Ray Epps, the man caught multiple times telling January 6th protesters to escalate their demonstration and go “into the Capitol” on January 6th, 2021, will spend no time in prison for his role that day.

Instead, Epps has been given 12 months probation, $500 in restitution, and 100 hours of community service.

🚨 #BREAKING: Ray Epps, the man who took credit for “orchestrating” January 6th by encouraging people to raid the Capitol, has been sentenced to 12 MONTHS PROBATION.

He will receive ZERO jail time.

Meanwhile, there are truly peaceful protestors ROTTING in prison simply for… pic.twitter.com/3cd0RdrrD3

— Nick Sortor (@nicksortor) January 9, 2024

BREAKING: Ray Epps, the only January 6 protester who actually told people to go into the Capitol, has been officially sentenced to one year probation, $500 restitution, and 100 hours community service.

While many J6 protesters are rotting in jail for non-violent crimes, Epps… pic.twitter.com/qPWwktAPbu

— Greg Price (@greg_price11) January 9, 2024

Ray Epps, the man who directed people to go into the Capitol and privately claimed credit for orchestrating the Capitol breach, gets one year probation. Nothing to see here! https://t.co/mlUr0mtur2

— Thomas Massie (@RepThomasMassie) January 9, 2024

According to Epps’ sentencing memorandum, Epps should have served 6 months in jail.

“Although Epps engaged in felonious conduct during the riot on January 6, his case includes a variety of distinctive and compelling mitigating factors, which led the government to exercise its prosecutorial discretion and offer Epps a pre-indictment misdemeanor plea resolution,” wrote DOJ senior trial counsel Michael Gordon in the sentencing memo. 

Epps’ attorney, Edward Ungvarsky, argued that Epps should serve no jail time, and that “right-wing political dramaturges” resulted in Epps being “attacked, defamed, and vilified.”

According to the sentencing memorandum, Gordon asserted that Epps “has been the target of a false and widespread conspiracy theory that he was an undercover government agent on January 6.”

Other mitigating factors included Epps calling the FBI on Jan. 8, 2021 to explain his actions two days prior. Further, Gordon listed his cooperation with both the FBI and the now-defunct House Jan. 6 Select Committee (which lost video evidence of their witness interviews), and what the DOJ describes as his efforts to de-escalate tensions between protesters and the police.

“Epps only acted in furtherance of his own misguided belief in the ‘lie’ that the 2020 presidential election had been ‘stolen,'” reads the memorandum. “However, due to the outrage directed at Epps as a result of that false conspiracy theory, he has been forced to sell his business, move to a different state, and live reclusively.“

As the Epoch Times reports further, Epps’ photo was removed from the FBI’s Jan. 6 most-wanted page without explanation.

On Sept. 18, 2023, prosecutors charged Mr. Epps with one count of disorderly or disruptive conduct in a restricted building or grounds, a petty misdemeanor with a maximum six-month jail term.

On Sept. 21, 2023, Mr. Epps pleaded guilty to the charge. In mere days, the high-profile case was dispatched, a stark contrast to many Jan. 6 prosecutions that have stretched across nearly three years.

Sentencing in the case had been scheduled for Dec. 20, 2023, but Chief U.S. District Judge James Boasberg granted a continuance until 10 a.m. Jan. 9 at the federal courthouse in Washington D.C.

In his sentencing memo, Mr. Ungvarsky said Mr. Epps’ intention all along was for peaceful protests at the Capitol on Jan. 6.

“Ray Epps understands the serious mistake he made when he joined others to attend the Stop the Steal Rally on January 6, 2021, and to encourage others to walk to the U.S. Capitol to continue to protest,” Mr. Ungvarsky wrote.

“At all times, Mr. Epps’ intent was that the protest would be peaceful and would be done peacefully,” Mr. Ungvarsky said. “Those were his words on January 5, and that was his intent on January 6.”

Late on Jan. 2, Mr. Ungvarsky filed a motion asking to shield under court seal the identifying information of persons mentioned in Mr. Epps’ forthcoming sentencing exhibits.

“For safety concerns, counsel has redacted the names and identifying information of persons who authored or are discussed in exhibits of sentencing letters and memoranda,” Mr. Ungvarsky wrote. “Documented prior harassment and threats provide a specific basis for this request in this case.”

America’s first commercial moon lander, and the first to launch from the Lower 48 in five decades, suffered a “critical” propellant loss from a fuel leak hours after United Launch Alliance’s new Vulcan booster blasted the spacecraft into space early Monday morning.

“An ongoing propellant leak is causing the spacecraft’s Attitude Control System (ACS) thrusters to operate well beyond their expected service life cycles to keep the lander from an uncontrollable tumble,” Pittsburgh-based company Astrobotic Technology wrote in a statement about its Peregrine robotic lunar lander. 

Astrobotic continued: “If the thrusters can continue to operate, we believe the spacecraft could continue in a stable sun-pointing state for approximately 40 more hours, based on current fuel consumption.”

“At this time, the goal is to get Peregrine as close to lunar distance as we can before it loses the ability to maintain its sun-pointing position and subsequently loses power,” Astrobotic added.

Update #6 for Peregrine Mission One: pic.twitter.com/lXh9kcubXs

— Astrobotic (@astrobotic) January 9, 2024

After launching from Florida at 0218 ET Monday aboard the Vulcan booster, the Peregrine lander separated from the rocket about an hour later and “entered a safe operational state.” Hours after separation, the propulsion system issue occurred. 

The first U.S. commercial robotic launch to the Moon successfully lifted off Jan. 8 on the first flight of @ULALaunch’s #VulcanRocket. @Astrobotic’s Peregrine Mission 1 lander is expected to reach the lunar surface in February: https://t.co/csvx73ZqgP pic.twitter.com/N7Mxiqi8GC

— NASA (@NASA) January 8, 2024

The failure of the propulsion system means the moon landing, initially scheduled for February 23, is no longer possible. 

Astrobotic posted an image of Peregrine in space on social media platform X. 

(1/4) We’ve received the first image from Peregrine in space! The camera utilized is mounted atop a payload deck and shows Multi-Layer Insulation (MLI) in the foreground. pic.twitter.com/dUuu0Idz8K

— Astrobotic (@astrobotic) January 8, 2024

X users pointed out that parts of the spacecraft’s outer skeleton appear ‘crinkled.’ 

Did someone take a baseball bat to that a thing?

— DJ 🇺🇸 || 👊🏿🏳️‍🌈🇺🇦 🇮🇱|| #exGOP (@XDXJ) January 8, 2024

Crinkled metal on spacecraft, oh my!! Houston, we have a problem.

— Ole Danielson (@oledanielson) January 8, 2024

Astrobotic developed Peregrine under a $108 million contract with NASA. 

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Former President Donald Trump warned there would be “big trouble” if the U.S. Supreme Court issued an unfavorable ruling in cases where he is denied access to states’ ballots.

The nation’s high court on Jan. 5 agreed to hear a case that stemmed from the Colorado Supreme Court’s earlier ruling that barred President Trump from appearing on the ballot in the state. The judges wrote that he should be blocked due to their interpretation of the Constitution’s 14th Amendment’s Section 3, which prohibits candidates who engaged in an “insurrection or rebellion” from running for office.

During a rally on Jan. 5, the former president told a rally in Iowa that he hopes “we get fair treatment because if we don’t, our country’s in big, big trouble. Does everybody understand what I’m saying?”

In their appeal to the high court, his lawyers argued that Colorado’s voters have been disenfranchised under the state Supreme Court’s ruling in December.

“The Colorado Supreme Court decision would unconstitutionally disenfranchise millions of voters in Colorado and likely be used as a template to disenfranchise tens of millions of voters nationwide,” the lawyers wrote in their appeal.

Aside from Colorado, Maine Secretary of State Shenna Bellows unilaterally ruled to block the former president from the ballot, prompting an appeal to the Supreme Court. And like in Colorado, Ms. Bellows argued that he should be barred from appearing on primary and general election ballots because of the 14th Amendment’s clause.

The appeal to the Supreme Court came one day after the president’s legal team filed an appeal against the ruling from Ms. Bellows that Trump was ineligible to appear on that state’s ballot over his role in the Capitol breach. Both the Colorado Supreme Court and the Maine secretary of state’s rulings are on hold until the appeals play out.

Attorney’s Prediction

Late last week, the former president’s attorney and spokeswoman, Alina Habba, said she believes the Supreme Court will “step up” to reject the ballot decisions because they are “pro-law” and “pro-fairness.”

“I think it should be a slam dunk in the Supreme Court. I have faith in them,” Ms. Habba told Fox News’ Sean Hannity. “You know, people like Kavanaugh, who the president fought for, who the president went through how to get into place, he’ll step up.”

The Trump appeals to the U.S. Supreme Court also follows one from Colorado’s Republican Party. Other legal observers expect the high court will take the case because it concerns unsettled constitutional issues that go to the heart of how the country is governed. At the same time, the 14th Amendment provision has been used so sparingly in American history that the U.S. Supreme Court has never ruled on it.

Some conservatives have warned that if President Trump is removed, leftist groups will routinely use Section 3 against opponents in unexpected ways.

Also, during his Iowa rally, President Trump warned Democrats are trying to sow public discord about the U.S. Supreme Court because he had appointed three of the high court’s justices.

“They’re saying, ‘Oh, Trump owns the Supreme Court; he owns it. He owns it. If they make a decision for him, it will be terrible. It’ll ruin their reputations,’” President Trump said. “‘He owns the Supreme Court. He put on three judges. He owns the Supreme Court. If they rule in his favor, it will be horrible for them. And we’ll protest at their houses.’”

President Trump has not been charged with or convicted of carrying out an insurrection, although Democrat officials have frequently invoked the term since the breach of the U.S. Capitol on Jan. 6, 2021.

The issue of whether President Trump can be on the ballot is not the only matter related to the former president or Jan. 6 that has reached the high court. The justices last month declined to fast-track a request from special counsel Jack Smith to take up and rule on the former president’s claims that he is immune from prosecution. However, the issue could be back before the court soon, depending on the ruling of a Washington-based appeals court.

Mr. Smith has charged the former president in Florida and Washington in two separate cases, one involving whether he allegedly mishandled classified documents and the other about his activity after the 2020 election. President Trump also faces state charges in New York and Georgia. He has pleaded not guilty to all the charges across the four cases.

The Associated Press contributed to this report.

Despite the continued ‘steadfast’ rhetoric on ‘not backing down’ to Russian forces which has persisted from Zelensky’s office, the consensus among realists has been that Ukraine’s only way out at this point is through negotiated settlement. On a public level at least, the White House has continued to back Kiev in rejecting negotiations as the bloodshed continues. 

Yet there has for many months been the suspicion that even the Biden administration sees the proverbial writing on the wall, and is quietly pressing for President Zelensky to engage in negotiations. Kiev has presented its own peace plan to allies, but which Moscow has already long rejected as an impossibility, given it would require that Russian troops simply march back home, handing Crimea and the four annexed territories back to Ukraine. For example, here is Point 6 of Zelensky’s ten point peace plan:

To cease the hostilities, Russia must withdraw all its troops and armed formations from the territory of Ukraine, plain and simple. Ukraine’s full control over its state border, recognized internationally, needs to be restored.

Without this, no long-lasting peace can be achieved. Each day Russian soldiers remain on Ukrainian land, Ukrainians have to fight and die to protect their homes and to shield the world from the long-lasting consequences of this aggression. 

Obviously, President Putin won’t negotiate for the demise or ‘loss’ of his whole two-year long operation, especially when by all accounts Russia has the upper-hand, also as Kiev struggles for lack of manpower and steady ammo supplies. Tragically, there have likely been hundreds of thousands of lives lost, and possibly just as many severely wounded from the war.

On Tuesday Defense Minister Sergei Shoigu announced the Kremlin assessment that Ukraine has lost over 200,000  of its troops in 2023. “Groupings of Russian troops are methodically reducing the combat potential of the Ukrainian armed forces. Over the past year, enemy losses exceeded 215,000 servicepeople and 28,000 weapons systems. We maintain the strategic initiative along the entire line of combat contact,” Shoigu told a meeting of military leaders. Of course, there’s no way to verify this figure, and both sides have kept military losses a tightly guarded secret. Zelensky too has recently said the other side has suffered “heavy losses”.

At this point, even Ukraine’s most ardent supporters acknowledge a hopelessly stalemated situation along the front lines. The war is now spiraling into senseless cross-border aerial attacks where civilians on either side bear the brunt of suffering.

It appears Washington is ramping up diplomatic efforts toward kick-starting a negotiation process on a track that’s favorable to Ukraine. But persuading Moscow will be a different story, also as it has the backing or at least tacit support (or ‘neutral’ silence from) large economies like China and India. Bloomberg on Tuesday has reported on a secret meeting recently held in Saudi Arabia:

A secret meeting took place last month between Ukraine, its Group of Seven allies and a small group of Global South countries to try to rally support for Kyiv’s conditions for holding peace talks with Russia, according to people familiar with the matter.

The previously undisclosed Dec. 16 meeting of national security advisers was held in Saudi Arabia and followed larger, publicized gatherings aimed at countering Moscow’s attempts to divide and paint Ukraine and its allies as unwilling to negotiate an end to the war.

It remains that many of these Global South countries have been key in helping Russia navigate and endure past the US-EU sanctions storm targeting Moscow.

Bloomberg says that the secrecy aspect was to make other countries feel more comfortable to speak and act freely without having to worry about potential blowback or repercussions from Moscow. Of course, Russia wasn’t invited, and crucially China didn’t go. Among major participants included senior representatives from Turkey, Indian, and Saudi Arabia – yet notably absent were Brazil (which apparently submitted a written statement), China, and the UAE, according to sources cited in the report.

“There was no major progress at the latest meeting, held in Riyadh, according to people familiar with the session who asked for anonymity to discuss matters that aren’t public,” Bloomberg writes. “Ukraine and its G-7 allies continued to resist calls from the Global South nations to engage directly with Russia, they said.”

China is seen as key to getting Russia to make significant compromise, yet both Xi and Putin know that Russian military success in Ukraine means Kiev has no cards to play. Ultimately, without China being on board with such initiatives to woo Global South countries to take a firmer anti-Russian line, there’s little that will come out of it.

Still, it seems each side is at least inching toward future talks. “Liu Jianchao, head of the International Department of the Communist Party of China Central Committee, told an event in the US that Russia has showed enthusiasm to have peace talks with Ukraine, when Chinese officials talked with them,” according to the latest from Bloomberg.

Via Greg Hunter’s USAWatchdog.com,

Renowned geopolitical and financial cycle expert Charles Nenner has been warning of a huge war cycle that happens every 120 years or so. 

With Tiawan/China and Russia/Ukraine and Israel and the Middle East conflicts, we are clearly in this huge war cycle.  Nenner also says we are simultaneously entering a huge financial down cycle that could easily turn into the Greatest Depression–ever.  Neither of these cycles can be stopped. Nenner explains:

“The problem is everywhere.  You may remember we said 10 years ago that the biggest problem for the United States is going to be internal.  There is a huge problem.  Nobody knows what to do anymore, and people are afraid to speak up…

History says if you are not allowed to say certain things, then you stop thinking certain things.  This is what is written in the book ‘1984.’ …

So, this is the end of what is going on in the United States.  I think America is lost, but it is not a surprise.  The Dutch ruled for 250 years, and then the Spanish, Portuguese came, and then the English came.  Every big society ends, more or less, after 250 years, and now it’s the United States…

People are talking about new systems.  They think Marxism is good, but it did not work because the people who did it before made mistakes. 

If you don’t wake up, this is what you are going to get, and that is a communist Marxist situation.”

So, is there nothing that can be done to save America?  Nenner says,

“The cycle is turning down, and people ask is there anything you can do?  You cannot do anything about it.  The question is what can you do?  You have summer and then you have winter…

if you know winter comes after summer, you can buy a coat.  I have predicted all these war situations, and out of the blue they are here.  There is nothing you can do about it.”

Where does Donald Trump fit in?  Nenner says,

“Trump is going to be the winter coat.  I think he can make it less bad.  If this continues the way it is, then we are going downhill very fast.  I think Trump is coming back.”

Nenner says interest rates are not going down until summer.  He likes gold longer term, but it has not bottomed yet. 

The stock market is in for at least a 30% fall in the next few months, and the country will fall into a deep recession after the halfway point in 2024. 

Yes, it could turn into the greatest depression ever because there is astronomical debt.  Nenner thinks the wild card is a multifront war that has already started. 

Be warned as Nenner thinks it can spin out of control at any time. 

War gets much worse before it gets better. 

Nenner also is warning about a huge wave of terrorism coming to America with the wide-open southern border.

There is much more in the 45-minute interview.

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with renowned cycle analyst and financial expert Charles Nenner for 1.06.24.

*  *  *

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There is free information and analysis on CharlesNenner.com.

OpenAI’s drama last year caught the attention of government regulators on both sides of the Atlantic. More specially, Microsoft’s $13 billion investment in the Sam Altman-led chatbot company is under intense scrutiny by European regulators. 

The European Commission said on Tuesday it’s mulling over whether the partnership could be reviewed under EU merger regulations:

“We are inviting businesses and experts to tell us about any competition issues that they may perceive in these industries, whilst also closely monitoring AI partnerships to ensure they do not unduly distort market dynamics,” Executive Vice-President and Commissioner for Competition Margrethe Vestager wrote in a statement. 

If Microsoft and OpenAI are found to be in breach of the bloc’s merger rules, Vestager could launch a full-scale investigation.  

The EU’s action follows a similar move by the United Kingdom’s Competition and Markets Authority (CMA) in early December. The CMA said it’s weighing “recent developments,” referring to the Altman-Microsoft drama. 

“The CMA will review whether the partnership has resulted in an acquisition of control — that is, where it results in one party having material influence, de facto control or more than 50% of the voting rights over another entity,” it said. 

In the US, the Federal Trade Commission recently said it would examine if Microsoft’s investment in OpenAI violates US antitrust laws. 

Early last year, FTC Chair Lina Khan penned an op-ed in The New York Times that explained: 

“The expanding adoption of AI risks further locking in the market dominance of large incumbent technology firms.”

Back to the EU Commission, which gives Microsoft and OpenAI until March 11 to comment on how its AI impacts market competition. 

Authored by Tatiana Darie, Bloomberg,

It’s valid to forecast that stocks will rally yet again in 2024. It’s also a deeply vulnerable view.

When formulating our S&P 500 outlook for 2024, the fraught debate among the Markets Live team has likely been echoed in trading rooms across the industry. A lot of the conflict ultimately boils down to the approach of a trader versus an investor. Sure, stocks can keep gaining from these already lofty levels. However, history suggests that the risk-reward to being bullish is poor at these valuations at this point in the cycle.

An optimistic stance may be the most logical base case, and that’s why Wall Street is confident. A good number of strategists are calling for the S&P 500 to top 5,000 this year, or even reach 6,000 by 2025. The MLIV team overall leans even more bullish than the Street median forecast of 4,850. And my colleagues observe that the bearish view hinges on “something” breaking, which is undermined by the principle of Occam’s Razor.

The issue is that there are quite a few “somethings” out there and the negative consequences will be large if any of them come to pass.

The clash in views is essentially because there’s a great probability of gaining a little versus the minority chance of losing an awful lot.

So I will lay out the bull case in earnest — and then also the key reasons why it could all go terribly wrong.

Here goes:

The Federal Reserve will pull off an elusive soft landing as powerful disinflationary impulses cause workers to reduce wage demands even though the labor market holds up just fine overall.

This is all aided by aggressive pre-emptive interest rate cuts, perfectly calibrated to restrain inflation even while easing economic stress.

Consumers, powered by positive real incomes, never fully erode their excess savings and hence equity earnings will return to double-digit growth after dropping an estimated 3% last year.

Buoyant liquidity conditions help further, and Fed Chair Jay Powell’s December pivot has validated an extraordinary loosening of financial conditions, which should be a boon to the economy.

Inflation has cooled significantly and core CPI has dropped below 3% on a six-month annualized basis.

The incredible fiscal tailwind won’t dissipate in an election year and there’s the upside risk that artificial intelligence is transformative for US productivity.

There’s a tremendous amount of cash on the sidelines.

After a year where tech drove most of the gains, there are plenty of other pockets of the market for investors to jump on in 2024 and round out the rally. For example, small caps and the equal-weighted counterpart of the S&P 500 are trading at steep discounts relative to the main benchmark.

It’s a compelling picture.

However, hear me out:

For a start, widespread economic complacency just isn’t justified once you consider the gloomy precedents on recession indicators.

The economy will eventually stall – if not slump hard – once higher borrowing costs bite households and corporates, which have largely been shielded from this tightening cycle by refinancing during the pandemic.

In fact, Bloomberg Economics argues that the US may already be in a recession as cracks in the labor market are widening despite strong payrolls numbers.

And history is very clear that economic contractions tend to hurt the stock market very badly indeed.

If a slowdown is averted, the Fed will keep rates elevated as the disinflation impulse fades amid robust economic activity.

The lagged effects of monetary policy will eventually matter for stocks – it’s not unprecedented for equities to start cratering more than a year after rates peak.

And the risk is greatly exacerbated by valuations.

If the Fed were to cut rates now, or if the S&P 500 holds on to current levels when the central bank starts to move, it would be the second-most expensive stock market at the policy turn in almost 60 years. Small caps and the equal-weight benchmark may seem compelling alternatives at first glance but, outside of the Magnificent Seven, corporate America is mired in a profits contraction.

Meanwhile, default rates have been rising and refinancing pressures for vulnerable borrowers are building. Did someone say credit crunch?

To protect cash flows, companies will cut investments and turn to layoffs, sending the unemployment rate higher.

This is at a time when there’s clear evidence that pandemic savings are draining.

Increasingly more Americans are failing on important payments, like auto and credit card debt.

Consumer resilience has been mistaken for consumer invincibility and the belated realization of that misapprehension will coincide with a severe reduction in profits.

Hands up that I’ve been incorrectly bearish for a long time.

Like many, I underestimated the resilience of the US economy, while the AI-triggered euphoria was an outcome few anticipated. But history validates the idea that poor fundamentals will eventually matter.

Now you have both sides of the argument, I’ll leave you to decide which stance has greater merit – but if you’ve finished reading this piece marginally more nervous about US stocks than when you started, I’ll take that as a win.

US stock futures dropped amid a risk-off tone as Monday’s tech-fueled bounce fizzled and investors turned their attention to this week’s inflation print as well as the start of corporate earnings season. As of 7:40am ET, S&P futures were down 0.3%, and Nasdaq futures dropped 0.5% following European bourses lower. The tech rally in US stocks on Monday came as Nvidia surged after announcing new AI products for personal computers. The Nasdaq 100 jumped the most since November on Monday and the S&P 500 traded near a record high while Japan’s Nikkei 225 index closed up 1.2% — a level unseen since March 1990. Bonds are lower pushing the 10Y yield as high as 4.05% as oil bounced back from the largest drop in about a month on signs of a weaker physical market, including a deep pricing cut by OPEC+ leader Saudi Arabia; Brent traded near session highs around $78. The USD was flat while the yen reversed earlier gains. Bitcoin dipped after surging past $47,000 on bets that the US is set to approve the first spot ETF.

In premarket trading, Juniper Networks jumped 23% after the Wall Street Journal reported the company was in advanced talks to be sold to Hewlett Packard Enterprise. Tinder-parent Match Group gained 14% after the Wall Street Journal reported that Elliott Investment Management had built a stake of about $1 billion in the dating-app company. Here are some other notable premarket movers:

• CrowdStrike rises 2% after being upgraded at Morgan Stanley, which sees a better demand outlook for the software firm’s services.
• Eversource Energy slips 3% after saying it’s in advanced talks to unload its share in three offshore wind projects that it planned to build with Orsted A/S.
• GoDaddy advances 1.5% after Piper upgrades the web-platform firm, saying a re-acceleration in growth with 30%+ normalized Ebitda margin in 2024 could reverse a five-year trend of multiple compression.
• MaxCyte climbs 5% after posting preliminary 4Q revenue that’s higher than the year-ago period.
• Microchip Technology slips 3% after the chipmaker said its preliminary 3Q revenue is down sequentially about 22%, compared to its previous guidance of 15% to 20%.
• Netflix drops 2% as Citi cuts its rating on the streaming-video company to neutral, citing “lofty” expectations.
• PayPal dips 2% after the payments firm was cut to equal-weight by Morgan Stanley, which highlighted “slower-than-expected progress.”

The 10-year Treasury yield held above 4%, a level Bill Gross called “overvalued” even after it surged 17 basis points last week as robust labor-market data spurred traders to pare bets on rapid Fed easing. Long-dated Gilts were among the biggest decliners in Europe after the government sold 2.25 billion pounds ($2.9 billion) of 20-year debt. And speaking of bonds, BlackRock issued a warning about the dangers of debt-fueled government spending in an election year as government bonds slumped under supply from countries including the UK, Italy and Belgium. This echoed what we published last night in “Citadel Trader: “Fed Wants To Avoid Pain AT ALL COSTS Ahead Of Elections; This Will Lead To Epic Fiscal Irresponsibility.”

“The new year is already putting the 2023 Santa rally to the test,” said Evelyne Gomez-Liechti, a strategist at Mizuho International, citing pressures including unexpected US labor strength, an overextended rally and heavy supply of new government and corporate debt.  

In other news, Investigators probing the fuselage blowout on a Boeing 737 Max 9 plane on Jan. 5 determined that the door plug moved upward before ejecting. In other news, a Chinese agency claims it has devised a way to identify users who send messages via Apple’s AirDrop feature as part of China’s broader efforts to root out undesirable content.

With CPI due Thursday, earning kicking off later this week and JPM’s influential Healthcare conference, this is the calm ahead of the proverbial storm. The major macro data points are CPI and PPI on Thurs and Fri, and prints may be market-moving as the bond market tries to determine the timing of the first rate cut among March, May, and June. Goldman claims the first cut will be in March while JPM maintains a call for cuts kicking off in June.

European stocks and US futures are on the back foot as oil prices bounce back from Monday’s steep fall. The Stoxx 600 is down 0.2% with miners and tech stocks among the worst-performing stocks, while energy and health care advance. Shares and bonds of Spanish blood plasma firm Grifols SA tumbled after short seller Gotham City Research LLC published a report criticizing the company’s financial reporting.

• Nexans rises as much as 6.1% after Berenberg starts coverage of the French cable manufacturer with a buy rating, saying the stock sits at an interesting entry point and the long-term outlook remains positive.
• DWS rises as much as 2.8% after Goldman Sachs upgraded the German asset management firm to buy, citing continued momentum and undervaluation.
• Pirelli gains as much as 3.5%, rising to the highest level in almost two years, after Italian investors in the Italian tiremaker agreed to boost their holding to more than 20%.
• Grifols plummets as much as 43%, a record drop since listing in 2006, after short seller Gotham City Research published a negative report on the blood plasma firm.
• Infineon and STMicro lead a drop in European chipmakers on Tuesday after US peer Microchip said its preliminary revenue for the quarter ending December fell by 22% q/q, worse than its guidance.
• Hays sinks as much as 19%, pulling peers PageGroup and Randstad down with it, after the company’s net fees fell sharply. The firm warns of challenging market conditions going forward.
• U-blox falls as much as 8% after Baader downgraded the Swiss wireless communications technologies provider to add from buy, saying it has lower short-term expectations.
• United Internet falls as much as 2.4% as UBS downgrades the stock, noting that shares are close to fair value after a rapid re-rating.
• Tecan slumps as much as 5.6% after the Swiss lab equipment maker released FY23 sales figures below expectations due to lower Covid-related sales and lower pass-through of material costs.
• Meyer Burger drops as much as 12% after Baader downgraded the Swiss solar-equipment manufacturer to reduce from buy, citing lack of visibility on the resilience bonus in Germany.
• Games Workshop shares drop as much as 3.5% after analysts had mixed reactions to the company’s first-half results, despite reported growth in both revenue and profits.
• SCA falls as much as 2.4% after Handelsbanken cut its short-term recommendation for the Swedish forestry and paper firm to hold from buy ahead of its 4Q report, due on Jan. 26.

Earlier in the session, stock gains across Asia faded after tech shares surrendered opening strength. The Hang Seng Tech index turned negative after wiping out 1.6% rally, and the Kospi erases advance following a Samsung earnings miss. Japanese markets remain in the green following Monday’s holiday. Chinese shares eked out modest gains amid steadily growing expectations for a near-term policy easing.

In FX, the Bloomberg Dollar Spot Index firmed while the Treasury 10-year yield rose as much as two basis points to 4.05%. Bloomberg Economics expects core US CPI Thursday to show disinflation continues to be very slow in supercore categories, while PPI data on Friday to reflect renewed supply-chain bottlenecks. The yen tops G-10 leaderboard with a 0.4% gain while Aussie reverses early uptick. Onshore yuan is marginally softer.

Treasuries slightly lower across the curve with losses led by long-end, steepening 2s10s, 5s30s spreads by 1.5bp and 1bp on the day. US yields cheaper by up to 2bp across long-end of the curve with 10-year sector trading around 4.05%. Bunds and gilts trade cheaper by 4.5bp and 4bp in the sector, as European supply skewed toward longer-end sales weighs. Swap spreads remain near top of Monday’s range, following surge wider on the back of weekend comments from Fed Dallas President Lorie Logan. JGB futures turned  positive after BOJ kept long-end bond buying amount unchanged. Core European rates underperform, weighing on Treasuries as market participants brace for the first of this week’s auctions. Meanwhile, Treasury auctions resume at 1pm with $52b 3-year notes, followed by $37b 10- and $21b 30-year sales Wednesday and Thursday. The When Issued 3-year is at ~4.125% is 36.5bp richer than December’s stop-out, which tailed the WI by 1.7bp, and below auction stops since May

In commodities WTI crude oil futures higher by more than 2% on the day, paring a portion of Monday’s 4.1% drop and adding to cheapening pressure on Treasury yields; gold rises ~$5 to $2,033.

Bitcoin dipped after surging past $47,000 on bets that the US is poised to approve the launch of the nation’s first exchange-traded funds investing directly in the world’s largest digital asset.

To the day ahead now, and data releases include German industrial production for November and the Euro Area unemployment rate for November, whilst in the US there’s the NFIB’s small business optimism index for December, and the trade balance for November. From central banks, we’ll hear from Fed Vice Chair for Supervision Barr, and the ECB’s Villeroy.

Market Snapshot

• S&P 500 futures down 0.3% to 4,787.25
• MXAP up 0.2% to 165.53
• MXAPJ little changed at 511.29
• Nikkei up 1.2% to 33,763.18
• Topix up 0.8% to 2,413.09
• Hang Seng Index down 0.2% to 16,190.02
• Shanghai Composite up 0.2% to 2,893.25
• Sensex up 0.1% to 71,459.92
• Australia S&P/ASX 200 up 0.9% to 7,520.52
• Kospi down 0.3% to 2,561.24
• STOXX Europe 600 down 0.1% to 477.48
• German 10Y yield little changed at 2.18%
• Euro little changed at $1.0943
• Brent Futures up 1.6% to $77.36/bbl
• Gold spot up 0.4% to $2,036.05
• U.S. Dollar Index up 0.10% to 102.31

Top Overnight News

• Japan’s Tokyo CPI for December cooled more than anticipated on a headline basis (+2.4% vs. +2.7% in Nov and vs. the Street’s +2.5% forecast) while core was inline (+3.5% ex-food/energy vs. +3.6% in Nov and vs. the Street’s +3.5% forecast). BBG   
• Saudi Arabia raised $12 billion in its biggest borrowing abroad since 2017. It’s been a record start to the year for emerging markets as issuers seek to lock in lower funding costs. BBG
• Microsoft’s $13 billion investment into OpenAI faces the potential of a full-blown EU merger probe, after a mutiny at the ChatGPT creator laid bare deep ties between the two companies. BBG
• Grifols tumbled after short seller Gotham City said the Spanish blood plasma firm artificially reduced leverage by consolidating earnings of units it doesn’t control and overstated profit. Grifols denied the allegations. BBG
• Israel is shifting away from major ground/air operations toward a more targeted phase of the war against Hamas and hopes to have the transition complete by the end of January. NYT
• Investors are warning governments around the world over “unmoored” levels of public debt, saying excessive pre-election borrowing promises risk sparking a bond market backlash. Government debt issuance in the US and the UK is expected to soar to the highest level on record in the coming year, with the exception of the early stages of the Covid pandemic. FT
• Congress on Monday began an uphill push to pass a new bipartisan spending agreement into law in time to avoid a partial government shutdown next week, with Speaker Mike Johnson encountering stiff resistance from his far-right flank to the deal he struck with Democrats. NYT
• Boeing slipped again premarket after United found loose bolts in some of its 737 Max 9 jetliners. Alaska Air said loose hardware was visible on some planes during inspections. The NTSB said it might widen its Max 9 probe beyond the model on which the accident occurred. BBG
• HPE is in advanced talks to buy JNPR for about $13 billion, in a bid to better position the nearly 100-year-old technology company in the era of artificial intelligence. WSJ
• The combination of low current valuations and a healthy economic outlook indicates that the Russell 2000 small-cap index should return roughly 9% in the next 6 months and 15% in the next 12 months. This compares with Goldman’s forecast that the large-cap S&P 500 will rise by 7% to 5100 at the end of 2024 (total return of 9% including dividends). In recent decades, nearly two thirds of the variation in Russell 2000 12-month returns has been explained by valuations at the start of each period and real US economic growth during the period. If Goldman’s 2024 US GDP growth forecast of 2% is realized, these historical relationships suggest small-caps should generate solid returns in coming months. GIR

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded higher as the region took impetus from the gains on Wall Street where tech outperformed as risk appetite was fuelled by a lower yield environment and a drop in oil prices. ASX 200 climbed above 7,500 with the index led by tech and consumer-related sectors owing to softer yields. Nikkei 225 printed its highest since March 1990 and rallied to just shy of 34,000 where it hit resistance. KOSPI was clouded after disappointing preliminary quarterly earnings from Samsung Electronics. Hang Seng and Shanghai Comp initially benefitted amid the broad constructive mood and recent PBoC hints at tools to boost credit including RRR although the upside was reversed after the PBoC drained liquidity and with Chinese oil majors pressured by the recent fall in oil prices.

Top Asian News

• Taiwan’s ruling party presidential candidate Lai said Taiwan will build up defence deterrence and economic security, while he will maintain the status quo and current President Tsai’s policies.
• Japanese police are investigating a suspicious object which was discovered in front of the main gate of the national diet building, via NTV
• ByteDance is further scaling back its ambitions in the gaming industry and is in talks to sell game titles to several prospective buyers, according to WSJ
• China’s CPCA (auto industry) says China sold 2.37mln passenger vehicles in December, +8.3% Y/Y. 2023 retail passenger vehicle sales +5.6% Y/Y
• China’s CPCA says China’s auto exports set to overtake Japan as the largest in both volume and value terms in 2023
• “China’s economic growth in 2024 is forecast to continue to gain pace, with the estimated annual GDP growth rate to reach 5.3%, said a report by the Center for Forecasting Science under Chinese Academy of Sciences on Tuesday”, according to Global Times
• Chinese Commerce Ministry says China is looking to further suspend tariff cuts on products including agriculture, fishery, machinery, auto parts and textiles from Taiwan

European bourses, Stoxx600 (-0.3%), initially began the session on a firmer footing echoing APAC optimism before succumbing to selling pressure as sentiment dwindled. IBEX 35 (-1.7%) underperforms, dragged down by Grifols (-42%) following a Gotham City Research report which said “we believe shares are uninvestable, likely zero”; Grifols to hold a board meeting on Tuesday. European sectors hold a negative tilt; Energy holds at the top of the pile as it attempts to nurse the prior day’s hefty losses whilst Tech lags after outperforming yesterday. Recruitment names have been hit by a profit warning from London-listed Hays (-12%).

Top European News

• Hapag Lloyd (HLAG GY) says it deems the situation in the Red Sea as “still dangerous” and will continue to sail around the Cape of Good Hope; will take next decision as of January 15th
• ECB’s Centeno says the ECB will not have to wait until May to make policy decisions, via econostream.
• Barclays said UK December consumer spending rose 2.3% Y/Y (prev. 2.9%).
• French PM Borne resigned and will act as caretaker until a new government is named. It was later reported that a new French PM is to be named on Tuesday morning, according to AFP.

FX

• DXY is directionless and contained within a 102.10-41 range, with the 21DMA residing just below the trough at 102.07.
• EUR continues to oscillate around the 1.0950 mark in light of a lack of fresh catalysts; session low at 1.0934.
• Yen is the best G10 performer, looking to make up ground lost last week, but still some way from its 28th December base at 140.24.
• Australian Building Approvals and Retail Sales initially supported the AUD, though strength faded alongside weakness in Iron prices.
• PBoC set USD/CNY mid-point at 7.1010 vs exp. 7.1502 (prev. 7.1006).

Fixed Income

• USTs are within yesterday’s bounds but pressured with concession ahead of a 3yr auction which is likely factoring; yield curve incrementally flatter thus far.
• Bunds are pressured but remain above the prior sessions respective 135.15 and 135.06 troughs. Overall, action appears to be influenced by concession as corporate supply remains in focus.
• Gilts were initially the relative laggard, given looming supply, though after the strong Gilt auction (record investor demand) the benchmark jumped back above 100.00, but shy of the initial 100.26 session high.
• Netherlands sells EUR 2.08bln vs. Exp. EUR 2.0-2.5bln 2.5% 2030 DSL; average yield 2.334% vs. prev. 2.950%
• UK sells GBP 2.25bln 4.75% 2043: b/c 3.62x, average yield 4.391%, 0.2bps tail.
• Italy to raise EUR 10bln from new 7yr BTP (demand was over EUR 73bln), and EUR 5bln from a tap of a 30yr, according to leads (demand was over UR 91bln).
• Saudi Arabia completes first issuance of USD international bonds worth USD 12bln, according to a statement.

Commodities

• Crude futures are largely retracing some of yesterday’s hefty losses coupled with added tailwinds from geopolitics – with recent reports suggesting three Hezbollah members were killed in an Israeli strike.
• Spot gold is trading within recent ranges and trimming some of the prior day’s losses despite a relatively rangebound Dollar and quiet newsflow; Base metals show a mixed picture with the breadth of the market narrow.
• Motiva’s Port Arthur, Texas refinery (636k BPD) large crude unit and coker were shut on Monday.
• Hezbollah is reportedly attempting to target to target Israel’s offshore gas infrastructure “Karish” with drones, Saudi Al-Hadath reports citing sources via journalist Oseran; Aurora Intel clarifies a FPSO was targeted and not a gas rig.

Geopolitics

• Israeli officials said they will tell US Secretary of State Blinken that Palestinians will not return to northern Gaza unless Hamas releases more hostages, according to Al Jazeera.
• US Secretary of State Blinken said he found leaders in the Middle East determined to prevent a wider conflict but added they all recognised hurdles and nobody thinks anything will happen overnight.
• Three Hezbollah members were reportedly killed in a targeted strike on a vehicle in Ghandouriyeh in southern Lebanon, according to Reuters sources.
• Hezbollah says it attacked the Northern Command base with drones in retaliation for the killing of Arouri and the commander of the Radwan force, according to Walla News’ Elster.

US Event Calendar

• 06:00: Dec. SMALL BUSINESS OPTIMISM 91.9, est. 91.0, prior 90.6
• 08:30: Nov. Trade Balance, est. -$64.9b, prior -$64.3b

Central Bank speakers

• 12:00: Fed’s Barr Speaks on Bank Regulation

DB’s Jim Reid concludes the overnight wrap

Morning from what promises to be a nice day here in Helsinki which has warmed up significantly to around -2C as I type. Markets also warmed up considerable yesterday to start a new week with the S&P 500 (+1.41%) posting its biggest advance since mid-November and taking it back to ‘only’ -0.13% YTD. Yields on 10yr Treasuries (-1.6bps) gave up most of their initial rally but still saw their biggest decline of 2024 so far. The equity move was buoyed by renewed tech optimism but otherwise it was a fairly quiet day, with sentiment supported by falling commodity prices along with some decent data releases, which collectively added to hopes that a soft landing could still be achieved.

The good data news came primarily from the New York Fed’s latest Survey of Consumer Expectations. This showed another decline in inflation expectations across several horizons, and 1yr expectations were down to 3.0%, which is the lowest since January 2021. In addition, 3yr expectations were down to 2.6%, which was the lowest since June 2020, and 5yr expectations came down to 2.5%, which is the lowest since March 2023. So plenty of good news from the Fed’s perspective ahead of US CPI on Thursday.

At the same time, yesterday brought some significant declines for oil and gas prices, with Brent crude down -3.35% to $76.12/bbl, whilst WTI fell by -4.12% to $70.77/bbl. So another positive tailwind on the inflation side, which followed Saudi Arabia’s decision to cut their oil prices for buyers in all regions. That decline was echoed among several other commodities too, with European natural gas (-7.89%) falling back, whilst soybean (-0.82%) prices fell to their lowest in over two years.

This backdrop proved supportive for equities, especially in the US, as the S&P 500 (+1.41%) had its best day since mid-November, while Europe’s STOXX 600 (+0.38%) posted a more modest gain. T ech stocks led the advance, and the NASDAQ (+2.20%) and the FANG+ Index (+2.75%) saw even larger gains. The tech rally was led by chipmaker Nvidia, which gained +6.43% after announcing new products aimed at making better use of AI on personal computers. The main exception from the equity rally were those companies affected by last week’s incident on an Alaska Airlines flight, when part of the fuselage came off the plane. The result was that Boeing (-8.03%) was the worst performer in the entire S&P 500, and there was also a big slump for Spirit AeroSystems (-11.13%), a supplier for Boeing. Boeing’s decline led to a notable underperformance for the industrial Dow Jones index of just 30 companies (+0.58%).

With inflation expectations falling back, it was a favourable day for bond investors, though we did see a substantial reversal of the bond rally in the latter half of the US session. This reversal was helped by comments from Atlanta Fed President Bostic (an FOMC voter this year) shortly after the European close who, while noting that inflation had come down by more than he expected, reiterated that he expected rate cuts to come only in Q3. Near the end of the session we also heard from Fed Governor Bowman, one of the most hawkish FOMC voices, who said that policy appeared sufficiently restrictive to hit the 2% inflation target but that “we are not yet” at the point of rate cuts becoming appropriate, and noted “the risk that the recent easing in financial conditions” could stall the progress on inflation.

On the back of this, fed funds futures slightly downgraded the prospects of imminent cuts. The chances of a Fed cut by March were down to 63% at the close, their lowest since the December FOMC, from 73% the day before (and an intra-day high of 76% shortly after the NY Fed’s consumer survey). Treasuries still rallied modestly on the day – with the 2yr yield down -0.5bps to 4.38%, whilst the 10yr yield fell -1.6bps to 4.03% – but these closing levels were 7-8bps above their intra-day lows. Overnight in Asia, yields on the 10yr USTs (-2.1bps) are slightly lower again, trading at 4.01% as we go to print.

Looking back at Europe, there was some data optimism as the European Commission’s survey offered a fresh signal that activity was bottoming out in December, with economic sentiment up for a 3rd consecutive month to 96.4. That takes it up to its highest level since May, whilst the final consumer confidence reading was revised up a tenth from the flash print to -15.0, which is the highest since February 2022. We did get some more mixed data out of Germany, with factory orders seeing a smaller than anticipated rebound in November (+0.3% vs +1.1% expected), but this subdued signal was offset by more encouraging export data for the same month (+3.7% vs +0.5% expected).

Otherwise in Europe, there was also a rally for sovereign bonds. That came even as the ECB’s Vujcic said that they were “not talking about cutting interest rates now, and probably won’t before summer”. So some fresh pushback on the idea of imminent rate cuts coming from one of the more hawkish ECB voices. Nevertheless, sovereign bond yields still fell on the day, with those on 10yr bunds (-2.1bps), OATs (-3.0bps) and BTPs (-3.0bps) all moving lower.

Asian equity markets are mostly advancing this morning after the tech led rally on Wall Street overnight. In terms of specific moves, the Nikkei (+1.1%) has reopened firmly after a public holiday while the Hang Seng (+0.16%), and the Shanghai Composite (+0.05%) are losing some momentum after a decent open on fresh hopes of PBOC easing (more below). Elsewhere, the KOSPI (-0.25%) is also reversing after index heavyweight Samsung Electronics slashed its earnings forecast for 4Q23. In overnight trading, US futures are seeing small losses with those on the S&P 500 (-0.10%) and NASDAQ 100 (-0.12%) slightly lower

On the topic of China policy, yesterday we heard from Zou Lan, the head of the PBOC’s monetary policy department, that the PBOC may use its monetary policy tools to provide support for the growth in credit. So a potential hint at more easing coming before too long.

Elsewhere, early morning data showed that Tokyo’s inflation rate slowed more than expected to +2.4% y/y in December (v/s +2.5% expected) from an upwardly revised gain of +2.7% in the previous month. Meanwhile, core inflation came in at +2.1% y/y in December, slowing for the second-straight month in line with expectations and down from November’s +2.3% increase, thus taking some pressure off the BoJ to rush into exiting its ultra-loose monetary policy. Other data showed that household spending fell -2.9% y/y in November (-2.5% in October), declining for a ninth consecutive months and worse than the market forecast for a -2.3% decline. The Japanese yen (+0.45%) is gaining for the second straight day and trading at 143.58 versus the dollar.

To the day ahead now, and data releases include German industrial production for November and the Euro Area unemployment rate for November, whilst in the US there’s the NFIB’s small business optimism index for December, and the trade balance for November. From central banks, we’ll hear from Fed Vice Chair for Supervision Barr, and the ECB’s Villeroy.

Fulton County District Attorney Fani Willis hired her secret lover to serve as special prosecutor in the Georgia racketeering case against Donald Trump and 18 other defendants, according to a Monday filing on behalf of Mike Roman, a defendant who led election day operations for the 2020 Trump campaign: 

“[T]he district attorney and the special prosecutor have been engaged in an improper, clandestine personal relationship during the pendency of this case, which has resulted in the special prosecutor, and, in turn, the district attorney, profiting significantly from this prosecution at the expense of the taxpayers.”

The prosecutor is Nathan Wade, a private attorney in the midst of a divorce who “has little to no experience trying felony cases, much less complex RICO actions,” according to the 127-page filing which seeks to have the charges against Roman dropped and both Willis and Wade disqualified from further participation in the case.  

According to the complaint, Wade has raked in at least $653,000 and upwards of $1 million for handling the high-profile case. By virtue of their relationship, that pile of taxpayer money benefits Willis, as they’ve traveled together to Florida, the Caribbean and Napa Valley, California, adding that Wade has also bought tickets for the pair to travel on Norwegian and Royal Caribbean cruise ships. 

In addition to his $250 hourly rate, Wade has also billed Fulton County for thousands of dollars in air travel and hotel stays, according to invoices attached to the filing. He categorized them as interview and research trips.  

The filing also alleges that Willis contracted with Wade contract without proper approval, as such a move requires a vote by the Fulton County Board of Commissioners. Roman’s lawyer, Ashleigh Merchant tells the Wall Street Journal her search of board meeting minutes found no indication his appointment was ever discussed, much less voted upon.

The timing of the transaction was rich: Wade filed for divorce the very day after his first contract with Willis began. The divorce is still pending, and Wade managed to have the proceedings sealed — for now. Merchant is asking for them to be unsealed.

Monday’s filing sums up the shadiness of the dealings nicely: 

On the day before Wade filed for divorce, [Willis] entered into an agreement to pay Wade far above what any other prosecutor in her office was being paid, and she hid this agreement from Fulton County, despite Wade being the single biggest expenditure in her office for professional service contractors for both 2022 and 2023.   

…

Wade is being paid hundreds of thousands of dollars to prosecute this case on her behalf. In turn, Wade is taking Willis on, and paying for vacations across the world with money he is being paid by the Fulton County taxpayers and authorized solely by Willis.

“It’s a bad look and it’s potentially criminal—again, assuming everything is true,” former Georgia prosecutor Chris Timmons tells the Journal. However, while Willis’s procurement of Wade’s services may have been illegal, Timmons doubts it would affect the indictment. 

Willis has yet to comment on the accusations, and a spokesman says a response will come “via a filing with the court.” The filing contains plenty of documentation about Wade’s hiring and billings, but no evidence of the romantic relationship, beyond citing “sources close” to the couple.   

Four defendants have pleaded guilty in the Fulton County case that alleges a conspiracy to interfere with the 2020 presidential election. Roman faces seven charges, including conspiracy to commit forgery, conspiracy to file false documents and racketeering. 

And just when you thought it all couldn’t get any shadier, there’s also this gem in the heap of exhibits attached to the filing…

It literally says “conf with White House Counsel” in May of 2022

This is Fulton DA Fani Willis lead prosecutor in the Trump case billing taxpayers $2000 to talk to Joe Biden’s White House about prosecuting Biden’s political opponent pic.twitter.com/oCGjx7j3bA

— Phil Holloway ✈️ (@PhilHollowayEsq) January 9, 2024

Authored by EurasiaNet’s David O’Byrne via OilPrice.com,

• Turkmenistan, eyeing to export its vast natural gas reserves, considers Iran as a strategic but complex Plan B for transit to Western markets.

• Current Iran-based gas swap arrangements with Azerbaijan and potential new deals with Turkey indicate a growing reliance on Iran as a transit country.

• The feasibility of these plans is clouded by concerns over Western sanctions, Iran’s reliability as a gas supplier, and geopolitical implications for the region.

For Turkmenistan and its ambitions to export its vast natural gas reserves westward, Iran is a tantalizing but also potentially cheap, and quick, Plan B.

Relying on a partner like Tehran, however, creates potentially profound complications.

The possibility of falling prey to Western sanctions cannot be discounted. And Iran has at times proven an unreliable supplier. 

Turkmenistan is already sending gas to Iran, albeit as part of a swap arrangement with Azerbaijan. Two billion cubic meters of gas are piped into remote northeastern areas of Iran that are in need of the fuel. And Iran then sends an equivalent amount to Azerbaijan. The result, if only in purely notional terms, is that Azerbaijan is a buyer of Turkmen gas.

Tehran has been expanding pipeline capacity with a view of increasing annual Azerbaijan-Turkmenistan swap volumes to 5.5 billion cubic meters.

The apparent success of this model has inspired more of the same. 

In November, Turkmen and Iraqi officials met in Ashgabat to discuss the prospect of a similar swap, of up to 9 billion cubic meters annually over a period of five years. Again, Iran would act as the go-between.

The dream when contemplating sending gas to Europe has been to build the so-called trans-Caspian pipeline, or TCP, which would bridge Turkmenistan to Azerbaijan. This solution would cost upwards of $20 billion.

And there are the geopolitical headwinds coming from Russia to consider. Moscow has made little secret of its opposition to seeing a TCP completed in any form, despite having signed off on the 2018 Convention on the Legal Status of the Caspian Sea, which would allow the construction of a sub-sea gas pipeline from Turkmenistan to Azerbaijan. 

Russia undermined its own positions in this area, however, by embarking on its catastrophic full-blown invasion of Ukraine in early 2022. One key result has been that Europe has radically slashed the amount of gas it buys from Gazprom.

This state of affairs has benefited Azerbaijan. In July 2022, Azerbaijan reached a landmark agreement with the European Union that should see it doubling its exports to Europe to 20 billion cubic meters a year by 2027.

The most recent TCP alternative being explored by Turkmenistan involves Turkey playing a more active role than being just a transit route.

On December 6, conversations took place in Ashgabat at the Intergovernmental Turkmen-Turkish Commission on Economic Cooperation around the possibility of transiting Turkmen gas to Turkey via Iran.

Details are sparse for now. Turkmenistan’s Foreign Ministry, which chaired that exchange, remarked only on the “promise of the project” and that more detailed negotiations at governmental and company levels would start “in the near future.” 

Existing infrastructure suggests what might be possible. 

There are two pipelines able to carry gas from Turkmenistan to Iran: the 8 billion cubic meter per year capacity Korpeje-Kurtkuyu pipeline; and the 12.5 billion cubic meter capacity Dauletabad-Sarakhs-Khangiran pipeline. Iran and Turkey, meanwhile, are linked by the 14 billion cubic meter Iran-Turkey pipeline.

Turkey already imports 9.6 billion cubic meters a year of Iranian gas via its pipeline link, suggesting up to 4.4 billion cubic meters could be available for export to Turkey – or possibly more if Iran could expand the capacity of its pipeline to the Turkish border.

Turkish officials have declined to be drawn on any of the details – either on how talks with Turkmenistan are proceeding, or on what progress there has been in the parallel negotiations to renew a gas supply with Iran that is set to expire in the coming two years.

The latter talks are rumored to be deadlocked. While Tehran is said to be seeking a straight-down-the-line renewal, it is believed Ankara wants a substantial price reduction and concrete guarantees that Tehran will not arbitrarily suspend supplies as it did in January 2022. That unexpected interruption in deliveries triggered gas and power cuts across Turkey.

Iran is in a difficult position. Years of international sanctions have starved its domestic gas sector of investment. When exceptionally cold winter weather descends, it struggles to meet both high domestic demand and export commitments.

Allowing Turkey access to Turkmen gas via its pipeline grid could alleviate Iran’s troubles while ensuring Ankara’s supply security.

Turkmenistan’s gas could also play a role in Turkey’s ambitions to host a gas trading hub.

Currently Ankara’s plans appear to be limited to imports of Liquified Natural Gas, or LNG, by ship and gas from Russia.

This has sparked concerns that Ankara could use the hub as cover to re-export Russian gas to European markets that have halted Russian gas imports since Russia’s invasion of Ukraine. 

Whatever spare gas Turkey is one day able to import could later be re-exported to Europe via Turkey’s pipeline connections with Greece and Bulgaria, both of which also have spare capacity.  

The fact that any of this is contingent on Iran, though, is a problem.

It is unclear whether Iran would even be open to allowing Turkey to import Turkmen gas through its pipelines. It is not certain that Ankara may not merely be attempting to use possible Turkmen gas imports as a bargaining tool in ongoing negotiations with Tehran.

Equally unclear is whether the transit of Turkmen gas via Iran would fall foul of the international sanctions in place against Tehran since 2018.

Azerbaijan’s gas swap deal with Turkmenistan and Iran has not been sanctioned, while Turkey’s existing gas import contract with Iran, held by Turkey’s state gas importer Botas, has always been exempt from sanctions.

That exemption may not be extended to any new deals, however. In late 2022, Ankara offered private companies the chance to import gas from Iran using the spare pipeline capacity, but quickly abandoned the move, reportedly due to fears it would breach the international sanctions regime.