Business

WASHINGTON — The US Federal Reserve (Fed) on Tuesday adopted tight new rules for foreign banks to shield the US taxpayer from costly bailouts, ceding only minor concessions despite pressure from abroad to weaken the rule.

Foreign banks with sizeable operations on Wall Street such as Deutsche Bank and Barclays had pushed back hard against the plan because it means they will need to transfer costly capital from Europe.

The Fed, which oversees foreign banks, gave them a year longer to meet the standards, and applied it to fewer banks than in a first draft, but the rule was largely unchanged from when it was first proposed in December 2012.

“The most important contribution we can make to the global financial system is to ensure the stability of the US financial system,” Fed Governor Dan Tarullo, in charge of financial regulation, said in a speech at a board meeting at which the Fed unanimously adopted the rule.

The reform is designed to address concerns that US taxpayers will need to foot the bill if European and Asian regulators treat US subsidiaries with low priority when rescuing one of their banks.

The largest foreign banks, with $50 billion or more in US assets, will need to set up an intermediate holding company subject to the same capital, risk management and liquidity standards as US banks, the Fed said.

The Fed broke with its tradition of relying on regulators abroad in overseeing foreign banks after the 2008 financial crisis, during which it extended hundreds of billions of dollars in emergency loans to overseas banks.

“[The rule reduces] the likelihood that a banking organisation that comes under stress in multiple jurisdictions will be required to choose which of its operations to support,” Fed staff said in a document.

Discriminatory measures

Europe has warned of tit-for-tat action, with European Union Financial Services Commissioner Michel Barnier saying in October that the bloc would draw up similar measures if the Fed pushed ahead with its plans.

“It’s too early to give a detailed response,” Barnier said in an e-mailed statement. “In any case, we can certainly not accept discriminatory measures that would treat European banks less favourably than American banks.”

The Fed estimated that between 15 and 20 foreign banks will need to set up an intermediate holding company after the cutoff was raised to $50 billion of assets in the United States, from $10 billion in the proposed rule.

The Fed also gave foreign banks a year longer to meet the requirement to set up the new structure, with the new deadline set as July 1, 2016. Both changes had been widely expected in the market.

The new structure gives banks less flexibility to move money around than under the current rules, which let banks use capital legally allocated in their homecountry.

The Fed has taken a tougher stance than others on some of its bank capital rules. It has, for instance, proposed a leverage ratio — a hard cap on borrowing — of 6 per cent of assets, well above the 3 per cent global requirement.

Foreign banks acknowledged the slight softening of the rule, but said they remained unhappy.

“We continue to have a fundamental disagreement with the Fed about the appropriateness and necessity of applying an extra layer of US bank capital requirements,” said Sally Miller, head of the Institute of International Bankers.

The rule also subjects foreign banks with global assets of $10 billion or more to annual health checks known as stress tests that rely on home-country standards. Only the largest banks will also have to run US stress tests.

All in all, some 100 foreign banks will be subject to all or part of the rules, depending on their size. Many of the risk- management and liquidity standards adopted by the Fed at the meeting are also valid for US banks.

The Fed will closely watch how banks change their strategy on account of the new rules to avoid any risky activity popping up elsewhere in the business, staff said during the board meeting.

Foreign banks will still be allowed to hold US branches, which unlike full US subsidiaries are part of the parent company, and are not subject to the rules. But most risky activities are not allowed for branches.

“Certainly you’re going to have the institutions analyse their business strategy within the US... [but] you’re not going to be able to just shift assets wholesale from the [holding company] to a branch,” said Irena Gecas-McCarthy, a regulatory consultant at Deloitte & Touche.

SINGAPORE — Russia and Iraq are boosting crude shipments to a Chinese market where oil demand is growing at its slowest in more than 20 years, forcing rival suppliers to divert cargoes elsewhere.

The redirected shipments from Latin America, Africa and some Middle Eastern producers that were originally expected to go to Chinese refineries will drag on benchmark prices this year, and state oil companies have already started cutting official selling prices in their search for buyers.

Russia’s Rosneft, backed by its government to push East Siberian oil to Asia, and Iraq, armed with big discounts and easy terms, have landed contracts that will raise their combined shipments nearly 50 per cent more than China’s import demand is forecast to grow in 2014.

With state refiner PetroChina and oil major BP Plc. also delaying or dropping refinery projects in China due to worries about demand growth, sellers will be scrambling for shares in a market smaller than they had anticipated.

“Lots of people all around the world want to sell crude to Asia, and there may not be enough demand for everyone,” said Andrew Reed at Energy Security Analysis Inc.

China’s oil demand rose just 1.6 per cent last year, its slowest pace since 1992. Its crude imports grew 4 per cent, their slowest since at least 2007, according to Reuters data, and down from a rise of more than 17 per cent in 2010.

Although top China oil company China National Petroleum Corp. (CNPC) has said the nation’s crude imports will rise 7.1 per cent this year, or about 370,000 barrels per day (bpd), the bumps in Russian and Iraqi supplies would more than match that increase.

Russia’s biggest oil producer Rosneft, which supplied over 300,000 bpd to China in 2013, will ship an additional 180,000 bpd this year, with China-bound exports eventually to rise to more than 900,000 bpd.

“It’s a logical move. Russia is simply trying to secure a long-term offtaker of its crude,” Reed said.

As Iraq pushes hard to raise its market share in China and Asia, it is set to become China’s second-largest crude supplier this year by increasing shipments by 68 per cent to 882,000 bpd.

Last year, Iraq passed Iran to become China’s fifth-largest supplier after cutting its official selling prices for its main crude Basra Light.

Fight for share

China’s increased imports from Russia and Iraq only intensifies the fight for Asian market share among other oil exporters.

Producers in Latin America and Africa are already offering steeper discounts to Asian buyers as import needs in their traditional US and European markets drop.

“As the Atlantic basin needs less and less oil, crude from Latin America, Africa and Russia will have to find a new home,” said Jeff Brown of FG Energy. “Naturally they’re looking to Asia.”

This prospect of oversupply and ongoing slow growth in China prompted investment banks such as Goldman Sachs and Barclays in December to lower their oil price forecasts for 2014.

Dutch bank ABN AMRO in January cut its average Brent price for this year to $95 a barrel from $100.

“Oil oversupply is here to stay, at least in the next few years, outpacing the rise in demand and thus keeping oil prices under pressure,” it indicated in a research note.

This month, however, the International Energy Agency (IEA) became the third major forecaster to say that global oil use would be higher than expected this year due to economic growth in the United States and Europe.

Oil inventories are also at their lowest since 2008 because of stronger-than-expected demand and supply problems in some members of the Organisation of Petroleum Exporting Countries (OPEC), the IEA said.

Still, the bump in supplies to China from Russia and Iraq look especially bad for Latin American exporters, who had been looking to Asia as surging US shale oil output robs them of decades-old customers.

By the end of the first quarter, shipments of Latin American crude to China are likely to have fallen by 10 per cent from a year earlier to around 504,300 bpd, according to data compiled by Thomson Reuters. Compared with the first quarter of 2012, that volume would mark a fall of about 25 per cent.

Latin American producers deliver a set volume of crude and products to China under annual deals, and Chinese companies sometimes launch tenders to resell a portion of them, after factoring in domestic requirements.

“If China’s oil demand slows down, re-sales of Venezuelan and Ecuadorian crude and products will increase,” said a trader working in a private firm and involved in PetroChina’s sales.

All Ecuadorian fuel oil being delivered by Petroecuador to PetroChina, some 100,000 bpd, is currently being resold by PetroChina, and it also frequently resells crude and different Venezuelan refined products, the trader said.

Shipments of West African grades to China are also likely to fall in January and February versus a record in November, although it is too early to say if the drop reflects a decline in China’s appetite for the crudes.

AMMAN — The Jordan Phosphate Mines Company (JPMC) will establish $1.55 billion worth of joint Arab and foreign ventures as part of its strategic plan, according to Chairman Amer Majali. In a statement on Tuesday, he noted that these projects are intended to gradually raise the production of phosphate by 50 per cent until 2018, of which 30 per cent will be raised by the end of this year. Majali indicated that this year will witness a “positive” change that will be reflected on the company’s financial statement based on an expansion plan that will create 5,000 jobs.

LONDON — China overtook India as the biggest consumer of gold in the world last year, ramping up its demand by 32 per cent from the 2012 level, the World Gold Council (WGC) reported on Tuesday.

But globally, investors pulled away from the protection of gold as the risks of inflation and renewed financial crises receded.

Last year, demand from China for gold for jewellery, coins and bars totalled a “remarkable” new record of 1,065.8 tonnes.

That was ahead of Indian demand of 974.8 tonnes, according to the council representing leading gold producers.

Global demand for gold in jewellery last year was the highest for 16 years, but investment funds were heavy sellers and the price fell by nearly a third during the year.

The price is around $1,324.80 an ounce now.

The council also estimated that about 300 tonnes of gold have slipped through its statistics because quantities of the metal are scattered obscurely throughout the supply chain in China.

Inclusion of this missing amount would take total Chinese demand up to about 1,400 tonnes.

“China is number one for the first time,” the council’s Managing Director Marcus Grubb told AFP.

India had always been the biggest market since the 1950s and 1960s, he said.

The switch of places at the top of the ranking reflects in part a decision by the Indian government to reduce the importation of gold to help reduce a huge trade deficit.

These measures triggered a 63 per cent slump in demand for gold from India in the third quarter of last year, the council said, citing official India statistics.

However, for the whole of 2013, demand from India rose by 13 per cent from the level in 2012, partly because of heavy buying before some of the restrictions took effect in July.

Chinese demand was boosted by the rise of a middle class, by rising prosperity, by high levels of savings and by a shortage of other opportunities for investment, Grubb explained.

Last year “proved to be the year of the consumer, with gold jewellery demand close to pre-crisis levels and investment in small bars and coins hitting a record high”, the council indicated in its annual report.

“The result was annual gold demand of 3,756.1 tonnes, valued at $170 billion,” it pointed out.

Referring to disinvestment by exchange-traded funds (ETFs) which use instruments based on physical gold, the council said: “The gold market became polarised in 2013, as 21 per cent growth in demand from consumers and value-seeking investors contrasted with large-scale outflows from ETFs.”

“The net result was a 15 per cent decline in full-year gold demand in a year where jewellery, bar and coin demand reached an all-time high,” it added.

According to the gold council, a sharp fall in the price of gold in the second quarter of last year had provoked “strong and swift” demand from consumers in Asia and the Middle East which spread into Western markets in the last quarter of the year.

The price of gold fell by 28 per cent last year, hit by massive withdrawals of investors’ funds from ETFs.

Gold attracts funds seeking a defence against inflation and financial crises.

As concerns on these two fronts eased, investors reduced their exposure to the protection of gold and the ETFs sold 880.6 tonnes of gold last year, the council calculated.

Central banks overall continued to be net buyers of gold last year for the fourth year in a row, but their purchases in 2013 fell by 32 per cent from the 2012 level to 368.6 tonnes.

These figures meant that demand from consumers did not match disinvestment by funds and a slowing of purchases by central banks.

The supply of gold fell by 2 per cent to 4,339.9 tonnes, mainly because the amount of gold being recycled fell by 14 per cent.

In concluding, the report said that last year there had been an “unprecedented flow of gold from Western vaults to Eastern markets, via refiners in North America, Switzerland and Dubai”.  

AMMAN — Jordan Telecom Group (JTG) announced this week that net profit fell by 37.8 per cent in 2013 to JD51.7 million compared to JD83.2 million in 2012. The group’s revenues dropped by 11.7 per cent in 2013 to JD360.3 million compared to JD408 million in 2012, it indicated in a statement e-mailed to The Jordan Times. “The drop is linked to the high competition in the market affecting both mass and business sectors, in addition to the big drop in roaming visitors’ revenues,” JTG said. “The recent decision, during July 2013, to increase the special tax on mobile services from 12 per cent to 24 per cent also had a big negative impact on the mobile revenues.” According to JTG, the subscriber base witnessed a 1.6 per cent increase reaching 4.09 million subscribers at the end of 2013 from 4.03 million subscribers at the end of 2012. Capital expenditures by the group reached JD39.2 million at the end of December 2013 compared to JD38 million at the end of 2012.

AMMAN — Net profit generated by Jordan Phosphate Mines Company plunged last year to JD1.159 million from JD131.7 million in 2012, according to a statement published on Amman Stock Exchange website. The company’s revenues dropped to JD573 million in 2013 from JD759.4 million in 2012, it pointed out. The company attributed the lower revenues to a drop in phosphate sales, higher production costs mainly the energy bill, an increase in mining taxes as well as the decline in international prices of phosphate.

MOSCOW — Russia’s prime minister said on Monday he hoped to raise more than $5.5 billion this year by selling stakes in state companies, reviving a delayed privatisation programme that could spur a flagging economy.

At a meeting with deputy prime ministers, Dmitry Medvedev also sounded a note of caution, saying the sale of shares in companies such as Rostelecom or shipping group Sovcomflot could happen only in good market conditions.

Launched in 2010 by then finance minister Alexei Kudrin, the $50 billion privatisation drive to reduce the state’s direct role in the economy and improve a much-criticised investment climate has been dogged by delays.

Assets have since been removed from the lists, prey to volatile markets and a tug-of-war between more liberal-minded politicians and hardliners favouring a slower approach to privatisation.

“Just this year, we have a quite serious privatisation plan to raise 200 billion rubles ($5.7 billion), and I hope that these plans will be fulfilled,” Medvedev told the meeting.

“[The approach to privatisation] should be balanced. We should not delay but at the same time we should consider the economic circumstances in the world and in the country,” he said.

Russia’s economic growth has slowed, reaching just over 1 per cent last year after hitting an average 7 per cent before the 2008/09 financial crisis. Privatisation revenues would help meet generous election promises made by President Vladimir Putin.

Last June, Russia halved its privatisation target for 2014 to around $5.5 billion after many previously planned sales were stalled because of adverse market conditions.

The results of the sales so far have been mixed.

Sberbank, Russia’s largest bank, attracted strong investor demand for its stake sale in 2012, raising more than $5 billion, and the country’s second-largest bank, VTB, last year won sovereign backing for a $3.3 billion share issue.

But a 16 per cent stake in state diamond miner Alrosa was priced at the bottom of a planned range, valued at $1.3 billion, in October.

The main sell-off pencilled in for 2014 is a stake in Rostelecom, which competes with Russia’s three main private mobile operators — MTS, Megafon and Vimpelcom. Rostelecom recently merged its mobile assets with VTB’s Tele2 Russia mobile unit into a single company, T2 RTK Holding.

Olga Dergunova, head of the State Property Agency, told the meeting Russia expected to receive 150 billion rubles from that sale and the privatisations could start in the second quarter with Sovkomflot. She did not disclose the amount expected to be sold in Rostelecom.

State capitalists such as Igor Sechin, the head of state energy company Rosneft and a long-time ally of Putin, oppose privatisation — including of his own company.

The state had been planning to sell its stake in Novorossiisk Commercial Sea Port (NCSP) by the end of 2013. Rosneft asked Putin in October to sell it the state’s 20 per cent stake.

A further stake in VTB is due to be sold in 2015.

Separately, Russia’s central bank signalled for the first time that it could tighten policies in response to a ruble plunge that has outpaced all other emerging currencies.

The central bank matched market expectations by leaving its key interest rate unchanged at 5.5 per cent for the 16th consecutive month.

It based its decision on slowing inflation and disappointing growth.

But the bank went out of its way to caution that inflation still remained a “source of uncertainty” owing to the ruble’s drop against the dollar that has exceeded 7 per cent since the start of the year.

If the negative effects of the currency collapse widen, “the likelihood rises of inflation deviating from its medium-term targets,” it said. “In this case, the Central Bank will be ready to tighten its monetary policy.”

The central bank’s guidance was issued moments after the ruble established a historic low against the euro on the Moscow Exchange.

The Russian currency made a slight recovery after the statement was issued and stood at 48.04 against the euro — stronger than the 48.39 inter-day low it hit on January 30.

The dollar was worth 35.07 rubles and also within striking distance of its historic high.

Analysts at VTB Capital estimate that emerging market currencies have lost 1.5 per cent of their value against the dollar since the start of the year.

This makes the ruble the emerging world’s worst performer. The South African rand is second-from-bottom on the list with losses of 4.5 per cent.

Economists have concluded that the central bank purchased more than $8 billion (5.8 billion euros) of foreign currency on the Moscow market in January in an effort to stem the ruble fall.

This was the largest volume since the closing months of Russia’s 2008-2009 economic collapse.

Emerging markets have suffered from the Federal Reserve’s launch of monetary tightening measures that have seen investors flee riskier assets in anticipation of higher rates of return on US bonds.

Some policy makers in the Kremlin had spent recent months advocating an interest rate cut that could spur growth from just 1.3 per cent last year — the second-slowest pace of Vladimir Putin’s 14-year rule as both president and prime minister.

Many thus read Friday’s statement as a vow by Russia’s regulators to ignore political pressure and redouble their focus on their new mandate of fighting inflation risks.

“The meeting represents a statement of intent by the central bank and will dash any remaining hopes [including from within the Kremlin] that the bank might loosen policy aggressively in the face of continued economic weakness,” said Neil Shearing of the Capital Economic consultancy.

“This in turn will shift the emphasis back on to the government, and the need for a new wave of economic reforms that is now needed to revive growth,” he added.

But market players remained apprehensive and several complained that the central bank did not make its commitment to a stronger ruble explicit enough.

“The market has reached a consensus that the central bank does not intend to support the national currency by raising key interest rates,” Moscow’s Nord Capital financial advisory said in a research note.

Its economists accused regulators “of fuelling market fears and then squandering resources on currency interventions”.

FRANKFURT/PARIS — Europe’s corporate profits are still eroding but investors are at last starting to see glimmers of hope, with revenues picking up, domestic demand recovering and good news from exposure to the United States making up for bad news in emerging markets.

Recent weakness in emerging markets — which hit a number of European multinationals such as Nestle, AB InBev and Holcim — could delay the long-awaited European earnings recovery, but probably won’t derail it.

European companies have been aggressively reducing costs and cleaning up their balance sheets in the past few years. They are slowly starting to reap the benefits as global growth recovers, driven by the improved momentum in developed countries.

Half way into Europe’s earnings season, headline numbers are still dire: Restructuring costs and currency factors helped drive profits nearly 5 per cent lower in the quarter compared to the fourth quarter of 2012.

But a pickup in corporate revenue, up 2.3 per cent, is fuelling investors’ hopes that the worst days are over.

Results have been good compared to analyst expectations, with 58 per cent of companies reporting profits in line or higher than forecasts — Europe’s best score since the third quarter of 2012, according to Thomson Reuters StarMine data. And surveys of business such as the Purchasing Managers’ Indexes (PMI) are upbeat.

“The European PMIs for January were very good, especially the figures for Germany. There’s no doubt things are getting better in Europe,” said Ollie Beckett, fund manager at Henderson Global Investors, which has £70.8 billion ($118 billion) in assets under management.

“Europe has just been through two-three years of severe cost cutting, so as soon as the European economy picks up a bit, it will spark a big bounce in profits,” he added.

Positive signals

Domestic demand is the key to a recovery. Data showed last week that the eurozone economy grew 0.3 per cent in the fourth quarter of 2013, more than expected, after a 0.1 per cent rise in the third quarter.

Companies across the region — including cancer drugmaker Roche, telecom major Vodafone and the world’s biggest steelmaker ArcelorMittal, recently cited early signs of improvement in Europe which should bolster earnings.

“Europe is still tough but there are a number of lead indicators,” Vodafone Finance Director Andy Halford told reporters this month, and ArcelorMittal forecast European steel demand would return to growth this year.

Banks including Spain’s Santander, the eurozone’s biggest lender, France’s Societe Generale and Dutch group ING have also reported improved earnings as they shed bad debts and losses they suffered in the global financial crisis.

Even the overall year-on-year fall in profits was not necessarily bad news for investors: Much of it was due to one-off restructuring charges, which should leave companies in a better position in the future.

For example, ThyssenKrupp posted a better than expected quarterly operating profit on Friday, despite a net loss because of one-off charges related to the sale of a stake in Finnish steelmaker Outokump.

Big banks like BNP Paribas and Credit Suisse saw profits hit by costly legal settlements, but that removes future litigation risk.

There is still ample room to recover. Europe’s corporate profits overall are still 23 per cent below their peak of 2008, while US corporate profits have rebounded to 23 per cent above their 2008 peak, according to Thomson Reuters Datastream data.

“Just a bit of economic growth would be enough to spur a big rebound in corporate profits because of improved operating leverage,” said Mathieu L’Hoir, strategist at AXA Investment Managers, which manages 536 billion euros ($727 billion).

“In Europe, profit margins are still around 5.5 per cent, versus 9 per cent before the economic crisis, while in the US, margins are already back to 9 per cent. A rise to 7.5 per cent in margins in Europe would spark a 40 per cent bounce in profits,” he indicated.

Even troubled southern Europe, where demand collapsed at the start of the eurozone debt crisis, is starting to show signs of recovery, some analysts say.

“A strong domestic growth recovery is likely to be the largest source of upside surprise for the Southern European economies,” Deutsche Bank strategists said this month.

Roller-coaster ride
in emerging markets

But an improving European economy has not filtered through to everyone yet, with food makers and retailers in particular still hurting as shoppers’ disposable income is squeezed by subdued wage growth and austerity measures.

Nestle has warned that 2014 would be another challenging year as weaker emerging markets demand adds to pain from pricing pressure at home.

Europe’s No.1 retailer Carrefour saw its sales in Europe shrink last quarter due to a tough market environment from Italy to Poland, in addition to being hit by a deterioration in Brazil and China, the two major emerging markets it has earmarked for expansion.

“We’re just coming out of a deep recession, and you’re going to need a longer than normal period of decent growth in gross domestic product before you are likely to see significant earnings improvements,” Macquarie analyst Daniel McCormack warned.

“Also, demand from emerging markets is more sluggish than expected. Growth there is weaker, and there is less pent-up demand than in the last cycle,” he indicated.

European bluechips are more exposed to emerging market weakness than American and Japanese peers. According to data from MSCI, companies listed on the MSCI Europe index have about 24 per cent exposure to emerging markets, versus 15 per cent for MSCI USA and 14 per cent for MSCI Japan.

Swiss engineering group ABB, among those saying it saw more encouraging growth in many parts of Europe, has cut its medium-term sales outlook, citing a more cautious stance on emerging markets.

In addition, many European companies’ sales and earnings have been hurt by the drop of currencies from the Japanese yen to the Indian rupee or the Australian dollar against the euro.

HeidelbergCement, the world’s fifth-biggest cement maker, has for instance warned that exchange rate fluctuations would continue to impact its earnings this year after a weaker Indonesian rupiah and Australian dollar caused it to fall short of its own targets for 2013.

But for many European companies, bad news from emerging markets is offset by good news from exposure to the unexpectedly robust United States. Belgian supermarket group Delhaize, which makes about 60 per cent of its revenues in the United States, surpassed expectations for sales growth there in the fourth quarter.

Overall, global investors are increasingly positive about Europe’s prospects, reflected in huge inflows into the region.

Data from Thomson Reuters Lipper shows that US-based funds have poured $4.1 billion into European equities since the start of the year, $778 million in the past week alone, a 33rd straight week of net inflows — marking the longest streak of weekly inflows since Lipper started to monitor flows in 1992.

TRIPOLI — Small businesses are prospering in Libya’s major cities even as the economy at large is being throttled because of security problems and industrial action which has shrunk lifeline oil revenues.

Its financial woes combined with lawlessness has so far discouraged the return of multinationals, three years after the outbreak of an armed revolt which toppled long-time dictator Muammar Qadhafi.

Post-war reconstruction has been slow, with major infrastructure projects on the back-burner even as Libyans endure more and more frequent power cuts, especially in the west of the country.

Small businesses have been leading the way in post-Qadhafi Libya, with shops and boutiques in Tripoli and other cities boasting the latest in luxury brands.

“These investments are thanks to partnerships with foreign investors,” said chamber of commerce chief Idriss Abdul Hadi.

Such joint ventures have “promoted investment in the private sector at a time when the oil crisis has slashed the state budget, not allowing spending on planned development projects,” he added.

Economic experts, however, stress that trade and services play a secondary role in the overall Libyan economy, with only little value added.

The oil crisis dates back to last July when striking workers and pro-autonomy demonstrators in eastern Libya began blockading the country’s main terminals.

The action sent production shooting down to as low as 250,000 barrels per day (bpd), compared with 1.5 million bpd before the strike.

In early January, launch of production at Al Sharara field in the south after protesters in the area lifted their blockade allowed the country’s total output to recover to 570,000 bpd.

The oil sector accounts for 70 per cent of the gross domestic product (GDP), 95 per cent of state revenues and as much as 98 per cent of Libyan exports.

Only last week, protesters shut down oil and gas pipelines to the Millitah plant from Al Wafa field in southwest Libya.

Their action brought output back down to 460,000 bpd, National Oil Company spokesman Mohammed al Hrari told AFP.

Diversification and private sector

The World Bank, in a report issued last month, stressed “the urgent need for economic diversification in order to ensure long-term financial and economic stability”.

It called for reforms “to generate a vibrant private sector”, warning that “lack of access to financing, uncertainty in the legal environment and a fragile security situation” were key obstacles.

Ahmed Belras Ali, director of Libya’s stock market, warned of “a climate of fear among businessmen”.

“The stock market has lost an estimated 30 per cent of its value because of falling share prices,” he indicated.

Ali said hopes were pinned on the private sector, “which can serve as an engine of the economy, with the current weakness of state structures”.

Libya has lost more than $10 billion in revenues because of the crisis, according to estimates from the oil ministry and the World Bank.

Prime Minister Ali Zeidan has even warned that “the government could have difficulties paying salaries”.