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Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at dan@frontiermarkets.co with news ideas, feedback and anything else you find interesting.
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Africa
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Central African Republic adopts bitcoin as legal tender. The Central African Republic became the second nation to officially embrace crypto on Wednesday, when lawmakers unanimously approved a bill that legalized cryptocurrencies and gave bitcoin the same status as the country’s currency, the CFA franc.
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The Central African Republic has been mired in deadly civil conflict for the past nine years and is one of the world’s poorest countries. The country has not released infrastructure or regulatory details that will facilitate its crypto adoption, Casey Wagner of Blockworks reports.
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Central African Republic President Faustin-Archange Touadera. Photo: Shutterstock
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Last year, El Salvador became the first country to declare crypto legal tender in a decision that has been widely derided. A study by the National Bureau of Economic Research showed that only 20% of those who downloaded the country’s official crypto wallet continued to use it after receiving the $30 sign-up bonus.
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Libyan oil blockade could cost country billions. Libya faces significant losses after two of its largest oil terminals closed last week after they were stormed by forces of the Libyan National Army. Analysts said closing the oil terminals amounted to holding the country’s economy hostage until the Parliament’s candidate for prime minister is appointed, Al Jazeera reports.
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Brega oil port in Marsa Brega, Libya. Photo: AFP via Arab Weekly
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The country’s parliament, supported by the army, contends that prime minister Abdul Hamid Dbeibah’s term has expired, and that a new prime minister should be sworn in.
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The closure of the terminals has reduced oil production by Libya, which has the largest oil reserves in Africa, to 600,00 barrels a day—half its previous level. The disruption is estimated to be costing the country $60 million per day, AfricaNews reports
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On Wednesday, the US called for the shutdowns to end “immediately,” Arab Weekly reports.
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Asia
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Myanmar junta increases Aung San Suu Kyi’s sentence. A court in Myanmar sentenced deposed civilian leader Aung San Suu Kyi to an additional five years in prison in a closed trial on Wednesday, finding her guilty of corruption.
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Originally sentenced to six years in prison after a military coup in February 2021, Suu Kyi faces a possible 163-year prison sentence if convicted on all remaining counts. The prosecution has accused the former leader of accepting $1.3 million in gold bars from a political ally, but presented no evidence aside from witness testimony, the New York Times reports.
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Aung San Suu Kyi has been sentenced to five years in prison in Myanmar.
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Photo: Gemunu Amarasinghe/AP, via The Guardian
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The military ruled Myanmar for 50 years following its independence from the UK in before transitioning to sharing power with civilians in 2010. A spokesperson from the advocacy group Human Rights Watch called Aung San Suu Kyi’s most recent conviction “bogus,” The Guardian reports.
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Terrorism disrupts Pakistan-China corridor. A suicide bomber killed five people outside of Karachi on Tuesday, including three tutors from Islamabad’s Confucius Institute. The separatist Baloch Liberation Army (BLA) claimed responsibility for the attack.
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Categorized as a terrorist group by Pakistan, the BLA opposes Chinese investment in Balochistan, where many of the infrastructure projects that collectively form the basis of the so-called China-Pakistan Economic Corridor (CPEC) are located, the BBC reports. Following the attack, newly elected Prime Minister Shahbaz Sharif personally visited the Chinese embassy in Islamabad, his office said.
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The blast happened near the Confucius Institute in Karachi. (Photo EPA via BBC)
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Confucius Institutes are widely viewed in the West as propaganda instruments of the Chinese government, on which the Chinese government spends $10 billion a year, according to a report by the Council on Foreign Relations. The targeting of tutors affiliated with the Institute may be perceived as a rejection of Chinese influence in the region.
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Middle East
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Iran ramps up oil exports as China pulls back on Russian crude. Iran is ramping up oil exports and benefiting from a rise in oil prices as its main buyer, China, pulls back on its purchases of Russian oil due to the war with Ukraine, the Wall Street Journal’s Benoit Faucon reports.
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Iran oil exports—which go almost exclusively to China apart from rare deliveries to Syria and Venezuela—rose to 870,000 barrels a day in the first three months of the year, up 30% from an average of 668,000 barrels a day in the full-year 2021, said commodities data provider Kpler. China cut back its purchases of Russian oil by 14% in March, according to data from Chinese customs administration.
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Iran is now selling more oil to China despite charging higher prices than Russia.
Photo: Vahid Salemi/Associated Press
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Iran’s growing exports illustrate how the invasion of Ukraine is redrawing the world’s energy trade routes, as energy consumers look for alternatives to Russian oil and gas to avoid Western sanctions. The changes are expected to accelerate as more Russian oil comes off the market, with the International Energy Agency predicting that the country’s production will fall by more than a quarter.
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Europe
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Russia halts energy exports to Poland and Bulgaria, driving European gas prices higher. Russian state-gas supplier Gazprom announced on Wednesday it had halted gas supplies to Bulgaria and Poland over their refusal to use a new payment mechanism that allows Moscow to access the cash it receives for exports. The hit to EU energy security marks a significant escalation of Moscow’s attempt to divide the bloc along economic lines and undermine Ukraine's primary allies, the FT reports.
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Mateusz Morawiecki, Poland’s prime minister, accuses Russia of ‘gas imperialism.’ Photo: Kacper Pempel/Reuters
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In 2020, Bulgaria imported over 70% of its gas from Russia, while Poland's imports were around 45% of its energy mix, EU data shows. However, both countries remained defiant, reaffirming their preparations and continued support for Ukraine. Meanwhile, analysts suggest that the gas will not cause serious problems as demand drops with warmer spring weather.
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Gazprom's announcement jolted global gas markets, pushing prices higher and disrupting broader markets, with the euro falling to a five-year low against the dollar. European gas futures gained about 20% initially, and electricity prices rose to more than $110 per megawatt-hour—a six-times increase from 2021. Other EU members condemned Gazprom’s move as a violation of contracts denominated in dollars, and reiterated their intent to wean themselves off Russian energy.
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Global
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Global arms spending passes $2 trillion for the first time. Defense spending reached $2.1 trillion dollars for the first time in 2021, driven by an arms race in Asia, the Stockholm International Peace Research Institute reported. Despite the pandemic, inflation, and demands for direct household support, global military expenditure grew by 6.1%.
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China continues to drive an absolute increases in defense spending with a 4.7% rise from 2020, making it the only country to see 27 years of consecutive growth.
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China and India were the main drivers for the growth in Asia’s defense
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spending, SIPRI said. Photo: Reuters and Getty Images via Nikkei Asia
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While China and the US continue to represent the majority of spending, South Korea and Australia increased spending by 4% or more, and Japan and Singapore both boosted military spending by more than 7% as regional tensions contribute to escalation and repeated confrontations over Taiwan, trade aggressions, and the South China Sea.
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What we’re reading
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Al-Qaida-linked group in Mali says it has captured Russians. (AP)
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Guinea and Burkina Faso juntas risk more sanctions over transition delays. (Reuters)
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Hunger grips Burkina Faso due to increasing jihadi violence. (AP)
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How China cash flowed to Congo’s former first family. (Bloomberg)
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African debt: China to ‘co-chair’ debt restructuring talks with Zambia. (The Africa Report)
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Pakistani militants test Taliban promise not to host terror groups. (WSJ)
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Turkey: Erdogan critic given life sentence in ruling likely to stoke tensions with West. (WSJ)
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A likely victory for Marcos Jr. will mean broad policy continuity in the Philippines. (FrontierView)
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Malaysia’s 35% minimum wage hike stirs recovery concerns. (Nikkei)
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Indonesia palm oil export ban fuels global food inflation threat. (FT)
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Sri Lanka cabinet clears proposal to limit president’s power. (Bloomberg)
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Sri Lanka begins talks with China on refinancing debt. (Reuters)
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Erdogan’s embrace of Saudi crown prince signals end of dispute over Khashoggi murder. (FT)
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Saudi royals are selling homes, yachts and art as crown prince cuts income. (WSJ)
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Abu Dhabi crude to head to Europe to replace Russian oil. (Reuters)
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Russia’s occupation of southern Ukraine hardens, with rubles, Russian schools and Lenin statues. (WSJ)
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Russian central bank cuts interest rate to 14% and predicts economy will shrink by up to 10%. (Radio Free Europe)
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Russia nearly doubled its income from energy sales to the EU during wartime, study shows. (Radio Free Europe)
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Germany drops opposition to embargo on Russian oil. (WSJ)
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Moldova places security forces on alert after blasts in breakaway state of Transnistria. (WSJ)
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Saint Kitts and Nevis signals plan to cut ties with British monarchy and become a republic. (Independent)
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Nicaragua expels OAS mission from its territory. (MercoPress)
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Guyana sells first million barrels of oil from the Liza Unity production platform. (MercoPress)
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Brazil court deals blow to massive Amazon gold mine project. (AP)
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Chilean president pledges food subsidies for vulnerable families; inflation rises to highest level in three decades. (MercoPress)
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