United States: The Only country used nuclear bombs against civilians

The United States is the only country in history to use nuclear weapons against civilians in wartime. There has been no serious explanation by the US to justify its nuclear attacks on Japan. 

This August, people in Japan are marking the 78th anniversary of nuclear bomb attacks by the United States. Ceremonies are being held to mark the nuclear bomb attack on Hiroshima that killed 140,000 civilians. The bomb turned the city to ashes. The first nuclear attack took place on August 06 and days later, the United States dropped the second nuclear bomb on the Japanese city of Nagasaki that killed 70,000 people. 

"Leaders around the world must confront the reality that nuclear threats now being voiced by certain policymakers reveal the folly of nuclear deterrence theory," Hiroshima Mayor Kazumi Matsui said at a ceremony.

Was killing 200,000 civilians in the cruelest way possible really aimed at ending the Second World War because Japan refused to surrender or were the atomic bombs dropped in a warning to the former Soviet Union?

Experts say the dropping of nuclear bombs on Hiroshima and three days later on Nagasaki was unjustified from a military standpoint and that it was a political act to frighten the Soviet Union.

Since the apocalyptic scenes in Japan 78 years ago, the US has expanded its atomic weapons arsenal as well as its policy of nuclear proliferation. This was evident just recently with the AUKUS deal that involves Australia, the US and UK. 

Critics have accused Washington of violating the Non-Proliferation Treaty (NPT) with AUKUS scheme. On March 14, 2023, the Guardian said AUKUS represents a violation of the NPT as it transfers fissile material and nuclear technology from a nuclear weapons state to a non-weapons state. 

The Guardian added, “It allows fissile material utilized for non-explosive military use, like naval propulsion, to be exempt from inspections and monitoring by the UN nuclear watchdog…, (and) makes arms controls experts nervous because it sets a precedent that could be used by others to hide highly enriched uranium, or plutonium, the core of a nuclear weapon, from international oversight.”

The Chinese mission to the UN accused the US and UK of clearly violating the objective and purpose of the NPT. It added that such a textbook case of double standard will damage the authority and effectiveness of the international non-proliferation system.

The US has also brought the world closer to an Armageddon by launching a proxy war against Russia in the Ukraine war, risking a nuclear conflict by provoking another nuclear-armed state.

The same can be said about North Korea, with Washington militarily harassing Pyongyang and risking a catastrophe in East Asia.

Meanwhile, the US has been shielding Israel, its top proxy in West Asia, which has 200 to 300 nuclear weapons and the biggest source of insecurity in the region.

The regime, which has invaded or violated the territory of many regional states and refused to sign the NPT, enjoys the full backing of the United States.

This is while Washington accuses Iran of seeking a nuclear bomb despite the fact that the US intelligence community testified before Congress that Tehran’s nuclear program is peaceful.  

Numerous reports by inspectors from the UN nuclear watchdog, the International Atomic Energy Agency, have failed to produce any evidence that Iran’s nuclear activities have been diverted to a weapons program.

Observers believe the US and its close allies have been making accusations against the Islamic Republic to scare the West Asia region and beyond.

The atomic bombing of Hiroshima, as pointed out by experts, remains a very dark strain on the US image. Hiroshima’s mayor is not alone in calling for nuclear disarmament.  

The UN Secretary-General Antonio Guterres supported his call. "World leaders have visited this city, seen its monuments, spoken with its brave survivors, and emerged emboldened to take up the cause of nuclear disarmament," Guterres said in remarks read by a UN representative. "More should do so, because the drums of nuclear war are beating once again."

US President Joe Biden, ironically, was in Hiroshima not so long ago to attend the 2023 Group of Seven leaders’ summit.

In line with his predecessors, Biden fell short of offering an apology at the gathering for the nuclear attacks, despite Japanese officials repeatedly calling on Washington to do so. He did visit the Hiroshima Memorial Museum, which critics branded as a publicity stunt.

The museum includes the remains of the Hiroshima Prefectural Industrial Promotion Hall, the only building left standing after the US nuclear attack.

The file footage of people walking past destroyed buildings after the US atomic bombings of Hiroshima in 1945, along with the rubble in the flattened city will never go away.

Iran working to get frozen assets released

The Iranian government is making efforts to repatriate its frozen assets in some countries, including Japan, the Iranian Foreign Ministry spokesperson stated on Monday.

Speaking to reporters in a regular news briefing, Foreign Ministry spokesman Nasser Kanaani emphasized that Japanese Prime Minister Fumio Kishida and Iranian President Ebrahim Raisi had also discussed the matter of the financial claims on the sidelines of the October 2022 United Nations General Assembly session in New York.

He continued by pointing out that the Japanese government has frequently stated that it is willing to pay off its obligations and that it is now making an effort to do so.

Iranian Foreign Minister Hossein Amir Abdollahian landed in Tokyo, the capital of Japan, late on Sunday. He held talks with the country’s leaders on global, regional, and bilateral concerns on Monday. 

During a news conference on Monday in Japan, Amir Abdollahian stated that Iran wants Japan to support measures to secure security in the West Asia region by utilizing the potential and capabilities of nations in the region.

The Foreign Ministry spokesman also said that Amir Abdollahian took part in two meetings of foreign ministers of BRICS and BRICS Plus in South Africa in June during which the participants held bilateral meetings.

The issue of Iran’s bid to join BRICS was discussed in South Africa, Kanaani said. 

During the same trip, Amir Abdollahian announced that Tehran planned to convene a conference to study collaboration between the Islamic Republic and BRICS the currently consists of the five economically emerging countries of Brazil, Russia, India, China and South Africa.

On the US decision to deploy new fighter jets and destroyers in the Persian Gulf, Kanaani said, “Our position is quite clear and, in our opinion, the Persian Gulf countries are fully capable of guaranteeing their security and there is no need for the presence of foreign forces in the region.” 

He added the security of the Persian Gulf and the Sea of Oman is one of Iran’s top concerns, emphasizing that regional security should be supplied by collaborative partnership among the Persian Gulf and Sea of Oman’s coastline nations.

In response to a question that Britain's Home Secretary Suella Braverman has said the IRGC poses threat to UK’s national security, the Foreign Ministry spokesman described the United Kingdom as a backer of terrorists in the region.

The UK is unable to blame the IRGC because of its track record in West Asia, which has resulted in long-term instability in the region, as well as its involvement in directly and indirectly supporting terrorism, Kanaani said.

“The IRGC has provided significant services not only to regional countries but also to European states,” he added. 

He went on to say that the IRGC is a branch of the Islamic Republic’s official military in charge of protecting national interests and security.

 

Britain to join trans-Pacific trade pact

Britain on Sunday formally signed the treaty to join a major trans-Pacific trade pact, becoming the first country to take part since its inception in 2018 and opening the way for members to consider other applications including from China and Taiwan.

The signing was part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) commission meeting being held in New Zealand.

Ministers from member countries will meet later on Sunday to discuss a range of topics, including how to move forward with new applications and a review of the agreement itself.

Britain's Business and Trade Secretary, Kemi Badenoch said at the signing that her country was delighted to become the first new member of the CPTPP.

"This is a modern and ambitious agreement and our membership in this exciting, brilliant and forward looking bloc is proof that the UK's doors are open for business," Badenoch said.

The British government still needs to ratify the agreement.

The CPTPP is a landmark trade pact agreed in 2018 between 11 countries including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Britain will become the 12th member of the pact that cuts trade barriers, as it looks to deepen ties in the Pacific after its exit from the European Union in 2020.

China, Taiwan, Ukraine, Costa Rica, Uruguay and Ecuador have also applied to join the CPTPP.

New Zealand Prime Minister Chris Hipkins said the road to bringing Britain into the agreement had been long and at times challenging, but having major economies inside the partnership would bring the Atlantic to the Indo-Pacific in a way that strengthened the rules-based trading system in the region.

 

 

Iran emerges second largest sponge iron producer in the world

According to an IRNA report, the World Steel Association (WSA), in its latest annual report, has ranked Iran second among the world’s top sponge iron-producing countries for the year 2022.

Islamic Republic managed to produce 32.9 million tons of sponge iron in 2022 to stand at second place after India with 42.3 million tons of production.

According to WSA, Iran also kept its place as the world’s 10th largest steel producer last year, with 30.6 million tons of crude steel output.

Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) was also reported to be the world’s 20th largest company based on the WSA ranking.

The total global production of crude steel in 2022 was 1.301 million tons while the consumption of this product in the world was 1.301 billion tons.

Earlier, WSA in its monthly report for April 2023 ranked Iran eighth among the world’s top steel-producing countries for the mentioned month, indicating a one-place rise compared to the previous month.

The April report showed that Iran’s crude steel output increased 5.9% in the mentioned month while the global average growth rate stood at negative 2.4%.

Based on the WSA data, Iran produced 3.1 million tons of crude steel in April.

Meanwhile, the Islamic Republic produced 9.7 million tons of steel in the first four months of 2023, registering a nominal growth of 0.1% as compared to the same period in the previous year.

WSA report said that the world’s 64 steel producers managed to produce 161.4 million tons of the commodity in April, 2.4% less than the figure for the previous year’s same period.

The steelmakers produced 622.7 million tons of steel in the first four months of this year, which indicates a 13% drop as compared to the same period last year.

According to the WSA report, China, India, Japan, the United States and Russia were the world’s top steel producers respectively.

The Iranian steel industry has been constantly developing over the past years despite all the pressures and obstacles created by outside forces like the US sanctions and the coronavirus outbreak that has severely affected the performance of the world’s top producers.

 

Significance of G7 Summit

 

The three-day G-7 summit kicked off on Friday in Hiroshima. This is the seventh time Japan is hosting the meeting, the last time being in 2016 in Ise-Shima, a scenic coastal site in Mie prefecture. Directly on the heels of that gathering, Barack Obama paid a visit to Hiroshima - the first time a sitting US President had done so - which somewhat overshadowed the summit itself. In Obama's famous 17-minute speech at the Hiroshima Peace Memorial, he asked, "Why do we come to this place, to Hiroshima? We come to ponder a terrible force unleashed in a not so distant past. ... That is why we come to Hiroshima, so that we might think of people we love - the first smile from our children in the morning; the gentle touch from a spouse over the kitchen table; the comforting embrace of a parent." Seven years on, Japanese Prime Minister Fumio Kishida, who was elected from a Hiroshima district, stands at the center of the stage, welcoming the G-7 leaders. Chairing the summit in Hiroshima has been one of Kishida's top priorities since the beginning of his premiership. In an exclusive interview with Nikkei for this week's Big Story, he said, "It is crucial to invite world leaders and young people to the site of the atomic bombing and allow them to see the consequences of the destruction." Published just ahead of the summit, the story provides a comprehensive overview of Kishida's foreign policy agenda and explains what he hopes to achieve at the meeting, in his own words as well as those of diplomats and experts. This is a must-read for anyone seeking a more nuanced understanding of the summit.

 

 

Quad meeting scheduled in Sydney postponed

Australian Prime Minister Anthony Albanese said on Wednesday the Quad summit would not go ahead in Sydney next week without US President Joe Biden, who postponed his trip to Australia due to debt ceiling negotiations in Washington.

Albanese said the leaders of Australia, the United States, India and Japan would instead meet at the G7 in Japan this weekend, after Biden canceled a trip to Sydney on the second leg of his upcoming Asia trip, which was also to have included a visit to Papua New Guinea.

"The Quad leaders meeting will not be going ahead in Sydney next week. Though, we will be having that discussion between Quad leaders in Japan," Albanese told a news conference.

A bilateral program in Sydney with Indian Prime Minister Narendra Modi could still go ahead next week, Albanese said.

Albanese did not comment on whether Japanese Prime Minister Fumio Kishida would still visit Sydney next week

The Quad is an informal group that promotes an open Indo-Pacific. Beijing sees it as an attempt to push back against its growing influence in the region.

Asia Society Policy Institute senior fellow Richard Maude said the cancellation of Biden's visit to Papua New Guinea, which would have been the first visit by an American president to an independent Pacific islands nation, could set back Washington's battle for influence with Beijing in the region.

“The mantra in the region is all about turning up. Turning up is half the battle. China turns up all the time, and so the optics aren’t great,” Maude, a former Australian intelligence chief, told a panel discussion on the Quad on Wednesday.

India and Australia are not part of the G7 group of seven rich nations - Britain, Canada, France, Germany, Italy, Japan and the United States - but have been invited to attend the summit in Japan.

 

NATO to open Japan office for deepening Indo-Pacific engagement

Nikkei Asia reports, NATO is planning to open a liaison office in Tokyo, the first of its kind in Asia. The station will allow the military alliance to conduct periodic consultations with Japan and key partners in the region such as South Korea, Australia and New Zealand as China emerges as a new challenge, alongside its traditional focus on Russia.

NATO and Japan will also upgrade their cooperation, aiming to sign an Individually Tailored Partnership Program (ITPP) before the NATO Summit in Vilnius, Lithuania, on July 11-12. The two sides will deepen collaboration in tackling cyber threats, coordinate stances on emerging and disruptive technologies, and exchange notes on fighting disinformation.

The idea of opening a liaison office was first discussed between Japanese Prime Minister Fumio Kishida and NATO Secretary-General Jens Stoltenberg during the latter's visit to Tokyo at the end of January. In mid-April, the alliance circulated a draft proposal among its 31 members.

The proposal is to open a one-person liaison office in Tokyo next year. Whether the Japanese side provides the office space or if NATO funds the station is still under negotiation. NATO has similar liaison offices at the United Nations in New York, the Organization for Security and Co-operation in Europe in Vienna, as well as in Georgia, Ukraine, Bosnia and Herzegovina, Moldova and Kuwait.

In many cases the host nation offers office space for NATO. If Tokyo provides the funding for a Western military alliance to have a foothold in Japan, it would symbolize a new phase in defense cooperation.

The intent to deepen cooperation is mutual. Japan plans to create an independent mission to NATO, separating it from the Embassy in Belgium, where it is currently based. A new ambassador will be dispatched, to relieve the NATO duties of Ambassador to Belgium Masahiro Mikami. Kishida told Stoltenberg of the plans at the January meeting.

Officials hope that the NATO-Japan signing of the ITPP would create momentum leading up to the Vilnius summit. The gathering is expected to be attended by the leaders of Japan, South Korea, Australia and New Zealand -- like last year -- signaling NATO's deeper engagement with the Indo-Pacific.

Last June, Kishida, South Korean President Yoon Suk Yeol, Australian Prime Minister Anthony Albanese and then-New Zealand Prime Minister Jacinda Ardern attended the NATO Summit in Madrid. Known as the Asia-Pacific partners (AP4) of NATO, they held a meeting on the sidelines.

Danish Ambassador to Japan Peter Taksoe-Jensen told Nikkei Asia in a phone interview that a NATO liaison office would be the first of its kind in the Indo-Pacific and more than just symbolic. "It would be a very visible, real way to strengthen the relations between Japan and NATO," he said.

The Danish Embassy acts as the contact-point embassy of the alliance in Japan and is coordinating with the member states in Tokyo regarding NATO-Japan collaboration.

Taksoe-Jensen noted that the geopolitical landscape has changed drastically since NATO issued its previous Strategic Concept in 2010.

"At the time, Russia was considered a potential partner and there was no mention of China. In 2022, at the Madrid Summit, allied leaders decided that Russia was no longer a partner but a foe, and that there was also an acknowledgment that China's rise would and could have an impact on trans-European security," he said.

"This is why it is important for NATO to keep up relations with our partners in this region." The envoy said that the liaison office would also reach out to other important actors in the region such as India and ASEAN countries.

Taksoe-Jensen said NATO-Japan cooperation, going forward, will focus on challenges that transcend regions, such as cyber threats, disruptive technology and disinformation activities.

This cooperation, Nikkei has learned, will be formalized in the coming weeks, when NATO and Japan will launch the ITPP to lay out cooperation on fields such as cybersecurity, disinformation and space. It will be an upgrade from the Individual Partnership and Cooperation Program (IPCP) that the two sides signed in 2014.

"There will also be a look at interoperability," Taksoe-Jensen said, regarding how NATO and Japanese forces work together in different areas. But he said it was "a step too far at the moment" to consider the two sides to bolster regional deterrence together.

Michito Tsuruoka, an associate professor at Keio University, said that the war in Ukraine has changed the way NATO sees China. "In addition to the problems China poses by itself, a new dimension has been added: that of China as a supporter of Russia. This now becomes directly related to Europe's security."

Stoltenberg repeatedly mentioned the danger of China and Russia collaborating during his trip to Japan, Tsuruoka told Nikkei Asia.

Tsuruoka said that NATO having a foothold in Tokyo would have a significant meaning for Japan. "It means that when NATO looks at Asia, including China, it will be doing so through Tokyo's prism. When the representative sends back information to NATO headquarters, it will always be via Tokyo."

NATO spokesperson Oana Lungescu stressed Japan's importance in a statement to Nikkei on Wednesday.

"Among NATO's partners, none is closer or more capable than Japan," Lungescu said. "We share the same values, interests and concerns, including supporting Ukraine and addressing the security challenges posed by authoritarian regimes, and our partnership is getting stronger."

She noted long-standing cooperation between NATO and Japan, as demonstrated by Stoltenberg's visit to Japan at the start of the year and the Japanese foreign minister's participation at the meeting of NATO foreign ministers in April.

"The Secretary General has also invited the Prime Minister of Japan, as well as the leaders of our other Indo-Pacific partners, to the Vilnius Summit in July," Lungescu said.

"As to plans to open a liaison office in Japan, we won't go into the details of ongoing deliberations among NATO allies, but in general, NATO has offices and liaison arrangements with a number of international organizations and partner countries, and allies regularly assess those liaison arrangements to ensure that they best serve the needs of both NATO and our partners," she said.

 

Asian LNG spot prices slip to 21 month low

Asian spot liquefied natural gas (LNG) prices remained flat this week at the lowest level since July 2021 on muted demand and solid inventories in China, Japan and Korea.

The average LNG price for May delivery into northeast Asia was US$12.50 per million British thermal units (mmBtu), unchanged from the previous week, industry sources estimated.

Prices have fallen 55% year-to-date and more than 82% from the August 2022 peak of US$70.50/mmBtu.

"North Asian demand drivers are still errant, even for off- season speculative cargos. Pricing seems to be driven by sentiment correlated with euro hub markers," said Toby Copson, global head of trading at Trident LNG.

"I expect we will trade in this narrow range while we sit in shoulder season - until some impetus emerges for utilities as Chinese and Korean storage seems topped up," he added.

Tobias Davis, head of LNG Asia at brokerage Tullett Prebon, said the market has seen fresh bouts of demand from Thailand's PTT which lifted around 10 cargoes at US$12-US$13/mmBtu and is tendering for more volumes for May-September, while the Philippines secured its first LNG import cargo from Vitol and Indian end-users continue to pick prompt volumes.

"Prices below US$13/mmBtu continue to deter China, which remains quiet and on the sidelines with opportunistic bids, while healthy storage in Japan and Korea continue to keep that all important end-user demand at bay," Davis added.

Europe is still a favourable destination for cargoes, despite a series of strikes in France that have reduced the country's LNG imports by around one million tons in March, as cargoes have been diverted to neighbouring terminals.

Ken Kiat Lee, senior analyst at consultancy firm FGE, said that despite Europe's colder start to the shoulder season - the months after winter and ahead of summer - prices have continued to trade sideways with most markets sitting on above-average gas inventories.

S&P Global Commodity Insights assessed its daily north-west Europe LNG Marker (NWM) price benchmark for cargoes delivered in March on an ex-ship (DES) basis at US$12.374/mmBtu on April 5, a US$1.90/mmBtu discount to the May gas price at the Dutch gas TTF hub, according to Allen Reed, managing editor of Atlantic LNG.

Reed said that the spread between European gas and LNG prices hit a multi-month high on April 04, at a US$2.20 discount to Dutch gas prices for May - and was largely driven by strikes at French LNG terminals.

LNG spot freight rates have fallen amid softer gas prices and potential sub-charters entering the market, with Atlantic rates at US$42,000/day on Thursday and Pacific rates at US$62,750/day, according to Edward Armitage, an analyst at Spark Commodities.

 

UBS takes over Credit Suisse

Moves by authorities to avert a global banking crisis appeared to have lifted market confidence on Monday as investors welcomed emergency dollar liquidity from top central banks and a historic Swiss-backed acquisition of troubled Credit Suisse by UBS Group.

In a package orchestrated by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs (US$3.23 billion) for 167-year-old Credit Suisse Group AG and assume up to US$5.4 billion in losses.

Major central banks, faced with the risk of a fast-moving loss of confidence in the financial system, also scrambled on Sunday to bolster the flow of cash around the world with a series of coordinated currency swaps to ensure banks have the dollars needed to operate.

The Swiss banking marriage is backed by a massive government guarantee, helping prevent what would have been one of the largest banking collapses since the fall of Lehman Brothers in 2008.

Financial markets staged a modest relief rally in Asia on Monday but are wary about a range of risks including contagion, the fragile state of US regional banks, and moral hazard.

"Policy makers will be hoping that the weekend's UBS buyout of troubled Credit Suisse will draw a line under recent market stresses," said Brian Martin, ANZ head of G3 economics in London.

Central banks were already facing the conundrum of how much is enough? in the face of resilient labour markets, given the lags with which their policy decisions affect economies. They now have a new conundrum, 'how much is too much?' for financial stability?

Pressure on UBS helped seal Sunday's deal.

"It's a historic day in Switzerland, and a day frankly, we hoped, would not come," UBS Chairman Colm Kelleher told analysts on a conference call. "I would like to make it clear that while we did not initiate discussions, we believe that this transaction is financially attractive for UBS shareholders," Kelleher said.

UBS CEO Ralph Hamers said there were still many details to be worked through.

"I know that there must be still questions that we have not been able to answer," he said. "And I understand that and I even want to apologize for it."

In a global response not seen since the height of the pandemic, the Fed said it had joined central banks in Canada, England, Japan, the EU and Switzerland in a coordinated action to enhance market liquidity. The European Central Bank vowed to support euro zone banks with loans if needed; adding the Swiss rescue of Credit Suisse was instrumental in restoring calm.

Problems remain in the US banking sector, where bank stocks remained under pressure despite a move by several large banks to deposit US$30 billion into First Republic Bank, an institution rocked by the failures of Silicon Valley and Signature Bank.

On Sunday, First Republic saw its credit ratings downgraded deeper into junk status by S&P Global, which said the deposit infusion may not solve its liquidity problems.

US bank deposits have stabilized, with outflows slowing or stopping and in some cases reversing, a US official said on Sunday, adding the problems of Credit Suisse are unrelated to recent deposit runs on US banks and that US banks have limited exposure to Credit Suisse.

The US Federal Deposit Insurance Corp (FDIC) is planning to relaunch the sale process for Silicon Valley Bank, with the regulator seeking a potential breakup of the lender, according to people familiar with the matter.

There are also concerns about what happens next at Credit Suisse and what that means for investors and employees.

UBS chairman Kelleher told a media conference that it will wind down Credit Suisse's investment bank, which has thousands of employees worldwide. UBS said it expected annual cost savings of some US$7 billion by 2027.

The Swiss central bank said Sunday's deal includes 100 billion Swiss francs (US$108 billion) in liquidity assistance for UBS and Credit Suisse.

Credit Suisse shares had lost a quarter of their value last week. The bank was forced to tap $54 billion in central bank funding as it tries to recover from scandals that have undermined confidence.

Under the deal with UBS, some Credit Suisse bondholders are major losers. The Swiss regulator decided that Credit Suisse bonds with a notional value of US$17 billion will be valued at zero, angering some of the holders of the debt who thought they would be better protected than shareholders in the takeover deal announced on Sunday.

(US$1 = 0.9280 Swiss francs)

 

 

India becomes third largest auto market

India is now the world's third-largest auto market, reports Nikkei Asia. Based on preliminary results, India's sales of new vehicles totaled at least 4.25 million units, topping the 4.2 million sold in Japan.

According to the Society of Indian Automobile Manufacturers, new vehicles delivered in India totalled 4.13 million between January and November 2022, the report says. India's largest carmaker, Maruti Suzuki sales volume reported on Sunday takes the total to roughly 4.25 million units.

The report adds that the country's sales volume is expected to rise further with the inclusion of pending fourth-quarter sales figures for commercial vehicles. Tata Motors and other automakers are yet to reveal their year-end results.

In 2021, China continued to lead the global auto market, with 26.27 million vehicles sold. The US remained second at 15.4 million vehicles, followed by Japan at 4.44 million units.

Nikkei Asia said India's auto market has fluctuated in recent years. Roughly 4.4 million vehicles were sold in 2018, but volume dipped below 4 million units in 2019, due primarily to the credit crunch that hit the nonbank sector that year.

When the Covid pandemic triggered a countrywide lockdown in 2020, vehicle sales plummeted further below the 3 million-unit mark. Sales recovered in 2021 to approach 4 million units, but the shortage of automotive chips weighed on growth.

Vehicles powered by gasoline, including hybrid vehicles, accounted for most of the new autos sold in India last year, Nikkei Asia said, adding that electric vehicles hardly have a presence. Autos for the Indian market are seen having fewer semiconductors than those sold in advanced economies.

According to Nikkei Asia, the easing of the automotive chip crunch in 2022 provided a springboard for a recovery. Along with Maruti Suzuki, Tata Motors and other Indian automakers saw sales grow during last year.

India is home to 1.4 billion people, and its population is expected to outstrip China sometime this year and continue growing until the early 2060s. Incomes are rising as well.

Only 8.5 per cent of Indian households owned a passenger vehicle in 2021, according to British research firm Euromonitor, meaning there is plenty of room for sales growth. The government has started offering subsidies for EVs amid a trade deficit resulting from petroleum imports.

In Japan, 4,201,321 vehicles were sold last year, down 5.6 per cent from 2021, according to data from the Japan Automobile Dealers Association and the Japan Light Motor Vehicle and Motorcycle Association.

Nikkei Asia said the omicron epidemic and the lockdowns in China greatly undercut production, leaving automakers unable to meet demand.

Japan's auto sales peaked in 1990 at 7.77 million units, meaning sales have tumbled by nearly half from the all-time high, according to Nikkei Asia. And the country's declining population offers little prospect for a significant recovery in sales in the foreseeable future.

According to Nikkei Asia, China surged past Japan to become the second-largest auto market in 2006. In 2009, China overtook the US to become the world's largest market. 

 

Japan pledges US$30 billion for Africa to counter Chinese influence

Japan plans to infuse US$30 billion in aid and investment from its public and private sectors into Africa over the next three years as it seeks to counter China’s growing influence.

Speaking via video link at the eighth Tokyo International Conference on African Development (TICAD), Prime Minister Fumio Kishida stressed Japan will grow together with Africa.

This is an increase from the US$20 billion that Japan promised African countries in 2019 and we essentially achieved it over the last three years, Kishida said.

The pledge is seen as an effort by Tokyo to differentiate itself from China, which has been criticized by the US and some Western nations for burdening African countries with loans.

Japan launched the TICAD in 1993, to revive interest in the continent and find raw materials for its industries and markets for its products. About a decade later, China began holding a rival event, the Forum on China-Africa Cooperation, at a time when Japan was turning inward as it sought to rebuild its struggling economy.

Japan has over time shifted the focus of its engagement with Africa from aid to private-sector-led investment.

Japan’s total trade with the continent is just a small fraction of Africa’s trade with China, according to the Japan External Trade Organization. In 2020, Africa’s exports to Japan were US$8.6 billion, while African imports from Japan were about US$7.9 billion.

As against this, China’s total two-way trade with the continent reached US$254 billion last year.

President Xi Jinping last year pledged US$40 billion in loans and investment for Africa and promised to grow imports from the continent to US$300 billion in three years.

Except during the triennial TICAD meetings, Japan is almost invisible in Africa, Seifudein Adem, a global affairs professor at Doshisha University in Kyoto, Japan, said while Africa, too, is invisible in Japan.

Adem added, “China is also ahead in disseminating its ideas and values in Africa. While the global pandemic has widened the gap between Africa and Japan, the trend started earlier.”

He said Japan’s relative power has declined over the last three decades, as has its diplomatic and economic interest in Africa. However, the re-emergence of China as a global hegemon seems to be marginally stimulating Japan’s engagement with Africa and will continue to do so”, Adem noted.

At TICAD-8 in Tunis, which was attended by hundreds of heads of state and diplomats, Kishida, who spoke via video link, announced that Tokyo will help African countries with debt restructuring and extend loans worth around US$5 billion in coordination with the African Development Bank to promote sustainable African development.

This includes a special, newly created loan of up to US$1 billion for the purpose of advancing reforms that result in sound debt management and helping a resilient and sustainable Africa, the prime minister said.

Kishida also announced a further US$4 billion to promote Japan’s Green Growth Initiative. He also promised to contribute over US$1 billion to the Global Fund to help fight the spread of Covid-19 and other infectious diseases in Africa.

Kishida said Tokyo would work to ensure grain shipments to Africa amid a global shortage at a time when the international order is under threat after Russia invaded Ukraine.

Japan has aligned itself with the other Group of Seven countries in sanctioning Russia. However, the continent is divided over Moscow’s war in Ukraine, with many countries taking a neutral stance while others oppose sanctions, which Russia has blamed for food shortages in Africa.

Adem of Doshisha University said Japan’s approach to African development is distinct with its emphasis on transparency and the high quality of its projects.

 “But, from Japan’s point of view, the growing influence of China in Africa in the last two decades has made them all the more important to try to offset China’s unassailable competitive advantage,” Adem, the author of a forthcoming book on lessons for Africa from Japan and China, said.

However, he said Kishida has been more cautious in his diplomacy so far compared with previous leaders. Perhaps gone are the days of bold initiatives of the late Shinzo Abe, a friend of Africa, he said.

But Jonathan Berkshire Miller, a senior fellow at the Japan Institute of International Affairs, said: “Tokyo’s advantage will be to provide high-quality infrastructure, in line with the G20 priorities, and also enable African SMEs (small and medium-sized enterprises) through public-private partnerships.”

He said Japan has been making strides for decades on this through its TICAD process and evolving its assistance to the continent.

Miller said Japan views Africa in dynamic terms. However, Africa is changing and Japan is also realizing that its relations with the continent also need to balance the growing economic and geopolitical dimensions. Eventually, Japan would be advised to look more closely at building pre-existing partnerships with India and others in the region.

He said TICAD this year is of even more critical importance for African states to take ownership of partnerships and infrastructure cooperation. As the inflationary pressures and economic headwinds continue in recent months, the focus should be on partnership-based ventures that don’t saddle African states with unwieldy debt, Miller said.

Japan seeks to organize meeting of creditors to Sri Lanka

Japan is seeking to organize a Sri Lanka creditors' conference, hoping it could help solve the South Asia nation's debt crisis, but uncertainties cloud the outlook for any talks.

Tokyo is open to hosting talks among all the creditor nations aimed at lifting Colombo from its worst debt crisis since independence, but it is not clear whether top creditor China would join and a lack of clarity remains about Sri Lanka's finances.

Japan would be willing to chair such a meeting with China if that would speed up the process for addressing Sri Lanka's debt, estimated at US$6.2 billion on a bilateral basis at the end of 2020.

President Ranil Wickremesinghe told Reuters last week that Sri Lanka would ask Japan to invite the main creditor nations to talks on restructuring bilateral debts. He said he would discuss the issue with Prime Minister Fumio Kishida in Tokyo next month, when he is expected to attend the funeral of the assassinated former premier Shinzo Abe.

Tokyo, the number two creditor, has a stake in rescuing Sri Lanka, not just to recoup its US$3 billion in loans but also its diplomatic interest in checking China's growing presence in the region.

S&P Global this month downgraded Sri Lanka's government bonds to default after it missed interest and principal payments. The island nation of 22 million people off India's southern tip, with debt at 114% of annual economic output, is in social and financial upheaval from the impact of COVID-19 pandemic on top of years of economic mismanagement.

An International Monetary Fund (IMF) team met Wickremesinghe on Wednesday to discuss a bailout, including restructuring US$29 billion in debt, as Colombo seeks a US$3 billion IMF aid program. 

The president met the same day with Japan's ambassador.

Tokyo believes a new platform is needed to pull creditors together.

Sri Lanka is running out of time since it defaulted on its debt. The priority is for creditor nations to agree on an effective scheme.

Japan is keen to move this forward. But it's not something Japan alone can raise its hand and push through, the cooperation of other nations was crucial.

Japan's Foreign Ministry declined to comment. Sri Lanka's central bank and Finance Ministry did not immediately respond to requests for comment. An IMF spokesperson declined to comment.

Concerns include rivalry and territorial tensions between big creditors China and India, while Sri Lanka would have to commit to reforming its finances and disclose more information about its debt, the sources said.

Last month, shortly after Wickremesinghe took office when his predecessor fled the country, Chinese President Xi Jinping wrote to him that he was ready to provide support and assistance to the best of my ability to President Wickremesinghe and the people of Sri Lanka in their efforts.

Getting Beijing's cooperation on a debt restructuring was complicated by factors such as a large number of lenders.

A Chinese foreign ministry spokesman told Reuters that Beijing was willing to stand with relevant countries and international financial institutions and continue to play a positive role in helping Sri Lanka respond to its present difficulties, relieve its debt burden and realize sustainable development.

Japan hopes to see a new debt restructuring framework resembling one set up by the Group of 20 big economies targeting low-income countries. Sri Lanka does not fall under this "common framework" because it is classified as a middle-income emerging country.

It must be a platform where all creditor nations participate to ensure they all shoulder a fair share in waiving deb. Until these conditions are met, it would be difficult for any talks to succeed.

The common framework, launched by the G20 and the Paris Club of rich creditor nations in 2020, provides debt relief mainly through extension in debt-payment deadlines and reduction in interest payments.

Some people involved think an initial creditors' meeting could be held in September, but one source said it would "take a little while, possibly several months".

Restructuring talks are only possible after the IMF scrutinizes Sri Lanka's debt, the sources said.

 

 

Nancy Pelosi sets off on Asia tour

According to South China Morning Post, US House Speaker Nancy Pelosi has begun her anticipated trip to Asia, with her office naming four destinations but making no mention of Taiwan. 

This comes amid more stormy warnings from Beijing amid heightened tensions over her planned visit to the island.

Pelosi, No 3 in the line of US presidential succession, is leading a six-member congressional delegation to Singapore, Malaysia, South Korea and Japan, according to a statement released by her office on Sunday.

The statement skipped any mention of Taiwan, after days of intense speculation about a likely stop there fuelled tensions, with Beijing calling it a provocation and warning Washington against playing with fire.

“In Singapore, Malaysia, South Korea and Japan, our delegation will hold high-level meetings to discuss how we can further advance our shared interests and values, including peace and security, economic growth and trade, the Covid-19 pandemic, the climate crisis, human rights and democratic governance,” the statement quoted Pelosi as saying.

“America is firmly committed to smart, strategic engagement in the region, understanding that a free and flourishing Indo-Pacific is crucial to prosperity in our nation and around the globe,” the 82-year-old Democratic lawmaker said.

Beijing regards Taiwan to be a breakaway province, to be reunited by force if necessary, and warns against any official exchange with the self-governed island.

It earlier said Pelosi’s planned trip to Taiwan was a move to support Taiwan independence, in violation of one-China policy, followed by the United States.

On Thursday, Biden and China’s Xi Jinping spoke on the phone for over two hours. During the call, Biden tried to reassure Xi that US policy towards Taiwan has not changed.

“On Taiwan, President Biden emphasized that US policy has not changed and that the US strongly opposes unilateral efforts to change the status quo or undermine peace and stability across the Taiwan Strait,” an official readout on the White House website said.

After the leaders’ phone call, China’s Foreign Ministry quoted Xi as telling Biden that those who play with fire will perish by it and that they hoped the United States will be clear-eyed about this.

However, Pelosi indicated on Friday that she will be on a trip to Asia, but did not mention Taiwan. “I am very excited if we were to go to the countries that you will hear about along the way,” she said, Reuters reported.

White House spokesman John Kirby said, “Where she (Pelosi) is going to go and what she is going to do is up to the speaker to speak to.”

However, he added that the United States has not observed any signs of a specific military threat from China. “(We have) seen no physical, tangible indications of anything untoward with regard to Taiwan,” Kirby said.

  

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.”

 

QUAD slams coercive attempts to alter status quo in Indo-Pacific

In unprecedentedly strong language, the leaders of the Quadrilateral Security Dialogue (QUAD) expressed opposition to coercive, provocative or unilateral actions that seek to change the status quo in the Indo-Pacific.

The joint statement, issued after the leaders of Japan, Australia, India and the United States met for a summit in Tokyo on Tuesday, did not mention China by name, but the finger-pointing was clear.

The leaders were less clear when it came to Russia. The joint statement avoided blaming Russia directly for the war in Ukraine and only described the situation there as a ‘tragic crisis’.

The nuanced position reflected the difficult position of Indian Prime Minister Narendra Modi, who has so far avoided tarnishing India's long-standing friendship with Moscow. In his opening remarks, Modi said a free, open and inclusive Indo-Pacific is a shared objective of all of us, but did not mention Russia or Ukraine.

US President Joe Biden, Japanese Prime Minister Fumio Kishida, new Australian Prime Minister Anthony Albanese and Modi met for two hours at the Japanese Prime Minister's office for the fourth summit of the group and their second in-person meeting, after one in Washington last September.

The attendance of Albanese, sworn in just a day earlier, reflected how prominent a platform the QUAD has become since the four countries formed an unofficial core group to lead the international assistance after the 2004 Sumatra earthquake.

"Since we last met in person in September, an incident that overturns the rules-based international order has happened the Russian invasion of Ukraine," Kishida said in introductory remarks. "It is a blatant challenge to the principles set in the United Nations charter. We must not allow the same thing to happen in the Indo-Pacific."

Albanese, who was offered the opportunity to speak first after Kishida, said, "My government is committed to working with your countries and we are committed to the Quad.

"The new Australian government's priorities align with the QUAD agenda, taking action on climate change, and building a stronger and more resilient Indo-Pacific region through better economic security, better cybersecurity, better energy security and better environmental and health security," Albanese said.

Biden said that the world is navigating a dark hour in our shared history, in reference to the Ukraine war. This is more than just a European issue. It's a global issue.

"As long as Russia continues the war, the United States will work with our partners to help lead a global response because it's going to affect all parts of the world," Biden said.

Meanwhile, Modi commended the group's coordination in areas such as coronavirus vaccine delivery and climate actions, and said: "The QUAD has a constructive agenda for the Indo-Pacific, which will further strengthen its image as a force for good."

A joint statement issued after the meeting indirectly slammed China's actions in the East and South China seas.

"We strongly oppose any coercive, provocative or unilateral actions that seek to change the status quo and increase tensions in the area, such as the militarization of disputed features, the dangerous use of coast guard vessels and maritime militia, and efforts to disrupt other countries' offshore resource exploitation activities," it said.

The leaders agreed to hold the next in-person summit in Australia next year.

India's role in the regional security landscape is becoming more critical, after the border clashes of June 2020 made India's military one of the very few to have faced the Chinese People's Liberation Army on the field in recent years.

The QUAD summit comes three months after Russia's invasion of Ukraine, which has raised concerns in Asia about unilateral changes to the status quo.

India has historically had strong defense ties with Russia and abstained from United Nations votes against Moscow, taking a stance distinct from other QUAD members. As such, how the four QUAD nations will unite and align over the pressing security issues will be closely watched.

Shamshad Ahmad Khan, an Assistant Professor of International Relations at the BITS Pilani Dubai Campus, said the QUAD summit is taking place at a time when the Russian onslaught in Ukraine continues, North Korea is planning another missile test, experts in strategic circles are speculating on a Ukraine-type invasion of Taiwan by China, and Beijing's expansionist designs are a cause of security concerns for Japan and India.

Khan said China remains the biggest geopolitical challenge for India but added that given the economic interdependence of the two countries, they are involved in a dialogue to resolve their boundary issues.

"India is not likely to aggressively counterbalance China, and that is visible when you see the QUAD taking up softer security issues, climate change, vaccine diplomacy, while the newly formed AUKUS alliance of Australia, the United Kingdom and the United States aims to take up increasing defense cooperation to counterbalance China, he told Nikkei Asia.

Srikanth Kondapalli, a professor of Chinese studies at the Jawaharlal Nehru University in New Delhi, agreed that India sees Beijing as its biggest geopolitical challenge but took a different view on economic interdependence.

The professor said that India - which is estimated to grow at a rate of about 8% in the ongoing financial year - has received only US$8.2 billion investment from China. "That is quite a ridiculous amount," he said, observing that in contrast Beijing has invested a whopping US$52 billion in Pakistan, whose economy is going through a crisis.

At the QUAD, the leaders discussed a new maritime initiative called the Indo-Pacific Partnership for Maritime Domain Awareness (IPMDA), which will connect existing surveillance centers in India, Singapore, the Solomon Islands and Vanuatu to share information and monitor activities on the sea.

"This addresses a real need and something that the administration has heard a true demand signal from almost across the region ... The ability to know what is happening in countries' territorial waters and in their exclusive economic zones," a senior US administration official told reporters.

After the summit, the leaders held an event to open applications for the Quad Fellowship, which will sponsor 100 American, Australian, Indian, and Japanese students to study in the US for graduate degrees in science, technology, engineering, and mathematics (STEM) fields.

The QUAD meeting came on the last day of Biden's five-day Asia trip, which will likely be remembered for the president's bombshell statement on Monday that the US would be willing to use force to defend Taiwan.

On Tuesday, Biden was asked by a reporter if the policy of strategic ambiguity toward Taiwan was dead. He responded, "No."

Asked to elaborate, the president said "No," again.

Asked whether he would send troops to Taiwan if China invaded, Biden only noted, "The policy has not changed at all. I stated that when I made my statement yesterday."

 

United States-Japan at Tokyo Summit to commit to jointly deter China

According to Nikkei Asia, the Japanese and United States governments have begun coordinating on the wording of a joint statement to be released during their summit meeting on Monday in Tokyo. 

The statement will clearly state a policy of cooperation to deter and respond to China's activities in the Indo-Pacific region.

The statement will also outline a policy of keeping Japan under the US nuclear umbrella, and the sharing of security strategies between the two countries. The partners will confirm the launch of the Indo-Pacific Economic Framework (IPEF), led by US and clarify Washington's involvement in Asia.

This will be the first face-to-face meeting between Japan's Prime Minister Fumio Kishida and US President Joe Biden. The two leaders' expected reference to deterring China's hegemonic behavior reflects their concern that Russia's invasion of Ukraine has implications for Asia.

The US is deepening its military commitment to Europe to deal with Russia, and, for the time being, the US will be forced to conduct a three-front strategy -- in Europe, the Middle East and East Asia. Despite the challenges, the US will again stress both domestically and internationally that its top priority is China, which the US believes is its only strategic competitor.

The previous joint statement published last year and delivered by then-Prime Minister Yoshihide Suga and Biden spoke of the importance of peace and stability in the Taiwan Strait for the first time in almost half a century. It also included the phrase ‘the importance of deterrence’ in the region.

This time they will strengthen the wording to include the statement that they will deter China's actions that undermine stability in the region, and if necessary, will cooperate to respond. The statement will also emphasize that they will not allow the status quo to be changed by force, and it will maintain the previous wording regarding the Taiwan Strait.

The two countries will maintain economic sanctions against Russia, which continues its aggression against Ukraine, and will condemn threats to use nuclear weapons. The statement will also again call for the complete denuclearization of North Korea.

The US will clarify its stance on protecting Japan under the nuclear umbrella. The US has been unable to dissuade Russia, which possesses nuclear weapons, from invading Ukraine, and concerns about the effectiveness of nuclear deterrence are spreading. Washington will reaffirm that if Japan is threatened with nuclear weapons, it is willing to defend Japan not only with conventional forces but also with nuclear weapons if necessary. This will be included in the joint statement.

The two countries will also confirm that they plan to share security goals and strategies, specifically, the National Security Strategy to be formulated by the end of the year. They will pledge to strengthen cooperation between the Japan Self-Defense Forces and the US military in areas such as troop operations, joint use of bases, and procurement of equipment, as they prepare for a possible emergency in Taiwan.

Prime Minister Kishida will also discuss with Biden the Japanese government's intended increase in defense spending, which had previously been limited to about 1% of gross domestic product, and its moves to develop a strike capability against enemy bases. That is, the ability to hit missile launch sites and other targets.

Regarding economic strategy, the US will establish a mechanism to deepen its involvement in Asia. The two countries will agree to hold the first economic version of a "2 plus 2" ministerial meeting, with the Japan-US ministerial talks serving as a command post, at an early date. They will also outline their basic policy of creating a stable supply chain for semiconductors among friendly countries and regions.

During his visit to Japan, President Biden will announce the launch of the Indo-Pacific Economic Framework, a new type of economic bloc, which more than 10 countries, including South Korea, Australia, the Philippines and Thailand are, expected to participate in. The US is deeply cautious about rejoining the Trans-Pacific Partnership (TPP) and will first use the IPEF as a forum to establish rules for digital trade and other areas.

 

Finding legitimacy of freezing Iranian funds

The United States has long used sanctions to obstruct Iran’s access to its foreign exchange reserves. The Obama administration (2009-2017) used sanctions to pressure Iran to curtail its nuclear program and come to the negotiating table.

Through, a series of regulations and designations, Washington made clear that foreign companies and financial institutions that provided material support to the Iranian financial system – even by simply processing Iran-related transactions – could find themselves similarly designated and therefore cut off from the US financial system

Foreign banks that hold Iranian foreign exchange reserves responded to these sanctions by freezing Iran’s access to their reserves. Iranian requests to make transfers or payments have often been refused, even when transactions are technically permissible under exemptions intended to protect humanitarian trade.

Limiting Iran’s access to the reserves weakened Iranian currency, made the economy more vulnerable to a balance of payments crisis, and made it harder for the Iranian government and Iranian companies to do business abroad.

In 2014, Iran gained access to a small portion of its reserves after it reached an interim nuclear deal the world’s six major powers – Britain, China, France, Germany, Russia, and the United States. Iran was allowed to repatriate paltry US$4.2 billion in oil revenues held abroad.

In 2015, the same countries reached a final agreement, known as the Joint Comprehensive Plan of Action (JCPOA), in which Iran agreed to significantly curb its nuclear program in exchange for sanctions relief. As a result, Tehran regained access to more than US$100 billion in assets abroad.

In 2018, however, President Donald Trump withdrew from the JCPOA and reimposed wide-ranging US sanctions – effectively freezing Iran’s assets abroad again.

Iran’s total foreign exchange reserves amounted to US$115.4 billion at the end of the 2020 financial year, which ended on April 30, according to the International Monetary Fund (IMF). But as of October 2021, only US$12.2 billion was readily available and controlled by the monetary authorities after the re-introduction of financial sanctions, according to IMF estimate.

Most of Iran’s foreign exchange reserves have accrued in countries buying crude oil from Iran. Determining where exactly Iran maintains the reserves is difficult because the government treats information regarding the location and value of these reserves as a matter of national security.

Media reports, suggest that significant reserves are held in South Korea and Japan (historically major customers of Iranian oil) and Iraq (a country that buys electricity from Iran). Iran’s central bank also maintains accounts in several other countries, including China, Germany, India, Turkey, and the United Arab Emirates. Since the reimposition of US sanctions in 2018, Iranian economic diplomacy has focused in large part on bilateral negotiations with these countries to seek the release of funds.

Iran’s inability to access the reserves is more a function of the hesitance of financial institutions to process any Iran-related transactions – including humanitarian trade – without a green light from the US Administration. (Under U.S. law, humanitarian goods are not subject to sanctions, but some foreign companies and banks have been reluctant to do business with Iran for fear of violation of the US sanctions.) Faced with this predicament, Iran has pressured the South Korean, Japanese, and Iraqi governments to seek approvals from the United States.

For years, critics of the JCPOA have warned that unfreezing some or all of Iran’s foreign exchange reserves could be a windfall for the government. A key concern is that Tehran could use the billions of dollars to fund militant proxies and other malign activities. 

Historically, Iran has not drawn down large sums from its reserves. Part of the reason why Iran has accrued significant foreign exchange reserves is that, like most countries, it is happy to let its reserves grow. In 2002, Iran had around US$21 billion of foreign exchange reserves. By 2015, total reserves had risen to US$128 billion. In 2016, Iran regained access to its assets abroad as part of the JCPOA. By 2017, reserves had only fallen to US$112 billion. 

Even if the outflow of funds from the reserves were limited, the economic impacts of unfreezing could be significant. The accessibility of reserves serves to stabilize the value of Iranian currency and restore a degree of economic resilience in the face of crises.

Had Iran access to its reserves during the COVID-19 pandemic, it would have been better able to weather the economic impacts. Easier access to reserves would have helped Iran pay for imported medicine and medical equipment, especially Personal Protective Equipment (PPE) and devices such as ventilators that were in short supply in the first phase of the pandemic. Payment challenges put Iran at the back of the line for these goods, despite it being one of the first countries hit by the pandemic.

In March 2020, Iran applied for an emergency financing package from the IMF worth US$5 billion because its reserves were not readily accessible. Iran technically qualified for such a loan, drawn from a pool of financing earmarked for economies facing balance of payments crises. In the end, the loan did not come through because of the opposition by the US and technical challenges posed by US secondary sanctions.

Tehran maintains that it needs the reserves at least in part for humanitarian reasons, to pay for COVID-19 vaccines and medical supplies and to pay dues to the United Nations.

Iran has also called on the Biden administration to unfreeze some of its reserves as a goodwill gesture. In September 2021, Foreign Minister Hossein Amir Abdollahian urged the US to release at least US$10 billion before resuming talks on restoring the JCPOA.

“The Americans tried to contact us through different channels in New York (at the U.N. General Assembly) and I told the mediators if America's intentions are serious then a serious indication was needed,” Abdollahian later explained in a televised interview.

The United States, however, refused to offer concessions to bring Iran back to the negotiating table. From April to June 2021, Iran and the world’s six major powers held six rounds of talks. Diplomacy stalled in June during Iran’s presidential campaign and the political transition as Ebrahim Raisi took office and appointed his cabinet in August. On October 27, Iran’s new lead negotiator announced that nuclear talks would resume by the end of November.

Notably, Iran has complained that the US is obstructing the release of around US$7 billion of reserves reportedly held at two South Korean banks, the Industrial Bank of Korea and Woori Bank. In October 2021, Foreign Minister Abdollahian warned that Iran’s central bank could sue the South Korean banks if they didn’t release the funds. “US pressure (on Seoul) is a fact, but we cannot continue... to turn a blind eye to this question,” he said. 

Beyond the need for humanitarian aid, Iran is seeking access to the funds for two main reasons. First, at a political level, unfreezing the reserves is perhaps the clearest way that Iranian officials can indicate to domestic audiences that sanctions relief has been implemented. Just as critics of the JCPOA view the release of billions of dollars of reserves as a threat, Iranian officials point to those large numbers as a boon.

Second, Iran cannot operate normally in the global economy without the ability to use its foreign exchange reserves and to make transfers between currencies. For example, Iran runs trade surpluses with some countries and deficits with others. Effective reserve management requires converting reserves earned in countries where Iran runs a surplus, into the currency of those countries in which it is necessary to make up for a deficit.

Newly elected Japanese Prime Minister mesmerized by US mantra

Newly elected Japanese Prime Minister Fumio Kishida expressed skepticism about China's qualification to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) at his first press conference on Monday, noting the bloc's tough free trade requirements.

As regards China's application to join the CPTPP, he said, "we need to look at whether China can meet the high standards required by the trade pact." "It's still unclear if it can," he added.

Kishida noted that China was using force to shift the status quo in the region. "It is important to say what we need to say to China in coordination with allies and partners with whom we share fundamental values," he said.

US President Joe Biden on Monday congratulated Kishida on his election. "The US-Japan Alliance is the cornerstone of peace, security, and prosperity in the Indo-Pacific and the world, and I look forward to working closely with Prime Minister Kishida to strengthen our cooperation in the months and years ahead," he said.

Kishida will speak with Biden over the phone as early as Tuesday, in what is expected to be his first conversation with a global leader since taking office. They will affirm the importance of the Japan-US alliance and exchange ideas on ensuring a free and open Indo-Pacific. The leaders are also expected to discuss national security concerns in light of recent developments, including China.

On foreign policy, Kishida laid out three principles: 1) protecting universal values such as freedom, democracy, human rights and the rule of law; 2) strengthening Japan's defense; and 3) taking the lead in tackling global issues such as climate change and the free flow of data.

On strengthening Japan's security, the Prime Minister specifically mentioned missile defense. "To defend our territory, seas, airspace, as well as the lives and assets of our people, I am determined to strengthen the defense of Japan, including missile defense, and bolster maritime security capabilities," he said.

The reference to missile deterrence is seen as a nod to the upcoming two-plus-two security negotiations with the US Secretaries of State and Defense, during which the US is expected to propose basing intermediate-range missiles in Japan to deter Chinese actions in the Taiwan Strait.

"I will engage in foreign policy and national security challenges with resolve, drawing on the Japan-US alliance and the world's trust in Japan," Kishida said.

Kishida also said he is prepared to meet North Korean leader without preconditions. He called the resolution of the abduction issue ‑ the North's kidnapping of Japanese in the 1970s and '80s ‑ a top priority of the government.

On economic policy, Kishida promised that his cabinet will work together to distribute wealth widely among the people.

"I aim to create a new form of capitalism, and present a new socioeconomic vision to pave the way for Japan's future," he said.

The leader said he will set up a new team to lay out a post-pandemic social and economic vision for Japan. "We will create a positive cycle of growth and distribution to create an economy where people can prosper," he pledged.

Kishida said the government should consider tax reform, in particular changing the current rules that grant lower effective tax rates to those earning 100 million yen (US$900,000) or more.

He also listed a slew of other policies to foster economic growth, including promoting technological advancements, narrowing income gaps between urban and nonurban areas through digitization, protecting Japan's economic security and creating social welfare and tax systems that are fair to all work styles.

Kishida said he will dissolve the lower house on October 14 for an election on October 31, seeking a fresh popular mandate as he takes the country's reins.

"I want the Japanese people to decide before anything else whether they believe in me, and, if possible, to tap that confidence to advance a politics of trust and compassion," he said.

"I set the timeline in hopes of tackling daring coronavirus and economic measures with the public's support," Kishida said. Slowing case numbers in Japan contributed to his decision.

Regarding the Group of 20 Summit and the United Nations COP26 Climate Change Summit, which are scheduled around the time of the election, Kishida said he will be able to take part in discussions through remote and other technologies. "I hope to make Japan's presence felt," he said.

World powers creating ground for Israeli attack on Iran

The statement jointly issued by the world powers on Friday accusing Iran of attacking an Israeli ship reminds me of the saga of presence of weapons of mass destruction (WMD) in Iraq.  The time proved it was a ‘hoax call’ aimed at creating justification for attack on Iraq.

It may be recalled that earlier Israel convened a meeting in Jerusalem of representatives of United Nations Security Council nations to discuss the possibility of a retaliatory military strike on Iran for its attack on the Mercer Street. Israeli Defense Minister Benny Gantz declared, “Now is the time for deeds — words are not enough. It is time for diplomatic, economic and even military deeds — otherwise the attacks will continue.”

US Secretary of State, Antony Blinken and Foreign Ministers of Group of Seven (G-7) nations and the European Union on Friday issued a joint statement condemning Iran for carrying out a “deliberate and targeted attack” on an Israeli-owned vessel last week that killed two of its international crew.

The statement serves as a show of international unity against Iran’s actions in the region and assigns the Islamic Republic responsibility for the oil tanker attack off the coast of Oman, violating international law meant to guarantee freedom of navigation in the international waters. 

The G-7 nations — United States, Canada, France, Germany, Italy, Japan and the United Kingdom — were joined in the statement by the high representative of the European Union. 

“We condemn the unlawful attack committed on a merchant vessel off the coast of Oman on 29th July, which killed a British and a Romanian national. This was a deliberate and targeted attack, and a clear violation of international law. All available evidence clearly points to Iran. There is no justification for this attack,” the statement read. 

The G-7 nations and the EU further condemned Iran’s support for “proxy forces and non-state armed actors” as threatening international peace and security.

The statement follows the US, UK and Romania assigning blame to Iran for attacking the Israeli-owned Mercer Street vessel on July with an explosive drone. 

A report published Friday from US Central Command identified the drones recovered in the attack as Iranian-made.

Blinken on Wednesday spoke with UK Foreign Secretary Dominic Raab on “ongoing efforts to forge a coordinated response to Iran’s attack,” according to a readout of the call.