NEWS,01.07.2013

Top firms drop Iran as US sanctions bite

Two top Chinese shipping lines severed ties with Iran as tough new U.S. sanctions over the country's disputed nuclear programme came into effect on Monday, leaving the country increasingly dependent on front companies and overland routes.
Many of Iran's imports, including food and consumer goods, arrive by ship, either directly or via feeder services from places like the United Arab Emirates, and the latest set of sanctions are likely to worsen an already deep economic crisis.
"The vast majority of major container carriers have now ceased calling at Iran," said Daniel Richards, shipping analyst with Business Monitor International.
"As even feeder services begin to shy away from calling there, the country will struggle to continue importing."
Tehran is set to become more reliant on trade by land, which will push up prices already driven by currency volatility.
An Iranian food producer said business was getting more difficult. "The prices of food are so high, I don't know how people can afford it," the Tehran-based producer said. "They're about three times higher than before."
The US National Defense Authorization Act (NDAA), which came into effect on July 1, blacklists Iran's shipping, shipbuilding, energy and port management sectors.
The latest measures build on previous sanctions which targeted Iran's banking sector and key oil exports to try to force Tehran to negotiate on a nuclear programme it says is peaceful but which Western states fear has military aims.
While the NDAA has an explicit exemption for food, medicine and other humanitarian goods, foreign shipping firms have pulled out to avoid falling foul of its provisions.
China is among Tehran's main allies, but its shipping firms are also bailing out. China Shipping Container Lines (CSCL), among the world's top 10 lines, has become the latest group to exit Iran, a CSCL official confirmed.
In a June 27 letter seen by Reuters to US pressure group United Against Nuclear Iran (UANI), whose board includes former CIA and British intelligence chiefs, Shanghai-headquartered CSCL said it took "trade sanctions compliance with the utmost seriousness", ceasing all Iran business from July 1.
China's Cosco Container Lines, the world's number 5 player, was another firm to end ties.
"All of Cosco's business to and from Iran has been suspended," said a Shanghai-based company official, citing a company statement saying lines to Iran stopped in early June and those leaving Iran would end in early July.
An industry source summed up the impact of the latest US move. "China's shipping firms operate in a globalised trade, so they are more risk averse to Iran now," he said.
Tougher Trade
Taiwanese lines Evergreen and Yang Ming Marine said they had pulled out, while Singapore's Pacific International Lines has also cut ties along with two top South Korean shipping firms.
"The departure of international shipping companies including those from China and Taiwan indicates that the virtual economic blockade of Iran is increasing," said Mark Wallace of UANI, which has targeted companies trading in Iran to end links.
"It is a sign that Iran has fewer and fewer friends in the international community that are willing to do business with its regime," said Wallace, a former US ambassador to the UN.
AP Moller-Maersk's Maersk Line, the world's biggest container company, pulled out of Iran last year, joining others including the world's number two and three MSC and CMA CGM and smaller groups like Germany's Hapag-Lloyd.
Ali Reza Cheshm Jahan, deputy of logistics for Tidewater Middle East, which operates six ports in Iran and was blacklisted in 2011, said the remaining four lines had cut ties with the top southern cargo port of Shahid Rajaee.
"The carrying of goods and cargo at this port will be carried out by the Islamic Republic of Iran Shipping Lines (IRISL) and (a subsidiary)," he told Iran's student news agency last week.
IRISL, Iran's biggest cargo carrier, has tried to dodge sanctions by changing its flags and setting up front companies, the US Treasury and the European Union have said.
In March, Archer Daniels Midland, one of the world's top grain traders, said it unwittingly used a vessel beneficially owned by IRISL last year to transport grain in what it said was a "concerted effort" by Tehran to hide the ship's ownership.
Shipping sources say IRISL will find it harder to call at many ports globally, adding that Iran may become more dependent on land based trade via its borders with Iraq and Pakistan, slowing the transport of goods further.
"It seems logical that shippers will try and find the most convenient way to get their cargoes as close to Iran as possible in a first step," another ship industry source said. "It is improvising from there on."

EU accuses top banks of collusion

The European Commission said on Monday it suspected that 13 top investment banks including Barclays, Deutsche Bank and Goldman Sachs, colluded over derivatives trading in breach of EU antitrust rules.
A preliminary investigation showed that banks colluded to exclude exchanges from the over-the-counter market because they feared involvement by the exchanges "would have reduced their revenues from acting as intermediaries," the Commission said.
The banks instead allegedly continued over-the-counter trading in the massive credit default swaps (CDS) market between 2006 and 2009 an opaque business that was seen as contributing to the global financial crisis, the Commission said in a statement.
The EU's Competition Commissioner Joaquin Almunia said the banks would now have the chance to respond to the accusations, and that if the charges were confirmed once the investigation was completed they could face fines.
"If it is confirmed that banks collectively blocked exchanges from the derivatives market, the Commission could decide to impose sanctions," Almunia said at a press briefing.
"Exchange trading of credit derivatives improves market transparency and stability," he said, adding that collusion between the banks to prevent this type of trading would be "a serious breach of our competition rules".
Almunia declined to give an estimate of the size of possible fines on the banks but he said the CDS market at the moment is worth about €10 trillion  ($13 trillion).
The collapse of Lehman Brothers in 2008 "showed how derivatives trading is able to destabilise the entire financial system," Almunia said.
The European Commission investigation began in 2011 and has focussed on claims that Deutsche Boerse stock market and the Chicago Mercantile Exchange were excluded from the derivatives market.
It said the two exchanges decided to turn to the International Swaps and Derivatives Association (ISDA) and data service provider Markit to obtain the necessary licences.
But the banks "had instructed them not to do so", Almunia said.

Eurozone joblessness hits record high

Eurozone unemployment was at a record high in May, but consumer prices rose in June for a second month in a row and staved off the threat of deflation in the bloc's sickly economy.

Consumer price inflation in the 17-nation eurozone, which is suffering from its longest ever recession, increased to 1.6% year-on-year (y/y) in June from 1.4% in May, the EU's statistics office Eurostat said on Monday.

That was the second month of gains from a low of 1.2% in April, although the June reading is still below the European Central Bank's (ECB) target of close to, but not above, 2%.

Prices of food, alcohol and tobacco products were the key factor driving inflation in June, followed by energy and services, Eurostat said in its first, flash estimate.

The ECB said last week it will not end its accommodative policy stance, leaving it in place to help a gradual recovery that is expected to start in the second half of this year.

The ECB holds a monetary policy meeting on Thursday, though it is expected to hold interest rates at the current record lows for the foreseeable future.

In a sign of the weak economy, unemployment in the bloc stood at a record 12.1%, a touch above the revised figure of 12.0% in April, but below Eurostat's earlier reading of 12.2%.

It was lower than a forecast by economists polled by Reuters, who saw a reading of 12.3% in May.

Germany saw its jobless rate fall to 5.3% in the month, the second lowest in the single currency area after Austria at 4.7%. Italy and Spain saw a modest increase in joblessness, while unemployment in France was unchanged.

European Union leaders reiterated last week they would step up the fight against unemployment, which stood at 19.2m in the eurozone in May, and agreed to launch a special scheme for young jobless Europeans.

US to press China on cyber theft

US Treasury Secretary Jack Lew has said he will keep up pressure on China over cyber security, especially stealing of intellectual property and trade secrets, which he sees as separate from other internet-related issues between the two countries.
The recently appointed treasury secretary said on Sunday he had already raised his concerns on cyber security when he met with Chinese President Xi Jinping in China recently.
"It is fundamentally a different set of issues and is something that is going to remain high on our agenda of issues to talk to with them about," he told an audience at the Aspen Ideas festival, saying the meetings in China were "productive".
Lew and Secretary of State John Kerry are set to host their Chinese counterparts in Washington DC next week for the annual US-China Strategic and Economic Dialogue.
Computer hacking is a contentious issue between the two countries. US intelligence leaders have said that cyber attacks and cyber espionage had supplanted terrorism as the top security threat facing the United States.
For its part, China recently accused the US of "double standards" in cyber security after the flight from Hong Kong of fugitive former spy agency contractor Edward Snowden, who leaked details of US cyber surveillance tactics.
While not directly referring to the Snowden issue, Lew said cyber theft "is just different from other kinds of issues in the cyber area".
Lew said he also used the recent visit to Beijing to try and convince the new Chinese administration to reduce barriers to trade and open up the country to wider foreign investment.
US companies face barriers to invest in around 100 Chinese sectors, while China holds that the US bars Chinese investments on unjustified national security grounds.
"They fundamentally have to move from a place where they have a very rigid, structured support for all the industries and go to more market-determined interest rates, market-determined investment policies, opening their market more to international investment," Lew said.
"The fact that there are other issues that do come up between us can't become an issue as we talk about the core economic issues, which are frankly things China needs to do in order to grow its economy," he said.

Cameron inks $1bn in deals in Kazakhstan

British Prime Minister David Cameron signed a strategic cooperation agreement as well as $1.0bn in deals with Kazakhstan on Monday during his first visit to the energy-rich ex-Soviet state.
Cameron and Kazakh President Nursultan Nazarbayev also unveiled an oil and gas processing plant on the shores of the Caspian Sea that is meant to provide a new reliable source of energy for European countries.
The British premier played up the importance of Kazakhstan to regional security as he wound down a swing through the region that included visits to Pakistan and Afghanistan.
"We're in a global race for jobs and investment," Cameron said on Monday. "This is one of the most rapidly emerging countries in the world."
Western nations have attempted through the two decades since the Soviet Union's collapse to make gains in a Central Asian region that relies on Russia for its European energy export routes.
Cameron added that the two countries had signed a "strategic partnership agreement" that underscored the importance of their growing ties.
Plans to construct a European and US-backed natural gas pipeline called Nabucco have already fallen through and Western powers are now seeking to hammer out a new strategy to establish closer contacts with nations such as Kazakhstan.
Britain for one has decided to focus on bilateral relations with specific Central Asian countries. Cameron became the first British prime minister to visit the nation a landmark event highlighted by Nazarbayev.
Officials said the deals besides energy also covered infrastructure projects as well as those in the IT field.
"Our country is interested in having close relations with Britain," Nazarbayev said at a joint press appearance with Cameron.
"I am confident that the documents that we have prepared, as well as our negotiations, will give a new impulse to economic and political cooperation between our countries."
Kazakhstan is seen as one of the more neutral Central Asian countries that enjoys equally good relations with Russia and China as well as the West  despite periodic criticism by Washington and Brussels of its human rights record.
Nazarbayev has also hired former British prime minister Tony Blair as the nation's image consultant who has been tasked with improving Kazakhstan's attraction to investors.
Cameron led a large business delegation to the Central Asian nation that included top managers from Royal Dutch Shell.
The British premier and Nazarbayev jointly unveiled the Bolashak on-shore oil and gas processing facility that operates with involvement from the Anglo-Dutch giant.
The plant is stationed on the Kashagan oil and gas field  one of the largest deposits found in Central Asia.
It is due to process 450 000 barrels of oil and 8.8 million cubic metres of gas daily by the time it becomes fully operational.

China home prices up 7.4% in June

Home prices in major Chinese cities jumped 7.4% year-on-year (y/y) in June, an independent survey showed Monday, despite government moves to curb the property market.
The average cost of new homes in 100 major cities reached 10 258 yuan ($1 672) per square metre last month, the China Index Academy said in a statement.
June marked the seventh consecutive month of rises, it said, although the monthly increase of 0.77% narrowed slightly from May's 0.81% as banks tightened credit to the property sector due to a liquidity squeeze, the academy said.
For more than three weeks funds have been in short supply on China's interbank market, and the interest rates banks charge to lend to each other have surged to record highs.
The academy, which is owned by Soufun Holdings, China's largest real estate website operator, said banks had tightened mortgage lending as a result of the credit crunch.
But it added: "Looking into the second half, the upward pressure on home prices remains high, driven by multiple factors including demand and the 'heat' in the land market."
Property prices are a sensitive issue in China and authorities have sought for more than three years to control their rise.
Measures to contain prices include restrictions on purchases of second and third homes, higher minimum down payments and taxes in some cities on multiple and non-locally owned homes.