Saudi Pile of US Treasuries at Six-Year Low in Shift to Risk, Lira Lifeline Became $124 Billion Problem That Haunts Turkey, Turkey Urges Banks to Help Rebalance Economy With Credit Pivot.
Saudi Pile of US Treasuries at Six-Year Low in Shift to Risk
Key Takeaways
Saudi Arabia is reducing its holdings of US Treasuries and reallocating its oil wealth to riskier assets, reflecting a shift in investment strategy amid a growing backlash against the dominance of the US dollar.
The share of Saudi Arabia’s external wealth in risky assets has more than doubled since 2016, signaling a desire to diversify investments beyond the oil sector.
The Saudi sovereign wealth fund has increased its investments in US-traded stocks, including companies like Lucid and Alibaba, while China and other countries have been selling off US Treasuries.
Lira Lifeline Became $124 Billion Problem That Haunts Turkey
Key Takeaways
Turkey’s government-backed savings program, designed to protect lira deposits from depreciation, has become too large and costly to unwind, posing a risk to the economy.
The program, known as KKM, now accounts for over a quarter of total deposits and is draining state coffers, hindering policymakers in finding a more conventional economic path.
The central bank’s recent steps to scale back the program signal the beginning of the end for FX-protected deposits, but without firm policy rate hikes and support for the lira, changing savers’ preferences will be challenging.
Turkey Urges Banks to Help Rebalance Economy With Credit Pivot
Key Takeaways
Turkish Treasury and Finance Minister Mehmet Simsek is urging commercial banks to prioritize growth in corporate loans over consumer loans to rebalance the country’s economy.
Simsek is endorsing higher interest rates and a change in loan composition to slow domestic demand and rein in inflation.
Simsek’s efforts to implement more orthodox economic policies may be limited by President Erdogan’s focus on winning back Istanbul in the upcoming municipal elections.
In the Middle East, Thucydides Wins and Woodrow Wilson Loses
Key Takeaways
The realist approach to international politics is gaining prominence, with national interest and power taking precedence over values and ideals.
The Biden administration is shifting its stance towards Saudi Arabia, recognizing the need for strategic alliances in the face of global power struggles.
A potential triangular deal between the US, Israel, and Saudi Arabia could bring about peace in the Middle East, counter China’s influence, and potentially deter Iran from causing trouble.
‘Poor Man’s Cocaine’ Costing $3 a Pill Threatens to Proliferate
Key Takeaways
The production and trafficking of the amphetamine-type drug captagon, primarily linked to Syrian President Bashar Al-Assad and Lebanese militia Hezbollah, is likely to expand into Europe and pose a new threat to the region.
The illicit captagon trade is becoming more sophisticated, with traffickers and smugglers targeting new transit and consumption markets.
Captagon is being used as a “diplomatic tool” by Assad to secure financial support and sanctions relief, highlighting its role in political dynamics in the Middle East.