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Russian Oil Continues To Flow To India, China

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It has been exactly six weeks since Russia invaded Ukraine, with no end in sight to one of humanity’s biggest existential crises in modern times. In response to Russia’s unprovoked and unjustified war, the United States and the West have hit the rogue nation with a plethora of sanctions, with the latest announced just days ago mostly targeting Russia’s financial sector.
So far, Russia’s pivotal energy sector has largely been spared. With the exception of Lithuania and Poland as well as self-sanctioning by refiners and bankers, no country has yet to announce a ban on Russia’s energy products.
Also, Russian oil and gas exports to the EU remain largely unchanged since only the Baltic States have announced a 100% ban on Russian energy imports. Poland, a major thoroughfare for Russian energy supplies, has also been more proactive than most after it took steps to block Russian coal imports and announced steps to halt Russian oil imports by year-end.
Poland, home to the 1.3mb/d Druzhba pipeline that carries Russian crude to several points in Poland, Germany, and the Czech Republic, directly consumes ~330kb/d of Russian crude and imports 9.4mt of Russian thermal coal in 2020, accounting for ~5% of Russian exports.
The EU currently gets about 40% of its natural gas from Russia, which powers everything from household heating to factory production, and makes up around 25% of the bloc’s total energy consumption.
But that could soon change.
The flow of “bloody money” to Russia must stop, Kyiv’s mayor has said as the West prepares new sanctions on Moscow after dead civilians were found lining the streets of a Ukrainian town seized from Russian invaders.
Since Russian forces withdrew from northern Ukraine, turning their assault on the south and east, grim images from the town of Bucha near Kyiv, including a mass grave and bound bodies of people shot at close range, have prompted international outrage.
Experts are now saying that the atrocities against Ukrainian civilians revealed by the withdrawal of Russian forces from areas north and east of Kyiv have made it very likely that EU countries will impose sanctions on Russian oil in the coming months. In the United States, Treasury secretary Janet Yellen has warned of “enormous economic repercussions” from the Ukraine war.
The million-dollar question right now is how disruptive a total ban on Russian energy commodities will be on Russia’s economy.
Unfortunately, a ban on Russian oil and gas by the U.S. and the EU might not be as damaging to Russia as the west hopes, with the presence of heavily discounted Urals proving too irresistible for some.
India’s Surging Imports From Russia
India has never been a big buyer of Russian crude despite needing to import 80% of its needs. In a typical year, India imports just 2-5% of its crude from Russia, roughly the same proportion as the United States did before it announced a 100% ban on Russian energy commodities. Indeed, India imported only 12 million barrels of Russian crude in 2021, with the majority of its oil coming from Iraq, Saudi Arabia, the United Arab Emirates, and Nigeria.
But reports have now emerged of a “significant uptick” in Russian oil deliveries bound for India.
Matt Smith, the lead oil analyst at Kpler, has told CNBC that since the beginning of March, five cargoes of Russian oil, or about 6 million barrels, have been loaded and are bound for India. In other words, India has imported half as much crude from Russia in one month as it did in an entire year.
And, it could be all about the money.
According to the International Energy Agency (IEA), Urals crude from Russia is being offered at record discounts. Ellen Wald, President of Transversal Consulting, has told CNBC that a couple of commodity trading firms, such as Glencore and Vitol, were offering discounts of $30 and $25 per barrel, respectively, two weeks ago for the Urals blend. Urals is the main blend exported by Russia.
The experts say simple economics is the reason White House pressure to curb purchases of crude oil from Russia have fallen on deaf ears in Delhi.
“Today, the Government of India’s motivations are economic, not political. India will always look for a deal in their oil import strategy. It’s hard not to take a 20% discount on crude when you import 80-85% of your oil, particularly on the heels of the pandemic and global growth slowdown,” Samir N. Kapadia, Head of Trade at Government Relations Consulting firm, Vogel Group, has told CNBC via email.
Still, it will not be lost on many readers that India has maintained a cozy relationship with Russia over the years, with Russia supplying the Asian nation with as much as 60% of its military and defense-related equipment. Russia has also been a key ally on crucial issues such as India’s dispute with China and Pakistan surrounding the territory of Kashmir.
China To The Rescue?
But India might not be the lone pariah helping finance Putin’s illegal war.
Given China’s experience with evading sanctions, you would expect it to be among the first countries lining up to lap up those cheap barrels of Urals. After all, it’s a badly kept secret that Beijing has been using all sorts of clandestine means aka ‘cloaking’ to import cheap Iranian oil ever since it was sanctioned in 2011. China is already Russia’s biggest oil customer, importing an average of 1.72 mb/d in 2021.
However, Reuters has reported that China’s crude imports from Russia in the first two months of the year actually declined 9.1% to 1.57 mb/d.
But this has got little to do with China suddenly acting sanctimonious or moral compunction. Rather, the notable decline has been caused by Beijing’s crackdown on smaller independent refiners aka the teapots.
In a dramatic reversal of fortunes, back in June, Beijing announced huge cutbacks in import quotas for the country’s private oil refiners. According to Reuters, China’s independent refiners were awarded a combined 35.24 million tons in crude oil import quotas in the second batch of quotas this year, a 35% reduction from 53.88 million tons for a similar tranche a year ago.
The big reduction came as part of agovernment crackdown on private Chinese refiners known as teapots, which have become increasingly dominant over the past five years. The move is intended to allow Beijing to more precisely regulate the flow of foreign oil as it doubles down on malpractices such as tax evasion, fuel smuggling, and violations of environmental and emissions rules by independent refiners.
China’s teapots have been steadily grabbing market share from entrenched state players such as China Petroleum and Chemical Corporation(NYSE:SNP), also known as Sinopec, andPetroChina Co. (NYSE:PTR) ever since Beijing partially liberalized its oil industry in 2015. Teapots currently control nearly 30% of China’s crude refining volumes, up from ~10% in 2013.

By: Alex Kimani

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PFAs Invest N155.44bn Pension Funds In Real Estate

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The Pension Funds Administrators (PFAs) have invested N155.44 billion out of the total funds under the Contributory Pension Scheme in real estate properties as of the end of September 2021, data from the National Pension Commission (PenCom) have revealed.
The PenCom data on monthly pension fund portfolio showed that the total funds under management stood at N13tn as of September.
Other investment portfolios where the funds were invested included FGN securities; domestic and foreign ordinary shares; and corporate debt securities, comprising corporate bonds, corporate infrastructure bonds, corprate green bonds and supranational bonds.
The funds were also invested in local money market securities, comprising bank placements, commercial papers and foreign money market securities.
The PFAs invested the rest in mutual funds, comprising open/close-end funds, private equity funds, infrastructure funds, cash and other assets.
Speaking on real estate investment, the Group Managing Director/Chief Executive Officer, CFL Group, Mr Lai Omotola, highlighted the need to invest in real estate.
“Construction remains the fastest way of getting out of recession because of the large value chain to the economy towards creating jobs”, he said.
According to a report by Augusto & Co, a pan-African credit rating agency, the Nigerian pension industry’s net assets are expected to hit the N20tn mark by 2023.
It said in its 2021 insurance industry report that the growth in the pension industry’s managed assets had been largely driven by investment returns and additional contributions, to a lesser extent.
The report said the industry’s annual contributions over the last five years had averaged N699bn while withdrawals had averaged about N341bn, translating to a net annual contribution of N347bn and accounting for 26.6 per cent of the industry’s AuM growth over the period.
It said the remaining 73.4 per cent of average growth was attributable to investment returns earned on the portfolios.

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FG Targets $40bn Investment In Digital Infrastructure By 2025

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The Federal Government says it expects $40bn in private capital investments in digital infrastructure by 2025.
The government disclosed this in its ‘National Development Plan 2021-2025: Volume I.’
It said, “To achieve the goals outlined in the sector, the estimated public investment is N150bn from 2021-2025. Allocations will be made to priority projects in the sector as well as projects essential to the operations of the relevant ministries.
“In addition, the ICT sector is projected to facilitate the formation of up to $1bn in private equity and private capital investments in digital infrastructure of approximately $40bn”.
According to the government, to unleash Nigeria’s potential for industrialisation and sustainable economic growth, it will take measures to digitise the economy and make digitalisation a key driver of national economic development strategies.
It said it would grow the digital economy from 10.68 per cent to 12.54 per cent and improve e-governance by 100 per cent by 2025.
It added that to unleash the nation’s digital economic objective, it would need to improve legal framework of the sector through policy amendment and implementation; drive investment for infrastructural development through public funds and blended financing; prioritise skills development through the promotion of STEM and digital technology education; and drive local and foreign investments.
The government said, “There has been a gradual global transition to a fourth industrial revolution through the diffusion of digital technologies encapsulated in 5G, cybersecurity, artificial intelligence, machine learning, robotics, Internet of Things, computer vision, etc.
“These global trends have created an urgency for Nigeria to improve its digital and technological capacity in order to generate innovations that will enable Nigeria to harness the benefits of digitalisation for economic development and competitiveness.
“For economies to build resilience in a fast-paced, and ever-changing global environment, there is a need for a robust digital, ICT, and R&D ecosystem to drive innovation and continuous adaptability for sustainable economic growth.
“With its teeming, young, and tech-savvy population, and increased investor interest, Nigeria holds the potential to become a leading technological powerhouse and boost productivity across its economic sectors”.

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Fuel Price Increase: NLC Threatens To Shut Down Nigeria

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For the umpteenth time, the Nigeria Labour Congress (NLC) has warned the Federal Government against further increase in the pump price of fuel in the country and called on the Nigerian workers to prepare for total war against the fuel price hike.
The organised labour insisted that workers and masses would not accept any further increase in the pump price of fuel in the name of subsidy removal.
The NLC President, Comrade Ayuba Wabba, gave the warning in a New Year message to workers.
He also named Zamfara, Taraba, Benue, Kogi, Cross River, Abia and Imo states as seven states yet to implement the N30,000 minimum wage that took effect on April 18, 2019.
In the message titled “The Year 2022 Felicitations: Keeping Our Hopes And Aspirations Alive In The New Year”, NLC directed the affected states to commence indefinite strikes to force the respective state governments to implement the new wage.
NLC, in a 9-page statement, said the government was not relenting in its determination to push through further increases in the pump price of petrol in the name of “removal of petrol subsidy”.
It said, “We have told the government in very clear terms that Nigerians have suffered enough and will not endure more punishment by way of further petrol and electricity price increases.
“Our position in this regard is predicated on four major grounds. First is our concern on the deceit and duplicity associated with the politics of ‘petrol price increase’ by successive Nigerian governments. The truth is that the perennial increase by the government in the pump price of petrol is actually a transfer of government failure and inability to effectively govern to the poor masses of our country.
“We are talking of the failure of government to manage Nigeria’s four oil refineries and inability to build new ones more than thirty years after the last petrochemical refinery in Port Harcourt was commissioned; the failure to rein in smuggling; and the failure to determine empirically the quantity of petrol consumed in Nigeria.
“The shame takes a gory dimension with the fact that Nigeria is the only OPEC country that cannot refine her own crude oil.
“During the negotiations that trailed the last increase in petroleum prices, Organized Labour made a cardinal demand on government which is that it must take immediate steps to revamp and rehabilitate Nigeria’s refineries.
“A Technical Committee was set up to monitor progress in this regard. As we all know, the work of the Technical Committee, like our abandoned public refineries, has ground to a halt and further negotiations with the government adjourned sine die for nearly one year now.
“As a responsible social partner, we have at different times called on the government to show us what they are doing in response to our demands but silence is the response we get”.

By: Boye Salau

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