Business

RIYADH — Oil giant Saudi Aramco on Sunday reported a 124 per cent net profit surge for last year, in results released hours after its facilities were hit by Yemeni rebel drone and missile strikes.

As the world economy started to rebound from the COVID pandemic, "Aramco's net income increased by 124 per cent to $110 billion in 2021, compared to $49 billion in 2020," the company said.

The results followed news of the overnight attacks by Yemen's Iran-backed Houthi rebels, which caused no reported casualties but hit targets including Aramco facilities and a water desalination plant.

The attacks "led to a temporary reduction in the refinery's production, which will be compensated for from the inventory", said the Saudi energy ministry in a statement on state media, without providing numbers.

The Saudi-led military coalition which backs Yemen's government said it intercepted and destroyed ballistic missiles and drones launched towards Jizan and other areas in the kingdom, causing "damage" to several sites.

"Initial investigations indicate the militia used Iranian cruise missiles that targeted Al Shaqeeq desalination plant and Aramco's Jizan bulk plant," it said in a statement. 

Targets included a Dhahran Al Janoub power station, an Aramco gas plant in Yanbu and a gas station in Khamis Mushait, it said.

The Houthis confirmed they had launched the drone and missile attacks targeting a number of "vital and important" sites, including Aramco facilities.

In 2019, Houthi-claimed aerial assaults on two Aramco facilities in eastern Saudi Arabia temporarily knocked out half of the kingdom's crude production.

The Saudi energy ministry said in its statement the attacks had targeted a gas plant and the YASREF refinery, which produces 400,000 barrels per day according to its website, in the Yanbu Industrial City on the Red Sea.

'Geopolitical factors'

The kingdom, one of the world's top crude exporters, has been under pressure to raise output as Russia's invasion of Ukraine and subsequent sanctions against Moscow have roiled global energy markets.

Oil-rich Gulf countries, including Saudi Arabia, have so far resisted the pressure, stressing their commitment to the OPEC+ alliance of oil producers led by Riyadh and Moscow. 

Aramco president and CEO Amin Nasser cautioned that the company's outlook remained uncertain due in part to "geopolitical factors". 

Alluding to the effect price spikes have had on consumers, he noted that "energy security is paramount for billions of people".

"We continue to make progress on increasing our crude oil production capacity, executing our gas expansion programme and increasing our liquids to chemicals capacity," Nasser added.

On the latest results, for 2021, he acknowledged that "economic conditions have improved considerably".

The oil giant had in 2019 achieved a net income of $88.2 billion before the pandemic hit global markets, resulting in huge losses for the energy and aviation sectors, among others.

A strong rebound last year saw demand for oil increase and prices recover from their 2020 lows. 

Brent crude has repeatedly spiked above $100 per barrel lately, driven by supply concerns centred on Russia's invasion of Ukraine.

Saudi Aramco also said capital expenditure in 2021 was up 18 per cent on 2020 at $31.9 billion, a figure it expected to raise to approximately $40 billion-50 billion this year, before further growth. 

Saudi Arabia has sought both to open up and diversify its oil-reliant economy, especially since Mohammed Bin Salman's appointment as crown prince in 2017. 

Aramco floated 1.7 per cent of its shares on the Saudi bourse in December 2019, generating $29.4 billion in the world's biggest initial public offering.

In February, the kingdom shifted 4 per cent of Aramco shares, worth $80 billion, to the country's sovereign wealth fund — a move seen as a possible prelude to further opening up the oil giant.

CAIRO — Soaring bread prices sparked by Russia's invasion of Ukraine have bitten into the purchasing power of consumers in Egypt, a leading importer of wheat from the former Soviet states.

For the first time since he took office, President Abdel Fattah Al Sisi on Tuesday ordered a price cap on unsubsidised bread after the cost of the Egyptian staple rose by as much as 50 per cent.

The move is meant to cushion the invasion's impact on a country where, according to Michael Tanchum of the Middle East Institute, "keeping the price of Egypt's staple food affordable has been the bedrock of regime stability" for 60 years.

A fortnight ago, 1,500 Egyptian pounds ($95) was enough for Shaimaa Mohamed to buy a month's worth of groceries. Now, the mother of three says it is barely enough for two weeks.

Mohamed warned her children that the family would have to tighten its purse strings after a kilogramme of rice went from eight to 12 pounds seemingly overnight.

"I was in the same store 15 days ago, and today for the same price I have only filled half of my shopping cart. What happened?" she said.

The answer lies thousands of kilometres away in Ukraine, once known as "the bread basket of Europe".

Russia invaded its neighbour on February 24, causing the price of grain, oil and other essential commodities to climb worldwide.

'Existential threat' 

"In Egypt, prices of wheat and sunflower oil have escalated due to Egypt's reliance on Russia and Ukraine for 85 per cent of its wheat supply and 73 per cent of its sunflower oil," the UN's International Fund for Agricultural Development said on Thursday.

Per capita bread consumption in the country is almost 130 kilogrammes per year, well above the world average, according to official figures.

The North African country's popular flatbread, which has increased from one pound to 1.25 per loaf, is considered a litmus test for the economy.

Concerns have heightened as Egypt — a country where a third of the 103 million-strong population lives in poverty — gears up for Ramadan, which begins in April.

Consumption usually rises as households stock up for the month, but with inflation at a three-year high of 10 per cent in February, the situation is looking bleak in the final weeks before the country's Muslims start fasting.

Bankers JPMorgan have stirred talk of an anticipated devaluation of the Egyptian pound, which would be the second within six years.

Egypt's poor and working class shouldered the burden in 2016, when a slate of austerity measures — including a 50 per cent currency devaluation and subsidy cuts — were enforced to secure a three-year, $12-billion bailout loan from the International Monetary Fund.

Food insecurity in Egypt poses "an existential threat to its economy", according to the Middle East Institute.

Bakery boycott 

In efforts to mitigate the shock of the ongoing crisis, the government announced last week a $1 billion increase to the state's wheat provision bill.

Of the state's $5.5 billion budget for food subsidies, 57 per cent is dedicated to bread, and 70 per cent of Egyptians depend on this.

On Tuesday, Sisi directed the government to set a cap on the price of unsubsidised bread, after private bakeries hiked prices by as much as 50 per cent last week.

Prime Minister Mostafa Madbouli lectured traders last week, calling on them "not to exploit the situation", while asking Egyptians "to ration their consumption to limit the recourse to world markets" where prices are skyrocketing.

State media says authorities have seized thousands of tonnes of goods, launched legal proceedings against dozens of traders and shut down businesses for allegedly manipulating prices in recent days.

Businesses are not the only reason prices are going up, according to Islam Mohamed, marketing manager at a food import company.

"The cost of transporting and unloading cargo from Europe has gone up 30 per cent because of the price of oil," he said. "That will be reflected in consumer prices."

In his affluent neighbourhood on Cairo's western outskirts, "some people suggested boycotting the bakeries that raised the price of bread", the 34-year-old noted.

Most residents, however, shared a sense of resignation.

"Rising costs have hit everything. What would be the point of a boycott?"

LONDON — Oil prices soared on Thursday on tensions surrounding key producer Russia, as equities diverged with traders tracking interest rate decisions, the Ukraine conflict and China's pledge to support volatile markets.

The price of benchmark oil contract, Brent North Sea crude, jumped more than five per cent to return above $100 per barrel after Russia rejected a ruling from the UN's top court to suspend its Ukraine offensive.

"Russia's invasion is still dictating price action... given the country's global importance in terms of supply," said Interactive Investor analyst Victoria Scholar.

The fallout from the war in Ukraine could cut global economic growth by "over one percentage point" in the first year after the invasion, the OECD grouping of developed economies said in a report.

The impact "if sustained" would produce "a deep recession in Russia" and further increase global consumer price inflation by approximately 2.5 percentage points, it added.

The warning came as Russia's finance ministry said it had carried out interest payments on two foreign bonds, avoiding default for now after it was hit by unprecedented Western sanctions over Ukraine.

Central banks 

Central banks were in focus again on Thursday as the Bank of England (BoE) raised its main interest rate by a quarter point, following the US Federal Reserve's decision to do the same the day before.

The hike, widely anticipated by analysts, was the BoE's third straight rate rise as it battles with decades-high UK inflation.

"The global economy faces elevated levels of inflation because of various factors, including from surging energy and commodity prices," said Fawad Razaqzada, analyst at ThinkMarkets.

US markets were slightly down shortly after opening, as the market came to terms with the Fed's decision on Wednesday. 

The Dow Jones Industrial Average and the S&P 500 slipped 0.4 per cent, while the tech-heavy Nasdaq lost 0.9 per cent.

In Asia, Hong Kong's main stocks index closed with another massive gain, as investors pile back in after China's pledge to support markets.

The Hang Seng surged seven per cent, a day after a nine-per cent jump.

Another blistering surge in tech firms helped Hong Kong extend its recovery from the recent rout, while traders also cheered soothing comments on the US economy by the Fed.

China's top economic official has vowed measures to support beaten-down markets and indicated that a debilitating crackdown on the technology sector was nearing its end.

"The statement addressed so many issues on various fronts, which is really rare," said Ding Shuang at Standard Chartered.

"Selloffs tended to be self-fulfilling partly because of the lack of response from the government," but part of the government's aim is likely to break that inertia and stabilise expectations, he added.

COLOMBO — Sri Lanka will seek an International Monetary Fund (IMF) bailout, President Gotabaya Rajapaksa said on Wednesday, as it battles inflation and unprecedented food and fuel shortages.

A lack of foreign currency has left Sri Lanka unable to finance essential imports in what authorities say is the South Asian nation's worst economic crisis since independence from Britain in 1948.

"Subsequent to my discussions with the International Monetary Fund, I have decided to work with them," Rajapaksa said in an address to the nation, after meeting with an IMF delegation on Tuesday.

He added that IMF help was needed to secure "a new method" to repay around $6.9 billion in external debt and sovereign bond repayments due this year.

Long queues outside gas stations and rolling daily blackouts have become the norm, while skyrocketing prices have caused serious hardships among the island's 22 million people.

"The root cause of current issues is our foreign exchange crisis," Rajapaksa said, adding he was aware of the "difficulties" faced by people queuing for food and fuel.

"Today, I am determined to make tough decisions to find solutions to the inconveniences that the people are experiencing," he said.

Sri Lanka's foreign reserves, which sat at $7.5 billion when Rajapaksa took office in November 2019, dropped to $2.3 billion at the end of February.

The coronavirus pandemic hammered the island's tourism sector — a key foreign exchange earner while foreign worker remittances also declined.

International rating agencies have since downgraded Sri Lanka, effectively blocking its access to commercial borrowings.

They have also raised doubts about Colombo's ability to service its external debt amounting to just over $51 billion.

BERLIN — American chip making giant Intel said on Tuesday it planned to invest tens of billions of euros in the European Union, as the continent seeks to reduce its reliance on semiconductors from Asia.

The project to boost the entire production process, from the research of new technologies to the manufacturing and packaging of semiconductors, could total up to 80 billion euros ($87.9 billion) over the next decade, the group said in a statement.

The production of the key technology, also known as chips, has become a strategic priority in Europe as well as the United States, after the shock of the pandemic choked off supply, bringing factories to a standstill and emptying stores of products.

The details of the announcement were hotly anticipated in Europe, where governments have been jostling to host new production facilities as the continent seeks to reduce its dependence on Asian chip imports.

Earlier this year, the EU passed the Chips Act, a 43-billion-euro plan to boost production on the continent of the component, used in everything from electric vehicles to wind turbines.

Speaking at the Intel launch event, European Commission President Ursula von der Leyen said the US group's announcement was the "first major achievement" under the act.

'Mega site' 

Intel's planned investments span the EU, from Spain to Poland, addressing "the global need for a more balanced and resilient supply chain", said CEO Pat Gelsinger.

Semiconductors were "more critical than ever", and were the "brains powering essential digital technologies", he said in a press conference.

The cornerstone of the "landmark" investment was a 17 billion-euro "mega site" in the eastern German city of Magdeburg.

Intel plans to begin building the manufacturing hub in the "first half of 2023" with production to begin as soon as 2027.

The US group would also develop its research and development centre near Paris and a foundry design centre in France.

The new R&D base around Plateau de Saclay would in time employ 1,000 people, working on Intel's "high performance computing and artificial intelligenc design capabilities", the group said.

Intel would also hand a 12 billion-euro funding boost to its facilities in Ireland, while it said it had entered into negotiations with the Italian government to invest "up to 4.5 billion euros" in a manufacturing facility.

As part of the package, the chip-maker would also be expanding its lab capacity in Poland and developing joint centres with the Barcelona Supercomputing Centre in Spain.

MUMBAI — Paytm shares nosedived almost 13 per cent on Monday after Indian regulators banned the beleaguered payments platform from enrolling new customers and reports emerged that its founder was arrested for crashing into a police car.

The firm enjoyed India's biggest initial public offering four months ago, with the backing of Chinese tycoon Jack Ma's Ant Group and Warren Buffett's Berkshire Hathaway.

But it has since lost more than two-thirds of its market cap despite a commanding position in the local digital payments space, as investors fret over whether the perennial loss maker will ever turn a profit.

India's central bank demanded Paytm immediately stop enrolling new customers on Friday and ordered an audit of its IT systems, citing "certain material supervisory concerns observed in the bank".

Shares in the firm closed 12.84 per cent lower in Mumbai after hitting record lows in Monday's trade.

Paytm said it "remains committed to working with the regulator to address their concerns as quickly as possible".

The firm's woes were compounded over the weekend after news broke that founder and Chief Executive Vijay Shekhar Sharma had been briefly detained last month after crashing into a senior police officer's car in the capital New Delhi and fleeing the scene.

Paytm downplayed the incident in a Sunday statement that characterised the accident as a "minor offence". 

Sharma, named India's youngest billionaire in 2017, launched Paytm in 2010 and quickly made the platform synonymous with digital payments in a country traditionally dominated by cash transactions.

His enterprise has benefitted from government efforts to curb the use of hard currency — including the demonetisation of nearly all banknotes in circulation five years ago — and from the pandemic.

The platform had 350 million customers at the end of December, according to the company's regulatory filing.

But the last few months have seen a dramatic reversal of fortunes for the platform and Sharma has seen his net worth written down by over $1.5 billion since its November 2021 market debut.

Paytm's parent One97 Communications reported a net loss of 7.79 billion rupees ($102 million) for the December quarter. 

PARIS — The world economy's fragile recovery from the COVID-induced crisis is now threatened by Russia's war in Ukraine and soaring commodity prices.

Here are four questions regarding the risks to global gross domestic product:

Will growth stall? 

"The war happened right at a time when Europe and the US had a recovery that was going really well. Projections in Europe were among the highest... [in] the last 20 years," said Jacob Kirkegaard, resident senior fellow with the German Marshall Fund of the United States in their Brussels office.

In just two weeks, the war has had a "material impact" on the economy, European Central Bank Chief Christine Lagarde said on Thursday, revising the growth outlook for the eurozone to 3.7 per cent for 2022, from 4.2 per cent forecast in December.

The war and sanctions, which include a US ban on Russian oil imports, are raising prices of energy and other key commodities like wheat, fertilisers and metals to surge, International Monetary Fund chief Kristalina Georgieva said.

That comes "on top of already high inflation", Georgieva said.

"We got through a crisis like no other with the pandemic. We are now in an even more shocking territory."

Credit rating agency S&P has cut its projection for global growth this year to 3.4 per cent — a decline of 0.7 percentage points over its earlier forecast due to the expected slump in Russia's sanctions-hit economy and rising energy costs.

Moreover, the cost of hosting Ukrainian refugees and budgetary aid will cost the European Union 175 billion euros ($192 billion), economist Jean-Pisani Ferry from the Paris-based Bruegel Institute think-tank said.

"I don't think that global economy will go into a recession," said Kirkegaard.

But he warned of the threat from stagflation — persistently high inflation combined with high unemployment and stagnant demand.

Why are prices soaring? 

Inflation has been rising worldwide for a year — due to COVID-linked disruptions in supply chains, leading to a spurt in the prices of raw materials which have raised production costs.

The war has sent oil and gas prices soaring, threatening to worsen inflationary pressure.

Federal Reserve Chair Jerome Powell told the US Congress that every $10 hike in oil prices would impact growth by 0.1 percentage points and add 0.2 percentage points to inflation.

The United States recorded 7.9 per cent inflation in February — a new 40-year high.

"We are facing an oil shock, a gas shock and an electricity shock. This has never happened together," said Thomas Pellerin-Carlin, director the Jacques Delors energy institute.

Apart from oil and gas, other key commodities have been affected, with prices of aluminium, nickel and wheat skyrocketing.

Russian President Vladimir Putin on Thursday warned of inflationary pressures worldwide as a result of the Western sanctions on his country.

Several key industries have already been hit, with several steel plants in Spain shutting down due to high energy prices.

Millions of households are finding it more expensive to travel, heat their homes and bring food to the table.

"The price of bread went up enormously" since the war began, said Omar Azzam, a Cairo resident, referring to a 50 per cent hike in a country which is the world's top wheat importer.

French President Emmanuel Macron warned Friday that Russia's attack on Ukraine will "deeply de-stabilise" food supplies in Europe and Africa as some of the world's most fertile agricultural land goes unplanted.

If production strategies in other countries aren't adjusted "several African countries will be affected by famines within 12 to 18 months precisely because of the war," he warned.

More stimulus 

on the way? 

Countries launched huge stimulus programmes to prevent their economies from crumbling after the pandemic emerged in 2020.

But government are loath to dig much deeper into public finances.

Aid will likely be more targeted. The G-7 group of industrialised nations, for instance has called for massive support to households slammed by energy costs.

Emerging nations, however, will be more fragile and vulnerable to inflation and even political instability, experts warn.

Is COVID still a threat? 

While many countries are easing COVID restrictions, China has been doing the opposite.

The world's second biggest economy on Friday locked down Changchun, a city of nine million people, to control a fresh wave of coronavirus.

If such measures continue, they will hit the world hard, warned Kirkegaard.

"The Chinese economy will slow dramatically, China will shut down whatever they need to shut down," he said.

"It is as big and unknown as the war in Ukraine because unlike Europe and the US that are able to live with COVID, it is certainly not the case in China," he said.