Posted by Albert Gersh - December 31, 2013
- Reuters: New China-Iran oil contract may boost exports to pre-2012 levels, gut efforts to cap nuke deal's financial relief
- Bloomberg: Turkey's political war tanking economy, risks reversing decade of economic progress
- Analysts: Israel set for unprecedented year of startup IPOs
- Egyptian moves against Muslim Brotherhood put Hamas on the brink
What we’re watching today:
- A new oil contract being negotiated between China and Iran, which would see the Chinese state-trader Zhuhai Zhenrong Corp purchase light crude from Tehran, could according to Reuters boost imports from the Islamic republic "to levels not seen since tough Western sanctions were imposed in 2012," in the process undermining Western efforts to limit financial relief provided to Iran under the Joint Plan of Action (JPA) announced weeks ago in Geneva. Critics of the JPA had almost immediately raised concerns that even a limited erosion in the international sanctions regime would trigger a feeding frenzy, as nations and companies scrambled to ensure that they were not left behind in reentering Iran's markets. Those concerns were derided as "fanciful" by analysts linked to the Obama administration, while administration officials themselves blasted skeptics as uninformed. White House assurances have since come under significant strain. Most straightforwardly, the administration's assessment that the JPA would provide Iran with only $7 billion in relief appears to have neglected fundamental economic considerations including multiplier effects and the benefits of currency stabilization. Fears that a feeding frenzy will erode the sanctions regime even beyond what U.S. negotiators originally envisioned, meanwhile, have also gained traction. Actors ranging from automobile investors to Dubai have rushed to reestablish themselves inside Iran. News of the Chinese oil contract - which Reuters assesses would "go against" the JPA's emphasis on limiting Iranian oil imports to "current average amounts" - are likely to deepen fears that a downward spiral is taking hold.
- Bloomberg this week reported that the open political warfare rocking Turkey, which has pitted the ruling Justice and Development Party (AKP) against followers of U.S.-based cleric Fethullah Gulen, is endangering the country's economy, "driving the currency to unprecedented lows" and tanking Istanbul's stock exchange. Turkish bonds are being dumped by investors at a pace not seen in two years, and the Borsa Istanbul 100 Index this month lost 15 percent of its value, marking Turkey's stock market literally "the world’s worst performer" in recent weeks. The outlet evaluated that the crisis, which it assessed threatens to reverse nearly a decade of economic progress made by Turkey, is at risk of becoming a downward spiral of tit-for-tat moves by the two rival Islamist camps. Gulen-influenced prosecutors have been pursuing and widening a corruption probe that has already ensnared top AKP elites, and those elites - up to and including Turkish Prime Minister Recep Tayyip Erdogan - have responded by seeking to purge the judiciary of Gulenists. Turkish media reported yesterday that the battle was "entering a new phase," per an announcement by deputy prime minister Bulent Arınc that the government was developing a plan to "do whatever necessary – legal or judicial – against" opponents in the judiciary.
- The Wall Street Journal reported earlier this week that, in contrast to previous years in which successfully Israeli startups had focused on mergers and acquisitions, 2014 is shaping up to be a year in which similar companies attempt to go public. 2013 saw more Israeli startups acquired by foreign companies than any other year since 2006, with The Tower assessing in October that "announcements of multi-million and even billion-dollar acquisitions of Israeli startups [had become]... routine." The news site specifically referenced Google's billion-dollar acquisition of maps application Waze and Facebook's $100 million acquisition of data compression technology Onavo. The Journal projected that 2014, in contrast, will see Israeli startups switch to an IPO strategy. The outlet quoted Nimrod Kozlovski, a partner at Jerusalem Venture Partners, describing how "more companies in Israel now are lining up, trying to go to Nasdaq." The story also described a recent IPO by website development platform Wix.com, which last month debuted in the U.S. and raised about $127 billion. After a 70% increase in its stock, Wix.com now has a market valuation of over $1 billion. Wix.com had recently been in the news for non-financial reasons after an investigation discovered that many websites advocating anti-Israel boycotts were built on the Israeli-created platform.
- The Times of Israel reported today that Hamas is being forced to reposition itself in relation to the Egyptian Muslim Brotherhood - of which it is an off-shoot - in the wake of Cairo's recent decision to brand the Brotherhood a terrorist organization, with the shift likely to deepen an emerging consensus that the Palestinian faction is adrift after a series of failed geopolitical gambles. Hamas's regional influence had enjoyed something of a high-water mark during the year-long tenure of Egypt's Brotherhood-linked former president Mohammed Morsi, but has all but collapsed since Morsi's government was removed by the army in the wake of massive anti-government rallies. The army quickly moved against not just the Brotherhood but also Hamas, which it blamed for helping the Brotherhood and for facilitating jihadist attacks in the Egyptian-controlled Sinai Peninsula. An army campaign cut off access between the Hamas-controlled Gaza Strip and the outside world, and Cairo explicitly threatened a "harsh response" should the Palestinian organization continue to be implicated in terrorism on Egyptian soil. Egyptian Ambassador to the Palestinian Authority Yasser Othman this week pointedly told Palestinian media that Hamas would be expected to untangle itself from Egyptian affairs, and that - as far as deciding which groups are terror entities - "the criterion for implementing the law on anyone is their behavior toward Egypt and the extent of their intervention in internal Egyptian affairs." Jonathan Schanzer, vice president of research at the Foundation for Defense of Democracies, suggested this summer that Hamas's weakened position provides Western lawmakers with the opportunity to strike a financial death blow to the group.
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