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Posts Tagged ‘Egypt’

by Glenda Kwek
March 22, 2011
The Sydney Morning Herald

Libyan leader Muammer Gaddafi is reportedly sitting on a 143.8-tonne $6.4-billion pot of gold – enough to pay mercenaries to fight for him for years.

The gold bullion – held by the Libyan central bank and controlled by Colonel Gaddafi – is among the 25 largest reserves in the world, the Financial Times reported, citing the International Monetary Fund.

They provide the 68-year-old Libyan strongman a lifeline after billions of assets held offshore were frozen by the United States and the 27 member states of the European Union.

The gold reserves are believed to have been moved from the central bank in the capital, Tripoli, to another city such as Sebha in the south, which is near Libya’s African neighbours Chad and Niger, after fighting broke out, the Times reported.

While bankers told the Times that international banks or trading houses were unlikely to buy any gold believed to be from Libya, Colonel Gaddafi may find buyers in Chad or Niger.

“If a country like Libya wants to make their gold liquid it would probably be in the form of a swap – whether for arms, food or cash,” Walter de Wet, the head of commodities research at Standard Bank, told the Times.

The price of gold has risen recently, fuelled by growing instability in the Middle East and North Africa.

“If the dollar remains weak and we get further unrest in the Middle East, there is a very reasonable chance for gold to test the record high,” Darren Heathcote, head of trading at Investec Australia, told Reuters.

Ousted Egyptian dictator Hosni Mubarak reportedly used the 18 days of protests against his rule to move his fortune – estimated at up to $64 billion – to untraceable accounts in Western countries.

Other countries buying large amounts of gold include Iran, China, Russia and India, the Times said.

The United States holds the world’s biggest gold reserves – 8965.6 tonnes, according to the World Gold Council.

Other countries with massive stockpiles include Germany with 3749.8 tonnes, China with 1161.9 tonnes, India with 614.8 tonnes and Venezuela with 401.1 tonnes.

Read the entire article HERE.

by Tyler Durden
Zero Hedge
02/27/2011 14:07 -0500

Looks like speculation that the Egyptian Central Bank’s gold stash may have been just modestly plundered is starting to play out. According to Reuters. “Egypt has issued a ministerial decree immediately banning the export of gold in all its forms, including jewelery and ornaments, until June 30, the official news agency MENA said on Sunday. “This decision, which comes in light of the exceptional circumstances the country is passing through …, is to preserve the country’s wealth until the situation stabilizes,” MENA said. Egypt’s currency has come under pressure after some of the country’s main sources of foreign currency, including tourism and foreign investment, collapsed after the protests that ousted President Hosni Mubarak erupted on Jan. 25.” Obviously, this “emergency” step would not be required if the E(gyptian)CB was still in full possession of its purported stash of the inedible metal. Whether the decline is due to alleged Mubarak sequestering of the shiny metal, or by other members of the former ruling regime is unclear, but one thing is certain: the WGC is long overdue in adjusting the Egyptian gold holdings from 75.6 tonnes to their real current value… far lower. As for Egyptian fiat: that is as freely exportable now as ever. If only anyone wanted it. But yes, somehow emerging markets are manipulating their currencies lower than fair value, the conventional wisdom claims.

Reuters Article:

CAIRO (Reuters) – Egypt on Sunday banned the export of gold for the next four months, a measure bankers said seemed aimed at preventing businessmen and former government officials who acquired capital illegally from transferring it abroad.

An official from a gold mine in Egypt said he was confident it was not aimed at gold production but at individual exports.

A decree banning the export of gold in all its forms, including jewelry and ornaments, was issued by newly appointed Trade Minister Samir el-Sayyad. It takes effect immediately and continues until June 30, the official news agency MENA reported.

“This decision, which comes in light of the exceptional circumstances the country is passing through …, is to preserve the country’s wealth until the situation stabilises,” MENA said.

The MENA statement made no mention of whether the ban included exports of gold from mining. But an official from the flagship Sukari gold mine of Centamin Egypt said he was confident the order did not affect the mine’s operation.

“For Centamin this is not a problem … I know 100 percent that this is not a problem for us,” said Youssef el-Raghy, managing director for the Sukari gold mine, adding that the ruling appeared aimed at individuals taking gold out of Egypt not producers of gold like Centamin.

The Egyptian pound has come under pressure after some of the country’s main sources of foreign currency, including tourism and foreign investment, collapsed after the protests that ousted President Hosni Mubarak erupted on January 25.

But bankers said the decision on gold exports seemed designed more to stop individuals from expatriating funds under the radar than to stem major capital outflows.

“It is most likely aimed at the big guys — the top officials and businessmen who are under suspicion,” said John Sfakianakis, a Riyadh-based economist with Bank Saudi Fransi. “They are blocking capital flight in a new asset class.”

A banker in Cairo also said it seemed aimed at former officials or executives trying to smuggle gold or wealth out of the country.

Read the entire article HERE.

by Tom Gjelten
NPR

As governments across the Arab world look for ways to calm their angry populations, one challenge in particular stands out: how to address the spiraling cost of food.

Coincidence or not, the uprisings in Tunisia and Egypt came just as world food prices hit a record high. The World Bank reported this week that the cost of food is now at “dangerous” levels.

High prices are far more burdensome for people in the developing world because they typically spend a much higher percentage of their income on food. Many also buy raw food commodities — grain rather than packaged bread, for example — and it is those commodity prices that have increased most dramatically. Wheat prices have doubled in the past six months alone.

“Many households are buying raw rice,” notes Joseph Glauber, chief economist at the U.S. Department of Agriculture. “They’re milling it themselves. For them, a big increase in [raw] rice prices or a big increase in wheat prices is translated into a sizable increase [in food costs].”

In an interview with member station WAMU’s Diane Rehm, World Bank President Robert Zoellick described the high cost of food as an “aggravating factor” behind the unrest in the Middle East, even if it is not a primary cause.

“You had a large unemployed population and people clearly fed up with the political system,” Zoellick said. “But one of the reasons I think this is an important issue today is, those countries are going through something between transitions and revolutions. That’s where I’m most concerned about food now.”

Many governments in the Arab world subsidize the purchase of food already, but not nearly enough to counteract higher prices. If those governments now increase those food subsidies again in response to the rising discontent, they will be hard-pressed to improve delivery of other public services.

The policy challenge is complicated, but the basic economic problem is simple: The supply of food is not enough to meet the demand.

Across the world, food stocks are down in part because of unfavorable weather, ranging from drought to floods, in Russia, Pakistan, Europe, North America and Australia.

“Production of many crops was affected negatively by these unfavorable weather developments,” says Abdolreza Abbassian, the chief food and grain economist for the United Nation’s Food and Agriculture Organization. “This has led to tighter markets, and prices are reflecting that.”

The demand for food, meanwhile, has been growing, especially in big developing countries like China.

“Sixty percent of all soybeans traded in the world go to China right now,” notes the USDA’s Glauber. “Forty percent of all cotton goes to China, and … a fifth of all vegetable oil.”

This imbalance between tight supplies and growing demand inevitably pushes food prices up.

But government policies also play a role. World Bank officials intend to make that point during the current meeting in Paris of finance ministers from the Group of 20 industrialized and developing countries. Among the issues to be discussed is the imposition of food export limits, another factor in rising world prices.

In the U.S., government corn policies are part of the problem. Since 2006, the U.S. Congress has used tax credits and industry mandates to divert part of the U.S. corn crop to the production of ethanol, a biofuel.

The ethanol tax credit costs U.S. taxpayers $6 billion a year. It also drives up food prices. The more ethanol is produced, the less corn is left to feed livestock or people. The key justification for the ethanol policies is to reduce dependence on imported oil, but the policies come at a cost.

“It sets up a trade-off or conflict between the perceived national security benefits of providing a substitute for imported crude oil versus the increased food prices,” says Bruce Babcock, an agricultural economist at Iowa State University. “There is no doubt at all that expansion of the ethanol industry has increased the cost of producing meat, dairy, eggs and food around the world.”

The U.S. government now requires oil companies to blend ethanol into their gasoline products. It gives them a tax credit for each gallon of ethanol they produce, and it limits ethanol imports. According to Babcock’s calculations, the policies together push the price of corn as much as 40 percent above what it would otherwise be.

It is one more factor contributing to the spiraling cost of food around the world and causing hardship for food consumers in the Middle East and beyond.

Read the entire article HERE.

Transcript of Interview:

Heard on Morning Edition

February 18, 2011 – STEVE INSKEEP, host:

It’s MORNING EDITION from NPR News. Good morning. I’m Steve Inskeep.

People rising up in the Arab world have been demanding political rights, but the timing of these uprisings may have a lot to do with economics. We’re going to hear a lot this morning about the changes still underway in one of the most critical regions of the world. And we begin with a simple world-wide fact: the cost of food is rising.

NPR’s Tom Gjelten reports on what’s behind the increase and what nations, including the U.S., could do about it.

TOM GJELTEN: Perhaps it was a coincidence, but the uprisings in Tunisia and Egypt came just as world food prices hit a record high. Consumers here in the United States may not have noticed, but for people in the developing world, the impact has been dramatic. They spend a much higher percentage of their income on food. They also buy raw food – grains rather than packaged bread, for example – and it’s those commodity prices that have jumped the most.

Joseph Glauber is chief economist at the U.S. Department of Agriculture.

Mr. JOSEPH GLAUBER (U.S. Department of Agriculture): Many households are buying raw rice, they’re milling it themselves, so for them a big increase in rice prices or a big increase in wheat prices, you know, are translated into a sizable increase.

GJELTEN: World Bank president Robert Zoellick this week said he thinks the spiraling cost of food is an aggravating factor behind the protests in the Arab world, even if not the primary cause. Here was Zoellick discussing the unrest on NPR’s DIANE REHM SHOW.

Mr. ROBERT ZOELLICK (President, World Bank): You had a large unemployed population and people clearly fed up with the political system. But one of the reasons that I think this is an important issue today is, those countries are going through something between transitions and revolutions, and that’s where I’m most concerned about food now.

GJELTEN: With governments facing new political pressures, how they respond to rising food costs will be a key challenge. Many subsidize the purchase of food already, but not enough to counteract higher prices. And if governments now increase those food subsidies, they’ll be harder pressed to deliver on other services.

So it won’t be easy for governments to address this fundamental economic problem: the supply of food is not enough to meet the demand for food.

Abdolreza Abbassian of the UN’s Food and Agriculture Organization attributes the food shortages in part to bad weather.

Mr. ABDOLREZA ABBASSIAN (UN Food and Agriculture Organization): From Russia to Pakistan to U.S., Canada, North Europe, and before the year ended in Australia, so production of many crops were affected negatively.

GJELTEN: Meanwhile, the demand for food goes up because there are more people to feed.

Economist Joseph Glauber points to big developing countries like China.

Mr. GLAUBER: I think 60 percent of all soybeans traded go to China right now, 40 percent of all cotton goes to China, and even things like vegetable oil, about a fifth of all vegetable oil.

GJELTEN: That supply/demand imbalance pushes prices up.

But government policies are also important. World Bank officials intend to make that point when they meet this weekend in Paris with finance ministers from the planet’s top economic powers – the G-20. They will highlight the practice of limiting food exports, for example. That also drives up prices.

Here in the United States, government corn policies are part of the problem. Since 2006, through tax credits and mandates, the U.S. Congress has set aside more and more of the corn crop to make ethanol, a biofuel. The ethanol tax credit costs U.S. taxpayers $6 billion a year. Plus, the more ethanol is produced, the less corn is left to feed livestock or people.

Bruce Babcock, an agricultural economist at Iowa State University, says the justification for promoting ethanol production is that it means less dependence on foreign oil. But there is a cost.

Professor BRUCE BABCOCK (Iowa State University): It sets up basically a conflict between the perceived national security benefits of providing a substitute for imported crude oil versus the increased food prices. Because there’s no doubt at all that expansion of the ethanol industry has increased the cost of producing meat, dairy, eggs, and food around the world.

GJELTEN: The U.S. government now requires oil companies to blend ethanol into their gasoline products. It gives them a tax credit for each gallon of ethanol they produce. And it limits ethanol imports.

Economist Bruce Babcock says these policies together push the price of corn as much as 40 percent above what it would otherwise be – one more factor contributing to the spiraling cost of food around the world and causing hardship for food consumers in the Middle East and beyond.

Tom Gjelten, NPR News, Washington.

Pablo Gorondi
Associated Press
Wednesday February 23, 2011, 8:53 am EST

Oil prices rose to fresh two-year highs around $96 a barrel Wednesday amid concerns that a violent power struggle in Libya could disrupt supplies, with experts warning the next weeks and months would prove highly volatile.

If the chaos spreads to other bigger energy producers in the region, such as Iran or Saudi Arabia, price fluctuations could became as sharp as those in the 1970s, when an OPEC embargo caused gasoline shortages in the U.S., analysts warned.

By early afternoon in Europe, benchmark crude for April delivery was up 74 cents at $96.16 a barrel — the highest since October 2008 — in electronic trading on the New York Mercantile Exchange. The contract jumped $5.71, or 6.4 percent, to settle at $95.42 on Tuesday.

In London, Brent crude for April delivery gained $1.65 to $107.43 a barrel on the ICE Futures exchange.

Libyan leader Moammar Gadhafi on Tuesday called on supporters to attack anti-government demonstrators as protesters backed by defecting army units claimed control over almost the entire eastern half of the country, including several oil-producing areas.

Nearly 300 people have been killed so far in the rebellion, according to a partial count by the New York-based Human Rights Watch.

Libya holds the most oil reserves in Africa and is the world’s 15th-largest crude exporter at 1.2 million barrels per day, according to the Energy Information Administration.

“In total, some 300,000 barrels per day is now offline, but … the numbers could rise as we still do not have a clear idea how much oil is being impacted by striking Libyan workers deep inside the country,” said Edward Meir, senior commodity analyst at MF Global in New York.

As the Libyan government cracked down on protesters, Western oil companies including Eni and Repsol-YPF temporarily suspended oil production in the country. BP has started evacuating workers.

“The protests in Libya are the first to meaningfully put oil supplies at risk,” Goldman Sachs said in a report.

Goldman, which is forecasting benchmark crude to rise to $103 within 12 months, said recent violent protests in Bahrain show that wealthy oil-rich Gulf states are also vulnerable to political upheaval.

“These recent developments in Libya and Bahrain increase the risks of major supply disruptions,” it said.

The crisis in the Middle East and North Africa began in January with the overthrow of Tunisia ruler Ben Ali, spread to Egypt and the resignation of President Hosni Mubarak and has sparked protests in Yemen, Bahrain, Iran, Algeria, Morocco and Jordan.

Traders are watching closely protests in Iran, OPEC’s second largest producer, and for signs of any unrest in Saudi Arabia, the world’s biggest crude exporter. Analysts fear that further oil price spikes could fuel inflation, undermining consumer spending and global economic growth.

“Saudi Arabia, itself an authoritarian state, now finds itself surrounded by countries in the throes of revolution,” energy analyst Richard Soultanian of NUS Consulting said.

“Should the current situation continue to deteriorate, it has the potential to not only roil the energy markets but also upend the nascent and accelerated recoveries in developed and emerging markets.”

Some observers expect a return to the sharp fluctuations of oil prices seen in the 1970s.

“Today’s situation is reminiscent of the 1970s,” said Anthony Michael Sabino, a professor at St. John’s University’s college of business. “The price of oil will now jump in direct relation to one of its oldest barometers — political tension in the Middle East.”

“Expect nothing but a roller coaster ride for a few weeks, if not months.”

Read the entire article HERE.

Global Macro Monitor | Feb. 2, 2011, 5:50 AM
Business Insider

Take a look at the chart we’ve constructed from the Bureau of Labor and Statistics 2009 Consumer Expenditure Survey.  It conveys a sense of how Egypt’s poverty combined with the sharp rise in food prices sparked the political revolt against the Mubarek government.

The chart illustrates how the lower income groups in the U.S. really get squeezed when food and gas prices rise.  In the U.S. the average annual income for the consumer units (households) measured is $62,857, where food expenditures consume a little over 10 percent of income.

But averages distort the true picture of what is really going on as only 15 percent of consumer units fit into this income group.   Many have drowned in pools of water where the average depth is only 11 inches deep.    Almost one third of the households in the U.S.  spend close to or more than 20 percent of their annual income on food.

Remember this the next time the market cheerleaders and policymakers tout core CPI and dismiss food and energy inflation.  It may also help explain the rise in  social angst in U.S. society.  (click here if chart is not observable)

Read the entire article HERE.