Putin Won’t Bow to What’s Seen as Saudi Oil-Price Blackmail
(Bloomberg) — Russian President Vladimir Putin will refuse to submit to what the Kremlin sees as oil blackmail from Saudi Arabia, signaling the price war that’s roiling global energy markets will continue.
The unprecedented clash between the two giant exporters — and former OPEC+ allies — threatens to push the price of a barrel below $20, but Moscow won’t be the first to blink and seek a truce, said people familiar with the government’s position.
Putin’s government has spent years building reserves for this kind of crisis. While Russia didn’t expect the Saudis to trigger a price war, the people said, the Kremlin so far is confident that it can hold out longer than Riyadh.
“Putin is known for not submitting to pressure,” said Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank that advises government on foreign policy and economy. He has proved that he is ready for a hard competition “to protect national interests and to keep his political image as a strongman.”
After two decades at Russia’s helm, the president has enough experience to survive the current crisis, said three people, asking not to be named because the information isn’t public. Putin is not someone who gives in, even if the fight brings significant losses, said one person.
The Architect
The entire oil market is watching and waiting to see if Russia or Saudi Arabia will balk at the painful price slump and call a truce. Brent crude has plunged from over $50 a barrel in early March to as low as $24.52 this week as the Gulf kingdom, angered by the Kremlin’s veto of deeper OPEC+ cuts, undertook a historic output surge just as the coronavirus pandemic wiped out demand.
The losses are already visible for Russia, weakening its currency and potentially putting the nation on course for a recession. The state budget, which is based on oil prices of just above $40 per barrel, may be in deficit this year, forcing the government to tap its sovereign-wealth fund just two months after Putin promised higher social spending.
U.S. President Donald Trump on Thursday called the price war “devastating to Russia” and said, “at the appropriate time, I’ll get involved.” The Wall Street Journal reported the White House is considering new sanctions against Russia as a means to push for higher prices. So far, the Kremlin has refused to change policies in the face of such restrictions.
Kremlin spokesman Dmitry Peskov attributed the threat of sanctions to “Russo-phobia.” The country is not in an oil-price war with anyone and is always ready to talk, “especially in such dramatic times,” he said.
Earlier in the week, Peskov said Russia would like to see oil prices higher. Crude prices jumped after Trump’s comments.
Russia and Saudi Arabia were architects of the original cooperation deal between the Organization of Petroleum Exporting countries and several other non-members in 2016. Their goal was to end a slump in prices as low as $27 a barrel and initially their accord was a great success.
The Prince
Crude rebounded and relations between the two nations and their leadership were very warm. But over time, the alliance became increasingly unbalanced as the Saudis took an greater share of output curbs and Russia flouted its obligations.
Putin engaged in obvious power plays, making the OPEC+ meeting in June 2019 essentially redundant by pre-announcing fresh cuts after a chat with Saudi Crown Prince Mohammed bin Salman in Osaka, Japan.Russian decisions came to carry ever-greater weight within OPEC+, eventually leading to a rupture early this month. Saudi Energy Minster Abdulaziz bin Salman, the Crown Prince’s older brother, demanded additional cuts to offset the impact of the coronavirus, but his counterpart from Moscow, Alexander Novak, said no.
Saudi Arabia responded with a shock-and-awe oil price war that stunned the global oil industry. Riyadh’s unprecedented barrage on the crude market included the deepest price cut in 20 years, a record supply surge and a fleet of tankers to deliver it, and tens of billions of dollars for new fields.
If these shock-and awe tactics were designed to bend Putin to the kingdom’s will, so far they haven’t succeeded.
The Strongman
The Russian president has made refusing to back down under pressure one of the hallmarks of his rule. From the brutal crackdown on Islamist terrorists in Chechnya to the recent showdown with Turkey over the civil war in Syria, Putin has shown he’s willing to face down foes in the face of both military and economic pressure.
In 2014, when waves of western sanctions over Putin’s annexation of Crimea in Ukraine battered Russia’s economy and some of his closest associates, he refused to consider calls from some of his allies to soften his line. Earlier this year, Rosneft PJSC, run by the president’s close ally Igor Sechin, shrugged off U.S. sanctions on its trade in Venezuelan crude.Putin’s team expected the collapse of OPEC+ talks to lead to a price decline, two of the people said. The Russian leadership was ready for crude plunging as low as $20 and is facing the economic consequences with a cool head, one person said.
Still, with the national economy bleeding, “Russia has enough pragmatism and common sense not to refuse talks,” with its OPEC partners, Dynkin said.
The Kremlin is still open to cooperation with OPEC, but on its own conditions. The Russian proposal — rejected by the Saudis — for OPEC+ to maintain its existing production cuts until the end of June still stands, two of the people said.
For any discussion with the Gulf kingdom to restart, both Russia and Saudi Arabia will need to make some face-saving steps requiring “a complicated PR dance,” said Elina Ribakova, U.S.-based deputy chief economist at the Institute of International Finance.
Russia’s current position is unlikely to achieve that.“It is unlikely that Saudi Arabia now would turn around and agree to the Russian proposal of extending the current cuts,” said Dmitry Marinchenko, senior director at Fitch Ratings Ltd. “That would essentially mean they have given in to Russia and lost face.”
(Updates with Kremlin spokesman’s comment in ninth paragraph.)
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TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
