Interpreting Middle East Economic News and Analyzing Market Trends

Archive for April, 2013

Mashreq Bank sues ING over $43 million derivatives loss

The fallout from derivative losses continues…


ING Groep NV, the largest Dutch financial-services company, was sued in the U.S. by Dubai’s Mashreq Bank PSC (MASQ) over a $43 million investment loss tied to derivative securities.

Mashreq said in a complaint filed yesterday in Manhattan federal court that it invested conservatively with ING in 2005 and that in 2007 ING wrongly revised the investments to include collateralized debt obligations and other risky instruments.

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Top 10 reasons why Egypt is headed for economic disaster

Since the end of the revolution in 2011, there has been a lot of optimism on Egypt’s future.  In 2012, Egypt witnessed a democratic election which signaled an end to decades of Mubarak’s authoritarian rule.  The military stepped down and allowed a democratic transition to take place.  For the first time many Egyptians felt hope and optimism that the future will be much brighter for them.  This optimism was felt outside Egypt as well as foreign investors began looking at investing in Egypt.  Middle Eastern investors took the opportunity to snap up Egyptian banks.

This optimism, however, has now faded as the difficulty in transitioning to democracy became apparent.  Since President Mursi took office, things have been going down hill for the country.  Egypt faces enormous challenges, which few are willing to discuss much less attempt to address.  This is why we see Egypt headed for economic disaster.  Here are the top 10 signs that show why the country is facing such an ugly future:


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Kurds sell oil in defiance of Baghdad, dispute to escalate

Kurdistan stopped oil exports earlier this year in an attempt to resolve the dispute with the central government.  It was also under pressure from international oil companies to come to a lasting agreement in order to avoid having their contracts declared void by Baghdad.  International oil companies are heavily invested in Kurdistan, which is seen as having a more favorable business environment and less corruption than Baghdad.  Last week, Kurdistan began selling oil on international markets again to return the snub it received from Baghdad regarding the 2013 budget.


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Kuwait approves debt relief for a select few


The parliamentary debate, which has been going on for months, finally came to an end yesterday with a vote of 50 in favor and 4 against.  The bill calls for the government to buy personal loans of some citizens, write-off interest and reschedule payments.  The total expected cost is $2.6 billion.


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Egypt & Jordan: Taking away subsidies is proving more challenging than expected

Governments in the Middle East, regardless whether they have oil wealth or not, are being forced to rethink the subsidies they give to their citizens either to shore up their finances or to move along a more sustainable path.  We’ve discussed issues with subsidies in previous posts, here, here, here and here.  


Government’s in the region put themselves in the predicament they are in decades ago as a way to keep their citizens happy and give them a sense that their governments are doing something for them.  However, decades later and millions of people later, these governments are facing a financial crisis and no longer have a choice but to reduce subsidies.  In doing so, they are putting their survivability at risk as is the case with Egypt and Jordan (see below).


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