tv Best Of Bloomberg Markets Middle East Bloomberg July 1, 2017 1:00am-2:01am EDT
bloomberg's andrew joins us. >> it was like the two sides are very entrenched in their positions. one thing the crisis has been good for is access for the media. we had a briefing by the saudi foreign minister. we have a briefing by the country foreign minister. we have really had a lot of access on both sides trying to understand the points of view. that is a good thing. the bad thing is it doesn't seem as though the two sides are actually talking to each other or even through the mediator, it looks like kuwait is active. it is not clear that those are negotiations per se, more just touching bases. i agree with what you say, becoming entrenched and whenever they come out with the statement, it becomes very difficult to roll that back. you come and say that publicly.
you commit yourself to that stance. as markets prepared to open, we haven't seen many things that we may be nearer to. >> speaking of everybody making public statements and talking, we do have this ten-day deadline that was set. do we have any indication of what happens if qatar does not agree to this list of demands? >> that was one thing. on this list, most people we talked to say this is a blue sky demand. you take a very exaggerated position and walked back from that. we haven't had anybody on the gcc side, and say this is a starting point, they insist that these are the demands that must be met. they say they have 10 days which will bring us to about monday. there was no word on what next steps may be.
that is somewhat problematic because they basically went from zero to 60 overnight in terms of severing land and air and sea ties with qatar. there isn't much left for them to do. where do you go now if on monday, qatar asked to comply with what your demands are and doesn't offer a way forward. what is the gcc to do? there aren't many options that bring this to critical stages. >> could one of those critical stages be military? >> i'm not sure i want to speculate on that, it is certainly -- you could perhaps enforce the blockade. you could seek to enforce that in some other ways, we haven't seen anybody publicly say that that could come in. obviously, the longer that this drags on, you're bringing in other actors, your ring in iran
and turkey's will have their own interests to defend. everybody is becoming entrenched in the positions they are. everybody is becoming entrenched in the positions they are. something could go wrong, the risks are higher. >> it is the world's richest country, they can withstand a very long time. we have had some reports that looked at it as a banking sector and even if all the money was to come out, they can stand up, we know that shipments are coming in, we can track the ships that are bringing in food for qatar. we have stories about how they are flying in cows, they are digging in for the long run,
they consider this a siege. they're taking measures that they feel will protect the sovereignty. i think the idea is if we are waiting to see how long they can last, we will be waiting a long time. we have heard that it is a bit of a ghost town in the airports. it will hurt them but they do have a lot saved up for many days and they can last a wild -- last a while for sure. >> you have a senator in the u.s. saying that the u.s. could block arms sales. how much pressure can the u.s. bring to bear on the situation? >> the u.s. can bring a lot of pressure to bear, they have the military base there. trump has seemed to take sides with saudi arabia. tillerson has taken a more
neutral approach. he knows it extremely well. a lot of the comments he made have been very pragmatic, very middle-of-the-road and we can see the pressure he is exerting their. we are seeing some u.s. senators come in as well. i think the u.s. is stepping up its role and perhaps may be the one that can get these sides to come together. >> were they to comply with all their. we are seeing some u.s. senators come in as well. i think the u.s. is stepping up of those demands completely, that would effectively isolate saudi arabia. i think this is a ambient claim. tillerson asked the saudi's to spell out the demands of qatar. we are in the early part of a process to try to resolve this crisis.
>> rex tillerson was saying that this could be the base, unless that is impossible to fulfill, does that even make sense? >> these are claims that they could walk back, it is some that are great. it could be the basis for a negotiation. the actual demands themselves, i don't see qatar complying with. >> there is nothing in the 13 items that are reasonable? >> it is difficult for them to do. i doubt that qatar is shooting down al jazeera.
qatar cannot afford to break its ties with iran. field with them. -- they share a very logical oil field with them. these are designed to put additional pressure on qatar. there may be discussion on moderating some of the content of al jazeera or moderating some of the connections between qatar and iran. that becomes a basis for discussion. >> since the isolation of qatar that becomes a basis for discussion. >> since the isolation of qatar began, there has been a lot of pieces saying that we could see non-state actors strengthening their presence. the fact that if there was any willingness to continue negotiations with iran, it would have been more beneficial to have a neutral actor mediating in between. how well thought out you think this strategy to isolate qatar is?
>> i think it reflects a lot of frustration on the part of saudi arabia and the uae toward qatar. how well thought out it was, i think that is a very good question given that a short while after president trump was tweeting his support for qatar's isolation, his secretary of state was trying to calm the situation down, i think that some of the pressure that the saudi's and the uae have put on qatar, i think i have overreached. i think they are starting to worry what this disunity means for its campaign against the islamic state. >> what options does qatar have at the moment? do they have legal recourse against the demands?
>> it is not a legal question, it is a question of who their friends and allies are. i think the qataris will look to turkey and iran to demonstrate to saudi that there approaches is counterproductive. i think qatar will rely on a good relationship with the u.s. trying to find a negotiated solution. >> good thing that you talk about the u.s. in saudi arabia, we have a new crown prince, given who is calling the shots in washington and who is calling the shots in saudi arabia, when it comes to the gulf markets, is it a russian of not if but when tensions break out with iran?
>> i think we are heading in that direction. certainly on the part of saudi arabia. you see all u.s. allies are placing pressure on the u.s. to push back what they see as expanding iranian influence. in the trump administration, much more so than the obama administration. you have the greater agreement with respect to that. i think you will see a greater effort by the u.s. and some of its allies to push back against iran and the different places whethere it is in yemen or iraq or even the gulf itself. they feel that the influence has spread and gone unchallenged in recent years. >> president trump won a partial
>> welcome back to the best of bloomberg markets: middle east. the u.s. supreme court handed donald trump a partial victory on his travel ban. >> for people to be allowed to come to the u.s. from the six countries, they have to show atd donald trump a partial victory on his travel bona fide reason that they have a relationship with the u.s. it has to be something like an appointment offer they accepted, admission to a u.s. university, a family relationship, they are not allowed to have any of those things as a way to get to the u.s. of course, that will be tricky to sort out in less than 72 hours. this will take effect.
homeland security says at least they have some time to try to work it out. legal scholars we talked to said it will be very interesting to see how they apply this. >> the core issue has been solved. are we going to wait for that? we are looking at hearings come october. tell me more about that. >> the supreme court said that we are not done. we are not going to -- we are going to look at this. we know have to rule on whether you are allowed to do this in the short run, they did this. they said we would decide the larger issue with the full ban in three justices said they october. would be willing to accept the full ban. the other justices will have to do some serious thinking about this. in three justices said they october. meantime, it is moving down the road, the trump
administration is very happy this. tracy this. tracy: we also spoke to someone from the australian university. >> it is not a muslim ban, it is not the whole thing. the supreme court only left it partially. it was pointed out there. the ban as a whole is a decision that would be made to be in october. >> how do you think this will be received because it is not a total ban but the door is a little bit open. >> it will not be received very well. citizens of those countries that travel to the united states as early as possible, a number of them would probably be in the next 72 hours before the ban comes to the full effect. at the same time, a number of other countries -- some of the terrorist activities have
originated in those countries. that causes concern to those who think united states is being very biased. to all of these particular states which have been targeted by the ban. >> if you take a look at the decision from the u.s. supreme court, three conservative justices said they would have reinstated the full ban. we had justices roberts and kennedy favoring some sort of compromise. does this mean a full ban is just a matter of time, how should these countries prepare? >> it is possible, at the same time, i think those justices have not really supported a full ban. >> it is possible, at the same
to have to think about the interest of the united states -- do i have to think about the interest of the united states? whether they will come up with a viable refugee policy remains to be seen. tracy: up next on the best of bloomberg markets middle east, one shale producers says he can make profit even if oil falls to mid $20 per barrel. how the numbers add up on that claim. this is bloomberg. ♪
reserves and 25 years worth of oil reserves. our energy reporter joined us for more. >> the basin is a little bit different than a lot of other oil basins because it has so many different layers underneath it that can make oil. if you are drilling from the top, you can drill one straight hole down and then multiple -- they are trying to figure out exactly how many. maybe five, maybe 10 different laterals and track them also you can really lower the cost to drill it which produces more oil. that takes you down to the $20 range if you are really good operator like pioneer. >> i have to ask you, how does this affect opec? let's dive into our bloomberg right now. take a look at this permian powerhouse. the yellow line is the total opec crude oil production. as you can see, the permian output is just surging way past
that, even at $43 a barrel which according to wood mackenzie is currently the breakeven price per barrel. >> the big thing is that opec is banking on natural declines from oil wells all around the world happening as investment drops in oil. that, along with their cut, rebalancing the supply. they think permian can still produce oil but they don't think it can produce very much oil. they think the world needs to produce another five to 10 million barrels a day total. they think that all of shale can only do about half that. permian basin production can go from 2.5 million barrels to as much as 10 million barrels per day. that would bridge that gap. if that is true, then opec plans to cut oil, keep this applies -- the supplies down maybe
foiled by the u.s. alone. pump that much oil. -- >> they may think that shale can pump that much oil. the market is squarely focused on u.s. production and inventory. let me show you a chart that really spells it out, it is a little lighthearted. if you take a look at the price that wti has done, you can see that every wednesday, when the inventory data comes out, oil seems to take a significantly big downward. wednesday is the oil market's least very time of the week. what are the chances that we break out of this downward spiral in price? so long as investors and traders seem to be squarely focused on this u.s. inventory and production story? >> it is a great point. a lot of the banks and analysts are coming around to your way of thinking. they are lowering prices for the forecast for the rest of the year. for the longest time, opec and oil producers, they benefited on this lack of transparency in the oil market. nobody knows exactly what global production, what global demand,
where supplies are everywhere in the world. right now, the u.s. is the most transparent market in the world as far as data. the u.s. has the fastest-growing production, it is the last place in the world that supplies are going to draw down. saudi arabia says that everywhere else in the world except for the u.s. is -- cude supplies are drawing down. people want to see it in the the u.s. has the fastest-growing only transparent market available and it is not happening in the u.s. it is a catch-22, opec used to benefit from this. now it is getting squarely hurt by it. >> i know you used to be in houston which means you know that the shale story is as much a story about capital markets conditionsinancing as anything else. chances -- give us some color on what the financing picture looks like for shale only transparent market drillers?
are investors ready to put their money in these companies? even with oil prices drifting toward $40 per barrel? >> that is a great question. back 5, 10 years ago when it was taking off right after the financial crisis in the u.s., people had cut rates to next to nothing. people were looking for any way to get a return on investment, they were really happy to give money to toward $40 per barrel? shale producers even though the technology was not all that proven. it was really expensive to drill. you needed hundred dollars oil to be able to make a profit on it. i think what we are hearing from analysts and companies is that has flipped around. the technology has improved so much. they have been able to cut costs so much to make money that is in so much to make money that is in the 20's, the 30's, the 40's, the 50's that now investors are looking at it as less they can
♪ >> welcome back to "best of bloomberg markets: middle east." a dubai based conglomerate is buying retail arabia. you heard it first on bloomberg with its ceo. >> the deal is one of the, i would say landmark deals when it comes to retail in this part of the world. it's definitely a very important stepping stone. so, we're very happy to have close to deal with retail arabia. we have a lot of respect for what they have done and we think, we're happy to welcome them into our family and we think they are going to be a great addition to the great fantastic business.
>> can you disclose how much you are willing to pay for this fantastic steppingstone in your strategy? >> well, you know, we have agreed not to disclose the number. regarding the transaction. so, we'll keep it to that. >> okay. we are hearing around $500 million. last month, when we had you hearing you are denying to us that this was going to happen. but let me ask you, how much dry powder do you still have available after this deal for more m&a going into the future? >> enough. [laughter] >> all right. >> so, does that mean you're actually looking into more? >> yes, we are looking into a number of acquisitions, as i said previously. we are looking at expanding our footprint, not just digital but also physical that will enhance our position as well as add
value to our customers across the region. we really believe that, with some inorganic growth, that will come to top the great organic growth we had in the past two decades, we be able to create more moments for every day which is a division we live by. >> are you thinking more about -- technology? >> well, we announced last month an a delivery company. we are looking at some other stuff, some in technology, some in other added value services. we think we will continue to look at it as well as expanding our retail business. >> since we're on the topic of hypermarkets and supermarkets, you do have stores in qatar. i am wondering if you can give us some color of what you're seeing there following the blockade of the country.
>> i'm afraid i can't add much color to what you are covering. we have business in qatar. and basically, we continue to monitor the situation. we are open for business. i would say, as usual. it is not as a day to day as it used to be, but actually, things are still working. >> expand on that point, not as day-to-day as it used to be. are sales picking up, slowing down, is it more difficult to get goods in and out of the country? >> it's too early, because there have been reactions. there has been an effort to continue to have supply coming to the country, a lot of areas supply is coming compared to what used to come by sea. this being said, it is steadily -- definitely a situation we are monitoring, it's definitely a situation that is going to evolve. we will see how it will go. >> how about money? have you felt any pressure when
you are trying to move money between qatar and the uae? >> you know, we are a local retailer. we retail locally, mostly. we haven't seen so far anything that's worth mentioning on that front. >> what about supply routes, are they becoming more expensive? >> there has been an effort to -- to get more supply coming from, i mean, through air. and this is something that has been working when it gets to food and grocery related supplies. so, for the time being, things are working. there has been a readjustment and we are working to a certain extent. >> let's move geographies - let's jump over to saudi arabia. are you still planning to develop malls? >> yes, absolutely. we are very excited about that. >> give us some color on consumer sentiment.
>> well, i mean look, as i've said many times, we believe saudi arabia is the right market. we're very happy with the changes that are happening in saudi arabia and with the real effort that is ongoing for the past two years in addressing real issues. and we have seen that the country has gone through, i think, a lot of structural reforms, a lot of effort and more to come. this gives an investor hope that is there for a lot of confidence in the future of the country. in saudi arabia's future. we are going to continue our business in saudi arabia. we have sizable business there. we are going to top that with more developed. >> there's one more grocery store i shop at in abu dhabi. there's been speculation you might be interested in spinny's. is it true? >> i don't know. what i do know is you have to change your shopping habits. >> let's talk about what is
happening back in abu dhabi, in the uae. retailers have been forced to slash prices. does that affect your margins when everybody is competing to cut prices against each other? >> well, look, we, that is what we do, i would say and so far we have been managing to reserve our growth. very soon we'll be announcing our numbers. >> most of your revenue right now comes out of the uae, followed by saudi arabia, qatar. do you see any shift in this sort of structure? >> it will continue to be the case.
we have a plan in order to have -- to make sure our revenue is continuing to be generated from markets that have depth and also sustainability and this is something we have been delivering against. there will definitely be, i would say, a readjustment in terms of some of the markets we are operating in that are specific to those markets. i expect maybe qatar will become less. but other markets are picking up elsewhere. so that's possible, depending how the currency goes. but other than that, nothing substantive. >> you are, of course, privately listed company. you won't give us a number four -- for the deal you just announced. how are you actually funding it? debt, loans? >> the way we find ourselves, we -- the way we fund ourselves, we are very public when it comes to our financials. we are privately listed but we have a disclosure that is actually more likely a public the listed company. the way we're funding it is to
-- through our current debt structure. as you know, we always announce when -- we enter a deal, and we tap into the market with conventional bonds. >> do you expect more issuance to finance this? >> this is fully funded, executed. we had an opportunity to issue paper, we always make sure we never miss it. >> let's talk about the chinese economy. also, what is happening -- stephen engle joins us there. >> let's talk about the china markets and the opportunities for foreign companies. we welcome in the ceo from the netherlands. thanks so much again for talking to us. so, what stood out to you as a foreign business person who does business here? i think 13% of your revenue or thereabouts comes from china. what stood out to you? >> the premier is stressing very much the inclusive growth in the west. i mean, china has benefited quite a bit from globalization. the west, also, international trade. but in the west, and the united states, several european countries, the feeling is that
the gross globalization has not been beneficial for all parts of population and there is roughly 30% in all countries who feel to be left behind. and those people vote in a particular way. and as we've seen in the u.s. and with brexit but also le pen in france. it is a kind of protectionism. and, china, of course, does not want u.s. to be protection is an want free trade and wto. >> i'll play the devil's advocate. donald trump says they have not been playing by the rules, living up to the wto. and i know the europeans have been critical about market assets and not upholding some of the commitments they made. i know you are in china, so no one likes to criticize. but what is your fair assessment of how china has progressed since 2001?
>> well, china has been not always the advocate for free trade. no import barriers. i mean, let's look to how china developed over the last two decades. and did its own thing in. order -- thing in order to develop itself but where it's now, it is in the interest of china but maybe in the interest for the entire world to have more free trade. if we all are with drawing on our own islands and protect and close our borders, etc., i think nobody will benefit. obviously, china -- and also early this year president xi advocated that also for the west, even with the feeling that some people left behind, closing the borders is not the answer. having a more inclusive growth in the western countries is the answer and that is what premier li was saying today and also a message to us in the west to make our growth more inclusive and that is a task we have to fulfill. >> he did not spend much time on
climate change, but do think -- but again, do you think china is seizing this opportunity to take the global leading climate change? >> i do not know whether china will take the global lead, but i'm sure that china will take a lead. look to this year, the end of 2017, china will put a price on carbon's with thousands of companies in china. or in many western countries are still struggling, s hould be put a price on carbon emissions? and china is going to do that. now partly also, out of self interest, they need to clean up but they will do it. >> let's talk about the china opportunities for your company. i believe in february you talked about, what, high single digit growth for 2017 for the global revenue, right? how are you looking at china? i saw the breakdown. about 13% is china. 23% of revenue is asia. how do you see that growing? >> growing more than double digits. so, more than 10% growth in this
first quarter. and as i most likely look at this very moment, also, above 10%. so, china is offering a great opportunity for our company to grow. i mean, sustainable materials, healthy food ingredients, addressing climate change, bringing new innovation. it's all desired in china and we can bring those things to the market here and grow. urbanization is helping us. the more people are going to eat healthy, go to the store, buy their food, buy a car with our materials and buy our mysterious we love this country. >> coming up on "best of bloomberg markets: middle east," a daring offer from qatar airways. in the middle of the gulf spat, it wants to buy a chunk of american airlines. will it be a flight of fancy? more on that next. this is bloomberg. ♪ ♪
>> welcome back to "best of bloomberg markets: middle east." well, qatar airways is suggesting it might by 10% of american was rebuffed by the company with doug parker calling a puzzling at best and concerning it worse. -- concerning at worse. david ficklin is here to explain qatar's strategy. david: the relations between big international airways, they resemble international diplomacy. you cement an alliance with the marriage. this is not that different.
we see it again and again. american airlines a couple of us ago, qatar has states in iag. -- qatar has stakes in iag. it's a fairly common thing. i suppose what they would want to do is hope to solve several problems at once. qatar is diplomatically in a spot at the moment, just as qatar airways is in a spot. you can solve several problems. you could try and break some of the unity of the u.s. airlines against gulf carries. -- gulf carriers. you can get a voice in washington to talk about the visa restrictions that are a problems were gulf carriers and buff up the image of qatar a bit. >> is it going to work? david: ha! i suspect not. you saw those comments from doug parker. they are pretty tough. especially the sort of comments
for a potential major shareholder. they've misread the mood. american airlines does not want to attract a twitter thunderbolt from donald trump. it doesn't want to attract from -- opposition from its pilots union. and it's benefiting from growth. we had some air traffic control privatization which is in the form that u.s. airlines wants. thos laptop and visa bans, are the same things that u.s. airlines want. a look at where going.e's been this is bloomberg. ♪
a lot of that is flowing into the countries buzzing internet sector. >> i think you'll see even more interest coming from china to israel. to me, it is almost a marriage made in heaven. israel, which is great in deep tech, has a very small market. nonetheless, has always been trying to export its technology to the u.s. and the west. china has a huge home market and given the dominance of alibaba, tencent, baidu, etc, there's a need to get even more ahead of the curve. from their perspective on technology. right? so, the combination of markets and technology couldn't have been better. and the geopolitical situation is such that the israeli feel
very much at home with the chinese culture, and the government to government has a very nice friendship going on. >> why israel, though? why of all the different countries where there are lots of companies? why israel? >> if you look at mere statistics, israel has the largest r&d per capita in the world. if you look at the military on a per capita basis, one of the highest in the world. it has actually innovative technology that are disruptive and change our daily lives. i don't know whether you know if the -- was first invented in israel. instant messaging was invented in israel. and you know, you have seen waves of technology like google maps. and on intel's acquisition of $15.3 billion of -- technology. these are actually very relevant technologies to the way we live. >> you have been the subject as chinese investment.
who invested in your company? >> from china, we have had multiple investors, financial investors and strategic investors. in china, we have the alibaba group. we also have a major shareholder in -- shanghai. >> of course. what is the value add and the difference between having investors from china versus elsewhere? >> china is a huge market for us. ours is a search engine for e-commerce. some of the biggest e-commerce companies are in china. they are going to go global soon, as well. so, the chinese market itself as well as chinese companies tailoring for the rest of the world. >> is it also because there are other areas where it may be hostile to chinese investment, the u.s., for instance, has gotten harder to invest, or to
except foreign investment? is that why some of this money from china is looking at other markets? >> i can't comment on the sort of geopolitical situation between those two big nations, but i think between china and israel, there is no such thing as foreign ownership limits and for israeli companies to work in a joint venture situation in china to market their products, i think it is all very much something that can be done in a much more flexible way. and the two cultures are kind of similar -- you may of heard the phrase that they call shanghai -- the jews in china. the similarities in terms of the focus on family and education and the work ethic makes it much easier for the two cultures to work together. so, language is different. and i think there is more learning in that respect, but other than that, i think there is a sun and moon and stars aligned in that sense. >> that is it for this edition of "best of bloomberg markets: middle east."
♪ scarlet: coming up on "bloomberg best," the stories that shaped the week in business around the world. another global cyber attack causes havoc. most u.s. banks pass the fed's stress test. the gop delays a vote on health reform. >> the euro and markets have reacted very strongly to a speech by draghi. >> comments in sintra suggest that august 3 is going to be a tricky meeting. >> italy commits billions to save two banks. the country's finance minister