Pakistan: Painful Path to Recovery

I am pleased to share with my readers a report by IMS Research. You may not agree with all the points, but it makes a good basis for an ‘Academic Discussion’. Pakistan needs a ‘home grown plan’ to overcome its inadequacies.

According to the brokerage house, FY23 Federal Budget saw the government attempt to widen the tax net, but the brunt eventually fell on the existing narrow tax base in the shape of higher corporate and personal taxes.

The benchmark index of Pakistan Stock Exchange (PSX) shed 3.6% (6.6% in US$), with turnover thinning out even further.

Foreign institutions and local insurance companies remained aggressive sellers. Pakistan is inching closer to the IMF program, but investor confidence remains low due to a sticky current account deficit, and ugly inflation prints around the corner.

That said, we believe risks are largely in the price, with default likely be avoided as the IMF agreement draws near. 

Inching closer to the IMF program

Pakistan has significantly reduced energy subsidies and sharply raised direct taxes. The 7th and 8th IMF reviews are reportedly being combined and Pakistan could see US$2 billion program resumption.

The FY23 Budget attempted to widen the tax net on real estate and retailers, but ultimately could not avoid further burdening the narrow tax base.

Most large corporates will now face additional 10% tax in in 2022, which reduces to a permanent +4% in subsequent years.

Improved fiscal discipline reduces the load on the monetary side but the State Bank of Pakistan (SBP) could yet raise rates on July 07, 2022 monetary policy, with the next inflation print expected north of 18% and international oil prices failing to come off. We expect an increase of 100bps, which will take the Policy Rate to 14.75%. This may be the last rate hike of the cycle though.    

Improving relations with others

Chinese commercial banks have recently disbursed loans of US$2.3 billion, negotiations are underway with Saudi Arabia to enhance the deferred oil payment facility, and UAE is reportedly interested in acquiring stakes in state-owned entities listed at the PSX.

Progress includes the appointment of a new US Ambassador to Pakistan for the first time since 2018, the visit of the German Foreign Minister, and a positive outcome in the recent FATF plenary with exit from the grey list looking likely subject to on-site verification.

A European Union mission also reached Pakistan to assess GSP+ compliance, and the broader improvement in relations with the West should help Pakistan’s case in our view.

The brokerage house assigns little probability to Pakistan procuring oil from Russia, even though local refineries have been asked to assess suitability, with political considerations likely to win out over economic ones.

Key risks

The government is digging in, going by its increasing willingness to take tough decisions and secure the IMF program. While coalition partners such as MQM have expressed discontent at the results of local body elections in Sindh, and PML-N rule is vulnerable in Punjab, it is difficult to envisage the coalition fracturing at this stage.

Imran Khan is a lot quieter but remains a uniting factor for the ruling parties, no matter their disparate nature.

For the economy, stabilization measures are underway and Moody’s decision to downgrade Pakistan’s outlook to Negative has not been matched by the other major credit rating agencies.

Corporate profits will hurt in the near-term, owing to the 10% super tax for 2022, but the impact on recurring profitability is modest. On market cap to GDP, Pakistan is cheaper than its Covid low and nearly as cheap as its trough during the global financial crisis.

 

Welcome Yair Lapid, Goodbye Naftali Bennett

Yair Lapid swears in as interim Prime Minister of Israel at midnight, replacing Naftali Bennett, who announced not be running in the next elections being held on November 01, 2022.

This makes Lapid the 14th Prime Minister of Israel

Bennett, Lapid and their families participated in a small ceremony for Lapid's transition to Prime Minister. Before the ceremony, Lapid also paid a visit to Yad Vashem.

"Yair, I'm handing you the stick," Bennett told Lapid. "This country and this position do not belong to any one person. We're doing this together and now it's your time."

The Knesset dispersed a few hours earlier the same day with a 92-0 vote.

When Knesset Speaker Miki Levy announced the dissolution of the 24th Knesset, Bennett rose from his chair and signaled incoming Prime Minister Lapid that he would be replaced.

The two are expected to sit down for a long conversation in which they will discuss the overlap between them, Ynet reported.

On Tuesday, Lapid will make his first political trip abroad as Prime Minister to France, and will meet with French Prime Minister Emmanuel Macron.

He will also host US President Joe Biden in his visit to Israel.

In accordance with the coalition agreement, Naftali Bennett stepped down from the premiership, becoming alternate prime minister, a title Lapid held for the past year. Lapid will remain foreign minister, as well.

Lapid’s first stop after becoming prime minister was the Hall of Remembrance at Yad Vashem, which he said he visited “to promise my father that I will always keep Israel strong and capable of defending itself and protecting its children.” His father, former justice minister Tommy Lapid, was a Holocaust survivor.

After that, Lapid went to the Prime Minister’s Office for a handover ceremony and transition meeting with Bennett. Lapid’s wife, Lihi, and Bennett’s wife, Gilat, and their children attended, as did Prime Minister’s Office staff, but the ceremony was otherwise closed to press or guests.

Lapid made brief remarks, saying to Bennett, “I have worked under Prime Ministers. I am familiar with Prime Ministers. You are a good man and an excellent Prime Minister. You are also a good friend. This is not a farewell ceremony because there is no intention to take leave of you."

Bennett told Lapid that Israel and the premiership do not belong to any one person; they belong to the entire people of Israel.

“I hand over to you the responsibility for the State of Israel. I wish that you guard it well and may G-d watch over you,” he said.

Bennett wished Lapid luck and said to him the blessing parents traditionally say to children on Shabbat, “May G-d make you like Efraim and Menashe. May the Lord bless you and keep you. May he make His face to shine on you and be gracious to you. May He lift up His face to you and grant you peace.”

Lapid said his mother, author Shulamit Lapid, had blessed him in the same way earlier that day.

The new Prime Minister’s next stop was expected to be the residence of President Isaac Herzog. Lapid’s first trip as Prime Minister, originally planned for Bennett, is set for Tuesday.

 

 

Why Pakistan fails in boosting local production of crude oil and gas?

The report filed by Kazim Alam in Dawn should be an eye opener the policymakers and law enforcing agencies of Pakistan. The first and most important point is that production of oil and gas is constantly on the decline and E&P companies have not been able to increase production.

The second point is the real cause of concern, despite the fact that the country has a drilling success rate that’s notably higher than the international average (Every third drilling is successful in Pakistan as against one in five internationally; the average wells drilled in the country remains low.

Kazim has raised a pertinent point, whom to blame for the poor state of E&P in Pakistan: nature or bad governance? In my opinion the Government of Pakistan has to accept its inadequacy. It has failed in attracting foreign companies as well as providing security cover to the staff of E&P companies working in remote areas.

Since shifting blame to others is common the quote of an executive burst me into laughter. Citing the example of Kekra, a field located near Iran, he said the prospects seemed so good that E&P companies went all in, committing as much as US$140 million, or more than Rs28 billion at the current exchange rate. But they found nothing there. The supposedly huge reserves accumulated over hundreds of thousands of years had already slipped away in the intervening period.

The conclusion is that discoveries are small the efforts have to be accelerated by allocating more funds for drilling more wells. One of the most painful observations is that most of the E&P companies operating in public sector are made to pay huge dividend rather than spending money on drilling of new wells.

Some analysts say that in Pakistan people with vested interest often prevail over, they make big money in the purchase of crude oil as well as finished products. In case indigenous production of crude and POL increases, they will go bankrupt.

If any one does not agree with me should peep into the history. Excluding the output of OGDC, the share of all other companies is disappointingly low.
No ‘green’ refinery has been established after PARCO. Byco may be a good addition, but it is based on outdated technology. Other refineries have also failed major revamping and continue to produce low value added products.

To conclude it is sufficient to say only the Government of Pakistan can play a lead role by: 1) bringing in foreign E&Ps into the country, 2) offering new leases throughout Pakistan and 3) Encouraging OGDC to form new joint ventures.

Is Israel a free state?

Freedom in the World publishes a global report evaluating political rights and civil liberties in different countries and selected territories. The 2019 edition of the report includes development in 195 countries and 14 territories between January 1, 2018 and December 31, 2018.

According to the report, with a score of 80 out of 100, there is only one free country in the Middle East, Israel. Among all Mideast nations, this compares favorably with non-free nations such as Iraq (27), Iran (17), Saudi Arabia (10) and Syria (-1).

Rather than evaluating governments or government performance, Freedom in the World measures the rights and freedoms of individuals in the real world. Political rights and civil liberties can be affected by both state and non-state actors, including insurgents and other armed groups.

The US-based Freedom House said in its latest annual report that Israel is the only "free" state in the Middle East, contrary to claims by the country's critics who say its democratic values are being eroded. "Israel remains the region's only free country," read the report, Freedom in the World 2013, released days before Israel's election.

Independence is a condition of a person, nation, country, or state in which residents and population, or some portion thereof, exercises self-government, and usually sovereignty, over its territory.

But it also means what Mrs. Eleanor Roosevelt said. ”With freedom comes responsibility”

A Country is independent of other countries, but it relies on its people for leadership, productivity, development, healthy society, and keeping democracy and freedom alive.

For that to happen we must follow what Jonathan Lockwood Huie said, “Independence of a nation begins with independence of self. “

Israel and the United States of America (US) both claim they are independent countries, but don’t they need each other? Certainly Yes, Israel needs the support of the US with weapons, shared research and development of new weapons, new technologies, new medical research, and mutual ideas for their free countries, and keeping democracy and freedom alive.

The US as well needs Israel, which is the only free and modern Democratic country in the Middle East, as a gateway to Asia and the Middle East, as well as its scientific teams that cooperate with the American researchers, technology developers, etc.

Therefore, it has to be remembered that the independence of the nations starts within themselves, the independence of the people, their hearts, and their speech.

John Kerry demands action against 'Petrostate Dictators'

According to a report by Reuters, US Climate Envoy John Kerry said on Tuesday Russia's invasion of Ukraine was a warning to nations around the world that they cannot be hostage of oil-rich autocratic governments to meet their energy needs.

Speaking to Reuters on the sidelines of the UN Ocean Conference in Lisbon, Kerry said Russia has been using energy as a weapon and would continue to do so in the future but Europe was committed to put an end to its dependency.

"It's a warning to everybody that you do not want to be prisoners of petrostate dictators who are willing to weaponize energy," Kerry said.

Russia launched a large-scale invasion of Ukraine on February 24 this year, which Moscow calls a "special operation".

Kerry said the world was "running out of time" to tackle climate change but governments should not use the war in Ukraine as an excuse to delay the process even further.

"We have seen people choosing short-term (solutions) in order to respond to the challenge of losing gas for Russia," he said.

"And we cannot allow the war in Ukraine to alter the reality that we need to reduce emissions and we need to deal with speeding up the transition to alternative renewable energy."

Soaring energy costs and supply shocks triggered by the Russian invasion have spurred some countries to bet more on renewables but others to burn more coal, buy up non-Russian gas or pause efforts to reduce fossil fuels.

The European Union (EU) relied on Russia for 40% of its gas before Moscow invaded Ukraine.

"We have to make up some gas for Europe, which the US will work to do with others, but it has be a one for one replacement - not a whole series of new infrastructure with a 20- or 30-year horizon because that will crush the ability to respond to the climate crisis," he said.

He added, "We do not need to have new liquefied natural gas projects that require new drilling."

Germany drew criticism from the United States and others, including EU member states, for supporting the planned Nord Stream 2 gas pipeline, designed to deliver Russian gas directly to Germany. The project was halted two days before the invasion started.

Kerry said it was not worth "going backwards" and described the European Union as a "terrific leader" on renewable energies that has set higher goals than many other countries in the world.

 

World Bank happy over Padma Bridge opening

The World Bank that pulled out of financing Padma Bridge, citing a never-proven “corruption conspiracy”, has now congratulated Bangladesh and its people on completion of the much-awaited bridge.

“We are happy that the bridge is complete and Bangladesh will benefit from it,” World Bank Country Director for Bangladesh Mercy Tembon told the media during the inauguration event on the Mawa end of the bridge.

Now is the time to move Bangladesh-World Bank relations forward. The Padma Bridge will make a huge contribution to the economic growth of Bangladesh, she said.

“This bridge will contribute to accelerating integrated growth in the country and reducing poverty,” she added.

The World Bank, which initially agreed to co-finance the construction of Padma Bridge, cancelled its loan alleging corruption over the appointment of consultants for the bridge.

The Washington-based agency had a loan deal amounting to US$1.2 billion with Bangladesh for the project involving an initial estimated cost of US$2.9 billion.

Other lenders, such as the Asian Development Bank, Japan International Cooperation Agency, and the Islamic Development Bank also backed out of financing the bridge, leaving the government quite off-guard and embarrassed.

But, neither a case by the Anti-Corruption Commission nor another in a Canadian court failed to prove the corruption allegations.

It was Prime Minister Sheikh Hasina who stood alone and decided to go ahead with the nearly US$4 billion project with the country’s own funds.

The government took a challenge and proceeded with the self-financing plan, keeping aside money in the annual budget for the Padma Bridge project. The construction began in December 2015.

Dispelling all clouds of uncertainties, Prime Minister Sheikh Hasina finally inaugurated the long-awaited Padma Bridge, the longest in Bangladesh, connecting people on both sides of the Padma River.

The Padma Bridge project has been implemented at a cost of Tk30,193.39 crore with almost 100% internal funding which is believed to bring a new world to the country’s economy by connecting 21 southwestern districts through roads and railways with the capital.

The construction of the 6.15km (3.82 miles) bridge began in November 2015 to connect 21 districts of the country’s southwest with Dhaka via road and rail, thereby cutting travel time considerably.

The double-layer steel truss bridge incorporates a four-lane highway on an upper level along with a single-track railway on the lower level.

This is one of the largest mega projects Bangladesh has ever undertaken and the entire amount is financed by the Bangladesh government. 

Qatar to host Iran United States talks on reviving 2015 nuclear deal

According to a Reuters report, Qatar will host indirect talks between Iran and the United States in coming days. Iranian media also reported on Monday that amid a push by the European Union to break a months-long impasse in negotiations to reinstate a 2015 nuclear pact.

"Iran has chosen Qatar to host the talks because of Doha's friendly ties with Tehran," Mohammad Marandi, a media adviser to Iran's top nuclear negotiator, told the ISNA news agency.

A source briefed on the visit said that US Special Envoy for Iran, Robert Malley, was expected to arrive in Doha on Monday and meet with the Qatari foreign minister. An Iranian official told Reuters that Iran's chief nuclear negotiator, Ali Bagheri Kani, would be in Doha for the talks on Tuesday and Wednesday.

Iran's foreign ministry was not immediately available for comment and the Qatari government didn’t comment. Later, however, Iran's Tasnim news agency cited a source at Iran's foreign ministry as saying that "Bagheri will travel to Doha on Tuesday".

The pact appeared close to being secured in March when the European Union invited foreign ministers representing the accord's parties to Vienna to finalize an agreement after 11 months of indirect talks between Tehran and President Joe Biden's administration.

But the talks have since been suspended, chiefly over Tehran's insistence that Washington remove the Islamic Revolutionary Guard Corps (IRGC), its elite security force, from the US Foreign Terrorist Organization (FTO) list.

Last week, one Iranian and one European official told Reuters that Iran had dropped its demand for the removal of the IRGC's FTO sanctions, but still two issues, including one on sanctions, remained to be resolved.

"Nothing is agreed until everything is agreed," Iran's Foreign Ministry spokesman, Saeed Khatibzadeh, said on Monday.

The 2015 nuclear pact imposed restrictions on Iran's nuclear activities in exchange for the lifting of international sanctions. Then-President Donald Trump pulled the United States out of the deal in 2018, reimposing tough economic sanctions on Tehran.

Iran's clerical establishment responded by breaching the pact's nuclear restrictions, including a 3.67% cap on the level to which it could purify uranium and a 202.8-kg limit on its enriched uranium stock.

Joe Biden to ask G7 nations to ban import of Russian gold

US President, Joe Biden said Sunday that the Group of Seven (G7) nations will ban Russian gold imports to further impose financial costs on Moscow for its invasion of Ukraine.  

“The United States has imposed unprecedented costs on Putin to deny him the revenue he needs to fund his war against Ukraine,” Biden tweeted on Sunday. “Together, the G7 will announce that we will ban the import of Russian gold, a major export that rakes in tens of billions of dollars for Russia.” 

Biden’s announcement came on the first day of a G7 meeting in Germany; a formal announcement is expected later on during the summit.  

While it does not bring in as much money as energy, gold is a major source of revenue for the Russian economy. Restricting exports to G7 economies will cause more financial strain to Russia as it wages the war in Ukraine.  

The G7 includes the United States, France, Canada, Germany, Japan, the United Kingdom and Italy.  

The US and its allies have been searching for more ways to punish Russia for the bloody war that recently entered its fifth month. Biden has announced waves of penalties coordinated with allies that range from sanctions on Russian officials and oligarchs to export controls to sanctions on major Russian banks.  

Still, Europeans are limited in what they can do because of their dependence on Russian energy imports. European countries have vowed to phase out Russian oil but have not taken steps like the US to do so immediately.  

Biden administration officials teased new announcements to squeeze Russia ahead of Biden’s trip to Europe and it is possible there will be more announcements beyond the plan to ban Russian gold imports.  

Biden embarked on the trip to Europe for the G7 meeting and, later, a North Atlantic Treaty Organization (NATO) summit with the goal of demonstrating unity with allies on keeping up pressure on Russia even as the war roils the global economy. 

Biden spent Sunday morning meeting with German Chancellor Olaf Scholz and later participated in a working lunch with other leaders.  

A White House readout of Biden’s meeting with Scholz indicated Ukraine was a main topic of conversation.  

“The leaders underlined their commitment to Ukraine’s sovereignty and territorial integrity, as well as their continued provision of military, economic, humanitarian, and diplomatic support to help Ukraine defend its democracy against Russian aggression,” the White House readout said. “The leaders also discussed efforts to alleviate the impacts of Russia’s war in Ukraine on global food and energy security.” 

Biden also thanked Scholz for committing to boosting Germany’s defense spending above NATO’s 2% of gross domestic product target.  

A White House official characterized the meeting as “very warm and friendly” and said there was “very broad alignment on all of the issues that they discussed and all the common challenges that our countries are working on together.”

 

Russia-Azerbaijan-Iran-Pakistan railway route

Chairman of the Russia-Iran Joint Trade Council has said Moscow is pursuing the development of trade and transit through the Russia-Azerbaijan-Iran-Pakistan railway route, the portal of the Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) reported.

Speaking in a meeting with ICCIMA Head Gholam-Hossein Shafeie on Saturday, Vladimir Abedinov proposed to form a working group between the representatives of the chambers of commerce of Russia, Azerbaijan, Iran, and Pakistan to explore various aspects of the trade through the mentioned route.

Expressing Russia’s willingness to strengthen trade relations with Iran, the official pointed to the western sanctions against Russia and said, "These sanctions have changed the transit and logistics routes in the region. Since the impact of sanctions has caused Russia's trade relations to undergo significant changes. In this regard, we are looking for new transportation routes in the region.”

“Completion of the Rasht-Astara route is of great importance for Russia's trade purposes. This route paves the way for Russia to access Pakistan,” Abedinov said.

He further noted that Russia can also access Pakistan and India by sending its cargoes to Iran’s northern ports by vessel and then transit them through Iran to Pakistan and India.

"This is a complex route; therefore, Russia seeks to replace it with the railway through Azerbaijan to Iran, Pakistan, and India,” he added.

Shafeie for his part pointed to the current conditions as special for the whole region and considered it necessary to make special decisions in accordance with these conditions.

According to the ICCIMA head, considering the current situation, the Iranian government has made the issue of transit a priority in its goals and plans, although there are infrastructural problems in the port area on both the Iranian and Russian sides.

He further mentioned some of the problems regarding rail transportation to Pakistan, saying, “The railway problems in Pakistan are not easily solved despite Iran's efforts. For example, a shipment was sent by rail from Iran to Lahore, Pakistan, which took 35 days to arrive to the destination.”

 

Pakistan being pushed to imminent default

Having followed the rhetoric of the economic team headed by Prime Minister Shehbaz Sharif and spending hours in listening to trade and industry and economic analysts, I am forced to arrive at the conclusion that all the steps being taken are hastening Pakistan’s default process.  

If anyone is still living under some kind of illusion, he/she must understand that the foreign exchange reserves held by Pakistan have almost exhausted, whatever, numbers are being quoted are ‘borrowed’ not ‘owned’ by Pakistan.

Therefore, the top of the agenda item should be getting the US$ one billion IMF trance released. Once this amount is released only then other friendly countries and multilateral financial institutions will start disbursing the count.

Along with this, the ‘disaster recovery plan’ has to be supported by taking measures for luring remittances, boosting exports and containing import.

I believe the worst deficit being faced by the incumbent government is ‘confidence deficit’. Without mincing words, it may be said that most of the decisions taken since coming into power are not aimed at strengthening the economy but creating ‘financial chaos’.

For boosting exports, Pakistan’s competitive advantage has to be restored. Hike in interest rate, electricity and gas tariffs and POL prices will only erode competitiveness of the local manufacturers. If they can’t compete in the global markets, the objective of boosting exports just can’t be achieved.

It has become a must that economic team must learn to remain silent and avoid giving funny statements i.e. taking lesser tea. They just can’t deny the fact that no reduction has been made in the salary and perks of elected representatives, bureaucracy and judiciary. On the contrary there are proposals to increase their salaries and perks.

There is a lot of talk about ‘circular debt’ but no admission that the root cause of this menace is ‘blatant theft’ going on with the connivance of high officials of the utility companies.

Prime Minister was prompt in imposing 10% super tax on companies, but there was no is mention about taxing income from agriculture.

Always a refuge is taken behind ‘taxing income from agriculture being a provincial subject’. If taxing all income is the responsibility of the federal government why taxing income from agriculture is a provincial subject?

If the provincial governments keeps on failing in collecting tax on income from agriculture, these should be ‘stripped off’ this right.

Last but not the least; indiscriminate load shedding in the name of saving fossil oil/gas is the most illogical approach.

Therefore, there is an urgent need to produce exportable surplus by boost working of industrial units, attaining synergy and optimizing cost of production.

 

Pakistan Stock Exchange posts 2.6%WoW decline

During the week ended on June 24, 2022, news flow was dominated by the accord between the Government of Pakistan (GoP) and the International Monetary Fund (IMF). 

On Friday, the Prime Minister announced that a 10% super tax will be imposed on large sectors in FY23, causing the Pakistan Stock Exchange benchmark index to lose 1,665 points in one day, closing the market at 41,052 points or 2.6%WoW decline.

Earlier on Tuesday, it was announced that an agreement had been reached, in which the GoP revised the FBR collection target for FY23 to PKR7.4 trillion from PKR7.0 trillion.

Average volume for the Index surged to 300.5 million shares, up 72.6%WoW mainly due to Friday’s grand sell-off.

Other major news flows during the week were: 1) loan agreement signed with consortium of Chinese banks for US$2.3 billion, 2) FDI shrank 29%YoY in May, 3) cost of power generation surges by 131% YoY due to high fuel costs, 4) May banking spread plunges 42bpsMoM, 5) GoP mulled pledging five federal assets to issue Sukuk, and 6) ECC approved PKR149 billion in payments to IPPs and KE.

The top performing sectors were: Vanaspati & Allied industries, Power, Tobacco, Insurance, and Refinery, while the least favorite sectors were: Automobiles, Textile, Cement, Close-end mutual fund, and Banking.

Stock-wise, top performers were: POML, EFUG, KEL, SML, and PAKT, while laggards were: CHCC, KTML, GATM, MLCF, and JVDC.

Flow-wise, Insurance companies remained as the net sellers, offloading US$8.4 million followed by Foreigners (US$2.4 million), Mutual funds (US$1.1 million), NBFCs (US$0.7 million), and Companies (US$0.1 million), while Individuals (US$7.0 million), Banks (US$2.1 million), Brokers (US$0.2 million), and Other organizations (US$3.4 million) were on the buying side.

The super tax imposed on large sectors has come as a major shock to all players in the market. With profitability of these sectors decreasing by 10%, the market sentiment is surely negative as players look to liquidate their positions. Add inflationary pressure and rising interest rates to the mix, and this creates a strong bearish environment for the market. With that being said, the agreement with IMF is crucial for the country, with further financing now expected to be available from World Bank, China, and Saudi Arabia which will alleviate the downward pressure on the currency along with supporting the depleted foreign exchange reserves, hence having the potential to trigger a bull-run in the short term.

Israel occupying Palestinian lands for more than half a century

Fifty-five years after Israel began occupying Palestinian lands; it is more difficult than ever to imagine a way out. The seeds of the two-state solution that were planted by visionary leaders on both sides have failed to take root. 

All that remains is a fatalistic acceptance of the conflict’s insolubility. For both the occupied and the occupier, the future is bleak

Over the last 55 years Israel has been occupying Palestinian lands, there have been two intifadas, four wars in Gaza, and a long series of failed efforts to negotiate a two-state solution roughly adhering to Israel’s pre-1967 borders. The situation may truly be as hopeless as it seems.

Intransigence on both sides—which no US president has managed to overcome, though virtually every one since the Six-Day War has tried—has gotten us to this point. While the Palestinians have sometimes embraced international diplomacy, they have also engaged in periods of obdurate resistance. It was the Palestinians who thwarted two promising peace initiatives, led by the forward-looking Israeli governments of Ehud Barak and Ehud Olmert.

Given sentiment in Israel today, they might not get another chance. With each failed peace process, the promise of peace has lost its potency as a mobilizing cause in Israel. Meanwhile, Israel has gradually tightened its control over the occupied territories, with virtually no international pushback. Even the Arab states—six of which have normalized ties with Israel—seem to have grown indifferent to the agony of the Palestinians.

All of this has driven Israeli voters radically to the right, leaving Israel’s peace camp demoralized and weak. The religious-nationalist bloc that former Prime Minister Benjamin Netanyahu leads now represents the majority of Israelis. And as far-right as Netanyahu may be, he is practically a leftist compared to the tens of thousands of radical Jewish nationalists who marched through Jerusalem’s Muslim Quarter on Jerusalem Day last month waving Israeli flags, repeating violent and Islamophobic chants like ‘death to Arabs’, and attacking Palestinians.

When Algerians rebelled against their French occupiers in one of the most brutal anti-colonial wars of the post-1945 era, the philosopher Jean-Paul Sartre wrote, ‘It is not their violence, but ours, which turns back on itself.’ In fact, the French found the violence being enacted in their name so abhorrent that 75% of them voted to grant Algeria independence in the 1961 referendum.

A similar sentiment is difficult to discern in Israel. On the contrary, popular support for the military’s fight against ‘Palestinian terrorism’ is overwhelming.

To be sure, Israel has known its share of mass demonstrations in support of a peace deal, with protest movements like Women in Black still going strong. Israeli non-government organizations such as B’Tselem, Peace Now and Breaking the Silence work hard to alert Israeli society of the sins of occupation. Joint Israeli–Palestinian organizations, like those bringing together family members of those lost to the ongoing conflict, do similarly admirable work.

But none of these efforts has had a transformative impact on the peace process. This stands in stark contrast to the experience in Northern Ireland during the Troubles, when checkpoints, home searches, abusive language, blackmail, beatings and arbitrary arrests were once standard practice, just as they are today in the occupied Palestinian territories.

In Northern Ireland, pressure from civil-society groups and NGOs eventually drove the security forces to curb abusive practices, improve their recruitment processes and introduce training for dealing with intercommunity tensions. The path to peace in Northern Ireland was paved largely by a mobilized civil society.

In Israel, however, only the Supreme Court stands between the military and worse behavior. The reason seems to lie in the nature of the conflict. Algeria’s war of independence was an anti-colonial struggle taking place far away from France’s shores. And the Troubles came down to an intercommunity cleavage, which could be resolved through disarmament and power sharing.

The Israeli–Palestinian conflict, by contrast, is existential. The question of where to draw borders is not merely practical; it has deep religious and cultural significance. For the Palestinians, Israel is the occupying power, impinging on their right to self-determination, but it is also their homeland. And for the now-dominant Israeli right, the occupied territories are the cradle of Jewish Biblical civilisation.

By fighting for the same lands, the two sides are effectively calling for the unconditional exclusion, even destruction, of the other. That goes a long way towards explaining their eagerness to alter the demographic balance—Israel through Jewish immigration and the expansion of settlements, and the Palestinians by demanding the ‘right of return’ for all refugees. Yasser Arafat, the late founder of the Palestine Liberation Organization, once called the womb of the Palestinian woman his ‘strongest weapon’ against Israel, as it would give the Palestinians a demographic advantage in the occupied territories.

Even if Israel did accede to the creation of a Palestinian state, it might continue to face threats to its survival. After all, Palestine wouldn’t be located far from its borders, like Algeria was from France.

What if a radical Islamist group rose to power in Palestine and challenged the peace agreement? What if state-building faltered or failed, generating rising instability on Israel’s doorstep? Or what if Palestine became a frontline outpost of a hostile foreign power? Already, Hamas and Hezbollah—with robust assistance from Iran—have turned Gaza and southern Lebanon, respectively, into launching pads for missiles targeting Israeli territory.

 

Pakistan one of the best customers of IMF

According to a report by The Express Tribune dated April 29, 2019, Pakistan has borrowed around SDR 13.79 billion from the International Monetary Fund (IMF), out of which 47% of the loans were secured by PPP, followed by PML-N at 35%, while the military dictatorships lag behind with a mere 18%.

Pakistan joined (IMF) in 1950 as newly established country was facing fiscal problems since its creation in 1947 from British rule. In 1958, for the first time, Pakistan went to IMF for bailout. For this, IMF lent out US$25,000,000 ‑ originally the loan-amount is given in SDR; for this article it is considered to be 1SDR = 1USD to Pakistan on standby arrangement basis on December 08, 1958.

Pakistan again went to IMF in 1965. This time, IMF gave US$37,500,000 to war-torn nation on 16 March 16, 1965.

Three years later, Pakistan again went to IMF for third time for balance of payment problems for which IMF gave US$75,000,000 on October 17, 1968.

In 1971, Pakistan lost its Eastern half, East Pakistan, after the Bangladesh Liberation War. This war caused huge loses to Pakistan. For which, Pakistan got loan a loan of US$84,000,000 in 1972, second loan of US$75,000,000 in 1973 and fourth of US$75,000,000 in 1974 to meet its growing needs. 

In 1977, a standby arrangement of US$80,000,000 was made on urgent basis. 

Three years later, an extended facility of US$349,000,000 was reached in 1980.

Struggle of Pakistan continued, as Pakistan withdrew another US$730,000,000 as Pakistan was already part of US cold war against Soviet Union.

Another era was started, as democracy came back to Pakistan but old ways to handle economy poorly continued. 

Benazir Bhutto government withdrew US$194,480,000 as standby arrangement and another US$382,410,000 in shape of structural adjustment facility commitment on December 28, 1988.

In 1990, government of Nawaz Sharif decided against going to IMF instead arranged donations from friendly countries like Saudi Arabia.

In 1993, Benazir Bhutto again came to power and her government again went to IMF and reached an agreement to get standby arrangement of US$88,000,000 on September 16, 1993.

Poor handling of economy continued by her government as she got loan of US$123,200,000 under the extended fund facility and another US$172,200,000 were borrowed on February 22, 1994.

During that period economy of Pakistan remained in poor shape and Pakistan had to go to IMF again for record third in the period of Bhutto government.

This time Pakistan got an amount of US$294,690,000 on 13 December 1995.

 In 1997, Nawaz Sharif came to power. Benazir Bhutto government was sacked and left economy of Pakistan in worst shape.

Sharif government went to IMF on urgent basis for the first time and reached an agreement to get two amounts of US$265,370,000 and US$113,740,000 on October 20, 1997.

In 2008, Yousaf Raza Gillani received a US$7.6 billion loan from the IMF.

In 2018, Imran Khan became Prime Minister of Pakistan. For this, they arranged friendly loans from Saudi Arabia, United Arab Emirates and China to avoid tough IMF conditions. 

In 2019, when economic conditions worsened, they went to IMF for the twenty-second time for a loan of US$1 billion. 

IMF gave loan based on conditions such as hike in energy tariffs, removal of energy subsidy, increase in taxation, privatization of public entities and fiscal adjustments to the budget.

Israel takes aim at ruining Iran Turkey ties

In the recent past, Israel has launched an all-out media campaign against Iran that included bizarre claims of Iranian threats against ordinary tourists in neighboring Turkey. 

Israeli media and officials first issued warnings of imminent alleged threats from Iran to Israeli tourists in Turkey and then claimed that several attacks were foiled as a result of Turkish-Israeli security cooperation.

“The operational efforts with the Turkish security forces have borne fruit,” Israeli Prime Minister Naftali Bennett claimed.  “In recent days, in a joint Israeli-Turkish effort, we thwarted a number of attacks and a number of terrorists were arrested on Turkish soil.”

Neither Bennett nor other Israeli officials have offered any kind of evidence to support their claims.

The string of warnings began last week when several Israeli officials alleged that there were concrete threats that Iran was allegedly trying to target Israelis in Istanbul over the weekend, and urged all Israeli citizens to leave Turkey immediately.

Iran has officially responded to Israeli hyperboles. Iran believes that Israel is openly spreading lies unworthy of a response.

Nour News, a news outlet close to Iran’s Supreme National Security Council, said Iran is determined to avenge the assassination of Colonel Sayad Khodaei but it’ll not target innocent people. 

“Given the past experiences, Israel is well aware of the certainty of Iran’s response to this regime’s mischief and terrorist moves such as the martyrdom of Sayad Khodaei,” Nour News said, adding, “The officials of this regime also know that the Islamic Republic of Iran will not punish innocent individuals when taking vengeance on the Zionist government’s crimes.”

The outlet said the leaders of Israel know that only the perpetrators and those who issued orders will be punished. This is why Israeli officials seek to mobilize the public with unfounded claims to increase the cost of Iran’s revenge, according to Nour News. 

The Israeli claims are intended to achieve another goal. According to Nour News, Israeli officials want to pitch Turkey and Iran against each other through unfounded claims. This is while the Iranian and Turkish foreign ministers have recently spoken over the phone and discussed ways to boost bilateral ties. 

This month, Iranian Foreign Minister Hossein Amir Abdollahian and his Turkish counterpart Mevlut Cavusoglu spoke over the phone twice in less than a week. In the first call, they discussed the latest developments in bilateral relations, according to the Iranian foreign ministry.

Amir Abdollahian stressed the need to keep up the consultations between the two countries and promote cooperation, especially in bilateral trade and consular issues. The top Turkish diplomat invited his Iranian counterpart to visit Ankara for talks on issues of mutual interest in the near future.

In the second call, Cavusoglu once again extended an invitation to Amir Abdollahian to visit Turkey and expressed hope that continued negotiations between the officials of the two countries will help boost bilateral ties and increase their cooperation.

Amir Abdollahian reaffirmed Tehran’s determination to boost ties with Turkey more than ever before. The top Iranian diplomat also expressed hope that the two sides will hold more consultations over the matter.

The Israeli claims come against a backdrop of broader tensions between Iran and Israel. Israeli officials have ramped up their threats against Iran and, recently, even boasted about taking the battle into Iran. Bennett and other Israeli officials are now talking of ‘Octopus Doctrine’ a new strategy allegedly aimed at dealing with Iran directly instead of countering its allies in the West Asia region.

“The past year has been a year of changing course in Israel’s strategy vis-à-vis Iran,” Bennett said on June 7 at a meeting of the parliamentary defense and foreign affairs committee, according to the New York Times. “We have shifted into a higher gear. We are acting at all times and places, and we will continue to do so.”

Iran has said it will respond to Israeli provocative measures. Amir Abdollahian has recently said Israel must stop its provocative and hostile behavior.

In late May, IRGC chief Major General Hossein Salami vowed revenge for Sayyad Khodaei. He blamed the assassination of Khodaei on Israel, underlining that Iran will avenge his killing.

 

Iraq clears US$1.6 billion Iranian debts

Both, Iran and Iraq have announced that Baghdad has cleared its debts to Iran after months of talks over how to move forward with the financial issue. The move came after intensive diplomacy between Iran and Iraq.

A few weeks ago, Iranian Ambassador to Iraq Mohammad Kazem Al Sadeq met with the Governor of Iraq’s Central Bank Mustafa Ghaleb Mokhif in Baghdad to discuss ways to clear Baghdad’s gas and electricity debts to Iran.

During the meeting, they discussed aspects of banking and economic cooperation between the two countries, the payment of financial dues from Iraq, and overcoming the obstacles facing the work of Iranian companies in Iraq.

The repayments of Iraq’s debts faced two major problems: first, the Iraqi Parliament’s delay in approving the country’s fiscal budget and Second, US unilateral sanctions on Iran. 

Iraqi Prime Minister Mustafa al-Kadhimi had sought to find a solution to both issues. He said, “One of the problems that caused the delay in the payment of dues to Iran is the absence of the budget.” 

It seems that this issue has been resolved in recent weeks. Al-Kadhimi said Iraq’s debts date back to before 2020. Al-Kadhimi had cleared the responsibility of his government, which was formed in May 2020, from Iran's gas debt, amounting to about US$1.6 billion. He said, “There are no debts owed by the current government regarding Iranian gas.”

Iraq’s Electricity Ministry echoed a similar point in its statement announcing the repayment of debts. “The ministry announces the start of the payment procedures that will be completed within the next two days, bearing in mind that the issue of financial obligations towards neighboring Iran is one of the problems carried over by previous governments, and the current government has borne it, by heading towards internal borrowing to pay off debts, which were not paid due to the scarcity of financial allocations resulting from not approving the budget for that year,” it said. 

After much bickering, Iraq paid its debts to Iran and Tehran confirmed that it received its money from Iraq. 

Iranian Oil Minister Javad Oji announced that Iran had received US$1.6 billion in arrears for gas exports to Iraq. 

“In light of the active energy diplomacy, and after several months of negotiations, we received, hours ago, US$1.6 billion in arrears due from past years regarding gas exports to Iraq,” Oji wrote on Twitter. 

“Since the beginning of current Iranian year, as compared to the same period last year, the country's gas exports have increased by 25%, and the receipt of hard currency earnings from it has increased by 90%,” he added. 

Iraq relies on Iranian gas to operate electric power plants. Earlier, the Iraqi Minister of Electricity Adel Karim announced that Iraq needs Iranian gas for 5-10 years while confirming the ministry’s agreement with the Iranian side to supply the country with 50 million cubic meters of gas per day.

The repayment of Iraq’s debts to Iran came at a time when US unilateral sanctions against Iran are still in place. This may be the reason why some analysts underlined the need for South Korea to follow in the footsteps of Iraq. South Korea owes Iran US$7 billion in oil debts and has been reluctant to clear its debts. Iran has called on Seoul to pay its debts but the Iranian demand has fallen on deaf ears. 

South Korea has linked the repayment of debts to the outcome of talks in Vienna over reviving the 2015 Iran nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA).

Iranian Foreign Ministry spokesman Saeed Khatibzadeh pointed to South Korea’s stonewalling in his Monday presser. “A new government has come to power in South Korea and they have made promises that they want to pay off Iran's debt, but we have not seen any move,” he said.

Khatibzadeh noted, “We are waiting to see the difference between the new government and the previous non-compliant government in terms of debt repayment.”

He then appeared to compare South Korea with Iraq. “We give the new Korean government time to show in practice what it is doing to repay its debts, like the friends we had in the region,” he said. 

 

Is Pakistan at the verge of technical default?

This mornings I was alarmed to listen to three rumours: 1) banks are unable to buy foreign exchange for their clients from the inter-bank market, 2) whatever US dollars are still held by the central bank just can’t be used and 3) most probably the PML-N will do, what it did in nineties ‑ freezing of foreign currency accounts of Pakistanis till the time forex starts flowing into Pakistan.

I had brief chat with some of the senior analysts and the conclusion was, “Pakistan is at the verge of technical default”.

The overwhelming consensus was, “It is not because of any weakness of the economy of the country, but due to the inability of the decision makers to make prudent and timely decisions”.

The consensus was, “If the casual attitude of the policy planners is not changed immediately, they will only hasten the default”.

The first and the worst habit of the incumbent government is that it spends more time on blaming the previous government, but does not take into accounts its own acts.

It talks about austerity, but indulges in extravaganzas.

It even fails in listening to what the International Monetary Fund (IMF) and friendly countries (also willing to support Pakistan) are saying.

The coalition partners were too keen to control the reigns, but neither had the plans to take the country out of the crisis.

Someone was indecent but may be right, “They wanted to take their names out of Exit Control List (ECL) as well get immunity to rule the country”.

They neither have the will nor the spine to make difficult decisions.

Raising POL prices and electricity tariffs are the easiest decisions because all their expenses are borne by the government.

Their thinking is still not synchronized with what the IMF is saying.

They have not only failed in containing the twin deficits (budget deficit and current account deficit) which is also proliferating the third deficit – confidence deficit.

War in Ukraine could last years, NATO chief

From the very beginning, I have the strongest belief that Russia-Ukraine conflict has been instigated by the United States to weaken one of the largest crude oil producing country. I also have sympathy with the people of Ukraine who have been dragged in this war by offering a ‘lollipop’. NATO/European Union membership. 

While no efforts have been made by United States to solicit ceasefire, tons of ‘outdated’ arsenals have been hurdled into Ukraine. My faith gained further strength after reading one of the statements Head of NATO, “War in Ukraine could last for years’.    

Reportedly, the Head of NATO said on Sunday, the war in Ukraine could last for years, as Russia stepped up its assaults after the European Union recommended that Kyiv become a candidate to join the bloc.

Jens Stoltenberg said supplying state-of-the-art weaponry to Ukrainian troops would boost the chance of freeing its eastern region of Donbas from Russian control, Germany's Bild am Sonntag newspaper reported.

"We must prepare for the fact that it could take years. We must not let up in supporting Ukraine," Stoltenberg, the Secretary General of the military alliance, was quoted as saying.

"Even if the costs are high, not only for military support, also because of rising energy and food prices."

British Prime Minister Boris Johnson, who visited Kyiv on Friday, also spoke of a need to prepare for a long war.

This meant ensuring "Ukraine receives weapons, equipment, ammunition and training more rapidly than the invader," Johnson wrote in an opinion piece in London's Sunday Times.

"Time is the vital factor," he wrote. "Everything will depend on whether Ukraine can strengthen its ability to defend its soil faster than Russia can renew its capacity to attack."

Ukraine received a significant boost on Friday when the European Commission recommended it for candidate status, decision EU nations are expected to endorse at a summit this week.

That would put Ukraine on course to realize an aspiration seen as out of reach before Russia's February 24 invasion, even if membership could take years.

The industrial city of Sievierodonetsk, a prime target in Moscow's offensive to seize full control of Luhansk — one of the two provinces making up the Donbas — faced heavy artillery and rocket fire again, the Ukrainian military said.

"Russian forces will likely be able to seize Sievierodonetsk in the coming weeks, but at the cost of concentrating most of their available forces in this small area," analysts at a Washington-based think tank, the Institute for the Study of War, wrote in a note.

Serhiy Gaidai, the Ukrainian appointed Governor of Luhansk, told Ukrainian television, "All Russian claims that they control the town are a lie. They control the main part of the town, but not the whole town."

In the twin city of Lysychansk across the river, Gaidai said on the Telegram messaging app, residential buildings and private houses had been destroyed, adding, "People are dying on the streets and in bomb shelters."

Ukraine's military acknowledged that "the enemy has partial success in the village of Metolkine," just southeast of Sievierodonetsk.

Russia's state news agency TASS said many Ukrainian fighters had surrendered in Metolkine, citing a source working for Russian-backed separatists.

One of Russian President Vladimir Putin's stated goals in ordering troops into Ukraine was to halt the eastward expansion of the North Atlantic Treaty Alliance and keep Moscow's southern neighbour outside the West's sphere of influence.

However, the Western media continue to say, the war has killed thousands, reduced cities to rubble and sent millions fleeing. It is having opposite effect — convincing Finland and Sweden to seek to join NATO — and helping to pave the way for Ukraine's EU membership bid.

 

US Ambassador readying people of Bangladesh for an ‘engineered’ election

On June 13, 2022, I had posted a blog titled “United States starts playing regime change mantra in Bangladesh”. I quoted Jamie Raskin, Member of US House of Representatives, urging his colleagues to join him in standing with the people of Bangladesh, especially those bravest and most vulnerable. 

Today, I am quoting what the US Ambassador to Bangladesh, Peter Haas has said lately.

US Ambassador said the sanctions on Rab will not damage the bilateral relationship and that the two countries, which have deep ties, will move on and work together based on shared values of democracy and human rights.

“…A lot of people ask me if I think this will damage our bilateral relations. And I just say, I don’t think it has to,” he said in a talk show titled AmTalk. Video of the event has been uploaded to the Embassy’s Facebook page.

The envoy said there are frictions in the relationship. “And that’s okay when you have a relationship as broad and deep as ours. But what I want to see us do both on Rab and every other aspect is to sit down and to talk about… what do we need to do to resolve this issue.”

Last year, Washington imposed sanctions on Rab and some of its current and former officials.

Haas said his country heard a lot of times how Bangladesh was surprised when the US imposed sanctions.

“And maybe we’re almost surprised they’re surprised, because already in 2018, we stopped providing training to the Rab, because of our concerns on human rights.

For several years, we’ve published in our human rights reports our concerns. We’ve raised it with them in bilateral meetings. And so, while the sanctions may have come as a surprise, the idea that we had concerns should not have.”

The envoy said the US is also not perfect when it comes to democracy but that the striving for democracy must continue.

Referring to Bangladesh, he said there are things that the Bangladeshi people and the government can work on as well and the elections provide a good framing for that, because they’re still more than a year out.

“We don’t favour any particular party, or platform, or anything else … But what we would like to see is what I think all Bangladeshis would like to see, which is an election run at international standards that allow the people of Bangladesh to choose their next leaders in an open, competitive process free of violence and free of coercion.”

Haas said he welcomes some of the signs, some of the signals that they have been receiving.

“Foreign Minister [Abdul] Momen has made it clear that Bangladesh will welcome international observers. And I think that’s critical.

“But the election actually has already started. And so, it’s important to be looking at it all the way from now to make sure that everyone feels safe and secure in their decision on whether or not to participate in any aspect of the upcoming elections,” he added.

 

Israel using gas exports to boost its diplomatic influence

A visit to the Leviathan gas rig off the coast of Haifa illustrates Israel’s opportunity to up its gas game and wield its diplomatic power across the globe. The gas rig is actually quite big.

With three main levels and pipes that seem to go on forever – leaving one wonder how someone figured out how to connect them all.

Leviathan is the largest gas rig in Israeli waters that receives gas from the country’s largest gas reservoir located well over 100 km away. The gas flows through the rig where it is cleaned and then propelled directly to Israel where it immediately powers the country.

Russian invasion of Ukraine has opened what some in the industry call “historic opportunities” for the Jewish state to up its energy game and, in return, increase its diplomatic value and standing in the Middle East and beyond.

The illustrations are bountiful, but two are important: In March, President Isaac Herzog flew to Turkey and met with President Recep Tayyip Erdogan. Last month, Turkish Foreign Minister Mevlut Cavusoglu visited Jerusalem for talks with Foreign Minister Yair Lapid.

Ankara is heavily reliant on Russia for energy – including 45% of its natural gas and 17% of its oil. Reconciliation with Israel and improving relations is the key for Turkey to be able to potentially diversify its suppliers and cut back its dependence on Russia.

The second example was the flip-flop that Israeli Energy Minister Karin Elharrar did on May 30 when she announced that her ministry would be issuing licenses for new exploration of natural gas in Israeli waters. It was a sharp turn from what the Yesh Atid had announced just six months earlier in December 2021.

Elharrar said, “In the coming year we will focus on the future, on green energy, on energy optimization and on renewable energy, and while we do so we will put aside the development of natural gas, which, as is known, is a short-term solution.”

By May 30, Elharrar was singing a different mantra, “The global energy crisis provides an opportunity for Israel to export natural gas, along with the honest and real concern for what is going on in Europe.”

A global energy crisis and the recognition that Israel can play a role in resolving it and at the same time improving its international standing, makes the big difference.

“The world changed and we cannot ignore it,” said Energy Ministry Director General Lior Schillat. “There is a rise in the demand for gas especially in Europe since the Russia situation and they need a steady supply and the minister did a reassessment in the middle of the year instead of at the end of the year since we think it is possible to increase the supply.”

Oded Eran, Israel’s former Ambassador to the European Union, said that the developments in Europe are a historic opportunity for Israel and the energy minister’s policy reversal needs to be looked at through that prism. On the one hand, Eran explained, was the populist-driven decision last December to stop exploration which had wanted to put Israel on track with the climate change camp while ignoring the economic and diplomatic opportunities that gas provides the country.

Until now, Eran added, Israel was not viewed as an international energy player but just as a regional one. “But now with the war in Ukraine, you can see that Israel is not unimportant,” he said.

As an example, Eran referred to US President Joe Biden’s promise in March to transfer 15 billion cubic meters (BCM) of liquefied natural gas to Europe by the end of 2022 to help with the shortfall caused by the war in Ukraine. Israel, he said, already exports about 10 BCM of natural gas to Jordan and Egypt.

“This is not far from the amount that Biden promised Europe,” he said.

Rising Indian purchases of Russian coal and crude oil

According to a Reuters report, Indian purchases of Russian coal have spiked in recent weeks despite global sanctions on Moscow, as traders offer discounts of up to 30%.

Russia, facing severe Western sanctions, had warned the European Union in April against sweeping sanctions on coal, saying they would backfire as the fuel would be redirected to other markets.

India has refrained from condemning Russia, with which it has longstanding political and security ties, but urged an end to violence in Ukraine. New Delhi defends its purchases of Russian goods as part of an effort to diversify supplies and argues a sudden halt would jack up prices and hurt its consumers.

The US officials had told India there was no ban on energy imports from Russia but they (US administration) do not want to see a rapid escalation in imports from Russia.

As European importers shun trade with Moscow, Indian buyers are mopping up huge quantities of Russian coal despite high freight costs.

Its purchases of coal and related products jumped more than six-fold to US$331.17 million in the recent 20 days from the same period a year earlier, according to unpublished Indian government data reviewed by Reuters.

Similarly, Indian refiners have snapped up cheap Russian oil shunned by Western countries. The value of India's oil trade with Russia during the period under review jumped more than 31-fold to US$2.22 billion, the data showed.

"The Russian traders have been liberal with payment routes and are accepting payments in Indian rupee and United Arab Emirates dirham," one source said. "The discounts are attractive, and this trend of higher Russian coal purchases will continue."

Offshore units of such Russian coal traders as Suek AG, KTK and Cyprus-based Carbo One in places including Dubai and Singapore offered discounts of 25% to 30%, triggering bulk purchases of Russian thermal coal by traders supplying to utilities and cement makers, the sources said.

Another source said the Singapore-based unit of Suek was also accepting payments in dollars.

Suek and KTK did not immediately respond to requests for comment. Reuters could not immediately reach Carbo One.

The EU ban has barred new coal contracts and by mid-August will force the member nations to terminate existing ones.

India bought an average US$16.55 million of Russian coal a day, more than double the US$7.71 million it bought in the three months after Russian invasion on Ukraine on February 24, this year, according to Reuters calculations.

Oil purchases averaged US$110.86 million a day in the 20-day period, more than triple the US$31.16 million it spent in the three months ended May 26, 2022.

Indian bulk buying of Russian coal is set to continue, with June imports expected to be the most in at least seven and a half years, Refinitiv Eikon ship tracking data showed.

Bulk shipments of Russian thermal coal started reaching India in the third week of May, with orders mainly from cement and steel firms and traders, according to shipping data compiled by an Indian coal trader.

 

Pakistan should forget buying Russian oil for the time being

I am an ardent supporter of buying Russian oil being sold at huge discount. However, on the second thought, without mincing my words, I would say Pakistan should forget buying Russian oil for the time being. The country must solicit better terms and conditions from countries currently meeting Pakistan’s requirements.

First and the foremost, Pakistani refineries are not tuned to refine Russian oil. Even if Pakistan decides to buy Russian oil, the prerequisite is making these refineries capable of refining Russian oil. At this juncture, Pakistan neither has the foreign exchange nor the time to re-tune the refineries.

Second making payment to Russian suppliers is a stumbling block. Even those European countries, heavily dependent on Russian oil and gas, are being pressurized by United States to gradually curtail their purchases of energy products from Russia. The payment process is also being made difficult. On top of all, Pakistan also does not have ample rubles.

Third, Pakistan already enjoys deferred payment facility from Saudi Arabia. The kingdom is also willing to give more foreign exchange, but it would certainly not approve taking money from it and buying oil from Russia.

Pakistan can also increase purchase of motor gasoline and diesel purchase from these two brotherly countries to avoid any retuning of the refineries in Pakistan.

UAE is already a joint venture partner in Pakistan’s largest refinery, Pak-Arab Refinery (PARCO) located at Mahmood Kot near Multan and black and white oil pipelines in Pakistan.

Forth, the sailing time from Saudi Arabia/United Arab Emirates to Pakistan is certainly shorter as compared to any of the Russian ports. Therefore, the benefit of discounted price would be eroded to a significant extent by higher freight cost.

Along with buying crude oil and POL products from Saudi Arabia and UAE, Pakistan should also negotiate with Qatar to sell LNG at concessional price that too at a deferred payment.

On the diplomatic front Pakistan should also convince United States to let the country buy LNG from Iran. The argument is simple, “If India being a member of QUAD can buy oil from Russia despite sanctions; Pakistan should also be allowed to buy gas from Iran”.     

As such the negotiations regarding ‘Iran Nuclear Deal’ has been dragged for too long. If United States is willing to allow Venezuela to export oil, sanctions on Iran should also be withdrawn immediately to save the world from crude oil and energy products becoming too expensive.

This is also to remind the policy makers that Iranian President Ebrahim Raisi has already assured Pakistan’s Foreign Minister Bilawal Bhutto Zardari the willingness of his country to meet Pakistan’s demand of oil, gas and electricity.

Iran can fulfill Pakistan’s energy needs, says President Raisi

According to Tasnim News Agency, Iranian President Ebrahim Raisi expressed the country’s readiness to satisfy Pakistan’s demand for oil, gas and electricity. In a meeting with Pakistani Foreign Minister Bilawal Bhutto Zardari, held in Tehran, Raisi hailed the close ties between the two neighbors, saying the people of Iran and Pakistan are like relatives.

“We consider Pakistan’s security to be our own security,” he said, adding, “Some do not like the good relations between the two Muslim, neighboring, friendly and brotherly nations, but the development of relations leads to economic prosperity and more security for the nations of the region.”

There are no restrictions in Tehran for the development of relations with Islamabad, Raisi noted, saying, “We are ready to promote comprehensive cooperation with Pakistan and the Islamic Republic of Iran has the necessary capacity to meet Pakistan’s needs in various fields, including oil, gas and electricity.”

The Iranian president called the fields of energy, transit and cooperation and coordination in the regional issues and crises as important aspects of relations between the two countries, his official website reported.

For his part, Bilawal expressed satisfaction with the visit to Iran, adding, “As much as I am a child of Pakistan, I am also a child of Iran.”

Thanking Iran for exporting electricity to Pakistan, the Foreign Minister said, “We are fully prepared to complete and conclude the previous talks in the fields of security, trade and energy.”

Pakistani Foreign Minister also praised the government of Iran for its assistance in extinguishing the widespread wildfires in Pakistan’s Baluchistan province.

 

European leaders visit Ukraine

I am a bit surprised but a lot disturbed to read this news. German, Italian and Romanian leaders visited a small town Irpin to show support for Ukraine. However, little effort is being made to negotiate ceasefire. 

I also fail to understand why people of Ukraine have been made scapegoat to push Russia out of the energy market. United States has done this to Iran, Iraq, Libya and Venezuela in the past.

French President Emmanuel Macron said Thursday that there are signs of war crimes in a Kyiv suburb following “massacres” by Russian forces. He spoke in the town of Irpin while on a visit with the German, Italian and Romanian leaders to show support for Ukraine.

He denounced the “barbarism” of the attacks that devastated the town, and praised the courage of residents of Irpin and other Kyiv region towns who held back Russians forces from attacking the capital.

The four European leaders arrived earlier in Kyiv to the sound of air raid sirens as they made a high-profile show of collective European support for the Ukrainian people as they resist Russia’s invasion.

The visit, which includes a planned meeting with President Volodymyr Zelenskyy, carries heavy symbolic weight given that the three Western European powers have faced criticism for not providing Ukraine with the scale of weaponry that Zelenskyy has been asking for.

They have also been criticized for not visiting Kyiv sooner. In past weeks and months a number of other European leaders had already made the long trip overland to show solidarity with a nation under attack, even in times when the fighting raged closer to the capital than it does now.

The French president’s office said that Macron, German Chancellor Olaf Scholz and Italian Premier Mario Draghi, representing the three largest economies in Europe, traveled to Kyiv together on a special overnight train provided by the Ukrainian authorities.

President Klaus Iohannis of Romania — which borders Ukraine and has been a key destination for Ukrainian refugees — arrived on a separate train, tweeting on arrival, “This illegal Russian aggression must stop!”

“It’s a message of European unity for the Ukrainian people, support now and in the future, because the weeks to come will be very difficult,” Macron said.

The Russian forces are pressing their offensive in the eastern Donbas region, slowly but steadily gaining ground on the badly outmanned and outgunned Ukrainian forces, who are pleading for more arms from Western allies.

Several air raid sirens rang out while the European leaders were in their hotel preparing for the rest of their visit, and Kyiv authorities urged people to seek shelter. Such alerts are a frequent occurrence.

As he left the hotel, Macron, putting his hand on his heart, said in English, “I want to show my admiration for the Ukrainian people.”

German news agency dpa quoted Scholz as saying that the leaders are seeking to show not only solidarity but also their intent to keep up financial and humanitarian help for Ukraine, and a supply of weapons.

Scholz added that this support would continue “for as long as is necessary for Ukraine’s fight for independence.”

Scholz said that the sanctions against Russia were also significant and could lead to Moscow withdrawing its troops, according to dpa.

Scholz, Macron and Draghi have been criticized not only for helping too little but for speaking to Russian President Vladimir Putin.

Many leaders and regular people in the Baltic and Central European nations, which were controlled by Moscow during the Cold War, believe that Putin only understands force, and have viewed the efforts by Macron and others to keep speaking to Putin following his invasion as unacceptable.

Hopes were high among Ukrainians that the visit could mark a turning point by opening the way to significant new arms supplies.

Tamara Malko, a resident of Pokrovsk, in the Donestsk region of eastern Ukraine, said Macron and Olaf had been “very cold” toward Ukrainians so far, and hoped for a change.

“We want peace very much, very much and have high hopes for Macron and Scholz,” she said. “We want them to see and understand our pain.”

Luhansk regional governor Serhiy Haidai said the visit will not bring anything if the leaders ask Ukraine to conclude a peace treaty with Russia that involves giving up territory. He said that is something Ukrainians would never accept.

“I am sure that our president, Volodymyr Zelenskyy, is not going to make concessions and trade our territories. If someone wants to stop Russia by giving them the territories, Germany has Bavaria, Italy has Tuscany, the French can concede Provence, for instance,” he said.

“Listen, this is Russia. These are wild people. Today it will be one territory, tomorrow another one, the day after tomorrow another. And another thing: Many heroes of Ukraine died protecting the country as a whole. Nobody will forgive us if people die but we make concessions to the aggressor.”

The visit comes as EU leaders prepare to make a decision June 23-24 on Ukraine’s request to become a candidate for EU membership, and ahead of an important NATO summit June 29-30 in Madrid.

Also Thursday, NATO defense ministers are meeting in Brussels to weigh more military aid for Ukraine. On Wednesday, the US and Germany announced more aid, as America and its allies provide longer-range weapons they say can make a difference in a fight where Ukrainian forces are outnumbered and outgunned by their Russian invaders.

On Tuesday, during a trip to Ukraine’s neighbors Romania and Moldova, Macron said a “message of support” must be sent to Ukraine before EU heads of state and government “have to make important decisions” at their Brussels meeting.

“We are in a moment where we need to send clear political signals — we, Europeans, we the European Union — toward Ukraine and the Ukrainian people,” he said.

Macron is deeply involved in diplomatic efforts to push for a cease-fire in Ukraine that would allow future peace negotiations. He has frequent discussions with Zelenskyy and has spoken on the phone several times with Russian President Vladimir Putin since Putin launched the invasion in late February.

Scholz had long resisted traveling to Kyiv, saying he didn’t want to “join the queue of people who do a quick in-out for a photo opportunity.” Instead, Scholz said a trip should focus on doing “concrete things.”

Germany on Wednesday announced that it will provide Ukraine with three multiple launch rocket systems of the kind that Kyiv has said it urgently needs to defend itself against Russia’s invasion.