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Russia’s Rosatom says Egypt nuclear talks in final stages

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ABU DHABI (Reuters) – Russia’s state-owned nuclear firm Rosatom is in the final stages of talks for a contract to build a nuclear power plant in Egypt, a senior official of the company said on Wednesday.

Anton Moskvin, Rosatom Overseas vice president, said that the deal was expected to be signed by the end of the year.

Speaking on a visit to the United Arab Emirates, Moskvin said construction of the the first reactor of the plant at Dabaa in Egypt’s north would finish by 2022 if a contract was signed by the end of 2015. The contract would involve a loan from Russia to Egypt, he said.

“The sooner we finish the better,” Moskvin said.

“We can start site assessment work next year and then see how soon we can start real site work,” he said.

Egypt has been considering building a plant in Dabaa, situated in the Matrouh governorate, on and off since 1981.

Cairo froze its nuclear programme after the 1986 nuclear disaster at Chernobyl, but announced in 2006 it planned to revive it. Plans for a tender were being prepared when President Hosni Mubarak was deposed in February 2011.

In February this year, President Abdel Fattah al-Sisi said he had signed a memorandum of understanding with Russia for the project.

The Dabaa plant will have four reactors when complete by 2025. Rosatom is currently the only firm in negotations with Egypt over the project.

“There are some 200 people from both sides meeting every month and sometimes twice a month to discuss commercial, technical and other issues,” Moskvin said.

Rosatom is also in talks with Saudi Arabia’s nuclear government body, the King Abdullah City for Atomic and Renewable Energy, over the kingdom’s nuclear plans.

“We are in constant contact with the King Abdullah City, the latest meetings took place in September,” Moskvin said. “Our primary interest there is in a building contract.”

Saudi Arabia and Russia signed an agreement to cooperate on nuclear energy development in June. [ID:nL5N0Z5163]

In 2012, Saudi Arabia said it aimed to build 17 gigawatts (GW) of nuclear power by 2032 as well as around 41 GW of solar capacity. The oil exporter currently has no nuclear power plants.

(By Maha El Dahan, Reuters)

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South Africa’s Mediclinic agrees deal for Al Noor Hospitals

Comments (0) Africa, Business, Latest Updates from Reuters, Middle East

LONDON (Reuters) – South Africa’s Mediclinic Intl agreed to buy United Arab Emirates’ Al Noor Hospitals Group, gaining the upper hand on rival NMC Health in a tussle for expansion in the fast growing Gulf region.

But NMC Health, already a major player in the UAE, vowed to fight on, saying on Wednesday it remained committed to a tie-up with Al Noor.

Shares in Al Noor jumped 19 percent to 1,185 pence, above the 1,160 pence value of Mediclinic’s agreed offer and valuing the company’s equity at 1.38 billion pounds ($2.12 billion), as investors anticipated a battle for the group.

Mediclinic’s Chief Executive Danie Meintjes, who will remain CEO after the deal, said the combined group would be the largest private healthcare provider by revenue in the “highly attractive growth market of the UAE”.

Mediclinic, which has more than 50 hospitals in South Africa and Namibia, also has a presence in the UAE. Combining the two companies will create an operator with around 20 percent of the private beds in the region, analysts said.

It will also be the biggest player in Switzerland, the third largest in South Africa, and will have a 29.9 percent stake in Britain’s Spire Healthcare Group.

The deal, structured as a reverse takeover of Al Noor by Mediclinic, will create a London-listed group with a turnover exceeding $4 billion operating 73 hospitals and 35 clinics.

NMC Health, which is also listed in London, said it had made an informal cash-and-shares offer to buy Al Noor on Oct. 9, days after Al Noor and Mediclinic said they were in talks.

Al Noor Chief Executive Ronald Lavater said there was a “compelling strategic fit” with Mediclinic, and together they could expand coverage and service delivery in the region.

He said the board had considered the NMC Health proposal and had concluded it was “inferior both on the value and on the deal certainty”.

The tie-up with Mediclinic is backed by the two major shareholders in Al Noor, Sheikh Mohammed Bin Butti Al Hamed and Kassem Alom, who combined hold 34.3 percent, the companies said.

NMC, however, was undeterred. “This confirms our belief in the competitiveness of our initial possible offer and that the combination of NMC and Al Noor has the strongest strategic and financial rationale for all stakeholders,” it said.

Al Noor was advised by Rothschild, Goldman Sachs and Jefferies, while Morgan Stanley and Rand Merchant Bank worked for Mediclinic.

(By Paul Sandle, Reuters)

 

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Energy Subsidy Reform In Gulf Nations

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opec-oil-energy1

Gas price subsidies originally intended to level the playing field for the major oil producing nations now fall under heavy scrutiny for a variety of reasons. Reduction of fuel prices resulting from these subsidies leads to increased wasteful consumption and pollution. Reform policies now meet resistance from residential consumers and commercial interests. 

The six primary Gulf state producers all figure among the top 10 per capita energy consumers worldwide. While awareness is high among the producers that the subsidies desperately require reform, steps toward actual reform are gradual. Qatar, where gasoline and electricity subsidies are highest, is number one on the list, with 18,500 kg oil-energy-equivalence per capita, a level of consumption almost three times that of the USA or England.

Gas is so heavily subsidized in the Gulf States that consumers in Europe and America must find the prices shocking. Qatar, Bahrain, and Kuwait are all under $0.30 per liter as of the time of this writing. Although low fuel prices obviously bring about a trend of excessive and wasteful consumption, the big six producers’ lethargic reforms are not driven by a sense of urgency. Starting mid-2014, Qatar, Bahrain, and Kuwait raised diesel fuel prices by 50% with no fixed index, but rather with prices remaining a function of world market prices. Saudi Arabia has yet to establish any price reforms. 

GCC governments could once afford to subsidize energy prices and this works against reform today. When a falling oil price reduces profit there is additional resistance to subsidy reform. While in theory reducing subsidies should serve to diversify the industrial base of a country, it is not clear that this is a strong motivational force among the actual producers. After all it is a competitive force at work against reform. Awareness of other important factors is high, such as depletion of energy resources, damage to the environment, and slowed economic growth. But awareness does not lead to discipline, and energy consumption in the big six is higher than ever.

Less than $0.01 per kilowatt hour in Kuwait

Energy consumptionApproximately half of the subsidies are for electricity, and the growth rate in consumption of electricity here is approaching 10%. In Kuwait for example, the price of electricity is fixed at less than $0.01 per kilowatt hour. According to energy think tanks such levels of subsidisation and consumption are absolutely unsustainable. However with electricity consumption divided almost equally among commercial and residential interests, there is stalwart resistance to reform these programs which cap prices and keep consumers happy.

In countries like Saudi Arabia and Iran, subsidies for energy consumption are up to two to three times their expenditures for education and health care. Tempting though it may be to view this as a window on the way a society prioritizes its use of valuable resources, it is instead a residential consumer base of individuals devouring 58% of available electricity. Reduced air quality and other forms of environmental impact do not as yet serve to dissuade individual consumers from excessive use. 

UAE the first GCC country to eliminate price controls

Perhaps the most substantial step forward is United Arab Emirates’ announcement to deregulate transportation fuel prices in 2015. This makes UAE the first to eliminate price controls, and to take an extraordinary measure toward subsidy reform. This year with falling oil prices all of the GCC nations are under new pressure to institute subsidy reforms, especially in Saudi Arabia, where pre-tax energy subsidies to fiscal expenditure were more than 10% last year. 
As OPEC and IMF predict oil prices to remain below 2014 levels for at least the next five years, subsidy reform is clearly the mandate among the GCC nations. With consumption accelerating, the depletion of oil reserves and an inflationary rise in the cost of living may leave these energy-rich nations no alternative.

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Egyptian business activity grows at slower pace in September

Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Business activity in Egypt expanded for the second consecutive month in September, although the pace of gains in output and new orders slowed, a survey showed on Monday.

Egypt’s economy is still struggling since a popular uprising ousted autocrat Hosni Mubarak in 2011 and was followed by political instability that kept foreign investors and tourists away.

In a survey, the Emirates NBD Egypt Purchasing Managers Index (PMI) for the non-oil private sector fell to 50.2 points in September, from an eight-month high of 51.2 in August, but stayed above the 50-point mark that indicates growth in activity.

The index was below 50 points for the first five months of 2015.

“Given ongoing weakness in the export sector, it is encouraging that the overall PMI index continued to show an expansion in private sector activity,” said Jean-Paul Pigat, senior economist at Emirates NBD.

“While the pace of growth is moderate, the survey nevertheless points to a slight improvement in domestic demand in the first quarter of Egypt’s fiscal year FY2015/16. The challenge will be to maintain this momentum through the remainder of the year.”

The PMI’s output sub-index eased to 51.5 points in September from 52.8 points in the previous month, and only one-in-five panellists reported improved activity due to stronger demand.

The new orders index slipped to 50.5 points, from August’s 52 points, while the new export orders index shrank for the third consecutive month, to 47.8 points from 49.2 points a month earlier.

The employment index for the non-oil private sector fell to its lowest level in five months at 48.7 points, from 49.3 points in August.

President Abdel Fattah al-Sisi has pledged to reduce the jobless rate to 10 percent over the next five years. Unemployment stood at 12.8 percent during the first three months of 2015 according to the government’s statistics agency, but analysts believe actual unemployment may be higher.

The index of output prices fell to 49.5 points from 50.2 points in August.

Egypt’s urban consumer inflation has slowed, to 7.9 percent in August from 8.4 percent in July, official data showed in early September.

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Africa and the Middle East: Going Mobile

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ME mobile

By Enu Afolayan, Contributor

Going mobile. That’s the tune businesses, and marketers, are singing in the Middle East and Africa as the end of 2015 nears. If you don’t have a plan or haven’t started one, for the mobile marketplace, then you are at risk at being a generation behind the competition. You’re still driving a moped while everyone else is passing you by in their sleek, new electric cars that are almost driving themselves. Moreover, they are working on an app for that.

The people of the MEA market are snatching up mobile devices at a rapid rate and are second only to the Asia-Pacific market as the largest users of mobile phones. According to eMarketer, an independent market research company, 606 million people in the region have at least one mobile phone. They expect an increase to over 789 million in 2019. That’s a lot of phones. That’s a lot of people with phones who use mobile services and are increasingly buying goods and other services with them.

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Lubna Olayan, a Modern Arab Business Leader

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Lubna-Olayan

by Sheldon Mayer, Managing Editor

Lubna Olayan appears in “Most Powerful Women” lists every year, featured by Forbes, Fortune, and Bloomberg as a model of modern international business leadership. She was named Entrepreneur of the Year in 2010 by her alma mater Cornell University. After her renowned father and founder of OFC summoned her to head the Middle Eastern sector of his OFC conglomerate, Lubna Olayan raised the standards, and quietly began modernizing work flow practices, undaunted by her singularity as the only woman in a conservative, heavily male-dominated Arabic business-scape. Notably she now continues a trend to fill roles in her companies with women who are “deserving” of positions in business and engineering, in what she describes as a unique meritocracy for Middle Eastern businesses. Her meritocracy sweeps across vast borders of business and finance, and as a holding company it is uniquely diverse.

Although Olayan Financing Company is reserved in comments about their revenue and profit, assets are currently estimated to range from seven to ten billion dollars. With the leadership of Lubna Olayan the company expanded into real estate, manufacturing, and partnerships in international brands such as Nabisco and Burger King. Lubna, her brother, and two sisters sit on the board of directors of this global enterprise, each sibling taking a role as leader of a particular geographic area within the global scope.

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South Africa considers building refinery to process Iranian crude

Comments (0) Africa, Business, Latest Updates from Reuters, Middle East

JOHANNESBURG (Reuters) – South Africa is considering building an oil refinery that will process Iranian crude to bolster its petrol supply and reduce its dependence on foreign companies, a government official said on Tuesday.

Plans for the new refinery were being “conceptualised” Tseliso Maqubela, the deputy director general for petroleum and petroleum products regulation at the energy ministry, said. He could not estimate the cost or time frame for construction.

Pretoria has said it will resume oil imports from Tehran “tomorrow” if sanctions are lifted but without its own refinery, it would have to rely on foreign oil companies who own refineries in Africa’s most developed economy.

A landmark pact clinched on July 14 between Iran and the United States, Germany, France, Russia, China and Britain will limit Iran’s nuclear programme to ensure it is not put to making bombs in exchange for a removal of economic sanctions.

Before sanctions, Iran was the biggest oil supplier to South Africa, the continent’s second-biggest crude consumer, importing around 380,000 barrels per day (bpd).

Iran and the ruling African National Congress (ANC) share strong diplomatic relations, with Tehran backing the party that helped liberate South Africa from white minority rule. Iran was one of the first countries to resume trade with Pretoria after democratic elections in 1994.

“There are benefits to owning a refinery, basically the profits are re-invested in the country and outflows can be controlled,” said Maqubela.

“But most importantly you are able to protect your own sovereignty…we could not bring Iranian crude oil during the sanctions, even though the U.S. gave us an exception, because we did not have a facility where the crude could be refined.”

South African refineries were designed to refine Iranian crude but were refitted to process other types of oil after the sanctions.

“We believe it’s better to have a technology partner, a partner who will bring the financing and then a partner that can bring crude oil,” he said without naming specific partners.

Deputy Energy Minister Thembisile Majola said last Thursday South Africa was considering using Iranian oil for its new refinery which will add to the existing gas-to-liquid plant run by state-owned PetroSA.

Maqubela said the energy ministry was considering using a refinery planned, but not yet built, by PetroSA in the industrial port of Coega but that the eventual refinery may take another form and name or be located in a different region.

South Africa’s blueprint for growth and development, launched in 2012, gives the government until 2017 to develop new refinery plans to cope with growing fuel demands.

(by By Peroshni Govender, Reuters)

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Banks’ messaging system SWIFT’s growth in Middle East, Africa outpaces global rate

Comments (0) Africa, Business, Latest Updates from Reuters, Middle East

DUBAI (Reuters) – Growth in financial transactions messaging system SWIFT’s traffic volumes in the Middle East and Africa has accelerated by double-digit percentages this year as banks expand rapidly and non-financial institutions join the industry cooperative, said the regional head.

In the Middle East growth in the year up to the end of August was 12 percent, with double-digit expansion in Qatar and the United Arab Emirates helping offset a decline in Lebanon, Iraq and Libya, said Sido Bestani in an interview.

The data excludes Iran, which has been disconnected from the Belgium-based network since 2012 as a result of EU sanctions against the country.

Expansion in Africa in the past year was up 11 percent, led by Kenya, Ghana and Nigeria, Bestani said.

Average global SWIFT traffic growth so far this year is running at 10 percent. The Middle East and Africa represents more than 4 percent of total volumes, a level that should rise as both regions historically grow at a faster pace than the rest of the world.

Banks in the Middle East and Africa have been expanding both within and outside their borders in recent years. Through acquisitions, Qatar National Bank, the largest bank in the Gulf Arab region, has expanded into Egypt and several other African markets, while South Africa-based Standard Bank, Africa’s largest bank by assets, has built a presence in 20 countries including Nigeria, Angola and Mozambique.

In Africa, banks have been adding more clients in a country where the proportion of the population without a bank account totals as much as 80 percent in sub-Saharan Africa.

But Bestani said that drivers for business in the Middle East and Africa were different.

“We see more traction from some African communities,” said Bestani. “There is centralised decision-making, so for example the central bank of Ghana contacted us to ask if we can provide a service for complying with sanctions to all banks.

“In the Middle East we see less examples of supporting the community and more action at the level of individual banks and financial institutions.”

More non-financial institution companies are also joining. In the Middle East, around 50 such firms have joined, enabling them to handle cash management, trade and supply chain business through the system.

But SWIFT expects one of the main areas for future expansion to be the securities markets, where a lot of payments and settlement instructions are currently sent manually.

In the Middle East and Africa, including Turkey, payments represent 57 percent of information sent through SWIFT, with securities forming 30 percent of the total data. That compares with worldwide, where payments and securities roughly account for percent each of total data flow.

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Post-Sanctions Iran: A Modern Day “Gold Rush” for Investors

Comments (0) Latest Updates from Reuters, Middle East, Politics

Iranian flag

By Enu Afolayan (Contributor)

Iran is opening up all major sectors of its economy for foreign investments. The conditions are still under discussion, butforeign businesses are already preparing their market penetration plans. Iran offers exciting opportunities, however the risks are even higher.

On the 29th of June, the Foreign Minister of France met Bijan Namdar Zanganeh, the Oil Minister of Iran, to announce the beginning of a new era in the history of Iran’s oil industry. France’s Total corporation would be the first foreign company to develop Iran’s oilfields after the sanctions have been lifted.

It is expected that the additional oil from Iran will lead to a market supply increase, and consequently to a further decrease in oil prices. It is still a big question whether this scenario will become a reality. While experts and the media try to forecast the amount of barrels arriving on the market from Iran, there may be other aspects of this “Iranian thaw” that could be even more important than short-term fluctuations of BRENT and WTI oil prices.

Iran is opening up all major sectors of its economy for foreign investments. The conditions are still under discussion, but foreign businesses are already preparing their market penetration plans. Iran offers exciting opportunities, however the risks are even higher.

Economics of the Iranian Thaw

The result of the negotiations between Iran and the G6 countries (Russia, USA, EU, Great Britain, France, China and Germany) in July was the so-called Joint Comprehensive Plan of Action – the agreement on Iran’s nuclear program. In exchange for relief from some sanctions, Iran agreed to significantly reduce the stockpile of enriched uranium in the country, and to provide access to IAEA experts to all nuclear facilities in Iran for the next 20 years. Iran also agreed to suspend uranium enrichment operations for 15 years. The EU and the US agreed to lift sanctions starting next year as long as Iran complies with agreements made.

The decrease in oil prices shocked the Iranian economy that had already been struggling. Sanctions have been a heavy burden for the country, weakened by excess bureaucracy, corruption and mismanagement.

The sanctions imposed on Iran led to 60% decrease in oil exports – from 2.5 million barrels per day to 1.4 million barrels per day, with dire consequences for the country’s economy. In 2013, while oil prices were at their peak, Iran’s oil revenues fell from 100 billion USD to 35 billion USD, and GDP was down 5%.

The decrease in oil prices pushed the Iranian government into a corner and it had to recognise the urgent need of reforms. By agreeing with Western countries, Iran aimed to solve multiple problems: the lifting of sanctions, increasing the effectiveness of the economy by attracting foreign investments, and offsetting the oil revenue decrease through increased production output.

Oil-barrel

Oil Investments as a Key Goal of the New Governmental Policy

Throughout the history of Iran, oil played a significant role, not only for the economy, but also for the country’s national identity. The first nationalisation of the oil industry under Mohammed Reza Pahlevi happened under the idea of “liberation” of the country from English corporations that exploited the country’s oil resources. Mohammad Mossadegh, the prime minister of Iran in 1950’s, was the first politician to “give back the oil to the people of Iran”. In 1951, the property of Anglo-Persian Oil company (later known as BP) became national property of the country.

In 1953, as a result of a military coup, Mossadegh was ousted and nationalisation was cancelled. British and American corporations agreed on the privatisation of the National Iranian Oil Company. Even though only 10% of the company’s shares belonged to foreign corporations, Ruhollah Chomeini had gained many Iranian hearts by making the “battle for the oil” key to the main leitmotif of his political campaign in exile.

After the 1979 revolution, foreign companies were forced from Iran. The oil industry went into a long period of decline, which lasted until the end of 1990’s, when liberal president Mohammed Hatami attempted to revive the oil industry by cooperating with foreign partners. Unfortunately, his efforts were curbed by the nuclear program of Iran that deteriorated the country‘s relations with the West.

Today, the Iranian government is desperately trying to attract foreign investments into the oil sector in order to increase production output and to fill in the hole in oil revenue. Recently, the Oil Minister of Iran said that without sanctions the country would be able to increase output to 4 million barrel per day. However, Iran would need investments of 50 billion to 100 billion USD to achieve this ambitious goal. To attract this amount of money from foreign investors, the government of Iran has to ensure smooth transformation of all necessary institutions, and to restore the trust of the international community. After two decades of state oil monopoly and two nationalisations, it may take years.

The positive aspect is that after relief from the sanctions, Iran can bring about 30-40 million barrels of crude and condensates that it held in floating storage. Based on estimates of the International Energy Agency, it would ensure the supply of an additional 180,000 barrels per day for 6 months to the global market. Knowing that global consumption of oil is currently at about 90 million barrels per day, this additional oil supply is unlikely to influence oil prices.

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Iranian Foreign Minister Mohammad Javad Zarif shakes hands on January 14, 2015 with US State Secretary John Kerry in Geneva. AFP PHOTO / POOL / RICK WILKING

Non-oil Investments as a Side Effect

It isn’t only the oil and gas industry players that are enthusiastically welcoming the opening up of the Iranian market. The World Bank predicted a “massive economic windfall”, advising Iran to attract investments into non-oil industry, including infrastructure and communications. However, the success of the new investment policy depends on proper planning on the part of Iran. At the moment, the outlook is not as shiny as it might have appeared: widespread corruption and the need of transformation of many national institutions will probably hamper the government’s efforts and discourage investors.

Despite many organisational challenges, Iran attracts investors with tremendous opportunities. A modern day “Gold Rush” is expected to set off in Iran. Coca Cola, Mercedes, Arabian hospitality corporations, American grain importers, European power corporations and many others are already looking forward to the battle for their share of the Iranian market.

The internal privatisation began in Iran few years ago. For a decade, Iranian investors have been acquiring undervalued assets: insurance companies, hospitals, and other public utilities were put up for sale. Recently, the state telecommunications company was put up for sale. However, due to the deep crisis in Iran’s economy, it is getting harder and harder to find internal buyers for these assets. Foreign investments could be an easy solution for Iran’s desperate need for money.

At the same time, Iran’s government is still not clear on conditions of cooperation with foreign investors. President Rohani stated recently that foreign investors would be welcome only if they worked with a local partner, hired local workforce and transferred their technology to Iran.

While the new foreign investment law is still a work in progress, the Iranian president continues his meetings with investors, encouraging them to take the opportunities offered by the new post-sanctions Iran.

Failure of Industrial Nationalism

Media attention is now focused on the relief from sanctions in Iran. However, the key problem in Iran’s economy is not the sanctions that were imposed just a few years ago. The problems with Iran’s economy began much earlier, and they were linked to the nationalisation of all sectors and economic isolation after the revolution.

Iran has the largest hydrocarbon reserves in the world, but its production capacity is lower than that of Russia, USA, Saudi Arabia and Canada. This proves that Iran failed to use the potential of its oil industry to give an impulse to economic development. It had good chances to become a country with one of the highest GDPs per capita and to develop a smart investment policy to boost other sectors of economy. But unfortunately, the success of economic development depends not only on the amount of oil reserves, but also on institutional capacity, anti-corruption measures and proper management systems. Unfortunately, in all these areas, Iran has been at the bottom of global rankings. With or without sanctions, the government of Iran should find a solution to the country‘s internal structural problems.

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