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Yemen Houthi rebels claim missile attack on Saudi oil facility

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Yemen’s Iranian-backed Houthi rebels on Monday claimed to have damaged an oil facility in the Saudi port city of Jeddah in a rocket attack, in an assault that would demonstrate their ability to strike deep into the country.

Brigadier General Yahya Sarea, military spokesman for the Iran-allied fighters, said a new Quds-2 cruise missile had accurately targeted a distribution station, prompting fire engines and ambulances to rush to the scene.

The Houthi rebels regularly fire missiles into the kingdom but while most have been around the border area, Jeddah is around 700km to the north. State oil company Saudi Aramco and the government did not respond to requests for comment on the alleged attack.

“This operation came in response to the continued siege and aggression (against Yemen) and in the context of the (Houthi) armed forces’ promise to carry out large-scale operations deep inside Saudi Arabia,” Brig Gen Sarea tweeted on Monday.

Brig Gen Sarea also posted a satellite map image of the facility that tallies with a Google map of Saudi Aramco’s North Jeddah Bulk Plant on the north-eastern outskirts of the city near the airport. On social media, users posted videos of an apparent fire in Jeddah.

The alleged strike, coming after Saudi Arabia’s virtual hosting of the G20 summit on Sunday, would mark an uptick in the Yemen conflict and highlight the increasing range of Houthi missiles.

Saudi Aramco oil facility in Abqaiq
The oil processing hub of Abqaiq is one of the world’s largest processing plants © Maxim Shemetov/Reuters
Houthi rebels in Sana’a, Yemen in 2019
Houthi rebels regularly fire missiles into Saudi Arabia but most have been around the border area © Hani Mohammed/AP

The facility in Jeddah is less crucial to the kingdom’s oil infrastructure than the oil processing hub of Abqaiq, one of the world’s largest processing plants, which last year was damaged by a drone attack claimed by the Houthis.

Saudi Arabia and several of its allies said last year that Iran was behind the strike, a claim denied by Tehran. 

Oil prices edged higher on Monday to above $45 a barrel, but traders said most of the increase was due to the latest positive news on coronavirus vaccines, rather than concerns about supplies.

The uptick in Yemen tensions comes as the Trump administration is reportedly drawing up plans to designate the Houthi movement as a terrorist organisation, a move that aid agencies fear would restrict humanitarian supplies and damage the UN’s efforts to broker a peace deal. 

The impoverished Arab nation has been plunged into a humanitarian crisis since a Saudi-led coalition intervened in the civil war in an effort to restore the internationally recognised government that had been ousted by the Houthis.

The five-year war has descended into a deadly stalemate, with the Houthis still in control of the northern heartlands and the capital, Sana’a. Houthi attacks on Saudi infrastructure targets have increased since May when a ceasefire drawn up to deal with coronavirus ended.

Most Houthi strikes have focused on areas near the Yemeni border, such as the Red Sea port of Jizan, where there is a large oil refinery under construction, and the international airport at Abha.

This month Saudi Arabia said it had dealt with a fire at an offshore oil loading facility near Jizan, after its forces had intercepted two waterborne remote controlled vessels armed with explosives.



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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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