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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.