Americas: Last oil and gas auctions before October’s elections
Sectors: oil and gas
Key Risks: policy continuity; political stability
In Brazil, 70 onshore and offshore oil and gas blocks will be auctioned on 29 March while the fourth subsalt round is scheduled for 7 June. These might be the last opportunities for major oil companies to compete for the attractive fields ahead of the 7 October election, after which a potential leftist presidency could reverse or slow the involvement of private companies in the sector. Although reforms are not expected to be fully reversed, uncertainty over who will be running in October and ruling Brazil come January 2019 is expected to play a part in the upcoming bidding rounds. Among the companies authorised to bid on 29 March are BP, ExxonMobil, Repsol, Petrobras, Royal Dutch Shell and Total. The government does not expect to sell all the blocks and estimate they could raise around US$1.1bln between the March and June auctions.
Asia-Pacific: China launches renminbi-denominated oil futures market
Sectors: energy
Key Risks: market volatility
China opened a renminbi-denominated oil futures markets on the Shanghai International Energy Exchange (INE) for seven grades of high-sulphur crude used by Chinese refineries. The oil futures are the first Chinese futures that can be traded by overseas entities without a presence in China. Oil prices and trading has traditionally been in US dollars, and renminbi-trading is unlikely to supplant Brent or WTI as the primary oil benchmark in the near future. There are fears that at least initially trading volumes will be too low to avoid large price fluctuations. In addition, capital controls could still create difficulties for foreign investors, and China’s regulatory framework is still evolving. Nonetheless, over the medium term the growth of the exchange and other similar measures will support the internationalisation of the renminbi.
Eurasia: Six months after Eurobond sale, Tajikistan too indebted for ADB loans
Sectors: all
Key Risks: non-payment
On 26 March, the Asian Development Bank announced that it was providing Tajikistan with US$160m in grants for a number of projects, but that the country would no longer be granted loans from the institution. The ADB representative in Dushanbe said that the country’s debt obligations are unsustainable. Its external debts at the end of 2017 were around US$2.9bln, 40 per cent of GDP. The announcement comes just weeks after Tajikistan and Uzbekistan moved to mend their long strained relations, including an unprecedented announcement by Uzbek President Shavkat Mirziyoyev that Tashkent would support the development of hydropower projects in Tajikistan, including the world’s largest dam, the Rogun Dam. Mirziyoyev’s predecessor threatened war against Tajikistan if it went ahead with the project, which Dushanbe sold US$500m in eurobonds to help finance last September, equal to 16 per cent of its current debt load.
Europe: Catalan crisis returns to the fore; doubts whether Slovak crisis averted
Sectors: all
Key Risks: political instability; protests
The crisis in Catalonia returned to the fore over the weekend of 23-25 March, with protests in Barcelona turning violent after the Spanish Supreme Court ruled five independence leaders be held without bail on sedition charges. Jordi Turull, who was expected to be voted in as president on 24 March, was amongst those detained. Protests again escalated, with more than 70 injured on Sunday 25 March after reports emerged that ex-Catalan president and independence leader Carles Puigdemont was arrested in Germany and could be extradited to Spain. The developments portend a renewed escalation of the crisis. Meanwhile, Slovakia seemed to avert its own political crisis on 22 March when the coalition government agreed a new cabinet, replacing longtime leader Robert Fico. Although one major protest group called off its protest the subsequent day, 25,000 people still demonstrated in Bratislava to call for early elections and have vowed to continue doing so.
MENA: Egypt heads to the polls
Sectors: finance; macroeconomic stability
Key Risks: political stability; political violence; terrorism
Between 26 – 28 March, the Egyptian public is set to vote in a presidential election. Although the outcome is almost certainly a renewed term for current President Abdel Fattah al-Sisi, the election still bears key risks to political and macroeconomic stability. First, a low turnout – and consequently political apathy – could indicate electoral dissatisfaction with the government’s implementation of austerity policies, as well as its inability to conquer the threat of terrorism. This not only questions the regime’s ability to continue to pursue stringent economic reforms, possibly dampening foreign investment flows, but also raises the possibility of political instability and violence in the short-to-medium term, with the possibility of unrest and/or demonstrations being high in the coming days. Secondly, as evidenced by the assassination attempt on Alexandria’s regional security chief on 24 March, the risk of terrorist attacks during the presidential election remains high.
Sub-Saharan Africa: Khartoum to ink port deal with Doha
Sectors: all
Key Risks: increased tensions; increased foreign direct investment
On 26 March the Sudanese government is expected to sign a US$4bln agreement with Qatar to rehabilitate and manage the Suakin port on the Red Sea. Doha will take a 49 per cent share in the project, with the Sudanese government holding the remaining 51 per cent. The first phase is expected to be completed by 2020. However, the agreement is not without controversy. Last year an agreement between Turkey and Sudan for the former to rehabilitate Suakin island angered Sudan’s northern neighbour Egypt and contributed to the deterioration in relations between Cairo and Khartoum. Sudan’s support of Ethiopia’s Grand Ethiopian Renaissance Dam is also a sore spot and Khartoum’s latest agreement with one of Egypt’s rivals is sure to raise tensions once again.
