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China Becomes Global Lender Of Last Resort With Bailout Of World's Most Indebted Oil Company
Over the course of last month we variously described the Asian Infrastructure Investment Bank as an attempt by Beijing to deal a decisive blow to the post-World War II global economic order by undermining US-dominated multinational institutions, as an attempt to usher in a new era characterized by yuan hegemony, and as an effort to cement China’s regional influence via the implicit establishment of a sino-Monroe Doctrine.
With that in mind, we find it somewhat ironic that the China Development Bank (which isn’t the same as the AIIB but which we think might offer some clues as the how the new venture will be run under Beijing’s control), is set to provide $3.5 billion in financing to Brazil’s deeply indebted Petrobras. The new funding comes 6 years after a $10 billion oil export deal between the company and China and just days after Brazil signed up as a founding member of the AIIB.
More, via WSJ:
Brazil’s state-run Petroleo Brasileiro SA said on Wednesday it signed a $3.5 billion financing deal with the China Development Bank, highlighting the oil giant’s deteriorating financial condition in the wake of a vast corruption scandal as well as China’s growing ties to Latin America.
Petrobras didn’t provide any details of the deal, which is part of a cooperation agreement to be implemented this year and in 2016. But the transaction deepens the Brazilian government’s relationship with its largest trading partner and fellow BRIC country.
The Asian giant has provided similar assistance to countries like Ecuador, Venezuela and Argentina, helping those countries deal with falling global oil prices and their own debt problems.
“China again is…lending to state-owned companies that cannot access the market,” said Adriano Pires, an energy expert with the Brazilian Center of Infrastructure in Rio de Janeiro.
China has extended more than $100 billion in credit to Latin America since 2005, according to figures from Boston University’s Global Economic Governance Initiative. In January, Chinese President Xi Jinping said China’s foreign investment in Latin America would hit $250 billion over the next decade.
At the risk of extrapolating too much, it appears as though Beijing isn’t opposed to throwing billions behind serving as a lender of last resort and we can’t help but wonder if the new round of Petrobras financing is indicative of where China will steer initial AIIB funding — that is, into oil and Latin America. What’s interesting (and very ironic given how we’ve characterized the AIIB), is that it appears Beijing may look to channel the bank’s lending straight into Washington’s backyard, effectively slighting the original Monroe Doctrine even as China tacitly implements its own take on an official policy of regional influence and control.
Meanwhile, US allies continue to fall in line with France, Italy, and Israel set to jump on the bandwagon. Here’s more via Reuters:
Prime Minister Benjamin Netanyahu has signed a letter of application for Israelto join the China-led Asian Infrastructure Investment Bank (AIIB), the Israeli Foreign Ministry said on Wednesday.
More than 40 countries, including Australia, South Korea, Britain, France, Germany andItaly, have said they would sign up to the AIIB, with Japan and the United States the two notable absentees.
In a statement on its website, the Foreign Ministry said Israel's AIIB membership would open up opportunities to integrate Israeli companies into infrastructure projects it financed.
Israeli companies are increasingly turning to Asia to capture a boom in demand for their technology, as the government urges them to diversify export markets in response to Europe's rising anti-Semitism and potential trade sanctions.
And just like the ADB, the IMF isn’t intent on undermining the new institution. Via Bloomberg:
The Asian Infrastructure Investment Bank is welcomed as long as it commits to cooperation and efficient operations, China Business News cites IMF Managing Director Christine Lagarde in an interview.
AIIB is a wake-up call for countries that don’t agree with IMF’s quota system: Lagarde
China’s IMF quota should match the size of its economy, Lagarde says
Yuan becoming SDR currency is a matter of time: Lagarde says
* * *
We’ll close with the following quote from US Under Secretary Of State for Economic Growth, Energy, and the Environment:
“We hope that the governance of that institution and the environmental impacts are going to be done in way that’s consistent with what other multilateral development banks aredoing. We don’t have any concern, in theory, about the development of an Asian infrastructure bank.”
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This century will feature China acting like the US in the 20th.
What's Mandarin for 'Manifest Destiny'?
Petrobras is a $300 billion black hole.
It's taking down the entire of Brazil.
Brazil will be saved by the collapse of the US, just like everyone else.
Israel's been an AIIB member since the beginning, albeit a hidden one, thru it's back door computer virus.
Joining now is just for show.
300 billion, that's it? JPM is a much bigger black hole to America and they don't actually produce any products of real value.
Regardless of the idiocracy that is South American politics.
Control of the fossil resources of South America is a significant development. While the corrupt governments of south america do allow drug cartels to continue their brutal treatment of people, a chinese run company or government will clean shit up.
Still just as corrupt but there sure as hell won't be any of this kidnapping/ransom nonsense. People will just fucking disappear, for good.
Israel to join AIIB . lol .
Yes, I saw that, unfortunate that they won't be running the operation though.
Interesting times.
Petrobras ain't got shit compared to Deutche Bank. DB is a black hole two hundred and fifty times bigger.
Middle Kingdom
?? - "ti?nmìng" (combining hanzi for heaven and order) is the classical equivalent. Nowadays it's just "don't be as blatantly imperialistic as the US" or "more carrot, less stick".
China is the new Tony Soprano, will have to bust out Brazil soon.
China just bought Petrobras? So pretty much that means control of south america....
Tick tock you motherfuckers in north america.
Bring it on pussy, I'm yer huckleberry...
You'll be a daisy if you do.
Going to be fun, that's for damn sure.
So, all the London banks are in China, all the middle-eastern players financed by the London banks are in China, all the international manufacturing companies owned and financed by the London banks have their base of manufacturing in China, and now China is running plays from the East India Company playbook.
Colour me unsurprised.
London, it seems, has had enough of toying with those upstart United States of America.
Egads, Mate. How long have you been out?
They took Oz a couple years back!
During the Boer War the Australians were described as "more loyal to Britain than the English", and that is still true today. We have been promised to be spared the coming nuclear holocaust and will, as the last remaining high-technology state on the globe, lead the New World Order into a bright and beautiful future where the other 480 million people exist in irradiated wastelands for the sole purpose of making us toys.
At least then you could stop paying through the nose for a mortgaged toolshed and you'll have coal to burn.
I'm more interested in the half a million tonnes of thorium we've got.
talking to a nuclear physicist formerly at Brookhaven; his studies showed that after the most likely 'nuclear event' Australia and Chile looked the safest place to be.
i told him "heck, anyone who played RISK" knew that
and Israel joins AIIB too, the irony...
Where London points, Israel follows.
Wait, I thought it was the reverse.
-a NWO Hasbara Zionista
(catchy, aint it!)
Nah mate. London created Israel, not the other way around.
Give us your ports, your farmland, your commercial districts, your huddled masses, your gold, your shale oil, and let's see, what's left?
Your real estate, your steel industry, your...
and this is only the Chinese "World Bank clone"
wait until China makes an "IMF clone" in otder to "fix" what the AIIB messed up
speaking of the devil, is the US Congress ever going to approve the reforms? eventually, it's... too late
Yes, it was "too late" in 1972.
1914
1910
WIth 3 trillion + USD in the bank, China has to be a player of transition to move the fiat world from greenback to something else.
What that "something else" is; Loch Ness Leviathan or the Missing Mermaid; has still to be defined!
Those greek heretics in EU zone should pay China a visit, not just Putin.
SDRs with gold and yuan in the basket FTW. Maybe not now, but eventually.
So, will USA taxpayers give money to IRS, which will give it to Israel, which will give it to China (AIIB), which will give it to Brazil, which will give it to Petrobras, which will give it to Brazilian drug cartels?
More hands in the pie than the IRS simply giving it to the CIA who are the drug cartels like what happens now.
More hands in the pie means the pie needs to be bigger , and right there you have international "growth".
I take the contrarian play here, Chinese management are long term thinkers. Let's get one thing straight, the word "China" literaly translates as "the center of the universe". The Chinese have one goal and one goal only. A perfect world for Chinese people, run and owned by Chinese people. Unlike the other mixed race countries of the world that are busy fighting each other the Chinese keep taking slow steady steps towards this goal. Fucking brilliant in many ways, but then again I keep bees and their model is similar. The hive means everything, the individual, not so much.
No mixed race?
You have no idea how many sons that Mongol Genghis Khan sired!
Your perception of "race" is NOT their perception of "race"...the Chinese are a mixed bunch by their own standards. Like the Indians etc. etc.etc.
The whole world is in that conundrum seen from within... In Africa its even worse the tribal divides...
The Chinese in management in the state or company offices are dedicated to the goals of the hive, period.
I have done business there for 20+ years the state controls everything and is essentially the corporation.
India presents an interesting problem for the Chinese, but with those kind of dollar reserves, the India's friendship can be bought and the U.S. would be proper fucked. Corruption at the highest levels on earth in India, I mean really "innovative" stuff. It's why I don't sell to india.
I have never dealt with anyone from India who was honest. Seriously. The term 'honest Injun' must be the most inappropriate ever even of it was meant for the feathered ones.
I have never dealt with anyone from India who was honest. Seriously. The term 'honest Injun' must be the most inappropriate ever even of it was meant for the feathered ones.
Uighur, Wigger, Whatever.
+1 whenever I am in China, I am reminded by my hosts that their "Middle Empire" (yes, the center of the universe) is the homeland of over 50 Nationalities (Han, Miao, Tu, Va, Naxi, Bai, Yi, Tujia, etc. etc.) sporting dozens of languages/dialects... and one written sign system (courtesy of the venerated First Emperor)
so, yes, their perception of "race" is not exactly the Western perception of race (or even Nation, then the "village of origin" still lives, in China)
Hell, even the British and the French perceptions of race was not similar in the beginning of the 19th Century. Napoleon married a "Creole", for criminy and example. In the same time, the Brits were beginning to be all about "races", with a strange hierarchy of them trying to explain why their Anglo-Saxon mixture was slightly superiour to the "common" Germanic races... while forgetting that their elites were originally Norman, and still sport the telltales of that
------
(if you look for more controversy, here it is: imho, China and the EU have a lot more in common, while the US and Russia are way more similar to each other in many, many ways affecting how they interact with the rest of the world)
China is more similar to the E.U.? Bullshit. At least when I want to sell stuff in China, I can figure what the cost/bribes will be pretty easily. In the E.Z., there will be a hidden/surprise tax to discourage any future transactions.
So when did the E.U. adopt a communist single party system? You are such a disingenous douchebag Ghordius.
suit yourself. I'm talking about how they engage the rest of the world in the realm of diplomacy and you dive in the "narrows" of trade, with a side dish of internal politics
Amy Chua's book, "World On Fire", discussed the expatriate Chinese.
I built an owl house in the back yard, but some bees seem to have adopted it before any owls discovered it. I don't have the heart to run the bees out. Maybe I'll just have to build another owl house. :-)
No, no, no. The IRS is a trust based in Puerto Rico.
Don't be silly!
Yea but now they get access to US and Norwegian deep drilling technology as well as more oil fields.
The US looks to 'help' countries by lending them money so those countries can buy US made weapons.
China looks to 'help' countries by investing in resource production in those countries - with the goal to be able to route those resources to China when or if the time comes that they are needed.
The 'nasty' part of China's strategy is that it is all legal within the laws of those countries. The Chinese do not have to 'conquer' to get resources - nor do they have to compete with other countries to buy at 'market prices' - rather they can control the producers of those resources and set their own prices.
Correct, the MIC of the U.S. will be it's own undoing.
And toxic byproducts in Kenya or Brazil beats toxic byproducts on the mainland 10/10
They get cheap local labor because they're doing this in the developing world as an alternative to toppling governments and installing carbon copies of Idi Amin with cheaper suits.
Isreal will make a wonderful member of the new AIIB. And using Isreali technology as oppossed to US is a very savvy move by the Chinese authorities. If they were really smart they would let them run their central bank.
I'm going to enjoy watching Israelis being executed by Chinese executioners.
China will never allow a holocaust memorial to be built on Chinese soil.
Sick turd for brains.
Whatever about that the Chinks won't fall for the Holocau$t shakedown like we do in the West.
Watch the Racial Slurs, Monty.
Watch the Racial Slurs, Monty.
http://www.zerohedge.com/help/notice-racism
Most Israeli technology has been stolen from the US by dual-citizens.
Brazil is the "B" and China is the "C" in BRICS.
Who's surprised by this?
I guess I am more alarmed than surprised. Christine LaGarde is the "I" in MF(er).
Or should we say she was.
BRICS is a stupid name. It should be CRIBS as that is more in line with the actual order of things.
1. China
2. Russia
3. India
4. Brazil
5. Doesn't really matter.
Sounds much more "gang like" too. Maybe they can adopt green as the color for their bandanas
It's not used much on American television.
Wonder why?
Is Christine LaGarge the Suzy Orman of global economic policy?
Confucious say: "Yuan go in basket. Slam dunk. Swish!"
Except Suze is of the Tribe, Christine, contrary to some reports, is not.
You don't think .... this Cesspool of Communism .... Brazil .... will find the road back to Capitalism .... like China is trying to do ?
China: when only the most polite and formal fascism will do.
China's move gently broadens its access to Brasil's resources, which includes the drilling technology it is already in on, and it's a high risk bet. Petrobrás (PBR) is, in fact, completely upsidedown at the moment. $3,5 billion will last a month or two at its current burn rate.
PBR, as a state-run company has, well, been run by the State, and they've fucked it up so completely. Compound that against non-economic pricing.
This morning's news hints at a writedown of R$ 40 billion ($13 billion) against pillaging by corrupt politicians and PBR "management" and their contractors. I say that is small given the depth of the corruption -- almost no-one gave or got any PBR contract without getting some grease. It goes down about, but not quite, to the manual labor level. I'm sure the discussion is lively between the auditors (PwC) who won't sign off on PBRs books (although they had no problems doing so prior while the company was being strip mined) and the State (whose agents stripmined it); and who also are way into damage control mode. As well it should be. These people vaporized something north of $400 million in <5 years. That's hard to hide.
It's much worse than simply Petrobrás, its $330 billion collapse in market capitalization, and its failure to produce enough of anything to begin to pay off what it owes. PBR facilitated the creation of an entity called Sete to build platforms, ships and such for this ultra deep drilling; pouring $billions into it. Sete hasn't accomplished much for the $billions, but it has, in fact, been looted and mismanaged to oblivion. Its activity is essentially frozen at the moment for lack of funding and intrinsic inability to service its colossal debts.
This says nothing to the BNDES, the state development bank, that has been handing out $billions like candy to build badly overpriced (gotta skim the till somehow) overcapacity. Aside from this nonsense it has significant exposure to both PBR and Sete. Writing off $2,5 billion against PBR last week. Sete remains to be digested. And then there are the State pension funds that are pretty far under the bus. It's much messier than anyone outside can imagine. Brasil is fucked for the next decade and that only if they get the morons away from the levers. It's a stretch.
On a positive note perhaps Chinese jurisprudence for corrupt officials can be introduced.
Moar Order and Progress!
Amen, brother....
+100
They blow through the 10 billion US taxpayers "loaned" them already?
Someone check to see if Soros expanded his holdings before this deal went through
Nothing says corruption like an oil company going broke barely 3 months after a huge bull market in oil.
While the UK survives on peasant pay-day wonga, rope a dope loans , China is buying up swathes of land/assets worldwide.
The Chinese are gambling that when the Ponzi blows the nooses will be discriminate.
You cant blame China for wanting the grocerys South America provides.
Next they will want Mexican Avacodos.
The US isn't an Asian Infrastructure Investment Bank member, and Russia is.
And then they claim it's Russia that's isolated?
Well, however dumb you may think these bailouts are,
At least the Chinese are getting into an oil company.
The US ( & Canada ) bailed out General Motors...
and where did that get us???
!
Viva China
&
Gawd Unbless America