NEWS,05.07.2013

Russian PM sacks ally of oil boss Sechin

Russian Prime Minister Dmitry Medvedev on Friday sacked a senior resources official, believed to be a close ally of Igor Sechin, the boss of state oil firm Rosneft, in a move analysts said was a sign of growing confrontation between the two men.
In an order published on Friday Medvedev dismissed Alexander Popov, the head of Rosnedra, an agency responsible for granting licences to develop natural resources.
Popov was an aide to Sechin when Sechin oversaw Russia's energy sector as deputy prime minister.
Sechin, a close ally of Russian President Vladimir Putin, was last year appointed to head Rosneft, the world's largest publicly listed oil producer, majority-owned by the Kremlin.
Sechin's confrontation with Medvedev's team has grown since then as Sechin has embarked on an aggressive consolidation of assets under Rosneft's control. Medvedev's deputy for energy, Arkady Dvorkovich, has pushed for more privatisation and lower state interference in the strategic industry.
A more recent spat came over a decision by Rosnedra to awarded Rosneft and state gas major Gazprom licenses to tap oil and gas fields in the Arctic, which Dvorkovich has criticised.
Medvedev is also a close ally of Putin and was Russian president when Putin had to step down from the Kremlin as demanded by the constitution after two consecutive terms as president in 2008. Putin appointed Medvedev as prime minister when he returned to the Kremlin in 2012.
"It is clear that the confrontation between Medvedev-Dvorkovich on one hand and Sechin on the other is growing, and all means may be used in that fight," political analyst Stanislav Belkovsky said about Popov's dismissal.
Medvedev's order said Popov was dismissed because his post was being eliminated. In a separate decree Medvedev named Valery Pak as deputy minister of natural resources and the head of Rosnedra.
"Sechin still enjoys great political clout. This (change in Rosnedra) won't undermine his power," Andrey Polishchuk, an analyst with Raiffeisenbank in Moscow said.

Monetary divide to drive dollar surge

US monetary policy is zigging while the rest of the world is zagging, and the world should brace for a protracted dollar surge, more strains for developing economies and volatility in global markets.
After two weeks of signalling by central banks, investors are betting the Federal Reserve will raise US interest rates within 14 months. No similar move is seen in the euro zone, Britain or Japan before 2016 at the earliest  the first major divergence in rate expectations for five years.
Prospects of less Fed money printing and the European Central Bank's promise this week to keep interest rates low have already pushed the gap between US and German 10-year government bond yields to its widest since 2006.
The developing policy gap, and the United States' stronger economic outlook, means many investors are starting to assume the dollar is in the foothills of a mountainous rally.
That could provide a fillip for struggling European and Japanese exporters but would be bad news for emerging economies.
A stronger greenback has a depressive impact on dollar-priced commodities, raises dollar borrowing costs for companies and developing countries, and may ultimately stem the flow of US investment overseas.
Almost half the world's $80 trillion of private pension, insurance and mutual fund savings originates in the United States, and long-term shifts in the dollar's exchange rate can profoundly change their calculation of overseas returns and hence their preference for home or foreign markets.
"It's potentially going to have a big impact on the dollar and US fund managers who are the biggest investors in the global economy," said UBS strategist Manik Narain.
"They have been orchestrating the big inflows into emerging markets and now for the first time in 13 years they are seeing real US interest rates are on the rise."
The dollar has risen sharply against Japan's yen and emerging market currencies all year, but the latest shift in monetary outlooks within the developed world looks likely to push it up against the euro, sterling and other G7 currencies.
"We're big proponents of a stronger dollar it's the central investment thesis of this period," said Scott Thiel, head of global bonds at the world's biggest asset manager, BlackRock which has almost $4 trillion under management.
Others say the order in which countries were sucked into the global crisis is the main issue. But dollar strength still emerges under that scenario.
"There's potential for the appreciation of the dollar versus the euro and also against Asian currencies," said Arnaud de Servigny, chief investment officer at Deutsche Bank Wealth Management. "The entry into the crisis was the US first, followed by Europe, followed by Asia. Now the first out is the US, followed by Europe, and there's some uncertainty in Asia."
Historic shift
Prolonged periods of broad dollar strength have been few and far between since exchange rates were allowed to float in 1973.
Seismic dollar swings in the 1980s also resulted from mismatched economic cycles and monetary policies either side of the Atlantic and were met with bouts of central bank intervention, first to cap the dollar and then to stall its subsequent collapse.
Investors are looking at 1994 as a parallel for the present. Surprise Fed rate rises that year pushed bond yields higher everywhere, even as Germany's Bundesbank - then Europe's most powerful central bank - was furiously easing policy.
The interest rate gap peaked in 1995, the trigger for six years in which the dollar - still the world's main reserve currency - appreciated more than 40 percent on the Fed's broad trade-weighed index.
While the dollar has been gaining strength, the Fed's broad dollar index has risen only 4% so far this year.
The late 1990s saw major crises in emerging markets as dollar strength tightened global financial conditions and depressed world commodity prices, and as US money returned home to what was seen as a relatively safe high-growth story in Silicon Valley.
This week's historic decisions by the ECB and Bank of England to offer "forward guidance" on interest rates stands in contrast to the US Federal Reserve's timetable for less money printing and higher rates over the next two years.
With Japan also still in the midst of a renewed and aggressive monetary easing, the Fed's relatively hawkish leaning looks out of step with its major Group of Seven allies.
And despite attempts by Fed officials to emphasize conditionality, a hefty 195 000 rise in US non-farm payrolls in June will only reinforce that view.
But could a dollar rise itself be enough to make the Fed row back?
Jim O'Neill, former chairman of Goldman Sachs Asset Management and long-term proponent of emerging economies, told Reuters on Friday that the exchange rate fallout may be critical in shaping "reaction functions" around the world.
"The dollar is likely to rise but the Fed doesn't want to preside over a major tightening in financial conditions and so a huge dollar rise may itself contribute to the Fed toning down what it said," said O'Neill.
Big developing countries like China could also help themselves, by further reducing their dependence on the dollar for trade and investment, he added.
"The notion that emerging economies are always vulnerable to the curse of the dollar's exorbitant privilege is in their own (emerging countries') hands."

Greek aid could be split - EU

The next tranche of international aid for Greece could be split into instalments, the EU's top economic official said on Friday, holding out the prospect of a continued hand-to-mouth existence for Greece that threatens to stifle its economy.
Athens had hoped that euro zone finance ministers would sign off on the next €8.1bn tranche of aid when they meet on Monday, although Greek officials have conceded that Greece would not meet targets on reforming its public sector by an end-of-week deadline set by international lenders.
On Friday, however, Olli Rehn, the European commissioner in charge of economic and monetary affairs, confirmed what many officials have expressed privately amid growing frustration with Athens' slow pace of reform, namely, that the tranche could be split into several instalments.
"It is possible, but not certain," Rehn told a seminar in his hometown of Mikkeli, Finland, when asked about the issue. "It all depends on whether Greece can meet all requirements that they are committed to."
He said that talks involving the International Monetary Fund, the European Commission and the European Central Bank, which make up the troika that supervises Greece, would "continue as long as needed".
The euro fell slightly against the US dollar on Rehn's comments to 1.288.
Greece has been kept afloat by emergency loans alone since May 2010, a few months after the start of a debt crisis that sent shockwaves through the eurozone and threatened to push Greece out of the common currency.
The latest instalment is one of the last big cash injections that twice bailed-out Athens stands to receive as part of a €240bn rescue package that expires at the end of 2014. It needs the money in part to redeem about €2.2bn of bonds in August.

But public sector layoffs, which must be implemented alongside state privatisations as a condition of receiving aid, are an incendiary issue in Greece, which is struggling through a sixth year of recession and record high unemployment.

Spain 'told' Snowden was on Bolivia plane

Spain says it and other European countries were told that fugitive NSA leaker Edward Snowden was aboard the Bolivian presidential plane that was diverted to Austria this week, causing a diplomatic row.

Foreign Minister Jose Manuel Garcia-Margallo said on Friday on Spanish National Television "they told us that the information was clear, that he was inside".
The minister did not say who supplied the information and declined to say whether he had been in contact with the United States. But he says European countries' reactions were based on this information.
Bolivia President Evo Morales claims Washington pressured European countries to deny the plane flyover permission on Tuesday on suspicion that Snowden was using the flight as part of his bid to seek asylum.

Iceland rejects Snowden citizenship bid

The parliament of Iceland has rejected a proposal to offer US intelligence leaker Edward Snowden Icelandic citizenship, a parliament spokesperson said on Friday.

The 63-seat parliament late on Thursday voted against the proposal, which had been made by six members of the opposition, including Birgitta Jonsdottir of the Pirate Party and Ogmundur Jonasson, a former interior minister and member of the Left-Green Movement.
In an entry on her blog, Jonsdottir posted a message attributed to Snowden in which he said he had "been left de facto stateless”.
Iceland's centre-right government had already said that Snowden would not be given special treatment, noting that an asylum application would have to be made on Icelandic soil.
Earlier this week, the interior ministry said a fax with an application for asylum that had been sent to Iceland's embassy in Moscow, could not be considered as it was not possible to verify if it had been sent by Snowden.

Similar applications have been sent to 20 other countries.

Snowden makes 6 new asylum applications

Secret-spilling website WikiLeaks says NSA leaker Edward Snowden has put in asylum applications to six new countries as his effort to find refuge from American prosecution falters.

Snowden is believed to be stuck in a Moscow airport transit area and has already sought asylum from more than 20 countries, including Venezuela and Ecuador. Many have since turned him down.
President Barack Obama has publicly displayed a relaxed attitude toward the leaker's movements, but the drama surrounding the flight of Bolivian President Evo Morales - whose plane was abruptly rerouted to Austria over suspicions Snowden was aboard - suggests that pressure is being applied behind the scenes.
WikiLeaks said in a message posted to Twitter on Friday that it would not be identifying the countries involved "due to attempted US interference".