The Central Bank of Egypt (CBE) changed the way it allocated dollars at a foreign exchange auction on Tuesday and sought to reassure markets by repaying foreign investors a backlog of more than $500 million. In the first major move by the bank’s new governor Tarek Amer, the CBE said it had repaid foreign portfolio investors $547.2 million, clearing the entire backlog. “This is a very strong signal about the change in management ideology,” said Senior Economist at CI Capital Hany Farahat. “There has not been an indication of where such sources of funding have come from… It might just be more aggressive use of the reserves available at the bank.” Egypt’s stocks rallied following the payment to foreign investors. The CBE held the Egyptian pound steady at 7.7301 to the dollar at its second official dollar auction under Amer on Tuesday, but caused confusion by supplying some banks with more of their foreign exchange needs than usual and others with nothing at all. Bankers said some banks had bid late in the auction due to uncertainty over whether the CBE would move the exchange rate or hold it steady and had missed out. Others said some banks who bid early were also refused. The CBE said it had changed its “internal allocation process” but gave no details on the changes or whether they would apply to future foreign exchange auctions. [Reuters, Bloomberg, DNE, 12/1/2015]

Russia may freeze Turkish Stream gas project
Russia may freeze work on the Turkish Stream gas pipeline project in retaliation against Turkey for shooting down a Russian air force jet on November 24. Russia has imposed trade sanctions on Turkey, although so far the measures have not affected the Russian energy exports to Turkey. Russian Economy Minister Alexei Ulyukayev said Tuesday that no decision had been made regarding the freezing of the gas project already beset by delays or the nuclear power station that Russia is building in Turkey. Gazprom sources also said no decision had been taken inside the company about changes to the Turkish Stream schedule, but added that they were awaiting instructions from Russian President Vladimir Putin. Ulyukayev said last month that Turkish Stream could be among the projects affected by sanctions against Turkey. However on Tuesday he said, “There have been no decisions at this stage on suspending, freezing or ending financing for these projects. We are working on the assumptions that they will be carried out as they were agreed.” Turkish President Recep Tayyip Erdogan said that Turkey will wait to impose any sanctions against Russia in order to see what further steps Russia will take. Meanwhile, Turkey’s exports declined by 10.5 percent in November, data showed on Tuesday. [Reuters, 12/1/2015]

EU releases EUR 100 million in aid to Tunisia
On Tuesday, the European Commission disbursed a loan of EUR 100 million to Tunisia on behalf of the European Union (EU). The amount is the second tranche of a EUR 300 million macro financial assistance program for Tunisia. The first tranche was released in May. European Commissioner for Economic and Financial Affairs, Taxation, and Customs Pierre Moscovici said the loan will “support the agenda of economic and social reforms that Tunisia intends to implement. This is a new and tangible sign of our solidarity with Tunisia and of our support for the ongoing political transition there.” Also on Tuesday, the EU signed an agreement to provide Tunisia with EUR 25 million to finance a support program for the EU’s Association Agreement with Tunisia and a program to support Tunisia’s cultural sector. [TAP, 12/1/2015]

Iraqi Kurdish government may cut fuel, power subsidies
The Kurdish Regional Government (KRG) said Tuesday that it is exploring ways to cut spending, particularly on subsidies to the power sector as low oil prices strain finances and cannot bills to a number of international oil companies remain unpaid. “Reform options are under consideration and some are underway to reduce the subsidies of petroleum products and electricity,” KRG Deputy Prime Minister Qubad Talabani said. “Our people have become accustomed to generous government salaries and other payments funded by oil revenues. But what was feasible at $100 [per barrel of oil] is not sustainable at $40,” he said. The KRG has also delayed target oil production as it faces increasing pressure on its resource in the fight against the Islamic State (ISIS or ISIL). The KRG authorized the release of payments to oil exporting companies for November in line with payments made in the past two months, an official close to the Minister of Natural Resources said on Monday. Still, foreign operators warned they may have to curtail their investment in the region if payment is not forthcoming. On Wednesday, Gulf Keystone Petroleum said it had received a gross payment of $15 million from the KRG for oil exports, marking the third consecutive month of regular payments. [Reuters, 12/1/2015]

Kuwaiti government requests special 6.2 billion dinar budget for weapons
The Kuwaiti government has asked parliament to approve a supplementary budget of 6.2 billion dinars ($20.4 billion) to fund weapons purchases for its military over ten years. Minister of State for Cabinet Affairs Sheikh Mohammad Abdullah al-Sabah confirmed that the government had sent a request to parliament for a special budget, but declined to specify the amount requested. The government reportedly asked that the money be drawn from the country’s general reserves. [Reuters, 12/1/2015]

Also of interest
Saudis seen rejecting calls for OPEC cuts as rivals pump more | Reuters
Egyptian steel companies sign GBP 12 million deal with UK | DNE
A new direction for the Central Bank of Egypt (analysis) | Sada
Iraqi Kurdistan minister says no link between oil sales and ISIS | Reuters
Tunisia’s parliament approves Trade Ministry’s budget | TAP
Tunisia’s real GDP up 0.1 percent in third quarter of 2015 | TAP
Tunisia’s trade balance deficit drops 13.1 percent in first ten months of 2015 | TAP