Wednesday, December 14

Rex Tillerson tapped for US Secretary of State

Pres, of Libya’s Tobruk-based parliament visits Moscow

SECRETARY OF STATE TILLERSON

Donald Trump has announced his pick for Secretary of State: Rex Tillerson, the CEO of Exxon Mobil. In one of his ubiquitous tweets, Mr Trump called Tillerson a “world class player and dealmaker”.

The Exxon boss has also received accolades from Vladimir Putin, who awarded him Russia’s Order of Friendship in 2013 for his extensive business dealings in the country. While these ties could help foster understanding between the White House and Kremlin, there’s unease in Washington. Last week, the CIA accused Russia of hacking the Democratic National Convention specifically to help Trump become president.

Some Republican leaders have called for a congressional hearing on this report. One Republican making those calls, Marco Rubio, sits on the Senate Committee on Foreign Relations, the 19-member body that must approve Tillerson’s nomination. Made up of 10 Republicans and 9 Democrats, even a single Republican defection will torpedo Trump’s choice. If his appointment passes the Committee, Tillerson must then face a Senate vote early next year, where Republicans only hold a 2-seat majority.

If appointed, this arduous process will mark the start of what will be an extremely challenging 4 years.

PRESIDENT OF LIBYAN PARLIAMENT IN MOSCOW

The President of Libya’s Tobruk-based House of Representatives, Aguila Saleh Issa, is scheduled to visit Moscow on Wednesday to continue discussions on warming relations between his faction and the Russian government.

Since the overthrow of Gaddafi in late 2011, Libya has been ruled by two rival governments: the General National Congress in Tripoli and the House of Representatives in Tobruk, which is supported by the Libyan National Army (LNA). Foreign states have become involved in the conflict, with Qatar, Turkey and Sudan backing the Tripoli-based government and the UAE, Russia and Egypt supporting the LNA.

Officially, the Kremlin says it’s pursuing a neutral approach. Indeed, previous LNA requests for Russian weapons were denied due to an international embargo on Libya. However, following two recent visits to Moscow by LNA General Khalifa Haftar, Russia agreed to an arms deal with the LNA if this embargo is removed.

Moscow may well be looking to gain a foothold in Libya, potentially giving its energy companies access to oil fields and bolstering relations with other Arab states – principally Egypt, which also supports the LNA. Wednesday’s visit may signal an uptick in Russian involvement in North Africa.

US FED SETS DECEMBER POLICY

On Wednesday, the US Federal Reserve will meet to set December’s monetary policy. Futures markets are pricing in a 100% chance of an interest rate hike, which investors expect will be increased to between 0.5-0.75%.

Despite expectations that the Fed would raise rates 5 or 6 times over 2016, interest rates were kept steady due to fears over stuttering Chinese growth, Brexit and uncertainty over the US election. Indeed, a hike today would be the first in twelve months and only the second in 10 years.

The anticipation of a hike reflects recent growth across the US economy and the lowest unemployment rate in 9 years. Future tightening of monetary policy is also likely to be necessary to ease inflationary pressured caused by Trump’s pledges to cut taxes and fund large-scale infrastructure projects.

While the Fed’s ‘dot plot’ indicates 2 more rate hikes next year, Trump will have filled 2 vacancies on the 7-member Board of Governors by mid-2017, meaning the central bank’s policy is far from settled.