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The Morning Risk Report: Sanctions Spur Effort to Trade Without U.S. Dollars
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An Iranian offshore oil platform in the Persian Gulf. PHOTO: ALI MOHAMMEDI/BLOOMBERG NEWS
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U.S. allies, looking to buck American control over international trade, are developing alternate systems that don’t rely on U.S. currency. The catalyst was the Trump administration’s decision last year to reimpose trade sanctions on Iran after pulling out of the 2015 nuclear-weapons deal.
The U.K., Germany and France didn’t support the sanctions, which include a ban on dollar transactions with Iranian banks. So they are fine-tuning a system to enable companies to trade with Iran without using dollars.
[Continued below...]
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The new arrangements won’t change the dollar’s dominance in global trade, but they could diminish the U.S.’s power to impose its policies, including sanctions, around the globe. They also could make it easier for criminals and terrorists, who have long tried to sidestep the dollar, to move money outside of U.S. oversight.
The White House declined to comment on efforts by other countries to bypass dollar-denominated trading. An administration official said the U.S. is working to ensure oil is readily available in dollar-denominated markets from sources other than Iran, and to “bring Iran’s oil exports to zero.”
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From Risk & Compliance Journal
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Miami Executive Pleads Guilty in Venezuela Bribery Case
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An executive admitted to bribing Petróleos de Venezuela SA officials to secure and keep lucrative contracts, the Justice Department said Wednesday. The case against José Manuel González Testino, a Miami resident and dual citizen of the U.S. and Venezuela, is the latest conviction in a wide-reaching federal probe into Venezuela’s state-owned oil giant and its subsidiaries, including Houston-based refiner Citgo Petroleum Corp.
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SNC-Lavalin to Stand Trial on Bribery Charges, Judge Rules
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SNC-Lavalin Group Inc., which is at the center of a political scandal for Canada’s Liberal government, will face a trial over bribery and fraud charges, a Quebec judge ruled Wednesday. Prosecutors are expected to press for a guilty verdict against the Montreal-based engineering and construction firm that could trigger a 10-year ban on the company’s ability to bid on Canadian government contracts. There is a risk other governments across the world would honor that ban as part of their anticorruption guidelines.
Government contracts represent a significant chunk of SNC-Lavalin’s annual revenue, which in 2018 was over 10 billion Canadian dollars ($7.42 billion). Lawyers for SNC-Lavalin are expected to return to court June 7 to say whether they want to be tried by a jury or a judge.
The company’s shares, now trading at their lowest levels since 2005, are down by over one-third since February, when allegations first surfaced that the Liberal government tried to interfere in company’s criminal trial. SNC-Lavalin chief executive Neil Bruce said the court’s decision was expected and reiterated that the company intended to defend itself and seek an acquittal.
—Kim Mackrael and Paul Vieira
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The agreement covers owners of about 65,000 heavy-duty trucks sold between 2010 and 2013. PHOTO: SCOTT OLSON/GETTY IMAGES
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Navistar International Corp. agreed to pay $159 million to settle a lawsuit accusing the company of knowingly selling diesel trucks with faulty system exhaust-treatment systems. The agreement covers owners of about 65,000 heavy-duty trucks sold between 2010 and 2013. Navistar has spent more than $2 billion on warranty claims, engine retrofits and truck buybacks that nearly forced the company into bankruptcy a few years ago.
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Some businesses are pushing back against a regulatory proposal that would allow phone companies to block unwanted robocalls. Representatives for trade bodies that lobby on behalf of debt collectors, banks, health-care providers and other businesses met with Federal Communications Commission officials last week, urging them to delay a planned June 6 vote on the matter and instead seek public comment, people who attended the meeting said.
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Sara Netanyahu, the wife of Israeli Prime Minister Benjamin Netanyahu, agreed to plead guilty to a lesser charge and pay a $15,000 fine to avoid trial on charges of misusing state funds for lavish catering at the couple’s official residence, Israeli Justice Ministry officials said. Mr. Netanyahu faces his own set of corruption allegations that could lead to formal charges this fall for bribery, fraud and breach of trust.
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A visitor takes a selfie in front of the last Blockbuster Video store, located in Bend, Ore. PHOTO: RYAN BRENNECKE/THE BULLETIN/ASSOCIATED PRESS
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Fiat Chrysler Automobiles NV’s pursuit of a merger with Renault is the latest in a growing list of deals motivated by corporate executives’ abiding desire to avoid becoming the next Blockbuster. Some companies are buying up everything in sight in hopes of finding a tech wunderkind like Netflix. Others are combining forces with rivals to answer tech puzzles that have yet to be solved.
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Meanwhile, Fiat's proposal to combine with Renault is under scrutiny in France, where the government, unions and some executives at the French auto maker are questioning whether the plan undervalues Renault and puts jobs at risk.
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Banks reported an increase in sour loans led by credit-card debt and a surge in past-due commercial and industrial loans, a federal regulator said. The Federal Deposit Insurance Corp. in a quarterly report on bank earnings reported a 22.8% bump in commercial and industrial-loan balances that are 90 days or more past due.
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Federal forecasters are wrestling with the gaps in their knowledge of how tornadoes form. The science community now believes tornadoes most likely build from the ground up and not from a storm cloud down, potentially making them harder to spot via radar early in the formation process. But scientists still struggle to say with certainty when and where a tornado will form.
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Song Liuping, Huawei’s chief legal officer, attends a news conference on the company's ongoing legal action against the U.S. government. PHOTO: JASON LEE/REUTERS
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Huawei Technologies Co. asked a judge to quickly rule in its favor in its legal challenge to overturn a law that restricts its business in the U.S., saying American officials have failed to provide evidence that the Chinese tech giant poses a security threat.
Meanwhile, as the U.S. continues its campaign against Huawei, the Chinese telecom-equipment maker’s two biggest rivals are battling each other to take advantage. Nokia Corp. of Finland and Ericsson AB of Sweden said they would become the primary providers for Japanese mobile carrier SoftBank Group Corp.’s network upgrade to 5G, the latest generation of super-fast-mobile networks.
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American Airlines Boeing 737 MAX jets parked at a facility in Tulsa, Okla. PHOTO: AMERICAN AIRLINES/REUTERS
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Boeing Co. BA faces several challenges in getting its 737 MAX back on track even once regulators sign off on design changes to make the grounded jet safe, the company’s chief executive said.
Some MAX customers may seek to delay deliveries of their jets further because they have missed some or all of the busy summer flying season while other airlines may want their aircraft earlier than scheduled, Chief Executive Dennis Muilenburg said.
He acknowledged that convincing passengers to board the MAX again wouldn’t be easy. “We have work to do to earn and re-earn the trust of the flying public,” he said, calling the situation “a defining moment” for the Chicago-based company.
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Bed Bath & Beyond Wednesday said its new directors “will help the company navigate the current omnichannel retail environment.” PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS
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Bed Bath & Beyond Inc. named four new independent directors to its board and reached a settlement with activist investors who had been pressing the company to make leadership changes.
Bed Bath & Beyond, which not long ago reported its first loss and decrease in sales for a fiscal year as a publicly traded company, was being pressured by three activist investors who thought the company hadn’t adapted to new consumer behavior.
The company said it entered into an agreement with the three activists—Legion Partners, Macellum Advisors and Ancora Advisors, which in total own about 5.2% of Bed Bath and Beyond. All four of the directors the company appointed were a part of the activist group’s slate of nominees.
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Demonstrators at the Buenos Aires Obelisk participate in a one-day national strike on Wednesday. PHOTO: AGUSTIN MARCARIAN/REUTERS
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The United Auto Workers union is taking another shot at organizing Volkswagen AG’s U.S. auto factory, holding a vote in June that could determine whether it will be successful in winning representation at a foreign-owned car plant. The UAW has once before tried to unionize Volkswagen’s only U.S. factory and was defeated by a narrow margin, forcing them to wait several years to try again.
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Argentine unions held a national strike, forcing banks to shut their doors, airlines to ground flights and a soccer final to be postponed amid growing anger over President Mauricio Macri’s economic management. Argentina’s biggest trade union CGT launched the one-day strike as Mr. Macri faces a backlash months before a presidential election.
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Fortune sold 630 print pages of advertising last year, a 26% decrease from a year earlier. PHOTO: STEPHANIE AARONSON/THE WALL STREET JOURNAL
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Fortune magazine is raising its cover price, launching a digital paywall and boosting its conference business, in its first decisive steps as an independent publisher. The moves, which come about six months after Meredith Corp. sold the fabled business magazine to Thai businessman Chatchaval Jiaravanon, are intended to decrease Fortune’s reliance on print advertising, which has been in steady decline.
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NXP Semiconductors NV agreed to purchase Marvell Technology Group Ltd.’s suite of Wi-Fi and Bluetooth products, a deal the company hopes will bolster its connectivity offerings across key markets. NXP said it would pay $1.76 billion in cash for the unit, which generated about $300 million in revenue for Marvell in the year ended Feb. 2.
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