When the United States and Iran effectively shut down the waterway in late February, global energy markets responded loudly. However, the consequences for the global food supply represent a slower, quieter, and more dangerous impact that many people have not noticed.

The Silence in the Strait

Before the conflict, around 130 ships passed through the Strait of Hormuz every day, but by March 16, that number collapsed to single digits, representing a reduction of 95%. This left more than 750 commercial vessels either stranded in the Persian Gulf or circling in holding patterns outside the conflict zone, waiting for a signal that never came. These ships weren’t just deterred by the physical danger of being caught in a war zone. The most decisive factor in their decision was the prohibitive cost of insuring a ship through the strait, which spiked overnight.

Marine war insurance is a specialised financial contract that has existed for centuries to protect ship owners if a vessel is damaged or destroyed in a conflict zone. In normal times, coverage costs between 0.125% and 0.25% of the ship’s value for a single voyage. For a typical large cargo vessel valued at around $120 million, this translates to roughly $48,000 per transit.

However, the financial landscape changed dramatically during the conflict. Following attacks on vessels in the Gulf, and reports of mines in shipping lanes, insurers repriced premiums to between 1% and 10% of the hull value. This dramatic shift pushed the cost of a single transit for the same vessel to $1.2 million.

At these rates, most shipping companies turned around and called it quits. Now, navigating across the strait for ordinary commercial trade was near impossible, regardless of military risk.

Ships that really needed to reach the Gulf started taking detours around the southern tip of Africa, adding weeks of transit time and burning significantly more fuel in the process. The world’s most efficient trade artery had been blocked, and global supply chains were about to discover how dependent they had become on it.

Never Just About The Oil

When the strait closed, the world’s focus was primarily on oil. The Persian Gulf supplied approximately 20% of the world’s daily petroleum consumption, causing energy markets to react with extreme alarm. However, this fixation on oil obscured a more significant vulnerability. The region also produces a substantial portion of the world’s industrial and agricultural raw materials.

One of the most critical materials is helium, with Qatar alone supplying nearly one-third of the global total. Far from being used only for party balloons, helium is essential for cooling the superconducting magnets inside MRI scanners. Without a reliable supply, hospitals globally risk losing their diagnostic imaging capabilities.

Additionally, the Gulf region is a major hub for chemical feedstock and agricultural components. It ships roughly a third of the world’s methanol, which is a foundational ingredient for manufacturing plastics, resins, paints, and synthetic fibres. Furthermore, the region supplies about half of the world’s seaborne sulphur, a critical resource required for producing phosphate fertilisers and refining battery metals such as nickel and cobalt.

But among all the commodities that pass through the Hormuz corridor, nitrogen fertiliser is perhaps the most important.

Approximately 33% of all globally traded fertilisers passes through the Hormuz corridor. For urea, the world’s most widely used nitrogen fertiliser, that figure rises to 46%. Nearly half the world’s supply of the single most important agricultural input on the planet was suddenly unable to reach the farmers who needed it.

The Invisible Line Between Gas Wells and Grain Fields

To understand this, it’s important to familiarise ourselves with the chemistry. In the 19th century, there was an influential English economist and demographer known as Thomas Robert Malthus who believed that the population growth of the world would outpace the food supply, leading to an inevitable social crisis.

In his ’Essay on the Principle of Population’, he noted that the human population was doubling (geometrically) every 25 years back then, while food production increased arithmetically (linearly). He envisioned that there would be a point of crisis which would lead to wars, famine and extreme poverty.

However, in the 20th century, German scientist Fritz Haber successfully synthesised ammonia from nitrogen gas (from the air), and hydrogen gas under high pressure and temperature using an osmium catalyst.

With this information, Carl Bosch transformed Haber’s laboratory into a massive industrial-scale process for the company BASF by 1913. This created industrial fertilisers that would lead to green revolutions across the globe, feeding billions of people effortlessly. Malthus’s apocalyptic predictions did not come true because of scientific advancements, which led to the creation of the mass production of nitrogen fertilisers.

However, the blockade on the Strait of Hormuz has cut off the supply of natural gas, which is both a raw material and a source of energy in fertiliser production. This development inadvertently might cause the fulfilment of the Malthusian prophecy.

The numbers bear this out starkly. “We have 30-35% of crude oil, which is not moving, 20% of natural gas…and between 20 to 30% of other fertilisers that are not moving out,” said Maximo Torero, Chief Economist of the Food and Agriculture Organization.

Countries like Qatar, Saudi Arabia, and the UAE have built massive industrial complexes converting cheap domestic gas into exportable fertiliser.

Qatar State Fertiliser Company (QAFCO) operates the single largest urea production facility on earth, and supplies 14% of the global urea on its own. When the conflict disrupted regional gas infrastructure and made maritime export impossible, QAFCO went offline.

Saudi Arabia’s SABIC petrochemical complexes declared force majeure (a legal term meaning circumstances beyond their control prevented them from fulfilling their contracts). Storage silos filled to capacity with nowhere to send their product, and production halted. In one stroke, 14% of the world’s urea supply vanished from the market.

This isn’t just a Gulf issue. Natural gas prices spiked globally as buyers scrambled for alternative supplies, and this crushed fertiliser production in Europe too.

In Europe, natural gas accounts for up to 80% of the variable cost of making fertiliser. When gas prices spiked by 60% following escalation of the conflict, major producers found themselves making fertiliser at a loss.

Yara International (one of the world’s largest fertiliser companies) cut production at its European plants to 35% of capacity. This removed the equivalent of millions of tonnes of finished products from an already devastated market.

Prices, Panic and the Planting Window

Fertiliser prices are spiking at an alarming rate. Urea was traded around $450-$490 per tonne in early February, but it is now being sold at over $700 per tonne by late April. That is roughly a 50% increase in mere weeks.

Other fertiliser products are also seeing a surge, with liquid nitrogen variants jumping 22% month-over-month. Consequently, distributors are now rationing retail sales, and dealers have stopped quoting future prices because there is arguably no reliable way to predict what replacement inventory would cost.

The most dire consequence of all is the catastrophic timing, as the Northern Hemisphere’s spring planting season is just beginning. This matters because farming, unlike most other industries, cannot pause and resume. Crops have biological windows in which fertilisers must be in the ground, or else you face a permanent yield loss. There isn’t a way to catch up next year.

In an April survey of over 5,700 farmers across all 50 states, the American Farm Bureau Federation found that 70% of respondents could not afford necessary fertiliser, with regional impacts varying significantly. In the South, nearly 80% of farmers were priced out because crops such as cotton, rice, and peanuts require fertiliser close to planting time, preventing them from pre-purchasing stock. Conversely, the Midwest saw some protection through advance purchasing as 67% of farmers locked in their supplies early, though one-third of the region’s farmers remained entirely exposed to volatile spot prices.

The small farmers were hit the hardest. Large-scale commercial operations were better positioned to pre-book supplies months in advance and had the financial depth to absorb price shocks. However, smallholders and family farms operating on thin margins, purchasing inputs closer to planting time, did not have the time to adjust or cope with the doubled prices.

“The skyrocketing cost of fuel and fertiliser is creating more economic hardship for farmers who have already endured years of losses,” said Zippy Duvall, President of the American Farm Bureau Federation. “Without the necessary fertilisers, we’ll face lower yields, and some farmers will reduce acres altogether.”

University specialists and soil scientists, who calculate the economic efficiency of fertilisers, revised their guidance as urea prices rose. The optimal application rate for corn in Illinois dropped by 6 pounds per acre.

It might sound like a modest change, but the relationship between fertiliser and yield is not linear. Research from precision agriculture companies reveals that cutting application rates significantly below the optimal level creates disproportionate yield losses.

For example, a farmer who uses half the recommended nitrogen does not get half the yield reduction. It can be considerably worse. This means farmers who ration inputs very aggressively in response to price shocks end up losing a lot more in crop revenue for what little they can save on fertiliser.

This effect will alter planting decisions going forward. Corn, a very nitrogen-hungry crop, might be abandoned in favour of soybeans, which can absorb some of the nitrogen they need from the atmosphere. This is going to reduce the total caloric output, and markets are going to adjust well beyond the 2026 harvest.

Torero has warned that policy coordination is now essential to prevent the crisis from deepening. “We need to avoid export restrictions…especially now for fertilisers and energy,” he said, cautioning that without coordination, vulnerable countries could be priced out of essential supplies.

David Laborde, Director of Agrifood Economics at the FAO, echoed this concern from the demand side. “If we have rising demand because biofuels start to consume more…and lower supply because we have less input…food prices will go up,” he warned.

Ill-Prepared for The Indian Monsoon

India has structural vulnerabilities which the fertiliser shock makes worse. It imports 90% of its fertiliser raw materials. The kharif season (the monsoon planting cycle sown in June and July) produces almost 100 million tonnes of rice, which is the cornerstone of food security for more than a billion people.

The Indian government has moved quickly to protect its domestic fertiliser production, declaring an emergency guarantee of gas supply to fertiliser sectors at 70% of historical consumption. The FACT plant in Ambalamedu, Kerala, which produces NPK and DAP fertilisers, was flagged as a critical operation requiring protection.

Indian diplomats secured alternative fertiliser imports, arranging 2.5 million tonnes from Morocco, and 3 million tonnes from Russia via the much longer Cape route. Both these deals cost significantly more than what Gulf supplies usually cost.

Farmers in Punjab are anxious. India’s most productive agricultural state saw widespread panic buying and hoarding. Retailers report distributors bundling unwanted products with essential ones, forcing farmers to buy expensive supplementary inputs they do not need in order to access granular urea.

Harjinder Singh of Saidwan village in Kapurthala is one of thousands facing the consequences of this shortage firsthand. “I had never realised that getting a bag of urea would be such an ordeal, when paddy cultivation is still over a month away. Generally, the time after wheat harvesting is for celebrations. This year, the days preceding the harvest were filled with anguish because of the quality of grains. Post-harvest, we are grappling with urea shortage,” he said.

The situation could be further complicated by the weather. The Indian Meteorological Department forecasts the 2026 southwest monsoon projected rainfall at 92% of the long-period average, the lowest first forecast in at least 25 years. Global agencies simultaneously indicated that there is a 62% probability of El Niño conditions developing in the summer months, which is associated with weaker monsoons. The convergence of potential drought, depleted reservoirs, and fertiliser shortages creates a genuinely alarming picture for the next kharif harvest.

The urgency was captured sharply by the head of the UN Task Force on April 21. “With hunger looming, life-saving fertiliser shipments cannot wait,” the official said. “If we don’t get some solution immediately, the crisis will be very significant and severe, particularly for the poorest countries.”

Russia’s Quiet Leverage

Russia found itself in a powerful position as the Persian Gulf fertiliser infrastructure went down. Russia exports 23% of the world’s ammonia and 14% of its urea via the Black Sea and Baltic ports, which are unaffected by the Hormuz closure.

In what analysts are calling ’fertiliser diplomacy’, Russia leverages exports to cultivate political relationships across the Global South. Countries in Africa, like Nigeria, Ghana, and Ethiopia, are pre-purchasing Russian fertilisers for the third quarter of 2026 on terms that go beyond commercial transactions.

Senior Russian officials have been explicit about their strategy. “The escalation of hostilities in the Persian Gulf region has led to the closure of the Strait of Hormuz. The logistics and trade-economic architecture, as well as global energy and food security, are on the brink of collapse,” said Russian diplomat Alexander Venediktov. He described the situation as fraught with ’very serious consequences’ for countries dependent on imported hydrocarbons, fertilisers, and food, and was candid about Moscow’s positioning. “Nitrogen additive prices have risen by 30%. In the current extremely challenging situation, Russia is ready to act in coordination with its friends, countries of the Global South and East.”

It is not the first time Russia has done this. They used a similar approach during the Black Sea Grain Initiative in 2023, when grain export negotiations became a lever for extracting broader diplomatic concessions.

China has pursued a parallel strategy from the supply side by implementing strict export controls on phosphate fertilisers and urea to prioritise domestic agricultural security, which has subsequently cut off critical volumes to Southeast Asia and other import-dependent regions. This has further tightened a global market that was already in crisis.

The End of Just-in-time

Unlike oil price spikes, fertiliser or agricultural shocks don’t announce themselves immediately. Oil prices go up at the petrol pump within days, but fertiliser shortages take months to reveal the economic damage. The crisis has a built-in delay mechanism. We will see the consequences of what is happening now in the third and fourth quarters of this year.

The World Bank has observed that markets are already pricing in expectations for a smaller harvest, as evidenced by a 13% increase in wheat prices and a 7% rise in cereal indices.

The actual supply reduction has not yet materialised, but when it does, food price inflation will skyrocket.

For wealthy countries, this means higher grocery bills and compressed farm margins. However, for lower-income nations, it can be devastating.

Nations across Sub-Saharan Africa and South Asia will suffer significantly because they rely heavily on imports, and lack the capacity to subsidise fertilisers. In tropical and sub-tropical regions, the relationship between fertiliser application and crop yield is stark due to nutrient depletion in the soil. If things remain unchanged, we can expect a 40-50% reduction in maize yield across African countries.

The UN World Food Programme and the Food and Agriculture Organization expect the combined effects of conflict, fuel price inflation, and fertiliser shocks to push an additional 45 million people into food insecurity. This is on top of the 318 million people already facing severe food insecurity worldwide. At least 18 million people are expected to cross the hunger threshold in East and Southern Africa alone.

The lesson we can learn is structural. Our global economic system was built on the philosophy of maximum efficiency and minimum inventory to eliminate redundancy, but that is because the world was predictable and global trade was always available.

But things have changed as governments are now confronting the problem in real time. Spain has allocated €500 million to subsidise farmers from price shocks, while Ghana distributed fertilisers free of charge to prevent crop failure. Additionally, India redirected its gas supply from industrial users to fertiliser plants to address the crisis.

These are emergency measures improvised under pressure. In the long run, we will need something more durable. Domestic fertiliser production capacity in import-dependent countries has to improve.

Impact Will Be Felt Beyond 2026

Economic models suggest that the effects of the 2026 shock will likely persist for years. Even under an optimistic scenario in which the Strait reopens by mid-year, urea and phosphate prices are going to be elevated well into 2028. Qatar’s Ras Laffan gas complex has been attacked, and is damaged. It might take years to be fully operational again. Maritime insurers also need prolonged periods of stability before war risk premiums subside.

The yield this spring cannot be retroactively restored. The harvest will be what it will be. The world’s food supply depends on an unbroken chain of energy, chemistry, shipping, and trust. Breaking any one link in this chain can have severe consequences in every direction, affecting farmers in Arkansas and Punjab, grocery shoppers in Lagos and Jakarta, and boardrooms in Rotterdam and Chicago.

The post The Hormuz blockade is not just about the oil appeared first on International Finance.

After hitting a record low of 7.24 against the dollar early on Monday, Turkey’s lira found some support after Finance Minister Berat Albayrak stated the country’s economic action plan to ease investor concerns and the banking watchdog said it limited swap transactions.

The Financial Times reported on Friday, citing two sources, that the European Central Bank had concerns about banks in Spain, Italy and France and their exposure to Turkey.

“The exposure of European banks to Turkey seems to be not as large as people fear, so I think it’s manageable. It will not lead to a kind of banking crisis in the euro area,” stated Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

In early trade on Monday, the euro dropped as low as $1.1368– falling to its lowest level against the dollar since July last year. It last traded down 0.16 % at $1.1390 at 0040 GMT.

The common currency also slipped against the safe haven Swiss franc and yen. The euro briefly fell to a one-year low of 1.1302 francs against the Swiss franc before paring some losses. It traded at 1.1332 francs as of 0040 GMT, down about 0.2 % on the day.

The euro also dipped to a 10-week low of 125.455 Japanese yen in early trade before recovering slightly. It was last down 0.4 % at 126.00 at 0040 GMT. Turkey’s lira last traded at 6.84 against the dollar at 0040 GMT, after sinking to a record low of 7.24 in early trade on Monday.

The currency has fallen about 45 % against the greenback this year on worries over Turkish President Tayyip Erdogan’s increasing control over the economy and a worrying, widening rift with the United States.

Yamamoto said the Turkish lira may remain unstable, while he expected the euro to stabilise during the week.

“It seems that this kind of slowdown is a kind of necessary thing for the Turkish economy to reduce the current account deficit and the very high inflation,” he stated.

Meanwhile,the yen strengthened about 0.3 % against the dollar to 110.61 yen as investors continued to bid up safe-haven assets. The Japanese currency netted some gains after briefly rising to a one-month high of 110.32 yen per dollar.

The Australian dollar was also down 0.2 % at $0.72765 , close to an 18-month low of $0.72505 hit early in the session.

Elsewhere,the Mexican peso, Argentine peso and South African rand were also weak against the US dollar on Monday as the lira crisis unsettled some other emerging market currencies.

The post Investors bid up safe havens during Turkish crisis, euro goes soft appeared first on International Finance.

President Donald Trump’s withdrawal from the landmark agreement, signed by the U.S. and five other world powers, remains one of the most consequential foreign policy decisions of his presidency so far.

Secretary of State Mike Pompeo stated that renewed U.S. sanctions on Iran will be rigorously enforced and remain in place until the Iranian government radically changes course on Sunday. Emphasising that while the sanctions are an important pillar in US policy towards Iran—the administration is also open to looking beyond them and would “require enormous change” from Tehran.

“We’re hopeful that we can find a way to move forward but it’s going to require enormous change on the part of the Iranian regime,” Pompeo told reporters aboard his plane on his way home from a three-nation trip to South East Asia. “They’ve got to behave like a normal country. That’s the ask. It’s pretty simple,” he added.

Pompeo referred to the Iranian leadership as “bad actors” and stated that Trump is intent on getting them to “behave like a normal country.”

This language is believed to be code for regime change among many US allies, according to two European diplomats involved in negotiations with the Trump administration over how sanctions would be re-imposed.

The sanctions that go back into effect on Monday cover Iranian trade in automobiles and metals, including gold. The US also has banned imports of Iranian products like carpets and pistachios, and has revoked licenses that allowed Iran to purchase US and European aircraft. Iran acquired five new European commercial planes on Sunday before the sales were cut off.

The last and most significant sanctions — those on Iran’s oil sector and central bank — will be restored on November 4. This is crucial because Iranian oil sales are a vital source of hard currency.

The US-Iran nuclear deal in 2015 had lifted international sanctions. This was in exchange for Iran agreeing to restrictions on its nuclear program. While UN inspectors had said that Iran had been complying with the deal, Trump argued that it had not done enough to curb Iran’s malign activity in the region. Trump administration officials also argued that because the US lifting sanctions against Iran as part of the agreement, had in effect stripped Washington of one of its most powerful tools to put penalties on Tehran.

European countries have said that theyy remain committed to the agreement, viewing it as the surest way to safeguard their national security.

One of the European diplomats expressed concerns on the future, referring to worries that the US is eyeing regime change as the sanctions’ end goal. Both diplomats spoke on condition of anonymity, as they were not authorized to brief the media on ongoing negotiations.

Iran would either likely devolve into civil war, if the reimposed sanctions cause the government in Tehran to collapse, a situation very similar to what unfolded in Syria – or be under radical occupation, according to the diplomat. A deepening of Iran’s economic crisis could also lead into an influx of refugees and migrants towards Europe, in a situation once again, very similar to what happened on the hells of the Syrian conflict.

Pompeo noted that the US has long designated Iran as the world’s foremost state sponsor of terrorism and that it cannot expect to be treated as an equal in the international community until it halts such activities.

“Perhaps that will be the path the Iranians choose to go down,” he said Sunday. “But there’s no evidence today of a change in their behavior.”

In the meantime, he said, “we’re going to enforce the sanctions.”

Supporters of the Iran agreement have long argued that the US departure would alienate European allies who partnered with the US in the negotiations.

We “remain firmly committed to ensuring (the deal) is upheld and we continue to abide by our commitments,” the second European diplomat stated. “If we cannot fulfill these, this risks Iran deciding that it no longer has to abide by the restrictions.”

Iran’s economy has plunged into a downward spiral following Trump’s announcement that the United States was scrapping the nuclear deal. The downturn has sparked waves of protests across the country.

The post Restored Iran Sanctions mark unease for US’s European allies appeared first on International Finance.

The media reported a heavy build-up of riot police on Sunday night, including at least one armoured personnel carrier, in the town of Karaj, west of Tehran. State media said that the protesters attacked and attempted to burn down a seminary in the area on Friday night. At least one person was reported to be killed during the protests, alleged demonstrators.

The embattled government of President Hassan Rouhani has faced heavy criticism from conservative opponents, who have demanded action on corruption and renewed efforts to rescue the economy. On Sunday, his cabinet announced that it was easing foreign exchange rules, in hopes of undoing a disastrous attempt to fix the value of the rial in April – that led to widespread corruption and speculation.

That April decision, combined with fears over US sanctions, fuelled a run on the currency that saw it lose more than half its value.

Araghchi, a nephew of deputy foreign minister Abbas Araghchi, was reportedly fired by the new governor of the central bank on Saturday, apparently over his handling of this currency crisis.

On Saturday, Grand Ayatollah Hossein Nouri-Hamedani, one of the country’s top religious figures, said “economic corruptors” must face justice.

“People are upset when they hear that someone has embezzled billions while other people are living in tough conditions,” he said in a speech, according to the conservative Tasnim news agency.

The post Iran central bank forex chief arrested ahead of US sanctions appeared first on International Finance.

In the wider Greek debt crisis, 2017 now looks set to provide the necessary springboard for sustainable economic growth and renewed optimism.

The successful conclusion of Greece’s second bailout review on June 15 has ended months of uncertainty.It has paved the way for the International Monetary Fund (IMF) to re-join the country’s bailout programme via a maximum $2bn standby agreement, and prepared the required framework for debt relief that may be finalised within a year.

The agreement ends the stand-off between the IMF and the European Union, and provides for the disbursement of €8.5bn. It should be considered a key step in rebalancing the economy on a sounder footing and offering additional clarity on necessary debt relief.

The first disbursement of €7.7bn will take place in early July, of which €6.9bn will go towards debt servicing and €0.8bn to state arrears, while another €0.8bn will be disbursed for arrears clearance after the summer. Payment of state arrears will have a positive effect on the economy, whilst Greece’s liquidity needs remain relatively small until mid-2019.

Why was Greece lost in the labyrinth?

Whilst the eschatology of Greece may have shifted focus from death to resurrection, the post-mortem examination bears many contradictions. Contrary to popular belief:

• Greeks are by far the hardest working people in Europe and ranked fourth globally
• Greeks worked on average 2,042 hours a year, more than the average worker in both the UK (1,674 hours) and Germany (1,371 hours).
• Greece also ranked fifth out of 148 countries for availability of scientists and engineers

However, despite this work ethic and evident quality of human capital, Greek workers produced less than half of the economic output of their American counterparts, and just over half of their German partners.

Source: OECD data (2015)

Such failure to realise potential, and proximity to ending it all together, are underpinned in the country’s bureaucracy, lack of innovation and ease of doing business. Successive governments during the crisis have sought to remedy such problems via unprecedented fiscal consolidation and reforms. The latter, being truly structural rather than cosmetic,arguably form a singularity in Greece’s economic progress,enabling its rich human capital to compete with its European partners and attract foreign investment.

Key indicators are starting to improve

Whilst progress has been far from linear, the economy appears to be slowly exiting the labyrinth of economic depression,as statistics have begun to prove.

Exports have more than doubled since 2008. Tourist numbers continue to break annual records,with more than 30mn expected this year, nearly three times the local population. In addition, interest from foreign investors in tourism and real estate has ballooned.

At the same time, the massive fiscal adjustment has started bearing fruit by closing a competitiveness gap which has been entrenched for decades. Unemployment levels dropped to a five-year low in March 2017 whilst the primary surplus rose to 4.2% of GDP versus a target for 0.5%. This rapid adjustment is most evident in the current account balance, which stands at -0.6% of GDP versus -15.1% just before the crisis in 2008.

Most importantly, the Greek economy returned to growth in the first quarter of the year, with output growing by 0.4% compared to the initial 0.1% contraction provided in flash estimates. This economic expansion was driven by consumption and notably, fixed capital formation, which has dropped to record low levels (circa 11% of GDP versus a 21.5%average over the last 67 years).

This realignment of the Greek economy is increasingly supported by the Greek diaspora, which has begun returning to the country in the form of capital rather than in person. It is marked by the deployment of signific ant-investment in a large number of sectors from financial institutions to food, hospitality and real estate.

In order to fuel both the government coffers and investors’ interest, the Greek government is now proceeding quickly with large-scale privatisation. Recently, these have attracted strong investment interest from European, US and Asian investors, which at times is characterised by fierce competition for the same assets that failed to attract a single investor just a few years ago.

According to the Foundation for Economic and Industrial Research, the large-scale privatisation is expected to add some 4% to the GDP and reduce unemployment by 2.5%. These include the privatisation of 14 regional airports, the development of the former Hellenikon airport and the privatisation of Piraeus port.

The design of a virtuous circle at a government level is ambitious but simple – offer privatisations at attractive levels to investors linked to necessary capital expenditure outlay, encourage capital to flow back into the country, create thousands of new jobs, boost economic activity and thereby attract further investment at healthier levels.

Nearly there, but still a long way to go

However, the circle remains incomplete due to the lack of a strong banking sector.

In this context, during the last two years, the Greek government,under the auspices of the European Central Bank and Single Regulatory Mechanism, has proceeded quickly in adopting legislation for Greek banks to tackle the €100bn non-performing exposure issue.

To this end, the Single Supervisory Mechanism (SSM) has established aggressive targets to reduce NPEs by circa 40% by the end of 2019. Work-out legislation, which has now been adopted, forms the necessary framework to tackle this burden. It is intended that lower NPEs will translate to healthier bank balance sheets, renewed depositor confidence and credit expansion,which will fuel investments in the country and increase disposable income.

Considered within this wider context, the importance of the conclusion of the second bailout review must not be understated. By removing near-term risks related to repayments to creditors in July, the stage is now set for a discussion on the debt relief agreement after the elections in Germany,and subsequently Greece’s inclusion in the ECB’s quantitative easing programme.

Recent comments from European Commissioner for Financial Affairs, Pierre Moscovici, that Greece has met EU conditions to satisfy the suspension of excessive deficit procedures (fiscal deficit has fallen below 3% target) also set a positive tone.

Whilst many corners still obstruct line of sight, now is the time for investors to start looking seriously at Greece again, as the country edges ever closer to the labyrinth’s exit.

Petros Mylonas is Head of Southern Europe at LXM Group

The post Greece is putting debt crisis behind appeared first on International Finance.

Suparna Goswami Bhattacharya

July 15, 2016: With an eye on increasing its non-oil revenue, Saudi Arabia is considering a plan to tax millions of expats residing in the Kingdom. The proposal was included in the country’s National Transformation Plan (NTP), an ambitious multi-year programme released in June.

Finance Minister Ibrahim al-Assaf clarified that the “tax element is only an initiative that will be discussed”.

However, economists around the world do not think the plan will see the light of the day as it could hamper the Kingdom’s ability to attract foreign resources that is needed to revive growth. However, even the possibility has sent many expats in a state of tizzy.

“The main incentive of working in Saudi Arabia is the salary and perks. The move, if it actually comes to being, will lead to mass exodus of expats, unless of course you are in a senior position in a company,” says an expat of Indian origin working for a cement company in Saudi Arabia.

There are many changes imposed by Deputy Crown Prince Mohammed bin Salman. For instance, the kingdom will be joining other members of the six-nation Gulf Cooperation Council (GCC) in imposing value-added taxation (VAT) starting from 2018. Furthermore, post COP21 in Paris, there has been pressure on Saudi Arabia to reduce the use of fossil fuels. Hence, the Kingdom is preparing for a future of low oil prices.

Jacob Kirkegaard, senior fellow at Peterson Institute of International Economics, says, “Permanent loss of oil revenue means that they need additional income from elsewhere. Taxing expats does not cost much to the Kingdom politically as foreigners have no voice. This is also, in a way, in line with the Islamic tradition of taxing non-believers of Islam.” He adds that taxing only will foreigners also help in Saudisation. “Taxation will increase their (foreigners) labour cost, thus incentivising the private sector to hire more Saudi nationals.”

The NTP is a detailed road map of government initiatives which aims to reduce government spending on state salaries from 45 per cent to 40 per cent by 2020 and increase the role of the private sector in the economy from 40 per cent to 65 per cent by 2030. In fact, a similar idea was floated in the 1980s when oil prices had plunged to below $10. However, foreigners were so outraged by the potential impact that they went on a strike, including military contractors, grounding air force planes until the authorities backed down.

According to an expert who did not wish to be named, every year there is a lot of capital moving out of the country. “Last year, $40 billion was transferred outside of Saudi Arabia by expats. This is a wasted resource. However, at the same time I do not see this as a practical move since diversification of the economy means that that the Kingdom will be in need of more talent. If it is not available locally, they have to hire from outside,” the expert said.

Salman Al-Ansari, founder and president of the Washington DC-based Saudi American Public Relation Affairs Committee (SAPRAC), says, “This is still in the idea stage. I do not think there is much to panic as the government is smart enough not to take any haphazard decision that will have a long-term impact.”

Though all nations in the Gulf are going through tough times because of the fall in oil prices, the move is unlikely to be replicated by others. “The other countries have a much lesser population than Saudi and hence need less revenue. On the other hand, a place like Dubai is de facto a global tax haven and the business model that cannot survive by imposing income tax on foreigners. I doubt this policy will be replicated,” says Kirkegaard.

The post Saudi Arabia mulling over income tax on expats appeared first on International Finance.

Miriam Mannak

October 3, 2014: Africa’s second largest economy is a land of abundance, boasting vast reserves of coal, platinum, and gold. The country’s natural wealth isn’t, however, confined to the depths below the earth’s surface. She is also blessed with perpetual sunshine and strong, reliable winds, assets that up until recently have gone more or less unnoticed. The main reason being the immense deposits of coal, a substance which for ever and a day has been responsible for over 90% of South Africa’s electricity production.

But things are changing, particularly since January 2008 which brought along rolling power outages and a stuttering electricity supply. The reason: state-owned electricity producer Eskom was no longer able to meet the country’s energy demand due to aged and ailing infrastructure, and ultimately bad planning.

The private sector suffered as a result of the energy crisis, particularly mining houses and other energy intensive businesses. Their supply stream was for instance cut by 10%, to spread the crisis load. As a result, their production and revenue dropped, which led to mass retrenchments and rising unemployment.

Finally, the government presented a plan to solve the issues, comprising among other things the construction of two new enormous coal-fired power plants – Medupi and Kusile – and a renewable energy drive.

Six years have passed since the energy crisis struck South Africa, a period during which the country went from zero to dozens of viable renewable energy initiatives. The Cookhouse wind farm in the Eastern Cape province is one of them. This project comprises 66 turbines with a collective capacity of 138.6 Megawatts (MW). In the meantime some 130km north of Cape Town, the West Coast One project churns out MW after MW. Since December 2013, a new concentrated solar farm has come up in the Northern Cape. According to international solar think-tank SolarPlaza, the Northern Cape is the best location in the world after the Sahara and Australia for such projects.

These and other initiatives are just the beginning. The renewable energy sector might be small when compared to other nations, but it certainly is developing at a fast pace. The main drivers include a growing electricity demand and the fact that the Rainbow Nation has some very favourable wind and solar conditions.

In November last year, the South African Department of Energy signed agreements with 17 new renewable energy developers. This brings the number of green energy projects that have been approved since 2011 to 64. With a collective investment value of £5.5 billion, these ventures combined will generate around 4000 MW. In comparison, Medupi, which is years behind schedule, will put 4788 MW into the grid.

This is good news as South Africa’s energy situation is far from stable. Various reports have shown that this is hurting the investment climate and ultimately the economy.

Take ‘Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises’. This report by the World Bank and the International Finance Corporation analyses how easy it is to do business in 185 economies. It states that energy insecurity makes South Africa difficult for entrepreneurs (rank: 150). The latest World Economic Forum’s Competitiveness Report places the quality of South Africa’s energy supply at 99, out of a total of 144 countries.

Renewable energy expert Jigar Shah praises the steps South Africa has taken with regards to renewable energy. “It is obvious that addicting Africa further to coal and natural gas will lead to no further progress on electrification,” says the first CEO of the Carbon War Room, a global organisation founded by Richard Branson to curb climate change. Currently Shah runs his own solar consultancy firm in Washington DC. “Today, almost everyone sees the future of African electricity in terms of electrifying the hundreds of millions who don’t have access to electricity. That will only come from renewable energy.”

Shah also strongly believes in the investment potential of green energy in South Africa, solar in particular: “An investment in solar is most predictable, particularly in a place like South Africa and the rest of the continent, which isn’t 100% electrified; where the energy demand is high; and where the use of expensive diesel fuel is significant. The output of the sun is very predictable in South Africa, making the country a great solar destination.”

Apart from sunshine, the Rainbow Nation is blessed with favourable wind conditions. “We could generate 20,000 to 30,000 MW from the wind alone, and most likely more,” says Peter Venn, managing director of wind developing firm Windlab in South Africa.

“This country is a great wind energy location, particularly the Western, Eastern and Northern Cape provinces as well as KwaZulu Natal.”

Like Shah, Venn is convinced of the investment potential of wind projects in South Africa, even though the government has signed a mega nuclear energy deal with Russia. The strategic partnership, which is worth £30 billion, will authorise Russia’s Rosatom State Atomic Energy Corporation to build up to eight nuclear reactors by 2023.

Not everyone is happy with this. Opposition parties have voiced their concern, particularly around the lack of clarity and transparency of the agreement’s content. Last year, an unsigned draft agreement was circulated, which sought to give Russia exclusive rights for the construction of nuclear plants in South Africa, forcing Pretoria to seek consent from Moscow should it wish to enter into energy agreements with others.

“This… would be against South Africa’s national interest, limiting our ability to effectively negotiate and plan procurement of nuclear capacity from third parties,” said Member of Parliament and shadow minister of energy Lance Greyling in a statement. “The government’s silence on the matter is unacceptable.”

Others are worried that the nuclear deal with Russia will be detrimental to the government drive to further develop renewable projects.

Venn isn’t worried. “A wind farm takes 18 months to complete, with contracts stretching up to 20 years,” he says. “It takes 20 years to build this nuclear programme. In the meantime, we still need energy. This gap can be filled by renewables.”

The post Rainbow Nation’s energy sector is getting greener appeared first on International Finance.

Jaya Smitha Menon

August 18, 2014: The financial crisis of 2008 caused much misery to the sector, but for the FinTech startup community, it proved to be quite fertile. The need for changing old business models and bringinginnovation has bridged the gap between the FinTech startup ecosystem and the financial community.

According to a report by Accenture, investment in FinTech sector globally has increased from under $930 million in 2008 to more than $2.97 billion in 2013.

Driven by the need to cut cost, comply with increasing regulations and understanding the new costumer behaviour, the finance sector now has a bewildering array of start-ups. So, which among them are creating a stir in the market?

Payment engine

Payments is a growing sector but involves high cost and hidden charges. However, Currency Cloud(http://www.thecurrencycloud.com/), started in 2012, aims to make payments more transparent, fast and affordable. Its payment engine allows its customers, like TransferWise, Azimo, Fidor Bank and MANGOPAY, to enable secure and transparent transfer of money around the world. The London-based company has invested heavily in compliance, research and development, and allows costumers to get up and running in as less as two weeks via their API. Cloud recently raised $10million in Series B funding round from its existing investors along with a new investor.

Reputation and trust

In the financial world, trust and reputation is an important factor whether it is to hold a credit card or getting a mortgage. In today’s world, making online transactions with unknown people also demands a level of trust and reputation.Traity(https://traity.com/), a Madrid-based start-up is taking reputation and trust to a new level. If you are a good seller on ecommerce portals and use other online services, Traity will import that information into your profile. This helps financial institutions to take informed decisions even if you are in a foreign country. The company recently got a $5 million funding for further development.

Filling forms

Who doesn’t hate filling up forms and entering details each time; whether it be your personal information or your card details. Ensygnia’sOnescan(http://www.ensygnia.com/thecompany/), a patent protected app, helps to make mobile payments less cumbersome and faster, whether you are shopping online or in-store. Waitrose, the retail giant recently showcased Onescan along with few other mobile technology innovations that can redefine a customer’s shopping experience. Onescan allowed customers to complete a payment in-store using a mobile phone app, directly from any iPad screen in the store, without having the need to go to the till point. The company got a $3.3 million funding from Telefonica start-up accelerator Wayra.

Core banking solutions

Banks spend millions on its core banking solutions. But with time, the complexity and cost of the application increases enormously. This also limits their desire to penetrate untapped markets. Mambu(http://www.mambu.com/en/mambu-story-35.html), founded in 2011 wants to redefine this paradigm by providing a unique cloud based platform, which will help banks and financial institutions roll out products and services in a jiffy. This is much more relevant in the case of microfinance institutions that need a low-cost banking platform to support underbanked users. Mambu offers a flexible and cost-effective solution. It received $2 million from Runa Capital, Point Nine Capital and Kizoo Technology Ventures in 2013. Today,Mambu has over 100 clients in over 20 countries.

Crypto currencies

With Bitcoin gaining momentum, the future of crypto currencies seems to be brightening. To cash in on this new wave comes Epiphyte(http://epiphyte.us/index.html), which promises to integrate banks and financial institutions with the crypto-finance industry. With a range of cloud based products and services, taking care of security, risk and compliance, Epiphyte hopes to help financial institutions deal with traditional and new forms of money in a single network. The company’s middleware suite CBridge enables banks to interface with cryptofinancial networks in a controlled and secure manner.

The post Five interesting FinTech start-ups to watch for appeared first on International Finance.