Emerging Markets Daily - August 17
Aramco Eyes $25B Stake in India's Reliance, Pakistan and the Taliban, Zambia's Post-Election Economy, Indians Flock to Natural Gas Cars, Water Shortages Brew Wars
The Top 5 Stories Shaping Emerging Markets - August 17
Aramco in Talks for $25 Billion Deal to Buy Stake in India’s Reliance
“Saudi Aramco is in advanced talks for an all-stock deal to acquire a stake in Reliance Industries Ltd.’s oil refining and chemicals business, people with knowledge of the matter said.”
“The Saudi Arabian firm is discussing the purchase of a roughly 20% stake in the Reliance unit for about $20 billion to $25 billion-worth of Aramco shares, the people said, asking not to be identified because the information is private. Reliance, which is backed by Indian billionaire Mukesh Ambani, could reach an agreement with Aramco as soon as the coming weeks, the people said.”
“Shares in Reliance extended gains to as much as 2.6% in Mumbai after the Bloomberg News report.”
“A deal would forge a closer alliance between the world’s biggest oil exporter and one of the fastest-growing consumers. Ties and trade between the two countries have grown in recent years as India looks to bolster its energy security and Saudi Arabia reduces its support for Pakistan over the disputed territory of Kashmir. Riyadh and New Delhi elevated their relationship to a “strategic partnership” in 2019.”
“It would seal more than two years of negotiations and mark Aramco’s first all-stock deal since its initial public offering in 2019. Ambani confirmed talks about a deal with an implied stake valuation of $15 billion that same year. Discussions were delayed by the onset of the coronavirus pandemic and slump in oil prices.” Bloomberg reports.
Pakistan’s Glee over Taliban Takeover Obscures Domestic Threats
Financial Times
“As the Taliban swept into Kabul on Sunday after a dramatic military offensive, the leaders of neighbouring Pakistan did not hide their schadenfreude at the ignominious end to the 20-year US mission in Afghanistan.”
“Prime Minister Imran Khan declared that Afghans had ‘broken the shackles of slavery’. Raoof Hasan, his special assistant, wrote on Twitter that ‘the contraption that the US had pieced together for Afghanistan has crumbled like the proverbial house of cards’. As Afghan president Ashraf Ghani fled the country, Hasan hailed what he called ‘a virtually smooth shifting of power’ from Ghani’s ‘corrupt’ government to Taliban rule.”
“…Yet Pakistan has plenty to lose from the Taliban’s ascendancy, which risks triggering problems ranging from a flood of refugees to a resurgence of domestic terrorism linked to the insurgents, which has killed thousands of Pakistanis.”
“…Some sympathised with the Islamists’ extreme ideology, while others deemed it an indispensable asset to counter India. Taliban leaders have lived and done business in Pakistan, and wounded fighters have been treated in its hospitals.” Benjamin Parkin and Farhan Bokhari report
Spotlight on Zambia’s Economy as Opposition Leader Wins Election
African Business
“Zambia’s opposition leader Hakainde Hichilema has won a landslide victory in a fiercely contested election that was centered on a failing economy and rising unemployment in Africa’s second-largest copper producer.”
“The decisive victory for the long-time opposition leader looks set to buoy rattled investor confidence amid a hostile regulatory environment in the mining sector, a Eurobond default in December and over $12bn in external debt. The new president will have to move quickly to agree a bailout with the IMF and revamp talks with creditors to stop further damage to the economy, experts say.”
“Zambia’s economy has borrowed heavily to bankroll questionable infrastructure projects since Lungu took power in 2015.”
“Central to keeping the southern African country’s economy afloat is to strike a debt deferral deal with China, Zambia’s largest creditor, says Eric Olander, managing editor of The China Africa Project website and podcast.” Tom Collins reports
Indians Turn to Natural Gas-Powered Cars after Gasoline Price Hikes
Nikkei Asia
“With gasoline prices soaring and electric vehicles prohibitively expensive for most people, Indians are turning to cars running on a cheap alternative fuel, compressed natural gas.”
“The surge in demand has left India's two sellers of these vehicles racing to stay ahead as new players like Tata Motors and Honda Motor prepare to enter the market. It has also generated a burst of investment in CNG fuel infrastructure.”
“After 41 gasoline price hikes since May -- the result of surging global oil prices -- drivers are paying more than 100 rupees ($1.35) per liter in most parts of the country, almost 25% higher than at the start of the year.”
“…CNG, which results in fewer global warming emissions than gasoline, is made by compressing natural gas to less than 1% of its volume. It is used across India to heat homes. Elsewhere, it fuels some larger vehicles such as buses.” Kapil Kajal reports
How Water Shortages are Brewing Wars
BBC
“Unprecedented levels of dam building and water extraction by nations on great rivers are leaving countries further downstream increasingly thirsty, increasing the risk of conflicts.”
“…Water scarcity affects roughly 40% of the world's population and, according to predictions by the United Nations and the World Bank, drought could put up to 700 million people at risk of displacement by 2030. People like van der Heijden are concerned about what that could lead to.”
“…Over the course of the 20th Century, global water use grew at more than twice the rate of population increase. Today, this dissonance is leading many cities – from Rome to Cape Town, Chennai to Lima – to ration water. Water crises have been ranked in the top five of the World Economic Forum's Global Risks by Impact list nearly every year since 2012. In 2017, severe droughts contributed to the worst humanitarian crisis since World War Two, when 20 million people across Africa and the Middle East were forced to leave their homes due to the accompanying food shortages and conflicts that erupted.” Sandy Milne reports