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Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

Trump, Iran, Oil, and India

Oil and Rupee – a medium‐term overhang INDIA |STRATEGY

21 September 2018

While there are substantial uncertainties on how India will be affected by the oil‐related US sanctions on Iran, the certain aspect is that sanctions come into play from 4th November 2018. These sanctions are crucial, as India imports 10‐12% of crude oil (at favourable prices) from Iran, and Indian refineries are technically configured to process Iran’s crude. While the Indian government is in the process of finding a solution to address this problem, the retaliatory higher tariff decision in response to US’ increased duties on some of the Indian imported items, has been postponed to November18, after clarity emerges on the US response on Iran sanctions. In 2013, India received a partial waiver.

We expect international and domestic oil prices to trend higher as we near the implementation of US’ sanctions on Iran. Higher oil prices, resultant additional INR weakness, along with state elections in November‐December would continue to weigh on the Indian economy and financial markets. This could dent the likely positives of festive demand. Since the rupee is now adjusted to REER and because of muted RBI/government response to INR weakness, the current rupee levels seem sustainable. Our FY19 average rupee assumption remains at 70. Macro concerns will worsen or remain weak. For FY19, we expect an additional repo rate increase of 25‐50bps, which will address inflationary concerns; fiscal deficit to slip to 3.5%; CAD estimate at 2.7%; GDP growth to trend lower from 8.2% in Q1FY19. If our assumptions are right, bond yields could rise to 8.5% vs. our earlier expectation of 8.2%.

India’s economy and financial markets have benefited from tepid oil prices and stable currency for many years. A spike in domestic inflows to equity markets, particularly after demonetization, helped a strong rally. A weakening economic scenario, along with muted domestic flows, could be an overhang for the markets in general. We maintain: IT and pharma (stock‐specific) to outperform assuming more INR weakness and that the current rupee weakness is largely discounted. Fundamentals are stronger for IT than pharma. We like TCS, Infosys, Cyient, Aurobindo Pharma, Cadila, Biocon, and Divi’s.

Impact of US’ Iran sanctions on India – Not meaningful; more impact due to higher brent While there are no clear reports from the government and various permutations are being worked out, our analysis shows no meaningful impact on Indian oil economy. The scenarios can range from partial sanction waivers (as happened in 2013) to no waivers. No waiver for India will be more of a political negative and India could follow up with higher import tariffs on US goods (retaliatory response to already announced higher US tariffs). We expect sanctions to adversely impact international crude oil prices, India will be impacted more due to this (higher domestic oil prices, inflation, fiscal, bond yields, and Rupee weakness).

Post sanction announcement, India increased crude oil imports from Iran to meet 70‐80% of FY19 targets, implying even little impact for FY19. Monthly oil imports from Iran have started to reduce from August’ 18.

Global oil supply and spare capacities are in a tight spot; Iran sanctions to add to woes Given that Iran’ production/exports (8%/26% drop in Aug over Apr) have already slipped, oil markets could become tighter once the sanctions come into play (4 November). While OPEC and non‐OPEC have ramped up production, it may not prove to be enough. OPEC spare capacities currently run below 2mb/d and other major producers such as Russia and US have limited space to cause any meaningful increase in production.

Impact of partial waivers in 2013 – INR payment and oil imports from other countries When the sanctions were imposed in 2013, India (along with six countries) was partially exempted from the economic sanctions after agreeing to reducing oil imports from Iran. Payments were made in EUR and INR in the ratio of 55:45. Once EUR payments were halted, the Indian government used UCO Bank for financial settlement of exports and imports. Oil imports from Iraq, Saudi Arabia, UAE, and Kuwait increased.

Anjali Verma (+ 9122 6667 9969) [email protected] Raag Haria (+ 91 22 6667 9943) [email protected]


INDIA STRATEGY UPDATE

In this report, we have looked at: (1) Historical US sanctions on Iran and its impact on India (2) Current US sanctions on Iran (3) Scenario analysis: How it could all pan out (4) Global oil market situation (5) Indian economic impact from Iran oil sanctions

On 8thMay 2018, the US announced pulling out of the JCPOA (2015), also known as Iran deal,and followed it up with two rounds of sanctions with wind‐down periods of 90 days (deadline: 6th August 2018) and 180 days (deadline: 4th November 2018). The first round of sanctions imposed from 6th August targeted Iran’s: (1) Ability to purchase or acquire USD banknotes by the government. (2) Ability to trade in gold or precious metals. (3) Direct or indirect sale, supply, or transfer to or from Iran of:

a. Graphite. b. Raw or semi‐finished metals such as aluminium and steel. c. Coal. d. Software for integrating industrial processes.

(4) Ability to purchase or sale of Iranian Rials (IRR), or the maintenance of significant funds or accounts outside the territory of Iran denominated in IRR.

(5) Purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt.

(6) Iran’s automotive sector – it is the 12th largest automobile producer. More adverse impact on EU companies as they havesupply exposure to Iran.

The second round of sanctions imposed from 4th November will impact Iran’s (1) Energy sector – petroleum‐related transactions with Iran’s national oil

companies or purchase of petroleum/petchem products. (2) Ports and shipping industry. (3) Transactions with Iran’s central bank or designated financial institutions. (4) Provision of underwriting services, insurance, or reinsurance.



What happened in 2012? Sanctions were imposed in July 2012, lifted in 2015 Iran came under the purview of sanctions post 2005 when the UN’s IAEA declared Iran ‘Non‐compliant’ with its nuclear safeguard obligations. Following this, the UNSC, the US, and the EU, imposed a barrage of sanctions on Iran, targeting the country’s institutions and individuals. However, until 2012, sanctions were not related to oil. • November 2011: The US, UK, and Canada announced bilateral sanctions on Iran.

Additionally, US expanded sanctions to companies that aid Iran’s oil and petrochemical industries.

• January 2012: (sanctions imposed):The US imposed sanctions on Iran's central bank (the main clearing‐house) for its oil exports. EU,on the other hand, announced an oil embargo on Iran.

• June 2012: The US banned global banks from oil‐related financial transactions with Iran, however, seven countries (India, South Korea, Malaysia, South Africa, Sri Lanka, Taiwan, and Turkey) were exempted from the economic sanctions in return for reducing Iranian oil imports.

• July 2012: EU ban of Iranian oil exports takes effect. • October 2012: EU countries announce further sanctions against Iran over its

nuclear program, focusing on banks, trade, and crucial gas exports. • November 2013 (JCPOA signed): Iran and the P5 + 1, signed an interim

agreement known as the Joint Comprehensive Plan of Action (JCPOA) that provided some sanctions relief and access to US$4.2bn in previously frozen assets in exchange for limiting uranium enrichment and permitting international inspectors to access sensitive sites. Under JCPOA, Iran’s oil exports were capped at 1.1 mb/d, less than half its 2011 export level.

• January 2014: Iran began implementing the JCPOA deal on its nuclear program (limiting uranium enrichment). Iran had neutralised half of its higher‐enriched uranium stockpile by April 2014.

• January 2016 (sanctions fully lifted): IAEA announced Iran ‘compliant’ and confirmed Iran had taken steps outlined under the JCPOA allowing the UN imposed sanctions to be lifted immediately. This was followed by the EU and US lifting their sanctions imposed on the country.

India‐Iran payments for oil imports (a brief timeline) 1. India used Deutsche bank initially (paid in EUR) but this stopped after the

imposition of sanctions and Deutsche Bank succumbing to pressure from the US. 2. Following this, in mid‐2012, India looked towards coming to an agreement with

Iran, where 55% of the oil import bill would be paid in EUR through the Turkish Halkbank and the remaining 45% would be paid in INR through UCO bank.

3. Payments through Halkbank were halted post February 2013 following a fresh round of sanctions.

4. India continued to make payments for the 45% through UCO Bank in INR. Here, India and Iran arranged a sort of barter system, where they continued trades through setting up of a localized bank (UCO Bank in Kolkata). Payments for imports from Iran were made in INR through this bank, and it was alsoused to pay Indian exporters exporting to Iran. A part of the 55% (earlier traded in EUR) was now being accepted in INR and the remaining was considered as debt – to be paid when the sanctions would be lifted. Nearly US$7bn was accumulated as debt till 2016 (when sanctions were lifted).

While oil sanctions were imposed in FY12, oil imports from Iran fell in FY11 and shifted to higher imports from Iraq, Saudi Arab, UAE, and Kuwait.

Sanctions largely lasted from 2006 to 2016 but major heat was seen from mid‐2012 till 2016 when Iran’s oil industry came under pressure

India was one of the seven countries that received waivers from financial sanctions, provided it significantly reduced its oil imports from Iran. India was asked to make 15‐20% reductions in its imports from Iran every six months



India’s annual country‐wise crude imports Country‐wise Imports (mn tons) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19Iraq 13.9 14.8 23.8 24.2 24.6 24.0 35.7 37.8 45.7 12.1Saudi Arabia 26.9 26.3 32.1 35.0 39.3 34.5 39.6 39.3 36.2 9.2 Iran 22.1 16.1 14.9 13.2 11.3 11.2 13.6 27.1 22.6 8.1 UAE 10.4 12.7 14.9 15.6 13.6 16.3 14.8 19.3 14.3 3.9 Venezuela 6.2 10.1 9.4 20.7 21.3 22.8 22.7 21.4 18.3 4.0 Nigeria 13.0 16.3 15.5 13.0 15.9 17.9 23.0 17.7 18.1 2.7 Mexico 1.5 1.1 2.4 4.6 4.4 5.1 5.8 7.0 8.0 3.1 Angola 8.0 8.4 8.0 8.8 7.5 6.8 7.2 5.9 7.4 1.9 Kuwait 14.6 14.4 17.8 18.7 20.1 18.8 11.2 9.2 12.9 3.2 Brazil 2.3 3.0 3.8 3.7 3.0 4.6 4.0 4.3 4.0 1.0 Source:DGCIS, Ministry of Commerce, PhillipCapital India Research Evident impact of sanctions on Iran oil production

Source: Bloomberg, PhillipCapital India Research Evident drop in India’s oil imports from Iran

Source: DGCIS, Ministry of Commerce, PhillipCapital India Research

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Crude Oil Imports from Iran (mn tons)



Movement of brent vs. Iran oil production

Movement of USD‐INR vs. Iran oil production

Source: Bloomberg, PhillipCapital India Research

Movement of Indian oil imports with IBC Movement of USD‐INR with IBC

Source: PPAC, Bloomberg, PhillipCapital India Research

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Stock price movement of OMCs (BPCL, HPCL, IOC, MRPL) in light of Iran sanctions


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2018 – Could it be worse this time? Given the strong rhetoric from the US this time around, impact of sanctions could very well be greater than the impact felt in 2012. With the Trump administration demanding a complete zero‐down and refusal of any waivers on Iranian oil imports, as opposed to a 20% reduction every six months under Obama, oil markets could lose beyond the 1.2 mb/d drop seen in 2012 and leave the markets in a much tighter spot. Even if we consider the US softening its stance, in order to obtain waivers, select few countries can be asked to reduce their imports from Iran. Based on that, oil markets could still see a drop of 0.7–1 mb/d. Who buys Iran’s oil

Source: Bloomberg. *Flow of Iranian oil exports between Jan‐18 to July‐18. Signs of sanctions impact already showing While the European Union has said that it will not to be adhering to the US‐imposed sanctions and will remain a part of the JCPOA, European companies are not ready to oppose US sanctions, and the EU blocking statute may do little to help, realistically. Signs of the sanctions are already showing with the likes of Daimler and Total SA exiting the country. Iranian oil exports to EU have started dropping considerably. Drop in Iran oil exports to the EU


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700 Iran Exports to EU (tb/d)

Sanctions imposed are severe this time. While the EU has not imposed sanctions and blocking statute, companies have steered away from doing business with Iran



• Iranian oil production fell by 240 tb/d in August (‐6% mom), while exports fell by 400 tb/d (‐18% mom).

• South Korea started cutting purchases from Iran from May. July imports from Iran were down by 44% yoy, while imports from Russia jumped 60% yoy and imports from the US increased (0.7mn tonnes compared to no imports in the previous year). South Korea suspended all imports of Iranian crude from August.

• Japan will be suspending all Iranian oil imports from October after its last payment and finish loading all crude by mid‐September.

• UAE is likely to follow their suit and halt purchases from Iran. • Together, these three countries make up nearly 20% of Iran’s exports. • Turkish imports from Iran have fallen 45% between April and July, even as the

government maintains ‘US sanctions not binding’. • China has decided not to adhere to US‐imposed sanctions and continues its

purchase of Iranian oil. Price impact of sanctions: While oil prices have risen recently, they still remain between the de‐facto range of US$70‐80/bbl given the increased production from OPEC+, global trade tensions, and weaker global economic outlook, resulting in pressure on oil demand forecasts. However, we believe the impact of Iran sanctions is only partially reflected in the current oil prices and this could change once the second rounds of sanctions come into effect, putting pressure on output and inventories. Moreover, with the advent of hurricane season, pipeline bottlenecks in the Permian Basin, Venezuela in the continued decline mode, and the emergence of unrest in Iraq and Lybia, could aid in an upswing of oil prices in the near‐term.

Where does India stand – Hoping for waivers Iran continues to be India’s third largest importer of oil. India imported 3.13mn tonnes of oil from Iran in July 2018 (nearly 19% of total imports) – valued at US$ 1.7bn. India imported nearly 10% of its total crude requirements from Iran in FY18 (22.6mn tonnes) and preliminary estimates put FY19 imports at 25mn tonnes, 12‐13% of India’s total requirements. Country‐wise monthly oil imports of India Barrels Per Day Jan‐18 Feb‐18 Mar‐18 Apr‐18 May‐18 Jun‐18 Jul‐18Iraq 1,294,489 728,343 933,492 846,457 1,048,876 748,441 919,622Saudi Arabia 879,713 653,709 693,922 616,992 576,715 820,681 902,211Iran 358,537 539,323 429,640 538,515 671,986 571,406 809,858UAE 288,966 256,990 137,633 227,652 384,991 238,290 283,280Venezuela 365,272 282,970 243,187 278,938 360,414 230,319 468,768Nigeria 299,411 419,596 434,443 222,456 164,588 197,374 537,204Mexico 224,912 224,354 91,747 166,105 189,235 325,572 38,565Angola 89,772 95,665 186,232 255,545 29,679 145,572 34,264Kuwait 148,086 321,160 403,377 215,354 195,392 293,462 95,979Brazil 61,504 98,960 ‐ 29,879 90,109 89,403 75,354U.S.A. ‐ 33,482 28,972 ‐ 54,622 116,677 99,114

Source: DGCIS, Ministry of Commerce, PhillipCapital India Research Currently, refiners in India make payments for Iranian crude in EUR using the State Bank of India and Germany‐based EIH. Following President Trump’s announcement, SBI said it would be unable to handle oil payments to Iran from 4th November 2018. For now, the Indian Oil Ministry has asked refiners to prepare for a ‘drastic or zero’ imports from Iran. The statement echo’s US’ strong narrative and more recently, the US Secretary of State’s comments after the Indo‐US 2+2 dialogue of “expecting every country’s purchase of Iranian oil to go to zero”.

Reduced pace of oil imports from Iran already evident for South Korea, Japan, UAE, EU, and Turkey

More upside likely in oil prices after the second round of Iran sanctions

Iran continues to be India’s third largest importer oil, accounting for 10‐13% of its total crude requirements

Indian Oil Ministry, for now, has asked refiners to prepare for a ‘drastic or zero’ imports from Iran



While there is no official word from the Indian government yet and there is a huge smokescreen on the situation, majority of the Indian refiners have started reducing imports from Iran and are looking at other alternatives. Indian refiners had planned imports of nearly 25mn tonnes of crude from Iran for the current fiscal year (up from 22.6mn tonnes in FY18). Due to these obligations, majority of Indian refiners front‐loaded most of their purchases and should complete purchases of an estimated 76‐77% of their total planned volumes by October. • Amongst the public‐sector refiners, major players such as HPCL and BPCL have

front‐loaded and completed their contractual obligations, but remain hesitant about purchasing more Iranian crude.

• IOC, on the other hand, has stayed with the usual pace of oil imports from Iran (an annual term contract of 9mn tonnes) until October and will wait for more clarity.

• However, CPCL, a subsidiary of IOC, has canceled its October shipments and will not sign any further contracts citing insurance coverage issues.

• MRPL is likely to halt purchases once the sanctions come into effect and has already started looking at alternatives from other gulf nations to the Americas.

• Private refiners such as Reliance and HMEL have stopped all imports from Iran. Nayara (Essar) has started cutting their purchases and officially announced stopping all purchases from 4th November.

What lies ahead: A shift to other countries While alternative payment methods and requests for waivers are being looked at, expansion of the Indian refineries and the Indian basket of crude imports over the years has given the country the ability to import oil from multiple sources and protect itself against such risks. High complexity of most Indian refineries allows them to import and process cheaper grades from various countries. Moreover, the recent reductions in Brent‐Dubai differentials along with the recent broadening of Brent‐WTI spreads could aid in opening up more options and different grades. However, giving up on Iranian imports would mean losing out on shipping discounts, insurance coverage, and extended credit period that Iran offers, which is difficult for any other country to match. Brent‐Dubai Spread Brent‐WTI spreads

Source: Bloomberg, PPAC, PhillipCapital India Research

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Impact of US’ Iran sanctions in India so far: • SBI has refused to handle payments • Front‐loading followed by reduction of oil imports from Iran

• The Ministry of Shipping has offered India’s refiners the option of using Iranian oil tankers for imports from Iran

India has an option of shifting oil imports to other countries, but benefits that it received from Iran will have to be foregone



Shifts in the flow of oil for India Increased production from the US, favourable spreads, and a halt in Chinese purchase in lieu of rising trade tensions between the economies has shifted the flows of American oil towards India. Pompeo (US secretary of state), on the sidelines of the 2+2 dialogue, stated that US can replace any shortfall arising from the loss of Iranian oil. July 2018 data already show a 228% increase of oil imports from the US compared with the previous year (while quantum remains miniscule). Moreover, IOC reportedly bought 6mb of US crude for delivery between November 2018 to January 2019 (2mb of Mars in November, 1 mb of Eagle Ford and Mars each in December, and 2 mb of LLS in January). For August, imports from Iraq have risen meaningfully to top Saudi Arabia. Favourable Brent‐Dubai differentials allowed increase in purchases from Nigeria too. Country‐wise share of oil imports (monthly, % of total)

Source: DGCIS, Ministry of Commerce, PhillipCapital India Research

India and Iran trade India’s trade with Iran (US bn)

Source: Ministry of Commerce, PhillipCapital India Research

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Others U.S.A. Mexico Venezuela U.A.E. Iran Saudi Arabia Iraq

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Global supply and spare capacity getting tighter; higher oil price risks For the oil markets, the following factors pose serious challenges– OPEC+ aiming to achieve a 100% compliance rate under the Vienna agreement, the possibility of Iran sanctions resulting in higher impact on oil supply vs. the last time around, Venezuela oil production continuing to spiral down, revived Libyan production not sustaining, lower‐than‐anticipated increase in production from Brazil, Global oil supply and spare capacities tighter than ever. OPEC spare capacity (mb/d)

Source: EIA, Bloomberg, PhillipCapital India Research *As on July 2018 Amongst OPEC, there are three countries that have readily available spare production capacity – Saudi Arabia, Kuwait, and UAE. • While Saudi Arabia has the capacity to produce 12.5mb/d (it is important to note

that it has never surpassed 10.6 mb/d, and even if), bringing it online to those levels could take 6‐9 months.

• Other OPEC states have limited space to ramp up their productions – Libya and Angola have limited leeway to move, and a large part of Iraq’s spare capacity lies under a dispute between the government and the Kurds.

• Recent unrests and protests in Iraq’s Basra could add further pressure on output. • Outside OPEC, Russian spare capacity is estimated to be between 250‐300 tb/d. OPEC+aims to achieve 100% compliance in accordance with the Vienna agreement, which saw OPEC production rising by 40.7 tb/d (mom) to 32.3 mb/d in July. 8/15 members boosted their output compared to July. Largest declines came from Libya, Iran, Saudi Arabia, and Venezuela at ‐56.7, ‐56.3, ‐52.8 and ‐47.7 tb/d, respectively. Amongst non‐OPEC nations, Russian production increased by 0.1 mb/d to 11.25 mb/d in July, while Mexico and Kazakhstan saw declines of 0.14 mb/d combined.

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Source: Bloomberg, PhillipCapital India Research Our global oil demand‐supply model, derived from IEA estimates, suggest markets could be left under supplied for the year. Supply woes could worsen due to – strong demand and pressures from decreasing production in Iran, Venezuela continuing to drop to record lows, and the re‐emergence of political unrest in Iraq and Libya. However, we expect the markets tobe better supplied for the next year with the largest increase coming from the US, followed by Saudi Arabia and Russia. Global demand‐supply balance

Source: IEA, PhillipCapital India Research

Where does this leave India? We ran a scenario analysis to gauge the impact of sanctions and where it could leave India. 2012 is not 2018, and relationships with the Trump administration are far more fragile than they were with President Obama. While India has been caught in the crosshairs, the sanctions also pose a dilemma for the government –does it please the US, with whom India has been extending ties, or does it stand by cheap oil and long‐standing allies?

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Indian demand remains strong averaging 4.8mb/d for CY18 and expected to cross 5 mb/d in CY19

Production in Iran has dropped by 8% since the announcement of sanctions in May – from 3.8 mb/d to 3.5 mb/d in August Venezuelan production dropped to 1.2 mb/d in August and could end the year at 1 mb/d



While political relations will be strained, based on our analysis of possible scenarios from the oil point‐of‐view, we do not see any adverse impact on the country’s oil import bill or CAD from the loss of Iranian crude. Any adverse impact on the import bill would be witnessed from higher oil prices from a demand‐supply deficit in the markets on the back of Iran sanctions. As mentioned above, the higher complexity of Indian refineries allows them to import and process various types of crude. Replacing Iranian oil and benefits would be difficult but quite possible. Spread movements seen recently between Brent‐Dubai and Brent‐WTI should offer more competitive prices (and country‐wise options) for the Indian refiners. . Scenario 1: Partial Iran sanctions for India – implying US approval for partial oil imports along with Iran benefits on shipping cost and oil tankers (1) If the government succeeds in its attempts to obtain a waiver from the US in

response to reduction in oil exports from Iran, we could see higher off‐take from the US, followed by Saudi Arabia and other countries.

(2) Additionally, payment restructuring in Rupee terms (like 2013): India and Iran can resurrect the ‘Barter System’ and make payments for the trade between the two countries in Rupee terms; shift to the INR‐IRR (rupee‐rial) instead of EUR/USD (positive for INR). There are media reports suggesting that a deal between the Iranian Federal Bank and Indian IDBI and UCO bank (UCO bank was used in the 2012 round of sanctions) has been put in place to facilitate the said payment mechanism. The first payment would be made in November for the cargos loaded from August through October, given that Iran offers a 60‐day credit period to Indian refiners.

Scenario 2: Complete Iran sanctions in place – Nil oil imports Given the strong words and tweets from the US President, India abides by the US sanctions and cuts imports from Iran to nil. Then, replacing the lost crude would neither be difficult nor very expensive. We have factored in production levels, spare capacity, and overall costs and see a large chunk of the lost crude being replaced by the US and Saudi Arabia, with a marginal increase from Nigeria. The import bill could see a US $2‐4mn/month increase, depending on the prices prevalent at the time of restructuring. Scenario 3: Time‐bound waiver The US may consider giving waivers for a short period to India to complete the already inked contracts (which happened before Trump’s announcement). But after that, the US expects (as per the narrative) every country to reduce imports of Iranian oil to zero. Estimates on country‐wise shift of Indian oil imports and its impact on Indian oil import bill, assuming various scenarios of Iran sanctions Scenario Saudi Iraq Kuwait UAE Nigeria Mexico USA Iran Annual Change (USD mn)

1 12% 4% 3% 2% 3% 1% 25% 50% 26‐302 32% 7% 2% 1% 8% 4% 46% 0% 35‐373 34% 11% 5% 6% 5% 3% 36% 0% 38‐404 42% 8% 2% 4% 7% 2% 35% 0% 41‐43

Source:PhillipCapital India Research. *Estimates are based on latest available OSPs, benchmark prices and

considering Iran gives a complete CIF discount. While more details will help us gauge a more detailed economic impact, as widely understood, waivers will work in our favour and no waivers will weigh adversely on oil prices, inflation, bond yields, oil refiners, forex reserves, and currency. No waivers will be looked at as a long‐term negative for political relations with the US. No waivers will also lead to higher import tariffs on US’ exports to India. While we expect loss of Iranian imports to affect Indian refiners slightly negatively (given the extended credit periods and discounted pricing offered) – negative effects will be limited, not as drastic. The impact on the overall economy will be manageable.



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