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OPEC+ Confronts Biden Strategy



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By Cyril Widdershoven

OPEC+ made clear after their meeting on November 4 that it is not going to bend over under pressure of the US Administration and several other consumer countries to open up the taps. With a very strong statement made by OPEC leader Saudi minister of energy Prince Abdul-Aziz bin Salman the group made clear that it will pursue its current production strategy to confront still fledgling market fundamentals. During its press conference OPEC reiterated that it will be keeping to a rollover of its August program to gradually increase oil production by 400,000 bpd each month.

The oil market, according to OPEC officials, is still not back from its pre-COVID stability, while even that oil prices are hitting record levels not seen since 2014, the overall market is still instable. COVID threats, potential Chinese economic recession threats and other geopolitical considerations are not yet giving enough room to increase substantially supply. At the same time, as the Saudi minister made clear, calls made by consumer countries on OPEC+ to increase production are not a sign of realistic assessments.

As Prince Abdulaziz stated OPEC+ is not a cartel, but mainly a market stabilizing organization, not looking for higher prices but for a stable and transparent market. The latter, according to Abdulaziz, is under severe pressure, as the current energy crunch experienced in mainstream OECD countries, or especially the US and EU, is not caused by OPEC+ policies, but mainly due to internal domestic policy making effects of the respective consumer countries. While quoting his favorite movie-list, Prince Abdulaziz used the phrase of “the tail wagging the dog”, referring to a 1990s Hollywood movie by Dustin Hoffman and Robert De Niro, to address the fact that US President Biden’s attacks on OPEC+ are not going to force a new oil group strategy.

 OPEC+ officials are very clear in their assessments, all look at the US-EU energy crunch as a self-made disaster, due to a mismanagement of internal markets and increased pressure on oil and gas production in these countries. By increasing COP26 and G20 related strategy to counter emissions and push for less investments in hydrocarbons, countries, especially the USA, Canada and others, have been the main reason behind the higher prices and lower supply volumes globally.

The growing constraints on US upstream, especially shale oil and gas, but also by blocking construction of new hard-needed oil and gas pipeline infrastructure, US customers are now paying the price. The same is in place in the European Union, where environmental policies, mismanagement of gas production (Netherlands Groningen Gas field), Green Deal and Nordstream2, have led to an increased energy import dependency. The lack of realism in European and US green policies, not taking into account that intermittency of renewables and lack of backup by oil and gas (storage) has even led to higher usage of coal fired power generation.

OPEC’s main message to consumer countries was to reassess the current policy and strategies put in place to cope and counter with future and current stress factors. As Prince Abdul-Aziz made clear, OPEC+ is not able to manage the market fully, so any referral by other political leaders that it is a cartel is based on fables or total misrepresentation. OPEC also addressed the increased level of challenges put on their plate by an inconsistent and continuously changing political-economic environment, mainly by Western countries. The erratic strategies in place, as shown by leading energy agencies (IEA) or governments (US, EU), have led to an instable investment climate, in which especially privately owned oil and gas companies are not able or willing to invest in hard-needed new production opportunities.

As one of the most poignant examples is the lack of production growth currently witnessed in US shale. The former production capacity is not even touched anymore by investors and operators. Even that global oil and gas prices are hitting record levels, asset owners in the USA seem not anymore interested to increase overall production, but only focused on repaying debt and lowering gearing. The latter is even supported by new policies being presented by the Biden Administration, mainly looking at improving the US global standing at international fora, such as G20 or COP26, implying possible blockage of new hydrocarbon projects etc.

The latter is at present clearly shooting the Washington Administration is its own foot. By keeping oil and gas production down inside of the USA, not only Washington’s fairy tale of “energy independence” is put on ice, but also consumers, aka voters, are looking at higher gasoline and diesel costs. The latter is not caused by OPEC+ policies, but by the US political leaders themselves. If US oil and gas would be producing up to its own capacity, global prices would for sure be much lower than presently is the case. To blame and shame OPEC+ for this situation is a very weak approach. The Saudi energy minister has tried to refrain from a direct confrontation, but his remarks, which have been vividly quoted by journalists yesterday, are painting a clear message, “Biden get first your act together, before additional actions can be discussed”.

While the whole world is looking at OPEC+ to save the day, analysts are slowly changing their attention to Biden’s future strategies. There is a growing believe in the US that the Biden Administration will decide soon to use the Strategic Petroleum Reserve (SPR) to quell price hikes in the USA. The latter, already presented as a potential threat to OPEC, is however not at all a viable approach. Even if the US Administration will take the unprecedented step to use SPR as a market regulating instrument the overall effects will be minimal or even generate the opposite effect. OPEC’s leaders Saudi Arabia and UAE, combined with its non-OPEC compatriot Russia could easily counter the latter.

 If Biden would decide to put 30+ million barrels of SPR crude on US markets, a simple reaction could be to cut OPEC+ production by 1 million bpd for a month. No market disturbance would result, while Biden’s strategy is in shambles. Washington’s current power over oil and gas markets is only in the heads of energy policy advisors roaming lobby offices. Without any doubt, OPEC+ is able to counter any SPR move without feeling pain. The current Biden energy statements are really a sign of weakness. With his continuous threats, even backed by hardline anti-OPEC pundits in Washington, who see an option of a new anti-OPEC cartel bill in the air, the Administration is losing its future negation powers already.

Some even could say, an SPR opening would be supporting OPEC+ power position even. As some tried to address during the OPEC press conference, last oil and gas markets analysis shows that OPEC+ has not even been able to increase its production volumes the last month to the agreed upon 400,000 bpd level extra. Only 140,000 bpd have been put extra in the market, mainly due to technical or other constraints in an ever growing list of OPEC+ member countries. Main increases have been made by the usual suspects Saudi Arabia and other Gulf based producers. African volumes however have been lower in general, constraining overall performance. Some could now argue that some OPEC advisors are hoping for additional production in the US, and maybe even Canada, so that a risky new strong call upon OPEC+ crudes is not necessary. Another 1-2 months of lower than expected production levels being reported by OPEC+ could push analysts to doubt the always quoted excess production capacity in place. The latter, mainly thought to be in the hands of Saudi Arabia, UAE and maybe Kuwait or Russia, could however become doubtful, if a real need occurs due to a mishap or geopolitical crisis.

The next couple of months, OPEC+ could be sailing with a strong wind in its back. As Russian Energy Minister Alexander Novak reiterated during the OPEC+ press conference “the decision was made previously to increase production by 400,000 (barrels per day) every month, and I underscore every month, until the end of 2022”. If the latter is seen as a full OPEC+ statement, no real oil production spike is going to see the light very soon. Novak’s remarks about a very fragile demand globally in place, have been supported by Saudi’s Prince Abdul-Aziz too. Still, the call will be increasing, even if COVID will be a destabilization factor still during the winter.

At the same time, economics are very clear. OPEC+ is not willing to push prices down because of several reasons. The still fragile demand picture is a major supporting factor, but is also being used to have prices stay at a reasonably high price. As the Saudi energy minister reiterated repeatedly, without high price levels the future of oil and gas is very shaky. With a low oil price, investments in existing and future production are crippled. UAE energy minister Suhail Al Mazrouei reiterated that OPEC+ and all consumer nations need to work together to smooth global economic recovery from COVID. Al Mazrouei also said that the current 400,000 bpd increase will ensure a smooth sailing, as a rebalancing of market fundamentals is being supported.

All OPEC members, but especially Prince Abdul-Aziz bin Salman, also have pointed to the unrealistic picture being painted by the USA, UK, EU and even Asian countries. The current energy crisis is painted as an oil crisis, while reality is different. Natural gas and coal price levels have increased exponentially more than the global crude oil benchmark Brent. Abdul-Aziz even showed a graph to the media, on which the price increased of natural gas (EU +394%), LNG (Asia 400+ %) and coal (EU +109%) showed a very bleak price increase, while Brent only increased during the same period by 28%. In a main attack of US-EU statements, the Saudi minister said that it is clear that regulation and management of natural gas, coal and LNG markets needs to improve, taking advice from the OPEC+ supply regulating position. Al Mazrouei said that if “you look at the gas market, you look at the coal, the lack of having a governor of the market makes it so difficult for the consuming nations when it comes to a huge increase in the commodity prices”. As the Abu Dhabi energy minister indicated also “we haven’t seen that happening to oil in the same magnitude because of this group.” His Saudi counterpart made it clear by stating ‘oil is not the problem…What is the problem is the energy complex is going through havoc and hell.”

The OPEC+ press conference will have put oil on the fire already burning in the minds of Washington backers. In a first reaction, the White House accused again OPEC of imperiling the global economic recovery by refusing to speed up oil production increases. Biden clearly is looking for a way to get his message not only to OPEC+ but also back home to his own constituency. The US president is looking to be back on the international stage, especially after that he led the charge at the UN climate change conference for the world to cut back on fossil fuels. Still, OPEC leaders don’t seem to be impressed by an Administration that is out of touch with reality, and is threatening ‘to use all tools” to bring down fuel prices. In a reaction to the Financial Times (FT) Jennifer Granholm, the US energy secretary, already indicated last month that a release of oil from the country’s strategic stockpiles was among “tools” the Biden administration.  At present this is not a sharp Yakuza sword, but looks more like a blunt kitchen knife. The other utensils available in the kitchen of Biden are still unknown, but maybe they could be better be used to cut a Turkey for Thanksgiving or Christmas than to be used in a geopolitical power contest with Saudi Arabia, Russia and the UAE. Until the next OPEC meeting on December 2, we will be hearing a lot of political threats and knives being sharpened. Blood at present is not on the wall, except maybe from the foot of Biden as it seems he has been shooting his own foot.

***A possible rabbit out of the Biden’s Hat could however be a dramatically U-turn on Iran. A possible much more ‘forgiving’ approach towards the ultra-conservative Raisi regime offering a full JCPOA agreement could push the market to instability, as Iranian oil would become available. Still, the latter will not save the current winter or 2022 even, as most will be hitting markets later.

Courtesy: NEWSLETTER ON LINKEDIN; MENA Geopolitics Watcher

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Inquiry on General Babangida’s Involvement in Conventional Banking despite Introduction of Islamic Finance in Nigeria




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Dear Editor,

I hope this letter finds you well. I am writing to express my curiosity and seek clarification on a matter that has caught my attention, specifically pertaining to General Babangida’s involvement in the conventional banking industry despite his role in introducing Islamic finance during the financial reforms of his military government in Nigeria. Vide your special article commemorating his 81st Birthday published in your esteemed news website:

It is indeed noteworthy that General Ibrahim Babangida played a pivotal role in shaping the economic landscape of Nigeria by introducing Islamic finance principles. It is fascinating to witness the implementation of Islamic finance in Nigeria, as it promotes principles that align with religious and ethical values. General Babangida’s efforts to introduce this form of finance were undoubtedly commendable, reflecting his commitment to establishing an alternative financial system that adheres to Islamic principles.

However, recent observations suggest his active participation in the conventional banking sector in Nigeria. Certainly, it is intriguing to see General Babangida’s continued involvement in the conventional banking industry, which operates under different principles. While some may argue that his involvement in both sectors is simply a matter of personal choice, it raises questions about the compatibility of his actions with the ideals and principles of Islamic finance. While the former is interest driven, the latter prohibits interest related transactions completely.

I wonder if General Babangida has ever publicly addressed this matter or explained his reasoning behind being active in both sectors. It would be enlightening to hear his perspective on how he reconciles his involvement in conventional banking with his efforts towards promoting Islamic finance. This has raised questions in my mind and perhaps in the minds of others as well.

I am keen to understand the rationale behind General Babangida’s dual engagement in both Islamic finance and conventional banking. Does this reflect a strategic approach to diversify Nigeria’s financial sector, or are there specific reasons behind his involvement in conventional banking despite advocating for Islamic finance principles?

Additionally, it would be interesting to explore the potential impact of his dual involvement on the perception and growth of Islamic finance in Nigeria. Does his presence in the conventional banking industry hinder the progress of Islamic finance, or does it have the potential to bridge the gap between the two sectors?

I believe that delving into these questions could provide valuable insights and generate constructive discussions within the Islamic finance community in Nigeria. By shedding light on General Babangida’s dual involvement and the potential implications, we can further enhance our understanding of the challenges and opportunities faced by the Islamic economy in our country.

Thank you for considering my questions, and I look forward to reading more about this topic in your esteemed Focus on Islamic Economy.



Abba Musa Mamman Lagos


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10 Megatrends Shaping the World in 2024




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The report, “Navigating Megatrends Shaping Our Future in 2024”, was launched during the first day of the World Governments Summit (WGS) 2024, being held under the theme “Shaping Future Governments” from 12th-14th February in Dubai. The report examines the indicators that shape these megatrends, supported by evidence from today as well as future expectations. These trends inform decision-makers and foresight experts about various sectors and the potential opportunities in each.

Khalfan Belhoul, CEO of Dubai Future Foundation, said, “This report has been launched in line with DFF’s efforts to identify and communicate those trends with the most potential to shape opportunities and strengthen local and international partnerships to overcome current and future challenges.”

“The challenges that face us on our journey to the future require that we are agile enough to be able to adapt to rapid change. It is vital we pay attention to the signals we detect – only then can we be prepared to overcome challenges and seize opportunities. The World Governments Summit provides a platform for discussing these challenges and exploring the opportunities.”

Materials revolution

New types of materials will create a shift in the industry, with solutions based on artificial intelligence (AI) such as biopolymers, biorefineries, and chemical recycling paving the way. These solutions will facilitate the development of new biological and novel materials that could rival plastics.

Boundless Multidimensional Data

Enabled by developments such as 5G and 6G in addition to advanced connectivity, the availability of raw data will vastly increase. The Internet of Things (IoT) will continue being deployed in healthcare, agriculture, and smart cities, especially in the Middle East.

Technological Vulnerabilities

The cybersecurity sector will boom amid a sharp rise in smart home devices and wearable tech. According to a report by Allianz, the annual cost of ransomware is projected to reach around $265 billion by 2031. Meanwhile, the debate on the future of decentralised finance will continue.

Energy Boundaries

Advances in tech and the growing demand for energy will drive the pursuit of alternative sources of energy. Novel materials and machine intelligence will enhance current sources of energy, including their distribution around the world – and in space.

Saving Ecosystems

Approaches to conservation will be more interdisciplinary and future-focused, taking into account both societal and environmental factors. Driven by resource scarcity, climate change, and shifts in social values, environmental impact management will become increasingly holistic.

Borderless World – Fluid Economies

The world is witnessing a rise in unmediated transactions in finance, health, education, trade, services, and even space, which are blurring boundaries and creating more cross-border communities. Advances in communications, computing, and advanced machine intelligence will accelerate the creation of a borderless world that will change the way we work, live, and connect.

Digital Realities

The spread of 5G and 6G networks will enhance the applications of autonomous technologies and IoT. As quantum technologies become scalable and reliable, immersive experiences will become even more realistic.

Living with Autonomous Robots and Automation

Robotics and automation will increasingly be deployed across industries beyond automotive, manufacturing and supply chain logistics. This will provide opportunities for efficiency and innovation, although there will also be ethical challenges to address.

Future Humanity

New workplace norms will emerge, with people needing to adapt to non-traditional skill sets in areas such as digital literacy, communications, culture and sustainability.

Advanced Health and Nutrition

Accelerated progress in advanced machine intelligence, nano- and biotechnology, additive manufacturing, and IoT will transform health and nutrition, improving health and wellbeing for people of all ages. Technology will reduce, if not eradicate, some communicable and non-communicable diseases and enhance the sustainable use of and access to water and food.

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Africa’s New Online Foreign Exchange System will Enable Cross-border Payments in Local Currencies – what you need to know




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The high cost of making cross border payments on the African continent has driven governments on the continent to seek options of settling trade and other transactions in local currencies. This has given birth to the Pan-African Payment and Settlement System which was formally launched in Accra, Ghana, in January 2022.  Development economist Christopher Adam, who has studied the exchange rate policies of African countries, answers some key questions.

Why are African countries exposed in the international currency market?

Three main reasons. First, African economies are small and as such are highly dependent on trade with the rest of the world. Their exports are dominated by primary commodities including oil and gas, minerals and cash crop agriculture. On the import side, they purchase a whole range of goods – from essential commodities not produced at home such as fooddrugs and medicines, to capital goods and energy. A large proportion of these are sourced from China and other major economies of the global north. But because African countries are small relative to their trading partners they rarely have the power to determine the prices of imports and exports. They are “price takers” in world markets. And with world prices being set in the major reserve currencies of the world (the US dollar, euro, yen and renminbi), African countries are exposed to movements in these world prices. Second, “intra-African” trade is still a relatively small proportion of the total trade of African countries.

Finally, since African countries’ currencies mostly can’t be directly exchanged in international transactions, the dollar remains the most widely used currency in trade, even between African countries.

What’s required for the system to get off the ground?

The basic idea of the system is to be able to settle trade between African countries without having to use the US dollar.  There are two major challenges with that. First, intra-African trade accounts for less than 15% of Africa’s exports at present (although supporters of the African Continental Free Trade Area expect this to grow significantly over the coming decades). The African payment system therefore does not eliminate the role of the dollar (or other foreign currencies) in trade settlement entirely.

The second issue is that trade is not balanced between African countries. For example, Kenya exports goods of higher total value to Ethiopia than it imports from Ethiopia. If Ethiopia paid in its own currency, Kenya would end up with Ethiopian currency that it didn’t need. Some form of settlement currency that is acceptable to all is required – most likely the US dollar.

What are the challenges and potential risks?

Since trade rarely occurs instantaneously, some institution in the trade financing chain carries the exchange rate risk. Because of the gap between placing an order for imports and receiving them to sell in the local economy, there is a risk that the value of local currency will change relative to the currency in which the import is denominated.

In the “old” system, this risk is borne by the trader because everything is priced in dollars. The local currency value of the income from exports or the local currency cost of imports will change with movements between the local currency and the dollar, but the banks and those counterparts pricing in the dollar are protected.

Under the new system the same allocation of risk will remain in “external trade”. This currency risk is also present for intra-African trade.

An important question for the new African payment system is: who bears the exchange risk if one African currency depreciates relative to another? Should the importer carry the risk, or the exporter? Can and should the African payment system bear this risk of exchange rate movements itself? Where both currencies are volatile, traders might still prefer the relative stability of settlement through the US dollar.

The success of this system also depends on scale. The more trade settlement is routed through it, the easier it will be to settle in local currencies. Large currency imbalances will be less common. But until the system achieves this scale, the African payment system will need a strong balance sheet so that traders and participants can have confidence that settlement will be swift and risk free. It is unclear at the moment how this is to be achieved.

What is the best case scenario?

If the system can address the trade imbalance problem, provide clarity on risk management and reach scale, it could be very successful. But this is all going to be driven by underlying economic performance. Improved settlement will help but what is really driving this is the structure of trade. The more the economies of Africa can develop intra-African trade and the less dependent they are on extra-African trade, the less will be dollar dependence in trade. This growth in trade depends to some degree on trade settlement and trade financing but much more on production, consumption, trade policy and fiscal policy.

Christopher Adam is a Professor of Development Economics, University of Oxford

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