EsadeGeo Daily Digest, 04/11/2019

The Washington Post – Matthew Martin / Why Saudi Aramco’s IPO is no ordinary share sale

  • The company on November 3 confirmed its intention to list shares on the Saudi Arabian stock exchange. The long-delayed IPO is part of Crown Prince Mohammed bin Salman’s grand vision to reshape the kingdom’s economy. It’s no ordinary share sale, and not just because of its size. The original plan was to sell 5% of the company on international and domestic markets. That would have made for an IPO of between $50 billion and $100 billion — far outstripping the world-record $25 billion raised by Alibaba Group Holding Ltd. in New York in 2014. However, the proposal scaled back, and now the plans are to sell around 2%.
  • An international share sale may happen, though it’s fraught with difficulties. New York’s appeal is limited because of a U.S. law allowing victims of terrorism to sue foreign governments linked to attacks, which may lead to litigation against Aramco. Overseas listings also open the company to intense and unprecedented scrutiny. Concerning the timing, it has raised eyebrows. Aramco pumps about 10% of the world’s oil, yet crude prices have fallen 16% in the past 12 months. Accordingly, Saudi Arabia may be taking the view that it’s better to press ahead in case oil prices continue to slide.
  • Aramco makes more money than any other company, but investors may balk if the valuation is set too high, particularly given the political risk. To attract investors, Saudi authorities are reshaping the oil producers’ finances as well as promising bumper dividends. The deal has been marketed extensively to international investors, according to people familiar with the plans, and approaches have been made to potential key investors such as Malaysia’s Petroliam Nasional Bhd., China’s Sinopec Group and China National Petroleum Corp.

Associated Press – Nasser Karimi & Jon Gambrell / Iran spins more centrifuges on US Embassy crisis anniversary

  • Iran on Monday broke further away from its collapsing 2015 nuclear deal with world powers by announcing it’s doubling the number of advanced centrifuges it operates, calling the decision a direct result of President Donald Trump’s withdrawal from the agreement.
  • The announcement — which also included Iran saying it now has a prototype centrifuge that works 50 times faster than those allowed under the deal — came as demonstrators across the country marked the 40th anniversary of the 1979 U.S. Embassy takeover that started a 444-day hostage crisis.
  • As of now, Iran is enriching uranium to 4.5%, in violation of the accord’s limit of 3.67%. Enriched uranium at the 3.67% level is enough for peaceful pursuits but is far below weapons-grade levels of 90%. At the 4.5% level, it is enough to help power Iran’s Bushehr reactor, the country’s only nuclear power plant. 
  • However, this year’s commemoration of the embassy seizure comes as Iran’s regional allies in Iraq and Lebanon face widespread protests. The Iranian Consulate in Karbala, Iraq, a holy city for Shiites, saw a mob attack it overnight. Three protesters were killed during the attack and 19 were wounded, along with seven policemen, Iraqi officials said

The New York Times – Selam Gebrekidan, Matt Apuzzo & Benjamin Novak / The money farmers: how oligarchs and populists milk the E.U. for millions

  • Every year, the 28-country bloc pays out $65 billion in farm subsidies intended to support farmers around Europe and keep rural communities alive. But across Hungary and much of Central and Eastern Europe, the bulk goes to a connected and powerful few. The prime minister of the Czech Republic collected tens of millions of dollars in subsidies just last year. Subsidies have underwritten Mafia-style land grabs in Slovakia and Bulgaria. Europe’s farm program, a system that was instrumental in forming the European Union, is now being exploited by the same antidemocratic forces that threaten the bloc from within.
  • The program is the biggest item in the European Union’s central budget, accounting for 40 percent of expenditures. It’s one of the largest subsidy programs in the world, three times as much as the United States on farm subsidies each year. However, some lawmakers in Brussels who write and vote on farm policy admit they often have no idea where the money goes.  A company formed by the Czech prime minister, Andrej Babis, collected at least $42 million in subsidies last year.
  • The centerpiece of the program is that people get paid based on how much land they farm. The system is supposed to help hard-working farmers and stabilize Europe’s food supply. But in former Soviet bloc countries, where the government owned lots of farmland, leaders like Hungary’s prime minister, Viktor Orban, have auctioned off land to political allies and family members. And the subsidies follow the land.

Reuters – Manoj Kumar / India’s smog-bound capital suffers most hazardous air so far this year

  • Air pollution in New Delhi and surrounding towns reached the worst levels so far this year on Sunday, with authorities in the world’s most polluted capital city having already declared a public health emergency. The air quality index, measuring levels of PM 2.5, tiny particulate matter in the air, deteriorated to above 900, way over the 500-level that qualifies as “severe-plus”. Aside from the harm it was doing to the lungs of some 40 million people living in the capital region, the smog was so bad more than 30 flights were diverted from Delhi airport due to poor visibility.
  • “Wind speed is picking up and it could take 24 to 48 hours before the pollution level reduces to a level of around 500,” Mahesh Palawat, vice president of Skymet, a private weather forecasting agency, said. Anything above 400 on the AQI poses a risk for people with respiratory illness and can also affect even those with healthy lungs.
  • A survey of 17,000 people in the Delhi region found that 40% want to get out of the Delhi region because of the failure to control pollution. On Monday, according to a lawyer, the Supreme Court is likely to hear a petition on Monday from the environment agency, looking for ways to make state governments to take tougher action against farmers to curb the stubble-burning. However, politicians have been reluctant to upset their farming constituencies.

Financial Times – Valerie Hopkins / Balkan leaders warn that EU accession delay risks stoking tensions

  • North Macedonia and Albania face a risk of surging nationalism and unravelling economic reforms after the EU closed the door for years on their hopes of joining the bloc, according to leaders of both countries. Zoran Zaev, prime minister of North Macedonia, stated in an interview that he feared a return to his ethnically divided country’s “bad past”, including a narrowly averted civil war in 2001. Edi Rama, prime minister of Albania, said in a separate interview that his country risked becoming “collateral damage” from the internal European divisions concerning enlargement.
  • The warnings from both Balkan leaders underline analysts’ fears that the EU’s failure to proceed with both countries’ accession process will destabilise a geopolitically unstable union. However, French president Emmanuel Macron in effect blocked opening accession talks with North Macedonia and Albania.
  • Mr Rama and Mr Zaev said they understood the concerns of the EU member states that blocked the negotiations because they want to see reform in the bloc and of its enlargement policies. But they both agreed that any eventual membership was at least a decade off, and that their countries and the EU itself could meanwhile continue their reforms. Judy Dempsey, a non-resident senior fellow at Carnegie Europe based in Berlin, said that the EU’s credibility had been damaged because leaders had been told since 2003 that if they met the EU’s criteria, they would be admitted, and now that at least Skopje had done so, it was being rejected on the grounds that the EU must be reformed first.

The selected pieces do not necessarily reflect the views of Javier Solana and EsadeGeo. The summaries above may include word-for-word excerpts from their respective pieces.

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