Oil Price War Could Wreak Havoc On Eurasian Economies - OilPrice.com | Canada News Media
Connect with us

Business

Oil Price War Could Wreak Havoc On Eurasian Economies – OilPrice.com

Published

 on



Oil Price War Could Wreak Havoc On Eurasian Economies | OilPrice.com

Eurasianet

Eurasianet is an independent news organization that covers news from and about the South Caucasus and Central Asia, providing on-the-ground reporting and critical perspectives on…

More Info

Related News

A feud between Saudi Arabia and Russia that sent oil prices plunging on March 9 has rewritten economic forecasts across Eurasia.

Azerbaijan, Kazakhstan and Russia – the former Soviet Union’s largest oil producers – are preparing for budget shortfalls, pressure on their currencies and possibly recession. Adding to uncertainty is the panic over the quickening spread of the novel coronavirus causing COVID-19, which has cut consumer demand around the world.

Only last year Azerbaijan increased pensions and other social services to ease the pain of inflation and address rising discontent. At the time, President Ilham Aliyev said the spending would be covered by reforms to the tax system. Some of those funds would come from higher customs revenues, consumer spending (via a value-added tax), and an expected uptick in tourist arrivals. Yet these returns are now expected to fall because of COVID-19, said Gubad Ibadoglu, a senior analyst at the Economic Research Center in Baku and an assistant professor of economics at Rutgers University.

According to IMF data, Azerbaijan needs an oil price of around $53 per barrel to balance its budget. Benchmark Brent crude was trading around $36 on March 9, a market holiday in much of the former Soviet Union.

Because the government fears unrest, “it is impossible to cut social payments, which are almost 65 percent of the state budget,” Ibadoglu said in an interview. “The only way [to save] is to cut the investment budget and the defense budget. It’s not easy to cut the defense budget […] and the investment budget was already smaller [in 2020] than last year.”

After the last oil crash, in 2014, Azerbaijan devalued the manat twice. This time Ibadoglu expects Baku to manage a softer slide by spending hard currency reserves but foresees a run on banks when they open March 10 after a holiday weekend. “Nobody trusts the banking sector after the two devaluations,” he said. He also calculates that the Central Bank only has reserves to manage the manat for a few months.

Related: Can Saudi Arabia Survive The Oil Price War It Started?

In Kazakhstan, where the budget is based on an oil price around $57.80, President Jomart Kassym-Tokayev on March 9 promised to fulfill all government social obligations, but said Nur-Sultan would be forced to cut somewhere.

The oil price crash couldn’t come at a worse time. In recent days, citing force majeure due to the coronavirus, China has signaled it may slow purchases of gas from Kazakhstan, Turkmenistan and Uzbekistan.

Turkmenistan is China’s largest gas supplier and China buys almost 80 percent of Turkmen gas.

Many in the region will be glad to hear sthat at least Russia is better equipped to manage the crash this time than in 2014, though any recession would likely hurt migrant laborers.

Combined, Kyrgyzstan, Tajikistan and Uzbekistan supply Russia with 4-5 million temporary workers; Armenia adds hundreds of thousands more. These workers’ wages contribute the equivalent of over 30 percent of GDP in both Kyrgyzstan and Tajikistan, making them two of the most remittance-dependent countries in the world. After the 2014 crash, remittances to Central Asia fell over 50 percent, sowing pain in places like Naryn and Badakhshan. The transfers had largely recovered in recent years.

Today Moscow is much better prepared than it was six years ago, when the oil collapse combined with Western sanctions over Russia’s military adventures in Ukraine gutted the ruble, sending the currency to record lows. Since then Moscow has adopted a fiscal rule, basing its budget on an oil price of $42.60 per barrel; earnings above that amount are stashed in a sovereign wealth fund. When oil falls below that point, reports The Bell, the funds are spent to shore up budget deficits. (The Finance Ministry says that the amount currently in the fund, which is over 10.1 trillion rubles, will be enough to last Russia 6-10 years with oil prices at $25-30.)

This has somewhat decoupled the ruble from the oil price, though the ruble fell about 9 percent on forex markets March 9. The ruble’s fall will push down other currencies in the region.

For consumers, some of this pain may be mitigated by lower energy prices. For oil producers that price their exports in dollars, weaker currencies will make domestic spending cheaper. But any consolation will be ephemeral: Weaker currencies should stoke inflation.

Ibadoglu said Baku did not learn from previous devaluations, that it has done too little to wean itself off oil revenues. Today looks a lot like the day before the last crisis, he said: “The budget depends almost the same on the oil price and on oil revenues.”

By Eurasianet.org

More Top Reads From Oilprice.com:

Join the discussion | Back to homepage


Related posts

Let’s block ads! (Why?)



Source link

Business

Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

Published

 on

 

Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

Source link

Continue Reading

Business

TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

Published

 on

 

CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Business

BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

Published

 on

 

BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending

Exit mobile version