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Saudi FM criticizes EU business with Iran

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European companies engaged in business with Iran are enriching the country’s Islamic Revolutionary Guard Corps (IRGC) and inadvertently fueling its military activities in the wider Middle East, Saudi Foreign Minister Adel Al-Jubeir told CNBC on Sunday.

“We believe that a large percentage of the Iranian economy is controlled by the Revolutionary Guards and companies associated with the guards. And we believe that any dealings with those companies only serve to enrich the Revolutionary Guards and cause them to cause more mischief within the region and the world,” Al-Jubeir said, referencing the billions of dollars’ worth of deals struck between European companies and Iran since the lifting of international sanctions in 2015.

Tasked with defending the state and Iran’s Islamic ideals, the powerful IRGC — the branch of Iran’s military founded after the 1979 Islamic Revolution — is widely alleged to support militant activity by groups like Hezbollah around the region, from Iraq and Lebanon to Syria. It is also believed to control around a third of the country’s economy.

The passing of the Joint Comprehensive Plan of Action (JCPOA) in 2015, which lifted international sanctions on Iran in exchange for curbs on its nuclear development, saw a wave of new investment and business come into the country from Europe, led by Germany, France and the U.K. European multinationals Airbus, Siemens, Peugeot and Total have all struck major deals in the country worth billions.

Speaking at the Munich Security Conference, America’s top national security advisor H.R. McMaster described European nations like Germany doing business with Iran as essentially writing a blank check to the IRGC.

Asked if he agreed with McMaster’s assessment, Al-Jubeir said yes.

“We are talking to our friends in Europe about this. We are letting them know that the nuclear agreement that was signed with Iran is lacking,” Al-Jubeir said, describing what he believed were flaws within the agreement’s sunset clause (the timeframe for restrictions on its nuclear development) and the thoroughness of United Nations (UN) inspections.

“We also believe the nuclear agreement itself does not resolve the issue of Iran’s radical behavior which has to do with the ballistic missile resolutions of the United Nations … They also do not deal with the issue of Iran’s support for terrorism,” Al-Jubeir said.

Iran has consistently said it is abiding by all the parameters of the deal, a claim that has been backed up by UN inspectors.

Speaking Sunday to NBC News, Iranian Foreign Minister Javad Zarif said the U.S. was jeopardizing the nuclear deal.

“I believe President Trump has tried to walk away from that deal from day one of his presidency, and he has done everything in bad faith to prevent Iran from enjoying the benefits of the deal already. So we believe the United States is already in violation of very serious and important provisions of the nuclear deal,” he said.

Between the singing of the JCPOA and February 2017, Iran conducted up to 14 missile tests, in violation of UN resolutions. The minister emphasized his government’s belief that Iran should be punished for these alleged violations.

Sanctions on the IRCG have not been lifted, and many businesses remain wary of investing in Iran because any transaction that touches an IRGC-affiliated entity could be met with severe fines from the U.S.

While the U.S. has listed Iran as a state-sponsor of terror, it has not labeled the IRGC a terrorist organization, though in October of last year President Donald Trump said that the Corps had played “a central role to Iran becoming the world’s foremost state sponsor of terror.”

Fearing U.S. abandonment of the JCPOA, the foreign ministers of Germany, France and the U.K. in have urged the Trump administration to remain faithful to the deal, insisting that it is essential to international security. Federica Mogherini, the EU’s top diplomat, said in January that it “made the world safer and prevented a potential nuclear arms race in the region.”

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New rules on what is a green investment

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Climate change and low-carbon solutions are impacting investors’ portfolios.

Mitch Diamond | Getty Images

LONDON — A lack of clarity on what should be classified as a climate-friendly investment has been one of the biggest obstacles stopping money flowing into that area. But the EU is keen to change that.

Investors have complained that it is hard to select which companies are acting responsibly on the climate front, because there hasn’t been a common set of standards to analyze the key information needed.

However, the European Commission, the executive arm of the EU, announced Wednesday a new set of rules that aim to clarify what can be classed as a green investment and what can’t be. This regulation is expected to make it easier for investors to put their money in projects that will contribute to the sustainability of the planet.

The classification, known as taxonomy, will now be discussed with member states and European lawmakers before becoming law. It is part of the EU’s wider efforts to become the first continent in the world to be carbon neutral by 2050.

“We are taking a leap forward with the first-ever climate taxonomy which will help companies and investors to know whether their investments and activities are really green. This will be essential if we are to mobilize private investment in sustainable activities and make Europe climate-neutral by 2050,” European Commission Executive Vice President Valdis Dombrovskis said in a statement.

To achieve its carbon neutrality goal, the commission has suggested member states need to cut their emissions by at least 55% by 2030, compared to 1990 levels. And there will be regular checks on the efforts being made at the national level.

“Significant investments are required to green our economy. We need all companies to play their part, both those already advanced in greening their activities and those who need to do more to achieve sustainability,” Mairead McGuinness, the commissioner responsible for financial services, said in a statement.

What is green?

The new classification considers an economic activity as climate friendly if it contributes to one out of two possible objectives: it is reducing or preventing the adverse impact of climate change on itself, on people, nature or assets; or whether it is contributing to the reduction of greenhouse gas emissions.

The new document, which the commission says is based on science-based criteria, is just a first step and is expected to be updated over time.

“These criteria create common ground for businesses and investors, allowing them to communicate about green activities credibly and help them to navigate the transition to sustainability,” the commission said in the document.

It added that the new criteria covers the economic activities of roughly 40% of EU-domiciled listed companies, in sectors which are responsible for almost 80% of direct greenhouse gas emissions in Europe.

However, this does not include nuclear power activity nor gas, at least for now.

The commission is waiting for some more information before it decides whether or not nuclear, a divisive topic, will feature in the taxonomy. But ultimately this is subject to some political pressure from member states that have high investments in nuclear, such as France.

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Investors seek answers on Archegos, Greensill

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The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021.

Arnd Wiegmann | Reuters

Following the booming profit beats of its Wall Street rivals, Credit Suisse is expected to report a significant loss on Thursday as it navigates the fallout from two high-profile crises.

The Swiss lender announced earlier this month that it took a $4.7 billion hit from the meltdown of U.S. family hedge fund Archegos Capital and now expects a pre-tax loss of around 900 million Swiss francs ($960.4 million) for the first quarter.

The Archegos saga led to the departure of the bank’s investment bank CEO and chief risk and compliance officer, and was preceded by a separate shakeup in the asset management division in the wake of the collapse of British supply chain finance firm Greensill Capital. Credit Suisse ran $10 billion in funds tied to Greensill.

Several U.S. banks which also served as prime brokers to Archegos managed to exit their trading positions after the hedge fund failed to meet margin calls, and have since produced some eye-catching first-quarter profit beats.

Goldman Sachs reported an almost six-fold increase in net income while Morgan Stanley‘s profit jumped by 150%, despite it taking a $911 million loss from Archegos.

Credit Suisse has pointed out that aside from the Archegos and Greensill sagas, it was on course for its strongest underlying quarter for a decade in terms of financial performance.

However, investors will be looking for answers from the bank as to the extent of its exposure to Archegos and Greensill and whether further hits can be expected in the second quarter.

Questions ‘unlikely’ to be answered

“Investors are unlikely to have all their questions answered at this stage, in particular with respect to Greensill risks, where the group has been providing periodic updates,” Amit Goel, co-head of European banks equity research at Barclays, told CNBC on Wednesday.

“For Archegos the group may give more color if all the exposure has been exited, but if this isn’t the case they may not disclose the residual positions/risk.”

A little more detail can be expected on the steps management is taking to address risk management issues within the bank, Goel suggested, including the personnel changes made amid overhauls of the investment banking and asset management businesses in recent weeks.

The bank has launched two independent investigations into both its investment banking and asset management operations in the wake of the Archegos and Greensill sagas, but possible backlash from Swiss regulator FINMA will also be on the radar for investors, according to Morningstar European Banks Equity Analyst Johann Scholtz.

Scholtz also said he would be looking for evidence that “clear and tangible steps have been taken to improve risk management” and an “indication of what the long-term impact on revenue could be from a recalibration of risk appetite.”

“I anticipate that CS will try and steer the conversation more towards the good underlying performance of the business,” he added.

Franchise impact

The Financial Times reported last week, citing sources familiar with the bank’s operations, that Credit Suisse had made cuts to bonus pool accruals and other one-off booked items, a move some analysts fear may disenfranchise employees.

“On the risk of further franchise impact, we and investors will be looking to see if the group has taken steps to support earnings and capital in the quarter, which could have a negative impact in the future,” Goel said.

“For example, broad cuts to compensation across the IB (investment bank), which appears to be factored into the sell side analyst consensus, evidenced by a much lower cost:income ratio for (the first quarter of 2021) in the IB than in prior periods.”

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Putin warns against crossing Russia’s ‘red lines,’ talks up military

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Russian President Vladimir Putin attends the Extended Boards of Interior Ministry on February 26, 2020 in Moscow, Russia.

Mikhail Svetlov | Getty Images

Russian President Vladimir Putin warned against provoking his country in his annual State of the Union speech Wednesday, promising a swift retaliation against anyone who crossed Russian’s “red lines.”

Moscow will respond “harshly,” “quickly” and “asymmetrically” to foreign provocations, Putin told an audience of Russia’s top officials and lawmakers, adding that he “hoped” no foreign actor would cross Russia’s “red lines,” according to a Reuters translation.

Putin also touted the country’s planned investment in expanded military education, hypersonic weapons and intercontinental ballistic missiles. But Russia wants peace and arms control agreements, he stressed simultaneously.

The 68-year-old leader also condemned what he described as the constant tendency of international actors to blame Russia for wrongdoing, saying it had become like a sport.

The comments came in the final half hour of the 90-minute speech, which was predominantly focused on Russia’s fight against the coronavirus pandemic and domestic economic and social issues.

The speech came against the backdrop of deteriorating tensions with the U.S. and EU, and follows the recent imposition of sanctions on Russia from the Joe Biden administration over alleged cyberattacks, human rights violations and activity in Ukraine.

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