Archive for January, 2011

Estonia joins crisis-hit euro club

Saturday, January 1st, 2011 | Finance News


TALLINN (Reuters) – Estonia switched smoothly to the euro on Saturday, brushing off worries about a crisis in the currency club which is likely to put off bigger eastern European nations from joining for up to a decade.

The Baltic state of 1.3 million became the 17th euro zone country at midnight and was the first former Soviet state to adopt the euro, capping 20 years of integration with the West.

Estonia sees the change as marking the end of its struggles since a 2009 recession lopped 14 percent off its output. It hopes to entice investors by removing fears of devaluation and make borrowing more secure for its people, many of whose mortgages are already in euros from top Nordic banks.

"It is a small step for the euro zone and a big step for Estonia," said Prime Minister Andrus Ansip, who was the first to take euros out of a specially installed cash machine.

"We are proud to be a euro zone member state."

The central bank, whose governor will now help decide euro zone interest rates, said the changeover was smooth.

"The money reached ATMs and retail stores in time at the end of the year," said deputy central bank head Rein Minka.

Estonia will be the currency club's poorest member but its debt and deficit levels -- the cause of the crisis for some euro zone members -- are among the lowest in the bloc.

In economic terms, the single currency bloc will barely notice the addition -- Estonia's GDP is 0.2 percent of the euro zone's 8.9 trillion euros.


Poland, Hungary and other eastern European EU states are skeptical about joining the euro. They have all promised to join one day but want to see how the debt problems of Ireland, Greece, Spain and Portugal are solved.

They also fear that losing flexible exchange rates will make them less competitive and less able to fight financial crisis.

Polish central bank governor Marek Belka told newspaper Super Express Poland would join when there was "order" in the euro zone. "In the euro zone there are dramatic things happening, so why rush?" he said.

Czech Prime Minister Petr Necas has said the euro would not be to the country's advantage for a long time. Economists say the larger eastern EU nations may now not join before 2019-2020.

German Chancellor Angela Merkel and French President Nicolas Sarkozy used New Year addresses to show support for the euro.

"The euro is the foundation of our prosperity," said Merkel. "Germany needs Europe and our common currency ... We Germans assume our responsibility, even when it is sometimes very hard."

With a similar history of Nazi and Soviet occupation, all three Baltic states made joining Western structures their goals and joined NATO and the European Union in 2004.

Latvia and Lithuania hope to adopt the euro in 2014 and have had their currencies pegged to the euro for years.

The kroon will be converted at the rate of 15.6466 at which the currency was pegged to the euro. They will circulate together as legal tender for two weeks.

(Additional reporting by Patrick Lannin in Stockholm; Editing by Patrick Graham, Lin Noueihed and Padraic Cassidy)


Russia in milestone oil pipeline supply to China

Saturday, January 1st, 2011 | Finance News

MOSCOW (Reuters) – Russia, the world's top crude exporter, said it had begun scheduled oil shipments to China via an East Siberian link on Saturday as the Kremlin cements ties with its energy-hungry neighbor.

So far, Russia's 50,000-km oil pipeline network has been concentrated in West Siberia and run toward Europe.

With the commissioning of the Eastern Siberia - Pacific Ocean pipeline (ESPO), Moscow is carving out a large chunk of the world's second-largest energy consumers' market.

"The shipments started at 0030 (4:30 p.m. EST on Friday). We plan to pump 1.3 million tonnes of oil in January," Igor Dyomin, a spokesman for Russian oil pipeline monopoly Transneft, told Reuters.

According to the final schedule for crude oil exports and transit, in January-March 2011, Russia will ship 3.68 million tonnes of oil to China via ESPO.

An annual plan envisages the supply of 15 million tonnes (300,000 barrels per day). Many oil market participants expected it would effectively double Russian sales to China, which totaled 12.8 million tonnes (308,000 bpd) in the first 10 months of 2010.

Transneft started to ship the barrels along the first stage of the pipeline, which runs in a 2,757-km arch above Lake Baikal. So far the oil had been transported only by rail to the Pacific port of Kozmino.

On Saturday, the crude flowed to Daqing in China from Russia's Skovorodino via the pipeline.

When the 4,070-km the pipeline's second stage is finished in 2013, it will be the world's longest. At a cost of $25 billion, it dwarfs all other infrastructure projects in post-Soviet Russia.

Russian state oil firm Rosneft has been sending oil to China by rail ever since it bought the biggest unit of defunct oil giant Yukos six years ago. The purchase was facilitated by a $6 billion loan from China, which effectively prepaid $17 per barrel for 48.4 million tonnes of oil.

That contract ran out this year, and Rosneft decided not to extend it, citing the low selling price.

(Reporting by Vladimir Soldatkin; editing by Philippa Fletcher)