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March 5, 2022 – rdspinvestments

March 5, 2022

Powell’s Quarter-Point Hike Call, Risks Fed Falling Further Behind Inflation Job

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Stock MarketsMar 05, 2022 04:47AM ET

Powell's Quarter-Point Hike Call, Risks Fed Falling Further Behind Inflation Job© Reuters.

By Yasin Ebrahim

Investing.com — Federal Reserve chairman Jerome Powell confirmed plans this week to back a 25-basis point rate increase at the March meeting, but a quarter-point hike risks the Fed falling even further behind in its efforts to curb inflation.

“A 25 basis points rate hike at the March meeting would be a no decision as opposed to a decision … and it’s not going pull the handbrake on the inflation momentum that arguably is being further fueled [by the Russia-Ukraine conflict], Johan Grahn, head of ETF Strategy at Allianz told Investing.com in an interview on Monday, ahead of Fed chairman Jerome Powell’s remarks earlier this week.

In testimony before Congress, Powell said he would support a 25-basis point, or 0.25%, rate hike in March, though added that he was “prepared to raise by more than that in a meeting or meetings” if inflation doesn’t subside later this year as expected.

Powell also flagged the “highly uncertain” impact to the economic outlook from the fallout of the Russia-Ukraine conflict.

But while uncertainty appears to be the only certainty concerning the outcome of the Ukraine crisis, the Fed still has a job to do. That job, the dual mandate job, is to maximize employment and ensure stable prices.

In 2020, the Fed tweaked the framework it used to react to changes in inflation and labor market trends.

Under this new framework, “employment is an important driver of policy decisions when there’s excess slack in the labor market, but it drops out completely once the unemployment rate dips below 4%…,” Jefferies said in a report earlier this year.

With the unemployment rate running below 4%, the Fed’s dual mandate has arguably become a one-dual mandate to curb the pace of inflation now running at a 40-year high of 7.5%.

Fresh inflation data due next week ahead of the Fed’s March 15-16 meeting, is expected to show that rose to nearly 8% last month, and is likely to remain elevated as “Russia’s invasion of Ukraine has caused significant swings in commodity prices, which will no doubt exert upward pressure on inflation in the coming months,” according to Jefferies.

Earlier this week, Powell confirmed what the market has known for a while: the Fed is well behind the curve on inflation, and it’s pretty much an inside job as the central bank was too slow to react to signs of elevated price pressures.   

“We would have engaged our tools earlier,” Powell said earlier this week after conceded that the central bank’s expectations for supply-side problems to dissipate at a faster pace failed to materialize. 

In the wake of the Ukraine crisis that threatens global growth and is set to ramp up the pace of inflation, the Fed unfortunately finds itself between a rock and hard a place.

Hike rates too aggressively slowing an economy that is already expected to decelerate amid red-hot inflation, increases the risk of stagflation ahead. But hike cautiously, and there’s little room for flexibility to save the economy in the event of a significant slowdown.  

“If you don’t have a way to treat the patient down the road … this could be in two, three, or maybe five years, it becomes really dangerous, and now we’re talking about a much longer secular type of [stagflation] problem.

“In my view, it’s so critical that the Fed stay on point as we are off an already delayed rate hike cycle,” Grahn added.

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Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

With fast-weakening rouble and fears for future, Russians rush to shop

With fast-weakening rouble and fears for future, Russians rush to shop© Reuters. FILE PHOTO: Russian rouble coins are seen in this illustration taken, February 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) – In bright sunshine, a long queue of shoppers snaked outside an IKEA store near Moscow this week. Similar scenes were repeated across Russia as families rushed to spend their fast-depreciating roubles at the Swedish retailer which is exiting the crisis-hit country.

Russians are bracing for an uncertain future of spiraling inflation, economic hardship and an even sharper squeeze on imported goods.

The rouble has lost a third of its value this week after unprecedented Western sanctions were imposed to punish Russia for invading Ukraine. The moves froze much of the central bank’s $640 billion in reserves and barred several banks from global payments system SWIFT, leaving the rouble in free-fall.

(Graphic: Russia’s currency reserves have surged more that 75% since 2015, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwxzkxvo/Pasted%20image%201644935695631.png)

Cities across Russia were outwardly calm, with little sign of the crisis devastating financial sector and markets. Except for the lines of people looking to stock up on products – mostly high-end items and hardware – before shelves empty or prices climb further.

“The purchases that I planned to make in April, I urgently bought today. A friend from Voronezh also told me to buy for her,” shopper Viktoriya Voloshina told Reuters in Rostov, a town 217 kilometers (135 miles) from Moscow.

Voloshina said she was looking for office shelves and tables and also shopping on behalf of a friend from another town. “My heart is breaking,” she added.

Dmitry, another Moscow resident, lamented rapid price rises.

“The watch I wanted to buy now costs around 100,000 rubles, compared to 40,000 around a week ago,” he said, declining to give his surname.

But the spending burst visible this week may peter out.

While there is no palpable sign of panic, the wipe-out of rouble savings and the doubling of interest rates to 20% will squeeze mortgage holders and consumers.

Financial conditions — reflecting availability of credit in the economy — have tightened brutally this year, which Oxford Economics predicted would shrink domestic demand by 11% by year end and raise unemployment by 1.9 percentage points in 2023.

Zach Witlin, an analyst at Eurasia Group, notes sanctions are already hitting consumers via prices hikes and digital payments disruptions.

While consumers are not directly targeted, “fear and caution are exaggerating the impact,” with the exit of foreign brands such as IKEA creating a “snowball effect,” he added.

(Graphic: Russian financial conditions have tightened, https://graphics.reuters.com/GLOBAL-MARKETS/RUSSIA/dwpkrlknrvm/chart_eikon.jpg)

IMPORTS TO ISOLATION

Cars, machinery and car parts comprised nearly half of Russia’s $293 billion imports last year, according to the Federal Customs Service.

The government’s strenuous import cutbacks in recent years mean 2021 imports remained 7% below 2013 levels, before the first sanctions following Russia’s 2014 annexation of Crimea.

(Graphic: Russian imports and exports, https://fingfx.thomsonreuters.com/gfx/mkt/byvrjexzqve/Pasted%20image%201646418036290.png)

It has also beefed up trade with China, which is the only country to boost exports to Russia since 2014.

(Graphic: China’s trade with Russia, https://graphics.reuters.com/UKRAINE-CRISIS/xmvjoerqapr/chart.png)

But further declines look inevitable as the rouble plunges, insurers refuse cover to businesses exporting to Russia and shippers back away from Russian ports whether to export or to import.

While only a few Russian companies are targeted by sanctions “all of them will feel the chilling effect,” said Matt Townsend, sanctions partner at law firm Allen & Overy. “This is why sanctions are a very effective measure to isolate a country.”

The immediate economic shock will cause a 35% GDP contraction in the second quarter and a 7% decline in 2022, JPMorgan (NYSE:) predicted. But “growing political and economic isolation will curtail Russia’s growth potential in years to come,” it added.

That may come about if restrictions “limit the acquisition of technology needed to support Russia’s highest value industries,” RBC Global Asset Management warned.

The Biden administration is preparing rules to curb Moscow’s ability to import smartphones, aircraft parts and auto components.

But multinationals, from tech firms Apple (NASDAQ:) and Microsoft (NASDAQ:) to consumer goods producers Nike (NYSE:) and Diageo (LON:), have severed links with Russia, meaning shoppers will have limited access to the consumer goods they have grown accustomed to over three decades.

Chinese companies, so far staying put, could grab some market share but they too could fall prey to secondary sanctions as many of their products such as smartphones use U.S. origin technology.

Some Russians are not staying to find out. Lidia, a freelance worker from Rostov said the money transfer curbs were complicating receiving payments from abroad.

“The sanctions have hit me very hard. Prices are already up around 20%…It’s a fact that you already can’t buy some medicines. Things will get worse,” she said.

“Today my family and I are leaving Russia.” 

Europe at war: Six charts to know in financial markets

Europe at war: Six charts to know in financial markets© Reuters. FILE PHOTO: Women walk past a board showing the U.S. dollar and euro signs in a street in Saint Petersburg, Russia February 25, 2022. REUTERS/Anton Vaganov/File Photo

LONDON (Reuters) – Russia’s escalating war in Ukraine has sent commodity and energy prices soaring, boosted safe havens and hammered Europe’s common currency and its stock markets.

Below are six charts showing the recent dramatic market moves:

EURO IN THE DOLDRUMS

The euro fell below $1.10 on Friday for the first time in almost two years, having shed over 3% against the dollar this week for its biggest weekly fall since March 2020.

The single currency was nursing even bigger losses against the Swiss franc. It is down almost 4% over the week in its biggest such fall since January 2015, when Switzerland abandoned the franc’s three-year-old cap against the euro.

Worries that Russia’s invasion of Ukraine will deal the economy a fresh blow, especially as energy prices soar, explain why the currency is one of the week’s biggest losers. Graphic: The euro takes a beating, https://fingfx.thomsonreuters.com/gfx/mkt/akvezxnlepr/euroforkarin.PNG

GRAINS & METALS

Prices of raw materials from wheat to various metals have soared to multi-year highs as Western sanctions have disrupted air and sea shipments of commodities produced and exported by Russia.

Russia and Ukraine are two of the world’s biggest exporters of wheat, which scaled a 14-year peak on Friday, having gained nearly 40% since Russia invaded Ukraine on Feb. 24.

Russia is also a supplier of metals. Aluminium hit a record high on Friday while , where the country supplies 3.5% of world supplies, was also flirting with a fresh all-time peak.

Graphic: Grains and metals, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwaakxvo/Wheat%20and%20commodity%20prices.PNG ENERGY & GAS

prices rose another 21% over the week, closing at their highest since 2013, with buyers and shippers increasingly shunning Russian oil supplies which total up to five million barrels per day (bpd).

Neither the possibility of a million bpd of Iranian crude coming on tap in case of a revived nuclear deal with the West nor developed countries’ deal for a coordinated release of 60 million barrels made a dent.

European gas prices notched an astonishing 120% weekly gain, to hit 208 euros per megawatt hour — a record high. Graphic: Brent crude and European gas prices, https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnzzgjvq/Brent%20crude%20and%20European%20gas%20prices.PNG

EUROPEAN BANKS PUNISHED

European banks had another gruelling week, hit by a triple whammy of Western sanctions on Russia, a scaling back of rate hike expectations and a worsening macroeconomic environment.

The moves reverse all the gains made earlier this year when it appeared that economic recovery would allow central banks to raise interest rates, benefiting banks.

A European banking stocks index fell around 16%, its worst week since March 2020, bringing year-to-date losses to 20%. Shares in Russia-exposed lenders such as Austria’s Raiffeisen and France’s SocGen fell around a third over the week. Graphic: European banking stocks down over 16% this week, https://fingfx.thomsonreuters.com/gfx/mkt/gdvzybngwpw/banks%20for%20karin.PNG

LOVING BUNDS

Turmoil in European markets, heightened uncertainty over the economic outlook and a scaling back of rate-hike bets meant investors were keen to snap up safe-haven bonds.

In Germany — the euro area’s benchmark bond issuer — 10-year bond yields fell 30 bps this week in their biggest one-week fall since the euro debt crisis in 2011.

At -0.08%, German Bund yields are back in negative yield territory. In other words, investors are willing to pay Germany’s government to hold its bonds in an uncertain environment. That was not the case a week ago, when Bund yields stood at 0.22%. Graphic: Bund yields below zero, https://fingfx.thomsonreuters.com/gfx/mkt/zgpomzjqrpd/Bund%20yields%20back%20below%20zero.PNG

ROUBLE DISCONNECT

Russia’s rouble has tumbled more than 30% in offshore trade – its worst week on record – and around 20% in Moscow trade. Bid-ask spread are very wide – a sign of evaporating liquidity.

The divergence between onshore and offshore trade illustrates just how disconnected Russia has become from global financial markets after severe sanctions and countermeasures. Graphic: Russia rouble disconnect, https://fingfx.thomsonreuters.com/gfx/mkt/klvykbbgjvg/Russia%20rouble%20onshore%20and%20offshore.PNG

Putin says Western sanctions are akin to declaration of war

Putin says Western sanctions are akin to declaration of war© Reuters. FILE PHOTO: RussiaN President Vladimir Putin attends an event at the Novo-Ogaryovo state residence outside Moscow, Russia, July 23, 2020. Sputnik/Alexei Druzhinin/Kremlin via REUTERS ATTENTION EDITORS – THIS IMAGE WAS PROVIDED BY A THIRD PARTY./File Phot

LONDON (Reuters) – President Vladimir Putin said on Saturday that Western sanctions on Russia were akin to a declaration of war and warned that any attempt to impose a no-fly zone in Ukraine would lead to catastrophic consequences for the world.

Putin reiterated that his aims were to defend Russian- speaking communities through the “demilitarisation and de-Nazification” of the country so that Russia’s former Soviet neighbour became neutral and no longer threatened Russia.

Ukraine and Western countries have dismissed this as a baseless pretext for the invasion he launched on Feb. 24 and have imposed a sweeping range of sanctions aimed at isolating Moscow.

“These sanctions that are being imposed are akin to a declaration of war but thank God it has not come to that,” Putin said, speaking to a group of flight attendants at an Aeroflot training centre near Moscow.

He said any attempt by another power to impose a no-fly zone in Ukraine would be considered by Russia to be a step into the military conflict. Such a step he said would have catastrophic consequences for Europe and the world.

The NATO military alliance has rejected Kyiv’s request for a no-fly zone, on the grounds it would escalate the war beyond Ukraine into a far wider conflict, potentially pitting the United States against Russia.

‘GOING TO PLAN’

Asked about reports that Russian conscripts had been used in Ukraine, Putin said none had been involved and said the military operation was going to plan.

“There is not one conscript and we don’t plan for there to be,” Putin said. “Our army will fulfil all the tasks. I don’t doubt that at all. Everything is going to plan.”

That description was at odds with assessments from U.S. and British officials. British military intelligence said on Thursday that Russia’s advance on the Ukrainian capital had made little progress and encountered staunch resistance.

Putin dismissed concerns that some sort of martial law or emergency situation could be declared in Russia. He said such a measure was imposed only when there was significant internal or external threat.

“We don’t plan to introduce any kind of special regime on Russian territory – there is currently no need,” Putin said.

Kremlin spokesman Dmitry Peskov said that the West was behaving like a bandit by cutting economic relations over the conflict in Ukraine but that Russia was far too big to be isolated as the world was much larger than just the United States and Europe.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Italy seizes oligarchs’ villas and yachts to put pressure on Russia

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Stock Markets17 hours ago (Mar 05, 2022 11:55AM ET)

2/2

Italy seizes oligarchs' villas and yachts to put pressure on Russia© Reuters. FILE PHOTO: Russian businessman and president of the International Fencing Federation (FIE) Alisher Usmanov attends an awarding ceremony for Russian Olympic medallists returning home from the 2016 Rio Olympics at the Kremlin in Moscow, Russia, August 25,

2/2

By Crispian Balmer and Emilio Parodi

ROME (Reuters) -Italian police have seized villas and yachts worth 143 million euros ($156 million) from five high-profile Russians who were placed on sanctions lists following Moscow’s attack on Ukraine, the government said on Saturday.

The luxury properties were sequestered in some of Italy’s most prestigious retail estate locations – the island of Sardinia, by Lake Como and in Tuscany – while two superyachts were grabbed at their moorings in northern ports.

The police operations were part of a coordinated drive by Western states to penalise wealthy Russians and try to force President Vladimir Putin to withdraw his troops from Ukraine.

A list issued by Prime Minister Mario Draghi’s office showed the most valuable asset now in police hands is a 65 metre (215 ft) yacht, the “Lady M”, which has a price tag of 65 million euros and belonged to Russia’s richest man, Alexey Mordashov.

It was impounded in the port of Imperia.

A second luxury vessel, the Lena, was seized in the nearby port of Sanremo. It was worth some 50 million euros and was owned by Gennady Timchenko, whom Putin has described as one of his closet associates.

Billionaire businessman Alisher Usmanov had a villa worth 17 million euros seized on the Mediterranean island of Sardinia, while Oleg Savchenko, a member of the Russian parliament, had his 17th century house near the Tuscan city of Lucca, worth some 3 million euros, taken from him.

An undisclosed number of properties valued at 8 million euros were confiscated in Como from state TV host Vladimir Soloviev, who reportedly complained https://tinyurl.com/2p8994kf on Russian television when he found out last month he risked losing his Italian villas.

“But you told us that Europe has sacred property rights,” he was quoted saying by The Daily Beast.

Russian oligarchs have bought numerous villas in choice Italian settings over the past 20 years and sources have said more assets are expected to be seized in coming days.

Uzbekistan-born metals and telecoms tycoon Usmanov is well known in Italy for owning multiple properties on Sardinia, while Italian media say Mordashov owned a villa worth some 66 million euros ($72 million) on the same island.

Taking into account the assets of his whole family, Forbes magazine estimates that Mordashov had an estimated net worth of $29.1 billion before sanctions hit.

Mirko Idili, a coordinator of the CISL union in Sardinia, has warned that the sanctions and a reduced presence of rich Russians this summer could negatively affect the island’s economy and put more than 1,000 jobs at risk.

Italian banks were instructed by the Bank of Italy’s financial intelligence division on Friday to urgently let it know of all measures taken to freeze the assets of people and entities placed on the EU list.

($1 = 0.9152 euros)

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Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

IMF says war in Ukraine will have ‘severe impact’ on global economy

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Economy11 hours ago (Mar 05, 2022 12:15PM ET)

IMF says war in Ukraine will have 'severe impact' on global economy© Reuters. FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo

By Andrea Shalal and David Lawder

WASHINGTON (Reuters) -The International Monetary Fund on Saturday said it expected to bring Ukraine’s request for $1.4 billion in emergency financing to its board for approval as early as next week and was in talks about funding options with authorities in neighboring Moldova.

In a statement, the global lender said the war in Ukraine was already driving energy and grain prices higher, and had sent a wave of more than 1 million refugees to neighboring countries, while triggering unprecedented sanctions on Russia.

“While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious,” the IMF said in a statement after a board meeting chaired by Managing Director Kristalina Georgieva.

“The ongoing war and associated sanctions will also have a severe impact on the global economy,” it warned, noting that the crisis was creating an adverse shock to inflation and economic activity at a time when price pressures were already high.

It said price shocks would be felt worldwide, and authorities should provide fiscal support for poor households for whom food and fuel made up a higher proportion of expenses, adding that the economic damage would increase if the war escalated.

Sweeping sanctions imposed on Russia by the United States, European countries and others would also have “a substantial impact on the global economy and financial markets, with significant spillovers to other countries.”

IMPACT ON UKRAINE, MOLDOVA

In addition to the human toll, Ukraine was experiencing substantial economic damage, with sea ports and airports closed and damaged, and many roads and bridges damaged or destroyed.

“While it is very difficult to assess financing needs precisely at this stage, it is already clear that Ukraine will face significant recovery and reconstruction costs,” it said.

The board was expected to consider Ukraine’s request for $1.4 billion in emergency financing as early as next week. Ukraine also has $2.2 billion available through June under an existing stand-by arrangement, the IMF said last week.

Moldova and other countries with close economic ties to Ukraine and Russia were at “particular risk” of scarcity and supply disruptions, the IMF said.

It said IMF staff were actively discussing funding options with Moldova, which has requested an augmentation and rephasing of its existing $558 million IMF loan program to help meet the costs of the current crisis.

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Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Shell to put profits from Russian oil trade into Ukraine aid fund

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Commodities5 hours ago (Mar 05, 2022 01:30PM ET)

Shell to put profits from Russian oil trade into Ukraine aid fund© Reuters. FILE PHOTO: The Royal Dutch Shell logo is seen at a Shell petrol station in London, January 31, 2008. REUTERS/Toby Melville/File Photo

By Ron Bousso

LONDON (Reuters) – Oil major Royal Dutch Shell (LON:) will put profits from any Russian oil it purchases into a fund that will go towards humanitarian aid to Ukraine, the company said on Saturday.

Shell had on Friday bought a cargo of Russian at a record low discount, the first such trade since Russia invaded Ukraine last week.

The deal, which did not violate Western sanctions on Moscow, was criticized by Ukraine’s Foreign Minister Dmytro Kuleba.

“I am told Shell discreetly bought some Russian oil yesterday. One question to @Shell: doesn’t Russian oil smell (of) Ukrainian blood for you?,” Kuleba wrote in a tweet.

In a statement published shortly afterwards, Shell defended the purchase and said it would choose alternatives to Russian oil wherever possible, but this could not happen overnight because of how significant Russia is to global supply.

It added: “We didn’t take this decision lightly and we understand the strength of feeling around it.”

Shell said it would give any profits from the limited amount of Russian oil it has to purchase to a dedicated fund, and together with aid agencies would determine where those funds would best be used to help alleviate hardship suffered by the people of Ukraine.

Russian exporters have in recent days faced severe problems with credit lines, shipping and insurance, resulting in delays and cancellations to their attempts to find buyers for Russian crude.

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Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Russia may allow outside firms to maintain airliners amid sanctions, Tass says

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Stock Markets8 hours ago (Mar 05, 2022 03:15PM ET)

Russia may allow outside firms to maintain airliners amid sanctions, Tass says© Reuters. FILE PHOTO: Passenger planes owned by Russia’s airlines, including Aeroflot and Rossiya, are parked at Sheremetyevo International Airport in Moscow, Russia March 1, 2022. REUTERS/Marina Lystseva

OTTAWA (Reuters) – Russia could allow passenger airliners to be maintained by third-party firms in a bid to help its domestic carriers hit by sanctions over the invasion of Ukraine, Tass news agency said on Saturday.

Tass said the Russian transport ministry had drawn up a draft bill to help airlines until September 2022. It would also suspend all planned and unscheduled inspections of carriers, the Russian news agency reported.

Boeing (NYSE:) Co and Airbus SE (OTC:) – the world’s two largest aircraft manufacturers – have suspended the supply of components and services to Russian airlines, a move that will likely make it harder to maintain planes.

The bill would allow “the repair of aircraft and the replacement of components by third-party companies, as long as they meet the requirements for companies that are involved in maintenance,” Tass said. It did not give details.

Russian President Vladimir Putin earlier on Saturday said Moscow was in talks with aircraft leasing companies to resolve potential issues linked to sanctions.

Russia’s state aviation authority is recommending that domestic airlines with foreign-leased aircraft suspend passenger and cargo flights abroad from Russia from March 6 and from foreign countries to Russia starting on March 8 to prevent their possible seizure.

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Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Analysis-As Russia avoids energy sanctions, oil majors flee but TotalEnergies stays

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Stock Markets14 hours ago (Mar 05, 2022 03:25PM ET)

Analysis-As Russia avoids energy sanctions, oil majors flee but TotalEnergies stays© Reuters. FILE PHOTO: The logo of French oil and gas company TotalEnergies is pictured at an electric car charging station and petrol station at the financial and business district of La Defense in Courbevoie near Paris, France, June 22, 2021. REUTERS/Gonzalo Fuent

By Shadia Nasralla, Benjamin Mallet and Michel Rose

LONDON (Reuters) – France’s TotalEnergies cuts a lonely figure hanging onto its Russian investments during a mass exodus of western oil majors from the country after its invasion of Ukraine, even though no sanctions have forced such divestments.

“For existing assets, the company says it will respect European sanctions whatever the consequences. But for the moment, there are no sanctions on energy,” said a source familiar with the thinking inside TotalEnergies.

TotalEnergies has a future-oriented position in Russia, heavily weighted towards liquefied (LNG), with stakes in the yet-to-be built $21 billion Arctic LNG 2 project as well as in the producing Yamal LNG operation.

With the world trying to slash carbon emissions, oil majors are betting on LNG to replace more-polluting coal and oil. TotalEnergies first bought a stake in Russian gas producer Novatek in 2011 for $4 billion and gradually increased its stake to just under 20% by 2018.

“The company cannot divest assets from one day to the next unless sanctions force it to do so. One must take time to reflect,” said the source.

The French government has declined to comment on specific companies and Russia. French President Emmanuel Macron, who convened members of a Franco-Russian forum on Tuesday, did not urge TotalEnergies or French companies to leave Russia, two participants told Reuters. Among those present was TotalEnergies Chief Executive Patrick Pouyanne.

In contrast, Britain’s government immediately applauded Shell (LON:)’s and BP (NYSE:)’s decision to exit Russia. Chief Executive Officer Bernard Looney told employees BP “couldn’t reasonably carry on in Russia given the conflict in Ukraine,” according to a company source.

Billions of dollars of impending write-downs are piling up for the companies that have said they would exit their Russian assets: BP, Shell, Equinor and Exxon Mobil (NYSE:). For now, there are few potential buyers for the stakes and operations they are leaving in Russia.

Share prices of the companies that have exited Russia have outperformed TotalEnergies in recent days.

Graphic – TotalEnergies shares underperforming peers: https://fingfx.thomsonreuters.com/gfx/ce/xmpjoebwlvr/Pasted%20image%201646312060659.png

“We see a potential exit by TTE being much more complicated than it is for peers,” said RBC equity analyst Biraj Borkhataria

on Wednesday. “We see Russia as strategically important for TTE, particularly for its LNG business.”

TotalEnergies aims to satisfy 10% of global LNG markets by 2025 with 50 million tonnes a year. Russia accounts for 6 million tonnes from Yamal and another 4 million tonnes from Arctic LNG 2 once operational, according to RBC.

Reuters could not verify total returns on investments in Russia by the oil majors, which do not regularly publish asset and country-specific financials. Still, it was clear that BP, for example, has already made good on its investments.

When former U.S. President Donald Trump hit Iran with sanctions, TotalEnergies also stuck with its investment in a big gas field, dropping it only after failing to obtain a sanctions waiver from Washington in 2018.

At the time, media reported that Pouyanne told Trump that continued investment could help democratic progress in Iran.

In 2021, TotalEnergies’ cashflow from Russia amounted to $1.5 billion. It declined to give further details on its Russian investments and previous years’ cashflows.

Meanwhile, BP faces a write-down of up to $25 billion for dropping Russia and losing out on annual dividends from Rosneft which have fluctuated between around $300 million and $780 million, according to its quarterly results.

But the cashflow it has received from Russia over the years might soothe some of that pain.

In 2003, BP and Russian investors created TNK-BP in which BP invested $8 billion. In the 10 years that followed, BP received around $19 billion in dividends.

In 2013, Rosneft bought BP’s stake in TNK-BP for around $12 billion in cash and Rosneft shares that have yielded dividends for BP of over $4 billion.

Shell, which was an early partner in Russia’s first LNG plant, Sakhalin II, sold half of its 55% stake to Gazprom (MCX:) in 2007 for $4.1 billion, two years before the project came online.

Its 2021 net earnings from Sakhalin II and its Salym oilfields, which started full production in 2006, were $700 million, it said. Tax reports showed accumulated earnings from Russia were around $384 million in 2020, $455 million in 2019 and a loss of $16 million in 2018.

Flagging impairments from its Russian exit, Shell said it had around $3 billion in non-current assets. A Shell spokesperson declined to give further details.

As for Exxon Mobil shutting the door on its $4 billion in assets in Russia and triggering what could become a write-down, it has benefited from operating large offshore oil and gas fields near Sakhalin Island since 2005.

Exxon did not break down its investments in Russia and declined to comment on a potential writedown. But Chief Financial Officer Kathryn Mikells said on Wednesday that leaving its Russian oil and gas operations would shave 1%-2% from earnings.

“All of them will struggle to repatriate future income from Russia. A difference between them is that TotalEnergies’ can argue they have less direct ties the government because Novatek is privately-owned. The question is how long that argument can hold,” said Giacomo Romeo, Jefferies equities analyst.

“In terms of investment recoverability, direct stakes in LNG assets such as Sakhalin, Yamal and Arctic LNG are different from stakes in companies such as Rosneft and Novatek. Chinese or Indian investors might be interested in stakes in LNG assets, if the price is low enough and there are enough uncontracted volumes.”

(additional reporting by Ron Bousso, Sabrina Valle, writing by Shadia Nasralla; Editing by David Gregorio)

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Russia’s demand for US guarantees may hit nuclear talks, Iran official says

Russia's demand for US guarantees may hit nuclear talks, Iran official says© Reuters. FILE PHOTO: The Iranian flag flutters in front the International Atomic Energy Agency (IAEA) headquarters in Vienna, Austria July 10, 2019. REUTERS/Lisi Niesner/File Photo

By Parisa Hafezi and Francois Murphy

VIENNA (Reuters) – Russia’s demand for written U.S. guarantees that sanctions on Moscow would not harm Russian cooperation with Iran is “not constructive” for talks between Tehran and global powers to revive a 2015 nuclear deal, a senior Iranian official said on Saturday.

The announcement by Russia, which could torpedo months of indirect talks between Tehran and Washington in Vienna, came shortly after Tehran said it had agreed a roadmap with the U.N. nuclear watchdog to resolve outstanding issues that could help secure the nuclear pact.

“Russians had put this demand on the table (at the Vienna talks) since two days ago. There is an understanding that by changing its position in Vienna talks Russia wants to secure its interests in other places. This move is not constructive for Vienna nuclear talks,” said the Iranian official in Tehran, speaking to Reuters.

Russian Foreign Minister Sergei Lavrov said on Saturday that the Western sanctions imposed over the war in Ukraine had become a stumbling block for the Iran nuclear deal, warning Russian national interests would have to be taken into account.

Lavrov said Russia wanted a written guarantee from the United States that Russia’s trade, investment and military-technical cooperation with Iran would not be hindered in any way by the sanctions.

New U.S. sanctions imposed on Russia following its invasion of Ukraine should not have any impact on a potential revival of the Iran nuclear accord, the U.S. State Department said.

“The new Russia-related sanctions are unrelated to the JCPOA and should not have any impact on its potential implementation,” a State Department spokesperson said, referring to the 2015 deal by its formal name, the Joint Comprehensive Plan of Action.

“We continue to engage with Russia on a return to full implementation of the JCPOA. Russia shares a common interest in ensuring Iran never acquires a nuclear weapon. ”

When asked whether Russia’s demand would harm 11 months of talks between Tehran and world powers, including Russia, Iran Project Director at the International Crisis Group, Ali Vaez, said: “Not yet. But it’s impossible to segregate the two crises for much longer.”

“The U.S. can issue waivers for the work related to the transfer of excess fissile material to Russia. But it’s a sign that the commingling of the two issues has started,” Vaez said.

Two diplomats, one of them not directly involved in the talks, said China also has demanded written guarantees that its companies doing business in Iran wouldn’t be affected by U.S. sanctions.

Such demands may complicate efforts to seal a nuclear deal at a time when an agreement looked likely. All parties involved in the Vienna talks had said on Friday they were close to reaching an agreement.

The 2015 agreement between Tehran and major powers eased sanctions on Tehran in return for limiting Iran’s enrichment of uranium, making it harder for Tehran to develop material for nuclear weapons. The accord fell apart after President Donald Trump withdrew the United States in 2018.

TIMETABLE FOR ANSWERS

Meanwhile, Iran and the U.N. nuclear watchdog said they aimed to resolve a standoff over the origin of uranium particles found at old but undeclared sites by early June, aiming to remove an obstacle to reviving the 2015 deal.

The move was announced jointly by Iran and the International Atomic Energy Agency (IAEA) during a visit to Tehran by IAEA chief Rafael Grossi, who had arrived on Friday to discuss one of the last thorny issues blocking the relaunching of the pact.

Later, Grossi said it is hard to imagine any agreement to revive the Iran nuclear deal being implemented if the IAEA’s efforts to resolve open issues in Iran by June fail.

“My impression is that it would be difficult to imagine you can have a cooperative relationship as if nothing had happened if the clarification of very important safeguards were to fail,” Grossi told a news conference in Vienna.

According to a timeline in the statement, Iran will provide “written explanations including related supporting documents” to unanswered IAEA questions on three sites by March 20 before other exchanges, after which Grossi “will aim to report his conclusion by the June 2022 (IAEA) Board of Governors”, which begins on June 6.

A major sticking point in the talks is that Tehran wants the question of the uranium particles to be closed. Western powers say that is a separate matter to the deal, which the IAEA is not a party to, several officials have told Reuters.

Grossi, who also held talks with Iran’s foreign minister before returning to Vienna on Saturday, said, “there are still matters that need to be addressed by Iran”. The IAEA has been seeking answers from Iran on how the uranium traces got there – a topic often referred to as “outstanding safeguards issues”.

Grossi’s trip had raised hopes an agreement with the IAEA will potentially clear the way to reviving the nuclear pact. When he pulled the United States out, Trump also reimposed far-reaching sanctions on Iran.

Since 2019, Tehran has breached the deal’s nuclear limits and gone well beyond, rebuilding stockpiles of enriched uranium, refining it to higher fissile purity and installing advanced centrifuges to speed up output. Iran denies it has ever sought to acquire nuclear weapons.

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