Saudi Arabia and China sign strategic deals

Saudi Arabia and China showcased deepening ties with a series of strategic deals on Thursday during a visit by President Xi Jinping, including one with tech giant Huawei, whose growing foray into the Gulf region has raised US security concerns.

King Salman signed a comprehensive strategic partnership agreement with Xi, who received a lavish welcome in a country forging new global partnerships beyond the West.

Xi's car was escorted to the king's palace by members of the Saudi Royal Guard riding Arabian horses and carrying Chinese and Saudi flags.

The Chinese leader held talks with Crown Prince Mohammed bin Salman, de facto ruler of the oil giant, who greeted him with a warm smile. The two stepped into a pavilion as a military band played the countries' national anthems. Xi heralded a new era in Arab ties.

The display stood in stark contrast to the low-key welcome extended in July to US President Joe Biden, with whom ties have been strained by Saudi energy policy and the 2018 murder of Jamal Khashoggi that had overshadowed the awkward visit.

The United States, warily watching China's growing sway and with its ties to Riyadh at a nadir, said on Wednesday Xi's trip was an example of Chinese attempts to exert influence around the world and would not change US policy towards the Middle East.

A memorandum with China's Huawei Technologies, on cloud computing and building high-tech complexes in Saudi cities, was agreed despite US concerns with Gulf allies over a possible security risk in using the Chinese firm's technology. Huawei has participated in building 5G networks in most Gulf states despite US concerns.

Prince Mohammed, with whom Biden bumped fists instead of shaking hands in July, has made a comeback on the world stage following the Khashoggi killing, which cast a pall over Saudi-US ties, and has been defiant in the face of US ire over oil supplies and pressure from Washington to help isolate Russia.

 

In further burnishing of his international credentials, Saudi Arabia and the United Arab Emirates said on Thursday that the prince and the UAE president jointly led mediation efforts that secured the release of US basketball star Brittney Griner in a prisoner swap with Russia.

In an op-ed published in Saudi media, Xi said he was on a pioneering trip to open a new era of China's relations with the Arab world, the Arab countries of the Gulf, and Saudi Arabia.

China and Arab countries would continue to hold high the banner of non-interference in internal affairs, and firmly support each other in safeguarding sovereignty and territorial integrity", he wrote.

Xi, due to meet with other Gulf oil producers and attend a wider gathering of Arab leaders on Friday, said these states were a "treasure trove of energy for the world economy ... and are fertile ground for the development of high-tech industries".

Several regional rulers including Egypt's president, Kuwait's crown prince and Sudan's leader, arrived in Riyadh on Thursday.

Saudi Arabia and other Gulf states like the United Arab Emirates have said that they would not choose sides between global powers and were diversifying partners to serve national economic and security interests.

China, the world's biggest energy consumer, is a major trade partner of Gulf states and bilateral ties have expanded as the region pushes economic diversification, raising US hackles about Chinese involvement in sensitive Gulf infrastructure.

The Saudi energy minister on Wednesday said Riyadh would stay a "trusted and reliable" energy partner for Beijing and the two would boost cooperation in energy supply chains by setting up a regional centre in the kingdom for Chinese factories.

Chinese and Saudi firms also signed 34 deals for investment in green energy, information technology, cloud services, transport, construction and other sectors, state news agency SPA reported. It gave no figures, but had earlier said the two countries would seal initial agreements worth US$30 billion.

Tang Tianbo, Middle East specialist at the China Institutes of Contemporary International Relations (CICIR) - a Chinese government-affiliated think tank - said the visit would result in further expansion of energy cooperation.

 

Tata to produce chip in India

India's Tata Group will begin producing semiconductors in the country within a few years, a move that the chairman of the group's main company said will make the South Asian country a key part of global chip supply chains.

In an interview with Nikkei Asia in Tokyo on Thursday, Tata Sons Chairman Natarajan Chandrasekaran revealed that the conglomerate plans to launch new businesses in emerging fields such as electric vehicles.

"We have created Tata Electronics, under which we are going to set up semiconductor assembly testing business," Chandrasekaran said, referring to an electronic components manufacturer that the group founded in 2020.

"We will have discussions with multiple players," the chairman added, raising the possibility of partnerships with existing chip manufacturers. It is believed to be highly difficult for an inexperienced company to launch a chip making business on its own.

It is thought that semiconductor manufacturers and foundries in the US, Japan, Taiwan and South Korea are potential partners in the project.

Chandrasekaran also said, “Tata will look into the possibility of eventually launching an upstream chip fabrication platform." The upstream semiconductor manufacturing process plant called wafer fabrication plant, or fab, is more challenging both technologically and financially compared with downstream process of assembly and testing. His comments reflect the group's aspiration to enter the market if it is technologically and financially feasible.

Tata's move into chip making will break new ground for India, which has virtually no semiconductor industry, other than software-based design, although demand for semiconductor-intensive products such as smartphones and EVs is growing rapidly.

There is also growing momentum to diversify chip supply chains, which are at present concentrated in East and Southeast Asia, following the global chip shortage and US-China tensions. The ongoing US-China decoupling in chip-related technology is also leading major chipmakers to seek more diversified supply-chain locations, which may well open an opportunity for India to emerge as a frontier location. Tata seems to have decided that this is an opportune time to enter the market.

Chandrasekaran explained that his group has been promoting its future ready strategy, in which existing group companies, from steel to arms, adapt to new challenges, such as digitization and climate change, while also launching new businesses.

As part of that effort, the chairman revealed that the group as a whole plans to invest US$90 billion over the next five years. In addition to semiconductors, the chairman said the company is in the process of starting up new businesses such as the manufacture of EVs and EV batteries, production of renewable energy and development of super apps that allow users to buy goods and services from groceries to financial products.

He also said the group wants to unify the management of Air India, the national flagship airline that it has bought back from the government, and Vistara and AirAsia India, which are also in the group. However, he did not say whether this meant combining their brands, simply stating that it was an issue "up for discussion going forward."

 

Biden Climate Change Obsession Threatens US Security, says Pompeo

Lately, former US Secretary of State, Mike Pompeo said that President Joe Biden’s obsession to decarbonize the United States plays into the hands of adversaries like the Chinese Communist Party (CCP), making them richer and more powerful while imposing costs on Americans and making them less safe.

In an op-ed published on December 05 in the Washington Examiner, Pompeo argued that the Biden administration’s focus on fighting climate change is misguided and will hurt US families while empowering the country’s adversaries.

He took aim at the Inflation Reduction Act, which Biden recently described as the biggest, most important climate bill in the history of our country and which Pompeo said would make life more expensive for American families.

“The statement was telling, Americans were told its purpose was to reduce inflation, but in reality, it was a gas lighting Trojan horse,” Pompeo wrote in the op-ed, referring to Biden’s characterization of the Inflation Reduction Act, which the president made at a recent climate summit in Egypt.

Biden’s description of the measure perfectly encapsulated how climate change and green energy have skewed this administration’s priorities, Pompeo wrote.

When selling the Inflation Reduction Act to the American people, the Biden administration said it was meant to reduce inflation, which has been running close to a 40-year high.

Pompeo argued that in reality, it was a gas lighting Trojan horse meant to conceal the Biden administration’s real priority, which Pompeo said is to fight fossil fuels.

Pompeo also criticized US foreign policy under Biden as being so highly focused on fighting climate change that it diverts attention from the real threats posed by America’s adversaries on the world stage.

“Biden’s obsession to decarbonize America is guaranteed to enrich and empower the Chinese Communist Party,” he argued.

“A sizable portion of the law’s handout will go toward solar energy despite this administration being well aware that Chinese manufacturers dominate 80% of the market for solar panels and that many of them have ties to forced labor in Xinjiang,” he noted as an example.

When Pompeo served as Secretary of State under then President Donald Trump’s administration, he issued a determination that the CCP was guilty of genocide and crimes against humanity over its mistreatment of Uyghurs in Xinjiang.

Chinese officials have denied such allegations.

Congress later passed the Uyghur Forced Labor Prevention Act (UFLPA), which banned the import of goods from Xinjiang and other regions with links to forced labor.

Even though Biden signed the UFLPA into law, Pompeo alleged that the current administration has displayed mixed feelings about enforcing the measure in its bid to win concessions from China on climate change.

John Kerry, the US Special Presidential Envoy for Climate, faced allegations of lobbying against the UFLPA, which his spokesperson denied.

“This is false. Secretary Kerry has a thirty-seven-year record as a Senator and Secretary of State standing up for human rights and defending democracy,” a State Department spokesperson told the Washington Free Beacon.

“As Secretary Kerry has said from the start, the United States and China have mutual interests in solving the climate crisis while there’s still time, even when we fundamentally disagree on other critical issues,” the spokesperson added.

Kerry also sidestepped a question during last year’s COP26 Climate Change Conference, saying the issue was not my lane.

He was responding to a question from a reporter if he had mentioned human rights issues, including forced labor in Xinjiang, in meetings with Chinese officials.

“Well, we’re honest. We’re honest about the differences, and we certainly know what they are and we’ve articulated them, but that’s not my lane here,” Kerry said in November 2021. “My job is to be the climate guy, and stay focused on trying to move the climate agenda forward.”

Pompeo recalled the controversy over Kerry’s remarks and called the climate czar’s comparison of the Biden administration’s climate diplomacy with China to former President Ronald Reagan’s arms reduction talks with the Soviet Union as foolish.

“Reagan was looking to make the world safer, while Biden is enabling genocide in exchange for making energy less affordable and reliable for Americans,” Pompeo said.

“And it is ironic, given the Chinese are building coal-fired power plants at a ridiculous rate and only making the problem worse,” he added.

Pompeo argued that by foolishly prioritizing climate change in its dealings with the CCP over gross human rights abuses, aggressive actions against US allies, and the CCP’s espionage activities in America, the Biden administration has empowered China.

 

Crude oil losing all gains made in 2022

The price of crude oil plunged to its lowest level of the year on Wednesday, losing all of the gains made in 2022. This exhibits drying demand despite sanctions on export of Russian oil and OPEC Plus keeping production at lower levels.

The world's most actively traded commodity surged to nearly US$140 a barrel in March, close to an all-time record, following the launch of what Moscow called a "special operation" in Ukraine.

The market has been steadily declining in the latter months of the year as economists brace for weakened worldwide growth in part due to high energy costs. Wednesday's losses were driven by bigger-than-expected increases in US fuel stocks.

Brent futures fell to US$77.17 a barrel, settling below the year's previous closing low of US$78.98 a barrel touched on the first day of 2022. WTI weakened further from Tuesday's close, which was already a yearly low, to US$72.01 a barrel.

The recent declines have come against what should be a supportive backdrop for prices. China, the world's biggest crude importer, announced the most sweeping changes to its anti-COVID regime since the pandemic began. The country's crude oil imports in November rose 12% from a year earlier to their highest in 10 months.

G7 nations kicked off implementation of a price cap to restrict Russian exports that could cause that nation to reduce output in the coming year.

As against this, US distillate stocks posted a build of 6.2 million barrels, according to the Energy Information Administration, far exceeding estimates for a 2.2 million barrel rise. Gasoline inventories also climbed 5.3 million barrels against expectations for an increase of 2.7 million barrels.

The build in fuel stocks outweighed a 5.2 million barrel draw in crude stocks. The American Petroleum Institute had reported a crude stocks draw of around 6.4 million barrels, according to market sources.

At least 20 oil tankers queuing off Turkey face more delays to cross from Russia's Black Sea ports to the Mediterranean as operators race to adhere to new Turkish insurance rules added ahead of a G7 price cap on Russian oil, sources said on Tuesday.

Russia, the Vedomosti daily reported on Wednesday, is considering options including banning oil sales to some countries to counter the price cap imposed by Western powers.

"There's still tons of uncertainty in the markets today," said Claudio Galimberti, senior vice-president at Rystad Energy, adding crude production in Russia may not drop as much as expected earlier.

Still, warnings from big US banks about a likely recession next year weighed. The net speculative fund long position is now at a six-year low with some prominent funds liquidating in the past few days, said Dennis Kissler, senior vice president of trading at BOK Financial.

 

Iran delivers 2 million barrels oil to Venezuela

An Iranian tanker carrying about two million barrels of ultra-light oil has reportedly arrived in Venezuelan waters this week, Reuters reported on Tuesday.

Venezuela and Iran, both under United States sanctions, have recently expanded cooperation mainly through a swap that provides Venezuela's state-run oil company PDVSA with light oil for refining and diluents to produce exportable crude grades. PDVSA in return supplies Iran with Venezuelan heavy oil and fuel.

The Iran-flagged tanker Dore was seen in satellite images near PDVSA's Jose terminal on Monday, according to Reuters. It was previously seen near Asaluyeh, in the Iranian province of Bushehr, in October.

Dore's transponder was offline in late October after loading the condensate cargo, Refinitiv Eikon vessel monitoring data showed.

In November, two supertankers linked to Iran departed from Venezuelan waters carrying Venezuelan crude and fuel oil for Iran's state firm Naftiran Intertrade Co (NICO), according to internal PDVSA's exports schedules.

Including the cargo onboard the Dore, Iran has provided PDVSA with over 26 million barrels of crude oil and condensate so far this year, according to the internal company documents.

In exchange, Venezuela has so far delivered about the same volume to Iran and it plans to ship a 1.9 million barrel fuel oil cargo onboard another supertanker, the Huge, scheduled to depart from PDVSA's Jose terminal this month, the documents showed.

Iran also is involved in several refining projects in Venezuela aimed at helping PDVSA revive its motor fuel production.

Earlier this month, Iranian Oil Minister Javad Oji discussed the latest developments in the oil market in a phone conversation with his Venezuelan counterpart Tareck El Aissami.

The officials also talked about the development of energy cooperation between the two countries and followed up on the recent agreements reached between the two sides.

 

France: strong sugar prices help Tereos offset high production costs

French sugar group Tereos reported strong first-half results on Tuesday, including a net profit and a sharp rise in earnings, as high sugar and ethanol prices helped offset an increase in production costs.

Tereos, the world's second largest sugar maker by volume, posted a net profit of 133 million euros in the year ended September 30, 2022 as compared to with a year-earlier loss of 50 million euros, helped by higher prices that compensated for a sharp rise in energy and raw materials costs.

Over the same period, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) rose 132% to 464 million euros.

In a presentation to bond holders the group said it expected strong results at its sugar Europe branch to continue in the second half due to higher selling prices reached in its annual fixed-price contracts for B2B sales.

In Brazil, where Tereos is among the largest sugar and ethanol producers, the group should benefit from expected high prices and a higher sugarcane crushing volume, at 17.3 million tons, up from 15.6 million tons in 2021.

Tereos's decision to hibernate a plant in Brazil to maximize its margins amid lower yields led to a fall in daily production capacity but full year 2022/23 output and sales volumes were still expected to rise above 2021/22, it said.

The group's net debt fell 128 million euros from a year earlier and 131 million euros from the end of the first quarter on June 30 to 2.24 billion euros.

However, Tereos expects its net debt at March 31, 2023 to be higher than at March 31, 2022 as higher costs led to a rise in working capital.

Tereos said in October it would raise the price at which it will buy sugar beet from its members by 40% from last year.

The group anticipated its sugar processing season by about a week ahead of possible energy restrictions this winter if Russia cuts off gas supplies.

Tereos did not announce the name of a new managing director following the departure of Ludwig de Mot late September this year, the third chief executive to leave the group in two years. Pending recruitment, Gerard Clay will continue to perform the role in his capacity as Chairman of the Board of Directors, it said.

 

Indian food grain subsidy to surge to US$33 billion this year

Indian spending on subsidized food grain to the poor may rise to 2.7 trillion rupees (US$32.74 billion) this fiscal year, as the government continues to provide support to the poor at least until December 2022, according to a report by Reuters.

Federal government food subsidies will likely increase by 30% over the 2.07 trillion rupees (US$25.14 billion) estimated in the budget.

Increased subsidies on food grain and fertilizer are likely to strain the federal budget, even though the government has seen strong tax collections this year. That could prompt it to cut other expenses to meet the budgeted fiscal gap of 6.4% of gross domestic product (GDP).

As of end November, the Department of Expenditure has already released food grain subsidies worth about 1.5 trillion rupees to the state-run Food Corporation of India and states, according to a government document seen by Reuters.

India’s food grain subsidy bill has jumped sharply since the government announced a scheme in April 2020 to provide free rice or wheat to about 800 million people to reduce the pressure on household incomes from the COVID-19 pandemic.

The scheme has been slated to run from April 2020 to December 2022, leading to a total expenditure of 3.9 trillion rupees (US$47.25 billion).

India's finance ministry has opposed an extension of the measures, citing pressure on government finances.

But the costs could rise further if the government extends the program beyond December 31, 2022 when it is set to end.

If the scheme is extended until March 2023, the cost will shoot up to nearly 3.1 trillion rupees -- the second highest ever, the official added.

India’s food grain subsidy bill totaled 2.9 trillion rupees in 2021/22, when the government’s free food grain distribution scheme was operational throughout the year.

For 2020/21, the government had spent about 5.3 trillion rupees on food grain subsidies but this was partly because it chose to settle past borrowings of the Food Corporation of India.

The Ministry of Finance and the Ministry of Consumer Affairs, Food and Public Distribution did not immediately respond to emailed queries from Reuters.

India's total federal government expenditure is estimated at 39.4 trillion for 2022/23.

The government is also staring at a high fertilizer subsidy bill, over the estimated 1.05 trillion rupees in the budget, as the war in Ukraine has led to a surge in prices.