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Putin offers Trump one-year extension to nuclear arms treaty

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Russian president Vladimir Putin has offered to extend a crucial nuclear treaty with Washington by one year in a move that could hand Donald Trump a foreign policy win before the US presidential election.

Mr Putin told his security council on Friday that “it would be exceedingly sad” if New Start, a 10-year bilateral accord that limits US and Russian nuclear warheads, were to expire on February 5.

“I have an offer: to extend the existing agreement without preconditions for a year at least, in order to have the possibility to hold constructive negotiations on all parameters of the issues regulated by such agreements,” Mr Putin told foreign minister Sergei Lavrov. “Try to get some sort of coherent answer out of them as soon as possible.”

The Trump administration had refused to accept Russia’s earlier offer to extend the treaty for five years without preconditions, terms that are acceptable to Joe Biden, Donald Trump’s Democratic opponent. If elected at next month’s polls, Mr Biden would take office in January with little more than a fortnight to negotiate and sign a five-year extension, however.

The Trump administration is seeking to rack up foreign policy wins in the final stretch of the campaign before the November 3 election as US president tries to narrow Mr Biden’s lead in national polls.

Mr Trump said this month that US troops “should” return home from Afghanistan by Christmas, and claimed last month that “five or six” more countries were ready to strike US-brokered deals to normalise relations with Israel, following in the steps of the United Arab Emirates and Bahrain.

However the Trump administration has been unwilling to extend the treaty with Russia without extracting an agreement from Moscow to freeze its entire nuclear arsenal, including smaller tactical nuclear weapons that are not covered by the agreement but make up as much as 55 per cent. The US also wants to include China in nuclear accords.

Alexandra Bell, senior policy director at the Center for Arms Control and Non-Proliferation, said a short extension of the treaty would be “infinitely preferable” to expiration. But it would be better for both sides to extend the treaty for a full five years to “provide a more secure environment for Washington and Moscow to create new and expanded agreements,” she added. 

Marshall Billingslea, presidential envoy for arms control, did not immediately appear to respond to the offer. State Department did not immediately respond to a request to comment. 

Mr Lavrov said US intransigence over “quite a large number of [US] preconditions that go beyond both the treaty itself and our competence” had led to a “critical situation” where “work on extending the treaty without preconditions that are not contained in it has basically not even begun.” 

He warned that Russia would be left without “any sort of other instrument that ensures any kind of joint approaches to strategic stability” after US withdrawal from a series of other treaties. “Everything else has either already been destroyed or the Americans are offering to end it,” he said.

Mr Putin said Russia was willing to discuss China’s involvement and restrictions on new Russian hypersonic weapons, as well as Moscow’s own concerns over US missile defence and a conventionally armed long-range strategic cannon.

“In previous years New Start has worked faultlessly by fulfilling its fundamental role to limit and contain the arms race,” the Russian leader said. “Obviously, we have new weapons systems that the American side doesn’t have, at least not yet. But we are not refusing to discuss that side of the issue either.”

US national security adviser Robert O’Brien revived talks when he met his Russian counterpart Nikolai Patrushev in Geneva this month. The encounter was followed by talks in Helsinki between Mr Billingslea and deputy foreign minister Sergei Ryabkov.

The gap between the two sides was evident on Tuesday after Mr Ryabkov said the US stance was “unacceptable” — hours after Mr Billingslea said the US believed there was “an agreement in principle at the highest levels of our two governments”.

Andrei Baklitsky, senior research fellow at Moscow’s MGIMO university, wrote on Twitter: “One thing is clear: no deal for Trump before the elections. It’s either a one-year extension of the [New Start treaty] or nothing. I almost feel sorry for [Mr Billingslea], who was telling everyone that there’s a deal agreed in principle, which will materialise within a week. Or will he simply say that President Putin is not attuned to the Russian leadership?”



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Emerging Markets

Bond sell-off roils markets, ex-Petrobras chief hits back, Ghana’s first Covax vaccines

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The yield on the benchmark 10-year Treasury exceeded 1.5 per cent for the first time in a year and the outgoing head of Petrobras warns Brazil’s President Jair Bolsonaro against state controlled fuel prices. Plus, the FT’s Africa editor, David Pilling, discusses the Covax vaccine rollout in low-income countries. 

Wall Street stocks sell off as government bond rout accelerates

https://www.ft.com/content/ea46ee81-89a2-4f23-aeff-2a099c02432c

Ousted Petrobras chief hits back at Bolsonaro 

https://www.ft.com/content/1cd6c9fb-3201-4815-9f4f-61a4f0881856?

Africa will pay more for Russian Covid vaccine than ‘western’ jabs

https://www.ft.com/content/ffe40c7d-c418-4a93-a202-5ee996434de7


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Petrobras/Bolsonaro: bossa boots | Financial Times

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“Brazil is not for beginners.” Composer Tom Jobim’s remark about his homeland stands as a warning to gung-ho foreign investors. Shares in Petrobras have fallen almost a fifth since President Jair Bolsonaro said he would replace the widely respected chief executive of the oil giant.

Firebrand Bolsonaro campaigned on a free-market platform. Now he is reverting to the interventionism of leftist predecessors. It is the latest reminder that a country with huge potential has big political and social problems.

Bolsonaro reacted to fuel protests by pushing for a retired army general to supplant chief executive Roberto Castello Branco, who had refused to lower prices. This is politically advantageous but economically short-sighted.

Fourth-quarter ebitda beat expectations at R$60bn (US$11bn), announced late on Wednesday, a 47 per cent increase on the previous quarter. This partly reflected the reversal of a R$13bn charge for healthcare costs. Investors now have to factor the cost of possible fuel subsidies into forecasts. The last time Petrobras was leaned on, it set the company back about R$60bn (US$24bn at the time). That equates to 40 per cent of forecast ebitda for 2021.

At just over 8 times forward earnings, shares trade at a sharp discount to global peers. Forcing Petrobras to cut fuel prices will make sales of underperforming assets harder to pull off and debt reduction less certain. Bidders may fear the obligation to cap prices will apply to them too.

A booming local stock market, rock bottom interest rates and low levels of foreign debt are giving Bolsonaro scope to spend his way out of the Covid-19 crisis. But the economy remains precarious. Public debt stands at 90 per cent of gross domestic product. The real — at R$5.40 per US dollar — remains near record lows. Brazil’s credit is rated junk by big agencies.

Rising developed market yields will make financings costlier for developing nations such as Brazil. So will high-handed treatment of minority investors. It sends a dire signal when a government with an economic stake of just over a third uses its voting majority to deliver a boardroom coup.

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South Africa’s economy is ‘dangerously overstretched’, officials warn

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South Africa is pushing ahead with plans to shore up its precarious public finances as officials warn the economy is “dangerously overstretched” despite the recent boom in commodity prices.

Finance minister Tito Mboweni hailed “significant improvement” as he delivered the annual budget on Wednesday and said that state debts that will hit 80 per cent of GDP this year will peak below 90 per cent by 2025, lower than initially feared.

But Mboweni warned that President Cyril Ramaphosa’s government was not “swimming in cash” despite a major recent tax windfall. The Treasury now expects to collect almost 100bn rand ($6.8bn) more tax than expected this year after a surge in earnings for miners. This compares with a projected overall tax shortfall of more than 200bn rand. Still, the finance minister made clear that spending cutbacks would be necessary.

“Continuing on the path of fiscal consolidation during the economic fallout was a difficult decision. However, on this, we are resolute,” Mboweni said. “We remain adamant that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.”

The pandemic has hit South Africa hardest on the continent, with 1.5m cases recorded despite a tough lockdown. An intense second wave is receding and the first vaccinations of health workers started this month. More than 10bn rand will be allocated to vaccines over the next two years, Mboweni said.

‘We remain adamant that fiscal prudence is the best way forward’ – South African finance minister Tito Mboweni © Sumaya Hisham/Reuters

Even before the pandemic’s economic hit, a decade of stagnant growth, corruption and bailouts for indebted state companies such as the Eskom electricity monopoly rotted away what was once a prudent fiscus compared with its emerging market peers. 

Government spending has grown four per cent a year since 2008, versus 1.5 per cent annual growth in real GDP. The country’s credit rating was cut to junk status last year. Despite this year’s cash boost, the state expects to borrow well over 500bn rand per year over the next few years. The cost to service state debts is set to rise from 232bn rand this year to 338bn rand by 2023, or about 20 cents of every rand in tax.

The fiscal belt-tightening will have implications for South Africa’s spending on health and social services. On Wednesday Mboweni announced below-inflation increases in the social grants that form a safety net for millions of South Africans. “We are actually seeing, for the first time that I can recall, cuts in the social welfare budget,” said Geordin Hill-Lewis, Mboweni’s shadow in the opposition Democratic Alliance.

The finance minister is also facing a battle with union allies of the ruling African National Congress over a plan to cap growth in public sector wages. South Africa lost 1.4m jobs over the past year, according to statistics released this week. The jobless rate — including those discouraged from looking for work — was nearly 43 per cent in the closing months of 2020.

The South African treasury expects the economy to rebound 3.3 per cent this year, after a 7.2 per cent drop last year, and to expand 2.2 per cent and 1.6 per cent next year and in 2023 — growth rates that are widely seen as too low in the long run to sustain healthy public finances.

“The key challenges for South Africa do however persist, clever funding decisions aside,” Razia Khan, chief Middle East and Africa economist for Standard Chartered, said. “Weak structural growth and the Eskom debt overhang must still be addressed.” 



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