Lenders in the UK loan market are gripped by uncertainty as the failure to move ahead on Brexit this week leaves them with little visibility on how long they’ll be able to keep their preferential access to the European market. Banks and loan managers say the lack of clarity on “passporting rights” that allow them to seamlessly market products and services across the European Union is making planning diff icult, compelling some of them to insert clauses in their documents to minimise disruption. The passage of the Withdrawal Agreement Bill would have set the end of 2020 as the deadline for a transition but now the focus is on the length of any EU exten- sion beyond October 31. Nicholas Voisey, managing director of the Loan Market Association, said the market is trying to make their deals as “Brexit-proof” as possible, including by adding terms that would permit the transfer of loan commitments to other booking off ices. If Brexit were to happen in the immediate future “Much of the decision-making and discussions will still need to be ironed out — particularly relating to financial services,” he said. A prolonged ambivalence on the Brexit front could force more participants in the €400bn ($445bn) per year loan market to build safeguards, which could increase their cost of doing business. Some UK lenders, including global banks’ London off ices, have already shifted assets to other EU nations to help prepare for the loss of passporting rights. Nicola Wherity, London-based partner at law firm Cliff ord Chance LLP, said steps taken by lenders to overcome Brexit-related hurdles include setting up new EU hubs, seeking local licences and on-going process of shifting loans to these new branches. The financial markets rely on nine dif- ferent passports for carrying out core banking activity and non-EU firms face significant regulatory barriers to provid- ing cross-border services to EU clients without these rights, lobby group UK Finance says in its website.

US and Chinese trade officials are “close to finalising” some parts of an agreement after high-level telephone discussions yesterday, the US Trade Representative’s office said, adding that deputy-level talks would proceed “continuously.”
In a statement issued after the call, the USTR provided no details on the areas of progress.
“They made headway on specific issues and the two sides are close to finalising some sections of the agreement.
Discussions will go on continuously at the deputy level, and the principals will have another call in the near future,” it said.
The call came as Washington and Beijing are working to agree on the text for a “Phase 1” trade agreement announced by US President Donald Trump on October 11.
Trump has said he hopes to sign the deal with China’s President Xi Jinping next month at a summit in Chile.
Beijing was expected to request cancellation of some planned and existing US tariffs on Chinese imports during the phone call, people briefed on the negotiations told Reuters.
In return, China was expected to pledge to step up its purchases of US agricultural products.
The world’s two largest economies are trying to calm a nearly 16-month trade war that is roiling financial markets, disrupting supply chains and slowing global economic growth.
“They want to make a deal very badly,” Trump told reporters at the White House.”They’re going to be buying much more farm products than anybody thought possible.”
So far, Trump has agreed only to cancel an October 15 increase in tariffs on $250bn in Chinese goods as part of understandings reached on agricultural purchases, increased access to China’s financial services markets, improved protections for intellectual property rights and a currency pact.
But to seal the deal, Beijing is expected to ask Washington to drop its plan to impose tariffs on $156bn worth of Chinese goods, including cell phones, laptop computers and toys, on December 15, two US-based sources told Reuters.
Beijing also is likely to seek removal of 15% tariffs imposed on September 1 on about $125bn of Chinese goods, one of the sources said.
Trump imposed the tariffs in August after a failed round of talks, effectively setting up punitive duties on nearly all of the $550bn in US imports from China.
“The Chinese want to get back to tariffs on just the original $250bn in goods,” the source said.
Derek Scissors, a resident scholar and China expert at the American Enterprise Institute in Washington, said the original goal of the early October talks was to finalise a text on intellectual property, agriculture and market access to pave the way for a postponement of the December 15 tariffs.
“It’s odd that (the president) was so upbeat with (Chinese Vice-Premier) Liu He and yet we still don’t have the December 15 tariffs taken off the table,” Scissors said.
US Treasury Secretary Steven Mnuchin last week said no decisions were made about the December 15 tariffs, but added: “We’ll address that as we continue to have conversations.”
If a text can be sealed, Beijing in return would exempt some US agricultural products from tariffs, including soybeans, wheat and corn, a China-based source told Reuters.
Buyers would be exempt from extra tariffs for future buying and get returns for tariffs they already paid in previous purchases of the products on the list.
But the ultimate amounts of China’s purchases are uncertain.
Trump has touted purchases of $40bn to $50bn annually — far above China’s 2017 purchases of $19.5bn as measured by the American Farm Bureau.
One of the sources briefed on the talks said China’s offer would start at around $20bn in annual purchases, largely restoring the pre-trade-war status quo, but this could rise over time.
Purchases also would depend on market conditions and pricing.
US Trade Representative Robert Lighthizer has emphasised China’s agreement to remove some restrictions on US genetically modified crops and other food safety barriers, which the sources said is significant because it could pave the way for much higher US farm exports to China.
The high-level call came a day after US Vice President Mike Pence railed against China’s trade practices and what he termed construction of a “surveillance state” in a major policy speech.
But Pence left the door open to a trade deal with China, saying Trump wanted a “constructive” relationship with Beijing.
While the US tariffs on Chinese goods has brought China to the negotiating table to address US grievances over its trade practices and intellectual property practices, they have so far failed to lead to significant change in China’s state-led economic model.
The “Phase 1” deal will ease tensions and provide some market stability, but is expected to do little to deal with core US complaints about Chinese theft and forced transfer of American intellectual property and technology.
The intellectual property rights chapter in the agreement largely deals with copyright and trademark issues and pledges to curb technology transfers that Beijing has already put into a new investment law, people familiar with the discussions said.
More difficult issues, including data restrictions, China’s cybersecurity regulations and industrial subsidies will be left for later phases of talks.
But some China trade experts said that a completion of a Phase 1 deal could leave little incentive for China to negotiate further, especially with a US election in 2020.
“US-China talks change very quickly from hot to cold but, the longer it takes to nail down the easy phase 1, the harder it is to imagine a phase 2 breakthrough,” said Scissors. Pages 2, 3 & 12

VERONA/MOSCOW (Reuters) – Russia’s largest oil company Rosneft (ROSN.MM) has fully switched the currency of its contracts to euros from U.S. dollars in a move to shield its transactions from U.S. sanctions, its Chief Executive Igor Sechin said on Thursday.

Rosneft’s switch to the euro is seen as part of Russia’s wider-scale drive to reduce dependence on the dollar, but it is unlikely to quickly boost the euro’s role for Russia given the negative interest rates it carries.

“All our export contracts are already being implemented in euros and the potential for working with the European currency is very high,” Sechin told an economic forum in Italy’s Verona.

“For now, this is a forced measure in order to limit the company from the impact of the U.S. sanctions.”

Reuters reported earlier this month that state-controlled Rosneft set the euro as the default currency for all its new export contracts.

Washington has threatened to impose sanctions on Rosneft over its operations in Venezuela, a move which Rosneft says would be illegal.

Moscow has been hit by a raft of other financial and economic sanctions from Washington over its role in the Ukrainian crisis and alleged meddling in the U.S. elections. Russia denies any wrongdoing.

Last year, Rosneft exported oil and oil products worth 5.7 trillion roubles ($89 billion), according to its reports.

Russia’s largest producer of liquefied natural gas Novatek (NVTK.MM) also said on Thursday it had switched to euros in most of its contracts in order to avoid the impact of U.S. sanctions.

LIMITED IMPACT FOR NOW

Rosneft’s switch to the euro comes amid attempts by Russian companies to work out ways to carry out international transactions without the U.S. dollar.

Russian President Vladimir Putin has called for de-dollarisation that should help limit exposure to the lasting risk of more U.S. sanctions, while the Russian central bank has lowered the amount of U.S. Treasuries in its reserves in 2018.

The switch to the euro has its downside as, under the current policy of the European Central Bank, financial institutions are required to pay interest for parking excess reserves with the bank, known as negative interest rates.

“There is no sense in storing money under negative interest rates,” said Alexander Losev, head of Sputnik Asset Management.

Given the negative rates, Rosneft’s switch to operations in euros is capable of increasing the amount of euro conversion as Rosneft will seek to ditch the currency for those that are of more use for its operations, market experts say.

The euro’s share in Russia’s exports has been on the rise since 2015 but Rosneft’s adoption of it is unlikely to have an impact on the Russian currency market, said a manager at one of Russia’s state-controlled banks.

Other experts agree, saying that Rosneft will still need to convert its euros for tax payments and other needs in Russia.

A senior forex dealer at a state-controlled bank also said the impact of Rosneft’s move on the rouble will be negligible.

The Moscow Exchange (MOEX.MM) said Rosneft’s move will increase the euro share in its overall trade turnover.

Previously, the share of euro trade on the Moscow Exchange has been increasing only marginally. Over the past year, the euro/rouble share in overall FX turnover on Russia’s main bourse stood at 12%, up from 11% in 2017 and 9% in 2016.

Qatar has stressed the importance of natural gas in meeting the economic and environmental challenges facing energy consumers around the world.

Many countries around the world are searching for the right balance of reliable and secure sources of energy, which can drive their growth, while addressing environmental concerns at the same time, HE the Minister of State for Energy Affairs Saad bin Sherida al-Kaabi told the 21st ministerial meeting of the Gas Exporting Countries Forum (GECF).

“In this effort, many are discovering the versatile, flexible, economic, and environmental qualities of natural gas as a key enabler in the journey to achieve a lower-carbon economy,” he said.

He stressed on Qatar’s commitment to ensuring the continued availability of reliable LNG (liquefied natural gas) supplies to world markets, and to promoting greater growth in the LNG industry, as well as to serving the growing needs of its clients.

“We all have the same objective: To place natural gas at the heart of the energy industry as a fuel of the future to affirm our true belief that natural gas is a cornerstone in the energy transition and a destination fuel, not merely a transition fuel,” he said.

Drawing attention to unprecedented recurrent climatic conditions, including mean temperatures, turbulent seasonal cycles and extreme events, al-Kaabi had recently said it is time to take another look at natural gas and the number of advantages it has to make it a pivotal element in any strategy to tackle environmental challenges.

Qatar has highlighted the efforts to reinforce its position as the world’s leading LNG producer, which include the North Field expansion to increase the LNG production capacity to 110mn tonnes per annum by 2024, and a major ship-building campaign to build up to 100 LNG carriers over the next decade.

China became the world’s biggest natural gas buyer last year. Now it wants to start setting its own price.

That’s because importers have been paying rates influenced by events unrelated to China’s supply and demand balance from European weather to Middle East conflicts. So like it has for oil, gold and iron ore before, producers, distributors and financial exchanges in the top commodities market are seeking prices that they say better reflect Chinese fundamentals, and in their own currency.

The search for an internationally recognised Chinese natural gas price, including a proposed futures contract, follows the larger pattern of the world’s biggest commodities consumer seeking a greater say in how to price the raw materials it consumes.
‘We’ve been taken advantage of by foreign firms, Xu Tong, a deputy general manager of distributor Beijing Gas Group Co, said in an interview. Domestic indexes will ‘reduce premiums significantly.

China is also opening its commodities derivatives markets to foreign traders, partly in an effort to broaden the appeal of its currency, the yuan. In March 2018, an exchange in Shanghai introduced an oil futures contract for overseas investors, while Dalian followed two months later by opening up its iron ore trade.

China’s natural gas demand has boomed in recent years as the government of President Xi Jinping pushed industrial and residential customers away from coal. But domestic production of the gas hasn’t kept pace with consumption. Imports, meanwhile, surged almost 32% last year.

Domestic gas sales follow two different pricing structures: a government-set price for pipeline supplies, which is open to some negotiation between buyers and sellers, and the unregulated market for liquefied natural gas transported on trucks. And for imports, China mostly pays in US dollars at prices based mainly on either global oil or gas benchmarks set in the US or Europe.

The structure can contribute to losses for Chinese companies that resell overseas gas at lower domestic rates. PetroChina Co, the top oil and gas supplier, has chalked up $34bn of losses since 2011, when it began regularly reporting the figures.

LNG contracts first became tied to oil prices at a time when the fuel competed with petroleum used for home heating and power generation. More importantly, oil provided transparent and liquid price benchmarks that allowed buyers to hedge and sellers to secure bank financing. But prices have begun to uncouple as the global gas market deepens.
‘Gas fundamentals can’t be reflected by oil they are two separate products, Wu Yifeng, deputy general manager of natural gas at PetroChina’s international unit, said in an interview in Beijing.

Europe and the US have natural gas benchmarks that reflect supply and demand in their respective markets and are liquid enough to bank on. Asia doesn’t have that yet. A futures contract built around the current spot benchmark in northeast Asia assessed by S & P Global Platts is gaining traction, but remains a far cry from what’s seen in the west.

Chinese gas companies are trying to build their own, drawing on the success of the nation’s Dalian iron ore futures, which global traders look to for daily price signals because of the sheer size of the market.

The Shanghai Futures Exchange has said it plans to launch natural gas futures, though no timing has been set. The Shanghai Petroleum & Natural Gas Exchange, or SHPGX, hosts auctions for small quantities of domestic gas and publishes daily trucked LNG prices.

Whether China is able to achieve the clout it desires with gas prices may depend on ease-of-use and investor interest. Currently, crude oil, iron ore, rubber and purified terephthalic acid (used to make plastics and polyester) are open to foreigners, and most other commodity futures are isolated to only the domestic market. The gas contract SHFE is mulling will allow offshore entities to trade.

Another key factor for China’s pricing ambitions is a long-awaited national pipeline reform. The move to give more suppliers access to the transportation networks, which is now mainly operated by the three state-owned giants, must happen for prices to freely reflect the broader market, said Chen Gang, an assistant to the general manager at SHPGX.

Only then can domestic prices become a benchmark, with support from the derivatives market, according to Chen. The final step may be to link those prices to imported gas, he said.
Source: Gulf Times

Almost three years after Tesla Inc. Chief Executive Officer Elon Musk unveiled solar roof shingles as part of his push to buy SolarCity, the automaker says it finally has a version of the tiles that it can mass produce.

“It’s been quite hard,” Musk said on a conference call late Friday. “Roofs need to last a long time. When you add electrification to the roof, it’s a fair bit of complexity.”

The sleek roof is a key part of Tesla’s push to revive its struggling solar business. Musk unveiled the product in 2016, but the company hasn’t been able to bring production up to full scale. The photovoltaic tiles are designed to resemble regular shingles, unlike solar panels atop a roof.

The latest version of the shingles was introduced after Tesla lost its status as the biggest U.S. rooftop solar company. It’s also been sued by Walmart Inc. over fires at a half-dozen of the big-box stores that had Tesla solar systems, and the company still faces litigation from shareholders over the controversial SolarCity acquisition.

LONDON (Thomson Reuters Foundation) – Wealthier countries on Friday promised nearly $9.8 billion over the next four years to an international fund to help poorer nations develop cleanly and adapt to climate stresses, with nearly a dozen nations doubling their previous commitments.

The total was slightly higher than the $9.3 billion committed to the Green Climate Fund (GCF) at its first pledging conference in 2014, and came despite the absence of commitments by previous major donors such as the United States.

Climate finance analysts welcomed the stepped-up pledges – 11 of the 27 donor governments doubled their previous commitments – but said the totals were not rising as fast as the climate-change threats poor nations must deal with.

“It’s quite clear we have governments all over the world declaring climate emergencies, and far more finance from all sources is needed to adequately address the challenge,” said Joe Thwaites, a finance researcher with the U.S.-based World Resources Institute.

In its first five years the fund received total promises of a little over $10 billion.

But because the United States, under President Donald Trump, reneged on two-thirds of its initial $3 billion pledge, and currency values changed, it effectively had only $7.2 billion to spend, said Yannick Glemarec, its executive director.

The new commitments, if fulfilled, will effectively give it 70% more money to spend each year, with additional pledges likely in coming months, he said.

The funding is still a drop in the ocean compared with the estimated $3 trillion to $7 trillion a year needed to shift the world’s economy onto a more sustainable and climate-friendly path, Glemarec said.

But if used to show what is possible in developing nations and cut risks for private investors there, it could help spur the much larger investments needed to make that shift, he said.

“We are very excited because we should be able to prevent a lot of climate hurt” with the additional funds, he told the Thomson Reuters Foundation.

The GCF so far has allocated about $5.2 billion to 111 projects in 99 countries.

They range from green, low-cost housing in Mongolia’s polluted capital and a methane-fuelled rapid-transit bus system in Karachi to restoring climate-threatened ecosystems in Namibia.

The GCF has committed to spend half of its funding on efforts to help poorer countries adapt to climate threats, which rarely attract significant private or government finance.

‘GOOD START’

Most of the donors making fresh contributions came from Europe, though New Zealand, South Korea, Japan and Canada also committed funds, with New Zealand and South Korea pledging to double previous donations.

“This is a good start but in no way adequate to meet the needs on the ground,” said Wendel Trio, director of Climate Action Network Europe, saying he hoped more pledges would come.

The fund will remain open for additional contributions throughout its next term, GCF officials said.

Thwaites said Belgium was expected to commit to doubling its previous $100-million pledge to the fund in coming months, and Mexico had attended this week’s pledging conference in Paris too.

Gas-rich Qatar, at the U.N. Secretary-General’s climate summit in New York last month, pledged $100 million to help least-developed countries and struggling small islands cope with climate threats, Thwaites said.

The money was not intended for the GCF but shows issues affecting poorer states “are on their radar”, he said.

Stepped-up GCF funding is considered key to encouraging poorer nations to boost the ambition of their national targets to hold the line on emissions and better adapt to climate threats, finance experts said.

Both rich and poor governments are expected to improve their climate action plans – created as part of the 2015 Paris Agreement on Climate Change – by the end of 2020.

Many developing-nation plans rely heavily on external funding to meet their most ambitious goals to put in place everything from renewable energy to storm early warning systems.

Liane Schalatek, a climate finance specialist with the Heinrich Böll Foundation North America, said the new GCF pledges were positive but “probably not enough to give developing countries the confidence to significantly raise their ambition”.

They were also insufficient to pay for the roughly $15 billion in projects already waiting in the fund’s pipeline for cash, she said in a statement.

GCF head Glemarec said a key role of the GCF’s spending was to show private investors that good investments are possible in poorer countries, and remove roadblocks to those, by setting an example or helping shift policies.

In developed countries, 98% of investment in renewable energy is private, he said, but in the least-developed countries it is under 1%, he said.

Thwaites said the GCF “comes in with money to do things the private sector isn’t yet comfortable doing. They have a demonstration effect and a de-risking effect and then you see a lot more private finance can flow in those regions”.

This is especially appropriate for projects like establishing feed-in tariffs for solar or wind power that help create a renewable energy market and give investors confidence.

The GCF has so far mobilized $2.60 in additional financing for each dollar spent, though that figure is held down by its focus on adaptation projects, which struggle to attract private finance, Thwaites said.

He said the mobilization rate was particularly respectable given the fund is working “in really difficult environments”.

The European Commission will quickly start work on a tax on foreign polluting firms, the nominee for the EU’s economic and tax commissioner said yesterday, a move that could hit US companies and deepen a trade war with Washington.
In his confirmation hearing before EU lawmakers, Italy’s Paolo Gentiloni also pledged “adequate” fiscal efforts to counter an economic slowdown in the eurozone that he said could be longer than currently expected.
“We will try to be very quick and effective on a carbon border tax,” Gentiloni, who is due to take office in November, said.
He warned of legal and technical hurdles in devising the levy, but said work would start immediately to make sure the tax would be compatible with World Trade Organisation rules.
The tax is meant to shield European companies from competitors based in countries where climate protection schemes are not as strict.
President Donald Trump intends to pull the United States out of the international Paris climate protection deal that aims to reduce carbon emissions.
Under the terms of the pact, that cannot happen before November4, 2020. Gentiloni’s remarks come the day after the United States said it would slap 10% tariffs on European-made Airbus planes and 25% duties on French wine, Scotch and Irish whiskies, and cheese from across the continent as punishment for illegal EU aircraft subsidies..
Previous European commissions have resisted calls, led by steelmakers and traditionally protectionist France, for a carbon levy, but fresh momentum has come from increased prices in the EU Emissions Trading System (ETS), the European Union’s flagship instrument for making polluters pay.
In separate comments to lawmakers, Gentiloni, a socialist former Italian prime minister, also said minimum corporate tax rates were one of the possible solutions to what he said was unacceptably excessive tax competition between EU states.
Currently, the 28 EU countries decide freely their national tax rates for firms, with the EU having limited powers only on minimum rates on sales taxes.
He reiterated the EU should move alone on an EU-wide tax on digital corporations if no deal was reached at global level in 2020.
He said he was confident, although “not fully optimistic”, about an international agreement by that deadline.
In the event of no consensus, he said the European Commission would begin working on a proposal for an EU digital tax from next summer and would seek to take away from EU governments the veto power on tax matters that prevented the introduction of a digital levy in the bloc last year.
Gentiloni, who will also be in charge of the bloc’s economic policy, said the EU should consider measures to favour growth at a time when the bloc faces risks of a prolonged economic slowdown.
“In this situation our economic policies should be strongly oriented towards growth and investment,” he told lawmakers.
Gentiloni said the Commission’s annual recommendation on the eurozone’s fiscal stance would depend on the “seriousness and duration of the slowdown” as estimated in the next set of EU forecasts due on November 7. That could last longer than six months or a year, as currently expected, he cautioned.
In its latest economic forecasts released in July, the Commission predicted eurozone growth would slow to 1.2% this year from 1.9% in 2018, but forecast growth rebounding to 1.4% in 2020.
The bloc currently has a “broadly neutral” fiscal stance, despite pressure from some countries for more expansionary plans to counter recession risks.
The European Central Bank also backs a more expansionary fiscal stance.
The ECB loosened monetary policy further last month to lift growth and inflation, cutting its key rate to minus 0.5%, inching closer to what is the effective bottom, a level beyond which it would be counterproductive to go.
Gentiloni reiterated he would seek to use the leeway allowed by EU fiscal rules to permit governments to invest for growth and would also target a reduction of public debt.
He called for a review of EU fiscal rules that would make them simpler and urged an “ambitious” funding plan for an EU unemployment reinsurance scheme.
The bloc is currently debating whether to fund this scheme with loans or with more generous grants to states with high unemployment levels.