Aurelia Butler

Iraqi officials in Baghdad and their counterparts in the Kurdistan Regional Government have reached a preliminary agreement to resume oil exports from the country’s north, with a final agreement expected “within days”. The announcement by both governments on Sunday comes just over a week after Iraq said it had won a landmark arbitration case against Turkey over independent Kurdish oil exports, which the federal government in Baghdad has long considered illegal. The tribunal’s decision halted the flow of Iraqi crude to Turkey’s Ceyhan port. The temporary stoppage accounted for about 0.5 per cent of global oil supply, according to data from Citigroup and the IEA. The supply cut helped spark a rally in oil prices last week, sending international benchmark Brent rising to almost $80 a barrel.Several foreign oil companies said they had paused or slowed operations in Kurdistan in the wake of the tribunal decision.“Following several meetings between the KRG and federal government, an initial agreement has been reached to resume oil exports through Ceyhan this week,” Lawk Ghafuri, head of foreign media affairs for the KRG tweeted. Sources familiar with the discussions in Baghdad and Erbil, the capital of the semi-autonomous Kurdistan region, said that while the principal points had been agreed, some of the finer details were still being negotiated. Iraq is Opec’s second-largest producer, exporting about 3.3mn barrels of crude a day. Of those, Baghdad sends 75,000 b/d to Ceyhan from Kirkuk. The KRG does not publish its production figures but industry experts estimate it at about 440,000 b/d, most of which it exports.Iraq as a whole accounted for 27 per cent of Turkey’s imports of oil and other petroleum products in December 2022, behind only Russia, according to the most recent data from the Turkish Energy Market Regulatory Authority. Oil exports have been an economic lifeline for Iraq’s Kurdistan region. For years, the KRG exploited ambiguity in Iraq’s constitution to export crude and keep the revenues as a way of maintaining some financial independence from Baghdad. The agreement will see northern exports jointly managed by the KRG’s natural resources ministry and Iraq’s State Organization for Marketing of Oil, people from both governments who were familiar with the negotiations said. Bassem al-Awadi, spokesman for the federal government in Baghdad, said the KRG had agreed to form a committee to negotiate with SOMO over oil sales from the Kurdistan region, provided the oil was sold at a price set by SOMO. Industry experts say the KRG has historically sold its oil to traders at a significant discount.Revenues from those exports will be “received by the KRG into an account that the federal government will observe”, a source in the KRG said. That account would sit in Iraq’s central bank or in a bank “accredited by” the federal monetary authority, Awadi said, adding that the KRG president would have the authority to access those funds.The resumption of pipeline flows from the Kurdistan region and from Kirkuk’s oilfields, controlled by Baghdad, will still need approval from Turkey. Turkey’s energy minister Fatih Dönmez this week disputed Iraq’s statement regarding the outcome of the tribunal, saying that his country had several of its claims against Iraq accepted in the arbitration. Dönmez said lawyers were still negotiating on the final settlement amount. The Turkish energy ministry did not immediately comment on Sunday. More

This article is the latest part of the FT’s Financial Literacy and Inclusion CampaignThe number of people who feel ‘locked out’ of the financial system shot up by 40 per cent last year as lenders reined in their risk appetite amid a cost of living crisis, new data from peer-to-peer lending platform Plend shows. The research, supported by Nationwide Building Society, Fair4All, Step Change Debt Charity and Plend, is the largest financial inclusion survey in the UK with 4,500 participants, weighted to be nationally representative for age, gender and region. This year’s survey found that 28 per cent of people now feel locked out of the UK’s financial services market, up from 20 per cent when the inaugural research was done last year. The percentage who feel financially excluded rises to 45 per cent for black and ethnic minority groups.“As the current cost of living crisis has deepened . . . the issue of financial exclusion has without a doubt intensified, only exacerbating the poverty premium; the deeply unfair paradox that sees those who are least able to afford it paying the highest prices for goods and services,” said Yvonne Fovargue, MP and chair of the all-party parliament group on debt and personal finance. “It is imperative that we address the underlying issues that have led to this precarious situation,” she added. “Mainstream financial institutions” needed to honour their responsibility to “serve all members of society” she said, pointing to the need for a wider initiative to “address the flawed credit reference system, which continues to hold people back”.Some 40 per cent of those surveyed by Plend had loan applications rejected in the last 24 months. That figure rises to 54 per cent for black and ethnic minority applicants. Just over a fifth of interviewees were not confident they could access a loan or credit card tomorrow, while a third said they found it more difficult to access loans or credit cards since the start of the cost of living crisis. “Access to affordable credit is vital for an individual’s financial stability and mental wellbeing, however, this report exposes that large sections of the UK population are repeatedly being let down,” said Robert Pasco, Plend’s CEO. The Bank of England last week said there was “some evidence” of major UK banks “tightening their lending standards” as the economy worsened, a trend that makes it harder for people to get loans because they are judged to be at higher risk of default. Almost 60 per cent of black and minority ethnic interviewees said they had borrowed money from family, friends or through finance products, because of the cost of living crisis, and almost half of all interviewees said the cost of living crisis would not stop impacting them until at least 2024. More

Canada’s natural resources minister has warned the US against waging a “carbon subsidy war” with its allies, saying the Biden administration’s $369bn clean energy package creates an “unlevel playing field” in global trade.Jonathan Wilkinson, a senior member of Justin Trudeau’s Liberal government, said Canada and Europe were seeking to “match” the US Inflation Reduction Act and its colossal handouts for clean energy developers, but acknowledged that they would struggle to compete. The IRA’s “very significant subsidies had created an unlevel playing field for the Europeans and for Canada”, Wilkinson said in interview with the Financial Times.“We don’t want to get into a subsidy war with the Americans and neither do the Europeans and Japanese.“The Americans are the reserve currency of the world — they have the fiscal latitude to do things that I think almost no other country in the world can do,” Wilkinson added.The comments from a senior figure in the Trudeau government echo criticism in Europe, where the scale of the IRA’s handouts has triggered fears of capital flight across the Atlantic. French president Emmanuel Macron has warned that the IRA could “fragment the west”.In response to the IRA, Brussels has unveiled a host of new tax breaks and funding for clean energy developers, although like Canada the EU has made pricing carbon a cornerstone of its climate policy.On Tuesday, Trudeau’s federal government unveiled a new budget that included C$18bn ($13bn) worth of tax breaks for green electricity and other cleantech — on top of billions more committed in recent years — with finance minister Chrystia Freeland saying Canada must not be “left behind as the world’s democracies build the clean economy of the 21st century”. Wilkinson spoke with the FT just days after President Joe Biden visited Ottawa and talked up Canada’s “large quantities of critical minerals that are essential for our clean energy future”. The president also noted that the IRA “explicitly includes tax credits for electric vehicles assembled in Canada”. The US has sought to soothe allies’ concerns about the IRA in recent weeks, with energy secretary Jennifer Granholm telling the FT in a recent interview that the Biden administration “[doesn’t] want to see any trade rivalry” over the IRA and was working to resolve disputes “in a way that lifts all”. On Friday, the Biden administration also widened the scope of eligibility for IRA tax credits for EV batteries, a move designed to ease anxiety among US allies. During Biden’s visit to Ottawa, the US and Canada had discussed the “need for us to be working together . . . and not turning this into some kind of carbon subsidy war”, Wilkinson said. But Washington’s effort to use the IRA to reindustrialise the US must not damage allies, Wilkinson suggested. “It needs to be friend-shoring, not just one country winning.”Canada, already the largest foreign supplier of oil to the US from the world’s third-largest oil deposit, also has abundant reserves of critical minerals — such as lithium, nickel, cobalt, copper and rare earth elements — that it believes will support a lucrative battery supply chain in the country. Oil “is not the growth opportunity for this country on a go-forward basis in the way that critical minerals are going to be”, Wilkinson said. Wilkinson indicated that Canada would continue to take a more conciliatory approach to China than that of the Biden administration, which is seeking to end US dependence on cheap Chinese cleantech materials such as solar modules. “You don’t want to be dependent on countries that don’t share your values,” Wilkinson said, saying Russia’s invasion of Ukraine had shown the “destabilising effect” of relying on energy supplies from authoritarian regimes. Canada had already denied Chinese state-controlled entities access to its critical minerals mining sector, he said. “But that doesn’t mean we’re not going to buy solar panels from China. It doesn’t mean we’re not going to buy wind turbines from China.” More

Financial authorities should strengthen supervision of financial institutions’ date accuracy to prevent risks, the article said, saying if any enlightment should be drawn from the Silican Valley Bank crisis.    China should also let the insurance deposit system play its full role, allowing the mechanism to deal with problematic banks in a swift and orderly manner, so as to effectively prevent systematic risks, said the authors, who are from PBOC’s Financial Stability Bureau and the Deposit Insurance Corp. China’s commercial banks as a whole are sound and stable, the article said. The authors said China should consolidate the capital reserves for dealing with financial risks to ensure that there are sufficient resources to dispose risks in a timely manner. More

Will the pace of US hiring slow? Hiring in the US is forecast to have slowed in March following two months of strong gains that have helped make the case for the Federal Reserve to keep interest rates high, even in the midst of turmoil in the banking sector. The labour department is expected to report on Friday that the US added 240,000 jobs in March, according to economists polled by Reuters, down from the 311,000 jobs added in February and less than half the 517,000 added in January. The unemployment rate is expected to be steady at 3.6 per cent, while average hourly earnings are expected to be up 0.3 per cent month on month, a tick up from the rate in February.The data will be a crucial part of the Fed’s deliberations when it next meets, in May. Odds in the futures market are split on whether the US central bank will raise interest rates one more time, or whether the 0.25 per cent increase in March was the last in its hiking cycle. While market expectations for another raise had been tempered by the US banking system’s woes, those fears have begun to recede and evidence of persistent inflation may spur the Fed to tighten further. Kate DuguidWill the Antipodeans signal the end for global rate rises? Global investors are looking to interest rate decisions in Australia and New Zealand this week for a potential indication of just how quickly central banks might end the current regime of rapid rate rises.Investor expectations of continued tightening by central banks, including the US Federal Reserve, have waned in the wake of recent banking sector ructions. Markets are now suggesting more than one rate cut by some nations before the end of this year.Economists polled by Bloomberg expect the Reserve Bank of Australia to hold its cash rate steady at 3.6 per cent on Tuesday after repeatedly boosting the benchmark over the past 12 months from a starting point of just 0.1 per cent.Josh Williamson, chief Australia economist at Citigroup, said that if the RBA did keep rates on hold, “we expect the policy statement to keep optionality around possible further increases, at least until the details of the [consumer price index] show moderation in items where prices are a function of domestic demand”.But he added it was “highly unlikely the RBA would loosen financial conditions with the labour market operating ahead of full employment and with households sitting on substantial savings buffers”.The rates decision from the Reserve Bank of New Zealand on Wednesday could also act as a spoiler for those looking for an imminent end to global rate rises. Economists expect the RBNZ to raise rates at least once more, by 0.25 percentage points, to 5 per cent. Hudson LockettHow resilient is German industrial production?German industrial production is expected to have expanded in February, continuing the strong rebound registered in January.Economists polled by Reuters are forecasting growth of 0.4 per cent between January and February after rising 3.5 per cent in the previous month.January’s big rebound has raised expectations “that industry may continue to hold up well in the face of the energy crisis”, said Franziska Palmas, senior Europe economist at Capital Economics. In January manufacturing output was only 1.6 per cent below its level just before Russia’s invasion of Ukraine, “a fairly good outcome considering the severity of the energy crisis”, said Palmas. She estimated that if industrial production remained at January levels in February and March, it would rise by 1.9 per cent in the first quarter as a whole. The figures would confirm that German production is rebounding from the plunge at the end of 2022, which contributed to the country’s economic contraction, boosted by lower gas prices and the easing of supply chain disruption. Industrial orders in the eurozone’s manufacturing powerhouse, released on Wednesday, are also expected to show a 0.5 per cent expansion in February following 1 per cent growth in the previous month.Industrial production data for France and Spain, also published this week, will indicate how broad-based the expected resilience of the eurozone manufacturing sector is.Sylvain Broyer, economist at the rating agency S&P Global, thinks that the current order levels across eurozone factories suggest that they still have five months of assured production. “Alongside lower prices for industrial and energy commodities, this should ensure industrial production remains steady until the summer,” he said. Valentina Romei More