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‘Long way to go’ before Russia-Ukraine repair relations after prisoner swap

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Soldiers of the Ukrainian army on the front line during the Joint Forces Operation in Donbass area, Luhansk region, Ukraine, on June 2018.

NurPhoto | NurPhoto | Getty Images

A high-profile prisoner exchange between Russia and Ukraine is being seen as a boost to the possible resumption of peace talks, but some experts are tempering those hopes.

Ambassador Kurt Volker, the U.S. special representative for Ukraine negotiations, told CNBC Wednesday that “there is a long way to go before there would be any normalization between the two countries.”

“Russia’s invasion, occupation, and claimed annexation of Crimea will never be accepted by Ukraine,” Volker, who is also the executive director of the McCain Institute for International Leadership, told CNBC. “That said, it is possible to make progress toward peace in Eastern Ukraine.”

“This prisoner exchange is a good step, that could pave the way for further exchanges, a more durable cease-fire, withdrawal of heavy weapons and — ideally — a decision by Russia to proceed with implementing the Minsk agreements. If so, it would tremendously improve the lives of the local population,” he added.

On Saturday, a possible thawing of frosty relations between the two neighbors came about after Russia and Ukraine exchanged a total of 70 prisoners, including Ukrainian sailors that were detained in November 2018 following a skirmish in the Kerch Strait.

The incident in the strait was just one of a number of incidents reflecting heightened tensions between the countries since 2014, following Russia’s annexation of Crimea and its role in a pro-Russian uprising in the Donbass region in the east of the country.

The uprising prompted Russian-backed separatists within the Donbass to proclaim two “people’s republics” in Donetsk and Luhansk, exacerbating the destabilization of (and tensions with) Ukraine. It has also led to Russia becoming something of a pariah in the international community and it is still subject to sanctions for its actions.

What’s happened?

The conflict in the Donbass region is now in its fifth year, although it has been characterized more by regular skirmishes than outright war. Nonetheless, the human cost has been high. Over 13,000 people (including civilians and combatants from both sides) have died since 2014, according to the United Nations, and hostilities have affected 3.9 million civilians living in the region.

Efforts by France and Germany in 2015 to broker a cease-fire and peace deal, known as the Minsk agreements, were widely seen to have failed with both Russia and Ukraine accusing each other of failing to meet the conditions of the deal.

Against a backdrop of bitter relations, a lot of focus has been on how the new Ukrainian President Volodymyr Zelensky, a comedian and TV star by trade, would handle Russia after he campaigned on a pledge to end the conflict in the Donbass region. During his inauguration, Zelensky said that the government’s “first task is to achieve a cease-fire in Donbass.”

‘Normalization’ of Ukraine-Russia relations?

Zelensky said Saturday that all steps must be taken “to finish this horrible war,” Reuters reported, while Russian President Vladimir Putin said the swap would be “a good step towards the normalization of relations.”

Even President Donald Trump got enthusiastic, tweeting his approval and his hope for peace.

Experts are cynical, however. Otilia Dhand, senior vice president at Teneo Intelligence, is also not convinced that the exchange means conflict resolution, noting that there are major barriers to peace in place.

“First, this was just another (though high-profile) among several exchanges of prisoners between Ukraine and Russia under the 2015 Minsk cease-fire agreement,” she said in a note Tuesday.

“Second, the political conditions of the cease-fire agreement require constitutional reform in Ukraine prior to the restoration of Kyiv’s territorial control. Separatists would likely demand decision-making powers in foreign policy to prevent any possibility of Ukraine’s westward economic and security integration, which remains unacceptable for Kyiv.”

Nonetheless, Dhand noted that the recent increase in bilateral activity suggests that some form of talks over the Donbas conflict will likely take place soon, with both sides having vested interests in a resolution.

“Ukraine’s new president, Volodymyr Zelensky, seeks a substantial political victory to foster his position in the political system … Russia seeks a normalization of relations with the EU and the U.S., the easing of sanctions and the return to the global political stage,” she said.

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Saudi Aramco IPO set to value company up to $1.7 trillion

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Amin H. Nasser, president and CEO of Saudi Aramco, speaks during a news conference at the Plaza Conference Center in Dhahran, Saudi Arabia November 3, 2019.

Hamad Mohammed | Reuters

Saudi Aramco has set a price range for its listing that implies the oil giant is worth between $1.6 trillion to $1.7 trillion, below the $2 trillion that the Saudi crown prince had previously targeted, making it potentially the world’s biggest IPO.

Aramco said on Sunday it plans to sell 1.5% of its shares or about 3 billion shares, at an indicative price range of 30 riyals ($8.00) to 32 riyals, valuing the initial public offering (IPO), as much as 96 billion riyals ($25.60 billion) at the top end of the range.

Aramco could just beat the record-breaking $25 billion raised by Chinese e-commerce giant Alibaba when it made its stock market debut in New York in 2014.

Aramco’s listing is due in December and the company said last weekend that it will sell up to 0.5% of its shares to individual investors. Speculation and delayed announcements on the public listing of the world’s most profitable company have riveted investors and market watchers since plans for the float were first disclosed three years ago.

The oil giant has delayed the IPO — originally scheduled for 2018 — multiple times, reportedly over Saudi concerns about public scrutiny over its finances and because of the complexity of its corporate structure.

Analysts’ valuations of the company have varied from $1.2 trillion to $2.3 trillion. In comparison, Aramco’s closest U.S. rival, Exxon Mobil, has a market cap of nearly $300 billion and Chevron is valued at about $229 billion. When the IPO was first flagged in 2016 by the now-Crown Prince Mohammed bin Salman, he said then that he believed the company was worth around $2 trillion.

The Aramco listing would aim to drum up cash for a government looking to significantly reduce its budget deficit and diversify its economy beyond oil as part of the crown prince’s Vision 2030 program.

The country’s economy is still largely reliant on oil exports. Lackluster oil prices (a barrel of Brent crude is currently priced near $63) have prompted the country’s budget deficit (the amount by which its spending exceeds its revenues) to widen.

In 2018, the budget deficit was forecast at around 136 billion riyals (or around $36 billion), according to the kingdom’s Ministry of Finance. It’s expected to be a similar amount in 2019. And in 2020, the kingdom expects the deficit to widen to $50 billion, the kingdom’s finance minister said in October, according to Reuters.

—CNBC’s Natasha Turak, Holly Ellyatt and Joanna Tan contributed to this article.

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Saudi Aramco will not market IPO in the United States, report says

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An employee rides a bicycle next to oil tanks at Saudi Aramco oil facility in Abqaiq, Saudi Arabia October 12, 2019.

Maxim Shemetov | Reuters

Saudi Aramco does not plan to market its domestic initial public offering (IPO) in the United States, two sources familiar with the matter said.

Aramco had said in its IPO prospectus earlier this month that the offering of shares would rely on the 144A rule of the U.S. Securities Act, which allows a non-U.S. issuer to tap the U.S. market.

The sources said Aramco will no longer rely on that rule, meaning it will not market the shares in the United States.

Aramco did not immediately respond to a comment request.

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Democrats hold on to Louisiana governor’s seat despite Trump

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Louisiana Gov. John Bel Edwards has stunned Republicans again, narrowly winning a second term Saturday as the Deep South’s only Democratic governor and handing Donald Trump another gubernatorial loss this year.

In the heart of Trump country, the moderate Edwards cobbled together enough cross-party support with his focus on bipartisan, state-specific issues to defeat Republican businessman Eddie Rispone, getting about 51% of the vote.

Coming after a defeat in the Kentucky governor’s race and sizable losses in Virginia’s legislative races, the Louisiana result seems certain to rattle Republicans as they head into the 2020 presidential election. Trump fought to return the seat to the GOP, making three trips to Louisiana to rally against Edwards.

In a victory rally of his own late Saturday, Edwards thanked supporters who danced, sang and cheered in celebration, while he declared, “How sweet it is!”

He added, “And as for the president, God bless his heart” — a phrase often used by genteel Southerners to politely deprecate someone.

“Tonight the people of Louisiana have chosen to chart their own path,” Edwards said.

Trump had made the runoff election between Edwards and Rispone a test of his own popularity and political prowess heading into the 2020 presidential race. On Saturday, Trump went on Twitter in a vigorous plug for Rispone.

The president’s intense attention motivated not only conservative Republicans, but also powered a surge in anti-Trump and black voter turnout that helped Edwards.

As he conceded the race, Rispone called on supporters to give a round of applause for Trump, saying: “That man loves America and he loves Louisiana.”

Democrats who argue that nominating a moderate presidential candidate is the best approach to beat Trump are certain to say Louisiana’s race bolsters their case. Edwards, a West Point graduate, opposes gun restrictions, signed one of the nation’s strictest abortion bans and dismissed the impeachment effort as a distraction.

Still, while Rispone’s loss raises questions about the strength of Trump’s coattails, its relevance to his reelection chances are less clear. Louisiana is expected to easily back Trump next year, and Edwards’ views in many ways are out of step with his own party.

In the final days as polls showed Edwards with momentum, national Republicans beefed up assistance for Rispone. That wasn’t enough to boost the GOP contender, who wasn’t among the top-tier candidates Republican leaders hoped would challenge Edwards as they sought to prove that the Democrat’s longshot victory in 2015 was a fluke.

He had ties to unpopular former Gov. Bobby Jindal and offered few details about his agenda. Edwards also proved to be a formidable candidate, with a record of achievements.

Working with the majority-Republican Legislature, Edwards stabilized state finances with a package of tax increases, ending the deficit-riddled years of Jindal. New money paid for investments in public colleges and the first statewide teacher raise in a decade.

Edwards expanded Louisiana’s Medicaid program, lowering the state’s uninsured rate below the national average. A bipartisan criminal sentencing law rewrite he championed ended Louisiana’s tenure as the nation’s top jailer.

Rispone, the 70-year-old owner of a Baton Rouge industrial contracting company, hitched his entire candidacy to Trump, introducing himself to voters in ads that focused on support for the president in a state Trump won by 20 percentage points.

But the 53-year-old Edwards, a former state lawmaker and former Army Ranger from rural Tangipahoa Parish, reminded voters that he’s a Louisiana Democrat, with political views that sometimes don’t match his party’s leaders.

“They talk about I’m some sort of a radical liberal. The people of Louisiana know better than that. I am squarely in the middle of the political spectrum,” Edwards said. “That hasn’t changed, and that’s the way we’ve been governing.”

Rispone said he was like Trump, describing himself as a “conservative outsider” whose business acumen would help solve the state’s problems.

“We want Louisiana to be No. 1 in the South when it comes to jobs and opportunity. We have to do something different,” Rispone said. “We can do for Louisiana what President Trump has done for the nation.”

The president’s repeated visits appeared to drive turnout for both candidates.

Tour guide Andrea Hartman, 40, cast her ballot for Edwards in New Orleans.

“I do not agree with what Rispone advocates,” she said. “I also don’t want Trump coming here and telling me who to vote for.”

Rispone poured more than $12 million of his own money into the race. But he had trouble drawing some of the primary vote that went to Republican U.S. Rep. Ralph Abraham, after harshly attacking Abraham in ads as he sought to reach the runoff.

“We have nothing to be ashamed of. We had over 700,000 people in Louisiana who really want something better, something different,” Rispone said.

Rispone also avoided many traditional public events attended by Louisiana gubernatorial candidates and sidestepped questions about his plans. He promised tax cuts, without saying where he’d shrink spending, and he pledged a constitutional convention, without detailing what he wanted to rewrite.

Both parties spent millions on attack ads and get-out-the-vote work, on top of at least $36 million spent by candidates.

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