Donald Trump finally has taken the velvet gloves off in dealing with Vladimir Putin. A decision to sanction Russia’s biggest oil suppliers – Rosneft, where BP once held a stake, and Lukoil – has real bite.
The immediate reaction was a 5 per cent spike in the price of Brent crude to $66 a barrel. A jump to $120 a barrel, as seen three years ago, thankfully is a long way off.
The threat of renewed post-Ukraine disruption to carbon fuel markets will be watched closely.
Energy subsidies provided by Liz Truss and the Tories were a big factor in driving up the UK’s borrowing and debt.
Previous restrictions on Russian oil and gas supplies aimed to limit returns for Moscow, without harming Western economies. They clearly failed.
Data shows Moscow has secured £759billion in oil and gas revenues since the outbreak of the conflict, funding its war machine. The latest actions should be less porous.
Oil money: Russian President Vladimir Putin met with journalists on Thursday to comment on new U.S. sanctions targeting two major Russia’s oil producers
The US Treasury’s Office of Foreign Assets Control has a sweeping mandate.
Secondary powers allow it to sanction anyone buying oil from named Russian suppliers. That could be effective in stopping workarounds whereby India and China have been absorbing large quantities of oil diverted from Europe.
Secondary sanctions were effective in the past in damaging Iran’s oil export revenues. Consumers and businesses have reason to hope that oil prices won’t soar because of the sanctions.
Two big Gulf suppliers, Saudi Arabia and the UAE, have plenty of excess capacity. An obstacle to Gulf states ramping up production has been Houthi attacks on shipping in the Red Sea. Attacks on the Yemeni terror outfit by Israel may offer calmer and safer passage.
The Americans are likely to have more success in choking off supplies to India than to Putin’s allies in Beijing. China has a history of circumventing sanctions.
Anything which bolsters the global energy price will reward Western majors, including BP and Shell, which have been refocusing on the Gulf of America, Brazil and West Africa as they have slowed investments in green alternatives.
The last thing our Chancellor needs is a spike in energy prices before the Budget, when she wants to ease pressure on households by suspending VAT on household bills. If it’s not one thing, it is another!
Slow horses
Legal & General’s chief executive Antonio Simoes has been supportive of Labour’s plans to grow the economy by easing planning restrictions and investing in infrastructure.
But enthusiasm for Rachel Reeves and her ilk is starting to fade. The endless speculation about taxation of pensions, levies on wealth and changes in the savings regime are having a baleful effect.
The lengthy run-up to the Budget, with a month to go, casts a cloud over pensions and other savings, with consumers preferring to hoard cash.
Since taking the helm at L&G in January 2024, all the emphasis from the former HSBC banker has been on seeking to dominate the pensions buyout market in which there are decent returns.
Students of Simoes will have detected a change in tone dictated by dull share price action which has seen the stock slip 4 per cent since he took the helm.
Focus is shifting to improving the performance on asset management and retail investment, which until now have slipped down the pecking order.
Change of tack will not come a moment too soon for disgruntled investors.
Swapping places
I won’t pretend to be an expert on the London Stock Exchange Group’s (LSEG) role in complex derivatives markets.
Investors are more than impressed by deals which saw it deepen ties to major banks by selling a 20 per cent stake in
its bountiful clearing operation Post-Trade Solutions – placing a value of £850million on the enterprise.
Swap market deals are a sharp reminder that it is not just about equity trading. Listings on the LSE have slumped because of takeovers, many of them public-to-private. There is a less than impressive pipeline of initial public offerings.
But when it comes to AI, tech innovation, risk intelligence and data analytics, the LSEG is rocking.
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