Monday, April 30, 2012

Kuwait - Gold Clause, oil, value

September, 1982
March 24, 1982
Copyright (c) 1982 by The American Society of International Law, Washington, D.C.


Leading Cases from tke ICSID, NAFTA,
Bilateral Treaties and Customary International Law

Edited by
ToJJ Weiler


This case summary was prepared in the course of research for S Ripinsky with K Williams, Damages in International Investment Law (BIICL, 2008)
Case summary
The Government of the State of Kuwait v The American Independent Oil Company
(‘Kuwait v Aminoil’)

 Kuwait Oil history
"On February 22nd, 1938, oil was discovered in the Burgan field of Kuwait. The Kuwait desert had long stood witness to several strange black patches of a rough bituminous substance; but it was not until the matter was investigated in 1935 did it become apparent that the wealth of Kuwait had remained underground for years, and was yet to be discovered..."

"...On December 23rd, 1934, Sheikh Ahmad Al-Jaber Al-Sabah signed a document that was to increase his country's wealth and international importance: the first Kuwait Oil Concession Agreement was awarded to Kuwait Oil Company Limited. Kuwait Oil Company, Ltd. was formed by the Gulf Oil Corporation (presently Chevron Oil) and the Anglo-Persian Oil Company (presently British Petroleum)."

"A new era of historic importance began on 6th December 1975 with the Nationalisation of Kuwait's oil industry. In line with all the other Arab oil-producing states, Kuwait began negotiations in the early 1970s to restore control over its own natural oil resources. By mutual agreements with the Company's two original partners, the State's shareholding in Kuwait Oil Company was progressively increased until full control was achieved. On March 5th, 1975, an agreement was signed by the State of Kuwait and the two oil companies (British Petroleum and Gulf) giving Kuwait complete control of its oil resources."

Thursday, April 26, 2012


Pietro Catte

"Tommaso Padoa-Schioppa initially developed his views on economic and monetary relations among countries mainly in the context of his thinking on European integration, but he always drew important insights from the analogies and differences between the policy issues arising in the European and in the global context. He also felt that Europe, having an important stake in global stability, could and should contribute actively to more effective global governance. Particularly in the last years, with the global financial crisis, he was increasingly emphatic in advocating a profound reform of international monetary arrangements... "


Lorenzo Bini Smaghi: Tommaso Padoa-Schioppa - economist, policy-maker, citizen in search of European unity - SIB

This review of Tommaso’s life and legacy is obviously partial, with a focus on his central bank experience, in particular at the ECB. But his contribution is much broader. He certainly believed in exchanging ideas. I heard him say once, during his short tenure at the Finance Ministry, “If people are willing to discuss issues in a rational way and in good faith, I am confident a solution can be found”. I am not sure it really applied to the specific issue we were talking about at that time, but it certainly applies to the way Europe has been constructed since the start, including over the last few months. It reflects his vision of, and hopes for, Europe in the 21st century.


Wednesday, April 25, 2012

aeaweb - Interview with Robert A. Mundell

Interview with Robert A. Mundell
Howard R. Vane and Chris Mulhearn

"...By the 1960s, with the system in trouble, some economists had begun to advocate flexible exchange rates, including such distinguished figures as Milton Friedman, James Meade, Harry Johnson, and Gottfried Haberler. The prime motivewas to give independence to monetary policy in the U.S. and Britain. After the system had broken down, we moved by default to flexible exchange rates. I’m not sure that we’ve learned the right lessons from that period. It is probably fair to say that the majority of people have bought the arguments that flexible exchange rates are a free market solution and better than any alternatives. I disagree with that. If flexible exchange rates have proved to be acceptable, it is only because countries have been able to rely upon a fairly stable dollar (and now the euro) as measuring rods for their own units of account. If there were no dominant economy in the world, flexible exchange rates would be an unmitigated disaster.
I regard flexible exchange rates as an expression of monetary nationalism. It is true that with a flexible exchange rate a country gets monetary independence. It is free to set its own inflation rate where it wants to. Thus, after the former Soviet Union countries shifted from communism to capitalism, they created their own currencies and, following the advice of the international institutions, adopted flexible exchange rates. This let them have whatever inflation their money-financed fiscal deficits produced, and without exception they had hyperinflation. Ten years after the transition, measured GDP was lower than it was under communism.
My own preference is for monetary internationalism, where we use an international monetary system for the benefit of the world economy. This equalizes the playing field between big and small, rich and poor countries. Even a small country can gain monetary stability by fixing its currency to a large stable neighbouring country. The world as we have it is biased against the small and poor countries. The United States does not feel any pressure to restore the fixed-exchange rate international monetary system because all of its massive internal trade and most of its external trade is conducted in terms of the dollar.
At the very time when the U.S. was pushing the world into flexible exchange rates, the civilized countries of Europe were moving in the opposite direction, by creating the European Monetary System (to replace the IMF) and moving toward fixed exchange rates, culminating in the apotheosis of fixed exchange rates, the   single currency called the euro. Other nations have seen what a great success this is for Europe and are imitating it in other regions of the world. The regions are trying to make up for the disaster created by the center..."


A sidenote:

Thursday, April 19, 2012

WGC - Gold and the International Monetary System in a New Era

Proceedings of the Conference
held in Paris
19th November1999

FOREWORD by Haruko Fukuda, Chief Executive Officer, WGC

INTRODUCTORY REMARKS by Robert Raymond, Chairman, CPR; former Director-General,
European Monetary Institute; former Executive Director, Banque de France
Robert Mundell, C. Lowell Harris Professor of Economics, Columbia University -
1999 Nobel Prize Laureate in Economic Science

Patrick Artus, Chief Economist, Caisse des Depôts
Geoffrey Wood, Professor of Economics, City University, London
Forrest Capie, Professor of Economics, City University, London
Christian de Boissieu, Professor of Economics, University of Paris
Harold James, Professor of History, Author of the official history of the IMF
Heiner Flassbeck, Former Deputy Finance Minister, Germany

Introduction by Antonio Casas Gonzalez, President, Central Bank of Venezuela
Leonard Tsumba, Governor, Reserve Bank of Zimbabwe
Radek Urban, Executive Director - Financial Markets, Czech National Bank
Marc Flandreau, Economist, Observatoire Français de Conjonctures Economiques
Dr D Ajit, Director, Economics, Reserve Bank of India

Senator Philippe Marini, Rapporteur Générale,Financial Commission, French Senate
Remarks by Valéry Giscard d’Estaing, former President of France

Introduction by Stewart Murray, Chief Executive, London Bullion Market Association
Tom Butler, Consultant, World Gold Council
Jessica Cross, Director, Virtual Metals
Stephen Smith, Treasurer, Placer Dome
Chris Thompson, Chairman and CEO, Gold Fields Ltd

Introduction by Jean-Pierre Patat, Executive Director, Banque de France
Edmond Alphandery, Chairman, CNP, former Minister of Economics
and Finance, France
Yukio Yoshimura, Executive Director for Japan, IMF
Jean-Pierre Landau, Director, French Banking Association
Antonio Casas Gonzalez, President, Central Bank of Venezuela
Jean-Pierre Patat, Executive Director, Banque de France

CLOSING REMARKS, by Robert Pringle, Corporate Director: Public Policy & Research,

[Mrt: Interesting read parts in read - search]


WGC - Central Bank Gold Agreements

An overview

Download: "Latest sales under the third Central Bank Gold Agreement (CBGA3)"



[A presentation, open zip, open pdf]


Wednesday, April 18, 2012

Bank-reg - The International Monetary System: Old and New Debates

How Have Multiple Reserve Currencies Functioned in the Past?
Why were the Rules-Based Adjustment Indicator and the
Substitution Account abandoned in the past?

Catherine R. Schenk
University of Glasgow
Prepared for ‘The International Monetary System: old and new debates’, sponsored by the Reinventing Bretton Woods Committee
Paris, December 2010


• Sterling operated as an important secondary reserve currency during the Bretton Woods period, comprising over half of the reserves of 35 economies as late as the 1970s. The competition between sterling, the US dollar and gold was considered destabilising, with portfolio shifts threatening exchange rate stability and international liquidity. This threat prompted collective action to support the role of both the dollar and sterling in the international monetary system while an alternative international reserve asset was debated from 1959-67.

• The effort to replace national currencies as international reserve assets was a failure. The SDR did not achieve this goal, nor did it prolong the pegged exchange rate system as it was intended to do. Instead, both gold and sterling gradually receded in importance as international reserve assets, leaving the dollar dominant by the early 1970s.

• The diversification of reserves by many countries from sterling to the US dollar did not take place naturally in response to market forces. The process was carefully managed by G10 central banks in cooperation with holders of sterling. Three Group Arrangements were signed providing overlapping lines of credit amounting to the equivalent of c. £120 billion today.

• The G10 Group Arrangements to manage the diversification of sterling reserves were agreed in 1966, 1968 and 1977 – they thus persisted despite the devaluation of sterling in 1967, the advent of a supposedly floating exchange rate regime in the early 1970s and a sharp fall in the share of global reserves denominated in sterling.

• During the end of the Bretton Woods period, from 1968-1974, currency competition was eliminated since the UK offered a US dollar value guarantee to countries holding sterling so long as they did not further diversify their reserves. Given high nominal interest rates in London, this guarantee allowed these economies to reap premium real returns on their sterling assets. The credibility of the guarantee was underpinned by the 2nd Group Arrangement from G10 central banks.

• The Group Arrangements provided the UK with a ‘safety net’ of credit from G10 central banks that could be activated if countries began to diversify their reserves away from sterling. They aimed to reduce first mover advantage for diversification and to delay a damaging run on the pound that would prompt a run on the dollar.

• The failure of the SDR to resolve apparent problems in the IMS led to consideration in the early 1970s by the C20 and IMF of a Substitution Account to promote the SDR as a replacement reserve asset for the US dollar. This plan was finally abandoned in 1981. Key obstacles were: burden of risk, use of IMF gold and governance.

• Rather than replacing the US dollar with the SDR, the US Fed and Treasury sought to improve the symmetry of the adjustment process through a rules based system to force countries in persistent surplus to adjust through currency appreciation. These plans were ultimately unsuccessful in the 1970s because of a lack of consensus over governance and implementation but they echo US proposals at the G20 Seoul Meeting in November 2010..."



In cooperation with French Treasury, Ministry of Economy, Finance and Industry along with Banque de France
December 10-11, 2010
Paris, France

This meeting was held to summarize our findings for the year and second to provide initial reflections about France’s call for a New Bretton Woods as a priority for its presidency of the G20 in 2011.

BdF - Re-Examining Central Bank Orthodoxy for Un-Orthodox Times

 Speech by Christian Noyer, Governor of Banque de France
“Re-Examining Central Bank Orthodoxy for Un-Orthodox Times”
Global Interdependence Center 2012
Paris, 26 March 2012

"...Overall, the euro area is well protected against all of these risks thanks to the robustness of its institutional framework

Price stability is unambiguously the priority objective of monetary policy

Monetary financing of governments is strictly prohibited

The Eurosystem (the ECB and National Central Banks) is extremely well capitalised, which protects its independence.

This has allowed the Eurosystem to implement nonstandard measures on a large scale without endangering its credibility..."


Wednesday, April 11, 2012

NE - JD - For a revival of Europe

"Jacques Delors recently spoke before the members of the S&D group of the European Parliament to support their call for “a revival of Europe”.
In this tribune based on his speech, he reminds the difficult situation in which the Economic and Monetary Union is. To address the situation he explains that not only a fiscal consolidation is necessary but also to restore confidence in Europe so that it provides growth and employment.
Jacques Delors looks at the international causes of the crisis in the Eurozone but also reminds the EMU’s initial concept default, which relies only on a monetary pillar, and not an economic one. He deplores also the lack of coordination of the economic policies in Europe and stresses the necessity to come back to the triptych that he favours: “competition which stimulates, cooperation which strengthens and solidarity which unites”.
Finally he thinks that it is essential to take stock: it is necessary to come back to the “Community method” and to better define the spheres of competences of the EU and its member states, in line with the formula by Tommaso Padoa-Schioppa: “Austerity for the states, growth and dynamism for the Union”..."


Wednesday, April 4, 2012

Jeffrey Frankel - A Proposal to Anchor Monetary Policy by the Price of the Export Commodity

“A Proposal to Anchor Monetary Policy by the Price of the Export Commodity”
Jeffrey Frankel
Ayako Saiki

The debate over monetary standards and exchange rate regimes for developing countries is as wide open as ever. On the one hand, the big selling points of floating exchange rates – monetary independence and accommodation of terms of trade shocks – have not lived up to their promise. On the other hand, proposals for credible institutional monetary commitments to nominal anchors have each run aground on their own peculiar shoals. Rigid pegs to the dollar, for example, are dangerous when the dollar appreciates relative to other export markets.
This study explores a proposal that countries specialized in the export of a particular commodity should peg their currency to that commodity. When the dollar price of the commodity on world markets falls, the dollar exchange rate of the local currency would fall in tandem. The country would thus reap the best of both worlds: the advantage of a nominal anchor for monetary policy, together with the automatic accommodation to terms of trade shocks that floating rates claim to deliver. The paper conducts a set of counter-factual experiments. For each of a list of countries specialized in particular mineral or agricultural commodities, what would have happened, over the last 30 years, if it had pegged its currency to that commodity, as compared to pegging to the dollar, yen, or mark, or as compared to whatever exchange rate policy it actually followed historically? We compute what would have happened under these scenarios to the price of the commodity in local terms, and we then simulate the implications for exports. Illustrative of the results is that some victims of financial difficulties in the late 1990s might have achieved a stimulus to exports precisely when it was most needed, without having to go through wrenching currency collapses, if they had been on regimes of pegging to their export commodity: South Africa to gold or platinum, Nigeria and Indonesia to oil, Chile to copper, Argentina to wheat, Colombia to coffee, and so on. Not all countries will benefit from a peg to their export commodity, and none will benefit in all time periods. Nonetheless, the results suggest that the proposal that some countries peg their currency to their principle export commodity deserves to take its place alongside pegs to major currencies and the other monetary regimes that countries consider.


Tuesday, April 3, 2012

European Unification: American Brain Child or European Dream

Muqarrab Akbar*
Ishtiaq A. Choudhry**

Berkeley Journal of Social Sciences
Vol. 1, No. 2, Feb 2011

"The European Union is a vital economic partner and political lieutenant of United States of America. Washington established links with Europeans in mid 1940s by injecting new life in war torn Europe with massive economic investment and aid. The relationships between the two continents have substantially evolved over the past four decades. Today’s partnership reflects the increasing importance and growing potential of the American and European friendship. In fact United States did not only support the economically devastated Europe but also struggled hard for European unity. This paper is intended to provide a comprehensive account and analysis of the American efforts and her contribution in European integration.
The study will elaborate whether European Union was a purely European dream or American brainchild or a result of combined efforts by transatlantic forces. Washington played pivotal role in the evolution, development and strengthening of a single European Political Complex through transatlantic co-operation. American unvarying efforts to unite post 2nd World War economically torn European will discover her role in the integration process of Europe..."


* Lecturer, Department of Political Science and International Relations, Bahaudddin Zakariya Univeristy,
** Quaid-e-Azam Professor, Centre for South Asian Studies, University of California, Berkeley, USA.