In this issue:

Hedge Funds' Buying Frenzy Drives Oil Price Up

IMF Is Chief Vulture in Argentina

IMF Demands Argentina Change Constitution To Pay Debt


From Volume 3, Issue Number 32 of Electronic Intelligence Weekly, Published Aug. 10, 2004

World Economic News

Hedge Funds' Buying Frenzy Drives Oil Price Up

A buying bonanza by global hedge funds is the cause of the rapid rise in the oil price, Saudi Arabia's former Oil Minister, Sheikh Ahmed Zaki Yamani, insisted in a CNN interview Aug. 5. The hedge funds, he says, are looking to make a fast return on their investments, and so have turned to speculating in the oil market. "The funds are injecting a huge amount of money. The world economy ... is paying the price. It's a bad thing." Pointing out that OPEC and the Saudis are moving to lower prices and increase production, he stated that "political factors" are feeding "panic being used by speculators...."

Among the "political factors" he mentioned are the ongoing legal battles concerning the Russian company Yukos. Russia's Justice Ministry, responding to reports that the government had loosened restrictions on the company's access to selling its assets, said Aug. 5 that it has kept Yukos's bank accounts frozen and revoked permission for Yukos to use those monies to pay for day-to-day operations.

Meanwhile, the price of U.S. crude oil hit $44.50 per barrel, and Brent crude rose to $41.22 a barrel.

IMF Is Chief Vulture in Argentina

The IMF has officially postponed approval of the third review of its agreement with Argentina in order to force the Kirchner government to relent on its "ungenerous" debt restructuring offer—pay more debt paid to the vulture funds—and increase its primary budget surplus to at least 4% of Gross Domestic Product (GDP). By delaying the approval (which is supposed to show that Argentina is complying with the IMF's conditionalities), the Fund throws into question the entire debt restructuring process, which the government is anxious to conclude. It's also unclear how the IMF decision will affect the U.S. Securities and Exchange Commission's approval of the restructuring document which the Argentine government submitted to it in early July. The SEC's approval is required for the process to move forward.

The decision to delay the approval was reportedly worked out by Deputy Finance Ministers of the Group of Seven, when they met on July 17-18 in California. Despite this, Finance Ministry officials say they intend to go ahead to unilaterally promote the restructuring plan through an international tour to begin at the end of August. IMF Managing Director Rodrigo Rato, Deputy Director Anne Krueger and Western Hemisphere Division Chief Anoop Singh have all gone on vacation, and sometime in September is the earliest that any decision on approval would be made, even though this is when the fourth loan review is also scheduled to begin.

IMF Demands Argentina Change Constitution To Pay Debt

The IMF told Argentina to "change its Constitution," if that's what it takes to ram through an acceptable "fiscal responsibility law." After having demanded that the Kirchner government implement a the fiscal responsibility law, to impose deeper austerity on the provinces, the IMF now says that the version already passed by the Senate isn't good enough. Why? It doesn't allow for sufficient punishments of individual governors who don't adhere to austerity dictates. According to Clarin Aug. 3, when Finance Ministry officials argued that the Argentine Constitution doesn't permit such punishments, the Fund replied "change the Constitution!"

Former Presidential candidate Ricardo Lopez Murphy, a leader of the right-wing synarchist opposition to Nestor Kirchner, is loudly backing the IMF's demand. He argues that Argentina should have a law similar to what former Brazilian President Fernando Henrique Cardoso put through in that country, "which has given Brazil so much latitude in making Brazil a reliable country."

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