Iran Blinks, Delays Vote On European Crude Export Halt Even As US Escalates Military Developments Against CountrySubmitted by Tyler Durden on 01/29/2012 14:29 -0400
After it was the west backing down from further unnecessary escalation with Iran two weeks ago, when Israel and the US delayed indefinitely joint naval operations in the Arabian Gulf, it is now Iran's turn to blink. Following reports that Iran would pass a law halting crude exports to European countries, in advance of the full-blown embargo expected to take place some time by June, or as soon as European countries have found alternative supplies, we now learn that "Iran's parliament on Sunday postponed the debate over the bill." This is happening just as nuclear inspectors are arriving in the country "to probe allegations of a secret atomic weapons program." Yet does this mean that Iran has just exposed a major weakness that the West will immediately pounce on? It is still unclear - Reuters reports that "Iran's oil minister said on Sunday the Islamic state would soon stop exporting crude to "some" countries, the state news agency IRNA reported." Naturally the vague, open-endedness of this statement makes it quite clear that it was Iran's turn to de-escalate this time around. Or does this simply mean that Iran has been unable to conclude alternative oil trade arrangements with China, Russia and India just yet?
A brief and comprehensive summary of the main events in the past week, both good and bad.
In what is likely a long overdue move, Iran has finally decided to give Europe a harsh lesson in game theory. Instead of letting Euro-area politicians score brownie points at its expense by threatening to halt imports and cut off the Iranian economy, the Iranian government will instead propose a bill calling for an immediate halt to oil deliveries to Europe. The move, with most reports citing the Iranian news agency Mehr, has come about in response to the EU agreement to impose sanctions against Iran, which were announced earlier this week. And why not? After all if Europe is indeed serious, sooner or later Iran will be cut off but in the meantime experience significant policy uncertainty, which is precisely what the flipflops on the ground need. The one thing that Europe, however is forgetting, is that all that whopping 0.8 Mb/d will simply find a new buyer. And with China, India and Russia already having bilateral agreements with Iran in place, we are confident that said buyer will have a contract signed, sealed and delivered within an hour of the proposed bill's passage. Furthermore, as SocGen speculated, the fact that Europe will be even more bottlenecked in its crude supplies (good luck Saudi Arabia with that imaginary excess capacity), and which just may force the IEA to release some more of that strategic petroleum reserve (and thus give JPM some more free money on the replenishment arbitrage) will send Brent to $125-150 - something which Iran will be delighted by. That is of course unless some "experts" discover that Iran may or may not have a complete arsenal of shark with fricking nuclear warheads attached to their heads (despite what Paneta has already said) which gives the US the green light for a full blown incursion, which in turn will send oil over $200, and the world economy into a global coordinated re-depression.
- Greek Debt Wrangle May Pull Default Trigger (Bloomberg)
- Italy Sells Maximum EU11 Billion of Bills (Bloomberg)
- Romney Demands Gingrich Apology on Immigration (Bloomberg)
- China’s Residential Prices Need to Decline 30%, Lawmaker Says (Bloomberg)
- EU Red-Flags 'Volcker' (WSJ)
- EU Official Sees Bailout-Fund Boost (WSJ)
- EU Delays Bank Bond Writedown Plans Until Fiscal Crisis Abates (Bloomberg)
- Germany Poised to Woo U.K. With Transaction Tax Alternative (Bloomberg)
- Ahmadinejad: Iran Ready to Renew Nuclear Talks (Bloomberg)
- Monti Takes On Italian Bureaucracy in Latest Policy Push to Revamp Economy (Bloomberg)
Riskier assets advanced today, as market participants reacted to yesterday’s FOMC statement, as well as reports that Greece is making progress in talks for a debt-swap deal. However despite a solid performance by EU stocks, German Bunds remain in positive territory on the back of reports that the ECB has ruled out taking voluntary losses on its Greek bond holdings but is now debating how it would handle any forced losses and whether to explore legal options to avoid such a hit according to sources. As such, should talks between private creditors and other governing bodies stall again, there is a risk that Greece may not be able to meet its looming financial obligations. Of note, Portuguese/German government bond yield spreads continued to widen today, especially in the shorter end of the curve.
- BOJ Should Be Allowed $643 Billion Fund to Buy Foreign Bonds, Iwata Says (Bloomberg)
- Banks Hoarding ECB Cash May Double Company Defaults (Bloomberg)
- China Police Open Fire on Tibetans as Protests Spread (Bloomberg)
- Sarkozy Presidential Rival Hollande Would Lower Retirement Age, Lift Taxes (Bloomberg)
- IMF takes tougher stance over Greek debt (FT)
- Iran threatens to act first on EU embargo (FT)
- PM says ‘no complacency’ on economy (FT)
- George Soros: How to pull Italy and Spain back from the edge (FT)
- Japan's NEC to slash 10,000 jobs (Reuters)
- Obama Planning Corporate Tax Overhaul (Bloomberg)
Even American military and intelligence chiefs admit this ...
The advance reading of Q4 UK GDP released today came in at -0.2%, slightly below expectations, however many market participants had feared a worse outcome for the indicator, allowing the GBP to pare the losses made in the lead-up to the GDP announcement. The Bank of England minutes released today have shown that the MPC unanimously agreed to keep the UK rate at 0.5%, and maintain the volume of the APF, however they also revealed that some MPC members saw the need for further QE in the future. Despite higher than expected German IFO Business Climate data this morning, European indices are trading in negative territory, with technology and financial stocks suffering the highest losses. This has seen asset reallocations into safe havens, which has seen Bunds outperform for the morning.
SOTU Post Mortem:
The best news possible: "Nothing will get done this year, or next year, or maybe even the year after that." Barack Hussein Obama
The worst news: Everything else.
Here is the text of President Barack Obama’s State of the Union Address as prepared for delivery at 9 p.m. ET. "Jobs" 33 vs. "Fat Cats" 0, Rich 3 vs Poor 1, Hope 2 vs Unicorns 0, Change 9 vs Tooth-Fairy 0, Mortgages 5 vs Apple 0, Main Street 1 vs Wall Street 3, China 4 vs Europe 1; DEBT CEILING 0
Humans are a flawed species. Our minds are easily manipulated. We don’t like pain. We prefer instant gratification. We are susceptible to mass delusion. We will often choose hope over critical thought. Those with higher IQs will regularly attempt to take advantage of those with lower IQs. Fear and greed are the two motivations used by the minority in power to control and manipulate the majority. The American people have been led astray by a small group of powerful men. We were herded through a door in the wall of perception that promised an American dream of material goods, entitlements and pleasure with no obligations or responsibility to future generations. There is only one choice that can save this country from ruin. Each individual must make a choice to either to continue supporting the manipulative, corrupt status quo or coming back through the Door in the Wall.
“The man who comes back through the Door in the Wall will never be quite the same as the man who went out. He will be wiser but less sure, happier but less self-satisfied, humbler in acknowledging his ignorance yet better equipped to understand the relationship of words to things, of systematic reasoning to the unfathomable mystery which it tries, forever vainly, to comprehend” – Aldous Huxley
Despite German and French Manufacturing and Services PMI data outperforming expectations, European equity indices are trading down at the mid-point of the European session on extended concerns over the still-not-settled Greek PSI agreement. Further downward pressure on German markets came from Siemens’ earnings report earlier this morning, with the company missing their revenue targets and foreseeing a difficult economic environment for them in Q2 of this year. In UK news, despite an unexpected fall in government spending, UK debt has topped the GBP 1tln mark for the first time.
Investors are waiting on the outcome of a 2 day Federal Reserve meeting which ends on Wednesday. Here they are following any signs that interest rates will remain low, as that could put pressure on the U.S. dollar. The Tokyo Commodity Exchange, December, gold contracts climbed as high as 4,167 yen/gram, its biggest gain since mid-December. The gains initially propelled cash gold even though trading was slow during the Lunar New Year break. Japan has been notably absent in the gold market in recent years. This may be changing as concerns about the Japanese economy and continuing debasement of the yen may be leading to Japanese diversification into gold. The scale of domestic savings in Japan remains enormous. This would be a new and potentially extremely important source of demand in the gold market which could help contribute to much higher gold prices.
- Fears Mount That Portugal Will Need a Second Bailout (WSJ)
- EU to Have No Deadline for End of Greek Talks (Bloomberg)
- Japan economy predicted to shrink in 2011 (AFP)
- Japan’s Fiscal Pressure Intensifies as Tax-Boost Plan Insufficent: Economy (Bloomberg)
- Berlin ready to see stronger ‘firewall’ (FT)
- Obama Speech to Embrace U.S. Manufacturing Rebirth, Energy for Job Growth (Bloomberg)
- EU Hits Iran With Oil Ban, Bank Asset Freeze in Bid to Halt Nuclear Plan (Bloomberg)
- China's Oil Imports from Iran Jump (WSJ)
- Croatians vote Yes to join EU (FT)
- Japan’s $130 Billion Fund Unused in Biggest M&A Year in More Than Decade (Bloomberg)
- Buffett Blames Congress for Romney’s 15% Rate (Bloomberg)