JAPAN AND SOUTH KOREA RESUME ECONOMIC TALKS
apan and South Korea have held their first meeting of financial leaders in seven years and agreed to resume regular dialogue. The two countries are seeking to increase cooperation and improve relations stalled by tensions in the region and sluggish economic growth. Asian financial leaders have warned of risks to the regional economy and called on countries to be vigilant about possible repercussions of the turbulence in the US and European banking sector. Japan and South Korea will strengthen partnerships in high-tech industries and plan to hold regular financial dialogue in the future.
FRANCE AND JAPAN SIGN NUCLEAR PARTNERSHIP AGREEMENT
France and Japan have signed a nuclear cooperation agreement aimed at strengthening research and development of next-generation nuclear reactors. The agreement includes work on extending the safe lifetime of existing reactors, decommissioning nuclear plants and promoting the recycling of used nuclear fuel. The two countries also discussed technical cooperation in the nuclear fuel cycle and the creation of a supply chain involving countries with “common values”. Japan will allocate funds for the development of sodium-cooled fast reactors. The agreement comes as France seeks to revitalise its nuclear sector and reduce dependence on suppliers such as Russia.
INDIA AND RUSSIA SUSPEND RUPEE TRADE NEGOTIATIONS
India and Russia have suspended efforts to establish a bilateral rupee payment mechanism because Moscow does not want to accumulate rupees in its coffers. This is a setback for Indian importers seeking to reduce currency conversion costs. Russia prefers to be paid in Chinese yuan or other currencies. Although trade between the two countries continues, alternatives are being sought for payments, such as using currencies of third countries like China.
TURKEY WILL MAINTAIN STRONG TIES WITH RUSSIA
Turkey has undergone significant changes in its foreign policy due to the economic crisis and the need to improve relations with several countries, including Russia. Despite Russia’s invasion of Ukraine and international tensions, Turkey has maintained a balanced stance and seeks to maintain cordial relations with Russia, due to its importance as a neighbour and strong shared economic ties.
Opposition leaders have also expressed their intention to pursue a diplomatic stance towards Russia and abandon the current government’s confrontational approach. While Turkey’s foreign policy changes have been welcomed by its regional rivals, the relationship with the EU remains complicated, although the opposition seeks to re-establish relations with Russia.
POLAND TO DEMAND EU SANCTIONS ON RUSSIAN AGRICULTURAL IMPORTS
Poland will demand EU sanctions on imports of Russian agricultural products, according to the Polish ambassador to the EU, Andrzej Sados. Sados said that Europe is not threatened by disruptions in the supply chain of agricultural products at present, on the contrary, they have a problem of surpluses. He also mentioned that they are solving the problem of increased imports of agricultural products from Ukraine.
Since Russia launched its invasion of Ukraine last year, the EU has adopted 10 sanctions packages against Russian individuals and companies. In April, Poland proposed a new set of punitive measures against Moscow, including a ban on imports of piped oil and diamonds.
CHINA’S FALLING IMPORTS AND EXPORTS CAST A SHADOW OVER ECONOMIC OUTLOOK
China’s imports fell sharply in April, while exports rose at a slower pace, indicating weak domestic demand and putting pressure on an economy already hit by cooling global growth.
The decline in imports suggests that the world will no longer be able to rely on China’s domestic growth, and also reveals weakness in the economies of its main trading partners. These data raise concerns about external demand and risks to China’s domestic economy.
CENTRAL BANKS ARE BUYING GOLD AT THE FASTEST PACE IN 80 YEARS
The World Gold Council, which represents the precious metal industry, reported that last year central banks added the most gold to their reserves since 1950, when records began. And this year’s data suggest that this trend is still alive and well.
The dollar has dominated world trade and served as the global reserve currency since the end of World War II, but the Russia-Ukraine conflict shook the global order and financial authorities are leading a shift in what appears to be a move away from the US dollar.
EUROPE MUST DRIVE ITS OWN TRADE AGENDA, SAYS GERMAN FINANCE MINISTER
German Economy Minister Robert Habeck warned that Europe risks becoming paralysed amid the rivalry between China and the United States, and needs to chart its own economic and trade agenda.
Habeck said the only option to avoid this is to push for a European trade agenda and strengthen multilateral organisations, such as the World Trade Organisation. He pointed out that the economic conflict between China and the US is shaping international trade flows, with China seeking to attract European and German investment, while US companies are seeking independence from China.
PROGRESS IN BLACK SEA GRAIN DEAL TALKS, SAYS ANKARA
There was progress in negotiations on the Black Sea grain deal in Istanbul. The deputy defence ministers of Turkey, Russia and Ukraine, along with UN officials, took part in the talks. They agreed to continue four-way technical meetings on the agreement, which is scheduled to expire on 18 May.
The agreement was brokered by the UN and Turkey in July last year as a measure to address the global food crisis exacerbated by the conflict in Ukraine. It allows for the safe export of grain and fertiliser from three Ukrainian ports on the Black Sea.
G7 SEEKS TO ‘DE-RISK’ TIES WITH CHINA BY DIVERSIFYING SUPPLY CHAINS
G7 leaders will discuss concerns about China’s use of “economic coercion” in its international relations. They are expected to issue a joint statement that will include a specific section on China.
In addition, a separate communiqué is expected on economic security to counter coercive efforts by any country. The G7’s approach to China is an important issue in the current discussions and a common approach is being sought, although some members are sceptical about certain investment controls. The G7 meeting will be a test of how much they can agree on a common approach towards China.
G7 countries will seek to diversify their supply chains away from China as part of a united approach to reduce their dependence on a single country, US President Joe Biden said after the G7 meeting in Japan this month.
The G7 says its “policy approaches are not designed to harm China, nor do we intend to frustrate its economic progress and development”.
However, China thinks otherwise, with the state-backed Global Times newspaper describing the G7 meeting as an “anti-China workshop”.
VENEZUELAN OPPOSITION URGED TO BACK SUSPENSION OF BOND REPAYMENT STATUTE OF LIMITATIONS
Venezuela’s political opposition, recognised as the legitimate government by the United States, has been urged by a group of key creditors to back the suspension of the statute of limitations on payments of suspended government bonds.
The government of Nicolas Maduro proposed a five-year suspension until 2028, but some bonds will mature in October, which could result in bondholders losing their right to demand payment.
Venezuela’s creditors’ committee is seeking support from the opposition to avoid risks and possible litigation that could damage the country’s economy. The opposition has not yet taken a position on the matter.
EU MEMBER STATES APPROVE WORLD’S FIRST COMPREHENSIVE REGULATION ON CRYPTOCURRENCIES
European Union member states adopted the world’s first comprehensive rules to regulate cryptoassets. These rules require licences to issue, trade and safeguard cryptoassets in the EU, and aim to prevent money laundering and terrorist financing. Regulation of cryptocurrencies has become more urgent after the collapse of the FTX platform.
Cryptocurrency companies are seeking regulatory certainty, putting pressure on other countries and regulators to follow the EU’s lead. The UK has established a gradual approach, while the US is using existing securities rules while deciding whether to implement specific new rules.
UKRAINIAN BLACK SEA GRAIN DEAL EXTENDED FOR TWO MONTHS
Ukraine’s Black Sea grain deal has been extended by two months, in what UN Secretary-General Antonio Guterres called “good news for the world”.
Turkish President Tayyip Erdogan announced the extension in a televised speech and it was subsequently confirmed by Russia, Ukraine and the United Nations. The flow of ships through the corridor had stalled in recent days, as the agreement in the following days.
GERMAN CARMAKERS CALL FOR POST-BREXIT RULES TO BE POSTPONED
The German car industry association is urging the European Union and the United Kingdom to postpone post-Brexit rules that it believes would hinder the transition to electric vehicles, which could give wings to UK-based carmakers calling for the same.
Under the trade deal struck when Britain left the EU, 45% of the value of an electric vehicle sold in the EU must come from Britain or the EU from 2024 to avoid tariffs.
The problem is that the battery pack can account for up to half the cost of a new electric vehicle, and Europe has not yet developed a large enough battery industry of its own, and is unlikely to do so by the end of 2023, the VDA association said in a statement.
US HALTS MORE EXPORTS TO RUSSIA
The Biden administration halted exports of a wide range of consumer goods to Russia and added 71 companies to a trade blacklist, while the Group of Seven (G7) announced new sanctions against Moscow over its war in Ukraine. Some of the restricted items include hearing aids, dentures and artificial joints.
AUSTRALIA AND INDIA TO FORGE CLOSER ECONOMIC TIES AND MINERAL EFFORTS
Australian Prime Minister Anthony Albanese met his Indian counterpart Narendra Modi in Sydney on Wednesday to discuss regional security and economic ties, and signed a migration agreement to boost Indian student and business travel to Australia. Modi is visiting Australia for the first time since 2014, and two months after Albanese travelled to India.
India and Australia are members of the Quad group of nations, which also includes Japan and the United States. Modi went ahead with his visit to Sydney after a meeting of Quad leaders in the city was cancelled when US President Joe Biden was forced to return to Washington from a G-7 summit in Tokyo to negotiate the debt ceiling.
IMF APPROVES $3.5 BILLION AID PACKAGE FOR CÔTE D’IVOIRE
The International Monetary Fund (IMF) has approved an aid package to Côte d’Ivoire totalling USD 3.5 billion. The first tranche amounts to almost $500 million.
The programme, approved by the Fund’s executive board, is spread over 40 months and should help the West African country implement “the national development plan put in place by the authorities, while preserving its macroeconomic stability,” according to a statement.
The measures taken to “reduce price pressures, increased security spending and the trade imbalance, due to robust domestic demand, have reinforced macroeconomic imbalances,” the IMF said, prompting the government to request IMF support.
ASEAN AND CANADA MUST SEEK COMMON GROUND TO FINALISE FREE TRADE AGREEMENT
Southeast Asia is a key region for Canada, and its recently launched Indo-Pacific Strategy places particular emphasis on strengthening the relationship with this dynamic area. An impressive C$2.3 billion in funding has been earmarked for this strategy over the next five years, of which more than 10 per cent is earmarked specifically for the Association of Southeast Asian Nations (ASEAN). One of the main objectives is to strengthen the trade relationship with this strategic Indo-Pacific region.
In November 2021, exactly one year before the announcement of the strategy, ASEAN and Canada launched negotiations for the ASEAN-Canada Free Trade Agreement (FTA). This remarkable breakthrough in the ASEAN-Canada partnership signifies Ottawa’s unwavering commitment to promote trade and economic engagement in the region, an essential strategy to diversify Canada’s trade and investment, which has traditionally focused on the United States and China.
ECB WARNS BIG EUROPEAN BANKS WILL BE AFFECTED IF FUNDS RUN INTO TROUBLE
Major euro zone banks could be affected if their financial clients, such as funds, insurers and clearing houses, withdraw deposits or otherwise run into problems, the European Central Bank warned on Tuesday. The ECB study looked at the risk of contagion from so-called shadow banks – such as funds and other financial firms that provide financing in one form or another – to traditional lenders, and vice versa.
According to the study, exposure in terms of both bank assets, such as loans, and liabilities, such as deposits, was concentrated in the euro area’s 13 largest lenders, including its eight globally significant banks. The biggest risk it identified was shadow banks withdrawing their funds from banks as deposits and repos. These represent 13% of all traditional banks’ liabilities, or more in the case of the largest banks.
This could occur if shadow banks – or non-bank financial intermediaries (NBFIs) in regulators’ jargon – were to be affected by outflows or lose confidence in a bank.
EXPORT PRICES OF INDUSTRIAL GOODS FALL BY 0.2% IN APRIL AFTER 27 MONTHS OF INCREASES
The General Export Price Index for industrial products recorded a year-on-year decline of 0.2% last April, its first negative rate after 27 consecutive months of year-on-year increases, as reported on Tuesday by the National Statistics Institute (INE).
The year-on-year fall in April in export prices was due to intermediate goods, non-durable consumer goods and capital goods, in contrast to energy, which increased its year-on-year rate by more than 1.5 points, to 37.4%, due to the lower price of electricity production, transport and distribution compared with April 2022.
TOYOTA AND DAIMLER TRUCK UNITS TO COMBINE OPERATIONS UNDER A HOLDING COMPANY
LDaimler Truck Holding AG and Toyota Motor Corp have reached a preliminary agreement to combine their truck units in Japan, the companies said on Tuesday. Under the memorandum of understanding, the activities of Daimler-owned Mitsubishi Fuso Truck and Bus Corp and Toyota subsidiary Hino Motors Ltd will be merged into a holding company.
The shares of the new company are expected to be listed on the main market of the Tokyo Stock Exchange. Martin Daum, CEO of Daimler Truck, told a press conference in Tokyo that the companies see the merger as an opportunity to achieve the scale needed to make technological breakthroughs.
The worldwide sales organisation will remain independent, but the two companies will work together on development, purchasing and production. Daimler Truck and Toyota will invest equally in the company and cooperate on the development of hydrogen and other technologies in areas such as connectivity and autonomous driving, according to their statement.
NVIDIA TO BECOME THE FIRST US CHIPMAKER TO BE VALUED AT MORE THAN A TRILLION DOLLARS
Nvidia Corp (NVDA.O) was on track on Tuesday to surpass $1 trillion in market capitalisation for the first time, which would make it the first US chipmaker to join the $1 trillion club.
The company’s shares rose 3.5 per cent to $402.91 in pre-market trading.
Meta, valued at about $670 billion at the last close, reached the $1 trillion market capitalisation milestone in 2021, while Apple Inc (AAPL.O), Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O) are the other US companies in the club.
THE KREMLIN SAYS RUSSIA WILL PARTICIPATE IN THE BRICS SUMMIT AT THE “APPROPRIATE LEVEL”
The 22-24 August summit of the BRICS grouping of emerging economies, comprising Brazil, Russia, India, China and South Africa, will be attended by President Putin. The Kremlin said on Tuesday that Russia will participate at the “appropriate level” in the BRICS summit planned for South Africa, in response to a question on whether President Vladimir Putin will attend the meeting.
INFLATION RESUMED ITS DOWNWARD TREND IN MAY: DOWN NINE TENTHS OF A POINT TO 3.2%, AND CORE INFLATION MODERATED TO 6.1%
The Consumer Price Index (CPI) fell by 0.1% in May compared with the previous month and cut its year-on-year rate by nine tenths to 3.2%, its lowest level since July 2021, due to the moderation in food prices and lower fuel prices.
With the fall in May, inflation has resumed its downward trend after the rise of eight tenths of a percentage point in April, which put it at 4.1%, according to advanced data published on Tuesday by the National Statistics Institute (INE). Statistics has attributed the moderation of inflation in May to the lower cost of fuel and, to a lesser extent, to the fact that food prices rose less in the fifth month of this year than in the same month in 2022.
In Madrid, 31 May 2023
International Trade and Sanctions Department