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Russia's SWIFT Ban Could Send Shockwaves Through Oil And Commodity Markets – OilPrice.com

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3 years ago

March 1, 2022

Harry Miller

Russia’s SWIFT Ban Could Send Shockwaves Through Oil And Commodity Markets | OilPrice.com

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.

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By Alex Kimani – Feb 28, 2022, 7:00 PM CST

Russia’s decision to invade Ukraine was originally met with a relatively tepid response from world leaders, but now sanctions are intensifying key Russian banks are banned from SWIFT.
The increasingly aggressive stance being taken by Western leaders against Russia’s invasion of Ukraine suggests Russia’s energy exports could yet be sanctioned.
It isn’t only oil and gas that will be affected by the SWIFT ban, with supply disruptions likely to occur for aluminum, copper, nickel, and cobalt among others.

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After months of frantic diplomacy, the West’s worst fears finally came true on Thursday after Russian forces launched their long-feared attack on Ukraine. Russian forces have repeatedly fired missiles at military control centers in Kyiv and other regions, though they have failed to decisively take any key city amid stiff resistance from Ukrainian forces. On the same day, Western leaders slapped a raft of fresh sanctions on Russia, including the exclusion of Russia’s largest financial institutions from global financial systems; imposing an asset freeze against all major Russian banks, canceling all export permits with Russia, and prohibiting all major Russian companies from raising financing within their territories, among other measures.

President Biden talked about blocking select Russian banks from the global financial systems and also announced export restrictions that would “include restrictions on Semiconductors (NASDAQ:SOXX), Telecommunication (NYSEARCA:XTL), encryption security, lasers, sensors, navigation, Avionics (BATS:ITA), and maritime technology.”

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Prime Minister Johnson announced plans to “exclude Russian banks from the UK financial system.” However, no plans were made to force UK businesses to divest from Russian holdings. Despite that, BP (NYSE:BP) announced that it would sell its ~20 percent share in Rosneft (OTCPK:RNFTF). BP saw its shares fall by more than 5 percent on the news.

Understandably, Ukraine feels that the West has not been doing nearly enough to deter Russia. Ukraine’s foreign Minister Dmytro Kuleba has been calling on the West to block Russia from the SWIFT payments system, a move opposed by Germany due to its heavy reliance on Russian gas supplies. SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a secure messaging system that facilitates rapid cross-border payments, making international trade flow smoothly.

Now, Ukraine may finally get its wish: Western allies, including Germany, have finally agreed to unleash the ultimate ‘financial nuclear weapon’ on Russia by excluding key Russian banks from the SWIFT payment system.

On Saturday, a spokesperson for the German told Reuters that Germany and its Western allies have agreed to cut Russia out of the SWIFT global payment system in what would mark a third sanctions package aimed at halting Russia’s invasion of Ukraine. The sanctions agreed with the United States, France, Canada, Italy, Great Britain, and the European Commission also include limiting the ability of Russia’s central bank to support the rouble.

And now, some analysts are saying that a SWIFT ban on Russian banks is likely to lift oil prices well above $100 a barrel.

Amrita Sen, a consultant at Energy Aspects, has told Reuters that Brent crude prices will definitely go back above $100 and probably return to the highs of $105 if the ban takes effect. “But I wouldn’t rule out a quick move to $110 a barrel,” she added.

And, she seems to be right on the money.

Late last week, crude oil prices began paring their war-driven rally as sanctions on Russia have so far avoided impacting the country’s oil and gas exports, and have also not blocked Russia’s access to the SWIFT financial system. However, the oil price rally appears to be back in full force, with Brent up 5.06% to trade at $102.89 per barrel in Monday’s intraday trading while WTI climbed 5.24% to change hands at $96.39 per barrel.

Oil prices last jumped above $100 a barrel when Russian forces invaded Ukraine on Feb. 24, with Brent breaching $105 a barrel for the first time since mid-2014.

Commodity Rally

But oil is not the only commodity whose supply would be severely disrupted if Russian banks are banned from SWIFT.

At least 10 oil and commodities traders have told Reuters that flows of Russian commodities to the West will be severely disrupted or halted for days, if not weeks, until clarity is established on exemptions.

Russia produces 10% of the world’s oil and 40% of European natural gas but is also a major exporter of aluminum, copper, nickel, and cobalt, among other key commodities, all of which could see price spikes either due to direct bans or through Russia’s exclusion from SWIFT.

Previously, European leaders were rumored to be mulling sanctions on the Russian energy sector; however, the European Commission President has cleared the air, announcing that Europe would instead “make it impossible for Russia to upgrade its oil refineries.” Ironically, Europe has been buying more gas from Gazprom (OTCPK:OGZPY) than before Russia’s invasion of Ukraine.

In a previous article, we reported that the markets remain deeply concerned about the risk of a full energy supply disruption to the EU–which receives roughly 40% of its gas via Russian pipelines, several of which run through Ukraine. According to David Frum of The Atlantic and author of Trumpocalypse: Restoring American Democracy (2020), Russia’s Ukraine invasion has been greatly aided by high energy prices, especially natural gas, in the ongoing energy boom. Frum notes that the price of Russian gas on spot markets surpassed $10 per million metric BTUs in June 2021 before tripling to the current $30 per million metric BTUs. The sharp rise in energy prices has helped Russia’s foreign exchange reserves hit $630 billion, or 42% of the country’s $1.5 trillion GDP.

With those massive financial resources, Russia could inflict real havoc on world energy markets if it chooses to, with the natural gas markets likely to be the hardest hit because gas is harder to substitute. In theory, Russian pipeline gas could be partly replaced by liquid natural gas from the United States, Qatar, or other suppliers; unfortunately, ramping up LNG production and shipment is very difficult to do in a hurry.

However, Russia has so far not shown any intentions of stopping oil and gas exports to Europe and the rest of the world as part of the tit-for-tat measures Putin has warned about, preferring to ratchet up rhetoric about nuclear warfare. President Vladimir Putin has ordered Russian nuclear deterrent forces put on high alert in a dramatic escalation of tensions with the West over Moscow’s invasion of Ukraine.

By Alex Kimani for Oilprice.com

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Business

The #1 Skill I Look For When Hiring

Published

16 hours ago

September 17, 2024

Nick Kossovan

File this column under “for what it’s worth.”

“Communication is one of the most important skills you require for a successful life.” — Catherine Pulsifer, author.

I’m one hundred percent in agreement with Pulsifer, which is why my evaluation of candidates begins with their writing skills. If a candidate’s writing skills and verbal communication skills, which I’ll assess when interviewing, aren’t well above average, I’ll pass on them regardless of their skills and experience.

Why?

Because business is fundamentally about getting other people to do things—getting employees to be productive, getting customers to buy your products or services, and getting vendors to agree to a counteroffer price. In business, as in life in general, you can’t make anything happen without effective communication; this is especially true when job searching when your writing is often an employer’s first impression of you.

Think of all the writing you engage in during a job search (resumes, cover letters, emails, texts) and all your other writing (LinkedIn profile, as well as posts and comments, blogs, articles, tweets, etc.) employers will read when they Google you to determine if you’re interview-worthy.

With so much of our communication today taking place via writing (email, text, collaboration platforms such as Microsoft Teams, Slack, ClickUp, WhatsApp and Rocket.Chat), the importance of proficient writing skills can’t be overstated.

When assessing a candidate’s writing skills, you probably think I’m looking for grammar and spelling errors. Although error-free writing is important—it shows professionalism and attention to detail—it’s not the primary reason I look at a candidate’s writing skills.

The way someone writes reveals how they think.

Clear writing = Clear thinking
Structured paragraphs = Structured mind
Impactful sentences = Impactful ideas

Effective writing isn’t about using sophisticated vocabulary. Hemingway demonstrated that deceptively simple, stripped-down prose can captivate readers. Effective writing takes intricate thoughts and presents them in a way that makes the reader think, “Damn! Why didn’t I see it that way?” A good writer is a dead giveaway for a good thinker. More than ever, the business world needs “good thinkers.”

Therefore, when I come across a candidate who’s a good writer, hence a good thinker, I know they’re likely to be able to write:

Emails that don’t get deleted immediately and are responded to
Simple, concise, and unambiguous instructions
Pitches that are likely to get read
Social media content that stops thumbs
Human-sounding website copy
Persuasively, while attuned to the reader’s possible sensitivities

Now, let’s talk about the elephant in the room: AI, which job seekers are using en masse. Earlier this year, I wrote that AI’s ability to hyper-increase an employee’s productivity—AI is still in its infancy; we’ve seen nothing yet—in certain professions, such as writing, sales and marketing, computer programming, office and admin, and customer service, makes it a “fewer employees needed” tool, which understandably greatly appeals to employers. In my opinion, the recent layoffs aren’t related to the economy; they’re due to employers adopting AI. Additionally, companies are trying to balance investing in AI with cost-cutting measures. CEOs who’ve previously said, “Our people are everything,” have arguably created today’s job market by obsessively focusing on AI to gain competitive advantages and reduce their largest expense, their payroll.

It wouldn’t be a stretch to assume that most AI usage involves generating written content, content that’s obvious to me, and likely to you as well, to have been written by AI. However, here’s the twist: I don’t particularly care.

Why?

Because the fundamental skill I’m looking for is the ability to organize thoughts and communicate effectively. What I care about is whether the candidate can take AI-generated content and transform it into something uniquely valuable. If they can, they’re demonstrating the skills of being a good thinker and communicator. It’s like being a great DJ; anyone can push play, but it takes skill to read a room and mix music that gets people pumped.

Using AI requires prompting effectively, which requires good writing skills to write clear and precise instructions that guide the AI to produce desired outcomes. Prompting AI effectively requires understanding structure, flow and impact. You need to know how to shape raw information, such as milestones throughout your career when you achieved quantitative results, into a compelling narrative.

So, what’s the best way to gain and enhance your writing skills? As with any skill, you’ve got to work at it.

Two rules guide my writing:

Use strong verbs and nouns instead of relying on adverbs, such as “She dashed to the store.” instead of “She ran quickly to the store.” or “He whispered to the child.” instead of “He spoke softly to the child.”
Avoid using long words when a shorter one will do, such as “use” instead of “utilize” or “ask” instead of “inquire.” As attention spans get shorter, I aim for clarity, simplicity and, most importantly, brevity in my writing.

Don’t just string words together; learn to organize your thoughts, think critically, and communicate clearly. Solid writing skills will significantly set you apart from your competition, giving you an advantage in your job search and career.

_____________________________________________________________________

Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.

Business

Politics likely pushed Air Canada toward deal with ‘unheard of’ gains for pilots

Published

1 day ago

September 16, 2024

Anne Joseph

MONTREAL – Politics, public opinion and salary hikes south of the border helped push Air Canada toward a deal that secures major pay gains for pilots, experts say.

Hammered out over the weekend, the would-be agreement includes a cumulative wage hike of nearly 42 per cent over four years — an enormous bump by historical standards — according to one source who was not authorized to speak publicly on the matter. The previous 10-year contract granted increases of just two per cent annually.

The federal government’s stated unwillingness to step in paved the way for a deal, noted John Gradek, after Prime Minister Justin Trudeau made it plain the two sides should hash one out themselves.

“Public opinion basically pressed the federal cabinet, including the prime minister, to keep their hands clear of negotiations and looking at imposing a settlement,” said Gradek, who teaches aviation management at McGill University.

After late-night talks at a hotel near Toronto’s Pearson airport, the country’s biggest airline and the union representing 5,200-plus aviators announced early Sunday morning they had reached a tentative agreement, averting a strike that would have grounded flights and affected some 110,000 passengers daily.

The relative precariousness of the Liberal minority government as well as a push to appear more pro-labour underlay the prime minister’s hands-off approach to the negotiations.

Trudeau said Friday the government would not step in to fix the impasse — unlike during a massive railway work stoppage last month and a strike by WestJet mechanics over the Canada Day long weekend that workers claimed road roughshod over their constitutional right to collective bargaining. Trudeau said the government respects the right to strike and would only intervene if it became apparent no negotiated deal was possible.

“They felt that they really didn’t want to try for a third attempt at intervention and basically said, ‘Let’s let the airline decide how they want to deal with this one,'” said Gradek.

“Air Canada ran out of support as the week wore on, and by the time they got to Friday night, Saturday morning, there was nothing left for them to do but to basically try to get a deal set up and accepted by ALPA (Air Line Pilots Association).”

Trudeau’s government was also unlikely to consider back-to-work legislation after the NDP tore up its agreement to support the Liberal minority in Parliament, Gradek said. Conservative Leader Pierre Poilievre, whose party has traditionally toed a more pro-business line, also said last week that Tories “stand with the pilots” and swore off “pre-empting” the negotiations.

Air Canada CEO Michael Rousseau had asked Ottawa on Thursday to impose binding arbitration pre-emptively — “before any travel disruption starts” — if talks failed. Backed by business leaders, he’d hoped for an effective repeat of the Conservatives’ move to head off a strike in 2012 by legislating Air Canada pilots and ground crew to stick to their posts before any work stoppage could start.

The request may have fallen flat, however. Gradek said he believes there was less anxiety over the fallout from an airline strike than from the countrywide railway shutdown.

He also speculated that public frustration over thousands of cancelled flights would have flowed toward Air Canada rather than Ottawa, prompting the carrier to concede to a deal yielding “unheard of” gains for employees.

“It really was a total collapse of the Air Canada bargaining position,” he said.

Pilots are slated to vote in the coming weeks on the four-year contract.

Last year, pilots at Delta Air Lines, United Airlines and American Airlines secured agreements that included four-year pay boosts ranging from 34 per cent to 40 per cent, ramping up pressure on other carriers to raise wages.

After more than a year of bargaining, Air Canada put forward an offer in August centred around a 30 per cent wage hike over four years.

But the final deal, should union members approve it, grants a 26 per cent increase in the first year alone, retroactive to September 2023, according to the source. Three wage bumps of four per cent would follow in 2024 through 2026.

Passengers may wind up shouldering some of that financial load, one expert noted.

“At the end of the day, it’s all us consumers who are paying,” said Barry Prentice, who heads the University of Manitoba’s transport institute.

Higher fares may be mitigated by the persistence of budget carrier Flair Airlines and the rapid expansion of Porter Airlines — a growing Air Canada rival — as well as waning demand for leisure trips. Corporate travel also remains below pre-COVID-19 levels.

Air Canada said Sunday the tentative contract “recognizes the contributions and professionalism of Air Canada’s pilot group, while providing a framework for the future growth of the airline.”

The union issued a statement saying that, if ratified, the agreement will generate about $1.9 billion of additional value for Air Canada pilots over the course of the deal.

Meanwhile, labour tension with cabin crew looms on the horizon. Air Canada is poised to kick off negotiations with the union representing more than 10,000 flight attendants this year before the contract expires on March 31.

This report by The Canadian Press was first published Sept. 16, 2024.

Companies in this story: (TSX:AC)

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Business

Federal $500M bailout for Muskrat Falls power delays to keep N.S. rate hikes in check

Published

2 days ago

September 16, 2024

Anne Joseph

HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.

Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.

Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”

Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.

The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.

Those delays forced Nova Scotia Power to spend more on generating its own electricity.

This report by The Canadian Press was first published Sept. 16, 2024.

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