Oil futures plunged below zero on Monday, the latest never-before-seen number to come out of the economic coma caused by the coronavirus pandemic.

Stocks and Treasury yields also dropped on Wall Street, with the S&P 500 down 1.8%, but the market’s most dramatic action by far was in oil, where the cost to have a barrel of US crude delivered in May plummeted to negative $37.63. It was at roughly $60 at the start of the year.

Traders are still paying $20.43 for a barrel of US oil to be delivered in June, which analysts consider to be closer to the “true” price of oil. Crude to be delivered next month, meanwhile, is running up against a stark problem: traders are running out of places to keep it, with storage tanks close to full amid a collapse in demand as factories, automobiles and airplanes sit idle around the world.

Tanks at a key energy hub in Oklahoma could hit their limits within three weeks, according to Chris Midgley, head of analytics at S&P Global Platts. Because of that, traders are willing to pay others to take that oil for delivery in May off their hands, so long as they also take the burden of figuring out where to keep it.

“Almost by definition, crude oil has never fallen more than 100%, which is what happened today,” said Dave Ernsberger, global head of pricing and market insight at S&P Global Platts.

“I don’t think any of us can really believe what we saw today,” he said. “This kind of rewrites the economics of oil trading.”

Also exacerbating the volatility is that few traders are buying and selling US oil to be delivered in May. They won’t even have the opportunity to do so after Tuesday, when trading contracts for it expire and the earliest delivery they’ll be able to buy is for June.

Brent crude, the international standard, fell nearly 9% to $25.57 per barrel.

A dismal 2020

The plunge in oil sent energy stocks in the S&P 500 to a 3.7% loss, the latest in a dismal 2020 that has caused their prices to nearly halve.

Halliburton lurched between gains and sharp losses, even though it reported stronger results for the first three months of 2020 than analysts expected. The oilfield engineering company said that the pandemic has created so much turmoil in the industry that it “cannot reasonably estimate” how long the hit will last. It expects a further decline in revenue and profitability for the rest of 2020, particularly in North America.

The S&P 500 fell 51.40 points to 2,823.16. The Dow Jones Industrial Average lost 592.05 points, or 2.4%, to 23,650.44, and the Nasdaq dropped 89.41, or 1%, to 8,560.73.

The losses ate into some of the big gains indexes have made since late March, driven lately by investors anticipating the potential reopening of businesses as infections level off in hard-hit areas. Pessimists have called the rally overdone, pointing to the severe economic pain sweeping the world and continued uncertainty about how long it will last.

“The government can declare whatever they want in terms of encouraging people to get out and do stuff,” said Willie Delwiche, investment strategist at Baird. “Whether or not broad swaths of society do that remains to be seen. It’s going to take seeing people start to get out and do stuff again. That will be the necessary positive development, not just declaring getting things open.”

New stay-at-home economy

More gains from companies that are winners in the new stay-at-home economy helped limit the market’s losses. Netflix jumped 3.4% to set another record as people shut in at home look to fill their time. Amazon added 0.8%.

In Asia, Tokyo’s Nikkei 225 fell 1.1%. The Hang Seng index in Hong Kong lost 0.2%, and South Korea’s Kospi fell 0.8%.

European markets were modestly higher. The German DAX was up 0.5%, the French CAC 40 was up 0.7% and the FTSE 100 in London gained 0.7%.

In a sign of continued caution in the market, Treasury yields remained extremely low. The yield on the 10-year Treasury slipped to 0.62% from 0.65% late Friday.

Stocks have been on a general upward swing recently, and the S&P 500 just closed out its first back-to-back weekly gain since the market began selling off in February. Promises of massive aid for the economy and markets by the Federal Reserve and US government ignited the rally, which sent the S&P 500 up as much as 28.5% from a low on March 23.

More recently, countries around the world have tentatively eased up on business-shutdown restrictions put in place to slow the spread of the virus.

But health experts warn the pandemic is far from over and new flareups could ignite if governments rush to allow “normal” life to return prematurely. The S&P 500 remains nearly 17% below its record high as millions more US workers file for unemployment every week amid the shutdowns.

Many analysts also warn that some of the the recent rally for stocks is due to expectations the economy will pivot quickly and rebound sharply once economic quarantines are lifted. Those could prove to be too optimistic.

“There’s still uncertainty surrounding the reopening of the economy,” said Julian Emanuel, chief equity and derivatives strategist at BTIG. “Come fall, are we going to be back on airplanes? Are we going to go out and eat?”

Source:AP

The ranks of Americans thrown out of work by the coronavirus ballooned Thursday to more than 20 million in just four weeks, an unprecedented collapse fueling widening protests and propelling President Donald Trump’s push to relax the nation’s social distancing guidelines.

Trump planned to announce new recommendations later in the day, despite warnings from business leaders and governors that more testing and protective gear are needed first.

The government said 5.2 million more people applied for unemployment benefits last week, bringing the running total to about 22 million out of a U.S. work force of roughly 159 million — easily the worst stretch of U.S. job losses on record.

Some economists say the unemployment rate could reach 20% in April, the highest since the Great Depression of the 1930s.

While some leaders and citizens have called on government to reopen stores, factories and schools, health authorities and many politicians warned that returning to normal is a distant goal and that easing up on restrictions too soon could allow the virus to come storming back.

The decision of when and how to ease up rests with state and local leaders, who imposed the mandatory lockdowns and other restrictions put in place over the past month.

The outbreak has infected more than 2 million people worldwide and killed more than 137,000, according to a tally by Johns Hopkins University, though the true numbers are believed to be much higher. The death toll in the U.S. reached about 31,000, with over 600,000 confirmed infections.

Fallout from the virus spread in ways both predictable and devastating, from police torching an illicit food market in Zimbabwe, to emergency flights carrying foreign farm workers to Britain and Germany, and protests at U.S. state capitols against job losses.

In France, Amazon suspended operations after a court ruled it wasn’t doing enough to protect its workers in the country. The online retailer has six warehouses in France.

In Britain, a government survey found that a quarter of companies had suspended business. Cargo traffic at Europe’s massive port of Rotterdam in the Netherlands sank 9.3% in the first quarter from the same period a year ago, and its CEO warned of worse to come.

The World Health Organization’s European chief said optimism that the spread of the virus is declining in Italy, Spain and France has been tempered by the knowledge that it is rising or remaining at a high level in Britain, Russia and Turkey.

“The storm clouds of this pandemic still hang heavily over the European region,” Dr. Hans Kluge said.

On Wednesday, the U.S. reported that American industrial output shriveled in March, registering its biggest decline since the nation demobilized in 1946 at the end of World War II. Retail sales fell by an unprecedented 8.7%, with April expected to be far worse.

The International Monetary Fund said fallout from what it calls the “Great Lockdown” will be the most devastating since the Depression.

That has made leaders all the more anxious to send people back to work and school and to rebuild devastated economies.

Italy’s hardest-hit region of Lombardy is pushing to relaunch manufacturing on May 4, the day that the national lockdown is set to lift. Regional officials are considering ordering companies to stagger opening hours to avoid cramming public transportation.

But Italy’s deputy economic development minister, Stefan Buffagni, called the plan premature: “Going in a random order risks fueling confusion among citizens and businesses.”

In the U.S., thousands came out in Michigan and Oklahoma to protest the lockdowns they say have destroyed livelihoods.

In Michigan, some were masked and armed with rifles, but many unmasked people defied stay-at-home orders and jammed nearly shoulder-to-shoulder in front of the Capitol building in Lansing. In Oklahoma, cars plastered with protest signs drove past the Statehouse in Oklahoma City: “All jobs are essential,” read one sign on the back of a pickup truck.

“This arbitrary blanket spread of shutting down businesses, about putting all of these workers out of business, is just a disaster. It’s an economic disaster for Michigan,” said protester Meshawn Maddock.

In Michigan’s northern Leelanau County, Sheriff Mike Borkovich said enforcing the restrictions is taking a toll.

“People are frantic to get back to work. They have been very edgy,” he said.

Troubling data indicate the worst may still be to come in many parts of the world.

Japan’s prime minister announced he would expand a state of emergency to the entire country, rather than just urban areas, as the virus continued to spread. Japan has the world’s oldest population, and the elderly are especially vulnerable to the coronavirus.

The British government was set Thursday to extend a nationwide lockdown for several more weeks, as health officials say the coronavirus outbreak in the country is peaking. Britain awaited its first flight of Romanian farm workers, and more than 30,000 other workers registered for flights to Germany to help plant and harvest.

U.N. Secretary-General Antonio Guterres urged stepped-up efforts to prepare Africa for the virus, warning that the continent “could end up suffering the greatest impacts.”

In Zimbabwe, where food was scarce even before the outbreak, police raided a market, torching 3 tons of fresh fruit and vegetables and scattering farmers who had broken travel restrictions to try to sell their crops.

(AP)

It’s a grim truth that times are good for the coffin business when they’re bad for people, and the coronavirus pandemic is no exception.

At a factory belonging to Europe’s largest coffin maker, OGF, in eastern France, workers are doing overtime to meet demand from families parting with their loved ones.

“Due to the epidemic, we decided to manufacture just four models of coffins that are top sellers with families” compared to the 15 types usually on offer, said factory director Emmanuel Garret.

The change “allowed us to optimise production”, he added.

Output has risen to 410 coffins per day, compared to 370 normally.

Workers are putting in nearly an extra hour per day.

“People have been forewarned and are ready to come in and work on Saturdays,” said Didier Pidancet, who heads up the team that selects the wood for the coffins.

France has been one of the countries worst hit by the coronavirus.

“We’re proud to be participating in this national effort, we’re doing our best to ensure that victims can have their final overcoat, as we say,” added Pidancet.

– No shortages –

Founded in 1910, the factory in the town of Jussey originally produced wood charcoal and flooring. At the outset of World War II it began to specialise in making coffins.

It is now part of the OGF Group, which has two factories including the one at Jussey, and makes one in four coffins used in France.

The 10 hectare (25 acre) site is responsible for the entire process of producing coffins. It strips the logs, cuts then dries the wood, which is eventually crafted and assembled into coffins.

The wood, mostly oak, comes from local forests.

While temporarily cutting back on the number of models, the factory has made another adjustment: it has been making more larger coffins.

“Orders for larger sizes are up a bit,” said Garret, although he declined to draw a link to reports that COVID-19 mortality rates are higher for overweight people.

While many manufacturers have encountered problems as lockdown restrictions complicate deliveries, the Jussey factory is well stocked.

“We’re OK, we have three months of stocks of wood, glue, nails and varnish,” said Garret.

– ‘Play our part’ –

Some of the factory’s workers are no strangers to previous surges in deaths.

“During the 2003 heatwave we increased production to 500 caskets a day,” said David Theurez, a 30-year veteran at the site.

The heatwave, which claimed nearly 15,000 lives in France, was in some ways more difficult for the factory as they had no warning and had to call workers back from vacation.

“But today, it’s a bit different, you have to protect yourself as well with masks and gloves,” said Theurez.

“It’s a collective crisis, we all have to make an effort and play our part,” he added.

The factory’s workers themselves haven’t gone unscathed: three have come down with COVID-19.

Fifteen others are at home, forced into isolation by existing serious health issues, or because they have to mind their children as school has been cancelled.

Like many other French companies, the factory has had difficulty obtaining protective gear for all of its employees.

It had a local seamstress make masks for employees and work stations are disinfected regularly.

The factory’s director thinks that the rapid adoption of social distancing measures and protective gear has helped them avoid more cases as eastern France has been hard hit with coronavirus infections.

“Fingers crossed,” said Garret.

Source:  AFP

Tens of millions of jobs are now at risk from the coronavirus pandemic, with entire industries being shut down to keep the virus from spreading. Governments across Europe are spending billions on wage subsidies in a desperate effort to save jobs and cushion the economic blow.

A spike in unemployment is a triple threat to a country’s economy: consumer spending and tax revenues drop, while social welfare costs skyrocket.

The International Labour Organization estimates that almost 25 million jobs could be lost worldwide due to the coronavirus pandemic.

Governments across Europe are using public money to try to secure jobs through the crisis by paying or reimbursing companies that have seen their revenues dry up. Their goal: to keep employees on the payroll so they can resume working when businesses re-open.

Here are some of the plans to help individuals that have been announced so far.

France

As the number of cases of the virus began to rise, the French government extended its system of chômage partiel, or partial unemployment.

When a company is forced to reduce or suspend work, it can apply for state funding of 70 percent of an employee’s gross salary, to a maximum of €6,927 per month.

As of March 24, 730,000 workers were being paid under this scheme. The finance ministry has already set aside €8.5 billion in funding but that amount is expected to rise.

With schools and crèches (nurseries) closed, the French government is also giving paid leave to parents who cannot work from home and who are responsible for children younger than 16.

The annual winter embargo on evicting tenants from residential properties has also been extended to May 31.

Germany

Berlin has expanded its short-time allowance, or Kurzarbeitergeld, to include companies that cut working hours as a result of the coronavirus.

It pays at the same level as unemployment benefits: Up to 67 percent of net wages lost due to shorter hours, to a maximum of €6,700 per month.

Tenants who are unable to pay their rent will be protected from eviction until September 30, although back rent will be owed when the economic situation improves.

United Kingdom

The Coronavirus Job Retention Scheme will see the UK government reimburse companies for 80 percent of gross salaries up to a maximum of £2,500 (€2,714) per month.

This can be backdated to March 1, with the system in place initially for three months.

Finance Minister Rishi Sunak said he was “placing no limit on the amount of funding available for the scheme”.

Ireland

A new temporary wage subsidy will allow affected companies to recoup up to 70 percent of salaries from the Irish government to maintain current employment levels, with a maximum of €410 per week (€1,777 net per month).

Special arrangements have been made for the childcare sector, which include the state paying all the wages of crèche workers as well as contributing to other running costs. The aim is for parents to be able to stop paying fees and still be guaranteed a place when the crèche reopens.

Italy

As part of the economic package adopted on March 16, Prime Minister Giuseppe Conte’s government extended a series of “social shock absorbers”. 

They include paying up to 80 percent of an employee’s salary for a period of nine weeks to a maximum of €1,130 net per month.

Self-employed people have also been awarded a one-off payment of €600.

Spain

The existing provision for temporary layoffs, known as ERTE, has been expanded to cover businesses affected by the virus. Up to 70 percent of salaries will be paid, with a maximum of €1,412 per month.

The Spanish government has also ordered utility companies to maintain services to all “vulnerable” households, even if they are unable to pay their bills.

Trouble ahead

These temporary packages come at a steep cost to the taxpayer but, if successful, they will help economies recover more quickly when the outbreak recedes.

Economists are nonetheless warning of a deep recession to come. A key economic survey published by IHS Markit on Tuesday showed the largest collapse in eurozone business activity on record.

And despite the quick moves to shore up economies, some warn it may not be enough.

So far, “policymakers’ efforts to date have failed to brighten the darkening picture”, said IHS Markit chief business economist Chris Williamson, in a statement accompanying the survey results.

Bell, of BMO Global Asset Management, wrote in an economic update on Tuesday that government measures “will do no more than blunt the blow to economies and families”.

Source: France 24

Cambodian authorities last week seized a Cameroon-registered ship that is suspected of having taken part in ship-to-ship transfers to North Korea of oil and other banned goods, RFA has learned.

In a statement Sunday, the General Commissariat of National Police said the MT-Courageous was found to be illegally anchored in Cambodian waters between Koh Tang and Koh Poulo Wai, uninhabited islands in the Gulf of Siam southwest of the country. The ship had previously been expelled from Taiwan.

According to the police statement, the tanker has 16 crew members and had been anchored there since Thursday to await new orders from its owner before it was seized on Friday.

The statement also said that the Courageous had violated UNSC resolutions 2375 and 2397 for transferring cargo with North Korean ships.

The seized ship’s crew were sent to the Prosecutor’s Office in Sihanoukville, where they may face legal action. Their nationalities were not made public.

“For a period of 24 hours, they didn’t communicate with us to try to request authorization to dock or request legal permits from the Cambodian maritime border authorities,” Chhay Kimkhoeun, a spokesman for the police, told RFA’ s Khmer Service Sunday.

“That tanker was in involved in activities that violated the UNSC sanctions against North Korea,” the spokesman added.

Deputy National Police Commissioner General Teng Suon confirmed that the tanker violated UNSC resolutions by participating in ship-to-ship transfers with North Korean ships. He did not say when the transfers occurred.

RFA was unable to reach the Sihanoukville court’s spokesperson Lim Bun Heng, for comment.

The United Nations Security Council has over the past decade imposed a raft of economic sanctions on North Korea to deprive Pyongyang of supplies, resources and revenue that could be funneled into its nuclear and missile programs.

Source: Radio Free Asia

As they rubber-stamped the bloc’s 46-page negotiating document, general affairs ministers from the 27-nation EU used words such as complicated, difficult, and tough with respect to the forthcoming talks aimed at trying to reach a free trade deal with the UK.

Michel Barnier was referring to a claim made on a number of occasions by London-appointed Northern Ireland Secretary Brandon Lewis that there would not be a border on the Irish sea.

However, this is a key component of the Brexit withdrawal agreement that the British Government has fully endorsed. It is crucial to preventing highly contentious border checks on land between the Republic of Ireland and Northern Ireland.

When trade talks start next week, major challenges are also likely to emerge relating to fishing rights, employment standards, climate change, and a whole range of other issues.

Outside the venue of the ministers’ meeting in Brussels, workers’ unions held a demonstration. They highlighted the fact that poverty and youth unemployment levels remain very high in the EU. It is time, they said, for the remaining 27 countries to take action.

Right now, everything remains the same. It is as though the UK is still in the EU. But when the Brexit transition period ends on December 31, there will be wide-ranging consequences if a trade deal has not been reached. That is the outcome many experts are predicting. It’s anticipated Boris Johnson is set to prioritize UK-US relations above ties between London and Brussels.

The UK delegation led by negotiator David Frost is due to arrive here next Monday to begin formal talks with the EU’s team, headed up by Michel Barnier. According to analysts, the two biggest obstacles standing in the way of a possible deal are the unrealistic time frame and the influence of eurosceptic Donald Trump.

Source: Presstv

Ryanair’s chief executive Michael O’Leary has sparked outrage after he called for the profiling of Muslim men at airports, claiming that terrorists are “generally of a Muslim persuasion”.

Muslim men should be profiled and face further checks at airports because “that is where the threat is coming from,” the controversial CEO of Europe’s largest low-cost carrier said in an interview with the Times newspaper published on Saturday.

He further noted under such profiling guidelines, passengers that would be flagged as a potential threat for terrorism would “generally be males of a Muslim persuasion”.

“Who are the bombers? They are going to be single males traveling on their own… If you are traveling with a family of kids, on you go; the chances you are going to blow them all up is zero,” he said.

“You can’t say stuff, because it’s racism, but it will generally be males of a Muslim persuasion. Thirty years ago it was the Irish. If that is where the threat is coming from, deal with the threat,” he added.

A spokesman for the Muslim Council of Britain has accused O’Leary of “Islamophobia” and “encouraging racism”.

“In Germany this week a white person killed eight people. Should we profile white people to see if they’re being fascists? He’s being very blinkered and is actually encouraging racism,” Labour MP Khalid Mahmood told the Times.

The legislator was referring to mass shootings in Germany’s southwestern city of Hanau late on Wednesday during which eight people were killed and five others wounded.

Germany has been targeted in recent years by several extremist attacks, one of which killed 12 people in the heart of Berlin in December 2016.

But far-right attacks have become a particular concern for German authorities. The increase in hate crimes in recent months has prompted the country to expand a crackdown on right-wing political violence in order to repress the disturbance.

It seems that there has been a rise in far-right attacks across Europe in recent years.

On Thursday, a Muslim prayer leader was stabbed in the neck in front of hundreds of horrified onlookers at a mosque near Regent’s Park in the British capital London.

Raafat Maglad, who is in his 70s, returned to the London Central Mosque on Friday, saying he was sorry for the alleged attacker.

“I forgive him. I feel very sorry for him. What is done is done, he is not going to return,” he said, adding that as a Muslim he does not hold any hatred in his heart.

Maglad, who had his arm in a sling as he was escorted in to the mosque by security, said it was “very important” for him to attend Friday prayers.

Addressing worshipers over the loudspeaker system after prayers had ended, London’s mayor Sadiq Khan urged people to remain vigilant and reassured them that police would maintain a presence at the mosque, particularly as the holy month of Ramadan approaches.

A 29-year-old man who is believed to have been attending prayers was arrested on Thursday on suspicion of attempted murder inside the mosque.

However, concerns about the wider threat to mosques were voiced following the stabbing.

London Central Mosque is one of the country’s largest and can hold 5,000 worshipers with people from across London going there for prayers.

Although the incident has not been declared a terrorist incident, the Met’s SO15 counter terror unit is looking into it.

Less than a year ago, the mosque was affected by another stabbing incident.

Britain’s Muslim community has lost trust in the government. Fifty-two percent of all hate crimes last year were aimed at Muslims. But mosques are struggling to get government funding allocated to protecting places of worship. They receive a fraction of what other faiths are awarded.

Source: Presstv

US authorities have allowed airlines in the country to resume flying through the airspace south of Iran now that tensions between the two countries have subsided.

The US Federal Aviation Administration said on Saturday that flights can resume over much of the Persian Gulf and the Sea of Oman, adding that it had come to the conclusion that hostilities in the region had de-escalated.

The aviation watchdog enacted bans on entering parts of the airspace over Iraq, Iran and the Persian Gulf in early January when tensions flared up between Tehran and Washington over a series of incidents that even raised the prospects of war in the region.

Pilots and carriers were instructed to avoid the region because there was a risk that civilian aircraft could be confused with military planes operating in the area.

Concerns about the safety of flights deepened on January 8 when Iran accidentally shot down a Ukrainian airliner flying from Tehran to Kiev.

All 176 people on board were killed in the incident which came hours after Iran fired ballistic missiles at two American military bases in Iraq.

The missile attacks had come in response to US airstrikes in early January that killed a top Iranian military commander along several Iranian and Iraqi military personnel.

Iran has taken full responsibility for the downing of the Boeing 737-800 operated by Ukraine International Airlines, saying it will do it best to clarify the circumstances surrounding the incident.

Aviation bodies in Europe as well as major airlines around the world have already removed bans on flights through the Iranian and Iraqi airspace.

Source: Presstv

Ever since the dollar cemented its role as the world’s dominant currency in the 1950s, it has been clear that America’s position as the sole financial superpower gives it extraordinary influence over other countries’ economic destinies. But it is only under President Donald Trump that America has used its powers routinely and to their full extent, by engaging in financial warfare. The results have been awe-inspiring and shocking. They have in turn prompted other countries to seek to break free of American financial hegemony.

In 2018 America’s Treasury put legal measures in place that prevented Rusal, a strategically important Russian aluminium firm, from freely accessing the dollar-based financial system—with devastating effect. Overnight it was unable to deal with many counterparties. Western clearing houses refused to settle its debt securities. The price of its bonds collapsed (the restrictions were later lifted). America now has over 30 active financial- and trade-sanctions programmes. On January 10th it announced measures that the treasury secretary, Steven Mnuchin, said would “cut off billions of dollars of support to the Iranian regime”. The State Department, meanwhile, said that Iraq could lose access to its government account at the Federal Reserve Bank of New York. That would restrict Iraq’s use of oil revenues, causing a cash crunch and flattening its economy.

America is uniquely well positioned to use financial warfare in the service of foreign policy. The dollar is used globally as a unit of account, store of value and medium of exchange. At least half of cross-border trade invoices are in dollars. That is five times America’s share of world goods imports, and three times its share of exports. The dollar is the preferred currency of central banks and capital markets, accounting for close to two-thirds of global securities issuance and foreign-exchange reserves.

The world’s financial rhythm is American: when interest rates move or risk appetite on Wall Street shifts, global markets respond. The world’s financial plumbing has Uncle Sam’s imprint on it, too. Most international transactions are ultimately cleared in dollars through New York by American “correspondent” banks. America has a tight grip on the main cross-border messaging system used by banks, swift, whose members ping each other 30m times a day. Another part of the us-centric network is chips, a clearing house that processes $1.5trn-worth of payments daily. America uses these systems to monitor activity. Denied access to this infrastructure, an organisation becomes isolated and, usually, financially crippled. Individuals and institutions across the planet are thus subject to American jurisdiction—and vulnerable to punishment.

America began to flex its financial muscles after the terrorist attacks of September 11th 2001. It imposed huge fines on foreign banks for money-laundering and sanctions-busting; in 2014 a $9bn penalty against bnp Paribas shook the French establishment. Mr Trump has taken the weaponisation of finance to a new level (see chart). He has used sanctions to throttle Iran, North Korea, Russia, Turkey (briefly), Venezuela and others. His arsenal also includes tariffs and legal assaults on companies, most strikingly Huawei, which Mr Trump accuses of spying for China. “Secondary” sanctions target other countries’ companies that trade with blacklisted states. After America pulled out of a nuclear deal with Iran in 2018, European firms fled Iran, even as the eu encouraged them to stay. swift quickly fell into line when America threatened action if it did not cut off Iranian banks after the reimposition of sanctions in 2018.

Using the dollar to extend the reach of American law and policy fits Mr Trump’s “America first” credo. Other countries view it as an abuse of power. That includes adversaries such as China and Russia; Russia’s president, Vladimir Putin, talks of the dollar being used as a “political weapon”. And it includes allies, such as Britain and France, who worry that Mr Trump risks undermining America’s role as guarantor of orderliness in global commerce. It may eventually lead to the demise of America’s financial hegemony, as other countries seek to dethrone its mighty currency.

The new age of international monetary experimentation features the de-dollarisation of assets, trade workarounds using local currencies and swaps, and new bank-to-bank payment mechanisms and digital currencies. In June the Chinese and Russian presidents said they would expand settlement of bilateral trade in their own currencies. On the sidelines of a recent summit, leaders from Iran, Malaysia, Turkey and Qatar proposed using cryptocurrencies, national currencies, gold and barter for trade. Such activity marks an “inflection point”, says Tom Keatinge of rusi, a think-tank. Countries that used merely to gripe about America’s financial might are now pushing back.

Russia has gone furthest. It has designated expendable entities to engage in commerce with countries America considers rogue, in order to avoid putting important banks and firms at risk. State-backed Promsvyazbank pjsc is used for trade in arms so as to shield bigger banks like Sberbank and vtb from the threat of sanctions.

Russia has also been busy de-dollarising parts of its financial system. Since 2013 its central bank has cut the dollar share of its foreign-exchange reserves from over 40% to 24%. Since 2018 the bank’s holdings of American Treasury debt have fallen from nearly $100bn to under $10bn. Russia’s finance ministry recently announced plans to lower the dollar share of its $125bn sovereign-wealth fund. “We aren’t aiming to ditch the dollar,” Mr Putin has said. “The dollar is ditching us.”

Elvira Nabiullina, Russia’s central-bank governor, says the move was partly motivated by American sanctions (which were imposed after Russia’s annexation of Crimea in 2014), but also by a desire to diversify currency risk. “I see a global shift in mood,” she says. “We are gradually moving towards a more multi-currency international monetary system.” Ms Nabiullina echoes Mark Carney, the governor of the Bank of England, who said in August that the dollar-centric system “won’t hold”.

Russia’s debt is being de-dollarised, too. New issuance is often in roubles or euros, and the government is exploring selling yuan-denominated bonds. Russian companies have shrunk their foreign debts by $260bn since 2014; of that, $200bn was dollar-denominated. Conversely, Russian firms and households retain a fondness for dollars when it comes to holding international assets: they have $80bn more than they did in 2014. Dmitry Dolgin of ing, a bank, finds this “puzzling”, but suspects it could be that the interest rates on dollar assets, higher than on euro equivalents, outweigh the perceived risk from sanctions.

Dasvidaniya, dollar

ing expects 62% of Russia’s goods and services exports to have been settled in dollars in 2019, down from 80% in 2013. Its trade with China was almost all in dollars in 2013; now less than half is. Trade with India, much of it in the sanctions-sensitive defence sector, shifted from almost all dollars to almost all roubles over that period. One reason for this shift, say Russian officials, is that it speeds trade up, since dollar payments can be delayed for weeks as financial intermediaries run sanctions checks.

Energy and commodities firms are among Russia’s most active de-dollarisers. The greenback is the global benchmark currency for oil trading, and escaping its grip is hard. “The key thing to understand is that risk management, the entire derivatives complex, is in dollars,” explains the boss of a global energy firm. “So if you want to have risk management—as an oil trader, buyer or producer—you have to have contact with the dollar system.”

Nonetheless Rosneft, a state-backed producer that accounts for over 40% of Russia’s crude output, has denominated its tender contracts in euros. Surgutneftegas, another producer, still prices in dollars but has added a clause to contracts saying they can be switched to euros at its request—“a back-up plan in case Trump throws shit at the fan”, says a trader. Last March Gazprom priced a natural-gas shipment to western Europe in roubles for the first time. The cost of switching out of dollars is modest, says an executive at a global oil-trading firm: “an extra person in the finance department and a bit more currency risk.”

Will China follow the trail blazed by Russia? Mr Trump has exposed China’s profound vulnerability to the dollar-centric financial system. America’s ability to blacklist or hobble Chinese tech firms, such as Huawei, ultimately rests on punishing suppliers and other counterparties who do business with them through the dollar-based banking and payments system. An American legal case against a senior Huawei executive, who is fighting extradition from Canada, reportedly relies in part on evidence from an American-appointed overseer at hsbc, an Asia-centric bank run from London. In October America sanctioned eight cutting-edge Chinese tech firms for alleged human-rights abuses in Xinjiang province. The administration has threatened to block listings by Chinese firms in New York and restrict purchases by American investors of Chinese shares.

China’s first attempt to bypass the dollar was bungled. After the financial crisis in 2007-09 it promoted the international use of the yuan and pressed for it to become part of the imf’s “Special Drawing Rights”, in effect receiving the fund’s imprimatur as a reserve currency. China set up currency swap deals with foreign central banks (it has done over 35). There was heady talk of the yuan challenging the dollar for the top spot by 2020. Then came a stockmarket panic in 2015 and the government clumsily tightened capital controls. The yuan’s share of global payment by value has stayed at about 2% for several years. Zhou Xiaochuan, a former governor of China’s central bank, has said that yuan internationalisation, which he promoted while in office, was “a premature baby”.

America’s display of financial firepower and new technologies are changing the calculus again. China has some of the building blocks to become more autonomous. It has its own domestic payments and settlement infrastructure, called cips. Launched in 2015, it has so far complemented swift (which it uses for interbank messaging). It is tiny, processing less in 2018 than swift does each day. But it simplifies cross-border payments in yuan, giving banks lots of nodes for settlements. Reports suggest that China, India and others may be exploring a jointly run swift alternative.

A will and a Huawei

Parts of the world’s consumer-finance system are coming under China’s sway thanks to its digital-platform firms, which have globalised faster than its conventional banks. Payments through Alibaba (and its affiliate Ant Financial) are accepted by merchants in 56 countries. The Alipay logo is, in some places, as common as Visa’s. In capital markets, in 2018 China introduced a yuan-denominated crude-oil futures contract on a Shanghai exchange. Known as the “petroyuan”, it is seen by some as a potential rival to the dollar in pricing oil. China has encouraged important firms listed in America to list their shares closer to home as well. On November 26th Alibaba, China’s most valuable company, which in 2014 floated in New York rather than in Hong Kong or Shanghai, completed a $13.4bn additional listing in Hong Kong (the funds were raised in Hong Kong dollars). “As a result of the continuous innovation and changes to the Hong Kong capital market, we are able to realise what we regrettably missed out on five years ago,” said Daniel Zhang, Alibaba’s chief executive.

China’s central bank is reported to be working on a new digital currency, though details are sparse. Some speculate that it wants to get a head-start on America in building whatever international system emerges for managing payments in central bank-issued digital currencies. It discussed creating a common cryptocurrency with other brics countries (Brazil, Russia, India and South Africa) at a recent summit. China may end up doing Bitcoin with an authoritarian twist: instead of anonymity it may want all data to be trackable and centrally stored.

That America’s geopolitical rivals want to escape the dollar’s dominance is no surprise. Perhaps more striking is that its allies are flirting with it, too. In her manifesto for 2019-24, Ursula von der Leyen, the new president of the European Commission, said: “I want to strengthen the international role of the euro.” Jean-Claude Juncker, her predecessor, has called the dollar’s dominance in European energy trade an “aberration” (when just 2% of imports come from America). The commission is working on a new action plan, part of which involves encouraging eu countries to eliminate “undue reference” to the dollar in payments and trade invoicing, according to a staffer.

So far the eu’s main initiative has involved Iran. It has tried to create a way for its banks and firms to trade with it, while shielding them from America’s wrath. But Instex, a clearing house created for this purpose by Britain, France and Germany, with the commission’s support, is crude and limited. It is essentially a barter mechanism and does not cover oil sales (it is limited to non-sanctioned humanitarian trade). It was structured to allow firms to engage in commerce without resort to the dollar or swift. But they have stayed away for fear of incurring secondary sanctions.

The stuttering performance of Instex reflects the sheer scope of America’s reach. As Adam M. Smith, a sanctions expert at Gibson Dunn, a law firm, points out, America can claim jurisdiction if a transaction has any American “nexus”, even if it is not denominated in dollars. This includes transactions that rely on banks under American jurisdiction, or where a foreign counterparty relies on American nationals to approve, facilitate or process the transaction, or where one party uses a back-end payment, accounting or email system that is stored on servers in America.

Despite this, some European officials remain optimistic. On November 29th six more eu states said they planned to join Instex. “It’s a ten-to-twenty-year thing, and hopefully not only covering Iran. You can’t undo decades of policy in a year,” says a French official. And, if Europe manages to reform the inner workings of the euro, its financial reach will expand. “We need to complete the project first: banking union, fiscal integration, genuine capital-markets union, and so on,” another French official says. European powers are likely to play a leading role in central-bank efforts to create a global electronic currency. Last year Mr Carney floated the idea of a network of central-bank digital monies that could serve as a global invoicing currency. If it happens America may not be invited.

A haven above

The true test of any reserve currency is a financial crisis. Eswar Prasad of Cornell University, the author of “The Dollar Trap”, notes that the greenback benefits during times of turmoil. The 2007-09 crisis, which originated in America, paradoxically strengthened its status as a safe haven. When global trade, saving, borrowing and reserves are largely in one currency, these strengths are mutually reinforcing. No other capital market comes close to America’s for depth and liquidity, a key factor when choosing a currency for commerce.

Yet financial supremacy depends on a heady mix of economic clout, incumbency and legitimacy. And the martial approach that America has adopted threatens the dollar’s dominance, reckons Jeffrey Frankel of Harvard University. A former American treasury secretary agrees. In 2016, while still in office, Jack Lew told an audience in Washington: “It is a mistake to think that [sanctions] are low-cost. And if they make the business environment too complicated, or unpredictable, or if they excessively interfere with the flow of funds worldwide, financial transactions may begin to move outside of the United States entirely—which could threaten the central role of the us financial system globally, not to mention the effectiveness of our sanctions in the future.” As the Trump administration continues to use sanctions aggressively, efforts to circumvent them will accelerate. America does not have a monopoly on financial ingenuity.■

Culled from The Economist

Ash spewed by a Philippine volcano is being mixed with plastic waste to make bricks in an inventive response to the country’s persistent problems of pollution and frequent natural disasters.

The Taal volcano burst into life nearly a week ago, sending towering dust columns into the sky and leaving nearby Binan city coated in fine grey powder.

Environment officials did not just clean up the mess but decided to combine the ash with sand, cement and discarded plastic to form about 5,000 bricks per day for local building projects.

“Instead of just piling up the ashfall somewhere, we are able to turn it into something useful. And it includes plastics, too,” said city environmental officer Rodelio Lee.

The Philippines faces a waste crisis, with a report last year saying it uses a “shocking” amount of single-use plastic, including nearly 60 billion throwaway sachets per year.

It is also plagued by some 20 major storms annually and regular, powerful earthquakes which together kill hundreds of people each year.

Due to its position on the Pacific “Ring of Fire” zone of seismic activity, it also has periodic volcanic eruptions.

Taal’s jets of lava and 15-kilometer (nine-mile) walls of ash have sent more than 70,000 people into evacuation centres and prompted warnings that a far bigger eruption could happen at any time.

With volcanic ash and plastic both in plentiful supply, the officials in Binan see their project as a silver lining.

“During these times, our creativity becomes apparent,” said the mayor of Binan, Arman Dimaguila.

Source: AFP