Complex Made Simple

4 things at this year’s G20 that impact regional business

This year’s G20 (Group of 20) summit in Buenos Aires, Argentina will unite 19 leaders of the world’s biggest economies and a representative of the European Union, all in one place. With international relations the way they are today, with trade wars and passive aggressive tensions proliferating, this year’s event could make for an interesting piece of political melodrama. US President Donald Trump alone is bound to make some controversial waves.

Here are some potential highlights to look out for.

The main event: Trump meets Xi

The US and China have been embroiled in an escalating trade war in 2018, imposing tariffs on one another as Donald Trump and Xi Jinping butt heads.

According to the BBC, only days before the summit in Argentina, President Trump said current tariff levels on $200 billion of Chinese imports would rise as planned.

According to China, the US had instigated the “largest trade war in economic history.”

So what will come of the Xi and Trump’s meeting at the G20?

“Expect a deal between at the G-20 summit in Argentina, but manage your expectations,” a Wells Fargo executive told CNBC on Friday.

Al Jazeera reports that Trump told reporters he was open to making a trade deal, as he was leaving the White House for the G20 summit in Argentina and a meeting with Chinese President Xi Jinping.

“I am optimistic that they will strike a deal. I don’t think it’s going to be the deal that either side wants, but I think there will be some concessions,” said Kirk Hartman, global chief investment officer at Wells Fargo Asset Management, to CNBC. “I think this is more about protecting U.S. technology as much as it is trade, so I think you will see some comments on that front.”

He added that any agreement at the meeting “will be extremely positive for the market.”

The threat to GCC-China trade still remains. According to data from the European Union (EU), Chinese imports to the GCC totaled $47.7bn in 2017, representing 11.4% of imports in the region. China was the country with the most imports to the Gulf.

The GCC’s total trade with China was close to $110bn last year, with the largest export from the region being crude oil, and accounts for more than two thirds of China’s trade with the Middle East, according to Nasser Saidi, former chief economist of DIFC, former Lebanese economy minister, who was quoted by gulf daily The National.

The cancelled meeting: Putin and Trump no more

Donald Trump cancelled a meeting with his Russian counterpart, Vladimir Putin, in protest at Russia’s seizure of Ukrainian naval boats, the BBC reported.

The US president said he would not meet Putin because the Ukrainian ships and sailors seized by Russia in the Black Sea near Crimea had not been returned, the British news source continued. Twenty-four sailors were arrested in the Black Sea incident.

Asked what the two leaders would talk about if they met, the US national security adviser, John Bolton, said earlier this week: “I think all of the issues that we have, on security issues, on arms control issues, on regional issues, including the Middle East – I think it will be a full agenda. I think it will be a continuation of their discussion in Helsinki,” the Guardian reported.

Saudi needs crude above $73 on average next year to balance its budget, according to the International Monetary Fund, and as reported by Bloomberg. It lacks the financial reserves of 2014, the last time it decided against cutting output to support prices and instead chose to fight a price war against U.S. shale producers.

Russia, on the other hand, can breakeven at $53 per barrel, according to Renaissance Capital’s calculations. US breakeven levels are similarly lax.

READ: Oil pundits looking at Dec. G20, OPEC meetings for price scenarios

UK PM will try selling BREXIT deal


Prime Minister Theresa May arrives ahead of the G20 summit. Image: Reuters

UK Prime Minister has had a tough time arguing for her BREXIT deal back home, and now she will have to bring her debate to the global stage.

According to the Evening Standard, a British publication, May will take the opportunity to voice her determination for the UK to “play a full and active role on trade on the global stage” after Brexit.

She will tell fellow leaders: “Our relationship with the EU will remain close. A free trade area, with no tariffs, fees, charges, quantitative restrictions or rules of origin checks, will protect jobs, including those that rely on integrated supply chains.”

“International firms that have invested in UK production or use European bases to supply the UK market will benefit from these arrangements,” she continued.

The Middle East could stand to be affected by BREXIT.

“While the Middle East in some respect may be shielded from the negative impacts of Brexit, some industries such as tourism and real estate could still be hit,” Lukman Otunuga, Research Analyst at FXTM, said.

“A welcome development from Brexit could be a scenario where the UK and nations in the Middle East directly agree on beneficial trade deals with each other,” he continued. “This strategy may end up supporting economic growth both ways as key products and services from the UK make their way with greater ease to nations such as Saudi Arabia.”

READ: Middle East economies still dominated by oil sector development

Leaders to mend bridges with Saudi Crown Prince?

While the Saudi government has denied the Crown Prince Mohammad Bin Salman (MBS) had anything to do with journalist Jamal Khashoggi’s murder, some leaders are waiting for more evidence of this.

Before touching down in Buenos Aires, for instance, UK Prime Minister Theresa May said she would raise the controversy of Khashoggi with MBS, the Guardian reported.

At the moment, oil prices are undergoing a continuous dive. WTI is about to hit $50 per barrel, and Brent crude has already dipped below $60.

This puts Saudi in a strong position to help balance oil prices.

In the coming months, as the dust from the US tariffs on Iran settles, international leaders will have to put any uncertainties aside to try and reach an understanding with Saudi regarding the oil market.

A more conclusive decision will surely be reached on December 6 at the upcoming OPEC meeting in Vienna, Austria, where a supply cut is expected to happen.

“ will indicate a cut of between 1 million and 1.5 million, and that will do, the market probably will stabilize,” Johannes Benigni, chairman and founder of consultancy JBC Energy Group, told CNBC.

READ: Past vs. Present: GCC support packages to MENA