Worried About the Wave; Refinery Remorse

Tidal Wave: We’re hearing that one of the most popular topics at this year’s meeting of uber-egotists in Davos, Switzerland, is sovereign wealth funds – the hundreds of billions of dollars in oil profits abroad awaiting investment in assets around the world.

Many of the world's petro-states, such as Russia, Kuwait, Abu Dhabi and most recently Saudi Arabia, have formed such investment funds to hold their oil profits and turn them into diversified assets. According to Morgan Stanley, these funds, now totaling some $2.5 trillion in assets, stand to skyrocket in size over the next dozen or so years until they are at $28 trillion in 2022, or twice the size of the current U.S. economy.

All this cash in the hands of countries that perhaps have different agendas from the West's is behind a call from some quarters for an unspecified "code of conduct" among such funds. The implication is that, short of unspecified "transparency," recently even inserted as an issue into the presidential campaign by Hillary Clinton, Washington would put its foot down.

How is Washington going to put its foot down when it's not the funds, but the likes of Morgan Stanley and CitiGroup that are pleading to be saved by these funds because good, solid Americans like Warren Buffett don't see the upside?

The truth is that control over global finance is shifting East, largely to these petro-states but also to other countries such as Singapore that manage their wealth better than the U.S. has. And the U.S. isn't going to have much control over it.

Refining backsliding: It's a sign of how far matters have deteriorated that $87 oil is regarded as a blessing. Could oil fall as low as $70 a barrel if there's a severe, prolonged recession such as Larry Summers has predicted for months over at the Financial Times? And would prices at the pump drop commensurately? Sure. But that's still a historically high number.

And one of the biggest reasons for expensive oil is a shortage of the right kind of refineries around the world. Meaning that there's plenty of really bad quality oil -- so-called heavy oil, laden with sulfur that must be removed. But there aren't enough refineries capable of rapidly processing it. So you get a backup of this surplus crude, and a runup in prices of the light, low-sulfur crude that the refineries can process.

In short, $87 oil is really the price of that much-demanded light, low-sulfur crude, not the heavier stuff. If there was a way to process the heavier stuff, the price of all crudes would drop.

The Saudis themselves have been among the chief gripers about this state of affairs.

The bad news is stated in an analysis in the venerable Middle East Economic Survey. There are huge delays in a planned near doubling of refinery capacity in the Saudi kingdom. The report was posted by Engineerlive.com.

The Saudis currently can refine about 2.1 million barrels of oil a day. And they have another 1.8 million barrels a day of new capacity on the drawing boards. Their partners in these refineries are ConocoPhillips and France's Total, both of which according to this report are getting cold feet about cost overruns. Will they come on line by late 2012 -- almost five years from now? -- perhaps.

Which brings me to India. Why is it that Mukesh Ambani's Reliance Petroleum can put up a completely new, world-class refinery capable of processing the worst crudes on the planet in just 18 months, and ConocoPhillips, Total and Aramco cannot?

Ambani is set to complete a near doubling of his 660,000 barrel-a-day refinery in Jamnagar, in southern India, by the end of December. That's a turbo-charged pace.

It's also more proof of why Big Oil is on the decline. It has trouble competing with the aspirations of people like Ambani.

Photo: thelastminute
Rights: Creative Commons

Horelma! Horelma Peramam! Stand Up and Be Counted

The Kazakhstan billionaire Horelma Peramam has just spent 50 million pounds ($97 million) in the largest new residential property sale in U.K. history. Good ol' Horelma bought the Toprak Mansion on London's The Bishops Avenue, with its seven bedrooms and four kitchens.

Only, who is Horelma? I'm no slouch on Kazakhstan wealth, and I've never heard that name. Neither have any of a multitude of friends who have emailed asking about this fellow. A Google search pulls up 2,800 listings. All of them about this land sale.

What nationality is Peramam? It's definitely not Kazakh, or any other Turkic nationality that I've heard of. Not Slavic. Not Korean. Not German.

How about pseudonyms? Is it someone from Kazakhstan's first family?

Guesses are welcomed.

Electricity in Kabul and (Don't Hold Your Breath) Possible Reconciliation in Kazakhstan

Lights in Kabul: The Associated Press has an excellent story on one reason why Afghan President Hamid Karzai and the U.S. can't get much political traction in that country -- six years after the Taliban were dispersed, Kabul has just three hours a day of electricity at this time. Though I've been tracking Afghanistan since first going there almost two decades ago, I had no idea that the standard of living in the capital was still so miserable. There's a simple rule I learned talking to people in the Caucasus, Central Asia, Afghanistan and Pakistan -- if you want political support, give them simple things like electricity, clean water, schools, roads and hospitals. (tip to The Oil Drum)

Kazhegeldin to return? The opposition blogosphere in Kazakhstan is lit up with new reports that former Prime Minister Akezhan Kazhegeldin is -- this time really -- returning to Kazakhstan a decade after going into exile. I'm told that this time the talk could be serious. Recall that it's Kazhegeldin who has single-handedly made President Nazarbayev's life miserable over the last decade. Well, not entirely single-handedly -- Nazarbayev himself has played a role with his clumsy handling of rival and critical voices. Yet Kazhegeldin financed the information war in Washington and London that led to a plummet in Nazarbayev's reputation in the West through the revelations of what became known as Kazakhgate. In terms of post-Soviet pocket-lining, we're not talking big numbers -- American businessman Jim Giffen is accused of channeling about $80 million in oil company payments to the numbered bank accounts of Nazarbayev, his family and associates. But it shocked, shocked Washington to see actual evidence that its allies have power AND money aspirations, and moreover that they (listen up) rig their elections! Kazhegeldin and Nazarbayev have had secret talks numerous times over the years, but until now have not managed to reach agreement on Kazhegeldin's return. One main issue has been the very real apprehension that Kazhegeldin could be imprisoned or killed.

Photo: pittaya
Rights: Creative Commons

Planespotting Putin, Musharraf and Nazarbayev

What do these three heads of state have in common? All have had their executive aircraft -- those luxury suites on wings on which they travel the world -- photographed and logged by amateur plane-spotters.

This is good fun. But these hobbyists can also break news. For instance, the latest issue of Foreign Policy has a piece about a possible six-year European shopping spree by Tunisian First Lady Leila Ben Ali. Tunisian bloggers have tracked the north African country's presidential aircraft all over Europe, while noting that reclusive leader Zine el-Abidine Ben Ali almost never leaves his office. They don't seem far from putting two and two together.

The on-line Foreign Policy piece considerately explains how to get started tracking the movements of presidential planes using sites such as Airliners.net. How about the aircraft used by Vladimir Putin? Or the plane used to fly Nursultan Nazarbayev? How about Pervez Musharraff's aircraft?

The movements of the presidents themselves aren't that interesting. After all, that's well-covered by the media. But it could be grist for trackers of first family wealth and spending habits.

Putin's Hidden Wealth

Last August, I sat down for dinner in Moscow with Stanislav Belkovsky, an estranged Kremlin insider with extraordinary political antennae. This compelling, 36-year-old Russian, a computer programmer by training, runs a think tank called the National Strategy Institute along with a news website. Amid a long discussion of Russian politics and history, Belkovsky provided his take on the main thrust of Kremlin policy today -- allowing the folks who have lined their pockets for the last seven years to cash out their winnings.

Among those folks? Vladimir Putin. Belkovsky claimed that, as part of the spoils of being president, Putin was bestowed with lucrative shares in two Russian energy companies -- 37% of Surgutneftegas and 3%-4% of Gazprom. He said this wasn't provable at the moment, but that the signal of veracity would be if that 37% went on the market before March, when Putin steps down as president. Belkovsky was sure that, given the non-transparent aspect of most Russian companies, the shares would be snapped up by another big Russian company such as Gazprom or Rosneft. If Putin does cash out, Belkovsky said, these shares would be worth some $40 billion. A nice bit of change, but not surprising for those familiar with the publicly known holdings of the presidents of the former Soviet Union's other petro-states, Kazakhstan and Azerbaijan. At that level in government in that part of the world, one does not retain respect among peers solely with political power -- one must also have enormous personal wealth to project the mystique that's necessary to grip the political reins in this treacherous environment.

I raise this now because Belkovsky has recently given a couple of interviews repeating his assertions, including one published in today's London Guardian. Robert Amsterdam, who is imprisoned oligarch Mikhail Khodorkovsky's lawyer, has concluded on his blog that Belkovsky's remarks are a "leak" reflecting a struggle among the Kremlin's wealth-holding factions. Amsterdam thinks that one of these factions must be behind this supposed leak.

There does seem to be a struggle going on, but that isn't very surprising. The same has gone on with some regularity in both Kazakhstan and Azerbaijan. These fellows have a lot of spoils to fight over.

Belkovsky, a bearded bear of a man, once worked for exiled oligarch Boris Berezovsky. Then he went to work for Putin. In other words, there is no ideology here. With Belkovsky, it's all business.

And I think there's a simple, non-conspiratorial explanation for the appearance of this material now. It's called the news cycle. Putin is on his way out as president, and there's uncertainty on the outside as to how the levers of power -- and the spoils -- will be shared. So naturally there is interest among journalists, editors and pundits about anything that would shed light.

Belkovsky's theory has simply intersected with that news cycle. This man strikes me as no one's errand boy.

Turkmenbashi's Hidden Wealth

A website I hadn't previously heard of -- Gundogar -- poses one of the most self-evidently important questions I've heard recently: Whatever happened to Turkmen President Saparmurat Niyazov's fortune?

In her excellent piece, Gulnoza Saidazimova frames the stakes -- billions of dollars -- and the players (mainly German institutions) in the as-yet undisclosed location of Niyazov's presumed wealth.

We all know, just as a teaser, that the main reason the ultra-important trans-Caspian natural gas pipeline wasn't built during the 1990s was that Niyazov demanded that a $500 million bribe be deposited into his German bank account by the Western project developers, but was rebuffed.

What about the bribes that were paid? Given the history of the wealth of the world's fallen dictators, and the European banks that protect them, one is led to believe the money won't get back to Turkmenistan soon.