FEATURED: NATO: ‘ Western Sanctions on Russia & Affect on Markets for Goods & Services ‘

#AceNewsReport – Sept.15: With this major issue being so prominent in our news headlines almost daily l thought it would be interesting to publish this NATO review regularly: The question posed on this one are is as follows:

Have Western sanctions had any effect on Russia?

When Russia illegally annexed Crimea and started interfering in Eastern Ukraine, the West responded with economic sanctions. In July 2014, sanctions were enacted in a coordinated manner by the European Union, the United States, Canada, and other Allies and partners.

These sanctions were further strengthened in September 2014. EU sanctions, which had been due to lapse in July 2015, have been extended to January 2016. The US and Canadian sanctions are open-ended.

There are three types of economic sanctions. The first restricts access to Western financial markets and services for designated Russian state-owned enterprises in the banking, energy, and defence sectors. The second places an embargo on exports to Russia of designated high-technology oil exploration and production equipment. The third is an embargo on exports to Russia of designated military and dual-use goods.

The justification for these Western sanctions is internationally well-understood. But to muddy the waters, Russia imposed a ban on food imports from Western nations in August 2014. That ban remains in place.

After around a year of these sanctions and measures, what impacts can we see on both the Russian and European economies?

For the Russian economy, the sanctions are generally assessed to have helped exacerbate the macroeconomic challenges it was already facing, notably the rapid and pronounced fall in oil prices that started in the last months of 2014.

Furthermore, the combined effect of these sanctions and of the fall in oil prices caused significant downward pressure on the value of the Rouble and increased capital flight.

At the same time, the sanctions on access to financing forced the Russian state to use part of its foreign exchange reserves to shore up the sanctioned entities.

These developments forced the hand of the Central Bank of Russia, which abruptly ceased to defend the value of the Rouble and hike interest rates in December 2014.

Russia’s ban on Western food imports had a compounding effect on this challenging picture, as it led to higher food prices and hence to further inflation. This was in addition to the effect of the fall in the value of the Rouble, which had already raised the price of imported goods and services in Roubles.

Recent data confirm Russia’s entry into recession, with GDP growth of -2.2% for the first quarter of 2015, as compared to the first quarter of 2014. Recent forecasts suggest a fall in real GDP in the order of 3%-3.5% for 2015, and growth of around zero for 2016.

3263_tn718.jpg

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange July 7, 2015. © Reuters

In sum, Western sanctions have been a success in terms of the proximate goal of inflicting damage on the Russian economy.

This comes in addition to the signalling value of the economic sanctions.

Western nations

  • took coordinated action (signalling unity)
  • against strategic entities of the Russian state (signalling attribution of responsibility)
  • in a manner designed to cause concrete economic damage (signalling credibility)
  • while accepting the (limited) risk that economic pain may befall them as a result (signalling resolve).

But have these sanctions had painful consequence for their initiator?

European economies are affected by the sanctions and by Russia’s current recession principally through trade , i.e. by losses in export revenues.

Losses are caused:

  • directly by Western sanctions (exports of oil-producing equipment and of military and dual-use goods);
  • directly by Russia’s food import ban;
  • and indirectly due to Russia’s recession and lower exchange rate, which together lead to much lower demand for imports (from anywhere in the world).

The latter, indirect effect is by far the largest, but it can only be partly attributed to Western sanctions – the lower oil price remains the dominant driver according to leading analysts.

TABLE 1 – Shifts in goods exports to Russia and to other countries – EU Member States

REPORTER Total exports
in 2014Q1
(EUR mn)
Change in
exports to
Russia
EUR mn)
Change in
exports to
other markets
(EUR mn)
Net change
(EUR mn)
Net change
(% of 2014Q1)
Cyprus 325 -5 182 177 54.3%
Ireland 21,107 -78 3,717 3,639 17.2%
Bulgaria 4,859 -41 646 606 12.5%
Croatia 2,364 -21 254 233 9.9%
Poland 40,223 -521 3,811 3,291 8.2%
Czech Republic 32,205 -365 2,836 2,471 7.7%
Hungary 20,433 -165 1,633 1,467 7.2%
Malta 536 0 37 37 6.9%
Denmark 20,548 -114 1,490 1,376 6.7%
Slovenia 6,597 -85 499 414 6.3%
Germany 278,427 -2,566 17,952 15,386 5.5%
Romania 12,758 -91 734 643 5.0%
Luxembourg 3,618 -14 177 163 4.5%
Portugal 11,707 -18 460 442 3.8%
EU Total 1,143,317 -8,652 49,019 40,367 3.5%
Spain 60,276 -301 2,358 2,057 3.4%
Italy 96,151 -668 3,708 3,040 3.2%
France 109,586 -612 3,667 3,056 2.8%
Slovakia 16,194 -156 547 391 2.4%
United kingdom 96,345 -333 2,599 2,266 2.4%
Austria 33,037 -360 497 137 0.4%
Netherlands 125,648 -590 988 398 0.3%
Belgium 88,707 -360 51 -309 -0.3%
Estonia 2,854 -147 132 -15 -0.5%
Sweden 31,179 -196 -72 -267 -0.9%
Latvia 2,589 -87 55 -33 -1.3%
Greece 6,379 -24 -81 -105 -1.6%
Finland 13,248 -358 23 -336 -2.5%
Lithuania 5,415 -374 118 -256 -4.7%

Source: Eurostat trade statistics; 2015Q1 compared to 2014Q1; Extra-EU and Intra-EU trade.

For European Allies and Partners, recent data demonstrates that the losses incurred due to Russia’s general economic downturn have been well contained.

Of course, exports to Russia have fallen substantially, on average by around one-third when comparing the first quarter of 2015 with the first quarter of 2014. However Russia’s importance as a destination market is quite limited for most European countries and, more importantly still, European businesses have been able to find new markets for their products, both within Europe and beyond – a phenomenon referred to by economists as trade diversion.

The analysis of trade diversion is an essential component of any serious analysis of the impacts of sanctions.

The analysis of trade diversion is an essential component of any serious analysis of the impacts of sanctions. This is shown in Table 1, again focusing on the change between the 1st quarter of 2014 (without sanctions, with a high oil price, and with Russia still growing), and the 1st quarter of 2015 (with sanctions, with a low oil price, and with Russia in recession). Table 1 displays the results for the 28 countries of the European Union.

Some 21 out of the 28 EU Member States experienced a net gain in exports to the world in spite of the Russian downturn, thanks to increases in exports to other markets (both within and beyond the EU) that more than compensated for the falls in exports to Russia. The same is true for the European Union in the aggregate, with exports to Russia falling by 8.65 billion Euros, but exports to other destinations increasing by 49.02 billion Euros (including intra-EU trade).

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A man stands next to a building under a board showing currency exchange rates in Moscow, December 16, 2014. © Reuters

It is also interesting to note that, apart from the three Baltic states, all the other Central and Eastern European Member States were able to more-than-compensate for the losses related to Russia (notably because their exposure to the Russian market was not especially high to begin with). The same is true for Southern EU Member States, leaving the special case of Greece aside (see below), and for all of the large EU economies, most notably Germany and Italy, countries that are often portrayed as having significant economic linkages with Russia. What these official trade statistics clearly prove today is that Russia can undergo a severe recession, and be saddled with a robust sanctions regime, without causing any net export losses to these countries.

3265_tn450.jpg

European businesses have been able to find new markets for their products, both within Europe and beyond – a phenomenon referred to by economists as trade diversion. © Reuters

There are, however, 7 EU Member States that have experienced net losses. These countries naturally split into two groups: those that were able to expand into new markets, but to an insufficient degree; and those who experienced losses on both counts, i.e. from the Russian market and from other markets. Sweden and Greece are the only countries to have experienced both types of losses, signifying a general loss of export competitiveness which is not due to the Russian downturn. Belgium, Estonia, Latvia, Finland, and Lithuania belong to the former category.

As for the size of the total net losses, only Lithuania and Finland is relatively severe cases, i.e. where the losses in export revenues would be expected to have a significant impact on GDP growth. On that count, however, only Finland seems to be experiencing disappointing macroeconomic results, while Lithuania remains on a robust growth trajectory thanks to strong domestic demand.

As the European economy overwhelmingly shrugs off the effects of Russia’s recession – which is only partly caused by sanctions – Western Allies should take comfort in the knowledge that pursuing a strong and principled sanctions policy appears eminently affordable. The evidence indicates that the doomsayers have been proved wrong.

First published here on July.13 2015

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INDIA: ‘ Modi trying to build a Silicon future on a tea stall past as he visits California ‘

#AceFinanceNews – Sept.15: In his youth, Narendra Modi helped his family sell tea near railway and bus stations. Later this month, in the first visit to California by an Indian prime minister in three decades, he will be looking to help further sell the idea of his country as a hub for manufacturing and the digital industry.

Here’s what is in store when Modi makes his way to Silicon Valley.

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NEW YORK: ‘ Economic reports business inventories edge up 1% in July ‘

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#ALERT ‘ Online scammer’s are recruiting by pretending to become your friend or buddy ‘

#AceFinanceNews – Sept.15: They’re looking for people to help them transfer money and stolen goods. Of course, they don’t come right out and say that’s what they want. Instead, they claim to offer work at home jobs or pretend to be your romantic partner and ask you for a ‘favour.’

SCAM ALERTS Screenshot from 2015-09-15 14:22:05The scammer’s’ goal: to use your bank account, personal information and address to help them steal money.

Read more >

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#ALERT: ‘ Nannies or Caregivers listing your services on certain sites can lead to you owing money ‘

#AceFinanceNews – Sept.15: Are you a nanny or caregiver who lists your services on sites like care.com, sittercity.com, or craigslist.com? A few months ago, we warned about a scam that targets caregivers like you. Here’s a reminder: a con artist emails or texts an offer to hire you.

SCAM ALERTS Screenshot from 2015-09-15 14:22:05

The scammer also sends you a check and asks you to deposit it, keep some money for your services, and send the rest to someone else to — supposedly — pay for special items or medical equipment. But the check is fake, and it can take weeks for a bank to discover the forgery. If you deposit the check and withdraw the funds, you’ll wind up owing the bank all that money.

But the check is fake, and it can take weeks for a bank to discover the forgery. If you deposit the check and withdraw the funds, you’ll wind up owing the bank all that money.

After the last post, we heard back from many people with great ideas to help avoid this scam:

Read more >

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One of London’s hottest fintech startups just lured a Silicon Valley veteran to be CTO

Gabriella Poczo WorldRemit CTOWorldRemit

#AceFinanceNews – Sept.15: International money transfer startup WorldRemit has lured a 23-year Silicon Valley veteran to be its new chief technology officer.

Gabriella Poczo is joining the London-based startup to help oversee the businesses expansion.

Poczo spent 13 years at SUN Microsystems and four at Skype, where she spearheaded the company’s shift from desktop to mobile. She has also served at T-Mobile and messaging service textPlus.

WorldRemit is one of London’s hottest startups, valued at $500 million (£320 million) earlier this year. The company specialises in international money transfers to mobile wallets as opposed to bank accounts. These are hugely popular in emerging markets.

WorldRemit is currently seeing 300,000 transactions a month and 30% of those coming out of Europe are going to mobile wallets. These types of transactions are also the fastest growing segment.

Poczo told Business Insider: “I met with Ismail [Ahmed, WorldRemit’s founder and CEO] and Richard [Igoe, WorldRemit’s current CTO] and I connected with the challenges. One of the things that was really a joy at Skype was that every day you knew you were helping people.

“Most of our [WorldRemit’s] competitors are solving first world problems, they’re solving rich people’s problems. We’re out there in the trenches. It’s hard work. We’re building out the network.”

WorldRemit covers 21 mobile wallets across 15 countries and Poczo says her main job is facilitating the expansion of this. All the wallets WorldRemit plugs into were built separately so the challenge is to make a unified system that can send money across these diverse networks seamlessly.

Poczo says: “While currently we do service 21 mobile wallets, which represents 66 million people out of 300 million registered users, there’s still growth there. We want to become ubiquitous with mobile money and mobile wallets. In order to scale in that theatre requires people, process, and technology.”

See Also:

Original Article: http://www.businessinsider.com/worldremit-names-former-skype-exec-gabriella-poczo-as-cto-2015-9?utm_source=feedly&utm_medium=referral

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LONDON: ‘ British inflation just dropped back to absolutely nothing again ‘

deflated hot air balloonREUTERS/China Daily

#AceFinanceReport – Sept.15: Inflation slipped to zero in the year to August, according to figures just out from the Office for National Statistics.

Analysts had expected inflation to fall to nothing in August, dropping from +0.1% in the year to July.

Inflation has been particularly weak this year due to the effect of plunging oil prices – and commodities, oil among them, are now tumbling again.

Analysts expected core consumer prices, which strip out the cost of items with volatile prices, like food and energy, to fall to 1% — and it did.

See Also:

Original Article: http://www.businessinsider.com/uk-inflation-figures-for-august-2015-9?utm_source=feedly&utm_medium=referral

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#MARKETS: ‘ CHINA: ‘ Beijing’s efforts to reform push European & Asian stocks lower as stocks fall back into the red ‘

#AceMarketsNews – Sept.15: Concerns over China kept financial markets on edge on Tuesday, with an underwhelming reaction to recent data and Beijing’s efforts at corporate reform helping push European and Asian stocks lower.

Europe’s main markets had inched higher in early trade, with investors avoiding firmer bets ahead of the first meeting of the U.S. Federal Reserve in years at which a possible rise in interest rates has been a live issue.

But worries about the impact of any Fed hike on dollar borrowers across the developing world, and its effect on growth, continued to dominate, with Shanghai stocks falling another 3.5 percent and oil at just $46 a barrel.

“It’s all about caution today,” said Andy Sullivan, a portfolio manager with Swiss investment firm GL Financial Group. “There is concern about the Fed, plus the China data continuing to be weak.”

While Tokyo inched higher, MSCI’s broadest index of Asia-Pacific shares outside Japan erased early gains to fall 0.7 percent. An hour after opening, the main indices in Frankfurt, London and Paris were up to 1 percent lower.

China falls drag stocks back into red

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FEATURED: ‘ The Consensus is No Rate Hike this Week ‘

#AceFinanceNews – Sept.15: Some random thoughts … Based on the data, I noted that a rate hike this week is possible, even likely. However the consensus of economists is no rate hike at the FOMC meeting this week.

Economists at Goldman Sachs, Deutsche Bank, J.P. Morgan, Nomura, and many others see December as more likely than September (some see the Fed waiting until 2016). Economics professor Tim Duy also thinks a September rate hike is unlikely. Duy and Goldman Sachs chief economist Jan Hatzius have probably been as accurate as anyone in forecasting Fed actions – and neither expects a rate hike this week.

The arguments against a rate hike are low inflation, low inflation expectations, market based financial tightening (stronger dollar, wider credit spreads), global economic weaknesses, recent stock market volatility, slack in the labor market, and asymmetrical risks (hiking too soon poses much larger risks than waiting too long).

Those arguing the FOMC will probably raise rates this week point to “some further improvement” in the labor market since June, and that the forces holding down inflation are dissipating. The revisions to the FOMC projections will be mostly supportive of a rate hike – and it wasn’t long ago that FOMC members were hinting they’d hike rates in September if the economy evolved as expected.

In a WSJ article yesterday, Harriet Torry and Jon Hilsenrath pointed out that every central bank that has raised rates over the last seven years had had to reverse course. See: Lesson for Fed: Higher Interest Rates Haven’t Been Sticking. Of course that will be true for the FOMC meetings in October and December too!

A rate hike this week still seems possible to me (just focusing on the data), but it seems every research piece I read says “no”.

Original Article: http://feedproxy.google.com/~r/CalculatedRisk/~3/qsCRlK80Mj0/the-consensus-is-no-rate-hike-this-week.html

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