Bershidsky on Europe: Turkey Blocks Twitter
Here's today's look at some of the top stories on markets and politics in Europe.
Sanctioned Russian billionaire sells his business.
On March 20, the U.S. government announced sanctions, including travel bans and asset freezes, against an inner circle of bureaucrats and businessmen close to Russian President Vladimir Putin. Gennady Timchenko, who owned 40 percent of Swiss commodities trader Gunvor, featured prominently on the list. The U.S. Department of the Treasury even said that Putin himself was an investor in Gunvor and could have access to its funds. In response, Gunvor announced that Timchenko had sold his stake the day before to his partner, the company's chief executive officer, Torbjorn Tornqvist. Gunvor admitted that the sale took place "in anticipation of possible economic sanctions," though the timing suggests it may have been backdated. Even so, the move was not strictly necessary to avoid economic damage. Timchenko's numerous assets are mainly in Europe and Russia, and his partners in ventures include France's oil major Total. Gunvor is the fourth largest oil trader in the world. The billionaire's businesses are too big and well-positioned to go away because of personal sanctions against him. In fact, none of his entities, not even Gunvor, is on the U.S. list, except for the St. Petersburg-based Bank Rossiya, in which he owns a small stake. Likewise, other close Putin associates are only listed as individuals, and their entities can continue operating.That is probably not an omission on the part of the U.S.: It is deliberately designing the sanctions so as to insult Putin but avoid retaliation against U.S. companies operating in Russia.
EU banking union receives final approval .
After a final, all-night round of negotiations, the European parliament and the European Union member states finally agreed on the details of a joint system for resolving banking crises. Bank supervision will be handed to the European Central Bank and liquidated or bailed out by a central authority, which will draw on a $76 billion rescue fund. The member states agreed to fill the fund within eight years rather than 10 as originally envisioned. That is an especially big compromise on the part of Germany, trying to keep the costs of European integration down. European Partliament members rejoiced at having forced Germany's powerful finance minister Wolfgang Shaeubleto make concessions, but the resulting anti-crisis mechanism is extremely cumbersome: It involves more than 100 voting decision makers at various levels. The EU has created a Frankenstein monster that is hardly likely to make bank insovlencies and bailouts a more transparent or informed process.
Turkey blocks Twitter.
Turkey's Internet regulator blocked access to Twitter soon after Prime Minister Recep Tayyip Erdogan threatened to shut down the microblogging network as a "menace to society." "Twitter and the rest, we will root out all of them," Erdogan told an election rally. "I don't care what the international community says, they will see the power of the Republic of Turkey." The dearth of uncensored news media has forced Turks to use social networks to share information, especially on government corruption. It was through Twitter, Facebook and YouTube that recordings of Erdogan's and his allies's confidential, and unpleasantly revealing, phone conversations spread throughout the country. Erdogan, who calls these recordings "tapes" because he is not particularly tech-savvy, has threatened to move against the networks for some time, and now he has. The international community, which he vowed to ignore, said the obvious things: EU telecom commissioner Neelie Kroes called the Twitter ban "groundless, pointless, cowardly." Emotions aside, she is right about the "pointless" part. There are ways to access any site that even the Chinese builders of the Great Firewall cannot beat. Erdogan needs to study the North Korean experience if he really wants social networks to stop being a factor in his country.
Volvo returns to profitability.
The Swedish carmaker Volvo showed a $150 million net profit in 2013 after years of mounting losses, a vindication of its Chinese owner Zhejiang Geely Holding Group Co.'s strategy of cutting costs and reorienting Volvo toward the Chinese market. The Swedish company's total sales dropped slightly in 2013, from $19.4 billion to $19.05 billion, but they surged 46 percent in China. Volvo is only a niche company, selling a little more than 400,000 cars a year, but it has a clear marketing message, selling increased safety and minimalist Swedish design, and if it can keep its costs under control and its prices acceptable for the emerging world, it can forget about its previous disappointing performance under the ownership of Ford. Volvo's revival is an encouraging example to French carmaker Peugeot, now entering into a close partnership with China's Dongfeng. Chinese companies may still make somewhat clunky cars of their own, but in partnership with technologically advanced European producers they can move mountains.
Bouygues still not giving up on SFR.
Billionaire Patrick Drahi appeared to have elbowed out competitor Martin Bouygues from the race for Vivendi's French mobile operator, SFR. Drahi's cable company, Numericable, last week began exclusive negotiations with Vivendi on the purchase of SFR. Bouygues, however, is nothing if not tenacious: He increased his offer for the mobile company, bumping up the cash part from $15.6 billion to $18.2 billion. That is $1.9 billion more than Numericable is offering. Vivendi executives worried that Bouygues's previous offer left their company with too big a stake in the combined entity comprising SFR and Bouygues's own mobile operator, 43 percent. So Bouygues's new offer brings down Vivendi's share to 21.5 percent. The proposal answers all the concerns of Vivendi management except one: A deal with Bouygues would bring down the number of mobile operators in France and reduce competition, something that could slow down the deal's regulatory approval and perhaps burden it with unexpected government-imposed conditions. The Numericable story is much prettier: The combination of mobile and fixed communications is the current global trend. Vivendi would be wrong to jump at Bouygues's improved offer: whatever stake it keeps in SFR will be worth more with Numericable as a partner.
(Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter at @Bershidsky.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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