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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TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
