GULF WEEKLY: Erdogan visits Saudi, Sharjah on Negative outlook, Oman plans privatizations
A skimmable summary overlaid with our analysis and links. Headlines:
* Moody’s restored stable outlooks to Gulf banking sectors due to improved operating conditions.
* Saudi Arabia ordered 50k+ Lucid EVs, and colorful details emerge of its 2018 talks with Tesla.
* Erdogan visited Saudi Arabia in a breakthrough in relations after dropping the Khashoggi case.
* Saudi-Iran talks in Iraq seemed to make progress on the Yemen file and on reopening embassies.
* The US has finally nominated an ambassador to Riyadh, Michael Ratney.
* S&P put Sharjah on a Negative outlook, on the cusp of junk status, given a lack of fiscal reform.
* Adnoc bought Mubadala’s 25% stake in Austrian firm Borealis ahead of an IPO of JV Borouge.
* Qatar jumped to 22nd in military spending in 2021, ahead of Pakistan, and budgeted more for 2022.
* OIA plans to privatize 20 Omani companies by 2025 and raise $6.8bn, including $4bn this year.
* Oman’s personal income tax law is on track for 2023, according to a source at Tawazun.
* GCC Databank updates: IMF REO forecasts, S&P forecasts for Sharjah & RAK, Sharjah headline GDP.
Cross-cutting themes
Oil / Iran
* Brent crude is back up to $108, driven largely by expectations about an EU ban on Russian oil. Meanwhile, OPEC+ is expected to continue with another standard taper of about 0.4m b/d in June at its meeting next week (Rt). However, a monthly taper of nearer to 0.7m b/d would be needed to reach the revised baseline allocation by October, as planned in the July 2021 agreement.
* The JCPOA talks have been on pause for over a month, but Iran’s foreign ministry said a new meeting is pending after a conversation with the EU’s Josep Borrell (AM, Amw). Meanwhile, Crisis Group and the European Council on Foreign Relations published an open letter to the US and Iran, signed by senior former European officials, including former German and British foreign ministers. It called on the US to show leadership and flexibility to resolve the terrorist designation of the IRGC, the remaining block, noting “we believe that there are ways to provide the counter-terrorism benefits of the current designation while still accommodating Iran's specific request… [but] Iran should not expect a nuclear deal to address broader areas of disagreement.”
The IMF’s Regional Economic Outlook was released, providing some analysis and more detailed near-term forecasts.
* It includes general government breakeven oil price forecasts, which for 2022 range from $53 for Kuwait to $128 for Bahrain. Kuwait sees the most improvement because it is the most dependent on oil revenue in the region and so gets more relative benefit from increasing output under the OPEC+ deal.
* It provides central government balance forecasts for Qatar (5.4% in 2022) and UAE (0.1% in 2022) as the WEO gives general government fiscal forecasts for these countries.
Moody’s released banking sector outlooks for the Gulf states. It returned Bahrain, Oman, Qatar and UAE to Stable as operating conditions improve, having applied Negative outlooks back in 2020. The Stable outlooks had earlier been restored to Kuwait and Saudi Arabia.
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