Monthly Archives: April 2023

After Four Years of Hugely Costly Tragicomic Farce, the Jig Is Surely Up for Juan Guaidó

After pulling off one last stunt, resulting in his expulsion from Colombia, Gauidó has not only outlived his political usefulness but has become a source of embarrassment to his erstwhile handlers (primarily the US).

How fortunes have changed for Juan Guaidó, until recently Venezuela’s US-appointed “interim” president. Almost all of the 60 countries that once supported him have abandoned his “presidency” and interim government. In Latin America, all left-leaning governments, including neighbouring Colombia and Brazil, have reestablished ties with Nicolás Maduro’s administration and roundly condemned Guaidó’s attempt to bring it down by using foreign pressure to spark a military uprising.

In what seems like one last attempt to garner international attention, Guaidó began this week by furtively crossing the border from Venezuela into Colombia with the apparent intention of gatecrashing a one-day conference hosted by the Colombian President Gustavo Petro to discuss the fragile political situation in Venezuela. Representatives from 19 countries, including Argentina, Brazil, Spain, the United Kingdom and the United States, and the EU had been invited to the San Carlos Palace on Tuesday. Guaído claims he had also received an invite from Colombia’s Foreign Minister Alvaro Leyva, an allegation that Leyva strenuously denies.

On Monday afternoon, Guaído announced on social media that he had crossed into Colombia on foot to evade Maduro’s “persecution.” Spain’s El País reported on the same day that Gauído’s unexpected chess move had put Petro “en jaque” (in check) by causing a diplomatic crisis that threatened to disrupt the Colombian president’s one-day conference, which he had spent months preparing:

Juan Guaidó has become the protagonist of a party to which he was not invited and has sent the president of Colombia, Gustavo Petro, into an unexpected diplomatic scramble. This is a key week for Petro and his role in the Venezuelan crisis. Representatives from 20 countries will meet this Tuesday at a summit in Bogotá to try to reactivate the dialogue between Maduro’s government and the opposition that has been paralyzed for months. Neither of the two parties will participate in the meeting, but both the government of Nicolás Maduro and the opposition delegation… have given their support to the meeting. However, the presence of Guaidó in Colombia… has become a powder keg that threatens to spoil the conference.

“Juan Guaidó does not exist here or in Venezuela.”

Of course, Guaído’s claim that he had been invited to the conference is risible. Why would the foreign minister of a government that has treated Guaidó as a political non-entity since taking office last June invite him to a conference aimed at helping to resolve the political crisis in Venezuela — a crisis that Guaidó has done nothing but fuel and profit from? In September last year, Colombia’s Ambassador to Venezuela, Armando Benedetti, told the Colombian newspaper Semana: “Juan Guaidó does not exist here or in Venezuela.”

It’s arguable whether Guaidó, as a political figure, exists anywhere anymore, apart from in the hearts and minds of certain demented US politicians. In late December, Venezuela’s opposition parties delivered the killer blow by voting to oust him as “interim president” and dissolve his parallel government.

In a statement Leyva said Guaidó was not welcome at the summit — as, indeed, was no other member of Venezuela’s opposition or government. Guaidó had apparently crossed the broader into Colombia in an “irregular” way (i.e., at a location that is not a designated point of entry), opening the door to possible deportation back to Venezuela. His goal, according to Leyva, was to “make noise” at the conference.

This is where it gets really interesting: according to Leyva, Colombia’s immigration authorities were apparently able to track Guaidó down thanks to a tip off from a senior US government official. Guaidó was then told that he had to leave the country as soon as possible and was accompanied by US agents all the way to Bogota’s El Dorado airport. At the airport a one-way ticket to Miami was paid for by the United States. In fact, according to Levya, all of the steps taken to remove Guaidó from Colombia were green lighted by US authorities.

On his arrival at Miami airport, Guaidó was seemingly met by no one but a few journalists:

Guaidó’s treatment at the hands of Petro’s government could not contrast more starkly with the VIP treatment he received from Petro’s predecessor Ivan Duque four years ago. In early 2019, during the first few months of Guaido’s “interim presidency”, both Duque and Brazil’s then President Jair Bolsonaro lent out planes belonging to their respective presidential fleets for Guaidó’s tour of South America, which included stops in Brazil, Argentina, Ecuador and Paraguay. On his arrival in Bogota, on February 24, Guadó was given the full red carpet treatment, including full military honours, by the Duque government:

Of course, Duque was not the only head of state to give Guaidó such special treatment. For the first two years of his “interim” presidency, the governments of dozens of countries around the world — many of them the same NATO members or allies that now support sanctions on Russia as well as a broad smattering of South American nations, then under the control of US-aligned governments — recognized Guaidó as Venezuela’s legitimate leader…

Read the full article on Naked Capitalism

Is Zelensky’s International Charm Offensive, Backed Up With US Bullying, Finally Paying Dividends in Latin America?

Mexico’s Chamber of Deputies “hosted” a video conference with Zelensky last week, becoming only the second legislative chamber in Latin American to do so since the war began. But the event turned out to be a lot less than met the eye.

Over the past couple of years, Mexico’s President Andrés Manuel López Obrador (aka AMLO) has tried to steer a more independent course for his country, both in the realms of economic and foreign policy, and has been facing ever increasing pressure and interference from Washington as a result. Mexico already had a long, albeit interrupted, history of neutrality dating all the way back to the early 1930s. In 1939, a neutrality clause was even added to its constitution by the government of then-President Lazaro Cardenas, which also nationalized Mexico’s oil and gas a year earlier.

In May last year, AMLO reiterated that position in relation to the Russia-Ukraine/NATO conflict:

The policy stays the same, we do not want to get directly involved in sanctioning any country. We want to have a position of neutrality, we have been expressing that in the United Nations so that dialogue can be sought in this way. If we lean in favor of one position or another, we lose authority and therefore cannot, if requested, participate in the possibility of reaching an agreement, of conciliation.”

A Significant Turnaround (Or Perhaps Not?)

But on Wednesday last week, reports began emerging in Mexican and international media that Mexico’s Chamber of Deputies had invited Zelensky to speak to the Mexican nation in a video conference, becoming just the second legislative chamber in Latin American to do so since the war began. On the surface, it represented a significant turnaround. After all, the AMLO government has steadfastly refused to endorse sanctions against Russia while AMLO himself has repeatedly criticised NATO’s relentless arming of Ukraine as well as Zelensky’s own role in the conflict.

But the event turned out to be a lot less than met the eye. In reality, just a small group of opposition lawmakers called the Mexico-Ukraine Friendship Group*had invited the Ukrainian president to speak. The event was not held in the Chamber of Deputies but a much smaller side chamber where roughly 100 of the Chamber’s 500 deputies, all from the opposition PAN, PRI and Citizens’ Movement parties, were gathered. That didn’t stop the Chamber’s President Santiago Creel, who presided over the conference, from condemning the Russian invasion of Ukraine and expressing Mexico’s solidarity with Ukraine.

This takes some chutzpah given that: a) it is the executive, not the legislative, branch — and more specifically, the Foreign Ministry — that sets foreign policy in Mexico; and b) only around one-fifth of all the Chamber’s deputies were actually present at the event, and those who were absent included all members of the governing MORENA party.

In fact, shortly after the event the Political Coordination Board of the Chamber of Deputies, headed by MORENA member Ignacio Mier, released a statement clarifying that the meeting of the Mexico-Ukraine Friendship Group “does not represent the consensual position” of the Chamber of Deputies. The speeches at the event, it said, were given in a purely personal capacity. In other words, this was not in any way a bilateral meeting between States and Creel was in no position to speak for the Mexican people.

Zelensky Escalates His Charm Offensive

As readers know, Ukrainian President Volodymyr Zelensky (and his US-EU backers) have been trying to build support for Ukraine’s cause across Latin America and the Caribbean ever since the early days of Russia’s special military operation, albeit with limited success. While most of the governments in the region did condemn Russia’s invasion of Ukraine, few were willing to support Western sanctions against Russia, as I reported in my March 11 2022 piece, Latin America, As a Whole, Refuses to Embrace Total Economic War Against Russia:

Only four out of 33 Latin American and Caribbean countries — Cuba, Nicaragua, El Salvador and Bolivia — abstained in the vote to condemn Russia’s invasion during the emergency meeting of the United Nations General Assembly. The real number would have almost certainly been five if Venezuela’s diplomats hadn’t been barred from attending the vote after Maduro’s cash-strapped government had fallen behind on its subscription fees.

On the other side of the divide, a small number of governments in the region have publicly endorsed the West’s… economic sanctions against Russia. They include Ecuador, Colombia, Chile and Guatemala. The rest of the countries occupy the vast middle ground between the two polar extremes. Despite condemning Russia’s invasion of Ukraine, they have expressed opposition to the US-NATO-led push to isolate Russia from the global economy.

Most importantly, they include the two heavyweight economies of Latin America, Brazil and Mexico, which together account for roughly 60% of the region’s GDP. To put that in perspective, the two largest economies of the European Union, Germany and France, account for just under 40% of the total GDP of the European Union.

In early October, Zelensky issued another call for Latin America to support Ukraine in its war efforts, this time in a speech to the UN General Assembly. The following day, AMLO responded by blasting sanctions as “irrational” policy instruments that only serve to exacerbate “the suffering of the people.” Like Argentina, and Brazil, Mexico refused to sign a statement of the Organization of American States summit that condemned Russia alone for the war in Ukraine.

In late February, Zelensky announced plans to escalate his diplomatic offensive in Africa and Latin America, just days after Western governments had spectacularly failed, at the Munich Security Conference, to persuade governments from the two continents that Russia’s invasion of Ukraine represented an existential threat not only in Europe but across the globe…

Read the full article on Naked Capitalism

What Does Biden’s Pick for Next World Bank President Augur for the Global War on Cash?

Ajay Banga, in his former senior executive roles at Mastercard, waged a decade-long “war on cash.” Under his tenure, the company did more than just about any other to demonise the role of physical money around the world.

Almost exactly two months ago, on February 23, the Biden administration unveiled its nomination for the next president of the World Bank, the Washington-controlled Brettons Wood lending institution. That choice was Ajay Banga, a former CEO of Mastercard Inc and senior executive of Citigroup. In a statement the White House praised Banga for his “extensive experience leading successful organizations in developing countries and forging public-private partnerships to address financial inclusion and climate change.”

As Vijay Prashad noted at the time, there will be no other official candidates for the job since — by convention — the US nominee is automatically selected for the post:

This has been the case for the 13 previous presidents of the World Bank—the one exception was the acting president Kristalina Georgieva of Bulgaria, who held the post for two months in 2019. In the official history of the International Monetary Fund (IMF), J. Keith Horsefield wrote that US authorities “considered that the Bank would have to be headed by a US citizen in order to win the confidence of the banking community, and that it would be impracticable to appoint US citizens to head both the Bank and the Fund.”

By an undemocratic convention, therefore, the World Bank head was to be a US citizen and the head of the IMF was to be a European national. Therefore, Biden’s nomination of Banga guarantees his ascension to the post.

And so it has proven to be. When nominations for the post closed three weeks ago, there were no other publicly declared candidates. Which begs the question: Who is Ajay Banga? And more specifically, what could his appointment mean for the global war on cash?

A “Davos Type of Globalist”

Apart from his Indian heritage, Banga is hardly an atypical choice for World Bank president. He comes from the private sector, has next to no prior experience of development finance and investment, and is closely tied to both Wall Street and corporate America. Up until now his entire career has been spent working for international corporations, from his early days at Nestle in India to later stints at Citigroup and US payments processing giant Mastercard, where he served as president and CEO before being made executive chairman.

On leaving Mastercard in December 31, 2021, Banga joined the growth equity firm General Atlantic. He is chairman of the Partnership for Central America, a public-private partnership ostensibly focused on economic development in the “northern triangle” of Central America. Banga was also the longest-serving chairman of the U.S.-India Business Council (USIBC) representing more than 300 of the largest international companies operating in India, and until recently was chairman of the International Chamber of Commerce.

He has long been a fixture at major events like the World Economic Forum. “He’s very much the Davos type of globalist,” said Bright Simons, an analyst with Imani Africa, a think tank based in Accra, Ghana. And in the eternal spirit of the WEF, Banga plans to leverage public-private partnerships in his new role at the World Bank, recently telling the FT that he will turn to the private sector for both funds and ideas.

As Prashad notes, Banga’s resume is not dissimilar from that of most US appointees to head the World Bank:

The first president of the World Bank was Eugene Meyer, who built the chemical multinational Allied Chemical and Dye Corporation (later Honeywell) and who owned the Washington Post. He too had no direct experience working on eradicating poverty or building public infrastructure. It was through the World Bank that the United States pushed an agenda to privatize public institutions. Men such as Banga have been integral to the fulfillment of that agenda.

Banga has also played a major part in the global war on cash, particularly during his more than 10-year tenure at Mastercard. For payment companies like Mastercard and Visa that generate fees from facilitating money transfers between banks accounts, cash is their number one rival. In 2010, just months into his now job as CEO, Banga openly declared war on cash:

“In today’s terms, only 3% of retail spend in India or in China are through electronic payments. The rest is cash. I have declared war on cash; I believe MasterCard will grow by growing against cash. If you keep looking at 3%, everybody’s a rival; if you look at the remaining 97%, everyone’s a partner.

The strategy appears to have paid off, at least for Mastercard shareholders: During his 11-year tenure, the company tripled revenues, increased net income sixfold and grew its market capitalization from under $30 billon to more than $300 billion.

By 2017, Banga was calling for companies to work together “to take cash out,” albeit not quite completely. In other words, to kneecap it. From Livemint:

Eighty-five percent of the world’s retail payments—person to merchant are in cash. It is 95% plus in this country [India] even after demonetization. It’s 80% in Japan. So it is not a developed country versus developing country thing. It is a huge open marketplace. And no one company can win it by itself. It is going to need lots of companies focusing on taking out cash because cash is expensive and cash is not useful the way it used to be.

It shouldn’t be zero. It’s got a role to play, it’s anonymous and people like anonymity, its fungible and people like fungibility. I am respectful of that but why should it be 95%. So who do I view as my competition? Cash. I don’t view another network, I don’t view Paytm, I don’t view Apple as competition. We are actually working with all of them. They all need our technology.

A Decade of Demonising Cash 

Both Mastercard and Visa have played arguably the biggest role in demonising cash over the past decade or so. As Brett Scott documents in his book Cloud Money, the payments industry has “consistently cast card payments as being safer, cleaner and higher status than cash, thereby slowly associating the latter with crime, disease and low status.”

The demonisation campaign hit a whole new level when cash became erroneously associated with COVID-19 infections…

Read the full article on Naked Capitalism

Mining Corporations Are Up in Arms Over Mexican Government’s Potentially Game-Changing Mining Reform Proposals

Mexico’s government already faces the threat of international dispute settlements over its energy reforms and proposed ban of GM corn. It now wants to radically change the rules of the game for its huge mining sector.

Mexico is the world’s largest silver producer, accounting for roughly one out of every five metric tons of the precious metal mined in 2021. It is also among the top ten global producers of 15 other metals and minerals (bismuth, fluorite, celestite, wollastonite, cadmium, molybdenum, lead, zinc, diatomite, salt, barite, graphite, gypsum, gold, and copper). For the past 31 years the country has functioned as a veritable paradise for global mining conglomerates, serving up some of the laxest regulations in Latin America. But that could all be about to change.

The Mexican parliament’s lower chamber on Monday (April 17) began debating a proposed overhaul of the country’s mining law. Also under debate are proposed amendments to the National Water Law, the General Law of Ecological Equilibrium and Environmental Protection, and the General Law for the Prevention and Integral Management of Waste. This comes just two months after Mexican President Andrés Manuel Lopez Obrador (aka AMLO) signed a decree handing over responsibility for lithium reserves to the energy ministry, after nationalizing the country’s lithium deposits in April 2022. 

The main objectives of the reforms are threefold, Mexico’s Economy Minister Raquel Buenrostro told a private meeting of legislators on Monday (April 17): to restore state control over Mexico’s mineral and water resources; to regulate the granting, maintenance, supervision and termination of mining concessions; and to protect human rights, the environment and human health.

What Makes (Made?) Mining in Mexico So Special?

One thing that sets Mexico apart from most, if not all, other resource-rich countries in Latin America is the extreme preferential treatment it grants to the mining industry. In the country’s 1992 Mining Law, mining activity took precedence over all other industries and activities. Article 6 of the law reads:

The exploration, exploitation and beneficiation of the minerals or substances referred to in this Law are public utilities and will have preference over any other use or utilization of the land, subject to the conditions established herein, and only by a Federal Law may taxes be assessed on these activities.

Thanks largely to this bizarre four-line paragraph, the claims of the mining industry on Mexican land have had greater import than not just all other industries but all other human activity. For the next 31 years Mexico’s federal government has been bound by law to act against the interests and rights of both private landlords and local communities in order to guarantee mining companies access to the lands upon which a concession is granted.

“No other mining law on the continent grants preferential access over any type of land use,” Jorge Peláez Padilla, a professor of law at the Autonomous University of Mexico (UNAM), told the investigative journalist website Contralinea in 2013. The result has been rampant expropriations of private — and in some cases communal or even protected park — land, for the sake of private mining operations.

The duration of the concessions granted can also be uncommonly long. The 1992 Mining Law allows concessionaires to explore or exploit Mexican land for 50 years, and up to one century if the interested party requests an extension.

The law was the brainchild of Carlos Salinas de Gortari, who served as president of Mexico between 1988 and 1994. As I wrote in my 2014 WOLF STREET piece, Slimlandia: Mexico in the Grip of Oligarchs, in those six years Salinas set Mexico’s economy upon a path of rampant privatisation, deregulation and liberalisation:

During his… presidency Salinas not only signed up to NAFTA, but he also embarked on a privatization spree, selling off mines, banks, railways, electricity networks and, of course, Telmex, the national telephone company. Salinas relied on a relatively small group of Mexico’s oligarchy to supply him with campaign (and perhaps personal) funds, in return for the sale of state assets at favorable rates and terms…

Just as happened in Yeltsin’s Russia, the “liberalization” and privatization of Mexican markets has given rise to a new über-caste of oligarchs. More than half of the 11 Mexican tycoons featured on Forbes’ 2012 Rich List (who between them controlled a total wealth of $129.7 billion) are or once were owners of former state-run enterprises. They include owners or important shareholders of mines (Germán Larrea and Alberto Bailleres), telecoms companies (Carlos Slim, Ricardo Salinas Pliego and Emilio Azcárraga) and banks (Roberto González Barrera, Alfredo Harp Helú and Roberto Hernández Ramírez).

Unhappy Miners

Unsurprisingly, mining companies, both Mexican and foreign, are not overly happy about the prospect of losing the preferential regulatory treatment to which they have grown accustomed. The Mexican association of mining engineers, metallurgists and geologists (AIMMGM) warned in a statement that the proposed reforms represent an existential threat to the industry by drastically altering the procedures for obtaining mining concessions, the exercise of investors’ rights and compliance with regulatory obligations, as well as the penalties for failing to do so…

Read the full article on Naked Capitalism

German Vaccine Maker BioNtech Faces Series of Lawsuits for Alleged COVID-19 Vaccine Harms

The experimental mRNA COVID-19 vaccines that were developed and launched to market in record time, generating record profits for their manufacturers as well as injuries for untold thousands, will be put to the test before the German courts.

The Mainz-based pharmaceutical company and Pfizer partner BioNtech is facing a series of lawsuits in its native Germany for suspected injuries and adverse events caused by its COVID-19 vaccine. The lawsuits were supposed to begin at the end of this month (April 2023) but have been pushed back to July 7. The two law firms bringing the suits, from Düsseldorf and Wiesbaden, are representing 185 claimants, and plan to extend the scope of the suits to include the three other main vaccine manufacturers (presumably in reference to Moderna, Janssen and AstraZeneca).

The experimental mRNA COVID-19 vaccines that were developed and launched to market in record time, generating record profits for their manufacturers as well as injuries for untold thousands, will now be put to the test before the German courts. If successful, the class action suit may pave the way for similar suits in other parts of the world. If so, it is likely to be the national governments that bought the vaccines and made them de facto mandatory by making life unbearable for the unvaccinated, rather than the vaccine makers themselves, that will end up bearing the costs.

To its minimal credit, the German government, unlike most of its counterparts in Europe, is at least beginning to acknowledge some of the harms caused by COVID-19 vaccines. It has even coined a name for the phenomenon: post-vac syndrom.

The Tricky Task of Proving Causation

Anyone who suffers permanent health damage as a result of a recognized vaccination complication can apply for at least a modest pension from one of the state’s pension offices. For all other suspected vaccination complications, it is far more difficult to receive compensation. In early July, the first of the 185 claimants will finally have her day in court. She allegedly suffered heart damage as a direct result of vaccination, reports the Spanish daily ABC (translated by yours truly):

The woman, who according to her lawyer works in the medical profession, wants to remain anonymous. She alleges that she was forced to get vaccinated in order to keep her job and she blames (BioNtech) for having put a vaccine on the market whose side effects had not been sufficiently studied. The crux of the matter will be whether her lawyers can demonstrate causality, whether there is a direct connection between the vaccination and the damage, in addition to excluding and ruling out other possible causes.

A second female litigant complains of suffering from a herpes-associated illness, lung disease, menstrual disorders, nervous system dysfunction and vision problems, reports Der Tagesspiegel. A third woman experienced, among other things, severe muscle twitching after the vaccination and was bedridden for seven weeks.

BioNtech insists that “so far in none of the cases [it has] examined has a causal connection between the described health impairments and the vaccination with Comirnaty been proven.”

“We take our responsibility as a vaccine manufacturer very seriously,” carefully examining each case, said a company spokeswoman. BioNtech, like all COVID-19 vaccine makers, is essentially immune from liability for any harms its products may produce. It can also fall back on the correlation vs causality argument. “When evaluating the case,” said the spokeswoman, “we can rely solely on the medical facts to evaluate whether there is a causal relationship or not. Unfortunately, that is what is often missing.”

Germany’s Shifting Vaccine Landscape

When Pfizer-BioNtech’s experimental mRNA COVID-19 vaccine hit the market, in December 2020, it was met with a mixture of relief, excitement and pride in Germany, the country where it was developed. That enthusiasm was not shared by all German citizens, however, with the result that by the autumn of 2021 Germany had somewhat lower vaccination rates than some of its Western European neighbours. The government’s response was to ramp up the coercive pressure on the unvaccinated.

Germany came closer than just about any Western country to enacting a universal COVID-19 vaccine mandate. Through its vaccine passport system, it systematically discriminated against millions of unvaccinated civilians, depriving them of access to basic government services, public buildings and even the ability to travel or work. Like neighboring Austria, it also experimented with targeted lockdowns of the unvaccinated.

In August 2022, by which time it was abundantly clear that the vaccines prevented neither systemic disease caused by SARS-CoV-2 or transmission of the virus and many EU countries, including even Austria, had softened or suspended their COVID-19 vaccine passport restrictions, Germany’s Health Minister Karl Lauterbach was talking about taking them to a whole new level. As I reported at the time, this included plans to repurpose the Corona-Warn-App into a color-coded system as a means of more easily corroborating people’s vaccination status.

The app’s different colors would confer different rights in the future. Those rights would apparently include the ability to access certain public places as well as the right not to wear a mask in hospitality venues. In the end, the plans came to nothing, perhaps due to the intensity of the public backlash. A few months later, the German government was threatening to cancel its vaccine deals as its stockpiles of unused vials kept rising, and Lauterbach found himself at the center of one of the biggest vaccine injury scandals to have emerged since the pandemic.

Lauterbach’s U-turn

On numerous occasions Lauterbach had claimed that the COVID-19 vaccines were “without side effects,” even as the Paul-Ehrlic-Institute (PEI), Germany’s medical regulatory body and research institution for vaccines and biomedicines, was reporting growing numbers of vaccine injuries. By the summer of 2022, it had lodged 323,684 cases of vaccine side effects resulting from a total of 183 million single vaccine jabs: an average rate of 1.8 cases per 1,000 doses. Severe vaccine side effects were clocking in at an average of around 0.3 per 1,000.

That was a significant understatement, according to German health insurance firm BKK Vita. In a letter to PEI in late February 2022, the firm’s board warned of a dramatic under-reporting of the side effects of vaccinations based on the billing data of its health insurance division. According to that data, as many as 2.3% of vaccine recipients — an order of magnitude higher than PEI’s number — were suffering from post-vaccine side effects…

Read the full article on Naked Capitalism

Austria’s Third Largest Lender, Raiffeisen Bank International (RBI), Is Trapped In Russia, Its Most Lucrative Market

Raiffeisen Bank International (RBI) is one of the few large European banks that continues to conduct business more or less as usual in Russia. But as the profits from its Russian operations surge, the associated risks and costs are also rising.

Since the introduction of a law in August 2022 allowing Russian President Vladimir Putin to directly block the disposal of Russian subsidiaries of foreign businesses from “unfriendly countries”, it has become increasingly difficult for Western banks to leave Russia. In the meantime, profits at the Russian subsidiaries of some European banks that have stayed put and maintained their operations have soared. They include Austria’s Raiffeisen Bank International (RBI), which until recently had categorically ruled out leaving Russia.

But the pressure is rising. The US government appears to be turning the screws on certain Western lenders that have stayed in Russia and have continued to conduct business more or less as usual there. In February, the US Treasury Department’s Office of Foreign Assets Control (OFAC) launched an investigation into RBI’s business activities related to Russia. As the FT pointed out, “there is no suggestion of wrongdoing. But it signals Raiffeisen is in the sights of both regulators and politicians.”

Soaring Profits, Rising Risks

RBI’s presence in Russia dates back to 1996, when it began rapidly developing a lucrative trade finance business. It later set up a highly successful retail banking operation that is now among the five biggest privately owned commercial banks in the country, with 4.2 million customers and 9,400 staff. Then the war in Ukraine began.

As I noted just over a year ago, the gathering exodus of US and European banks out of Russia sparked by the war could end up providing a boon for RBI. So it has proven. First, the Austrian bank attracted new deposits from Russians reluctant to keep all their money with local lenders. Then it benefited from the rapid appreciation of the ruble following Vladimir Putin’s demand in March 2022 that European countries pay for their gas in rubles as opposed to dollars or euros.

Even though RBI has ended almost all new lending in Russia, with its loan book shrinking by €9bn (30%) year over year by the end of December, its profits have soared. In 2022, its net profit from Russia rose 4.4-fold, to €2.05 billion. The bank’s group profits reached €3.6 billion, up from €1.4bn in 2021. Sixty percent of those profits came from its operations in Russia and Belarus.

Despite the multiple rounds of sanctions Brussels has imposed on Russia, the EU has had to keep its cash lines with Russia open to ensure gas and oil deliveries continue. As many Western lenders have abandoned the Russian market or temporarily closed their operations there, RBI has picked up much of the slack. It is now the largest facilitator of financial transfers into Russia, accounting for 40-50% of all payments in and out of the country, according to the FT.

RBI is also one of only two foreign banks on the Central Bank of Russia’s (CBR) list of 13 “systemically important credit institutions”. But it faces a serious dilemma: since the war began it has become more, not less, dependent on its Russian business. And as the resulting profits surge, the associated risks and costs are also rising. Indeed, the profits themselves are for the moment trapped in Russia and Belarus, thanks to EU-US sanctions.

“We have very, very good results on the one hand, but on the other hand enormous problems,” said chief executive Johann Strobl.

This dichotomy has been reflected in the financial markets. Since their pre-invasion February peak, RBI shares are down just under 50%, whereas the Eurostoxx 600 banking index has staged a full recovery during the same time.

Also, Russia recently started granting loan repayment holidays to their troops fighting in Ukraine. The banks that grant these loans must write off the entire debt if these soldiers are either maimed or killed on the battlefield. This has led to accusations that banks like RBI and Unicredit are complicit in financing Russia’s war effort…

Read the full article on Naked Capitalism

As US and Canada Threaten to Sue Mexico Over Energy Policies, Mexico “Nationalises” Sizable Chunk of Electrical Grid

After years of confrontation and souring relations with Spanish energy giant Iberdrola, Mexico’s AMLO government has just agreed to purchase 80% of the company’s Mexican operations.

Earlier this week, the Mexican government struck an agreement with Spanish energy giant Iberdrola to purchase 13 of its power plants in Mexico. Mexican President Andrés Manuel López Obrador (aka AMLO) hailed the deal as a “new nationalization of the electricity industry,” allowing operational control of the 13 power plants to be transferred to the state-owned Federal Electricity Commission (CFE). With this, CFE will increase its share of the electricity market from just under 40% to 55.5%.

The acquisition was made through a national investment vehicle majority controlled by Mexico’s National Infrastructure Fund (Fonadin), a subsidiary of the National Works and Public Services Bank (Banobras). For its part, Fonadin is managed by Mexico Infrastructure Partners, an asset manager of investment funds in the infrastructure and energy sectors, and it will essentially be leasing control of the power plants to CFE. In other words, there are a lot of moving parts to this “nationalisation” process.

Iberdrola’s CEO, Ignacio Galan, described the deal as a win-win while expressing hard-earned respect for Lopez Obrador’s drive to increase state control over energy:

“That energy policy has moved us to look for a situation that’s good for the people of Mexico, and at the same time, that complies with the interests of our shareholders.”

By agreeing to sell up, Iberdrola has been able to put to rest a raft of lawsuits it was facing in Mexico, which could have cost as much as $800 million in litigation costs. The company will now be focusing most of its attention on the US and European markets, where it hopes to graze on the succulent green energy subsidies offered in the US government’s Inflation Reduction Act and the EU’s REPowerEU plan.

Iberdrola’s decision to divest most of its assets in Mexico, until recently one of its most important markets, is part of a growing trend I warned about back in September 2021, in Why Are Spanish Companies Beating a Retreat from Latin America:

For the past 30 years the region has provided huge money-making opportunities for many of those companies. It has also served as a giant springboard for international expansion as well as a highly lucrative home from home during Spain’s sovereign debt crisis. But in the face of deteriorating economic conditions, rising political uncertainty, depreciating currencies and growing resource nationalism in the region, some firms are now getting cold feet.

Rough Relations

The deal is the culmination of roughly two years of intense — and often not very cordial — negotiations between Iberdrola, Spain’s largest energy company, and the Mexican government.

AMLO has repeatedly likened the power Iberdola holds over Mexico’s energy resources to the Spanish conquistadors of the 16th century. It hardly helps that Iberdrola appointed AMLO’s long-time rival, former President Felipe Calderón Hinojosa, as well as Calderón’s former energy secretary, Georgina Yamilet Kessel Martínez, to its international board. At one point, AMLO even threatened to pause diplomatic relations with Spain over the abuses of its energy and infrastructure firms.

The 13 (mostly natural gas-powered) plants represent around 80% of Iberdrola’s installed capacity in Mexico. Their combined electricity generation capacity is 8,539 megawatts (MW), with almost 99% of that amount coming from the 12 combined-cycle natural gas plants. A major player in the global renewables sector, Iberdrola is — or at least was — the largest private participant in Mexico’s electricity industry.

The company landed in Mexico in the late 90s, lured by the opportunities offered by then President Ernesto Zedillo’s electricity reforms. It expanded rapidly during the following six-year terms of Vicente Fox, Felipe Calderón and Enrique Peña Nieto. Mexico quickly became a key market in its aggressive international expansion strategy. By 2020 it was the largest private electricity producer in Mexico, with a market share of around 20% (compared to 39% for CFE).

Peña Nieto’s energy reform bill of 2014 gave even freer rein as well as generous government subsidies to foreign companies in the energy sector. By the time AMLO came to power in late 2018, private companies, almost all of them foreign-owned, controlled more than half of Mexico’s electrical grid. They also enjoyed huge sway over the country’s civil service, regulatory bodies, and judicial and legislative branches.

Different Government, Different Rules

But all of that changed when AMLO came to power in late 2018. For the first time in 30 years Mexico had a government that was not only determined to halt the privatisation and liberalisation of Mexico’s energy market but to begin dialling it back. Allegations of corrupt practices and price gouging by Iberdrola and other energy companies became a popular talking point at AMLO’s morning press conferences. The juicy contracts began drying up. Instead, a range of obstacles began forming, from disconnections to nonrenewal of permits and fines for price gouging.

The times of plenty had come to an end. And not a moment too soon…

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First Russian Shipment of (Allegedly) Diesel Docks in Mexico Since G7 Plus-Imposed Price Cap, Stoking Controversy and Confusion

The ultimate irony: if the ship was indeed carrying Russian diesel, it was probably able to skirt the price cap rules due to a cheeky little manoeuvre in Spain.

Last Thursday (March 30), a cargo ship called the Loukas I landed at the Mexican port of Guaymas, in Sonora. The vessel had set off from Novorossiysk, Russia, on February 19 and done a stopover in Spain. But it is not clear what was on board. For weeks the London-based price reporting agency Argus Media maintained that the ship was carrying Russian diesel. If true (a big “IF”), it would make it the first tanker of Russian oil to dock and unload in a Mexican port since the G7 imposed a cap on the price of Russian petroleum products in February.

From El País:

The Argus consultancy, an organization that produces international market analysis, mentioned in a report that the Loukas I was heading to Mexico loaded with 145,400 barrels of diesel of Russian origin. The prestigious firm explained that the ship, which left from Novorossiysk, Russia, would be the first of several fuel shipments brought to the Mexican market.

“The Government of Mexico, through its state company Petróleos Mexicanos, aims to keep increases in gasoline and diesel prices below the inflation rate (…) A cheaper fuel supply from Russia could alleviate the pressure on Mexican finances”, said the consultant in a report that has generated a lot of attention.

The Russian Embassy described the allegations as “fake news” while the port authorities in Guaymas insisted the vessel was carrying Russian fertilisers. Petróleos Mexicanos (aka Pemex) also denied the claims, asserting that the shipment was for a private company: “It is not ours or one of our subsidiaries’”. Mexico gets most of its diesel from US refineries, though Pemex has recently increased its output of finished gasoline and diesel.

A Small, Shrinking Club

In February, as readers are well aware, the G7, the European Union and Australia agreed to limit the price of Russian diesel and other refined petroleum products, in the hope of squeezing Russian revenues. They set two price limits: a $100 per-barrel cap on products that trade at a premium to crude, such as diesel, and a $45 cap for petroleum products such as fuel oil and industrial lubricant oil.

Relatively speaking, this is a small club of countries, accounting for roughly one-eighth of the global population — the so-called “Golden Billion,” as Putin disparagingly calls it. But its numbers are shrinking in size: in recent days G7 member Japan, one of the original signatories of the price cap measures, broke ranks and is now buying Russian oil at prices above the cap once again, arguing that its economy needs continued cheap access to Russian energy. 

So far, no other countries beyond the “Golden Billion” have agreed to apply the price caps. Instead, global demand for Russian diesel appears to be rising. According to Argus, Russian diesel exporters were more successful in selling their products in March thanks to higher discounts. This, it says, “has encouraged significant shipments from Russia to the Middle East, West Africa, transatlantic to Brazil and now to Mexico.”

But what was actually on board the Loukas I?

According to Guillermo Von Borstel, the commercial director of the Guaymas Port Administration, the Loukas I was not carrying diesel at all but instead liquid NPK fertilizers (Nitrogen (N), Phosphorus (P) and Potassium (K)). This argument holds a certain amount of water (if you’ll excuse the pun). Mexico, like Brazil and other economies in Latin America, is heavily dependent on Russian imports of fertiliser components. What’s more, Guaymas has specialised facilities for processing liquid fertilisers, says Von Borstel:

This type of product is normally handled at this port. There is a specialized station run by a North American company that distributes these urea and UAN 32 fertilizers to the north of Sinaloa, Sonora, Baja California and Arizona.

I don’t know where in the ocean the ship loaded up on fuel, but it would only be the marine fuel needed to operate the vessel. There is a terminal [in this port] specifically meant for hydrocarbons operated by Pemex, but it did not go there it. Over the last few years the fuel tankers have been received by Pemex.”

Given Russian fertilisers are not subject to sanctions, the port authorities in Guaymas allowed the ship’s content to be unloaded, says Von Borstel. As such, it remains a mystery what was actually on board the Loukas I. For the moment, it is the word of Mexico’s state-owned oil company and the port authorities in Guaymas against that of London-based price-reporting agency Argus Media.

The irony is that if the Loukas I was indeed transporting Russian diesel, it was probably able to skirt the price cap rules with a little help from EU Member Spain, where it took a stopover during its voyage from Novorossiysk, says Argus:

The European Commission’s price cap guidelines state that an oil product will no longer be considered of Russian origin if blending operations in a third country involving oil products result in a different product with a different customs code.

Spain has become a vital cog in Russia’s restructured oil supply lines. In late January, Bloomberg‘s Javier Blas reported that the Spanish enclave of Ceuta was being used to switch (and in the process blend) Russian oil from smallish Russian vessels to Very Large Crude Carriers, or VLCCs. Amid the resulting fallout, Spanish authorities warned shipping companies of the risks of flouting the sanctions, yet over a month later large volumes of Russian oil were still being switched off the Spanish coast, according to Bloomberg.

Souring US-Mexico Relations

Even if the Loukas I was carrying Russian diesel, this, in and of itself, should not be controversial given that Mexico is not party to the price cap on Russian oil and has not lent its support sanctions against Russia. But, of course, it is controversial. Some Mexican journalists and pundits have warned that it risks further exacerbating tensions between the US and its southern neighbor.

In one tweet, the Spanish-Mexican veteran journalist Joaquín López-Dóriga asked why AMLO had not joined the “global” blockade on Russian exports, which elicited a swift, sharp rebuke from the Russian Embassy in Mexico (translated by yours truly):

“We remind those who forget that 85% of the global population did not impose sanctions against Russia.”

They include, much to Washington’s chagrin, the US’ second largest trading partner, Mexico. Just over a year ago, the US Ambassador to Mexico Ken Salazar cautioned Mexican lawmakers against cosying up to Russia:

The Russian ambassador was here (in Mexico’s Congress) yesterday making a lot of noise about how Mexico and Russia are so close. This, sorry, can never happen. It can never happen.

If Mexico, the US’ direct neighbour to the south and second largest trading partner, were flouting the US-spearheaded sanctions against Russia, the resulting fallout could provide a “new source of friction” between the two countries, says the Bloomberg-affiliated outlet El Financiero...

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