World Economic News

Iran To Withdraw Foreign Currency Assets from Europe

On Jan. 18, Iranian Central Bank chief Ebrahim Sheibani was quoted by the unofficial Iranian Students News Agency, announcing that Iran would begin the transfer of its hard currency assets in Europe to other parts of the world. Speculation centered on Southeast Asia, including Malaysia and Singapore, among other countries. Such action would come in anticipation of UN-imposed sanctions on Iran for its nuclear program. Analysts estimate Iran's holdings in Europe at $40-$50 billion. By Jan. 21, reports were that Iran had begun the withdrawals, but this was denied by Sheibani. "We will transfer Iran's foreign accounts whenever we believe it is necessary," he said on state television.

The deputy governor of the Central Bank, Mohammad-Jafar Mojarad, told the state news agency IRNA that the bank has no plans to transfer its accounts to Southeast Asia, further intensifying speculation as to where it might transfer its money. Iran's Oil Ministry has also called on OPEC to cut oil production by 1 million barrels per day, but a spokeswoman said this was connected with an expected fall in demand in the second quarter of 2006, and not related to the nuclear standoff.

Porsche CEO Attacks Hedge Funds, Other Speculators

At the annual Porsche conference in Stuttgart on Jan. 26, CEO Wendelin Wiedeking reiterated why Porsche, in autumn 2005, raised its share in Volkswagen to 20%, thereby becoming the largest Volkswagen shareholder, even surpassing the state of Lower Saxony. One of the reasons for this move was to prevent a foreign takeover of Volkswagen by a group of speculative investors, such as hedge funds or private-equity firms, the Frankfurter Allgemeine Zeitung reported Jan. 27. The move had been sharply criticized by fund managers, and in particular, by JP Morgan.

In his address on Jan. 26, Wiedeking violently attacked short-term-oriented financial investors. He said it would be an "illusion" to believe "that any pension or hedge-fund manager in Denver, Colorado or Las Vegas, Nevada would care about the job situation in Germany." Those managers, he said, are deciding on the basis of short-term profit expectations, even if it means destroying century-old corporations. Speaking at a public event in Frankfurt Jan. 21, Wiedeking had denounced "Anglo-Saxon investment banks," which have tried to interfere with the Porsche/Volkswagen cooperation. "According to the logic of these people," he said, "we shouldn't even exist." Why should anybody take advice from "financial investors that are going berserk"? Commenting on JP Morgan's explicit rejection of the closer cooperation between Porsche and Volkswagen, Wiedeking added: "JP Morgan provides yet another proof for the fact that just playing around with numbers, out of touch with any economic reality, can only lead to madness."

Britain Opens Public Debate on Nuclear Power

The British government released an energy consultation paper Jan. 23, which will be circulated for three months for public discussion, on what to do about that nation's energy crisis. Included among the options is the construction of new nuclear-power plants. Today, ten nuclear plants account for about 19% of the UK's electricity. Without replacing old plants, that is projected to fall to 7% by 2020.

Trade and Industry Secretary Alan Johnson said that the UK will become dependent upon imports for 80% of its energy supplies if it does not go nuclear. Britain already imports its (politically vulnerable) natural gas, he said, and soon will have to import oil, as North Sea reserves deplete. Energy Minister Malcolm Wicks said in an interview with the Guardian that he did not see practical obstacles to a new generation of nuclear plants. The approach the government is proposing in the paper is that private companies will invest in nuclear plants. The Engineering Employees Federation welcomed the review, but added that "there is no time to lose" in putting a program in place.

Toshiba Buys Westinghouse Electric and Nuclear

The effort to return one of two nuclear power plant suppliers to U.S. ownership was defeated this month when Japan's Toshiba, outbidding General Electric and other interested parties, offered $5 billion for the Westinghouse Electric Company, which includes its nuclear division. Although there were rumblings on Capitol Hill that this might have national energy security implications, nothing was done to intervene. Through this deal, Toshiba will gain access to the growing nuclear market in China, and other countries. Westinghouse has built nearly half of the nuclear reactors that are in operation around the world. Although it has built none in China, Westinghouse is a favored vendor for up to $8 billion in Chinese orders for new nuclear plants, and earlier this month, its large advanced pressurized water reactor design was approved by the U.S. Nuclear Regulatory Commission, making it easier to export.