15/01/2016 BBC Business Live


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This is Business Live from BBC News with Sally Bundock and


Balancing the books in Russia - a budget cut is planned


as the Kremlin copes with those oil prices falling off a cliff.


Live from London, that's our top story on Friday the 15th of January.


As oil prices languish near 30 dollars a barrel,


the Russian government prepares for a year of austerity.


China's answer to the World Bank, the AIIB, prepares for its official


But will the new lender really shift the balance of power


And we are 30 minutes into the European trading day -


most of the main markets are headed lower as investors digest the latest


swings in the oil price and Chinese stocks enter a bear market this


And we'll be getting the inside track on the future of cars.


Will they hover above the ground - well, the last one, probably not.


Our technology correspondent Rory Cellan-Jones will be


Today, we want to know - would you trust your car


It's been another roller-coaster week for the price of oil -


it's sinking again today after Thursday's brief rebound


but earlier in the week, crude fell below 30 dollars a barrel


- a level not seen since 2004.


Countries dependent on the black stuff to keep their coffers


lubricated are certainly feeling the strain,


Today, the Kremlin is expected to announce a 10% cut in its annual


Over half of the overall revenues for the government comes from oil,


so as the price drops, there's a direct knock-on effect


Last year's budget was based on an oil price of $50 a barrel -


a price that is rapidly becoming a distant memory for oil producers.


Russia had hoped this year would see a change in fortunes and for it


to see a return to economic growth, having slipped


But that is looking increasingly unlikely.


10%, probably not enough. I was looking at the sums here. The


Kremlin apparently will need oil to rise to $82 a barrel.


To meet its current budget. You and I know that is not going to happen.


10% is payment on account, if you like. It will not be the last and is


not the first. This is a serious situation for Russia. Again, looking


at numbers, estimates say if oil stays at $30 a barrel for the


remainder of this year, it is likely to go even lower, but if it


$30, it wipes Russia's currency reserves gone. Yes. Give us some


more! The trouble for Russia is they have locked themselves into a


situation where distributing this is the basis for the economy. I had the


reform, they have had it for a long reform, they have had it for a long


time but it was rejected by Putin when he returned in 2012. They are


now reaping the consequences. They have nowhere to turn to except


hoping the price will rise, somehow something will happen, or reform,


which is dangerous for the regime. Just wonder if the economic action


at the moment which is ritzy bleak could force Putin's hand to reform.


-- pretty. To stop the sanctions and stop the Russian retaliatory


sanctions which are crippling things like the financial services. That is


good logic but it is improbable. His primary objective is for Russia to


be a great power. It is significant the military budget is being


protected and it is very large and growing. It would mean him stepping


back from Ukraine which he is going to find it very hard to do. It would


mean his finding some way to get out mean his finding some way


of the mess he has made going into Syria in the first place and that is


especially him. If the worst case especially him. If the worst case


scenario plays out this year and oil continues to go down, some predict


as low as $10 a barrel, that was the case for Russia and the people of


Russia, how will that play out? If things become more chronic economic


league, is that going to have a knock-on effect on Putin's


popularity and any dissension? They have got the television and media


locked down. They locked down for life. They have


recently given their police the right to fire in crowds should they


wish to do so, including women and children. How is the general public


coping and is it tough? It is tough. The polls show they are not hopeful


about the future. That is not the same thing as them saying, Putin has


made a mess of things and replaced. To do that, you would need


an idea of who and how might replace him, there is non-. Such a man or


woman would need a programme. There woman would need a programme. There


is no way to articulate a programme. So he is in a position where events


have taken control. And he and we will have to see how it plays out.


We appreciate your time, as always. And no doubt we will speak to you


soon. Fruit and vegetable in Russia, inflation, 30%.


It is difficult. announcement about budget cuts, we


will update you. Goldman Sachs says it's struck


a deal with the US Department of Justice to pay a $5.1 billion


settlement over its marketing US banks have taken much


of the blame for the 2008 crisis after granting mortgages


to unqualified borrowers, then repackaging those loans as safe


investments and selling The settlement comes


after Wall Street rival JP Morgan reported better than expected


profits for the three recovering to close 10.3% lower,


after it confirmed there had been police raids on the company's


facilities to investigate Investors are worried Renault might


also be involved in cheating emissions tests, following


the Volkswagen scandal last year. However, Renault stressed that tests


have shown "no evidence" of devices designed to cheat tests,


comments backed up by Fiat Chrysler Automobiles is denying


allegations that it encouraged The car company is being sued


by the owner of two US dealerships, who says it offered financial


incentives to dealers to report unsold vehicles as sold and then


cancel those sales Fiat Chrysler says it has carried


out an investigation and found Check out our website. BHP, $7.2


billion write-down on its onshore oil wrecks. That is another part of


the falling oil price story. That is a lot of money. They are talking


year ago, it had 26 and it had five year ago, it had 26


by the end of the first three months of the year.


Markets showing signs of being on the case. Let's talk about China


now. Now, China's answer


to the World Bank will be officially What is going on is much today is a


Infrastructure Investment Bank - What is going on is much today is a


big day for the Chinese. Hello. The AIIB as it is known will


be launched officially in Beijing. The headquarters this weekend. It


will hold its first board of directors meeting. This is a bank


which focuses clearly on providing loans for Asia -based infrastructure


projects including the likes of roads, health, education and energy


projects designed to grow the economy is of the recipient


countries getting the loans. China is the AIIB's largest shareholder


but India and Russia are also big players and all 57 countries have


signed up to the bank including many in Europe, controversially, like the


UK, France and Germany who joined in spite of opposition from Washington.


The US sees this as an attempt by China to come to Washington's


efforts to increase its influence in Asia and it is seen as a challenge


to existing institutions like the World Bank and the IMF. The AIIB has


tens of billions of dollars to spend and is expected to make its first


loans available in the second half of this year. Thank you so much.


So that is in Beijing this weekend. A mixed picture on the markets. A


Mini bounce back in Wall Street yesterday but that did not help


Asia. China entering a bear market, stocks in Shanghai at 3.5%. That is


Japan. This is Europe. Corporate Japan. This is Europe. Corporate


stories making the headlines. The merger of British Telecom with EE


has been given the Green light by authorities in the UK. That is


affecting trade in London. We have mentioned BHP, listed in London as


well. A lot going on and we will discuss the winners and losers.


Let's look ahead now to Wall Street. Citigroup and Wells Fargo have


reported fourth-quarter earnings. Citigroup makes up a substantial


part of its revenue from Asia and America -- emerging markets, has it


been affected by the slowdown in China? It is still expected to make


a growth in earnings. The biggest presidential mortgage lender WeFargo


experienced a big growth but with the exfoliate -- portfolio exposed


to the oil sector, watchers will be interested to see how it affects the


bottom line. Retail sales grew in December showing Americans are still


spending and we will get businesses on business in the entries for


November and manufacturing and business output for November.


Good on you. Let's stay with the markets.


Jeremy Stretch, Head of Foreign Exchange Strategy


Good to see you. Let's talk about the connection, audio and the


markets. We have seen a horrible two weeks of the trading year. Can you


explain, oil continues to tumble, markets react. They reacting to $30


oil or to the reason we have got $30 oil? It is $30 oil particularly for


those economies reliant on oil your conversation about Russia was


pertinent and Canada, under significant pressure, it has lost


more than 10% of its value because of the correlation with oil. So


direct economic relationships in oil producing companies -- countries but


why is the price falling? Slower global growth and fears and eating


from China as the big swing demand variable in terms of both -- growth


projection causes the price to foil along with an excess of supply.


Interesting to see how the day progresses. A lot of news coming out


of the States. News from China about its money supply and its debt levels


which was worrying today. Asia closing at a 3.5 year low for the


week today. Angela Merkel is meeting with Mario Draghi in Berlin today.


They are having a chat. I would love to be a fly on the wall!


It is interesting because there is a degree of pressure in Germany


have seen this in the comments from the Central Bank regarding the


problems the German system has with negative deposit rates. The printing


of money. It seems to be the case Mario Draghi is going to be facing


relative criticism from Angela Merkel about the perception because


of the legacy that brings. Generally when you find money printing, it


boosts asset markets. But the Dax is down" and it is. It has created a


degree of a bubble in the asset markets and Germany is mindful this


policy could store up Rob Evans for the future. So it will be


interesting to hear not an official version but unofficial versions of


the conversations -- problems. You know the routine, right? You are


You will take through the papers shortly.


Most of us have one - and many of us use them daily.


Will you trust your car to drive itself?


We'll be discussing all that and more in just a few minutes.


You're with Business Live from BBC News.


A mega-merger in the UK's telecoms industry is likely to get


To find out more about what this means, let's talk to Matthew Howett,


So talk us through where we are at the moment, the competitions


authority has said these companies can tie up. How will they have to


change in terms of which bits BT might have to get rid of or anything


like that, do we know anything? Essentially, the competition markets


authority has said these companies are fine to join together. They are


bringing together two fairly separate businesses. BT has a


business around broadband and BT business around broadband and BT


primarily. EE on the mobile side fairly complimentary. There should


not need to be any changes to that business. Over time BT may look to


further integrate the division. These are the things we will find


out about in the coming months. Matthew, just briefly. What


this mean for customers? Will base much of a difference in terms of


pricing and customer service? At the end of the day, this is all about


the customer. What BT is doing by buying EE, they are gambling on the


fact that people want to take all of the services from one provider,


something we call quad play, they will take TV, broadband, landline


and mobile from one operator. It could lead to a form of cost saving.


This is something that will be pursued in the coming months.


Thank you for your time. There is so much more information about that


British Telecom EE tie-up on our website. There is also the ode to


deal with three to agree on -- 02. We will hear about that in the


spring. You have interviewed Jimmy Wales,


the founder of Wikipedia. Wikipedia is 15 years old this week.


What would we do without it? It has enriched my life, Sally!


balancing the books in Russia - as a new era of low oil prices begins,


so the Kremlin looks to cut its budget by up to 10 %.


And now let's get the inside track on the future of the car industry -


one of the biggest money makers in the world at the end of a week


where the big names in the business have been showing off their latest


It's a market worth a whopping $800 billion a year -


And big changes are in the works - to keep customers buying


as well as address environmental concerns.


Electric is gaining steam with brands like Tesla,


that offer luxury and 4x4 all electric vehicles.


We've seen prototypes for driverless cars from the likes


of Google and others - but is that technology about to be


Apple is thought to be developing prototypes as we speak.


So could the traditional players soon be facing


Lots of questions - and hopefully some answers.


Our technology correspondent Rory Cellan-Jones is here.


You had the pleasure of meeting Elon Musk. I drove to meet him in a car


which was an exciting, slightly terrifying experience. Tesla make


electric cars sexy. It is a electric and it accelerates like nothing on


earth. It has a range of about 250 miles.


features in it. You can switch on Lane control. You can sit there on


the freeway, it will stay in Lane. You can keep a certain speed. You do


keep your hands close to the wheel. It will even change Lane, indicate


and automatically move out into the next lane. I am fascinated by this!


It will do this. There is an extraordinary vision that this will


be commonplace, in fact it will be the norm in about ten years' time.


You will only dry if you want to dry. It will be like owning a car


which is not self driving in the long-term will be like owning a


horse, you will have it for sentimental reasons but not for


daily use -- you will dry. I do not have a car for sentimental reasons!


The point he's making is your car will completely automatically. You


might dry a Europcar, you won't need to. It will come to you without much


intervention. This man is an inspiring, brilliant thinker. What


he's saying is a bit too extraordinary for


when he said you will be able to pick up your car, if your car is in


Los Angeles it will drive to New York to meet you, I said, maybe that


that is a long time away. He said about two years. I think that is


slightly mad. Think about the regulatory changes you need. The


technology is evolving very fast, the regulation less so. Allowing


driverless cars onto the road will be huge decision and will need a


huge change in the structure. That is always the case of


the regulation struggles to keep up. Thanks, Rory.


To Switzerland now because exactly a year ago, the financial world


was buzzing with a new word: Francogeddon.


The Swiss National Bank shocked markets by abandoning its peg


to the euro - causing the Swiss franc to soar in value.


The policy, in place for three years, was designed to keep


the franc low, and Swiss exports competitive.


The move caught traders by surprise and even bankrupted one brokerage -


but how much long term damage has it done to the Swiss economy?


It was called Francogeddon, market mayhem one year ago. The Euro peg


abandoned, the Swiss franc sword. Swiss exports and Swiss


more expensive overnight. Disaster was predicted for Switzerland's


economy but what did happen? Fortunately, the situation has been


challenging but not dramatic. Many empathises could deal with the


situation, without having some severe difficulties -- many


enterprises could deal with the situation. How has Switzerland's


economy avoided disaster? costs and increasing productivity is


one way. Many workers here are now putting in a 45 hour week instead of


the usual 40 at no extra pay. And more painful measures could follow.


50% of all Swiss exports are sold in the euro zone. One measures firm


take is to relocate their production because based on a currency rate of


1.08 per euro now, the Swiss franc is still overvalued. Surveys show


one in five Swiss manufacturers want to outsource, but that is not an


option for the hard-pressed tourist industry. It hopes Switzerland's


questionably stunning landscapes will push price back into the


background. We have to concentrate on those experiences which are


unique to our country. I think we have to sell Switzerland through the


emotions, three something which you cannot buy. No Francogeddon yet


then, but huge challenges ahead. Swiss businesses feeling the cold,


and everyone agrees 2016 will not beat you seek, even for this usually


resilient economy. It looks pretty.


Jeremy Stretch is back to look at the papers.


This treat from a regular James Newman, he says I don't trust my


car's parking sensor. I trust driverless cars but not the people


in them. Hermione says Mike are drives itself.


I understand you have your own experience of this situation? I have


a self parking mechanism on my car and the first time I used it it


drove the car into the curb and damaged the wheels so I think there


are teething problems! Did you have are teething problems! Did you have


any recourse? Was based on the fact that the car in front was part badly


so it was lining itself up with that. It is always the small print.


On the subject of small print, a teenager, a 19-year-old UK teenager


who is studying at Stanford University in the US, has come up


with a robot lawyer to help bypass the massive fees. I


interesting that he is studying in the US rather than the UK so he has


perhaps decided the US situation is better. He has designed an algorithm


to look at parking issues and provided an opportunity to come back


with advice to deal with parking fines which are very easy to pick up


as we all know. It is an attempt to revolutionise the sector and provide


an opportunity for recourse. I think we should name him, Joshua Browder,


studying computer science in the US. That is a name we should remember.


Studying at Stamford, try harder, Josh, that is what


There will be more business news throughout the day on the BBC Live


webpage and on World Business Report.


It is a cold, frosty start across the country that lovely and bright


with some sunshine around.


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