Brazil's chief prosecutor asked the Supreme Court to authorize the arrest of the presidents of the Senate and of the ruling PMDB party for allegedly trying to obstruct police investigations, newspaper O Globo said on Tuesday.

Supreme Court Justice Teori Zavascki must now decide whether to accept the request, O Globo said.

Chief prosecutor Rodrigo Janot also requested permission to arrest suspended House speaker Eduardo Cunha and former president José Sarney, who was a senator until 2014, for seeking to block the two-year-old probe into political kickbacks at state oil company Petrobras.

Senate President Renan Calheiros, PMDB acting president and Senator Romero Jucá, former president Sarney and Cunha are some of Brazil's most powerful political leaders. The four men have denied any attempt to halt the probe.

Their arrests could weaken the new administration of interim President Michel Temer, as it seeks to build support in the Senate to convict suspended President Dilma Rousseff on charges of breaking budgetary laws.

The chief prosecutor also requested Calheiros be removed from the Senate presidency, O Globo said. If he is suspended, an ally of Rousseff, Senator Jorge Viana, would become the acting president of the Senate in the middle of her impeachment trial in the upper house.

The trial is expected to conclude in mid-August as Brazil is hosting the Olympic Games in Rio de Janeiro.

Under Brazilian law, the Supreme Court must approve any judicial action taken against members of congress. Sarney was included in the request, even though he is no longer a senator, because he is mentioned in the same case as Jucá and Calheiros.

The chief prosecutor's request to the Supreme Court came following the release of recordings made by Sérgio Machado, a former senator and PMDB ally who struck a plea bargain deal with prosecutors to collaborate in the sweeping corruption probe that has plunged Brazil into political mayhem.

Machado recorded Calheiros, Juca and Sarney, separately, allegedly discussing strategies to weaken the investigation.

The recordings were leaked by newspapers in recent weeks and caused Jucá's dismissal as Planning Minister.

The Supreme Court voted unanimously last month to remove Cunha, a bitter rival of Rousseff's, as speaker of the lower house on charges of obstructing the corruption investigation.

Media representatives for Calheiros, Jucá, Sarney, Cunha and Janot did not immediately respond to requests for comment on the O Globo report. A Supreme Court spokeswoman declined to comment.

http://www.reuters.com/article/us-brazil-politics-idUSKCN0YT1H6

China's foreign exchange reserves in May fell to $3.19 trillion, their lowest since December 2011, central bank data showed on Tuesday, likely due to the effects of a stronger dollar and sporadic official intervention.

But analysts said the drop did not necessarily suggest a resurgence of speculative capital outflows.

The reserves, the world's largest, fell by $27.9 billion in May - the biggest monthly drop since February.

They rose by $7.1 billion in April and $10.3 billion in March, reflecting easing capital outflows and the dollar's drop against non-dollar currencies such as the euro and yen.

"It mostly reflects exchange rate fluctuations which we estimate lowered the dollar value of the portion of the reserves held in other currencies by $25 billion," Julian Evans-Pritchard, from Capital Economics, wrote in a note.

Economists polled by Reuters had predicted foreign exchange reserves would fall to $3.20 trillion at the end of May from $3.22 trillion at the end of April.

The People's Bank of China has intervened in foreign exchange markets to cushion the yuan against capital outflows as markets brace for a rise in U.S. interest rates this year.

China said it will give the United States a 250 billion yuan ($38 billion) investment quota for the first time to buy Chinese stocks, bonds and other assets, deepening financial ties and interdependence between the world's two largest economies. The announcement was made at the bilateral Strategic and Economic Dialogue in Beijing on Tuesday.

U.S. central bank chief Janet Yellen said in late May that the Federal Reserve should raise interest rates "in the coming months" if the U.S. economy picks up as expected and jobs continue to be generated, bolstering the case for a rate increase in June or July.

Heavy capital outflows seen last year seem to have subsided after the PBOC's heavy intervention to support the yuan in January and February, though the more recent weakening of the yuan to its lowest levels this year has put outflows back on the radar.

http://www.reuters.com/article/china-economy-forexreserves-idUSL4N18R31Q

European Union governments have hit a wall with the U.S. in attempts to shield banks and companies that do business with Iran from the threat of financial sanctions.

EU finance ministers pressed U.S. officials to provide more explicit guidance on the administration’s sanctions regime during talks in Brussels in late May, without success, two people familiar with the meeting said. Spokeswomen for the U.S. Treasury and the European Commission declined to comment on the talks.

With an estimated $24 billion in additional EU trade at stake over the next two years, Europe, Russia and the U.S. lifted economic sanctions linked to Iran’s nuclear program in January. Yet restrictions on dollar-denominated trades related to Iran were among the penalties left in place, crimping Europe’s expansion of business ties with the Islamic republic.

“Banks evidently view the risk of violating U.S. sanctions as too great,” Arnold Wallraff, head of the German government’s Office for Economic Affairs and Export Control, said in an interview. “Additional measures to limit liability would be helpful. Politicians need to address that.”

With oil and aviation deals usually financed in dollars with large banks sharing the risks, the ban on dollar transactions remains a hurdle for deals such as Iran’s agreement to buy 118 Airbus planes worth $27 billion, announced shortly after sanctions were lifted in January.

EU finance ministers and officials pressed the U.S. to give assurances to banks about the reach and application of the remaining sanctions, according to the people, who asked not to be identified because the talks were private. In its response, the U.S. declined to go beyond its publicly announced policy, the people said.

Past Penalties

The push by EU governments reflects pressure by banks after the nuclear deal with world powers sparked optimism that Iran would rejoin the global financial system. More than half of international companies interested in doing business with Iran are holding back for fear of running afoul of sanctions, according to a report by global law firm Clyde & Co.

EU-Iran trade is expected to quadruple in the next two years from an annual level of some $8 billion, according to the U.K. Foreign Office. Yet U.S. politics mean the window for expanding trade with Iran may be closing, with Republican presidential frontrunner Donald Trump signaling he’d tear up the Iran accord that he says led to U.S. “humiliation.”

Nuclear-related sanctions, including a ban on Iran’s use of the SWIFT system for international financial transactions, were lifted in January following the nuclear deal. Other international sanctions related to terrorism and ballistic-missile development remained in place, as does a U.S. ban on American commerce with Iran.


Past U.S. penalties loom large, including the record $9 billion fine that BNP Paribas SA agreed to pay in 2014 in part for dealings with Iran. France’s Societe Generale SA, Germany’s Deutsche Bank AG, Zurich-based Credit Suisse Group AG, ING Groep NV in the Netherlands and the U.K.’s Standard Chartered Plc are among the big European banks that have said they’re generally not prepared to do business in Iran yet.

‘Lack of Clarity’

France’s government, worried that companies may lose exports, is said to be in talks with the U.S. Treasury’s Office of Foreign Assets Control, or OFAC, to seek a commitment that banks can do business without incurring legal woes.

The U.S. administration says Treasury and State Department officials have held meetings with companies, government officials and financial institutions in more than a dozen countries to discuss the sanctions relief for Iran. Guidance on OFAC’s website is regularly updated in response to questions about the scope of the sanctions, the Treasury spokeswoman said by e-mail.

U.S. Secretary of State John Kerry met European bankers including Deutsche Bank AG Co-Chief Executive Officer John Cryan in London in May, telling them “that legitimate business, which is clear under the definition of the agreement, is available to banks.”

That doesn’t satisfy the Europeans. Several EU companies have asked the European Commission to take their individual cases to the Treasury so they can gain legal clearance or permissions before trading with Iran, Francesco Fini, an official in the office of EU foreign-policy chief Federica Mogherini, told Bloomberg BNA on May 25.

“Lack of clarity from the U.S. is causing a lack of certainty for companies like Airbus,” Franck Proust, a French member of the European Parliament, said during a committee meeting in May. “There are no banks at this point that will support investments.”

http://www.bloomberg.com/news/articles/2016-06-07/u-s-said-to-rebuff-eu-bid-to-shield-banks-from-iran-sanctions-ip59qkxe

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