8/29T News & Notes

The noose is tightening...

RSX Russia may cut off oil flow to the West - Telegraph
The UK's Telegraph reports that fears are mounting that Russia may restrict oil deliveries to Western Europe over coming days, in response to the threat of EU sanctions and Nato naval actions in the Black Sea. Any such move would be a dramatic escalation of the Georgia crisis and play havoc with the oil markets. Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline. It is believed that executives from lead-producer LUKoil have been put on weekend alert. "They have been told to be ready to cut off supplies as soon as Monday," claimed a high-level business source, speaking to The Daily Telegraph. Any move would be timed to coincide with an emergency EU summit in Brussels, where possible sanctions against Russia are on the agenda... A supply cut at this delicate juncture could drive crude prices much higher, possibly to record levels of $150 or even $200 a barrel. With US and European credit spreads already trading at levels of extreme stress, a fresh oil spike would rock financial markets. The Kremlin is undoubtedly aware that it exercises extraordinary leverage, if it strikes right now.

"Israel reaches strategic decision not to let Iran go nuclear" - Jerusalem Post
The Jerusalem Post reports that Israel will not agree to allow Iran to achieve nuclear weapons and if the grains start running out in the proverbial egg timer, Jerusalem will not hesitate to take whatever means necessary to prevent Iran from achieving its nuclear goals, the government has recently decided in a special discussion. According to the Israeli daily Ma'ariv, whether the United States and Western countries will succeed in toppling the ayatollah regime diplomatically, through sanctions, or whether an American strike on Iran will eventually be decided upon, Jerusalem has put preparations for a separate, independent military strike by Israel in high gear.

Bank of China flees Fannie-Freddie - FT
FT reports Bank of China has cut its portfolio of securities issued or guaranteed by troubled US mortgage financiers Fannie Mae (FNM) and Freddie Mac (FRE) by a quarter since the end of June. The sale by China's fourth largest commercial bank, which reduced its holdings of so-called agency debt by $4.6 bln, is a sign of nervousness among foreign buyers of Fannie and Freddie's bonds and guaranteed securities. Foreign investors have been a mainstay of the market for such debt, but uncertainty over the mortgage financiers' capital positions and the timing and structure of a potential government rescue has made some investors reassess their exposures. Asian investors in particular have become net sellers of agency debt, said analysts.