Iraq: Momentary Gains for a Jihadist Group

 

Video Transcript:

The Islamic State in Iraq and the Sham, ISIS, an al Qaeda-related group that is a principal extremist actor in the Syrian civil war and ongoing Iraqi insurgency, seized parts of Ramadi and Fallujah in Iraq on Jan. 3. Rather than viewing this as a fundamental power shift between ISIS and Baghdad’s security forces, however, it should be seen as a temporary victory.
Tensions between Baghdad and the Sunni tribes of Anbar province have been simmering through most of last year and boiled over on Dec. 30 when President Maliki ordered a Sunni protest camp to be dismantled by security forces. The arrest of a local senior Sunni politician led to clashes severe enough to prompt Maliki to withdraw security forces from the region in an effort to de-escalate the situation. It was this security vacuum that ISIS used to seize territory in both cities.
It is one thing to grab territory, especially if it is predominantly uncontested, and quite another to hold it against a concerted military operation mounted by the Iraqi security forces. Sources in Iraq claim that roughly 300 ISIS fighters remain in Ramadi while 800 or so are entrenched in Fallujah. While the urban terrain will give ISIS fighters a serious combat boost as the established defenders against the better equipped Iraqi security forces, they won’t have the numbers or ability to hold indefinitely.
ISIS survives in Iraq by being an insurgent group, avoiding direct confrontation and hiding and moving through the population. This territory grab in Ramadi and Fallujah gives them an address, alleviating the Iraqi security forces of one of their most difficult missions of just finding ISIS. Now they can actually concentrate force, and if executed correctly, degrade sizable chunks of combat power in detail.
The withdrawal of U.S. troops and their allies at the end of 2011 and the outbreak of the Syrian civil war next door has given ISIS the ability to rebound into a capable regional actor, but at the same time their aggressiveness has them overcommitted, outgunned and alienated on multiple fronts. Other rebel groups in Syria have started serious infighting with ISIS recently after they became disillusioned with their actions and have attacked several units despite the advantage this gives to the Assad regime.
This leaves the recent Fallujah and Ramadi seizures likely to be temporary at best. The only serious complicating factor for the Iraqi security forces is moderating their use of force so as not to antagonize the Sunni tribes further. While these tribes might covertly support ISIS or turn a blind eye to their actions against the Maliki government, they do not want to be drawn into an open civil war. Many of the tribes in Anbar have already come out in support of the government forces, with just a few throwing their lot in with ISIS.
ISIS’s ultimate goal is to destabilize Iraq to the point where they can accomplish their ultimate aim of a regional Islamic Emirate. They can only accomplish this if they can unite a sizable portion of the Sunni population into a sectarian civil war through their own actions or by provoking the Shiite government into actions that accomplish the same. Without this, they will come up short.

Iraq, Turkey: Oil Flow To Restart Following Deal With Kurds

Iraq, Turkey: Oil Flow To Restart Following Deal With Kurds

November 19, 2014 | 1928 GMT


The Iraqi government will resume oil exports to Turkey for the first time since March following last week’s settlement of a dispute with the Kurdistan Regional Government, Turkish Energy Minister Taner Yildiz said Nov. 19, Hurriyet Daily News reported. Yildiz said the shipments, which are to begin any day, would start at 150,000 barrels per day. Iraqi and Kurdish leaders had been in conflict over how to divvy up oil revenues and over Kurdish plans to export oil to Turkey through an independent pipeline.

Iraq’s Kurds, Baghdad Take Step Towards Compromise

Iraq’s Kurds, Baghdad Take a Shaky Step Toward Compromise

November 14, 2014 | 2136 GMT

Kurdistan Regional Government Prime Minister Nechirvan Barzani speaks during a press conference in the northern Iraqi city of Arbil on Sept. 18, 2013.(SAFIN HAMED/AFP/Getty Images)

 

Summary

Kurdistan Regional Government (KRG) leadership and Iraqi Oil Minister Adel Abdel Mahdi announced Nov. 13 that they have reached an agreement for the KRG to send 150,000 barrels per day of oil to the central government and for the central government to send $500 million to the KRG to pay salaries for civil servants for the month of October. Financial stress has pushed the Kurds to negotiate with Baghdad, but the core points of contention between Baghdad and Arbil that hamper a more comprehensive and enduring compromise remain.

Analysis

Despite the KRG’s repeated claims that it can develop enough energy revenue to exist independently of Baghdad, financial and political factors keep Arbil from having that option. Without a deal with Baghdad, the KRG is losing out on roughly $1.2 billion per month, the bulk of which goes toward paying the salaries of civil servants — a critical component of the patronage networks underpinning the KRG’s two main parties, the Kurdistan Democratic Party and the Patriotic Union of Kurdistan. The lack of budget allocations has put the KRG in more than $9 billion of debt. The KRG claimed in September that it has made only $1.3 billion from the legally questionable export of 14 million barrels of oil over the course of eight months. As of October, the KRG has shipped a total of 17 million barrels of crude from Ceyhan, in Turkey, and is pumping about 300,000 barrels per day through the KRG-Turkey pipeline.

The KRG had to sell its oil at a sizable discount — at least 15 percent below market value, on average — due to the legal risk of defying Baghdad’s authority and the insurance premium on crude cargoes sitting for months in tankers in search of willing buyers. With the price of Brent crude now below $80, the profits are becoming even slimmer. This financial strain is intolerable for the KRG: It has to pay the monthly salaries of peshmerga fighters on the front line with the Islamic State, pay off debt to international oil companies and contractors operating in the region and manage the growing financial burden of a large influx of refugees.

Baghdad has also lost out on revenue from Kirkuk crude sales while its conflict with the KRG has persisted, but southern Iraqi oil production continues to grow at a steady pace, with southern terminals averaging 2.55 million barrels per day for October. Baghdad could certainly use extra revenue from northern oil exports to help manage growing costs from the war against the Islamic State, but the central government is under far less financial stress than the KRG. Thus, the burden of the compromise lies on Arbil.

 

The New Agreement’s Limitations

The central government and the KRG have kept the details of the preliminary agreement vague, but it is unlikely that Baghdad would agree to release funds without the KRG conceding that at least a portion of the oil exported from the KRG be marketed through the Baghdad-controlled State Oil Marketing Organization and that Baghdad distribute the revenue from those exports. Knowing that the KRG will be loathe to give up physical control of the export and marketing of this oil, Baghdad will have the right to restrict budget allocations at any time. And knowing that Baghdad will be able to withhold payments at any time, the KRG will resist sacrificing full authority to the State Oil Marketing Organization and will seek additional funding sources to scrape by and maintain some leverage in its ongoing negotiations with Baghdad. (The KRG has been rumored to have negotiated a $5 billion loan with Goldman Sachs and Deutsche Bank to help create a financial buffer.) This is the state of limbo in which the preliminary deal has been set.

But the complications do not end there. The status of Kirkuk will continue to be a major impediment to a lasting deal. During the Islamic State siege, Kurdish peshmerga occupied the Baba and Avana domes of the Kirkuk field and the nearby Bai Hassan field. These fields are still legally under Baghdad’s control through the North Oil Company but are now under the Kurds’ physical control. Without Baghdad’s permission, the KRG reportedly has been producing roughly 120,000 barrels per day from the Avana dome and Bai Hassan field collectively and has been blending that crude for both domestic use and export. The KRG was already facing legal challenges in exporting crude from the Tawke, Taq Taq and Shaikan fields that lie indisputably in KRG territory, but exporting crude from clearly disputed fields will only add to the legal ambiguity surrounding KRG exports, even as the KRG will try to use the preliminary deal with Baghdad to convince investors of a new level of Kurdish energy autonomy.

 

The Outside Players

Turkey will also be a key factor in determining just how far KRG energy autonomy will expand. Ankara sees the need to keep the KRG dependent on Turkey for export routes and ultimately its economic survival. Though Turkey is eager to exploit Kurdish energy and is building out infrastructure to this end, its strategy toward the KRG is still driven by containment as Ankara struggles to limit a kaleidoscope of Kurdish factions seeking autonomy through political, financial and militant means within and beyond Turkish borders. It is no coincidence that the KRG-Baghdad preliminary agreement came after Turkey hosted Iraqi Foreign Minister Ibrahim Jaafari on Nov. 7 in Ankara, where Turkey made a point to reiterate its respect for Iraq’s territorial integrity.

What remains to be seen is whether Baghdad and Ankara come to an agreement on how revenue from KRG oil export sales will be handled. To date, Turkey has deposited revenue in a Halkbank account, parsing it out in small amounts to the KRG but keeping the Kurdish region financially strapped. Ankara and Baghdad will want to maintain that financial leverage over the KRG, but Baghdad will not allow Arbil to export its own oil while Turkey determines revenue distribution. The KRG naturally would prefer to control its own revenue, but deprived of that option, it will demand that Turkey or another outside arbiter manage the account to avoid being held hostage to Baghdad.

Meanwhile, the evolution of the battle against the Islamic State will have a degree of influence over the level of cooperation between Baghdad and Arbil. The Islamic State threat has placed the United States at the center of Iraq once again, and Washington’s interest is to maintain Iraq’s cohesion and instill enough cooperation among factions to develop a ground fighting force capable of containing jihadist forces. Indeed, the KRG has tried to leverage any peshmerga support it would offer in an offensive to retake Mosul in its energy negotiations with Baghdad. The Islamic State threatens both the KRG and Baghdad sufficiently to compel the two sides to cooperate for now. But as the jihadist movement weakens over time, so will this aspect of their cooperation.

The thorniest details have yet to be sorted out, and those details strike at the fundamental issue of sovereignty and territorial integrity for Arbil, Baghdad and Ankara alike. Though constraints have pushed the KRG to the negotiating table with Baghdad, this highly tenuous agreement still faces many hurdles.

Iraq oil minister negotiates with Kurdish leaders

 

Iraq oil minister negotiates with Kurdish leaders

By Alexander Whitcomb 1 hour ago

Iraq Minister of Oil Adil Abdul-Madhi met with Kurdish Prime Minister Nechervan Barzani on Thursday.

Iraq Minister of Oil Adil Abdul-Madhi met with Kurdish Prime Minister Nechervan Barzani on Thursday.

ERBIL - Iraq’s top oil official met with Kurdish leaders in Erbil today as the Kurdistan Region pushes for control over hydrocarbon exports and revenue.

Adil Abdul-Mahdi, the newly appointed Iraqi minister of oil, met Kurdistan Regional Government (KRG) Prime Minister Nechervan Barzani and Deputy Prime Minister Qubad Talabani in a closed-door meeting in Erbil on Thursday. This is Abdul-Mahdi’s first visit to Erbil since assuming office.

Kurdish officials were heartened by Abdul-Mahdi’s appointment in September because of his past close ties with the Kurds.  The former vice president replaced Hussein al-Sharhistani, who had fiercely opposed Kurdistan’s independent oil ambitions.

Earlier this week,  Barzani said the federal government must export oil from the disputed Kirkuk area – whose large oil fields are now under KRG, not federal, control – through the Kurdistan region.

“We wish to settle all outstanding issues with Baghdad,” he said. “However, if we do not reach agreement, the Kurdistan Regional Government has other solutions.”

He reiterated that his government was seeking greater economic independence in line with its constitutional rights, and that it must protect itself from political blackmail by securing an independent revenue stream.

Former Prime Minister Nouri al-Maliki had signed an order to cease budget transfers in January in response to the completion of a new Kurdistan Region-Turkey pipeline, which has allowed the semi-autonomous region to dramatically increase its oil exports.

“When the Iraqi Government stopped the Kurdistan Region’s budget, we were not exporting oil and their decision was unilateral,” Barzani said. “The Kurdistan Region seeks a mechanism where such situations would not reoccur.”

He forecast the region could earn its full 17 percent share of Iraq’s national revenue by the end of next year, and that it could reach the 11 percent share it had been receiving – slightly more than a billion dollars a month – by March.

Kurdish officials project they can reach these targets because of improvements to the export pipeline through Turkey, increases in oil production, and the addition of oil from four Kirkuk fields formerly operated by Iraqi state-owned North Oil Company (NOC).  Iraq Oil Report said the KRG was blending and exporting approximately 138,000 barrels per day from former NOC fields after taking control of them in July.

The government urgently needs to secure income in the absence of federal budget transfers, as it has paid out of pocket for the region’s vast number of civil servants, whose salaries consume roughly 75 percent of the KRG’s budget.  Deputy Prime Minister Qubad Talabani announced earlier this week that legislation has been put to the region’s parliament authorising the government to assume international debt, and that he had visited the UK and United Arab Emirates to seek loans.

While he suggested this money would be used for strategic investment and not salaries, such loans would relieve the considerable burden currently placed on the KRG, which has almost no tax base and relies considerably upon oil export revenues.

Several parallel issues have been linked to reaching an oil deal. Barzani explained that the region has received 11 percent and not 17 percent of the national income in the past because the government first deducted national expenses; yet the government does not fund the Peshmerga, which serves as a national defence force.

If Baghdad refuses to pay the Peshmerga under a new national defense bill, lawmakers have indicated they will keep the full 17 percent.

Iraq: Kurdistan Regional Government Pursues Oil Autonomy

Iraq: Kurdistan Regional Government Pursues Oil Autonomy

November 12, 2014 | 1808 GMT

The Kurdistan Regional Government’s Cabinet submitted to Congress two laws that would improve the country’s autonomy over its oil sector, Rudaw Media Network reported Nov. 12. The first law would create a bank account to consolidate the country’s oil revenue, providing more transparency. The second would create a publicly owned company to oversee the contracting of oil discovery, production and export. The bill will be voted on when the country’s parliament reconvenes Nov. 17. The Kurdish Regional Government has long tried to gain more influence over its oil production.

 

Russian Ruble Plummets and Forces Policy Change – Capital Controls Next?

Via – DAILYFX

 

 

Russian Ruble Plummets and Forces Policy Change – Capital Controls Next?

By , Quantitative Strategist  and , Currency Strategist

 

11 November 2014 15:50 GMT

Talking Points:

  • Russia Has Scrapped its Managed FX Regime, Allowing Ruble to Float Freely
  • Policy Change Aimed at Scaring Away RUB Sellers with Threat of Intervention
  • Capital Controls Loom Ahead, Warning of Aggressive Volatility on the Horizon

The Central Bank of Russia (CBR) abandoned the exchange-rate “corridor” cont
aining the Ruble’s value against the Euro and the US Dollar, allowing the unit to float freely. The move marks the latest in policymakers’ attempts to deal with a precipitous drop in the currency that has thus far produced losses of as much as 47.8 percent this year against the greenback.

Why are there risks of more stringent capital controls and potentially significant trading losses on the horizon?  

 

Markets Send Russian Ruble Sharply Lower on Political Turmoil

 

The Ruble started what would evolve into a near-parabolic plunge in mid-July following the downing of Malaysia Airlines flight MH17 over the Ukraine. The incident marked an escalation of tensions between Moscow and Western powers that began as the toppling of Ukraine’s government amid mass protests early in the year led to the secession of Crimea and its subsequent Russian annexation. The US and the EU unveiled a new round of anti-Russian sanctions by the end of the month.

 

 

 

Geopolitical Risks Spark Capital Flight out of Russia

Russian Ruble Plummets and Forces Policy Change - Capital Controls Next?

Source: Bloomberg

 

Investors spooked by swelling geopolitical risk began pulling money out of Russia

, sending the capital account to lows unseen since 2009 and helping to push the Ruble to record lows against the Euro as well as the US Dollar. Selling pressure was compounded by a sharp reversal in crude oil prices. Energy sales account for close to two-thirds of Russian exports and a deteriorating outlook on that front helped encourage liquidation across the spectrum of assets sensitive to the country’s economic fortunes.  

 

Noteworthy Declines in Crude Oil Prices Worsen Pressure on Russian Ruble

Russian Ruble Plummets and Forces Policy Change - Capital Controls Next?

Source: Bloomberg

 

The dual headwinds of sanctions and a dimming exports outlook coupled with the sinking currency made for a toxic mix. A survey of analysts polled by Bloomberg reveals increasingly acute “stagflation” expectations as median forecasts for 2015 economic growth and inflation race in opposite directions. This has put the central bank squarely between the proverbial “rock and a hard place”. On one hand, soaring price growth demands tightening; on the other, fading output expansion begs for easing.

 

 

Russian Central Bank Put in Difficult Position as Raising Interest Rates Difficult, Ineffective

Russian Ruble Plummets and Forces Policy Change - Capital Controls Next?

 

 

 

Faced with this dilemma, policy officials set about attempting to stem the currency’s slide in an apparent bid to calm the waters before tackling larger issues. Trying to discourage sellers with aggressive interest rate hikes as well as directly fighting the drop by selling FX reserves in exchange for the local unit have proven futile. This has left the central bank with a hard choice: allow the Ruble selloff to run its course or introduce a far more draconian regime of restrictions to squash capital flight.

 

Bank of Russia Floats Exchange Rate to Stem Ruble’s Decline – Effectiveness Unclear

 

The Bank of Russia unexpectedly floated its exchange rate in an attempt to control the currency’s freefall, and thus far it looks like a risky move. Allowing the Ruble to run its course and raise the risks of outright intervention in FX markets, and the threat of unpredictable RUB selling makes it far less attractive to sell into the currency’s declines. The Russian Ruble rallied sharply on the CBR’s actions, but the early victory is hardly encouraging.  

 

As history amply demonstrates, the threat of big-splash intervention and even its repeated realization has failed to sustainably deflect investors’ assault on a given currency. One need only look at Japan and New Zealand’s recent attempts at bullying the markets to see how quickly their impact evaporates as traders shake off losses and return to the offensive.

 

Major Risk to Investors as Continued Ruble Losses Invite More Drastic Action

 

The punchline is clear: further Ruble declines and broader financial market volatility would force the Bank of Russia into even more drastic measures and threaten real monetary harm to investors. What was arguably unthinkable three months ago is now a distinct possibility: the CBR could halt all speculation and cross-currency investments with the Ruble and force substantial losses on investors and savers.

 

Sophisticated investors are likely among the first to abandon a given market on the first sign of danger. But the risk is clear – what if this sparks a broader run on the Russian banking system?

 

 

Volatility Prices and Realized Volatility on US Dollar/Russian Ruble at Highest since Financial Crisis

Russian Ruble Plummets and Forces Policy Change - Capital Controls Next?

 

 

Russian Financial Crisis of 1998 Offers Clear Warnings

 

The Russian Financial Crisis of 1998 underlines the potentially substantial effects of further turmoil and risks to the investor. Given a toxic mix of risks to the economy, the Russian government devalued the Ruble, defaulted on domestic debt, and in effect defaulted on payments to foreign creditors. The results were dramatic: the exchange rate plummeted and domestic inflation hit 84 percent as a veritable run on the Russian financial system sent domestic savers and investors scrambling for “hard” currencies. The ensuing political fallout brought now-Russian President Vladimir Putin into power.

Vladimir Putin knows the risks of political regime change are significant, and we would argue he could take even more significant measures to prevent this much.  

 

Capital Controls – Why should Investors Worry?

 

Putin’s government could in effect subject financial markets to far more stringent controls than in 1998 and for most intents isolate Russia from world financial markets.

If a trader is holding a position in the USD/RUB or any other RUB-based pair, this could mean that trades would be closed at a significantly unfavorable rate-likely causing losses for those on either side of the trade.  

 

Much of this is clearly speculation, and it is impossible to know exactly what the outcome will be. Yet the real takeaway is also sobering: further turmoil makes what was once seen as an insignificant possibility to a real probability. Putin’s actions to date increasingly hint at a policy of outright isolation from the West and even global capital markets.  

 

Even non-Ruble traders should take note; Russia is far from an economic backwater. Its financial links around the world have clearly shrunken in recent months due to sanctions and the flight of capital, but a true rupture of these connections may trigger violent gyrations across the asset spectrum as investors scramble to adjust portfolios.  

 

Keep an eye on a deterioration in the USD/RUB exchange rate, Crude Oil prices, and further geopolitical turmoil as clear warning of more drastic measures from the Russian government.

 

 

 

— Written by Ilya Spivak, Currency Strategist and David Rodriguez, Senior Strategist for DailyFX.com

Ruble Gains as Russian Bank Unexpectedly Free Floats Currency

Ruble Gains as Russia Lets Go of the Reins

Central Bank Abandons Routine Interventions and Lets Currency Float Freely on the Market

In trading Monday, the ruble extended a recovery that began Friday after hitting record intraday lows against the U.S. dollar and euro.

MOSCOW-Russia’s battered ruble recovered after President Vladimir Putin dismissed its recent drop as “speculative” and the central bank said it would allow the rate to float freely in the market, reducing its regular interventions and tightening supplies of rubles to discourage domestic investors from betting against the currency.

“We’re seeing some speculative jumps in the rate, but I think this should come to an end in the nearest future in light of the actions the central bank is taking in response to speculators,” Mr. Putin told a business conference early Monday in Beijing, where he is on a visit.

Shortly afterward, the central bank said it would eliminate the trading corridor it has been setting for the ruble and the regular interventions when it reached the boundaries. In recent weeks, that mechanism has done little to stem the ruble’s slide but cost the central bank nearly $30 billion in interventions. In its place, the central bank said it would intervene only when it sees “threats to financial stability.”

The ruble’s rise against the dollar on Monday, unassisted by intervention from the central bank, could foreshadow a period of relative stability for the currency, analysts and economists say. After the ruble’s tumble of as much as 32% against the dollar this year, currency traders say the currency’s current level-about 45 to the U.S. dollar and 56 to the euro-reflects the economic impact of Western sanctions and the recent slump in oil prices. Russia is the world’s second-biggest oil exporter after Saudi Arabia.

If the ruble stabilizes at least temporarily, that could remove a headache for the Kremlin. Concern has ticked up in recent weeks over rising prices, driven in large part by the cost of imports priced in rubles and about fading economic prospects.

Elvira Nabiullina, the central bank’s chairwoman, told Rossiya-24 state television Monday that the bank’s reserves are adequate. She explained the decision to end regular interventions as a recognition of reality, saying that “if we spend [reserves] unwisely, trying to fight fundamental market trends, that would lead us to the same result, only a bit later and with lower reserves.”

 

“The drop in the ruble rate over the last few days and its excessive fluctuations have nothing to do with economic fundamentals,” Ms. Nabiullina said. “In our view, the ruble rate was deeply undervalued compared to an equilibrium level.”

On Monday, the ruble extended a recovery that began Friday after hitting record intraday lows against the dollar and euro. By the end of the trading session on the Moscow exchange, the ruble was at 45.53 per dollar and 56.61 per euro, compared with Friday’s lows of more than 48 against the dollar and 60 against the euro.

In late New York trading, the ruble was at 45.997 per dollar and at 57.133 per ruble.

“Verbal intervention by the central bank is having an effect on the ruble: The threat of sizable one-off FX intervention seems to be working,” said Tatiana Orlova, Russia economist at Royal Bank of Scotland. “Also, President Putin threw his weight behind the [central bank’s] policy shift this morning, which I think could help to stabilize the population’s expectations.”

Ms. Nabiullina said the central bank will limit its interventions to situations where needed to “break panic, speculative demand.” In addition, the bank will limit lending of rubles to commercial banks, “which unfortunately have been used not only to finance the economy but also for ‘games’ on the currency market.”

Finance Minister Anton Siluanov praised the move to the free float but scolded the bank for not doing it earlier.

“I think that the decision came a bit too late as there was no need in having a trading corridor and spending reserves when the pressure on the ruble emerged,” Mr. Siluanov said.

The market moves and the central bank’s shifting responses-as recently as last week, the bank left the corridor mechanism in place but reduced its regular intervention amounts-underline how the combination of Western sanctions and the falling price of oil, Russia’s main export, have whipsawed the country’s economy and financial markets.

Also Monday, the central bank downgraded its forecast for economic growth and raised its expectation for capital outflow this year; it warned it now expects sanctions to stay in place through 2017. Even so, the bank said it expects Russia to be able to avoid a deep recession unless oil prices fall significantly further.

“The Russian economy will be stable even if oil prices remain at the level of $80 a barrel in 2015-17 and mutual sanctions are not canceled,” said Kseniya Yudaeva, first deputy chairwoman. But she said the bank’s baseline scenario calls for stagnation over the next two years after growth of 0.3% this year-the weakest performance since the 1990s and down from its previous estimates of 0.4%. An oil-price drop to $60 a barrel, something few eorecasters xpect, would trigger a deeper recession and further falls in the ruble, the bank warned.

The central bank also said it expects capital outflows to reach $128 billion this year, the highest since 2008, and fall back only slightly next year to $99 billion.

That outlook is a big reason why economists expect pressure on the ruble to remain despite the latest moves.

“The CBR’s limitations on ruble liquidity may help to stabilize the currency over the short term. However, ruble volatility and weakness may persist until there is more clarity on the CBR’s appetite for deploying discretionary interventions, while longer-term ruble depreciation may continue on deteriorating fundamentals,” said Phoenix Kalen of strategist at Société Générale .

-Alexander Kolyandr in Moscow and Chiara Albanese in London contributed to this item.

 

Putin Seeks to Reassure World Amid ‘Perfect Storm’ – Article & Video

Putin Seeks To Reassure World Amid ‘Perfect Storm’

The Russian ruble strengthened against the dollar on Monday after President Vladimir Putin said there were no “fundamental economic reasons” for the currency’s slide, but analysts -and the country’s central bank — beg to differ.

Speaking at an Asia Pacific Economic Cooperation (APEC) summit on Monday morning, Putin said he was hopeful that speculation against the ruble would stop soon, Reuters reported.

The currency has slumped almost 30 percent against the greenback this year. A decline in oil prices and Russia’s conflict with Ukraine that have led to Western sanctions on Russia, which have hit the economy as well as investor confidence in the country.

Early on Friday, the ruble hit its weakest-ever level against the U.S. dollar, sliding to 48.6, before recovering to trade at 46.2 within a few hours.

In an effort to quell speculative trading, the head of Russia’s central bank, Elvira Nabiullina, said on Monday the bank had allowed the currency to float freely, abandoning its trading corridor, news agencies reported.

As the traders digested this news and Putin’s speech at the APEC summit, the ruble traded 2.8 percent higher, at 45.35 against the dollar.

Read MoreRussia ready to defend ruble as rocky ride continues

Putin also said Russia and China intend to increase the amount of trade that is settled in yuan and ruled out capital controls for Russia, despite capital flight which has exacerbated the ruble’s decline.

He vowed to keep Russia’s debt levels down and said Russia planned to use part of its “sovereign reserves” to improve access to loans to draw foreign investment, but did not elaborate. “There will be no increase of sovereign debt,” Putin said. “We are planning to keep it at a safe, manageable level of below 15 percent of GDP.”

Putin’s attempts to reassure a global audience over the state of the Russian economy was a “sign of the seriousness of the situation that Putin feels the need to comment and try and re-assure on the exchange rate,” the head of emerging markets research at Standard Bank, said in a note Monday.

Timothy Ash said he would contend that low growth, lower oil prices, sanctions halting dollar liquidity and Russia’s ability to borrow, plus the security concerns in Ukraine “are all pretty fundamental factors”.

He said it was important that Putin had spoken, as “it suggests that officials will be more determined to defend the ruble again to support the boss’ view”.

Russian President Vladimir Putin

Reuters- Russian President Vladimir Putin

Meanwhile the country’s central bank released a document on Monday in which it lowered its 2014 growth forecast to 0.3 percent and forecast 0 percent growth in 2015. It also estimated that capital flight had risen above forecasts to 128 billion in 2014.

According to a central bank monetary policy document quoted by news agencies, the decline in the oil price would continue to constrain economic growth and the bank expected sanctions on Russia to remain until the end of 2017.

Speaking on national television, central bank head Nabiullina said the recent forex volatility was not dictated by fundamentals, and the ruble was undervalued, Dow Jones reported.

A ‘perfect storm’ for Putin

Nicholas Spiro, head of Spiro Sovereign Strategy, warned on Monday that Russia was suffering “a perfect storm.”

“While the cumulative impact of falling oil prices, a tougher sanctions regime, a resurgent dollar and an economy that’s sliding into recession have taken a heavy toll on the ruble, the loss of confidence in Russian monetary policy is turning a somewhat manageable decline in the currency into a rout.”

Rather than just concentrating on economic reform, one portfolio manager said Russia needed to see political reform.

“The story in Russia is the same as the story in emerging markets and what we’re looking for in the medium to long-term is political reform,” Max King, portfolio manager at Investec Asset Management told CNBC Europe’s “Squawk Box” on Monday. “That will require political change such as [Prime Minister Dmitry] Medvedev’s replacement by [former Finance Minister Alexei] Kudrin. I think that would be the cue for a major improvement in Russia.”

Nomura’s senior political analyst Alastair Newton agreed that the political situation in Russia was driven as much by geopolitics as by economic considerations. “Even though its immediate intentions over Ukraine remain unclear, I believe that the Kremlin has opted for an anti-Western stance which makes it hard for it to deviate from its current trajectory.”

“I doubt that consequent economic stresses in Russia will put the regime at risk in the near to medium term; but they do, in my view, pose a potential long-term threat to stability.”

Reuters contributed to this story.

Central Bank Announces its Intention to Invest its Reserves Abroad

Central Bank Announces its Intention to Invest its Reserves Abroad  
 

(Translated article)

30/10/2014

Central Bank of Iraq announced, during a meeting with representatives of the economic and investment commission in the House of Representatives Wednesday his intention to invest its reserves of hard currency and gold in the global market.

 

He said the former deputy director of the Central Bank of the appearance of Mohammed Saleh, Radio Free Iraq, “said the bank currently has a reserve of strong currencies can be invested in European banks and stable countries economically,” he said, adding “that the central bank has achieved in 2007 simple returns when invested currency reserves, expected to achieve a higher rate in the next year. ”

 

In addition, said director of planning and financial management in the Ministry of Finance Hilal Taan “that could the central bank to invest its reserves of currency and gold, in the form of bonds in stable markets,” explaining that “the profit resulting from the investment could be added to the treasury of the State General”.

 

On the other hand, a member of the Committee on Economy and Investment in the House of Representatives Nora Salem to the eye, “the difficulty of the currency and gold reserves invested by the central bank, under the circumstance of security and the deteriorating economic of the country,” adding, saying “It is better for the central bank to invest the currency and gold reserves in the years future. “

 

The central bank has $ 76 billion of the national currency as a reserve, and more than 30 tons of gold.

Iraq: Kurdish Oil Pipeline Capacity To Double

Iraq: Kurdish Oil Pipeline Capacity To Double

October 27, 2014 | 1450 GMT


The Kurdistan Regional Government is planning to increase the capacity of its oil pipeline from 280,000 to 700,000 barrels per day following upgrades, industry sources and officials said Oct. 27, Reuters reported. The oil will be pumped to the Turkish port of Ceyhan, likely raising tensions with Baghdad, which alleges the shipments are illegal. Reportedly, the flow will increase to 400,000 bpd by the end of the year. The Kurdistan Regional Government has consistently worked to expand its oil pumping capacity despite opposition from the Baghdad government.

Kobani Ensnares the Islamic State

Kobani Ensnares the Islamic State

October 21, 2014 | 0859 GMT

A C-130 cargo plane lands at Incirlik Air Force Base outside Adana ,Turkey.(Chris Hondros/Getty Images)

 

Summary

Kurdish People’s Protection Units and Free Syrian Army forces continue to battle Islamic State fighters in the Syrian border town of Kobani. The United States announced Oct. 19 that U.S. Air Force C-130 transport aircraft dropped containers of weapons, ammunition and medical aid to the town’s defenders. Washington reportedly informed Turkey of the move in advance. Now, Ankara has said it will allow Iraqi Kurdish peshmerga fighters to cross Turkish borders and move into Kobani to bolster the town’s defenses.

Given Turkey’s previous reluctance to support Kurdish fighters, Ankara appears to be altering its approach following considerable pressure from Washington and other allies. Turkey is keen to maintain strong ties with the United States and is willing to make compromises, which will also help preserve the integrity of its alliances in Europe and the Middle East. Despite this shift, however, Ankara remains wary of directly aiding the People’s Protection Units, commonly viewed by the government as terrorists and an extension of the Kurdistan Workers’ Party, known by its Kurdish acronym PKK. Regardless, allowing Kurdish fighters to cross the border will only make it harder and costlier for the Islamic State to take Kobani.

Analysis

The Islamic State arguably accomplished its objectives in Kobani weeks ago when it seized virtually all of the area except for the town itself. This allowed Islamic State fighters to shorten the route between the captured border crossing towns of Jarabulus and Tal Abyad by not having to circumvent Kobani. Stratfor previously noted that Kobani is of very little strategic or even operational value to the Islamic State, and the taking of the town will have extremely little effect on the direction of the conflict in Syria. Numerous Islamic State fighters apparently recognized this fact early on and reportedly sought to prioritize other battlefronts, but were overruled by top Islamic State commander Abu Bakr al-Baghdadi. Nevertheless, it is clear by now that the Islamic State — perhaps for symbolic reasons or because of operational momentum — has greatly prioritized the seizure of Kobani and has devoted significant resources and manpower to the effort.

 

 

Echoing Germany’s disastrous obsession with Stalingrad in 1942, despite having already isolated and reduced the city, the Islamic State’s leaders have elected to continue pouring hundreds of fighters into Kobani. They now face a difficult urban battle against determined fighters who are entrenched in prepared positions and supported by coalition air power. By assembling large numbers of fighters and equipment, the Islamic State has created a target-rich environment for the U.S.-led coalition. From the start of the battle, weeks ago, surveillance and reconnaissance overflights have progressively improved the coalition’s situational awareness, leading to airstrikes of more damaging accuracy and intensity. Over the last four days alone the United States and its Arab allies executed more than 60 airstrikes in Kobani.

The strikes have been disastrous for the Islamic State, which has lost hundreds of experienced fighters. Reports indicate that the group is doubling down on its flawed strategy by sending further reinforcements from its bastions of Raqaa and Tabqa to continue the assault. Ankara’s decision to open a route for Kurdish reinforcements into Kobani further hinders the Islamic State’s mission, but it is not as damning for the extremists as a Turkish committal of ground forces. Such a move appears unlikely for the time being. Although Turkey has significant amounts of men and materiel amassed on the border, there is no political will to become embroiled in the Syrian conflict. Ankara will make limited concessions, stopping short of full engagement against the Islamic State. With a coalition willing to maintain air operations and facilitate training for select rebels, Turkey can afford to bide its time for now while dealing with more pressing domestic issues.

 

A Risky Strategy

The Islamic State has mired itself in a foolhardy frontal assault against a marginal objective, and in doing so it has failed to address ominous developments in more vital Islamic State-controlled areas of Syria. In particular, Syrian forces have capitalized on a weak extremist presence in the critical and far larger city of Deir el-Zour, launching attacks against a reduced enemy. These attacks have enjoyed considerable success, driving Islamic State fighters from several neighborhoods in the city and destroying a number of bridges critical to the jihadists’ logistical operations.

The Islamic State continues to make gains in Iraq’s Anbar province, mainly because of its superior tactical skill and operational acumen against Iraq’s security forces. Had the Islamic State elected to send hundreds or thousands of fighters to Anbar instead of exposing them to the concentrated attacks in Kobani, it is highly likely that the jihadist organization would have been able to achieve considerably more success in a far more vital region.

The battle for Kobani is not yet over, and there remains the possibility that the Islamic State could prevail and seize the town. Were that to happen, however, the damaging truth is that the Islamic State’s obsession with Kobani has already set the group back considerably. With world media focused on the defensive Kurdish and Free Syrian Army fighters holding out against repeated Islamic State attacks, the extremists are handing a propaganda victory to their enemies. Even when the Islamic State does take ground, any success turns into a rallying cry for its opponents. Most important, replacing the severe losses it has already suffered will be difficult for the Islamic State. By devoting disproportionate resources and personnel to seize a town of marginal importance, the Islamic State has distracted itself from more pressing issues in Syria, thereby missing opportunities to achieve further success in Iraq.