Ones to Watch, 19 November 2018

Americas: Austerity 2019 budget approved in Argentina; risk of unrest, attacks ahead of G20

Sectors: all
Key Risks: civil unrest; terrorism; governability

In Argentina, the Senate approved the 2019 austerity budget by 45 to 24 votes on 15 November in a political victory for President Mauricio Macri’s government. The approval came three days after S&P cut Argentina’s credit rating to B from B+. Protests were reported outside the Congress building, though they were more peaceful than those on 24 October, a day before the bill was approved in the lower house. Also on 15 November two Argentine brothers with alleged links to Hizbullah were arrested in Buenos Aires amid intensifying security operations ahead of the G20 meeting scheduled to begin on 30 November. In addition, authorities arrested at least 12 suspects linked to the two home-made bomb attacks attempts which took place on 14 November. Further incidents and increased security-force presence should be expected over the coming weeks.

Asia-Pacific: China offers trade war truce but deal remains far-off

Sectors: various
Key Risks: trade war

On 16 November US President Donald Trump said that China was ready to make a deal to defuse trade tensions between the two powers, indicating that the implementation of further tariffs may be pushed back. Beijing reportedly sent a list of proposals to Washington, including an offer to buy more natural gas from the US and improve protection for intellectual property rights, in a bid to reach a trade war truce ahead of planned G20 meetings in Buenos Aires on 30 November. Since July, Washington has imposed tariffs on US$250bln worth of Chinese imports, while Beijing has slapped similar duties on US$110bln worth of goods it imports from the US. In September, Trump threatened to extend the tariffs to the remaining US$267bln in Chinese imports. While Trump’s remarks are optimistic, it remains unlikely that the US and China will reach an agreement.

Eurasia: KazAtomProm IPO kicks off Kazakh privatisations

Sectors: energy
Key Risks: corruption; management

Kazakhstan‘s state-owned uranium firm KazAtomProm listed on the London and Astana stock markets, raising US$450m for 15 per cent of the firm, thus valuing it at US$3bln. The listing was placed at US$11.60 a share, at the bottom end of the guidance banks it had provided. The listing is the first major privatisation under the government’s privatisation agenda, with oil company KazMunaiGas (KMG) likely to list next year. The listing put KazAtomProm at a 35 per cent discount to the other major listed uranium company, Cameco, in part a reflection of corruption concerns. The company is the world’s largest producer of uranium but its announcement in 2016 that it would cut production by 10 per cent coupled with its December 2017 decision to cut production by 20 per cent had little lasting impact on markets.

Europe: Brexit deal plunges May’s cabinet into chaos

Sectors: all
Key Risks: political instability

Two cabinet members resigned from British Prime Minister Theresa May’s government on 15 November, only a day after a majority of the cabinet approved her draft withdrawal agreement with the European Union. However, senior Brexiteer Michael Gove’s decision to remain in the cabinet was seen to stem further defections, although a number of MPs in May’s own Conservative party called on her to resign. Her Brexit deal appears, at the least, 30 votes short of being able to secure passage in the House of Commons at present and May has yet to elucidate a strategy for trying to win over opposition MPs to back the deal. The risk of a no-deal Brexit has increased somewhat, although calls for a second referendum are also rising as May has refused to countenance these so far. Market volatility and political turmoil could accelerate.

MENA: CIA finds that Saudi Arabia’s Mohammad bin Salman ordered killing of journalist

Sectors: defense; oil & gas
Key Risks: sanctions

The CIA reportedly concluded that Saudi Arabia’s crown prince Mohammad bin Salman (MbS) did order the assassination of journalist Jamal Khashoggi. The assessment, which Riyadh strongly rejects, is the most definitive to date linking MbS to the operation. The CIA’s conclusion referred to a telephone call between MbS’ brother Khalid bin Salman, Saudi ambassador to the US and Khashoggi, directing him to the consulate. US President Donald Trump refused to listen to the tape of Khashoggi’s death and referred to Saudi Arabia as a ‘truly spectacular ally’. Lawmakers are pushing for harsher punitive measures on Saudi, including halting arms sales to the Kingdom with the current sanctions and US visa retractions on various members of Khashoggi’s hit squad purely symbolic. Further announcements are expected on 20 November. The CIA assessment means that calls for punishment on the Kingdom itself will continue to grow.

Sub-Saharan Africa: Nigeria’s Buhari and Abubakar unveil election manifestos, launch campaigns

Sectors: all
Key Risks: political stability; policy continuity

On 18 and 19 November Nigerian President Muhammadu Buhari and his main challenger Atiku Abubakar presented their election manifestos, officially launching their campaigns for the February presidential vote. Recycling his 2015 campaign promise that propelled him into office, Buhari pledged to fight corruption centre-stage in a potential second term. While corruption remains rampant, Buhari can point to moderate successes in prosecuting financial crime, with anti-graft authorities having doubled their high-profile corruption convictions since he took office. Meanwhile, Abubakar is positioning himself as a pro-business alternative to Buhari. Abubakar has vowed to privatise Nigeria’s refineries, issue new licences to boost oil sector investment, and bring annual infrastructure investment to US$90bln. Like Buhari, Abubakar has some credibility to his name, having overseen the liberalisation of Nigeria’s telecommunications sector as vice-president from 1999 to 2007. The race is on.