Brexits droht – ernste Verzögerungen an der Grenzabfertigung, Lieferengpässe beim Import von frischen Lebensmitteln und Medikamenten, im Zweifel gar Ausschreitungen.

Das alles nimmt Johnson in Kauf, denn ihm geht es um eine viel größere Frage: Mit welchem Wirtschaftsmodell kann sich das Vereinigte Königreich außerhalb der EU am besten positionieren?

Hier folgt der Premier den extremen Kräften in seiner Konservativen Partei. Schließlich waren sie es, die ihn protegiert haben, bis er Regierungschef wurde. Die Brexit-Hardliner, die in der European Research Group (ERG) zusammengeschlossenen radikalen Marktwirtschaftler, haben für Großbritannien schon lange ein ökonomisches Konzept. Sie lehnen die EU mit ihren vermeintlich protektionistischen Handelshemmnissen ab. Die meisten dieser EU-Gegner plädieren für starken Wettbewerb, freie Märkte und so wenig Regulierung und Einflussnahme durch den Staat wie möglich. Ihr Motto: keine Handelshemmnisse, keine Handelsquoten, keine Zölle. » | Eine Analyse von Bettina Schulz, London | Donnerstag, 12. September 2019

Central Banks Were Always Political – So Their ‘Independence’ Doesn’t Mean Much


THE GUARDIAN: The separation of monetary and fiscal policy serves the neoliberal status quo. It won’t survive the next crash

Independent central banks were once all the rage. Taking decisions over interest rates and handing them to technocrats was seen as a sensible way of preventing politicians from trying to buy votes with cheap money. They couldn’t be trusted to keep inflation under control, but central banks could.

And when the global economy came crashing down in the autumn of 2008, it was central banks that prevented another Great Depression. Interest rates were slashed and the electronic money taps were turned on with quantitative easing (QE). That, at least, is the way central banks tell the story. » | Larry Elliott | Thursday, September 12, 2019

Wednesday, 11 September 2019

Merkel Warns of Danger to EU of Singapore-style UK on Its Border


THE GUARDIAN: UK poses threat if it fails to match regulation standards of bloc, says German chancellor

Angela Merkel has highlighted the economic danger posed by Britain if it is allowed to become a Singapore-on-Thames as Boris Johnson’s Brexit envoy outlined a plan to ditch the UK’s commitments to stay aligned to the EU’s social and environmental standards.

In talks with European commission officials, the prime minister’s negotiator, David Frost, insisted that the UK is seeking a “clean break” from an array of the bloc’s regulations, a policy choice from the new British government that has caused alarm in other EU capitals. » | Daniel Boffey in Brussels and Jon Henley in Paris | Wednesday, September 11, 2019

Tuesday, 10 September 2019

The Guardian View on the Brexit Economy: The UK Risks Recession


THE GUARDIAN: There is no good time to be leaving the EU but this might be the worst – as a failure to learn the lessons of the 2008 crash leaves the country exposed to another downturn

There is more than a little truth in the idea that those who do not learn from history are condemned to repeat it. The global financial crisis was meant to lead to an economic and political reckoning for neoliberals carried away with their own ideology. They made all sorts of unrealistic promises that even a brief reflection would have shattered. Yet more than a decade on, the reckoning is far from over. This is especially true in the United Kingdom, whose prime minister peddles a sunny optimism in the merits of splendid isolation to fuel his Brexit fantasies. History ought to be a protection against this stripe of reckless utopianism. Yet in a world of instant headlines and short-term hits, who has time to dwell on the inconvenient truths? Still, dwell we must. David Blanchflower, the US-based economist, points out that thanks to a short-sighted austerity policy this has been the slowest economic recovery for 300 years. While politicians trumpet near-record levels of unemployment and wage growth, they fail to mention that the latest figures show that average earnings, when adjusted for inflation, stands today at £525 a week in total pay, £22 lower than in February 2008 » | Editorial | Tuesday, September 10, 2019

Thursday, 5 September 2019

Opinion: BoJo and This Brexit Nonsense


Three defeats in one day! Not bad going.

It appears that the prorogation of Parliament is backfiring – big time.

It is clear that the Conservatives have lost their way. Despite being a pro-business party, it was generally moderate, at least until Thatcher. But this band of shysters is making even Thatcher look moderate. That takes some doing.

But for all Thatcher’s faults, she did feel it was her duty to look after savers and pensioners. She also had an understanding of the cost of living. But that was because she rose through the ranks. As we know, Thatcher’s father was a successful grocer, and through that experience, she was able to relate to the needs, aspirations, and fears of the ordinary person.

One of the problems with today’s Tories is that the majority of them have been raised in great privilege. Many of them have never had to do a proper day’s work. They have certainly never had to earn a crust. As a result, they are totally and utterly out-of-touch with ordinary folk. What do they care about the prices of foods in supermarkets?

Furthermore, BoJo is under the influence of the ERG. That is not a good thing. JRM is a member of the ERG. What the hell does he know about real life? I understand that he has been advising his clients to take their money out of the UK because of Brexit. Such hypocrisy! Most of the 1% who are hell-bent on Brexit see our departure from the EU as a cash cow. They’ll impoverish the little people whilst enriching themselves – the 1%.

Brexit was supposed to be about regaining sovereignty. Personally, I never bought into the lie. And a lie it has turned out to be. We shall regain not an iota of sovereignty; rather, we shall be relinquishing the modicum of sovereignty regained to the US. We will fall right into the clutches of Washington. It will not be a partnership of equals––it cannot be because of the sheer differences in size and influence of the two countries––but an exercise in poodledom. It will also turn into a bonanza for US corporations: they’ll will come and buy up what is left of UK industry and commerce.

Brexit is not a game I wish to play; it must be thwarted at each and every turn. Moreover, the mere thought of coming out of the EU in the era of Trump fills me with dread and foreboding.

Our place is in Europe: we must take our full part in its continuing development; and we must fashion it in the image of our liking.

People seem to think that the US is a WASP country. It no longer is. The demographics of the US have changed a lot since the 40s and 50s. The growing communities in the States today are the Hispanics, many of whom are turning to Islam, and Blacks. We British have far more in common with Europeans, with the French and Italians and Germans. Their languages are different, but their worldview and culture are very similar. We might eat different foods and parlay in a different language, but we share the same Weltanschauung. Indeed, having spent a lot of time with Europeans over the years, I can honestly say that I have more in common with a German, Frenchman or Italian than I do with an Englishman. The English are far too insular for my liking.

There! Now I have said it.

These are strange times.

@Mark Alexander

All Rights Reserved

Monday, 2 September 2019

The Developed World Is On The Brink of a Financial, Economic, Social and Political Crisis


Donald Amstad from Aberdeen Standard Investments delivers a sobering assessment on the state of developed market economies.


US Debt Clock.org »