Commodity-related shares drag the UK share index lower, but there’s better news for drugs firm Shire.
All the day’s economic and financial news, as the oil price slides into bear market territory
- Brent crude has hit a seven-month low, below $45/barrel
- Markets ‘lose faith’ in Opec
- Coming up: eurozone confidence data and UK industrial trends
European stock markets have all dipped into the red, as the oil price worries traders.
In London the FTSE 100 is down 28 points, or 0.4%. Royal Dutch Shell, the oil company, has shed almost 1.5%.
The oil slick only got thicker this Thursday, the markets drowning in a well of the black stuff.
Brent Crude quickly hit a new 2017 nadir, and its worst price since November 2016, this morning, dropping another 0.2% to sit just below $45 per barrel.
Libya and Nigeria are also pushing the oil price down, says the Wall Street Journal’s Georgi Kantchev.
Oil production in conflict torn Libya, which is exempted from the OPEC output deal, has surprised on the upside. Despite the continued civil war in the country, which has Africa’s largest oil reserves, Libyan output has recently climbed to 885,000 barrels a day, roughly three times its level from just a year ago.
Nigeria, also exempted from the OPEC agreement due to militant attacks on its oil infrastructure, is another wild-card. Last month, its production rose to 1.68 million barrels a day, its highest level in a year, according to OPEC data.
Wayne McCurrie, fund manager at Ashburton Investments, argues that Brent crude has fallen to levels which are unprofitable for shale producers – possibly putting a floor under the oil price.
Brent crude below 45$. Oversupply US shale. Below 45 no shale in the money so there is a bottom to how far price can fall
The fall in the oil price is encouraging investors to bail out of risky assets, says FXTM chief market strategist Hussein Sayed.
It’s evident that oil prices are becoming the primary driver of the financial markets. After both benchmarks entered a bear market with Brent plunging below $45 for the first time since November, investors are becoming more concerned as to when the plunge will stop.
Comments from Iranian oil minister, Bijan Zangeneh that Iran is in discussions with OPEC members for further production cuts fell on deaf ears, meaning that comments from OPEC members are unlikely to influence prices.
With no hard data to encourage bulls to jump in, the risk to the downside will continue to persist.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s an edgy feel in the markets this morning, after the oil price slumped deeper into a bear market last night.
Crude oil prices have taken another leg lower, falling to their lowest level since August overnight.
The move comes as an un-named OPEC member casts doubt over the possibility of deeper production cuts by the group, offsetting a drop in US inventories.
Global Update (12:35 pm)
FTSE down 21 points -0.28 %
CAC down 21 points -0.41 %
DAX down 29 points -0.23 %
DOW FUT down 10 points
We need to get back to at least positive real interest rates in order to stop these sorts of messes. QE was and is an excellent macroeconomic policy but it’s time to end it for the sake of the wider economy.
Government reveals who could run the West Coast Main Line, including HS2, and South Eastern rail franchises.
The European Union has to understand finally that idealism is simply magnifying human suffering and endangering the security of all parties. There is the realist alternative, which focuses on one’s own interest instead of morality. However, such foreign policy has a highly ethical purpose, i.e. peace and stability. The EU member states have made many mistakes during Syria’s civil war, which decreased their prestige, influence and security. Through the realist lens it’s important to make a serious assessment, which side in the conflict should be supported, and to remember that the strong do what they can and the weak suffer what they must.
The realists don’t refrain from bold proposals and suggestions when it comes to foreign policy. In 2012 Kenneth Waltz argued that Iran should have access to nuclear weapons. Three years later Stephen Walt pointed that in case of ISIS’s victory in Syria, the international community should learn how to live with it’s potential new member.2)Right now there are voices among realists, according to which the attempts to overthrow the al-Assad government were a mistake. Those examples result from a distinctive view of morality’s place in international relations.
According to realists, no country can be certain about other states’ intentions. That’s why security may be guaranteed by maximization of one’s power, so potential enemies are effectively deterred. States’ leaders should focus mainly on national interests. Realists assume that morality results in unnecessary suffering and endangers state’s importance in international relations. This is the reason why such analysts criticize humanitarian intervention, which jeopardizes the most important element of the state’s power, i.e. its citizens, and may cause a long-term involvement in affairs of a country that has no direct strategic meaning. Realists opposed the intervention in Libya in 2011, which was considered needless and conducted in an inept way. They were also against the intervention in Vietnam, which they viewed as doomed to fail, and the war in Iraq in 2003, which was perceived as destabilizing the whole region (and it turned out it was a correct assessment!).
Realism focuses on cold-hearted calculation. However, such foreign policy isn’t immoral. The competition for power and the balance that is its effect are the means to a highly ethical end, i.e. peace. It’s this mechanism that made the bipolar system so stable, made the sense of security for both parties and prevented the world from another global war.
Having in mind the mentioned issues, the question arises how the EU member states should act towards the Syrian crisis. It’s argued they ought to abandon their current foreign policy based on human rights ideology and altruism, and focus on their own security and ability to influence the future of the region. What’s the most important, in the case of Syria the radical solutions are the only and the best ones.
The prominent international relations scholar and the creator of modern realist school of thought – Hans Morgenthau – has written a few decades ago why the invasion in the Bay of Pigs had to fail. In the decision-making process both interest and the rule of non-intervention based on moral assumptions were taken into account. This resulted in a limited scope of intervention as the US feared the loss of prestige. The defeat was an effect of a policy that manoeuvred between security and ideas. In the end the goal wasn’t accomplished and the American prestige suffered. The Syrian case is somehow similar and that’s why the EU’s actions are bound to be inefficient.
Leaders of the EU member states assume that al-Assad isn’t and can’t be a partner in negotiations as he should be held responsible for his crimes and his regime should be overthrown. At the same time the West’s intervention, conducted mainly by the U.S., France and Great Britain, is still limited in its scope. Attacks on al-Assad’s forces aren’t handicapping his capabilities and simply protract the stalemate. The rebels are armed by the West, but not in the way that they can gain a strategic advantage. As a result the conflict is prolonged, the Syrian people’s suffering is increasing and the refugee and migration crisis is escalating. Except that no-one should be surprised that the Syrian president decided to fight until the end as the West stated blatantly he has to go.
What would a realist suggest? There are two radical options. One is the military intervention, which will change the balance of power in the war theatre and will result in overthrowing the government. However, such a scenario would result in a deep crisis between the West and Russia. What’s more, the West would have to count on Moscow’s withdrawal. At the same time the transformation would have to be conducted and if it was to succeed, there would be a necessity to create a new stable administration, i.e. a new satellite regime managed by the West. This, however, would require a long-term involvement in the reconstruction of the Syrian state. It is both risky and expensive.
The second possibility is to assume that al-Assad will win the war. It means that Europe may support him or at least withdraw from operations in Syria, so that other powers may have an influence on the country’s future. The first option is unthinkable for the West because of prestige and ideological factors. The other seems reasonable, though it won’t ensure stability as fast as Europe would expect.
EU member states have to acknowledge the fact that at the moment it doesn’t matter who will rule in Syria. For the EU the consolidation of power is important as it may contain the migration crisis. The opponents of al-Assad will surely point to the fact that his survival will relate to further incidents of political purges. But do we really believe that the internally divided opposition, which consists of democratic forces, government runaways and jihadist militias, won’t fight for the domination after al-Assad’s fall and won’t be responsible for other atrocities? We’ve been there before. In Libya, the West supported the rebel groups that had been fighting between each other for six years already since al-Kaddafi was murdered.
Policy-makers who base their diplomacy on moral issues, may argue that al-Assad’s staying in power is simply unethical. Yet, the bringing down the authoritarian governments in Baghdad and Tripoli resulted in a political vacuum, the destabilization of the region and suffering of the whole societies. At the same time the interventions weren’t conducted where it would be quite cheap and could actually protect human rights, for instance in Rwanda. Especially when you consider the fact that the West, and France in the first place, probably knew about the planned carnage and there are even reports it supported Hutu organisations.
For many the most important problem is the use of chemical weapons by the Syrian president. However, as Stephen Walt argued excellently, such crime attracts more attention. Those heinous acts result in our moral considerations about intervening. However, such dilemmas don’t occur in politicians’ minds when the bombing of civilians takes place.
Except for the aforementioned matters, we have to remember that pre-war Syria was in the Russian sphere of influence. Bashar al-Assad was perceived by the West as an enemy not because he violated human rights, but because he was Moscow’s and Tehran’s ally and because of his anti-Israel attitude, which was against the U.S.-Israel alliance. However, when the favourable circumstances emerged, France during the presidency of right-wing Sarkozy tried to end with al-Assad’s isolation and the French president stated that the Syrian leader was irreplaceable in the process of conflict-resolution in the Middle East. The U.S. under the democratic rule also considered the Syrian government as a potential partner in the period before the Arab spring. For example, the then senator and later secretary of state John Kerry stressed that America and Syria have common interests and al-Assad’s government is an essential player in the Middle East. When the revolution started, the West was thinking possibly that the chance to get rid of the inconvenient actor is at hand. Yet, the intervention on the side of the opposition is nothing more than meddling in another dominant power’s sphere of influence. What’s more, such involvement isn’t motivated by any crucial interest. A realist remembers that balance of power, which is related to assuring stability in one’s own sphere, allows to keep the international order and peace. The West shouldn’t hinder Russia’s operations aiming at restoring status quo ante and ensuring security.
The EU member states, which support the rebels, seem to not understand not only Russia’s role in the conflict but also Turkish interests. Ankara was repeatedly accused of backing up ISIS. If it was true, it would be possibly nothing more that cold-hearted calculation, i.e. the desire to create a dependent state or at least a state that would be a partner. The Turkish administration quickly realised that the balance of capabilities in Syria suggests that al-Assad is the strongest party. That’s why it wasn’t problematic for Turks to talk about Syria’s future with President Putin. Especially considering the fact that Syrian government’s preservation would be useful in maintaining Turkish territorial integrity and the smashing Kurdish rebellion.
How did the Western Europe act in the meantime? In 2016 the deal related to migration control was signed and it was expected that Turkey would provide shelter for Syrian refugees. At the same time France is reconfirming support for Kurdish demands as it has during last couple of years, which is a direct blow against Turkish interests. Germany is doing just the same as it decided to cooperate with PYD and YPG. When the West is aiding opposition forces, it’s protracting war at the Turkish gates and it’s threatening Ankara’s sense of security. Did we really anticipate that under such conditions Erdo?an will keep his promises? A realist wouldn’t be surprised by such a policy of the Turkish government, which is focused mainly (as every other administration!) on security and survival.
EU member states intervene hesitantly and follow the human rights ideology. It results in resigning from the place at the negotiating table, which is an act against Turkey’s and Russia’s interests of, the countries that seem to be ready to work together on the shape of post-war Syria. Therefore, EU is losing prestige, signalling to other powers that it is weak and is unable to protect its interests. Hans Morgenthau noticed correctly that states may gain if they end wars that are doomed to fail.
In one of his books John J. Mearsheimer pointed out that the democratic states use the liberal lie, i.e. they refer to the Western values, to intervene in other countries when the need to secure interests appears. It seems that in the case of Syria, the EU isn’t pursuing its interests and is driven by moral principles. As a result, it is suffering from loss of prestige and is endangering its own security. The Finnish president stated in 2016 properly that EU has a dilemma: should it protect its people and values or should it meet its international obligations. A realist has no second thoughts that every state should focus on guaranteeing its own survival and should concentrate on keeping citizens safe.
The presented reasoning doesn’t imply that the al-Assad government should be treated as a partner after the war ends. Yet, for Europe it is important to attain one goal after another. Firstly, we need to end the civil war and migration crisis, no matter what the cost. After that we may try to influence the government in Damascus, so that there is a power transition or power transition.
The al-Assad’s survival is crucial for the region as Syria was an important element of the balance of power and at the same time it helped to keep the peace. Europe is proceeding with a disastrous policy, which protracts the conflict. Thucydides wrote in “The History of the Peloponnesian War” that the strong do what they can and the weak suffer what they must. Europe should show its full power by conducting government change or negotiating with other powers if the first proposal is impossible. The policy of indecisiveness is nothing more than a sign of EU’s weakness and a suggestion to other players that they can test its patience constantly. The West should face the fact that, as John J. Mearsheimer stated, its social engineering aiming at overthrowing the governments failed and it would be better for everyone if it simply withdrew.
The UK chip designer, which is in dispute with Apple, says it is in talks with potential bidders.