Japan partially shuts down refining capacity

Japan has shut down one million barrels per day (bpd) refining capacity temporarily out of 3.3 bpd due to turnarounds and technical issues across, this translates into shutting down 31% of the country's overall capacity.

Japan's largest refiner Eneos has shut down 35% of its oil refining capacity, shutting down four plants with a total capacity of 618,100 bpd. The company has an overall 1.7 million bpd capacity across its ten units, which accounts for over 52% of Japan's total oil refining capacity.

Eneos shut its 145,000 bpd Sendai refinery on May 28 and its 141,000 bpd Sakai plant on May 17 for turnarounds. The two refineries are expected to restart operations in mid-July and late-July, respectively.

The company was also forced to shut its 203,100 bpd Kashima refinery on May 24 and 129,000 bpd Chiba plant on May 12 because of technical problems. The restart dates of the Kashima and Chiba plants are still unknown.

Another refiner Idemitsu also shut its 190,000 bbd Chiba refinery on April 28 for a scheduled maintenance. It is expected to last around two months, said market participants. Idemitsu's 70,000 bpd Keihin refinery operated by Toa Oil has delayed resuming operations after it started a turnaround in January this year.

Fuji Oil on May 23 has halted operations at its 143,000 bpd Sodegaura plant for a turnaround, with the shutdown planned for a month.

Cosmo Oil was forced to halt the 102,000 bpd No.2 crude distillation unit at its 177,000 bpd Chiba plant on May 16 because of some technical difficulties but resumed operations on May 28.

Japanese refiners have struggled with stable refining operations as their plants are getting old. Ageing refineries cause technical issues, and firms need more time for turnarounds to avoid unexpected shutdowns. Earthquakes also trigger technical issues at old refineries in Japan.

Eneos said earlier this month in its revised mid-term strategy that it has raised its budget for refinery maintenance during April 2023-March 2026 by 30% compared to the April 2020-March 2023 fiscal years, allocating US$3 billion to lift operating rates.

Lower runs also weighed on Eneos and Cosmo's profits from fossil fuel-related businesses in the 2022-23 fiscal year. Idemitsu's refinery issues also led to negative financial impacts, the firm stated in its April-December 2022 results.

 

United States: Bill passed raising debt ceiling

The House on Wednesday night passed a bipartisan bill to suspend the debt ceiling, overcoming vocal opposition from conservative and liberal lawmakers and bringing the country one step closer to avoiding an economy-rattling default ahead of next week’s deadline.

The legislation — which was crafted through negotiations between President Biden, Speaker Kevin McCarthy and their designees — cleared the chamber in a bipartisan 314-117 vote and now heads to the Senate, where leaders are hoping for swift consideration as the default deadline looms.

Treasury Secretary Janet Yellen has warned that the US could run out of cash to pay its bills by June 5, 2023, a situation that would plunge the country into its first-ever default — which economists and administration officials have warned would be catastrophic for the economy.

The bill suspends the debt limit through January 01, 2025, while also implementing a slew of cost-cutting measures including new spending caps over the next two years and a clawback of billions of dollars of unspent COVID-19 funds. It also includes permitting reform, puts an end date on Biden’s pause on student loan repayments and beefs up work requirements for federal assistance programs.

Wednesday’s vote marked a victory for McCarthy, who led his conference in passing a sweeping debt limit bill in April, got Biden to the negotiating table after the president for months insisted on a clean debt ceiling increase, and succeeded in narrowing those talks to just him, the president and their appointed deputies. McCarthy’s deputies then extracted concessions from the White House refused proposals like increasing taxes and worked furiously to sell the ultimate agreement to his conference.

“Passing the Fiscal Responsibility Act is a crucial first step for putting America back on track,” McCarthy said on the House floor Wednesday. “It does what is responsible for our children, what is possible in divided government, and what is required by our principles and promises.”

“Yes, it may not include everything we need to do,” he continued, “but it is absolutely what we need to do right now.”

But the deal simultaneously heightened the chances that McCarthy — who fought for his Speakership over 15 ballots in January — could face a challenge to his gavel from disgruntled conservatives who felt betrayed by the agreement he struck with the White House.

The vote also notched a win for Biden, who achieved the Democrats’ goal of punting any future debt limit increase beyond the 2024 presidential election.

Both camps, however, saw their fair share of opposition.

Seventy-one Republicans and 46 Democrats voted against the bill in the House — mostly liberals and conservatives protesting specific provisions of the bill. Their numbers, however, were never a threat to the bill’s passage because of a hodgepodge of moderates and leadership allies who — despite some acknowledging the bill wasn’t exactly what they wanted — threw their support behind the measure.

Conservatives, generally speaking, were frustrated with the lackluster magnitude of spending cuts in the agreement and the absence of several provisions that were in the debt limit bill — titled the Limit, Save, Grow Act — that House Republicans passed in April. 

The Congressional Budget Office (CBO) Tuesday estimated that the bipartisan debt limit deal could reduce projected deficits by about US$1.5 trillion over the next decade, a meager assessment compared to the roughly US$4.8 trillion the nonpartisan scorekeeper said the GOP bill would save.

Ahead of the high-stakes vote, more than 30 Republicans went on the record saying they would not vote for the bill, with some encouraging their GOP colleagues to join them in opposition.

“I want to be very clear: Not one Republican should vote for this deal. Not one,” Rep. Chip Roy said during a press conference Tuesday. “If you’re out there watching this, every one of my colleagues, I’m gonna be very clear: Not one Republican should vote for this deal.”

“It is a bad deal,” he added.

Liberals, on the other hand, voiced concern with the size and scope of spending cuts in the bill, and accused Republicans of holding the US economy hostage by forcing cost-cutting provisions in conjunction with the debt limit hike.

Work requirements also emerged as a particularly controversial topic throughout negotiations — which McCarthy dubbed a red line and House Minority Leader Hakeem Jeffries called a nonstarter. 

The legislation implements new work requirements for recipients of the Supplemental Nutrition Assistance Program — formerly known as food stamps — who are aged 50 to 54 and do not have dependents, and it includes some additional work requirements for the Temporary Assistance for Needy Families (TANF) program.

The bill does, however, include food stamp work requirement exemptions for individuals experiencing homelessness, veterans, and those 24 years or younger who were in foster care when they turned 18.

The CBO estimated that the work requirement changes would actually increase spending by US$2.1 billion over the next 10 years.

The bill came to the floor for a final vote on Wednesday after a drama-filled procedural vote that drove Democrats to trigger an emergency effort to help Republicans advance the bill.

While votes on rules, which govern debate over legislation, typically break along party lines, 29 Republicans broke from the GOP and opposed the rule on Wednesday as a way to boycott the debt limit bill. Shortly before the vote closed — as the bill was poised to be blocked — 52 Democrats threw their support behind the rule, bringing the final vote to 241-187 and allowing the debt limit bill to advance to the floor for a full vote.

“From the very beginning, House Democrats were clear that we would not allow extreme MAGA Republicans to default on our debt, crash the economy or trigger a job-killing recession. Under the leadership of President Joe Biden, Democrats kept our promise. And we will continue to do what is necessary to put people over politics,” Jeffries said on the House floor Wednesday.

He noted the last-minute scrambling on the debt limit bill.

“The question that remains right now is what will the House Republican majority do? It appears that you may have lost control of the floor of the House of Representatives. Earlier today 29 house republicans voted to default on our nation’s debt and against an agreement that you negotiated,” Jeffries said. “It’s an extraordinary act that indicates just the nature of the extremism that is out of control on the other side of the aisle.”

House passage of the Biden-McCarthy deal puts Congress closer to capping off a months-long saga over the debt ceiling, which began when the nation hit its borrowing limit on January 19, forcing the Treasury Department to begin implementing extraordinary measures so the country could continue paying its bills and stave off a default.

And it changes the political dynamics in the House GOP for McCarthy. 

McCarthy in January had made concessions and commitments on House rules and spending in order to secure the Speakership. The various factions of the conference had generally gotten along in the months since, but the right flank’s disappointment in the debt limit deal shattered that.

Rep. Dan Bishop even called for a vote to oust McCarthy as Speaker – though did not commit to making that move.

Allies of McCarthy hope that the discontent will blow over. 

“I think you’ll see that there’s still a broad cross-section of this conference that wants to try to figure out a way to do things together,” Rep. Dusty Johnson said.

McCarthy, for his part, is brushing aside the looming threat.

“Everybody has the ability to do what they want. But if you think I’m gonna wake up in the morning and be ever worried about that?” he told reporters Wednesday. “No, doesn’t bother me.”

 

 

Transition from OPEC to OPEC Plus

OPEC was founded in 1960 in Baghdad by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela with an aim of coordinating petroleum policies and securing fair and stable prices. Now, it includes 13 countries, which are mainly from the Middle East and Africa. They produce around 30% of the world's oil.

There have been some challenges to OPEC's influence over the years, often resulting in internal divisions, and a global push towards cleaner energy sources and a move away from fossil fuels could ultimately diminish its dominance.

OPEC became OPEC Plus in 2016 after joining hands with 10 of the world's major non-OPEC members, including Russia.

OPEC+ Plus represents around 40% of world oil production and its main objective is to regulate the supply of oil to the world market. The leaders are Saudi Arabia and Russia, which produce around 10 million barrels per day (bpd) of oil each.

OPEC member states' exports make up around 60% of global petroleum trade. In 2021, OPEC estimated that its member countries accounted for more than 80% of the world's proven oil reserves.

Because of the large market share, the OPEC decisions affect oil prices. Its members meet regularly to decide how much oil to sell on global markets.

As a result, when they lower supply when demand falls, oil prices tend to rise. Prices tend to fall when the group decides to supply more oil to the market.

On April 02, 2023 OPEC Plus agreed to deepen crude oil production cuts to 3.66 million barrels per day (bpd) or 3.7% of global demand, until the end of 2023, which helped to push up oil prices by about US$9 a barrel to above US$87 per barrel over the following days, but Brent prices have since lost those gains.

During the 1973 Arab-Israeli War, Arab members of OPEC imposed an embargo against the United States in retaliation for its decision to re-supply the Israeli military, as well as other countries that supported Israel. The embargo banned petroleum exports to those nations and introduced cuts in oil production.

The oil embargo pressured an already strained US economy which had grown dependent on imported oil. Oil prices jumped, causing high fuel costs for consumers and fuel shortages in the United States. The embargo also brought the United States and other countries to the brink of a global recession.

In 2020, during COVID-19 lockdowns around the world, crude oil prices slumped. After that development, OPEC Plus slashed oil production by 10 million barrels a day, which is equivalent to around 10% of global production, to try to bolster prices.

The current members of OPEC are: Saudi Arabia, United Arab Emirates, Kuwait, Iraq, Iran, Algeria, Angola, Libya, Nigeria, Congo, Equatorial Guinea, Gabon and Venezuela.

Non-OPEC countries in the global alliance of OPEC Plus are represented by Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan and Sudan.

United States and South Korea in talks to release frozen Iranian assets

Officials from the United States and South Korea are holding talks over unfreezing Iranian funds held in South Korean banks, according to a South Korean daily.

The talks are focused on releasing the US$7 billion Iranian funds that have long been blocked in South Korean banks due to US sanctions on Iran. The funds are oil revenues dating back to the period prior to the re-imposition of US sanctions on Iran in May 2018.

Citing diplomatic and government sources, The Korea Economic Daily said, “Korean and US government officials are involved in working-level discussions under Washington’s leadership to unfreeze the Iranian funds.”

The newspaper said the funds, if released, would only be used for public and humanitarian purposes such as UN dues and COVID-19 vaccines.

“If all goes to plan, we expect our strained relationship with Iran to improve significantly,” said a Seoul government official.

If talks turn out to be successful, the frozen money will be allowed to be transferred to Iranian bank branches in neighboring Middle Eastern countries, not directly to Iran, to monitor the flow and use of the funds, sources said.

The Korean newspaper also pointed to media speculation over the concessions that Iran is expected to make in exchange for getting its money unfrozen. It said that media reports alleged that Iran would release US prisoners and limit uranium enrichment levels to 60% in return. These speculations have so far not been confirmed by officials.

The frozen Iranian funds have been the biggest obstacle to improvement in Tehran-Seoul relations. They have also been a source of tensions between the two countries.

South Korea seems to be willing to improve its relations with Iran by releasing its funds. “Analysts said if the US$7 billion Iranian funds are released, it would significantly improve Seoul’s relations with Tehran, an energy and military power in the Middle East,” the Korean newspaper wrote.

“There is nothing South Korea can gain from becoming an enemy of Iran,” said Sung Il-kwang, a Korea University professor. “Korea will benefit from gaining access to Iran’s huge market.”

 

QatarEnergy to sign long term LNG supply deal with Bangladesh

QatarEnergy will sign a long-term liquefied natural gas (LNG) supply deal with Bangladesh's state-owned gas company Petrobangla on Thursday, the second Asian sales deal to be sealed for Qatar's North Field expansion project.

The 15-year agreement is for the supply of 2 million tons annually, Petrobangla's Chairman Zanendra Nath Sarker told Reuters.

Supplies are set to start in January 2026, he said.

The agreement will be one of many to come this year as state-owned QatarEnergy secures sales for its mega expansion of North Field, a source with direct knowledge of the new contract agreement, who did not wish to be identified, said.

Qatar is the world's top LNG exporter and competition for LNG has ramped up since the start of the Ukraine war, with Europe in particular needing vast amounts to help replace Russian pipeline gas that used to make up almost 40% of the continent's imports.

But Asia, with an appetite for long-term sales and purchase agreements, has been ahead so far in securing gas from Qatar's massive production expansion project.

This will be Bangladesh's second long-term deal with Qatar as it desperately looks for long-term LNG deals at a cheaper rate after prices spiked following the Ukraine war last year.

The contract will be QatarEnergy's second to Asia since it started selling the gas expected to come on stream from the North Field expansion project.

The two-phase expansion plan will raise Qatar's liquefaction capacity to 126 million tons per year by 2027 from 77 million.

Qatar's first Asian deal, with Sinopec, the longest to be signed at 27 years for the supply of 4 million tons a year, was followed by the state-owned Chinese company taking a 5% stake in the equivalent of one North Field East LNG train.

QatarEnergy's sales and purchase agreements to supply Germany with around 2 million tons of LNG annually through a partnership with ConocoPhillips cover at least a 15-year period.

Bangladesh has a 10-year LNG import deal with Oman Trading International. That LNG is priced at 11.9% of the three-month average price of Brent crude oil plus a constant price of 40 cents per million British thermal units (mmBtu).

Under its first 15-year deal with Qatar, Bangladesh pays 12.65% of the three-month average price of Brent oil plus a constant of 50 cents per mmBtu.

The North Field expansion project will help guarantee long-term supplies of gas globally. North Field is part of the world's biggest gas field that Qatar shares with Iran, which calls its share South Pars.

QatarEnergy chief Saad al-Kaabi said last week there was big demand for LNG and that he expects by the end of the year to have signed supply deals for all the gas expected to come on stream from the North Field expansion.

 

China to invest in Suez Canal Economic Zone

Chinese companies have pledged to invest over US$3 billion in new Suez-based projects.

Egypt's Suez Canal Economic Zone (SCZone) secured the investments from Chinese companies active in chemical, textile and apparel, power, pipes, and iron and steel industries. The investment agreements and commitments were secured during the visit by SCZone Chairman, Walid Gamal El-Din.

Focus of the deals appears to be the Suez Economic and Trade Cooperation Zone (SETC), an industrial estate near the city of Suez, jointly established by the governments of China and Egypt, for the purposes of inviting Chinese companies to set up industries, as part of the Belt and Road project.

The SETC was built by the Tianjin Economic-Technological Development Area (TEDA). The TEDA Suez zone was created in 2008 and extended in 2016 during a visit by Chinese President Xi Jinping to Egypt.

Last week, the SCZone delegation held discussions with Xinxing Ductile Iron Pipes Co, regarding a proposed US$2 billion ductile cast iron pipe manufacturing plant in the Sokhna Industrial Zone, Zawya said.

“The first phase of the project will have an annual production capacity of 250,000 tons of ductile iron pipes, which is expected to increase to 500,000 tons per year in the second phase,” it said.

Shandong Tianyi Company planned to establish bromine and caustic soda production plants in TEDA Suez, with a total investment of $310 million.

“The bromine production plant, valued at US$110 million, will cover an area of 270,000 square meters and have an annual production capacity of 140,000 tons,” it said.

Several other projects in textiles, power generation, apparel and fashion and other industries, worth tens of millions of dollars, to be located in Suez, Sokhna and Abu Khalifa were also announced.

While in China, Gamal El-Dien also met with officials from the China-Africa Development Fund, to discuss investments in the pharmaceutical, automotive, and green fuel industries. His counterparts expressed readiness to finance Chinese investment projects in SCZone, including those related to green hydrogen.

 

Fuel prices likely to fall globally

Global prices of diesel and motor gasoline have corrected significantly by 46% and 50% since the start of the calendar year 2023, due to rising concerns of global recession majorly emanating from Western/European front, to presently stand at US$86/US$90 per barrel, for gasoil and gasoline respectively.

Refiner’s main input, crude oil selloffs (Arab Light/ WTI/ Brent down 9.5%/9.8%/10.7% since start January 2023) have also remained rampant throughout CYTD as an overall direct repercussion of US-Fed’s hawkish stance (debt ceiling conundrum, banking crisis) resulting in significant stockpile build up over the previous week, softer demand in China amid COVID concerns, availability of low cost Russian crude towards China and India and finally easing prices of RLNG globally (US$9.3/mmbtu, down 60%YoY), resulting in power generation demand for diesel to fall drastically.

Moving forward, analysts expect gasoline cracks to gain strength and remain elevated with the onset of summer driving season beginning 1st June in the western front, where-in last time both gasoline/gasoil spreads peaked during July last year.

Overall, heightened geopolitical tensions will continue to provide major support to prices and in case OPEC Plus stands firm on it supply cut decisions, the prices may possibly increase further.

Naturally, domestic refinery margins have fallen sharply from their multi year highs from US$26/ US$45/bbl for MS/ HSD back in June2022, to presently stand at US$-0.2/2.6/bbl (down 100%/94%).

This has subsequently pushed domestic ex-refinery prices down by 10%/ 27% from peaks of PKR224/ PKR276 per liter in last summer, for MS/ HSD, even with the currency depreciating by 42% during this time.

Using the aforementioned space, IFEM margin was pushed into the positive territory as well which had been mostly negative for several months now.

Local refiners are also expected to reap benefits of the aforementioned fuel inflation expected during the summer season, which pushed the domestic cracking spreads as high as US$25/ US$45 barrel last year, for MS/ HSD respectively. Assuming Arabian Gulf gasoline/ gasoil prices increase by +10% from current levels, this is expected to raise domestic MS/ HSD prices by PKR18/ PKR21 per liter, respectively.

Outlook: Moving forward, sector profitability may remain firm in the near term as refined product margins are expected to remain strong during 2Q/3QFY23 alongside healthy inventory gains amidst increasing ex-refinery prices, but may eventually cool off post summers and the commencement of Middle Eastern capacities (one million bpd capacity inclusion beginning October 2323).

Although, worsening furnace oil yields in the wake of falling FO demand may be a risk to look out for as FO crack spreads presently stand at negative US$28/bbl.

 

OPEC to welcome Iran’s return to oil market

OPEC will welcome Iran’s full return to the oil market when sanctions are lifted, the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) told the Iranian oil ministry's website SHANA on Monday.

Iran is an OPEC member, although its oil exports are subject to US sanctions aimed at curbing Tehran's nuclear program.

Secretary General Haitham Al Ghais, who is visiting Tehran for the first time, added that Iran has the capacity to bring on significant production volumes within a short period of time.

"We believe that Iran is a responsible player amongst its family members, the countries in the OPEC group. I’m sure there will be good work together, in synchronization, to ensure that the market will remain balanced as OPEC has continued to do over the past many years," SHANA's English-language website cited him as saying.

Asked about OPEC’s voluntary production cut and its effect on oil prices, Ghais said, "In OPEC...we don’t target a certain price level. All our actions, all our decisions are made in order to have a good balance between global oil demand and global oil supply."

In a surprise move in early April, Saudi Arabia and other members of OPEC Plus, which comprises OPEC and allies including Russia, announced further oil output cuts of around 1.2 million barrels per day, bringing the total volume of cuts by OPEC Plus to 3.66 million barrels per day, according to Reuters calculations.

Saudi Arabia, the kingpin of OPEC, and Iran announced in March that they would restore diplomatic relations after years of hostility, in a deal brokered by China, the world's second largest oil consumer.

Turkey: Erdogan wins another term as President

Chairman of Turkey's Supreme Election Council (YSK) announced that the incumbent President Recep Tayyip Erdogan has been re-elected as the country's leader.

Yener said that Erdogan won Turkey's presidency over opposition challenger Kemal Kilicdaroglu in the second-round runoff vote.

He pointed out that Erdogan won the race with 52.14%, while Kilicdaroglu got 47.86% of the votes after counting 99.43% of the votes.

In a speech in Istanbul late Sunday, President Erdogan said Turkey’s 85 million-strong citizens are the winners in the national elections that concluded today.

More than 64.1 million people were registered to vote, including over 1.92 million who earlier cast their ballots at overseas polling stations.

Nearly 192,000 ballot boxes were set up for voters across Turkey.

On May 14, no candidate won the required 50% in the first round, triggering Sunday’s runoff, although Erdogan took the lead with 49.52%.​​​​​​

On that day, Erdogan’s People’s Alliance also won a majority in parliament.

 

 

Israeli President’s visit to Azerbaijan

President Isaac Herzog will travel to Azerbaijan on Tuesday to strengthen the strategic ties between Israel and the Shia Muslim country bordering on Iran.

During the two-day visit, Herzog plans to meet with his Azeri counterpart Ilham Aliyev and to take part in a special event marking the 75th anniversary of Israeli independence.

Aliyev will welcome Herzog and his wife, Michal, at his palace, with an honor guard, and the two presidents plan to hold a diplomatic meeting, followed by a lunch.

Health and Interior Minister Moshe Arbel will accompany Herzog to Azerbaijan, where he plans to meet with his counterparts in Baku to discuss greater cooperation in training doctors, emergency preparedness and digital health.

Israel and Azerbaijan are expected to sign an agreement on health cooperation during the visit.

The Herzogs will also meet with members of the Jewish community in Azerbaijan. They are expected to be met at the airport by 30 children who attend the Chabad School in Baku, waving the flags of Israel and Azerbaijan.

Azerbaijan opened an embassy in Israel for the first time in March of this year, though Israel has had an embassy in Baku since 1993.

Baku had been hesitant to open an embassy in Israel in the past for fear of alienating other Muslim-majority states or provoking Iran but saw the Abraham Accords and Israel's rapprochement with Turkey, in which Aliyev played a part, as turning points.

Israel and Azerbaijan have a close defense relationship. Jerusalem supplied drones to Baku that were used in its 2020 war with Armenia, according to foreign reports.

The Stockholm International Peace Research Institute found that 69% of Azerbaijan’s arms imports in 2016-2020 came from Israel, which represents 17% of Israel’s arms exports in that period.

About 40% of the petroleum imported to Israel comes from Azerbaijan.

Azeri politicians tied the move to open an embassy in Israel to Iran opening an additional consulate and declaring close ties with Armenia, with which Azerbaijan fought a war in 2020.

Iran and Azerbaijan share a 670-kilometer border, and there has long been speculation that Israel has launched covert operations in Iran from its northern neighbor.

Last year, Iranian Foreign Minister Hossein Amir Abdollahian accused Israel of having established its presence in several regions of Azerbaijan, which Baku denied.

Soon after, Iran staged a military drill along the border. Aliyev responded by having himself photographed with Israeli Harop kamikaze drones, which are produced in his country.

Also this week, Foreign Minister Eli Cohen will be making a diplomatic trip to Central Europe to meet with senior government figures in Croatia, Slovakia, Hungary, and Austria. He plans to visit four countries and meet with five foreign ministers in four days.

He will be the first Israeli foreign minister to visit Slovakia and the first in 10 years to go to Zagreb.

“The diplomatic visit to Central Europe strengthens our strategic coordination with our allies and creates opportunities for Israel to promote its diplomatic and economic interests on the continent,” Cohen said. “Israel’s allies in the EU play an important role…from economic, cultural and technological cooperation, to our joint fight against terror and a nuclear Iran.”

 

Iranian team visits location of deadly attack

A parliamentary delegation from the National Security and Foreign Policy Committee of Iran visited the location of the deadly armed attack that took place earlier this month on the border with Pakistan. Shahriar Heidari, a member of the Committee, led the delegation.

Last week, five Iranian border guards were killed during an attack by gunmen in the border region of Mak Soukhteh in Sistan-Baluchistan province. Two of the victims are officers and the remaining three are conscripts.

The troops serving in the border regiment of Saravan clashed with a group of gunmen who were trying to cross the border near the Mazesar border post, the Iranian police said, adding that the terrorists fled the scene after sustaining heavy losses, according to Tasnim.

The attack took place in Saravan, which is only 40 kilometers away from the border with Pakistan. Earlier, the deputy commander of the Iranian police and the commander of the Iranian border guards traveled to the location of the clash.

Heidari said the Iranian troops resisted from their location at the border post’s turret for an hour. “Five people of the border guards were stationed in the turret that was destroyed by the group for about an hour. The terrorists first asked the Iranian border guards to surrender, but the brave border guards of our country preferred martyrdom to surrender. And this shows the sacrifice, interest and courage of the border guards towards the soil of the country,” he said, according to the parliamentary news agency ICANA. 

He also said that the assailants were backed by foreign powers. “Based on the geographical conditions of this region, it is quite clear that the foreign services on the other side of the border had a close relationship with the terrorist group and definitely helped them in providing equipment,” he added. 

He continued, “The authorities should pay special attention to equipping the country's border guards, and I expect my colleagues in the parliament to soon put the plan to strengthen the border guards on the agenda so that the border guards of the Islamic Republic of Iran can be strengthened in terms of quality and quantity.”

Heidari said, “In the course of the clash, with the planning of the border guard commander and the border regiment and readiness, the turrets around the border guard helped as soon as possible. The border guards targeted the enemy's location in different places; some of the bad guys were injured in this conflict.”

He also called on Pakistan to ensure border security. “The expectation of the Islamic Republic of Iran from Pakistan is that this country also pays attention to the security of the border and this issue is very important for Iran. The foreign ministers of Iran and Pakistan should monitor these issues and Pakistan should take measures to ensure the security of the common borders so that we do not witness the repetition of such unfortunate events.”

Heidari noted, “The two countries of Iran and Pakistan have concerns about their common borders, but today only the Islamic Republic of Iran has been active and has taken measures to ensure the security of these borders.”

The lawmaker said Iran is also ready to conduct operations inside Pakistan to ensure security if Islamabad is unable to do so. He said such an operation can be done with Pakistan’s approval. 

“Pakistan must respect the right of neighbor, because the border tensions that occur under the influence of some currents and with the help of the equipment of foreigners harm the relations between Iran and Pakistan,” he continued.

 

Rising concerns about bunker quality

Singapore-based marine fuel supply firm, Integr8 Fuels, has warned ship operators of potential bunker quality issues. In its second Bunker Quality Trends report, the firm has assessed data relating to the supply of 60 million tons of bunker fuel over six months.

Integr8’s most important finding is that ships refuelling in the Amsterdam-Rotterdam-Antwerp port range are no less than 14 times more likely to receive very low sulphur fuel oil (VLSFO) consignments with sulphur levels exceeding the mandated 0.5% maximum than ships bunkering in Singapore.

The findings come at a key moment. They follow a series of high-profile incidents in Singapore, the world’s largest bunkering port, in which around 200 ships were affected by bad bunkers in the early months of 2022. Problems included clogged pipes, blocked fuel filters, and obstructed centrifuges.   

They also precede the 2025 introduction of the next Emission Control Area (ECA) in the strategically important Mediterranean Sea, affecting many thousands of vessels. From the beginning of May 2025, ships operating across the entire ECA will have to burn fuel with a sulphur content of no more than 0.1%.  

The Integr8 report provides owners with an update on fuel quality across a range of bunkering ports. In a statement, the company said it has addressed questions such as how likely an owner may be to face off-spec bunker situations; what parameters are the most problematic; and which ports pose the greatest risks.

The company’s Bunker Quality and Claims Manager, Chris Turner commented, “Whilst fuel quality remains good overall, pockets of problems remain, and data-driven buying remains the first line of defence to proactively protect buyers against most of the issues we see in the industry. We hope this report will provide ship operators and bunker buyers with the information and tools they need to mitigate risk and make smart buying decisions.”

The increasingly complex marketplace has prompted Integr8 to provide more data for clients. A new website will provide users with data sets that should give a basis for bunkering decisions such as when, where, costs, and avoiding possible delays.

Pablo Di Nieri, CCO said, “With so many different sources of data, and, in the case of pricing, a lack of official benchmarking system, it can be difficult to determine the right buying strategy or confidently assess performance. That’s why we have teams of research analysts and technical experts monitoring the market and producing valuable resources which users can access via our new website, along with regularly updated bunker pricing and quality information.”

 

Iran stresses unity among OPEC members

Iranian President Ebrahim Raisi stressed the necessity of strengthening unity among the members of the Organization of the Petroleum Exporting Countries (OPEC) to nullify the division created by the West.

Making the remarks during a meeting with OPEC Secretary General Haitham Al Ghais, in Tehran on Saturday, in the presence of Oil Minister Javad Oji, the president said, “Some Western countries seek to create division and disagreements among OPEC member countries to secure their interests, and the OPEC members should prevent the realization of these goals by strengthening their cohesion.”

He considered the constructive cooperation of the OPEC members with each other as an important factor in the success of this international organization and added: “The Islamic Republic of Iran has always had a constructive cooperation with this organization and we are determined to continue and improve the level of cooperation.”

The president further mentioned supporting the rights of oil producers and preventing discrimination against them as the philosophy of forming OPEC, and expressed hope that OPEC can bring peace to the oil market in the new period of activity.

During the meeting with the Iranian president and oil minister, OPEC Secretary General Haitham Al Ghais stated that the Islamic Republic of Iran, as one of the founding members of OPEC, has always had useful, effective, and constructive cooperation with this organization and its members and reminded, “Iran, both at the ministerial level and at the technical level has always acted in the direction of strengthening the cohesion and unity of OPEC members.”

Describing the situation of the oil market he said, “I hope that with the unity of OPEC members and benefiting from the constructive support and cooperation of the Islamic Republic of Iran, we will be able to bring peace to the market.”

The OPEC secretary general arrived in Tehran on Friday for reviewing the oil market situation, as well as the supply and demand outlook, with the Iranian officials, and exchange of views on the upcoming meeting of OPEC members and the ministerial meeting of the OPEC Plus (an entity consisting of the 13 OPEC members and 10 of the world's major non-OPEC oil-exporting countries).

Iran has always asked fellow OPEC members to refrain from any unilateral measures, warning that would undermine the unity of OPEC.

The Islamic Republic has called on members not to take unilateral measures that would undermine the unity and independence of OPEC and provoke the US to take action against Iran.

Reacting to Iran’s approach in this regard, the former OPEC secretary general said there were no unilateral decisions in the organization.

Mohammad Sanusi Barkindo said, “Regarding the issue of Iran and the sanctions, Iran had been faced with similar challenges in recent years and I am sure that it can overcome these issues.”

“Over the 60 years since the establishment of OPEC, we have faced many challenges, but what has always helped us is the unity of member stations. If we can preserve this unity, we can overcome the problems again,” the ex-OPEC secretary general said in an interview in Tehran on the sidelines of the Iran Oil Show.

Iranian Oil Minister Javad Oji has stressed that the global energy market needs an increase in the supply of Iranian oil saying, “As a major producer of oil and petroleum products, we are always ready to play our role in maintaining global energy security away from politics.”

Speaking after an OPEC Plus meeting last September, Oji noted that the role and importance of Iran's supply of energy resources, including oil, gas, and petroleum products, is of double importance in ensuring the stability and security of the world's energy.

“We have always declared that Iran is ready to contribute to the improvement of energy security in the world by avoiding the political use of energy. The global energy market needs an increase in the supply of oil and natural gas from Iran,” the minister said.

 

Iraq launches road and rail project to link Asia and Europe

Iraq has launched a US$17 billion project on Saturday to link a major commodities port on its southern coast by rail and roads to the border with Turkey, in a move designed to transform the country's economy after decades of war and crisis.

The Development Road aims to tie the Grand Faw Port in Iraq's oil-rich south to Turkey, turning the country into a transit hub by shortening travel time between Asia and Europe in a bid to rival the Suez Canal.

"The Development Road is not just a road to move goods or passengers. This road opens the door to development of vast areas of Iraq," Farhan al-Fartousi, director general of the General Company for Ports of Iraq, told Reuters.

Iraq's government envisions high-speed trains moving goods and passengers at up to 300 kilometres (186.41 miles) per hour, links to local industry hubs and an energy component that could include oil and gas pipelines.

It would mark a significant departure from the country's existing aged transport network.

Iraq's train service currently operates a handful of lines, including slow oil freight and a single overnight passenger train that trundles from Baghdad to Basra, taking 10 to 12 hours to cover 500 kilometres.

The Grand Faw Port, which was devised over a decade ago, is halfway to completion, Fartousi said.

Passenger transport between Iraq and Europe harkens back to grand plans at the turn of the 20th century to create a Baghdad to Berlin express.

"We will make this line active again and tie it to other countries," Fartousi said, noting plans to ferry tourists and pilgrims to Shiite holy sites in Iraq and Mecca in Saudi Arabia for the Haj pilgrimage.

The project was announced on Saturday at a conference aimed at courting Arab interest, including from Arab Gulf states, Syria and Jordan. A senior government aide said regional investment was on the table.

Promises of development are long-standing in Iraq but infrastructure remains decrepit even as the government of Prime Minister Mohammed Shia al-Sudani makes a push to rebuild roads and bridges.

But officials say the Development Road is based on something new: a period of relative stability since late last year that they hope can be maintained.

If work starts early next year, the project would be completed in 2029, Fartousi said.

"Even if Iraq was absent for a year or two or a decade or two, it must return one day or another. Hopefully these days are the beginning of the return of Iraq," he said.

China-South Korea to strengthen chip industry

China and South Korea have agreed to strengthen dialogue and cooperation on semiconductor industry supply chains, amid broader global concerns over chip supplies, sanctions and national security, China's commerce minister said.

Wang Wentao met with South Korean Trade Minister Ahn Duk-geun on the sidelines of the Asia-Pacific Economic Cooperation (APEC) conference in Detroit, which ended on Friday.

They exchanged views on maintaining the stability of the industrial supply chain and strengthening cooperation in bilateral, regional and multilateral fields, according to a statement from the Chinese Ministry of Commerce on Saturday.

Wang also said that China is willing to work with South Korea to deepen trade ties and investment cooperation.

However, a South Korean statement on the same meeting did not mention chips, instead saying the country's trade minister had asked China to stabilize the supply of key raw materials, and asked for a predictable business environment for South Korean companies in China.

"The South Korean side expressed that communication is needed between working-level officials over all industries", not just for semiconductors, a source with knowledge of the matter told Reuters.

The source declined to be identified because they were not authorized to speak to the media. South Korea is in the crosshairs of a tit-for-tat row between the United States and China over semiconductors.

China's cyberspace regulator said last week that Micron had failed its network security review and that it would block operators of key infrastructure from buying from the company. The US has pushed for countries to limit China's access to advanced chips, citing a host of reasons including national security.

About 40% South Korea's chip exports go to China, according to trade ministry data, while US technology and equipment are necessary for South Korean chipmakers Samsung Electronics and SK Hynix.

Deteriorating Israel-Arab relationships

Dynamics between Israel and the Arab world have taken a turn for the worse in the first few months of the current Israeli government headed by Prime Minister Benjamin Netanyahu.

The positive momentum in Israel-Arab relations, which Netanyahu himself was the key in generating through the signing of the Abraham Accords in September 2020 and which picked up pace during the Naftali Bennett-Yair Lapid government that followed, has slowed down since the Netanyahu took office in late December 2022.

Netanyahu initially sought to continue his regional achievements after taking over once again as prime minister, and Arab leaders at first played along. But this quickly changed given his government’s harsh policies and extreme statements; soon, Arab warnings to Israel and condemnations of its actions became a recurring theme.

In parallel, meetings between Israeli and Arab heads of state and ministers became increasingly rare, even though practical cooperation continued and previous understandings have mostly endured.

Under Israel’s current government, only limited progress may be feasible in Israel-Arab relations. But conditions for positive change do exist and include marginalizing Israeli extremists, avoiding a flare-up with the Palestinians, reducing the domestic turmoil in Israel, and ensuring the effective involvement of both the United States and the European Union.

Preventive diplomacy enabled the convening of two regional security summits, creating a new mechanism for engagement to increase stability. With Ramadan concluding without a flare-up, a cease-fire reached in Gaza, and domestic turmoil in Israel quieting somewhat, there is potential for renewed Israel-Arab engagement and there are already indications that this is happening.

This trend will become more significant if the United States prioritizes it. That will require Netanyahu to show greater moderation on the Palestinian issue, limit extremists in his coalition, and further backtrack on domestic democratic erosion.

The US should advance regional security summits and the Negev Forum, include a Palestinian component in Israel-Arab cooperative endeavors and normalization efforts, and encourage the EU’s recent initiative to advance a comprehensive regional peace.

 

History of Israel-Arab Normalization

Israel currently has official diplomatic ties with five Arab countries namely Egypt, Jordan, UAE, Bahrain, and Morocco.

Egypt was the first Arab state to sign a peace treaty with Israel, in 1979, in return for an Israeli withdrawal from the Sinai Peninsula it occupied in 1967.

Jordan followed in 1994, a year after Israel and the PLO recognized each other via the Oslo Accords. Progress toward Israeli-Palestinian peace enabled Israel to establish ties with other Arab states, but these were cut after the outbreak of the second intifada in 2000.

In 2020, following a gradual process, the Abraham Accords were signed, leading the UAE and Bahrain to normalize ties with Israel, with Sudan indicating it would follow suit when domestic conditions allow.

Also in 2020, Morocco re-established the official ties it had with Israel in the 1990s.

In 2022, Israel, the UAE, Bahrain, Morocco, Egypt, and the United States established the Negev Forum to advance multilateral cooperation.

Israel for decades had unofficial and secret relations with most Arab states. Israel-Arab relations traditionally have a strong security dimension, but also increasingly include civilian, economic, and political cooperation.

In 2002, the Arab League adopted the API, which promised Israel normal relations with the entire Arab world in return for peace with the Palestinians.

The API did not generate progress toward Israeli-Palestinian peace.

Currently, Saudi Arabia is seeking to update the API and possibly have it become a key part of a package of incentives for peace.

Netanyahu has repeatedly rejected the need to move forward with the Palestinians as a condition for progress with Arab countries. While he seeks to advance ties with Arab states to bypass the Palestinian issue, others in Israel and the international community seek to leverage normalization to advance Israeli-Palestinian peace.

Electronic Warehouse Receipt Financing: Still in a nascent stage in Pakistan

The Government of Pakistan (GoP) came up with an alternative delivery system for the benefit of farmers in year 2013. It is aimed at achieving financial inclusion of farmers, improve their financial conditions and on top of all achieving food security. Irony of fate was that when the program was launched there was no supporting infrastructure in the country. The work has to be started from ground zero, all the stakeholders have to join their hands and the GoP has to take the lead.

If one looks at more than one decade history, the progress is not very encouraging. On top of all hardly a few modern grains storage facilities have been constructed. Some basic questions arise, if there are no accredited storage facilities, how can the electronic warehouse receipts (ESRs) be issued? If farmers have no EWRs how can they borrow from the financial institutions?

A further probe indicates that a collateral management company has been established, it has accredited around a dozen flat-bed warehouses. However, hardly any warehouse with silos has been accredited. In the last financial year EWRs worth one billion rupees were issued and lending worth PKR700 million was made. The numbers look dismal keeping in view the size of just three crops, namely wheat, maize and rice.

Whatever EWRs have been issued were for maize and paddy, but not a single EWR has been issued for wheat. The point worth noting is that the country produces around 25 million tons wheat every year. The real cause of concern is that in the absence of modern grain storage silos, around 20% quantity goes stale before reaching the market. This is huge loss for the farmers as well as for the country.

As stated earlier, the GoP as well as the financial institutions have failed in convincing the potential investors to establish grain storage silo facilities. The point worth mentioning is that for the current financial year (FY23) State Bank of Pakistan (SBP) has fixed an indicative target of lending to farmers at PKR1.8 trillion. Against this target lending of PKR700 million against EWRs looks disappointing.

The introduction of EWRs in Pakistan is aimed at offering three options to the farmers: 1) safekeeping of commodities to avoid distress selling and post-harvest losses, 2) using EWR as collateral for borrowing from financial institutions and 3) trading of EWRs at the PMEX platform to efficiently sell the produce at a fair price.

The recent media reports indicate that at present only two commercial banks, out of more than two dozen, are running awareness sessions about lending against EWRs. These may be the banks that have lent significant amounts against EWRs. A question comes to minds what the other financial institutions are doing? It is necessary to reiterate that if there are no warehouses, no EWRs will be issued: If no EWRs are issued how the financial institutions would lend against the EWRs.

The EWR mechanism aims at improving the performance of the agricultural sector by stimulating economic growth both in the agricultural sector and also in the construction sector by creating an incentive for the private sector in constructing new warehouses. This will increase the capacity of the country to store agricultural produce without wastage, alleviating poverty and reducing shortages of agricultural produce in Pakistan.

The readers may be keen in knowing why a reasonably high amount has been lent against maize? According to the sector analysts chicken feed manufacturers has been the biggest beneficiary. They have the silos, warehouse management system, a large number of farmers/ suppliers and above all history of borrowing from the financial institutions. The lenders were comfortable in extending credit to financially strong borrowers. 

Analysts are of the view that unless an ecosystem is introduced for the storage of wheat, the efforts will not yield the significant results. However, the problem is that there are no silos. Historically the government has been the major buyer of wheat, but just does not have finances to buy more than more than 10 million tons. Almost the entire bought quantity is stored in highly inefficient flat-bed warehouses or kept in open.

A common complaint is that farmers are not ready to sell their produce to the government. However, the growers have contrary narrative. They say the government does not offer good price, there are extra ordinary delays in releasing payment and at time farmers get jittery because of fast approaching monsoon. The unscrupulous elements take advantage of the situation and force the farmers to sell their produce below the price fixed by the government.

Another narrative is that agents of neighboring country not only do expeditious buying but also pay a price which is higher than the support price fixed by the government. Soon after the purchase wheat is transferred to the ‘hideouts’. That is the reason that the government has to import wheat to meet the shortfall.

Analysts are of the view that if wheat is stored in the designated warehouses, it will be easy to monitor its movement. The borders have to be also monitored closely to contain slippage into the neighboring countries. EWR system can play a major role in not only saving large quantities going stale but also smuggling t the neighboring countries.

Pakistan plunging deeper into economic malice

Pakistan’s GDP growth has been provisionally estimated at 0.29%YoY for FY23, as against the revised growth of 6.1%YoY for FY22.

Agricultural sector’s growth is estimated at 1.55% for FY23, as compared to 4.3% in the earlier year, with crop output posting a negative growth of 2.49%YoY, offset by Livestock (3.78%), Forestry (3.93%) and Fisheries (1.44%YoY) growth.

The drop in crop production was largely anticipated in the aftermath of the floods in August 2022 that ravaged close to a third of the country’s land mass. Cotton crop was severely damaged during the period, as a result of which cotton arrivals at ginners remained lackluster, down by 34%YoY in 9MFY23.

Industrial output has been estimated to post negative growth in FY22 as against 6.83%YoY in the earlier year.

Within the Industrial Activities, Mining & Quarrying has posted a drop of 4.4%YoY, whereas growth in Manufacturing, Electricity (-3.91%YoY), Water and Gas supply (-6.03%YoY), and Construction (-5.53%YoY) have been estimated

To note, oil and gas production, as per the PPIS data, has dropped by 5.3% and 3.6%YoY, respectively in 9MFY23.

Moreover, OMC offtakes have dropped by 24%YoY in 10MFY23.

Furthermore, owing to restrictions on opening L/Cs, production activities across the country have been hampered.

For instance, data from PAMA indicates that production of automobiles in the country (excluding two- and three-wheelers) has dropped by 49%YoY in 10MFY23.

With the aforementioned backdrop and the figures furnished, GDP growth is likely to come in lower than the estimated figure, with a real possibility of Pakistan posting negative GDP growth in FY23.

Continuation of the FX crisis and the related import restrictions, along with the possibility of continuing climate-related disasters, is likely to keep GDP growth in check next year.

Heightened inflation expected for 1HFY24 (expected to taper off in 2HFY24) is likely to keep services sector growth in check as well.

With the delays in the IMF program and mounting external financing requirements (US$28 billion), further depreciation of the PKR against the greenback is likely.

 

US narrative on the removal of Ali Shamkhani

After a decade surviving Iran’s fractious politics, Ali Shamkhani was removed as secretary of the Supreme National Security Council (SNSC), the highest body in charge of foreign policy and national security, on May 22, 2023.

The former rear admiral, a young hero during the eight-year Iran-Iraq war who rose to become minister of defense in the 1990s, had served three presidents from rival factions as head of the SNSC. He was pushed aside in favor of Rear Admiral Ali Akbar Ahmadian, a senior Revolutionary Guards officer.

The reshuffling, which followed the execution in January of a former Shamkhani aide charged with treason, could significantly impact deliberations at the SNSC, which has only 12 permanent members.

“Shamkhani is considered a balancing factor in the decision-making process in Tehran,” Danny Citrinowicz, a fellow at the Institute for National Security Studies in Tel Aviv, told The Iran Primer.

Shamkhani was widely regarded to be pragmatic on contested issues, such as negotiations with the United States over Iran’s nuclear program. He was a moderate voice who called for discussions and dialogue, Alicia Kearns, British House of Commons Foreign Affairs Committee chair, told the BBC in January 2023.

Shamkhani has long been the most senior ethnic Arab in Iran’s government, largely dominated by Persians and other groups. He earned the trust of officials ranging from Supreme Leader Ayatollah Ali Khamenei, a hardliner, to President Mohammad Khatami (1997-2005), a reformist, due to his years of distinguished service in both the IRGC and the conventional military.

Shamkhani’s nearly 10-year term as SNSC secretary, from 2013 to 2023, was second only to Hassan Rouhani, who served in the position from 1989 to 2005. Shamkhani has been a survivor in a regime that has increasingly purged reformists, centrists and even some conservatives.  

Shamkhani has political enemies. For years, critics have charged him and members of his family, including his sons and son-in-law, of corruption and amassed wealth through shipping and construction companies.

In November 2022, Shamkhani reportedly faced criticism from hardliners for failing to quash the nationwide protests that erupted in September 2022.

In January 2023, Iran executed Alireza Akbari, who served as Shamkhani’s deputy from 2000 to 2004. Akbari was convicted of spying for Britain and corruption on earth. The execution triggered media speculation about Shamkhani's fate. IRGC-linked media reported that he might step down, but a news agency linked to the SNSC denied the reports.

Shamkhani’s last major accomplishment was helping to broker Iran’s rapprochement with regional rival Saudi Arabia. In March 2023, he led a delegation to Beijing for talks with the Sunni kingdom. The two countries agreed to restore diplomatic ties seven years after severing relations.

Shamkhani appeared to foreshadow the end of his term with a cryptic tweet on May 21. He quoted a 16th-century poem that Iranian media took as a sign of his imminent removal.

On May 22, President Raisi appointed Ali Akbar Ahmadian, an IRGC commander, to replace Shamkhani. Supreme Leader Khamenei then selected Ahmadian as his representative on the SNSC, which indicated his approval.

“I would like to thank and appreciate Ali Shamkhani's responsible, persistent presence and his efforts as the leader’s representative during these years,” Khamenei wrote in a decree.

Khamenei named Shamkhani his political advisor. “In light of the closeness between the two and the degree of Khamenei's trust in Shamkhani, he will likely continue to play a significant role in the decision-making process in Tehran,” according to Citrinowicz, who headed the Iran branch of Israel Defense Intelligence’s Research and Analysis Division. “Shamkhani has a great deal of knowledge and experience, with an emphasis on the nuclear issue.”

Khamenei also appointed Shamkhani as member of the Expediency Council, a body that resolves constitutional disputes between the Parliament and the Guardian Council. The body, which includes some three dozen members, has often included officials who have fallen out of favor. So the role could be largely ceremonial.

 

Viterra in talks to merge with Bunge

Global grain trader Viterra is in talks to merge with US rival Bunge in a potential mega deal that would reshape the top tier of global grains merchants.

There is no certainty that Viterra, part-owned by Switzerland-based mining and trading giant Glencore, will be able to reach an agreement on the terms. The deal structure is being discussed by both parties.

Any deal would be closely scrutinized by regulators as trade in staples such as wheat, corn and soybeans is already concentrated among Bunge and three other large players, raising global concerns about food security.

Bunge last year was the largest corn and soy exporter from Brazil, the world's top source of the staple crops for making animal feed and biofuels, according to data from shipping agent Cargonave. Viterra was the third largest corn exporter and seventh soybean shipper.

A merger with Viterra would also lift Bunge, with 2022 revenues of US$67.2 billion, closer to its nearest publicly traded agribusiness rival Archer-Daniels-Midland Co, which registered sales of nearly US$102 billion last year.

Shares of Bunge closed at a three-week high of US$93.61 on Thursday, valuing the company at about US$14 billion. Glencore shares fell 0.7%.

Global commodities merchants have built up cash reserves after turning in hefty profits over the past year as Russia's invasion of Ukraine disrupted shipments and crop prices soaring.

The agribusinesses make money buying, selling, storing and processing crops, often capitalizing on supply disruptions caused by crises like drought or war.

A merger with Bunge would put Viterra among the top tier of global grains merchants, with access to export terminals in the United States, one of largest grain producers and suppliers.

Viterra bought US-based Gavilon from Japan's Marubeni last year for US$1.1 billion, giving it significantly more physical grain handling assets in the US and making it the third-largest exporter of soybeans in Brazil, where Bunge already has a strong presence.

Viterra, formerly known as Glencore Agriculture, made the headlines in 2017 for a failed takeover approach to Bunge, one of the giant names of global grain trading, then valued at US$11 billion.

In May 2017, Bunge rebuffed Glencore after the latter made an informal approach to discuss a possible consensual business combination.

Glencore had publicly said it was reviewing options for its interest in Viterra, looking to unlock more value.

 

 

Lloyd’s Register drops ships of top Indian carrier of Russian oil

Lloyd's Register has told India's Gatik Ship Management, a major carrier of Russian oil since the Ukraine war that it will withdraw certification of 21 of its vessels by June 03, 2023.

It is the latest setback for Gatik, which was also been forced to find new flags for 36 of its ships after they were deflagged by the St. Kitts & Nevis International Ship Registry.

"Lloyd's Register is committed to facilitating compliance with sanctions regulations on the trading of Russian oil," it said in an email to Reuters. "Where supported by evidence, we withdraw class and services from any vessels found by the relevant authorities to be breaching international sanctions."

Classification societies such as Lloyd's Register in London provide services including seaworthiness checks, certification that is vital for securing insurance and entry to ports.

Lloyd's Register said, 11 of the Gatik vessels it was declassifying were also certified by the Indian Register of Shipping (IRClass).

Gatik, which is based in the Indian city of Mumbai according to shipping databases, did not respond to emailed requests for comment.

A major US insurer, the American Club, also told Reuters it was no longer providing cover for Gatik ships, while Russian insurer Ingosstrakh said it would not work with Gatik in future.

Neither the insurers, Lloyd's Register nor the flag registry spelled out exactly why they have dropped business with Gatik.

 

De-dollarizing transactions among ACU members

Governor of the Central Bank of Iran (CBI) held talks with senior banking officials from various Asian countries on the sideline of the 51st Asian Clearing Union (ACU) summit in order to encourage getting new members and de-dollarize the economic transactions among ACU members.

As reported by the CBI portal, Mohammad-Reza Farzin met and held talks with Governor of the Central Bank of Russia Elvira Nabiullina, Governor of the State Bank of Pakistan Jameel Ahmed, Deputy Head of the Monetary Policy and Economic Analysis Directorate of the National Bank of the Republic of Belarus Sergey Kalechits on the sidelines of the summit held in Tehran on May 23-24.

In the meeting with Nabiullina, the two sides emphasized strengthening trade exchanges and using the national currencies of the two countries in bilateral trade.

During the talks with the Belarusian delegation, Farzin said strengthening relations through bilateral and multilateral monetary agreements is a model that can play an important role in the development of trade relations between two countries.

Referring to Belarus’ readiness to join the ACU, the CBI head said, “Belarus's membership with its good capacities in its economy can lead to the development of the activities of this union.”

In the meeting with Farzin, Ahmed, the governor of the State Bank of Pakistan, welcomed the development of the banking relations with Iran by creating a non-SWIFT platform for connecting the bank systems of the two countries and clearing trade under the framework of the Asian Clearing Union and said, “We are ready for the development of banking relations. By introducing representative banks and creating a joint working group, we will provide the grounds for deepening banking relations.”

According to Farzin, accepting new members with the aim of creating synergy and diversifying the currency basket of the union can encourage de-dollarization in trade exchanges among the ACU members. This is one of the major goals of this union in the future, he said.

 

Grounded bulker blocking Suez Canal successfully refloated

A Hong Kong-flagged bulker that grounded in the Suez Canal blocking the key waterway for several hours on Thursday morning has been successfully refloated.

Leth Agencies posted on Twitter that the bulk Xin Hai Tong 23 had grounded at the 159 km mark on the canal at 0400 hrs local time.

In a second tweet a few hours later the agency said that tugs from the Suez Canal Authority had been able to successfully refloat the vessel at 0740hrs.

It was reported that a convoy of four vessels was stuck behind the stricken bulker and an ordinary group was set to enter the canal at 0600 hrs. Leth Agencies said that following the refloating of the Xin Hai Tong 23 a northbound convoy was due to enter at 0930hrs.

The Xin Hai Tong 23 is a 2010-built, 56,708 dwt bulker and flagged with Hong Kong.

The vessel has grounded in a narrow section of the Suez Canal and MarineTraffic shows it stranded diagonally across the waterway in similar way to the containership Ever Given which closed the canal for six days when it grounded in March 2021.

The Ever Given grounding caused chaos to the global supply chain. However, the Xin Hai Tong 23 is a significantly smaller vessel than the 199,000 dwt mega-containership and far less complex to refloat.

 

UAE new hub of Russian gold

The United Arab Emirates has become a key trade hub for Russian gold since Western sanctions over Ukraine cut Russia's more traditional export routes.

The records, which contain details of nearly a thousand gold shipments in the year since the Ukraine war started, show the Gulf state imported 75.7 tons of Russian gold worth US$4.3 billion - up from just 1.3 tons during 2021.

China and Turkey were the next key destinations, importing about 20 tons each between February 24, 2022 and March 03, 2023. With the UAE, the three countries accounted for 99.8% of the Russian gold exports.

Ever since the Ukraine conflict started, many multinational banks, logistics providers and precious metal refiners stopped handling Russian gold, which had typically been shipped to London, a gold trading and storage hub.

The London Bullion Market Association banned Russian bars made from March 07, 2022, and by the end of August 2022, Britain, the European Union, Switzerland, the United States, Canada and Japan had all banned imports of Russian bullion.

The data shows Russian gold producers quickly found new markets in countries that had not imposed sanctions on Moscow, such as the UAE, Turkey and China.

Louis Marechal, a gold sourcing expert at the Organization for Economic Co-operation and Development said there was a risk Russian gold could be melted down and recast and then find its way back into US and European markets with its origin masked.

"If the Russian gold comes in, is recast by a local refiner, sourced by a local bank or trader and then sold on into the market, there you have a risk," he said. "This is why carrying out due diligence is instrumental to end buyers wishing to ensure they respect sanctions regimes."

The UAE government's Gold Bullion Committee said the state operated with clear and robust processes against illicit goods, money laundering and sanctioned entities.

"The UAE will continue to trade openly and honestly, with its international partners, in compliance with all current international norms as set down by the United Nations," it said.

In a bid to further isolate Russia, Washington has warned countries, including the UAE and Turkey, they could lose access to G7 markets if they do business with entities subject to US sanctions.