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Middle East & African Monitor - 02 December 2016

  • Brent crude breaks through technical resistance as US output falls
  • Trump’s defence secretary has strong views on the Middle East
  • Cyber attacks target government agencies in Saudi Arabia
  • Russia/Turkey rapprochement hits a bump in the road
  • Pressure on the Nigerian Naira continues to build
  • Saudi Arabia to resume issuing SAR bonds in 2017
  • Oman plans OMR150 mio bond issue

REGIONAL COMMENTARY

Brent crude breaks through technical resistance as US output falls
Brent has finally broken through the US$52.00 resistance level following the OPEC agreement on Wednesday, and this opens up a potential move to US$58.00 in the near term on a purely technical basis. Prices have also been supported by comments yesterday from Russia’s Energy Minister, Alexander Novak, who confirmed that his country would support the OPEC decision by cutting 300,000 bpd of their own production, and by the release of the latest EIA report showing US oil production had dipped by almost 2% in September to 8.58 mio bpd against August’s 8.747 mio.  

Trump’s defence secretary has strong views on the Middle East
Donald Trump last night confirmed the selection of General James “Mad Dog” Mattis as his Secretary of Defence in a move that will probably cause some uneasiness in both Tehran and Tel Aviv. Certain analysts have suggested Mattis could support a push for an unwinding of the P5+1 nuclear agreement with Iran, especially as he has actively advocated for a return of to America’s previously strong military posture in this region as a counterweight to Iran, whom he called “the single most belligerent actor in the Middle East . However when it comes to the nuclear deal specifically, he stated recently that the agreement should remain in place as long as the Iranian government observed its terms and conditions. Meanwhile Israel will likely also have mixed feelings over his appointment, the ex-marine corps commander is reportedly a supporter of a two-state solution to the Palestinian issue, and has previously criticised the building of more Israeli settlements on occupied territory. “It’s got to be directly addressed, we have got to find a way to make the two-state solution that Democrat and Republican administrations have supported, we’ve got to get there, and the chances for it are starting to ebb because of the settlements, and where they’re at, they’re going to make it impossible to maintain the two-state option,” Mattis stated adding, “If I’m in Jerusalem and I put 500 Jewish settlers out here to the east and there’s 10,000 Arab settlers in here, if we draw the border to include them, either it ceases to be a Jewish state or you say the Arabs don’t get to vote, i.e.: apartheid. That didn’t work too well the last time I saw that practiced in a country.”

Cyber attacks target government agencies in Saudi Arabia
According to various media outlets, a number of government agencies in the Kingdom experienced a series of sophisticated cyber-attacks on their data systems over the past two weeks. A Reuters article quoted three US security firms including Symantec, as suggesting that a version of the ‘Shamoon’ virus was used to infect certain Saudi agencies computers, and was similar in make-up to the malware used in a previous attack on Saudi Aramco back in 2012. This style of hacking is highly advanced and usually attributed to state or state-sponsored actors, with some pointing the finger of blame at Iran for this most recent event.

Russia/Turkey rapprochement hits a bump in the road
President Erdogan’s surprise statement earlier this week, that his country’s armed forces had entered Syria primarily to remove Bashar Assad from office, must have raised more than just a few eyebrows in Moscow, especially when relations between Russia and Turkey had warmed considerably in recent months. Turkey’s head of international relations, Ayse Usluer, admitted that the two governments do have differences over the way forward in Syria, but also expressed his opinion that they can still work together. “The commonality to protect the territorial integrity of Syria and providing humanitarian aid, for instance for the people of Aleppo, we can negotiate on these issues. But, on the other hand, Russia insists to protect Assad, so this is some kind of convergence and divergence between Russia and Turkey," Usuler was quoted as saying by the VOA. There has been some diplomatic smoothing activity since Erdogan’s comments, with both sides foreign ministers meeting yesterday to discuss a ceasefire in Aleppo, and the Turkish President himself appeared to backtrack a little on the topic, when he stated yesterday that Turkey’s priority was to defeat both the YPG rebels and Daesh militants in Syria.

Pressure on the Nigerian Naira continues to build
USD/NGN is trading above 480.00 in the unofficial parallel market again this week as the chronic hard currency shortage appears to have worsened and foreign investors remain cautious over re-entering the Nigerian market. This situation was highlighted in recent comments made by the President of the country’s Bureau de Change association, Alhaji Aminu Gwadabe, who was quoted by the NAN news agency as saying that, speculation, hoarding, a fall in the volume of inward remittances and a lack of confidence by potential overseas investors were some of the reasons for the local currency’s ongoing weakness. Gwadabe also claimed that the offshore NDF market was contributing to the general US dollar liquidity challenge, “The existence of that market is a challenge to liquidity inflow to our own market,” he said adding that both the CB and Nigeria’s foreign exchange operators needed to work together to find a solution to the problem. You can read more details on this story here.

Saudi Arabia to resume issuing SAR bonds in 2017
Saudi Arabia’s Debt Management Office has been quoted in the country’s state-owned media outlet stating, that the Kingdom will resume its issuance of SAR denominated debt next year. These local currency issues had been temporarily suspended following the success of the country’s US$17.5 bio bond issue in October. The DMO said that the total amount of local debt issued this year by the MOF amounted to SAR 97 bio, and that it was working to develop a secondary debt market by registering and listing the local debt instruments on the country’s stock exchange.  

Oman plans OMR150 mio bond issue
The Central Bank of Oman has said it will conduct a OMR 150 mio development bond issue this month. The bond will have a tenor of 10 years and a coupon rate of 5.50% per annum. Meanwhile the government reported a budget deficit of OMR 4.43 bio for the first 9 months of this year.

Middle-East-African-Monitor-02-12-2016

AND FINALLY…
that the Sheikh Zayed Grand Mosque in Abu Dhabi covers an area of 22,412 square meters and can accommodate up to 41,000 worshippers? Meanwhile the carpet in its main prayer hall is the world’s largest ,weighing 35 tons and measuring 5,627 sqm.

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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NBAD Middle East & African Monitor - 02 December 2016

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