Thursday 1 June 2017

Britain must keep Tony Blair out of Brexit discussion



Having roots in Pakistan, once upon a time a British Colony and a member of Common Wealth for a long time, I believed that Britain was the oldest democracy. However, this belief has been shattered after hearing that its ex-prime minister Tony Blair would steer the country out of the turmoil. In my opinion, he should have been punished for committing war crimes, the worst being his support for Iraq invasion on the premise of having weapons of mass destruction. Ideally, he should be hiding his face because tendering an apology could not save him from the ultimate fate.
In the recent past, I was engrossed with other topics that included Pakistan’s prime minister, Nawaz Sharif, facing disqualification, US president not behaving in the desired manner and his visit to Saudi Arabia, elections in Iran and ongoing war in my country’s neighborhood, Afghanistan. I confess that I missed statements of Tony Blair saying that he plans to become more involved in the debate surrounding Britain’s departure from the European Union because of the harm it would cause the country.
The 63-year-old, who was speaking on the 20th anniversary of his landslide win over John Major in the general election of 1997, told the Daily Mirror, “I am going to be taking an active part in trying to shape the policy debate and that means getting out into the country and reconnecting. This Brexit thing has given me a direct motivation to get more involved in politics. You need to get your hands dirty, and I will.” I believe Britishers should not pay any heed to his uttering.
I regret that Britisher, who are the custodian of democracy and good behavior gave him a chance to resurface, whereas he should have been completely dumped for bringing the worst disgrace to them. I will even ask a question, are the politicians from treasury and opposition benches incapable of bringing the country out of the turmoil?
My question to Tony Blair, if he is such an ardent supporter of Britain remaining in the European Union (EU), why did he keep his country out of the common currency, euro? I understand that somewhere at the back of his mind was that if Britain joins euro; it would become subservient to Germany and France.
At this juncture, both Germany and France are adamant at punishing Britain out of the EU or be ready to pay a huge cost to stay its member. If Tony Blair committed a mistake of becoming the spokesman of war monger George Bush and now living in isolation, Britain also faces isolation for its decision to quit the community. Even if the new parliament wishes to reverse the process, it would only be at the stringent conditions of the EU.

Sunday 28 May 2017

OPEC becoming subservient to US Shale oil producers



I will prefer to say at the outset that Saudi Arabia has become subservient to the US administration. Zionists, god-fathering Israel, have succeeded in creating the perception ‘Iran is a bigger threat.’ This has helped the US in soliciting arms orders worth US$350 billion.
Now, OPEC-led by Saudi Arabia, is being convinced to allow US Shale oil producers to increase their output under ‘mutual coexistence’. Both the Saudi decisions indicate that its foreign and economic policies have become subservient to the US.
The history of the relationship between OPEC and the US shale oil industry has evolved a great deal since the cartel discovered it (OPEC) has a monstrous rival eating up its market for around five years.
To convince Saudi Arabia to give more space, US bankers providing funds to Shale oil producers came to Vienna and key OPEC members are getting readying visit Texas in a bid to understand whether the two industries can coexist or are poised to embark on another major fight in the near future.
The complete surrender by the Saudi Arabia is evident from the statement of Khalid al-Falih, its Oil Minister, who said, "We have to coexist." One can recall that he pushed through OPEC production cuts in December, reversing Riyadh's previous strategy of pumping as much oil as possible and try to push US Shale oil producers out of business, by keeping oil prices low.
OPEC has already decided to extend a helping hand to US Shale producers, but keeps seeking supplies at a level to hold prices below $60 per barrel.
Some analysts believe that now OPEC realizes supply cuts and higher prices only make it easier for the shale industry to earn higher profit after it found ways of slashing costs.
Iran that has already consented to support Saudi Arabia justifies its decision. "For all OPEC members $55 (per barrel) and a maximum of $60 is the goal at this stage," said Bijan Zanganeh, Iran's oil minister. "This price level is not high enough to encourage too much shale? It seems it is good for both."
Some OPEC members seem keen to show they have shed any prior naivete about shale, making it a key topic during Thursday's meeting after barely mentioning it before. Shale's limitations, including rising service costs, also were discussed.
"We had a discussion on (shale) and how much that has an impact," said Ecuador Oil Minister Carlos Pérez. He expressed helplessness, "But we have no control over what the US does and it's up to them to decide to continue or not?"
"In terms of the threat, we still don't know how much (U.S. shale) will be producing in the near future," Nelson Martinez, Venezuela's oil minister said after the talk.
OPEC meets again in November to reconsider output policy. While most in the group now appear to believe that shale has to be accommodated, there are still those in OPEC who think another fight is around the corner.
"If we get to a point where we feel frustrated by a deliberate action of shale producers to just sabotage the market, OPEC will sit down again and look at what process it is we need to do," said Nigerian Oil Minister Emmanuel Kachikwu.

Sunday 21 May 2017

President Donald Trump: An Ace Arms Seller



At the first destination, Saudi Arabia, U.S. President Donald Trump succeeded in signing an arms sale agreement worth US$350 billion.  He is likely to secure more orders on visits to Egypt, Jordan, Turkey and Israel. Arms sale in on the themes: campaign against ISIS and terrorism, challenge of Iran and turmoil in collapsing states of Syria and Yemen.  But the top item on the agenda is Israel-Palestinian peace process, which the president said was a top priority for his administration, through its recognition by Arabs.
Trump’s rhetoric is based on “Iran is a bigger threat as compared to Israel”.  The U.S. assault started with Iraq’s attack on Iran soon after the Islamic Revolution. Arab monarch’s were made to believe (by the U.S.) that the fall of Iran’s monarch was the beginning of their downfall. The war continued for almost a decade. Later on, Iraq was prompted to attack Kuwait, one of the best friends of Saudi Arabia.
In the aftermath of 9/11 U.S. attacked Afghanistan and Iraq. Further stringent sanctions were imposed on Iran. However, the superpowers agreed to withdraw these sanctions on the condition that Iran would roll back its nuclear program. To project Iran as enormous threat, it has been dragged into proxy wars to weaken it and to portray that “Iran is not a regional superpower”.
The need to create this perception aroused, after the emergence of Hezbollah, which smashed Israel’s military superiority.  Therefore, Iran has to be constantly engaged in wars. A question remains unanswered who initiate the assault, Iran or others? The western media has been arousing anti Iran sentiments by capitalizing Arab-Iran hatred.
The ultimate objective, which the U.S. wishes to achieve is “Recognition of Israel by Arabs”. The process started when Muhammad Anwar el-Sadat was president of Egypt and continued till his assassination on 6 October 1981. It seems most of the Arab are already convinced and are desperate for making the formal announcement. However, they have not forgotten the fate of Anwar Sadat.
One of the expectations is that at the end of Trump’s visit the formal announcement will come. Therefore, all the guns have to be aimed at Iran, which is often considered “the game spoiler”. But one has to try to find an answer to the question what is the cost of this recognition? Why Saudi Arabia  has to pay US$350 billion to give a boost to the U.S. economy?



Saturday 20 May 2017

What next for Iranian President Hassan Rouhani?


Incumbent President Hassan Rouhani, who sought re-election, won a landslide victory. He got 23.549 million votes out of a total of more than 41 million votes and his arch-rival Ebrahim Raisi got 15.786 million votes.
Iranians seeking greater freedoms have voted for President Hassan Rouhani, to secure second term. However, he is likely to face resistance by the hardliner.
There is perception that Rouhani will face more pressure in his second term as it is feared that the hardliners will create more problems for him.
Rouhani has decisively defeated Khamenei's protégé, hard-line judge Ebrahim Raisi, but the supreme leader still makes the ultimate decisions on policy, and his conservative faction still controls the judiciary and security forces.
They (hardliners) may re-assert their dominance at home by more confrontation abroad, by extending Iran's interventions in Iraq, Syria and elsewhere in the Middle East. They also fear more confrontational policy with the U.S. and Saudi Arabia.
However, certain quarters believe that since economy is the top priority of Supreme Leader Ali Khamenei, Rouhani's liberal economic policies are likely to get his endorsement, like the cautious support he got for the nuclear deal.
Rouhani, landslide victory in 2013 was on a promise to reduce Iran's diplomatic isolation, spent most of his time on the nuclear agreement with six powers that resulted in a lifting of most sanctions in return for curbs on Tehran's nuclear program.
Rouhani will have to find an accommodation with them, or end up like his reformist predecessor Mohammad Khatami, who whetted Iranians' appetite for change but failed to deliver it during two terms from 1997-2005.
The silver lining is that Rouhani has built his reputation as an establishment figure who could deliver some of the aims sought by reformists without alienating conservatives.
The added advantage is, Rouhani is a regime insider. He is loyal to the establishment. He is not a reformist but a bridge between hardliners and reformists.

Friday 19 May 2017

Pakistan Stock Exchange witnesses massive selling by foreigners



Following the announcement of Pakistan’s up gradation to Emerging Market status in the MSCI Index, the market nosedived and continued the downward trend during the week ended 19th May as investors resorted to profittaking. The benchmark index closed at 50,742, down 1.95%WoW. Average daily traded volumes fell by 1.45%WoW to about 350 million shares, with EPCL, DSL, WTL, LOTCHEM and SILK as volume leaders. Key news flows during the week were: 1) As per provisional estimates FY17 GDP growth came in at 5.28% as compared to 4.51% in FY16, missing budgeted target of 5.7%, 2) As per State Bank of Pakistan (SBP) current account deficit widened 205%YoY to US$7.247 billion during first ten months of current financial year, 3) SBP granted an operating license to staterun Bank of China to meet the financing needs of CPEC projects, 4) Supreme Court has ordered National Refinery to pay Rs305 million to SBP for failing to pay Saudi Aramco its dues on time and 5) FBR has blocked Rs100 billion sales tax refunds and rolled back the Refund Payment Orders( RPOs), claimed by the textile sector filed from the tax period July 1, 2016 onwards. Stocks leading the bourse during the week were: LOTCHEM, POL, PPL, AGTL and HMB, while laggards were: PSMC, HUBC, UBL, CHCC and MCB. Foreign participation remained weak with outflows of US$16.4 million compared to outflows of US$2.46 million a week ago. SBP is scheduled to announce Monetary Policy on Saturday (May 20’17). It is anticipated to be a nonevent with policy rate expected to remain unchanged. Budget FY18, to be released at the end of next week, can present opportunities depending upon expected taxation measures. Moreover, on the international front, continuation of oil supply cuts in the upcoming OPEC meeting scheduled for 25th May.

Pakistan has been reclassified as part of the MSCI Emerging Market (EM) Index effective June'17 with a lighter than expected pro forma weight of 0.14% (as of 20th April'17 with prices impacted by Panama Leaks) in the MSCI EM Index contrary to expectations of close to a 0.19% weight as simulated by MSCI in April'16. If market momentum continues, Pakistan should regain weight in line with expectations in the next SemiAnnual Index Review by MSCI. Additionally, passive fund flow allocation will be at more reflective weights and will likely continue through to the rebalancing of MSCI indexes in Novemver'17. The list of Tier-1 stocks as part of the reclassified MSCI Pakistan Index include: OGDC, HBL, UBL, MCB, LUCK and
ENGRO while 27 other names have been nominated for the small cap index. Pakistan's graduation is likely to have farpositive implications where apart from increasing foreign visibility, it draws comparisons for multiple rerating akin to 20062008. Macros lend further support (broad parallels can be drawn with macroeconomic indicators during the last time Pakistan was part of MSCI EM) where FY1718 GDP growth of 5.1%, driven primarily by development initiatives under CPEC, remains well above the EM average of 3.8%, warranting improved valuation. Near term the broader market is likely to focus on the Federal Budget FY18 (expected on 26th May) where investors should expect targeted expansionary fiscal measures ahead of General Elections in 2018.
Current account deficit (CAD) for April'17 surged significantly to record at US$1.13 billion compared to US$546 million in the preceding month. Despite trade deficit shrinking by 2% on a MoM basis, CAD widened primarily on account of absence of CSF inflows in April'17 (vs. inflows of US$200 million in March'17), further aided by a sequential decline of 9%MoM in remittances. Consequently, the current account deficit for 10MFY17 reached US$7.2 billion (2.3% of GDP), up 205%YoY from US$2.4 billion in the corresponding period last year on the back of 1) rapidly growing trade deficit as imports accelerated (+16%YoY) while exports remained flat and 2) continuous decline in remittances (fall of 3%YoY as compared rise of 5.3%YoY during 10MFY16) on the back of lower inflows from GCC region (62% of total remittances). Moving forward, as trade deficit continues to widen along with a decline in remittances, current account deficit is expected to continue its downward spiral keeping deficit above US$8 billion (2.7% of GDP) in FY17.
In a recent meeting, ECC of the cabinet has decided to increase the quota of urea exports by another 300,000 to 600,000 tons owing to ample amount of urea inventory available in the country. The committee also extended the deadline for urea export to end October'17. Out of initial allocated quota of 300,000 tons, local manufacturers were hardly able to export 40,000 tons of the commodity to East Africa region at an estimated FOB price of US$230240/ton. In this regard, despite attractive quota allocation, the recent downtrend in international urea prices (down 30% to US$170/ ton breaking its last summer's low of US$171/ton touched in July'16) limited the attractiveness of exporting the excess urea inventory. In this backdrop, analysts believe urea exports are likely to remain unfeasible at current price levels. FFC is likely to be the most impacted whereas FATIMA remains largely immune given its lowest per bag manufacturing cost.