We asked bloombergs middle east executive editor if the invoice will be able to move its block off its hardline stance. The 13 demands can be part of the six. The six are just vaguer. They are more general statements of principle which obviously would open the door to some negotiation to some agreement. The six are based on agreements qatar has already signed. Easier toit would be get to some sort of deal there. It is the u. S. Trying to push the conversation back to these broader principles rather than these very specific 13 demands. Anchor where does that leave the u. S. . Will they be able to achieve this . Reporter they are certainly trying. Weve had a couple of weeks where not much was happening. The sense was that things are really stuck. As you just pointed out, as yousef pointed out, it went through a hopeful phase where they did seem to be some progress between qatar and the u. S. The allies actually said that that was a positive step, but not enough yet. Going back to this list of 13 see in, this is good to a way, this concerted effort by to try. With officials and get this back on track. Yousef so the americans very much handson still in this process, trying to resolve things. The other parties still involved is the kuwaitis. They sent out there foreign minister. What is he hoping to get . Reporter that has been consistent in all of this. The kuwaitis are the mediators. The americans are going to the kuwaitis. Nd using the that is one thing every saturday degrees on, the kuwaitis are the mediators every side agrees on, the kuwaitis are the mediators. What isnt happening is that sort of different tracks or different streams are starting. It is all going via the kuwaitis. Yousef it said that saudi arabias biggest banks could remain profitable despite the economic pressures. We spoke to Renaissance Capital for more on this. Guest i think the fact that the government is tightening spending and it is expected that it is affecting the banks negatively, that has been around it isout a year now affecting the banks negatively, that has been around for about a year now. I have been underperforming. They have been undervalued. I would argue that these concerns are correct and we should be worried about them, and i think if we continue to affect profitability over the next five years, but at the end of the day, i would argue that the saudi banks have priced for that. The market has priced in a lot of this. Yousef you join a host of other Analysts Bullish on the saudi banks. In terms of those who are keen to trade on some of those ideas, i was looking at some of the capital flows to gauge interest in the saudi story. I could see from the data that there is more to it going on when it comes to the saudi story. There definitely is. If you were to trade saudi on an do . X level, what would you guest i would not trade saudis on an index level. The influx have been quite significant, even during the summer months, and where the saudi banks, consumers, and on the backs of many of the names, which was really expected. From the past few quarters, saudi hasnt really reacted to results. This quarter has been quite different. I think we are seeing a lot of foreign inflows. If you look at the official assets in thegn saudi market has increased. Driver ofother key businesses and saudi arabia is nonoil gdp. What can we expect on the credit growth front . Guest that is still something that is part of the reform story. I wouldnt see it sifting through the numbers now. What saudi has been doing over the past year and a half is shifting from an Oil Dependent economy towards a nonOil Dependent economy. That is going to take time. I dont think that is something that is going to approve going to affect the numbers anytime soon. Yousef secondquarter net income at 896 million. It clearly beat the secondquarter net income. Youre looking at some further comments are saying they are on track to reach 2018, 2019 targets. They have achieved 502 million in cost savings. Income, 3. 2t billion. The estimate was for 3. 19 billion. Very marginal beating the minette income reading the net income. They were expecting visible progress on. Cuts all caps. On cuts. We have seen a lot of Companies Reporting the results. We have eric tech, the divide aerotechhe we had a tech, the dubai exchange. Guest results have been quite good so far. The other major story is coming out of qatar. We are showing what is happening with the interbank rates. It has come down a little more. We understand from our sources that more banks are now looking at further Funding Options to overcome some of those gaps. Have you feel about the qatar story now as this continues to drag on . Guest i think there will still be a lot of pressure on qatar and the economy and banks. I would argue this is the beginning. I think we are still going to see more and more pressure on this. I think the stress is going to be quite volatile going forward. Shery we are hearing from reports that abu dhabi officials have told lenders that banks with significant qatari are unlikely to win significant mandates in the uae. Expanding through the rest of the gulf nations . What sort of impact will this have on financial Business Activity in the region mark in the region . Guest if we look at qatari banks, they are definitely softening as we mentioned. If we are looking at other banks who have qatari ownership, it is clear the stance of the saudi , whether through shareholders or qatari banks or shareholders in foreign banks, the attitude towards those banks is going to be the same. Yousef what about when it comes to the egypt story . We did have the budget deficit at a fiveyear low and more and more support of macroeconomic data. As earnings kick into high cure over there, one of the key earnings . Guest there is a lot of interest in egypt right now. I think we are going to see the currency strengthening slightly through the end of the year. I always like to be simplistic. If youre talking about a recovery story, you would look at the banks. It is a proxy for the economy in the market. Can we say the egyptian economy has now bounced back, that Investor Confidence in the country is actually justified . Guest i would say Investor Confidence is increasing every day. Bouncing back, it is still a little early. It has started to go towards bouncing back, but we are seeing positive signs so far, which is what we have been talking about and what we expected, but i wouldnt say that it has bounced back. Yousef the government is also extending costcutting efforts for food rations. With all this reform happening, isnt there a point where you say, wait, you might be doing too much too fast . Guest some people said that, but a way but i think the way the government has been all theseit in doing subsidy cuts and trying to subsidize the needy, so far it has been balanced. Ive heard a lot of voices saying inflation is too much, and maybe you need to slow down, but i think on such a reform row graham is very Reform Program it is very difficult to slow down, on this or any steps back. Up, opecs best laid plans go awry. More on the cartels struggle to get prices heading north again, next. This is bloomberg. Yousef opec left its meeting in abu dhabi. Tracy alloway was there with the details. Tracy this is a meeting by opecs technical committee. It has been getting a lot of attention which underscores concerns about compliance with that Production Cut agreement. Compliance is said to have fallen to 86 in july, the lowest since the agreement when into effect in january. In terms of what we were hearing , what was discussed at the meeting, one interesting subject was the topic of internal versus external production estimates. Iraq,e and a rock and said that opecs estimates of production were the ones at fault for any alleged failures to comply, placing the blame squarely on those external estimates. The outcome has been pretty much what you would expect. A statement from opec talks about constructive discussions. Interestingly they do names of specific actors. ,hey say it the uae, iraq kazakhstan, and malaysia all expressed support for the existing mechanism. To be honest, that is what weve seen before. After the st. Petersburg meeting, the uae expressed similar commitment to maintaining its Production Cut. Will hiredo wonder, compliance from opecs translate from opec translate into oil prices . They didnt really bugs that much. Tracy the recent price action and oil has been interesting. We are it fall despite the fact that we had some pretty valid stockpile data overnight from api. Stockpiles were said to have fallen by 7. 8 Million Barrels last week, much higher than the 2. 8 million expected by the market. Meanwhile we also have Inventory Data that will come out later today, also expected to show a fall of 2. 2 Million Barrels for last week. Once upon a time you would have expected that kind of drawdown data to move the market in a positive way. That hasnt been happening. One of the explanations i have heard for that if there is still a lot of concern in the market about whether this is just seasonal strength of that is going to run out. There is some evidence of that given recent refinery utilization numbers, running quite high. Meanwhile there are the overriding concerns about whether or not opecs strategy is actually going to have much of an effect on u. S. Shale production. I would also like to highlight the Financial Market aspect of all of this. If you look at cftc positioning for hedge funds, they havent really gone all in. You will remove earlier this year, they got burned quite a number of times. They would make big positive thats on the price of oil, only to get burned as shale production restarted and caused a slump in crude. That burning actually caused some pain for particularly prominent hedge funds. Bullish,ee people are but not going all in, which explains why oil has been pretty range bound recently. Yousef we also spoke to the founder and ceo of qatar energy. Guest think the recent fall in oil prices over the past couple of months has been largely due to libertarian to libya and algeria. That said, i think libyan production and the security situation is very volatile. One of reports about their largest being shut down by protests. It is a mark of whether this libyan recovery is really sustainable. We expect to see out of this meeting on the compliance of these nations . Guest i think this is really a monitoring meeting, and we had these before. Theres an angle on this they are trying to encourage some of the less compliant nations to join in more enthusiastically, particularly a rock to meet its iraq obligations more closely. Goingt convinced that is to be because i think all these countries have their interests. I was going to ask exactly what sticks and carrots can opec to bring to bear on noncompliant members . Guest they always lacked a reinforcement mechanism. The ultimate mechanism is that saudi arabia and particular walks away from any deal and production goes up and prices collapse and members get hurt. That is the real nuclear option. We are not anywhere close to that now. Yousef coming up on best of Bloomberg Markets middle east, south africas president survived a noconfidence vote, but his win leaves his old party in the firing line. More up next. This is bloomberg. Yousef welcome backyousef to best of Bloomberg Markets middle east. Zuma survived a noconfidence vote despite several members of his party turning against him. The party may turn up to be the biggest loser. Reporter there were celebrations right across after that decision was made and after the voting was counted and the results right out. One can certainly assume that it was closer than they had ever expected. They will realize that any people within their own ranks really are favoring the president to zuma to leave. 198 members of parliament voted no, not in favor of that motion. Lets remember that the anc has 249 members in parliament. That an interesting one over 50 members didnt vote for president zuma to stay in office. Yousef we pulled up a chart on the bloomberg here. Are clients can pull it up our clients can pull it up. Lets show you with the south african 10 year yield. All the way up to 2. 5 right now. Quite a hike up. Thisrms of the impact from point onward, are we going to return to a relative status quo until the next Decision Point for jacob zuma . Guest suggestions are that heads will roll considering there are so many of the ruling African Congress that voted in favor of the president to step down. Of course the big issue here is that he doesnt know exactly who those members are, but he does have a fair idea. There were a few members of parliament who did come out vocally saying we need to vote without conscience and do the right thing, that the best thing for south africa may be to have new leadership from within the anc in order to move the country a lot more forward. Those yields themselves are set to have a torrid time considering that the remainder of the year will see the Political Party itself try to appoint a new leader in december. From here on in, a doesnt get any easier for the anc. If anything the fractions are about to splintering get even works and get even worse. Guest the vote just showed come i think the margin of victory was very slight for jacob zuma. So we roll onto the next event, probably at the end of the year when the anc appoints a new leader. Politics is going to continue to be the driver here. I dont think the agencies are going to take any relief from zumas reappointment and success. The market will remain a negative one, i suspect. Until you get some greater clarity about the future of south africa in terms of its political outlook, i think the Market Sentiment and Investor Sentiment is going to remain relatively negative, and the yields tell the story. Probably exacerbated by dollar strength, over well. I suspect we will remain in thats twice in until the next in that situation until the next political story evolves. It seems that we are getting more and more headlines. Not only in south africa, but also venezuela and brazil. Relative to what is happening in asian emerging markets, there seems to be more negative news flow when it comes to africa and latin america. Would you say that asian emerging markets are more of a safe bet for investors when it comes to putting their money and not worrying about Political Risks . You havethink when Political Risk with north korea, that is unlikely. Moment, asia, africa, latin america, emerging markets in general are starting to see faultlines exposed. I think the markets globally have been more or less pressed to perfection recently as geoPolitical Risks are highlighting some of that. There are problems looming. Yousef next on best of Bloomberg Markets middle east, the showdown between dana gas and its creditors deepens. The look at how latest developments that affect developers and their business. This is bloomberg. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. Yousef the feud between anna gas and its is between dana gas and its a islamic shareholders takes a new step. Dana gas shook the islamic bond market in may after saying it doesnt comply with sharia law. Guest theres actually a president for this if you go back in kuwait to the crisis. They also tried to avoid this. Because interest was seen as to , all the interest that was paid you would have to refund. Judge andwent to the the prehearings, you still have to pay back the principal, but there might be a case for the interest. It is not completely unusual, but i think we can take a bit of comfort that in this particular case, the u. K. Court has said we want to year the whole thing. I think the u. K. Court probably will look at the terms of the agreement and what the intentions were of the parties. It is a bit of a long shot, but not completely a zero chance. Anchor you mentioned the u. K. Court involvement there. They said last month that danna should withdraw the court action and begun under u. K. Law, which would mean the u. K. Would also decide the sharia compliance of the bonds. Is that unusual . What can we expect there . Guest when you have an agreement, it is the agreement that bind the parties. The sharia compliant elements isnt part of the agreement, per se. At the beginning of the transaction you get your sharia opinion, all the parties agree that it is sharia compliant, and you move forward. There arent really sharia contingent clauses. I think the court should look at the terms of the agreement and probably enforce the terms of the agreement. That it is sharia compliant is not part of the agreement. Here in the uae, it might have been a potential angle. I think in the u. K. They will probably look at it in terms of the overall agreement and publication. The high court is it going to be issuing any. Guest i wouldnt think so. Tracy some people i had spoken to said they expected dana went attempt to sweep some of this controversy under the rug by maybe offering a suite and restructuring deal. Are you surprised that hasnt happened . Guest theres an ongoing negotiation going on. Both parties are looking to get an advantage. Going from the position of effectively owing a lot of money in profits, they have come up with some arguments as to why things should change or why the restructuring should occur. Again, the u. K. Court did feel that there was substantial reason to actually hear a full Court Hearing in september. They had improved their position from these negotiations and discussions. I guess we just have to see what the ultimate outcome is. Tracy at this juncture in time, after we see a company say that money, if thisit continues, does it increasingly look a oneoff . For doesnt Say Something about potential weaknesses in the overall financial industry . Guest there is an issue overall in that there is a lot of complexity in these instruments, a lot of legal structuring. The principles of sharia are not necessarily universal. Different pa