Tag Archives: RESASS

London’s High Court rules against Venezuela’s Maduro in $1 bln gold battle

Venezuela’s President Nicolas Maduro looks on during a meeting with Alejandro Dominguez, president of the South American Football Confederation CONMEBOL, at the Miraflores Palace, in Caracas, Venezuela July 11, 2022. REUTERS/Leonardo Fernandez Viloria

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LONDON, July 29 (Reuters) – London’s High Court has rejected President Nicolas Maduro’s latest efforts to gain control of more than $1 billion of Venezuela’s gold reserves stored in the Bank of England’s underground vaults in London.

The court ruled on Friday that previous decisions by the Maduro-backed Venezuelan Supreme Court, aimed at reducing opposition leader Juan Guaido’s say over the gold, should be disregarded.

It marked the latest victory for Guaido, who has won a series of legal clashes over the bullion after the British government recognised him rather than Maduro as the South American country’s president.

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“I have … concluded that the Guaido Board succeeds: that the STJ (Venezuelan supreme court) judgements are not capable of being recognised,” the judge in the case said.

The Maduro and Guaido camps have each appointed a different board to the Central Bank of Venezuela (BCV) and the two have issued conflicting instructions concerning the gold reserves.

Lawyers for the Maduro-backed BCV board said the central bank was considering an appeal after Friday’s ruling, while Guiado, who has seen some international support falter over the last 18 months, called it an important victory.

The Maduro-backed BCV board said in a statement it rejected the court’s ruling and reserved “all legal action at its disposal to appeal this unusual and disastrous” decision.

Shortly after, the vice president and finance minister Delcy Rodriguez said on state television that “the damage caused to our people is serious” and that the court “has to rectify.”

Maduro’s legal team has said he would like to sell some of the 31 tonnes of gold to finance Venezuela’s response to the pandemic and bolster a health system gutted by years of economic crisis.

Guaido’s opposition has alleged that Maduro’s cash-strapped administration wants to use the money to pay off his foreign allies, which his lawyers deny.

“This decision represents another step in the process of protecting Venezuela’s international gold reserves and preserving them for the Venezuelan people,” Guaido said in a statement.

“This type of honest and transparent judicial process does not exist in Venezuela.”

The British government in early 2019 joined dozens of nations in backing Guaido, after he declared an interim presidency and denounced Maduro for rigging 2018 elections.

Guaido at that time asked the Bank of England to prevent Maduro’s government from accessing the gold. Maduro’s central bank then sued the Bank of England to recover control, saying it was depriving the BCV of funds needed to finance Venezuela’s coronavirus response.

Legal experts have said the latest case has been unprecedented as it has seen one of a country’s highest courts interpreting the constitution of another.

“This is an unfortunate ruling,” said Sarosh Zaiwalla at Zaiwalla & Co, which represented the Maduro-backed central bank, adding it would continue to pursue the case despite Friday’s decision.

“The BCV remains concerned that the cumulative effect of the judgments of the English Court appears to accord a simple statement by the UK Government recognising as a head of state a person with no effective control or power over any part of that state,” Zaiwalla added.

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Reporting by Marc Jones; Editing by Michael Holden, Catherine Evans, Barbara Lewis and Daniel Wallis

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Oil prices tumble more than $2 ahead of potential large U.S. rate hike

Pump jacks pump oil at an oil field on the shores of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. REUTERS/Grigory Dukor

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LONDON, July 14 (Reuters) – Oil prices fell more than $2 on Thursday as investors focused on the prospect of a large U.S. rate hike later this month that could stem inflation but at the same time hit oil demand.

Brent crude futures for September were down $2.14 to $97.43 a barrel at 1038 GMT after settling below $100 for a second straight session on Wednesday.

U.S. West Texas Intermediate crude for August delivery was at $93.78 a barrel, down $2.52.

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Oil prices have tumbled in the past two weeks on recession concerns despite a drop in crude and refined products exports from Russia amid Western sanctions and supply disruption in Libya. read more

“Clearly, focus is now on the demand side of the oil equation. Yesterday’s weekly EIA (U.S. Energy Information Administration) report showed sizeable builds in product inventories,” Tamas Varga, analyst at PVM Oil Associates, said.

“Collateral damage of growing fears of inflation is the strong dollar, which is also bearish for oil prices. Interestingly, physical markets are still strong but the change in sentiment of financial investors is currently the dominant driving force.”

The U.S. Federal Reserve is seen ramping up its battle with 40-year high inflation with a supersized 100 basis points rate hike this month after a grim inflation report showed price pressures accelerating. The Fed policy meeting is schedule for July 26-27. read more

The Fed rate hike is expected to follow a similar surprise move by the Bank of Canada on Wednesday.

Investors also flocked to the dollar, often seen as a safe haven asset. The dollar index hit a 20-year high on Wednesday, which makes oil purchases more expensive for non-U.S. buyers.

In Europe, signals were also bearish for demand with the European Commission cutting its economic growth forecast and raising the expected inflation rate to 7.6%. read more

Worries of COVID-19 curbs in multiple Chinese cities to rein in new cases of a highly infectious subvariant have also kept a lid on oil prices.

China’s daily crude oil imports in June sank to their lowest since July 2018, as refiners anticipated lockdown measures to curb demand, customs data showed on Wednesday.

Data from the U.S. Energy Information Administration also point to slackening demand, with product supplied slumping to 18.7 million barrels per day, the lowest since June 2021. Crude inventories rose, bolstered by another big release from strategic reserves. read more

U.S. President Joe Biden will on Friday fly to Saudi Arabia, where he will attend a summit of Gulf allies and call for them to pump more oil.

However, spare capacity at the Organization of the Petroleum Exporting Countries is running low, with most of the producers pumping at maximum capacity, and it is unclear how much extra Saudi Arabia can bring into the market quickly.

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Reporting by Julia Payne in London Additional reporting by Florence Tan in Singapore; editing by Kirsten Donovan and Jason Neely

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Sri Lanka protest sites calm as president’s resignation awaited

  • President Rajapaksa on way to Singapore from Maldives-source
  • Sri Lanka interim president imposes curfew in Colombo
  • Protesters to hand back president, prime minister’s residences

COLOMBO, July 14 (Reuters) – Sri Lanka’s main city, Colombo, was calm on Thursday as people waited for the resignation of President Gotabaya Rajapaksa, who fled to the Maldives to escape a popular uprising that erupted as the country struggled with an economic crisis.

Rajapaksa was on his way to Singapore from the Maldives on Thursday, a Sri Lankan government source said. His decision on Wednesday to make his ally Prime Minister Ranil Wickremesinghe the acting president triggered more protests, with demonstrators storming parliament and the premier’s office demanding that he quit too. read more

Rajapaksa had repeatedly assured the speaker of parliament that he would step down on Wednesday, but his resignation letter had not arrived as of Thursday, said an aide to Speaker Mahinda Yapa Abeywardena.

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The speaker could seek the advice of the attorney general on the next steps if the letter did not come by the end of the day, said the aide, who did not want to be named given the sensitivity of the matter.

Inside the president’s residence, ordinary Sri Lankans wandered the halls, taking in the building’s extensive art collection, luxury cars and swimming pool.

“The fight is not over,” said Terance Rodrigo, a 26-year-old student who said he has been inside the compound since it was taken over by protesters on Saturday along with the prime minister’s official residence.

“We have to make society better than this. The government is not solving people’s problems.”

The usual protest sites, however, were calm and organisers said they would hand the residences back to the government.

“With the president out of the country … holding the captured places holds no symbolic value any more,” Chameera Dedduwage, one of the organisers, told Reuters.

Wickremesinghe, nevertheless, imposed a curfew in Colombo from noon (0630 GMT) to early morning on Friday in a bid to prevent further unrest.

Protests against the economic crisis have simmered for months and came to a head last weekend when hundreds of thousands of people took over government buildings in Colombo, blaming the powerful Rajapaksa family and allies for runaway inflation, shortages of basic goods and corruption.

HOSPITALISATIONS OVERNIGHT

Police said one person was killed and 84 injured in clashes between riot police and protesters on Wednesday near the parliament building and the prime minister’s office, as people demanded the ouster of both Rajapaksa and Wickremesinghe.

Police spokesman Nalin Thalduwa said the man who died was a 26-year-old protester who succumbed after he was injured near the prime minister’s office.

The area around parliament was deserted on Thursday morning. Police manned a barricade on the approach road. Nearby, life returned to normal, with shops open and plenty of cars on the road.

The night before, an intersection there was packed with several hundred protesters and ambulances regularly ferried the injured out of the area.

“We want Ranil to go home,” Malik Perera, a 29-year-old rickshaw driver who said he took part in the protests, said on Thursday. “They have sold the country, we want a good person to take over, until then we won’t stop.”

Sitting in a park opposite the entrance to parliament, he showed bruising on his back that he said he received during the clashes.

Rajapaksa, his wife and two bodyguards left the main international airport near Colombo on an air force plane early on Wednesday. Maldives media said he was now waiting to fly to Singapore.

Government sources and aides said the president’s brothers, former president and prime minister Mahinda Rajapaksa and former finance minister Basil Rajapaksa, were still in Sri Lanka.

Sri Lanka’s parliament is expected to name a new full-time president on July 20, and a top ruling party source told Reuters Wickremesinghe was the party’s first choice, although no decision had been taken. The opposition’s choice is their main leader Sajith Premadasa, the son of a former president.

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Additional reporting by Sudarshan Varadhan and Waruna Karunatilake; Writing by Krishna N. Das; Editing by Raju Gopalakrishnan

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Sri Lankan president flees to Maldives, protesters storm prime minister’s office

  • President Rajapaksa flees hours before planned resignation
  • Protesters demand ouster of Prime Minister Ranil Wickremesinghe
  • Wickremesinghe declares emergency, rolls back soon after

COLOMBO, July 13 (Reuters) – Sri Lankan President Gotabaya Rajapaksa fled to the Maldives on Wednesday,bringing to an apparent end his family’s near two-decade dominance of the country after a massive popular uprising brought on by an economic collapse.

But his decision to leave his ally Prime Minister Ranil Wickremesinghe in charge as acting president triggered more demonstrations, with protesters storming the premier’s office demanding that he go too.

Wickremesinghe’s office initially declared a state of emergency and a curfew with immediate effect, then cancelled them but said the measures would be announced again later.

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Reuters Graphics

Police stationed outside the prime minister’s office fired several rounds of tear gas and a military helicopter briefly circled overhead, but protesters appeared undeterred and finally surged into the compound. Wickremesinghe’s team declined to reveal his whereabouts.

“It feels pretty marvellous, people were trying to take this place for about three hours,” said college student Sanchuka Kavinda, 25, standing next to a mangled, open gate of the prime minister’s office. “No matter what, everyone in this crowd will be here until Ranil also steps down.”

In a statement, Wickremesinghe said the protesters “have no reason to storm the prime minister’s office”.

“They want to stop the parliamentary process. But we must respect the Constitution. So security forces have advised me to impose an emergency and a curfew. I’m working to do that.”

On the lower floor of the two-storied, whitewashed colonial-era building, dozens of protesters gathered to sing Sinhala pop songs. In a nearby air-conditioned room, sat a large group of security personnel armed with assault rifles.

Protest organisers and security personnel manned a central wooden staircase at the heart of the building, guiding sightseers to and from the upper floor where the prime minister’s room is located.

At an adjoining room on the top floor, where Reuters interviewed Wickremesinghe a few weeks ago, the plush furniture had been hastily pushed to the corners and a line of armed security personnel ushered visitors through.

Sri Lanka has been run by the powerful Rajapaksa family for the better part of the last two decades. Gotabaya Rajapaksa was elected as the country’s president in November 2019.

NEW LEADER DUE NEXT WEEK

Parliament is expected to name a new full-time president next week, and a top ruling party source told Reuters Wickremesinghe was the party’s first choice, although no decision had been taken.

An attempt by Wickremesinghe to cling on would infuriate the protesters who say he is a close ally of the Rajapaksa family, which has dominated the country since Rajapaksa’s older brother Mahinda became president in 2005.

“An MP with one seat is appointed as PM. Now the same person is appointed as acting President,” the opposition presidential nominee, Sajith Premadasa, said on Twitter. “This is the Rajapaksa style of democracy. What a farce. What a tragedy.”

The president, his wife and two bodyguards left the main international airport near Colombo aboard an air force plane early on Wednesday, the air force said in a statement.

The parliament speaker, Mahinda Yapa Abeywardena, said Rajapaksa had phoned him and told him his resignation letter would arrive later on Wednesday.

A government source and a person close to Rajapaksa said he was in Male, the capital of the Maldives. The president would most likely proceed to another Asian country from there, the government source said.

ECONOMIC CRISIS

Protests against the economic crisis have simmered for months and came to a head last weekend when hundreds of thousands of people took over key government buildings in Colombo, blaming the Rajapaksas and their allies for runaway inflation, shortages and corruption. read more

Government sources and aides said the president’s brothers, former president and prime minister Mahinda Rajapaksa and former finance minister Basil Rajapaksa, were still in Sri Lanka.

Wickremesinghe, whose private residence in Colombo was set ablaze on Saturday, had offered to resign as prime minister but did not repeat that offer after he became acting president on Wednesday. If he does go, the speaker would be acting president until a new president is elected on July 20 as scheduled.

Amid the economic and political chaos, Sri Lanka’s sovereign bond prices hit fresh record lows on Wednesday.

The U.S. Embassy in Colombo, which is in the central district of the city, said it was cancelling consular services for the afternoon and for Thursday as a precautionary measure.

The island nation’s tourism-dependent economy was hammered first by the COVID-19 pandemic and then a fall in remittances from overseas Sri Lankans. A ban on chemical fertilisers hit output although the ban was later reversed. read more

The Rajapaksas implemented populist tax cuts in 2019 that hurt government finances, while shrinking foreign reserves curtailed imports of fuel, food and medicines.

Petrol has been severely rationed and long lines have formed in front of shops selling cooking gas. Headline inflation hit 54.6% last month and the central bank has warned that it could rise to 70% in coming months.

Mahinda Rajapaksa, president from 2005-2015 and later prime minister under his brother, resigned in May after protests against the family turned violent. He remained in hiding at a military base in the east of the country for some days before returning to Colombo.

On Tuesday, Sri Lankan immigration officials prevented Basil Rajapaksa, who quit in April as finance minister, from flying out of the country. read more

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Additional reporting by Kanishka Singh and Alasdair Pal; Writing by Raju Gopalakrishnan and Krishna N. Das; Editing by Sam Holmes, Shri Navaratnam and Kim Coghill

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China Q1 GDP tops forecast, but March weakness sharply raises outlook risks

  • China Q1 GDP +4.8% y/y, risks to outlook rise sharply
  • March activity indicators already show growing stress
  • Retail sales contract 3.5% in March, vs -1.6% in poll
  • March nationwide jobless rate highest since May 2020
  • Industrial output, investment beat forecasts

BEIJING, April 18 (Reuters) – China’s economy slowed in March as consumption, real estate and exports were hit hard, taking the shine off faster-than-expected first-quarter growth numbers and worsening an outlook already weakened by COVID-19 curbs and the Ukraine war.

The biggest near-term challenge for Beijing is the tough new coronavirus rules at a time of heightened geopolitical risks, which have intensified supply and commodity cost pressures, boosting global inflation and forcing Chinese authorities to walk a tight rope as they try to stimulate growth without endangering price stability.

Gross domestic product (GDP) expanded by 4.8% in the first quarter from a year earlier, data from the National Bureau of Statistics showed on Monday, beating analysts’ expectations for a 4.4% gain and picking up from 4.0% in the fourth quarter.

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A surprisingly strong start in the first two months of the year improved the headline figures, with GDP up 1.3% in January-March in quarter-on-quarter terms, compared with expectations for a 0.6% rise and a revised 1.5% gain in the previous quarter.

Analysts say April data will likely be worse, with lockdowns in commercial centre Shanghai and elsewhere dragging on, prompting some to warn of rising recession risks. read more

“Further impacts from lockdowns are imminent, not only because there has been a delay in the delivery of daily necessities, but also because they add uncertainty to services and factory operations that have already impacted the labour market,” said Iris Pang, Greater China chief economist at ING.

“Support from fiscal and monetary policy has not been enough to fully offset the damage to GDP created by the lockdowns. We may need to revise our GDP forecasts further if fiscal support does not come in time.”

WORSENING RETAIL SALES, JOBLESS RATE

Data on March activity showed retail sales contracting the most on an annual basis since April 2020 on widespread COVID curbs across the country. They fell 3.5%, worse than expectations for a 1.6% decrease and an increase of 6.7% in January-February.

The job market is already showing signs of stress in March, a usually robust month for labour market as factories resume hiring after the Lunar New Year holiday. China’s nationwide survey-based jobless rate stood at 5.8% in March, the highest since May 2020, while that in 31 major cities hit a record 6.0%.

The industrial sector held up better with production expanding 5.0% from a year earlier, compared with forecasts for 4.5% gain. That was still down from a 7.5% increase seen in the first two months of the year.

Fixed asset investment, a driver of growth that Beijing is counting on to underpin the economy, increased 9.3% year-on-year in the first quarter, compared with an expected 8.5% increase but down from 12.2% growth in the first two months.

Home sales by value in March slumped 26.2% year-on-year, the biggest drop since January-February 2020, according to Reuters calculations, pointing to a deepening downturn in the property market.

COVID-19 CURBS HITTING HARD

The government’s determination to stop the spread of record COVID-19 cases has clogged highways and ports, stranded workers and shut countless factories – disruptions that are rippling through global supply chains for goods ranging from electric vehicles to iPhones.

“The government faces a dilemma: how to balance economic growth and containing the outbreaks. Locking down large cities like Shanghai is highly costly. Such costs will become more visible in coming months,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

The contribution from net exports to GDP growth reduced to 3.7% in the first quarter from 26.4% in the fourth, underlining the loss of momentum in a key growth driver.

Fu Linghui, a NBS spokesman, acknowledged the rising downward economic pressures.

“We will step up the implementation of macro policies, make every effort to stabilise the economic fundamentals, and strive to achieve the targets and tasks for the year,” Fu told a press conference.

Late on Friday, the People’s Bank of China announced it would cut the amount of cash that banks must hold as reserves for the first time this year, releasing about 530 billion yuan ($83.25 billion) in long-term liquidity, although the size of the cut missed expectations. read more

The government has unveiled more fiscal stimulus this year, including stepping up local bond issuance to fund infrastructure projects, and cutting taxes for businesses.

Some analysts expect more easing, such as cuts to banks’ RRRs and benchmark lending rates, to shore up growth as the current economic growth is still way below the target of around 5.5% set by Beijing last month.

Julian Evans-Pritchard, senior China economist at Capital Economics, believe officials are taking a restrained approach to stimulus, noting the smaller-sized RRR reduction and lack of policy rate cuts.

“The upshot is that China’s economic performance is likely to remain lacklustre in the near-term.”

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Reporting by Kevin Yao, Stella Qiu and Ellen Zhang
Editing by Shri Navaratnam

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Pakistan’s Prime Minister Imran Khan ousted in no-confidence vote

ISLAMABAD, April 10 (Reuters) – Pakistan’s Prime Minister Imran Khan was ousted on Sunday when he lost a vote of confidence in parliament, after being deserted by coalition partners who blame him for a crumbling economy and failure to deliver on his campaign promises.

The result of the vote, the culmination of a 13-hour session that included repeated delays, was announced just before 0100 (2000 GMT on Saturday) by the presiding speaker of parliament’s lower house, Ayaz Sadiq.

Khan, 69 was ousted after 3-1/2 years as the leader of the nuclear-armed country of 220 million where the military has ruled for nearly half its nearly 75-year history.

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The late-night vote followed multiple adjournments in the chamber, called due to lengthy speeches by member’s of Khan’s party, who said there was a U.S. conspiracy to oust the cricket star-turned-politician.

Opposition parties were able to secure 174 votes in the 342-member house in support of the no-confidence motion, Sadiq said, making it a majority vote.

“Consequently the motion against Prime Minister Imran Khan has been passed,” he said to the thumping of desks.

There were just a few legislators of Khan’s ruling party present for the vote.

The house voted after the country’s powerful army chief General Qamar Javed Bajwa met Khan, said two sources who spoke on condition of anonymity, as criticism mounted over the delay in the parliamentary process.

Parliament will meet on Monday to elect a new prime minister.

Opposition leader Shehbaz Sharif, the front-runner to lead Pakistan, said Khan’s ouster was the chance for a new beginning.

“A new dawn has started… This alliance will rebuild Pakistan,” Sharif, 70, said in parliament.

Sharif, the younger brother of three-time prime minister Nawaz Sharif, has a reputation as an effective administrator. read more

Elections are not due until August 2023. However, the opposition has said it wants early elections, but only after it delivered a political defeat to Khan and passes legislation it says is required to ensure the next polls are free and fair.

Khan surged to power in 2018 with the military’s support, but recently lost his parliamentary majority when allies quit his coalition government. There were also signs he had lost the military’s support, analysts said.

Opposition parties say he has failed to revive an economy battered by COVID-19 or fulfil promises to make Pakistan a corruption-free, prosperous nation respected on the world stage.

His ouster extends Pakistan’s unenviable record for political instability: has completed their full term since independence from Britain in 1947, although Khan is the first to be removed through a no-confidence vote. (GRAPHIC: https://tmsnrt.rs/3JsJaU2)

Khan’s allies blocked the no-confidence motion last week and dissolved parliament’s lower house, prompting the country’s Supreme Court to intervene and allow the vote to go through.

Khan earlier accused the United States of backing moves to oust him because he had visited Moscow for talks with President Vladimir Putin just after Russia launched its invasion of Ukraine on Feb. 24. Washington rejected the charge.

Muhammad Ali Khan, a legislator from Khan’s party, said the prime minister had fought till the end and would return to lead parliament in the future.

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Reporting by Asif Shahzad, Syed Raza Hassan and Gibran Naiyyar Peshimam in Islamabad; Writing by Sanjeev Miglani; Editing by William Mallard, Jan Harvey and Jonathan Oatis

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EXCLUSIVE Sri Lanka to seek $3 billion to stave off crisis

  • Seeks further $500 mln from India for fuel
  • Government’s top priority is ensuring supply of essentials
  • To raise taxes and fuel prices within six months

COLOMBO, April 9 (Reuters) – Sri Lanka will need about $3 billion in external assistance in the next six months to help restore supplies of essential items including fuel and medicine, its finance minister told Reuters on Saturday.

The island nation of 22 million people has been hit by prolonged power cuts and shortages which have drawn protesters out on to the streets and put President Gotabaya Rajapaksa under mounting pressure.

“It’s a Herculean task,” Finance Minister Ali Sabry said in his first interview since taking office this week, referring to finding $3 billion in bridge financing as the country readies for negotiations with the International Monetary Fund (IMF) this month.

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The country will look to restructure international sovereign bonds and seek a moratorium on payments, and is confident it can negotiate with bondholders over a $1 billion payment due in July.

“The entire effort is not to go for a hard default,” Sabry said. “We understand the consequences of a hard default.”

J.P. Morgan analysts estimated this week that Sri Lanka’s gross debt servicing would amount to $7 billion this year, with a current account deficit of around $3 billion.

The country has $12.55 billion in outstanding international sovereign bonds, central bank data showed, and foreign reserves of $1.93 billion at the end of March.

“The first priority is to see that we get back to the normal supply channel in terms of fuel, gas, drugs… and thereby electricity so that the people’s uprising can be addressed,” Sabry said.

‘SENSE OF CONFIDENCE’

Anti-government protests have raged across the island for days, with at least one turning violent in the commercial capital of Colombo, in a threat to the country’s lucrative tourism industry.

“We respect your right to protest, but no violence, because it is counterproductive,” Sabry said.

“Our tourism, which was beautifully coming back in February with 140,000 tourists coming in, has been severely affected ever since the demonstrations.”

On Sunday thousands of protesters gathered near the president’s seafront office in Colombo, making it one of the biggest shows of public outrage in recent days.

A large contingent of police and at least one water cannon stood deployed near the site where several protesters held the country’s national flag.

The protesters included dozens of Muslims who sat in the middle of a blockaded road to break their Ramadan fast and others who urged the president to step down with shouts of “Gota (Gotabaya) go home”.

Sabry said he will lead a delegation of Sri Lankan officials to Washington to start talks with the IMF on April 18 and that financial and legal advisers would be selected within 21 days to help the government restructure its international debt.

“Once we go to them, first thing is there is a sense of confidence in the entire international monetary community that we are serious,” he said. “We are transparent, we are willing to engage.”

On Friday, a new central bank governor raised interest rates by an unprecedented 700 basis points in a bid to tame rocketing inflation and stabilise the economy. read more

Sri Lankan authorities will also reach out to rating agencies, Sabry said, as the country looks to regain access to international financial markets after being locked out due to multiple ratings downgrades since 2020.

Sabry said the government will raise taxes and fuel prices within six months and seek to reform loss-making state-owned enterprises.

These measures were among key recommendations in an IMF review of Sri Lanka’s economy released in early March.

“These are very unpopular measures, but these are things we need to do for the country to come out of this,” Sabry said. “The choice is do you do that or do you go down the drain permanently?”

‘FRIEND OF ALL’

Sri Lanka will seek another $500 million credit line from India for fuel, which would suffice for about five weeks, Sabry said.

The government would also look for support from the Asian Development Bank, the World Bank and bilateral partners including China, the United States, Britain and countries in the Middle East.

“We know where we are, and the only thing is to fight back,” Sabry said, looking relaxed in a blue T-shirt and jeans. “We have no choice.”

Discussions are ongoing with China on a $1.5 billion credit line, a syndicated loan of up to $1 billion and a request from Sri Lanka’s president in January to restructure some debt.

“Hopefully we will be able to get some relief which would help …until larger infusions come in,” Sabry said.

Beijing and New Delhi have long jostled for influence over the island off India’s southern tip, with the country pulling closer to China under the powerful Rajapaksa family.

But in recent weeks, as the economic crisis deepened, Sri Lanka has leaned heavily on assistance from India.

“We are a neutral country. We are a friend of all,” said Sabry, a lawyer who previously served as Sri Lanka’s justice minister. “So we think that goodwill will come in handy at this point in time.”

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Reporting by Devjyot Ghoshal and Uditha Jayasinghe in Colombo; editing by William Mallard and Jason Neely

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Russia to pay Eurobonds in roubles as long as reserves remain blocked

A view shows Russian rouble coins in this illustration picture taken March 25, 2021. REUTERS/Maxim Shemetov/Illustration/File Photo

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LONDON, April 6 (Reuters) – Russia edged closer to a potential default on its international debt on Wednesday as it paid dollar bondholders in roubles and said it would continue to do so as long as its foreign exchange reserves are blocked by sanctions.

The United States on Monday stopped Russia from paying holders of its sovereign debt more than $600 million from reserves held at U.S. banks, saying Moscow had to choose between draining its dollar reserves and default. read more

Russia has not defaulted on its external debt since reneging on payments due after the 1917 Bolshevik Revolution.

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“This speeds up the timeline around when Russia runs out of space on willingness and ability to pay,” one fund manager holding one of the bonds due for payment on Monday said.

The Kremlin said it would continue to pay its dues.

“Russia has all necessary resources to service its debts… If this blockade continues and payments aimed for servicing debts are blocked, it (future payment) could be made in roubles,” Kremlin spokesman Dmitry Peskov said.

With a total of 15 international bonds with a face value of around $40 billion outstanding, Moscow has managed to make a number of foreign exchange coupon payments on its Eurobonds before the United States stopped such transactions. read more

Russia’s finance ministry said on Wednesday it had to pay roubles to holders of its dollar-denominated Eurobonds maturing in 2022 and 2042 as a foreign bank had refused to process an order to pay $649 million to holders of its sovereign debt.

The finance ministry said the foreign bank, which it did not name, rejected Russia’s order to pay coupons on the two bonds and also did not process payment of a Eurobond maturing in 2022.

Russia’s ability to fulfil its debt obligations is in focus after sweeping sanctions in response to what Moscow calls “a special military operation” in Ukraine have frozen nearly half of its reserves and limited access to global payment systems.

‘ARTIFICIAL SITUATION’

JP Morgan, which had been processing payments on Russian sovereign bonds as a correspondent bank, was stopped by the U.S. Treasury from doing for the two payments due on Monday, a source familiar with the situation said. read more

JP Morgan (JPM.N) declined to comment.

Russia may consider allowing foreign holders of its 2022 and 2042 Eurobonds to convert rouble payments into foreign currencies once access to its forex accounts is restored, the finance ministry said.

Until then, a rouble equivalent of Eurobond payments aimed at bondholders from so-called unfriendly nations will be kept in special ‘C’ type accounts at Russia’s National Settlement Depository, the ministry added.

Russia has a 30-day grace period to make the dollar payment, but if the cash does not show up in bondholders account within that time frame it would constitute a default, global rating agencies have said.

Russia dismissed this as being a default situation.

“In theory, a default situation could be created but this would be a purely artificial situation,” Peskov said. “There are no grounds for a real default.”

Bondholders had been tracking bond payments since sweeping sanctions and counter measures from Moscow which have severed Russia from the global financial system.

Russia on Wednesday paid coupons on four OFZ treasury rouble bonds. These were once popular for their high yields among foreign investors, who are now blocked from receiving payments as a result of sanctions and Russian retaliation.

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Reporting by Reuters; Editing by Mark Potter, Hugh Lawson and Alexander Smith

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U.S. stops Russian bond payments in bid to raise pressure on Moscow

FILE PHOTO: A view shows a Russian rouble coin and a U.S. dollar banknote in this picture illustration taken October 26, 2018. REUTERS/Maxim Shemetov/File Photo

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NEW YORK/WASHINGTON, April 5 (Reuters) – The United States stopped the Russian government on Monday from paying holders of its sovereign debt more than $600 million from reserves held at U.S. banks, in a move meant to ratchet up pressure on Moscow and eat into its holdings of dollars.

Under sanctions put in place after Russia invaded Ukraine on Feb. 24, foreign currency reserves held by the Russian central bank at U.S. financial institutions were frozen.

But the Treasury Department had been allowing the Russian government to use those funds to make coupon payments on dollar-denominated sovereign debt on a case-by-case basis.

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On Monday, as the largest of the payments came due, including a $552.4 million principal payment on a maturing bond, the U.S. government decided to cut off Moscow’s access to the frozen funds, according to a U.S. Treasury spokesperson.

An $84 million coupon payment was also due on Monday on a 2042 sovereign dollar bond .

The move was meant to force Moscow to make the difficult decision of whether it would use dollars that it has access to for payments on its debt or for other purposes, including supporting its war effort, the spokesperson said.

Russia faces a historic default if it chooses to not do so.

“Russia must choose between draining remaining valuable dollar reserves or new revenue coming in, or default,” the spokesperson said.

JPMorgan Chase & Co (JPM.N), which had been processing payments as a correspondent bank so far, was stopped by the Treasury, a source familiar with the matter said.

The correspondent bank processes the coupon payments from Russia, sending them to the payment agent to distribute to overseas bondholders.

The country has a 30-day grace period to make the payment, the source said.

DEFAULT WORRIES

Russia does have the wherewithal to pay from reserves, since sanctions have frozen roughly half of some $640 billion in Russia’s gold and foreign currency reserves.

But a drawdown would add pressure just as the United States and Europe are planning new sanctions this week to punish Moscow over civilian killings in Ukraine. read more

Russia calls its actions in Ukraine a “special military operation”. Ukraine and the West say the invasion was illegal and unjustified. Images of a mass grave and the bound bodies of people shot at close range drew an international outcry on Monday. read more

Russia, which has a total of 15 international bonds outstanding with a face value of around $40 billion, has managed to avoid defaulting on its international debt despite unprecedented Western sanctions. But the task is getting harder. read more

“What they’re basically tying to do is force their hand and put even more pressure on (to deplete) foreign-currency reserves back home,” said David Wolber, a sanctions lawyer at Gibson Dunn in Hong Kong.

“If they have to do that, obviously that takes away from Russia’s ability to use those dollars for other activities, in essence to fund the war.”

It may also put pressure on Russian demands to be paid roubles for gas by European customers, he added.

Russia was last allowed to make a $447 million coupon payment on a 2030 sovereign dollar bond, due last Thursday, which was at least the fifth such payment since the war began.

If Russia fails to make any of its upcoming bond payments within their pre-defined timeframes, or pays in roubles where dollars, euros or another currency is specified, it will constitute a default. read more

While Russia is not able to access international borrowing markets due to sanctions, a default would prohibit it from accessing those markets until creditors are fully repaid and any legal cases stemming from the default are settled. read more

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Reporting by Megan Davies and Alexandra Alper. Additional reporting by Tom Westbrook; editing by Himani Sarkar and Jason Neely

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Four weeks of war scar Russia’s economy

Russian Rouble coin is seen on a broken glass and displayed on the Russian flag in this illustration taken, February 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

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LONDON, March 25 (Reuters) – Russia’s invasion of Ukraine on Feb. 24 sparked sweeping sanctions that ripped the country out of the global financial fabric and sent its economy reeling.

A month on, Russia’s currency has lost a large part of its value and its bonds and stocks have been ejected from indexes. Its people are experiencing economic pain that is likely to last for years to come.

Below are five charts showing how the past month has changed Russia’s economy and its global standing:

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ECONOMIC PAIN

In 2020, Russia was the world’s 11th-largest economy, according to the World Bank. But by the end of this year, it may rank no higher than No. 15, based on the end-February rouble exchange rate, according to Jim O’Neill, the former Goldman Sachs economist who coined the BRIC acronym to describe the four big emerging economies Brazil, Russia, India and China.

Recession looks inevitable. Economists polled by the central bank predicted an 8% contraction this year and for inflation to reach 20%. read more

Forecasts from economists outside Russia are even gloomier. The Institute of International Finance predicts a 15% contraction in 2022, followed by a 3% contraction in 2023.

“Altogether, our projections mean that current developments are set to wipe out the economic gains of roughly fifteen years,” the IIF said in a note.

IIF on Russia GDP

INFLATION BUSTING TURNS TO DUST

Since taking office in 2013, central bank governor Elvira Nabiullina’s biggest triumph was curbing inflation from 17% in 2015 to just above 2% in early-2018. As price pressures rose in the post-pandemic months, she defied industrialists by raising interest rates eight months straight.

Nabiullina also resisted calls in 2014-2015 for capital controls to stem outflows following the annexation of Crimea.

But those achievements have been torn to shreds in less than a month.

Annual price growth has accelerated to 14.5% and should surpass 20%, five times the target. Households’ inflation expectations for the year ahead are above 18%, an 11-year high.

While panic-buying accounts for some of this, rouble weakness may keep price pressures elevated read more .

With Russia’s reserves warchest frozen overseas, Nabiullina was forced to more than double interest rates on Feb. 28 and introduce capital controls. The central bank now expects inflation back at target only in 2024.

Russia inflation

INDEX ELIMINATION

Sanctions are forcing index providers to eject Russia from benchmarks used by investors to funnel billions of dollars into emerging markets.

JPMorgan (.JPMEGDR) and MSCI are among those that have announced they are removing Russia from their bond and stock indexes respectively (.MSCIEF).

Russia’s standing in these indexes had already taken a hit following the first set of Western sanctions in 2014 and then in 2018, following the poisoning of a former Russian spy in Britain and investigations into alleged Russian meddling in the 2016 U.S. elections.

On March 31, Russia’s weighting will be dialled to zero by nearly all major index providers.

Reuters Graphics Reuters Graphics

RATINGS RUPTURE

When Russian troops stormed into Ukraine, their country had a coveted “investment grade” credit rating with the three major agencies S&P Global, Moody’s and Fitch.

That allowed it to borrow relatively cheaply and a sovereign debt default appeared a distant prospect.

In the past four weeks, Russia has suffered the largest cuts ever made to a sovereign credit score. It is now at the bottom of the ratings ladder, flagging an imminent risk of default.

Russia’s credit rating sees largest cut ever seen globally

ROUBLE TROUBLE

A month ago, the rouble’s one-year average exchange rate sat at 74 per dollar. Trading on different platforms showed the ample liquidity and tight bid/ask spreads expected for a major emerging market currency.

All that has changed. With the central bank bereft of a large portion of it hard currency reserves, the rouble plunged to record lows of more than 120 per dollar locally. In offshore trade it fell as low as 160 to the greenback.

As liquidity dried up and bid/ask spreads widened, pricing the rouble has become haphazard. The exchange rate is yet to find a balance on- and offshore.

Reuters Graphics
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Reporting by Karin Strohecker, Sujata Rao, Rodrigo Campos and Marc Jones; Editing by Sam Holmes

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