Surveillance: OPEC & Russia with UAE's Al-Mazrouei

and of course, on the Bloomberg Terminal. The Churchill States was a British protectorate that became the United Arab Emirates and the families of the United Arab Emirates came together with the power of Abu Dhabi and their oil to control a large part of the market and culturally to be a huge part of the Arabian peninsula. So he'll

Ben Mohammed al Missouri joins us right now. He is Energy Minister for the United Arab Emirates, and I'm honored to say from one of our most prestigious petroleum engineering schools the universe, you have Tulsa. He is hugely qualified to speak on his these matters. Ministers, thank you so much for joining Bloomberg Surveillance this morning. I'd like to know the power did ascendant United Arab Emirates has right

now over Russia. Explained the dialogue explained the change in the relationship of you A with Russia in the last week's Well, it's great to be with you and to address your audiences. Um. First of all, you A, as you know, is a member of an alliance called Open Plus. That alliance since formed, have been doing a great job, in my view, balancing the market, balancing the supply and demand. And we we have a history within that alliance and

we've been through wars. We've been member countries, been through wars, been through confort been through sanctions. Some of the members, as you know, we're on and Venezuela. But something we always do and that's almost a law in the way that we work. We have one objective only, which is trying to maintain the supply to the market and ensure

that that supply is affordable. Nowadays when the new politics heads and we also the price is going higher, and we are increasing the production gradually according to a plan, but we cannot under any circumstances see a replacement for ten percent of the world production that's from oil gas as well. So I don't think practically if we bring politics into the organization we can help the consumers would

start to help the consumers. Whatever you say that, sir, but very importantly, and this is your public service to desired family as well. Movebadalla and others within Abu Dhabi are considering their Russian businesses. Should the United Arab Emirates provide sanctions of some form, formal or informal to Mr Putin and Russia. Well, I'm not going to talk about the politics. I'm here to tell you about the market.

I'm here to tell you what can we do to ensure that the consumers in the US and Europe and elsewhere are getting an affordable supply of hydrocarbon? And in order for us to do that, we have to use every battle that is available. If you if someone is asking us to let go of ten percent, then we are asking we're telling the consumers that we are going to increase the prices higher, and that is something we cannot be part of. We have to be we have

to be wise in what we are asking for. Excuse me, minister, I am wondering you keep saying it's important to have

affordable gas, affordable crude. What's affordable? What barrel? Is sort of the line in the sand when it comes to a price point for you, well, the price is a result and the balance between the supply and demand is that's that's where where we are worth argeting that we had the five years the five years average, but you know, we do our best and the world six months ago have convened in COPI and asked us and asked the the financial institutions to limit the the financing of new

oil and gas projects and that and now six months after that they are asking some more. Oyal that does not go hand in hand. We need now to put a strategy and we need to come up with the resources to find a new new new battles. The loss in the group more than a million battle Minister, you raise such an interesting point about the idea that there's been a lack of investment which has caused a lack of production in this market, which is the reason why

people say it's so tight. Given that backdrop is the level of the price at which there is demand destruction, that supply demand push and pull a lot higher than it's that it used to be for OPAC, in other words, is a hundred dollars a barrel much more sustainable over a longer term for you, based on the lack of

production and a lack of investment. Well, we always look at the consumers and we all know that the current prices today are not comfortable to many countries and they they we need to get the prices to something that is reasonable. What is that price level? I think the market will dictate that. It's the balance between the supply and demand. So if we put more resources, we can bring more oil and we can sustain that oil for

years to come. As you know, where the world is almost consuming a hundred million barrels a day every year, we lose eight millions of that and then his investment who's investing. Very limited countries are investing, or our afford to invest because we've been into a rollercoaster from seeing at twenty dollars oil to a hundred hundred plus today.

So it is not encouraging investments. And many countries and shareholders have been to have been telling the companies, the IOSS who are reliable partners, and the shale oil producers as well, we're not going to give you the resources to to grow your production. That is troublesome when you are hit with a geo political conflict like we are having today. So what we need to do we need to get our acts together. You will do whatever we can as an open plus, but we need the financial markets.

We need the lenders to start easing on financing oil and gas project so we can bring more battles in the future. Minister, if you're taking this so seriously, why was the OPEC plus meeting this month thirteen minutes long? Well, we we we are meeting in a few days and we are looking at the market. That was question. Just to go back to the meeting early this month, it was thirteen minutes long. This is one of the biggest energy crisis we've seen it a long long time, and

you had a gathering that lasted thirteen minutes. Why should we take what you're doing seriously if you only meet for thirteen minutes. Well, there, when we meet, we look, well, we look at the nons and NaNs and uh and there are lots of unknowns at that meeting, including how many battles are we're going to miss. And another thing is is the deal closed with Iran, which is a major partner and producer in in into the alliance, and how many battles of the stone capacity going to come

to the market. All of these things are unknown to us, so it's very difficult to come and and make other than the plans. So we increased the four hundred thousand and that's what we have agreed to do earlier. Minister, I am fascinated by the view east from Dubai and Abu Dhabt India. With all of your remit for the Zayd family, can you please explain the India response to this war in Ukraine. There's such an interesting relationship between the United Arab Emirates in the India. Please explain to

us the India approach that you see. Well, many many countries have have purchased from there, looked at at opportunities and some have seen a discount and acted on it. And I think I think that's the the the southern

right decisions of these countries. We don't have an oil and gas sanctions or Russians on on Russian oil and gas, so I think many countries have elected to go and and purchase because there is there has been a discount, and I think that's that's what we saw in the news if if if that's what you mean, and many others are going to do the same. So thinking of squeezing barrels outside the market. When a discount is there is just illusional. In my view, countries are going to

go and buy the cheaper available crude effort fits their refineries. Minister, we have to leave it there. Thank you very much for betting with us this morning. The u A a energy minister on some of the big issues in the energy markets right now. We now adapt with David Malpass. He is President of the World Bank, and I know he's laughing at me because he knows I really want to quiz him on the end of valuation dynamics, but that would be inappropriate this morning with the President of

the World Bank, Mr Malpass, thank you for joining. I want to cut to the chase, David, with wheat down from the panic peaks. If you shift at the World Bank to aid for whatever ends up in Ukraine, how will you affect that process? Hi? Hi Tom. It's a worldwide problem. So that with the prospect of wheat shortages drove up the price, but the markets are really adjusting some. The World Bank puts a lot of money into food aid,

which is one of the crises facing poor people. We we do seventeen billion dollars per year UH in various forms of food support. One of the critical things for people UH in poor countries is that there they have targeted support meaning UH not subsidies that that support everyone uh and are costly, but can you target it towards the people that need it the most. As we look at Ukraine, then we're we put in a lot of

money already. We were able to disperse in the in recent weeks over half a billion dollars, which is very fast aid that was much needed by the government at the here at the at the beginning of the or early in the in in the war. And I'm hopeful the headlines that you were you were just giving sound optimistic. Thanks, David, I am absolutely fascinated. I say this with great respect

for the institution. How the World Bank treats Russia moments ago Johnson and Johnson with further sanctions as many of you, I'm sure I heard in the Bloomberg World Bloomberg making decisions in the last forty eight hours on the use of our terminal within Russia. David mel Pass, how does the World Bank address as sanctioned Russia around your usual mandates.

Russia is a shareholder of the World Bank and participates in board discussions, but we stopped lending to them in teen after the Crimea invasion and we've suspended all operations and programs UH in Russia and in Belarus. UH. In the current environment are people UM Many people have come out of Russia UH, and so that's not so much an issue for us. The bigger issue is building the response for not only Ukraine but also people the refugees

in the Eastern Europe. How do you build a response, David, when you do have these constraints on prices, when you do see to Tom's point, we still is incredibly elevated. You have seen some of the farming of fields in Ukraine decimated. Farmers can't get out there. How much is this going to disrupt frankly, your ability to help and what you think should be priced into the market. The critical is that supply increase outside of of Russia and

even and of Ukraine. Ukraine may have some comeback in crops, but they need to need to have fertilizer and seeds and meet the planting cycle. So critical variable for the world is how responsive is supply elsewhere. That gets into UH, the the UH, the subsidies that are being done that sometimes stop people farmers from from producing and increasing their output.

So that's one. And then as far as the refugees, we have a great deal of contact with the other agencies that along with the World Bank are responding to two refugees in Poland, in Moldova, UH, in Romania, UM, and we have programs in each of those that are directly UH engaging with the refugees and helping the European agencies and the national agencies that are helping those people.

We hope that your efforts are successful. David, we were talking about what this changes if this ceasefire does come to fruition, if this is real coming to the table on both sides with Ukraine and Russia. How much does that change your outlook? How much of an improvement versus just removing some of the worst tail risks does this present for you? Well, I was watching your market indicators this morning, so you were showing the decline in oil prices.

That helps. I was just in Senegal and Morocco. One of the burdens on countries that are that are facing UH, that are facing fragility in the region. You know, in North Africa, big problem is the weapons inflow coming from Europe through Libya into North Africa into Islamic Uh fundamentalism that even this morning there was a bombing in Nigeria. These are big problems. And on top of that, then the price of diesel fuel goes up and of of wheat goes up. So the the best response from the

world can be more production and market access. For Senegal, the most important thing in the world really is if they were able to where if they were allowed to to ship peanuts to the United States right now their biggest customers China advised some four hundred thousand tons per year, and uh, the the US not because we have so many barriers. Also, you know, the ethanol subsidies in the US are so punishingly expensive that it distorts common agricultural

policy in Europe. I just want to make the point that there's a lot that the advanced economies can do to allow people to sell to those markets and ethanol. There there's a David mal Pass we know, we love and know from another time in place Mr male Pass. One final uh comment, if you will, you have a staff that is world class, including Dr Pangestu from Indonesia. Marie al capangestu is she speaks of resiliency and food. How do you bring food resiliency to the planting season

of Ukraine. Uh So fertilizer from western Europe would help. You know they've been cut off from Belarus. But I think cessation of the of the violence is the starting point the You know, farmers are resilient by nature. They work, they work their tails off and they grow a lot for the world, Ukrainian farmers included. So you have to stop the war, uh and then quickly provide them enough

funding for for for seeds and for the fertilizer. Uh that I think those steps can't could still be taken here in March mon pass thank you not evel conversation set and a Tommy wants to thanks for reacting to that breaking news to have amount pass that the president

of the World Bank. There are moments John and Lisa of privilege at Bloomberg, and one of them was a good long decade or more so ago in a small room with Thomas Shelling, the giant of thinking about war, the Nobel Laureate, where he sat and I sat mesmerized. Is Professor Shelling spoke about how you end wars. Michael Kimidge and Leona Fix have taken this to a new wonderful extreme in Foreign Affairs magazine. Leona Fixes, with the Corbel Foundation in Berlin, were honored that she could join

us this morning. Leon. I love how you frame if Russia wins, if Russia loses. Professor Shelling would suggest, the only way to end the war is exhaustion. Do we need an exhausted putin? What we certainly need is we need a sustainable piece and not a provisional piece. And despite the optimistic news of today, this will be the

main challenge for Ukraine moving ahead in negotiations. So basically, how to prevent that any negotiated agreement right now with Russia will only leave Ukraine weaker, especially in military terms, and could encourage Russia to come back in a couple of months or a a couple of years to finish the business they've started. And that's the crucial, the crucial point. How to prevent an unjust piece, as sit Settle said um and prevent also a continuation of a very cool

war that we've seen so far. If Russia wins or Russia loses, is the equal outcome a partition of Ukraine. I think the challenge now is that we don't see this clear cut options anymore. So Russia is too weak to win, but at the same time they are too strong to loose, and that makes the situation right now so difficult to navigate UM and the Ukrainians have put up a formidable resistance as we've seen the last weeks, but again they are also too weak to finally, UM

make Russia withdraw from all parts of Ukraine. So the question of territorial concessions that you just raised will be a crucial one in negotiations. And for President Zelenski, who has been able to gather Ukrainians behind his brave and courageous stands UM, he has a little room for compromise there because there's no appetite whatsoever to give up on

Crimea on other parts of Ukraine. But also from the Russian side, they will want to leave negotiations with successes that they can sell at home, and the minimum success from a Russian perspective would be to have liberated quote quote um di don bust in eastern Ukraine. Leanna, so that we can understand the points of leverage here and what exactly brought both sides to the table at the place where they are now. Was it the sanctions or was it really the resistance that has brought Vladimir Putin

to a more compromising stance. Absolutely both of it, and I want to underline this, without Ukrainian Ukraine's resistance, we would not have seen this incredible sanctions package, also because there was such an international outcry in the European public,

in the US public. So what helps Ukraine is to strengthen its negotiation position by weakening Russia's position and putting further pressure on Russia to not put out maximalist positions in negotiations with Ukraine, but to be open for compromises. So this is the moment where we have to keep up pressure on Russia, and only if Ukraine asks us to lose some of the pressure to think about sanctions,

then we can consider these options. Our main aim should be how can we help Ukraine to negotiate a sustainable piece, and that should be the goal of all Western policy at the moment, Leona. Then it goes to this question of what the West response should be in order to get Vladimir Putin to continue negotiating and to continue to make good how much will there be discussions about loosening some of the sanctions in response to a certain period

of ceasefire. Is that feasible or does that seem wrong considering the fact that we're still talking about war crimes. This is a discussion that we might have at some point, but this is certainly not the discussion that we should have right now. We've seen in the past that Russian words have always very often not being followed up by

rushington deeds. So until we really see some credible Russian deeds, some credible withdraw, some signals that Russia is seriously willing to make concessions and to negotiate, we should not waste the issue of sanctions yet. Only if we see that there's a credible path ahead and Ukraine asked us to do so, then we should again put our efforts into the service of Ukraine, even if this might be a

tough decision to make. As a broader strategic goal is certainly to weaken Russia in general, to prevent that Russia has further ambitions towards you pen security. But at the moment, it really is about keeping up the pressure to help Ukraine Leona fix We started with Thomas Shelling, and of course he defined our study of deterrence in nuclear threat is putin a nuclear threat. He is certainly willing to

use nuclear coersion as an instrument. Um he has a lot many more conventional means at his disposal before he would actually consider the nuclear option. We've learned from the past that we should never say never when it comes

to Putine and to Russia. But again this is something that at the moment he uses to curse the West to deter the West from further support for Ukraine, and that is something where the West should not be intimidated because especially military support for Ukraine, even if there is a negotiated outcome, will be incredibly important again because Ukraine should not leave these negotiations weaker than they've entered it and be at risk of another Russian aggression in a

couple of months or or years. Perhaps so not being intimidated, but at the same time being cool headed as the US President has been when he did not raise the alert levels of US nuclear forces. That is at the moment, the right strategy, but obviously not to take off anything from the list because the Russian press that has proved in the past to do, um to do things that we've not expected him to do. Leanna Fix thank you with the Coba Foundation and fixed income on the Mystery.

Serradorajapa joins us now with Society General, where they've got just terrific dynamic analysis. Sobrato, the dynamics of equities is simple, down we go a vix of thirty six, boom, up we go with a huge growth rally. Is there any presumption of price down in fixed income and the idea that we get a hall mary of lower yield and higher bond prices. Um. I think we're starting to reach

some key resistance points. At two fifteen tents, for instance, is going to be a level that I'm going to be watching to see if tenny years can actually break through that level. But to me, really all the focuses on the curve, as you guys have been discussing them in the two times part of the curve is very very close to voting. It could actually invert by the end of this this week. I was thinking you could invert in the first half. It looks like it's gonna

happen a lot sooner. So that's really where the focus is right now. The nuance to pros and the derivative expertise of society general is the idea of a flat curve saying yield twos intense or a true inversion or a depth of inversion. Do you predict a certain negative amount which gives us that depth of inversion which signals recession. So I don't think that there's any sort of a

magic number that we're watching. What typically tends to happen is when the curve gets flat or inverted, you tend to see that in about a year's time or years lag, I should say, you start seeing a meaningful store around in growth. And so you know, the the inversion starts, you know, first in the back of the curve typically and then as we progress it starts moving towards the

front of the curve. Now you see the two stands part of the curve chare Powell is looking at the three montenure part of the of the curve and saying that part of the curve is not avert, so we're not concerned. But the two stands part of the curve is saying that the tent that the three month part of the curve is going to start. Three month rates are gonna start moving higher, and that the that the next sort of progression is going to be for the front end, uh you front front part of the yield

curve to start to to flatten. Regardless, I would say, within a year's time, you're gonna see, uh that the impact of the flatter curve on the broader economy and that typically what you know, tends to lead to a surround in growth. So about we had on Steve off of Federated earlier and he said, when he looks at the yield curve, he sees a bond market that's pricing

in a soft landing. Do you agree? It's hard to know, because you know, I think the barn market, the reaction bond market is a lot more dire than what you're seeing in all the other markets, right like you like you're you're discussing earlier financial conditions broadly speaking, are still very very accommodative. So really what the bond market seems to be a little bit ahead of itself in expressing concern about the the the health of the economy, if

you will. And that's when it gets really really tricky, because it's going to be very very hard for the FED to be able to raise rates from from the zero lower bound to two and fifty you know, basis points in a matter of you know, six to eight months and not have the economy, um, you know, have some sort of hard landing. And that's really where it gets very tricky. Um. And that's why I think it's

it's it's really hard to know. Do you think, Subadre that what we're seeing in risk markets and I'm not just talking about equities but also in riskier credit that basically the bet is that the FED will have to backtrack on some of the hawkishness, that they won't be able to go that fast, or else they will be able to and the economy will have accelerated to enough of a degree that it will be able to hold in.

And basically, are they praising in something that seems increasingly impossible? Yeah, I mean I think I would agree with that view in the sense that the FED is very, very eager to raise rates very fast at least, you know, front load these rate hikes because you know they can. The unemployment numbers are are very very low, the economy generally speaking is very strong. The growth trajectory for this year is very strong, so they're very very eager to frontload

these these rate hikes. You know, we'll have to see what happens in the latter half of the year after they say deliver a fifty basis point at the main meeting and perhaps even at the June meeting and then they announced the runoff in the bounty. You know, we'll have to see how the market reacts to the market still holds up, then they could probably raise rates once

a meeting for the remainder of the year. If not, they're going to have to pause, you know, sometime in the latter half of this year, or perhaps even early next year. So I think the Fed is very much keen on front loading these rate hikes. Whether they can keep that sustained pace of of hiking this year and well into each next year is is yet to be seen. We are not there yet. We are a little bit away to three digits from a positive yield on the

German two year piece. What does that signal? But you know, the world is getting to a non negative you know, bond yield environment because of the inflation dynamics. So inflation is not just a US story, it's it's it's a global story. You're starting to see even you know Japanese, you know j g B, you'll start to hit up

against yield curve control restrictions there. So I think that the general trend, and especially in Europe, the inflation dynamics are a lot more pronounced because of their dependence on Russian oil, and they have i would say, a greater propensity to or to go into a recession because of their dependence on on Russian oil and commodity prices in general. The US in some respects is much more insulated because

we're energy independent. So I think the move now reflects, you know, the reality of the inflation adnamics and the global inflation dyna mixed with you know, with bonds getting out of negative gentry across you know, across the world. Santra, thank you sevent for that of silk Chin right now on what this devolves down to for investment branch, Shoot joins, his chief investment strategist at Northwestern Mutual. We're short term,

as I'm going to suggest three years, Brent. The emotions of the moment, the uncertainty of the moment, causes confusion for anyone looking long term. How do you adapt well? I think Jonathan of the nail on the head and his opening when he talked about this being a positive but certainly a lot of uncertainty. But I think the most important part is it's a little bit less than it was yesterday, and so to me, that is why the markets moving higher, and that's a positive in the

near term. In the longer term, I still think you have room for the market to move higher. Um certainly the rise and oil prices have put upward pressure on inflation. The FED could be raising rights here, but I think all in all, the economy is still in a decent place, and I think that means that we have room to

move higher in the near to intermediate term. Bran, do you think that, frankly, if we do get some sort of resolution or at least not a worsening in this situation, that gives the FED the green light to go as aggressively as they can. Yeah, I don't know. I mean, I guess to me, I think the FED is going to try to tighten as much as they need to to get the inflation narrative under control just a bit. And certainly they've done that with their words. We'll see

if their actions follow. I still don't believe the FED intends to cause any sort of economic recession like overtightening. They want to tighten just enough to actually, um, you know, keep inflation under control and to keep expectations under control, which has been lost in all this. The five year five year forward break even is at two forty. That is hardly out of control. This isn't This is two thousand and twenty two, and to me, that doesn't mean

the FED. That means the FED doesn't have to overdo it. Inflation expectations are not embedded yet and it's not permanent. Meanwhile, I was looking at this, uh, this dashboard that Gino Martin Adams of Bloomberg Intelligence put out. We're basically only ten out of fifteen indicators were flashing yellow or red and only five remaining are green, including relative earnings per

share growth. However, all of these flashing signs, which are you actually watching to see whether you should change some of your constructive view? Yeah, I think people are focused on the yield curve first and foremost. Into me, I

would take that with a grain of salt. I mean, let's think about the tenure Treasury and think about what has actually happened with quantitative easing over the past few years, and how distorted the term premium is probably on the tenure treasury, And so to me, I would take that with a grain of salt. Certainly it shows that we are aging in the cycle. We are getting further along, there is no doubt about that. But a recession could still be, you know, two years away, and during that

time periode, the market can move higher. And I guess can kind of put this into numbers because I noticed the spread between the ten and two with somewhere around eight basis points. This morning, the spread between the ten and two year was eight point five basis points to positive. What happened after that, you didn't have a rescessant of two thousand and one, and you had one of the best equity markets in the history of this country. And so take it with a grain of salt and realize

that it is one indicator. And overall, to me, the consumer is still in good shape, leading economic indicators are still rising, and corporations are still in good shape. And so I don't think our recession is imminent, and I think we still have him to run, Brent. We were weaned on the optimal portfolio some of us a little bit older know that price down, yield up can occur. It's called a bear market in the bond market. Great,

does the efficient portfolio work here with bonds in retreat? Yes, But I think you need to think about it a little differently. And so people think about a sixty is just being the SMP in the bond market. We think about it as including commodities and gold, and so I think people have gotten a lesson in diversification over the past few months, and I think they're gonna continue to

get one going forward. You need to own those as hedges against different economic environments, which is what we have seen. I think the SMP five hunded is still frankly expensive. You get better earnings growth right now, all else being equal, outside of the SMP five hundred at a cheaper price. And so I'm not suggesting investors run from that, but I still want to be in things that are cheap because I do think there's still upper pressure on the bond market and I think the economy has for the

room to run. Hi Brent, thank you buddy for Bamida spread shitty of Northwestern Many Child. This is the Bloomberg surveillance podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

Bloomberg dot com, and of course, on the terminal. I'm Tom Keene, and this is Bloomberg