Over the weekend, China unveiled its newest foreign policy initiative: the Asian Infrastructure Investment Bank (AIIB) a multilateral development bank headed by Beijing to provide financing for Asian projects. The AIIB is a clear rival to Western-headed development banks such as the IMF, the World Bank, and the Asian Development Bank, which are all popularly regarded as dominated by Western developed countries like the United States and Eurozone. The opening of the bank’s doors for applications for the position of Prospective Founding Member has seen a major breaking of ranks for staunch Western allies like Australia, Japan, Great Britain, and even Canada.
The bank will ostensibly allow for the development of projects under the “New Silk Road Economic Belt” policy, which will channel foreign and domestic capital towards developing neighbors and regional partners of China, including several oil and gas exporters in Central Asia. The New Silk Road Economic Belt policy, according to Xinhua, will work “perfectly in tandem” with the nascent AIIB.
Russia also chomped at the bit to be one of the prospective founding members, as part of a larger strategy to pivot to Asia in light of European sanctions and its ongoing conflict in Ukraine. The United States, however, has spent the past few weeks trying to convince allies to decline joining the bank, citing the need for assurances that the development it finances will meet global standards of environmental and labor conditions.
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- Some 70% of Uzbek citizens turned out for presidential elections, according to official data released from Uzbekistan’s Central Election Commission. Elections are only considered valid in Uzbekistan if 33% of the country participates in them. While 5 candidates are part of the election, the campaigns have all attracted international attention due to their absurd message, which consists of reaffirming support for incumbent and current President Islam Karimov.
- Rio Tinto’s CEO Sam Walsh has issued a statement on the second largest mining company’s ongoing battle with the Mongolian government on the Oyu Tolgoi copper mine: there only remains a few deal-breaker issues to clinch a new agreement. Walsh insisted that Rio Tinto is still committed to the $4.5 billion project which has become mired in negotiations and contract violations related to taxes and cost overruns. When Oyu Tolgoi is finally up and running, it will, according to conservative estimates contribute to roughly a third of Mongolia’s overall economic capacity.
- Benchmark prices of oil and futures contracts have declined on optimism and uncertainty on the Iran deal. Fears that sanctions being lifted will allow for an influx of Iranian crude in an already oversupplied market have pushed down the price and caused speculators to hedge against a suspected decline of up to $5-6 as early as next week. OPEC’s decision last November (precipitated primarily by Saudi Arabia) to not cut supply has created a harsh market for potential Iranian exporters.
- The Iranian negotiators have backed away from a critical element of the deal – refusing to ship their atomic fuel out of the country. Previously, Iran had tentatively agreed to send the majority of its uranium to Russia, where any weapons grade material would be utilized for future military projects. Abbas Araqchi made the announcement to reporters and while US negotiators insisted this was not necessarily a deal-breaker (suggesting that the fissile material could be mixed into more stable fuel-grade material), and has lent more credence to fears of Western observers who oppose the deal due to fears of Iranian non-compliance.
- Despite more trouble on the horizon for oil prices amid optimism and uncertainty on the Iran nuclear, deal, the rouble has surged to its 2015 high. Admittedly, this is not saying much considering its 40% year-on-year depreciation against the dollar, but it does show that the currency has at last decoupled from dollar-denominated oil prices. The rouble rally rose in response to monthly tax payments reflecting a rule requiring exporters to convert their foreign currency earnings into roubles. This is in sharp contrast to the trends of late last year, when the rouble’s value roughly correlated with the decline in benchmark oil prices.