Finally United States kneels down before Iran

The United States announced to re-impose sanctions on Iran. President Donald Trump unilaterally pulled his country out from an agreement signed by big powers with Iran. The US government threatened countries to bring down their oil imports from Iran to zero or face similar sanctions. Many critics fail to understand the logic of President Trump as they strongly believe that he will not be able to achieve much by re-imposing sanctions.

Some analysts say that the US administration wishes to maintain a delicate balancing act with the waivers by ensuring the oil market has sufficient supply and avoid a politically damaging spike in fuel prices. The US also wants to ensure that Iran doesn’t collect enough revenue that the US sanctions become irrelevant. Countries that get waivers will be required to pay trough an escrow accounts in their local currency. That means the money won’t directly go to Iran, but will be allowed to use it for buying food, medicine or other non-sanctioned goods from its crude customers.

Let us first of all find the rationale behind re-imposition of sanctions on Iran by the US. I will prefer to use a quote. It says the re-imposition of sanctions on Iran by the US are aimed at achieving two targets: 1) quashing its nuclear ambitions and its ballistic missile program, but also 2) weakening its financial strength to support groups fighting proxy war in Syria, Yemen, Lebanon and other parts of the Middle East”.

Some analysts say that the US has imposed proxy war on the above stated countries for establishing its hegemony in Middle East and North Africa (MENA). The US efforts are aimed at weakening these countries so that they don’t become a potential threat for Israel, which has faced humiliating defeat in Lebanon. Hezbollah, a Lebanon-based resistance group smashing Israel’s military supremacy is often termed a terrorist outfit and alleged for receiving funds and military hardware from Iran.

No sooner did these sanctions became effective, the US confirmed granting waivers to eight countries, allowing them to continue to import oil from Iran for the next six months. The countries include South Korea, Japan, India, China, Turkey, Taiwan, Italy and Greece. The waivers will facilitate these to continue to import oil, although there is a great deal of disagreement among analysts over how much Iran’s exports will fall.

This waiver means that the supply situation will ease further. Reportedly Iran’s oil exports will stabilize at around 1 million barrels per day, and could even increase again in the coming months because Japan and South Korea have hardly been buying any Iranian oil lately. Receiving the waivers will allow them to continue buying. To be sure, not everyone agrees on this point, some believe the hawkish government in Washington will make other efforts to curb Iranian oil export.

Announcement of waivers, are a defeat of the US, seemingly backtracking a policy to cut Iran’s oil exports to zero. However, the Secretary of State Mike Pompeo continues to play the famous US mantra, “maximum pressure” campaign will continue and that the administration hopes to get to zero. The waivers were granted to countries that “need a little bit more time,” he said. 

I am also obliged to refer to what has been said by Professor Frank N. von Hippel, former assistant director for national security in the White House Office of Science and Technology. He said that it was a terrible mistake for the Trump Administration to pull the US out of the agreement between the P5+1+EU and Iran, commonly referred as Joint Comprehensive Plan of Action (JCPOA).

“The US has lost credibility with the other permanent members of the UN Security Council, Germany and the EU”. He also warned, “If Iran reacts by ending its own compliance with the JCPOA, we might be on a path to war. The US does not need another unnecessary and costly war”.

Who killed Jamal Khashoggi?

The killing of Jamal Khashoggi - a Washington Post columnist and a critic of Saudi Crown Prince Mohammed bin Salman (MbS) - has sparked global outrage and pitched the world’s top oil exporter into crisis. The incident has put the West’s relationship with Riyadh into sharp focus, given scepticism about Saudi Arabia’s shifting explanations of the killing at its Istanbul consulate.

To calm down the situation, Riyadh announced arrest 18 persons as part of its investigation into the case, which include a 15-man security team that Turkey says flew in hours before the killing. Saudi Foreign Minister Adel al-Jubeir said that those behind the killing would be prosecuted in the kingdom and that the investigation would take time. In my opinion investigators may be misled or forced to release an incorrect report based on the reports of Western media, controlled by the Zionists. Even a person of ordinary wit can identify the culprits, if the motive of killing is established.

In many countries, especially where monarchy/dictatorship prevails over, the rulers don’t like critics. Sooner than later such persona non grata are either put in jail or assassinated. Though, United States claims to be the largest democracy, it also does the same in the name of regime change, two of the most talked about names of the present era are Sadam Husain of Iraq (hanged) and Mursi of Egypt (put in jail). In this part of the world where I live, killing of politicians and journalist is too common. Therefore, killing of Khashoggi is not surprising. However, the storm being created in a cup of tea needs a little deeper probe because his assassination according to spy agencies is ‘elimination of an agent when he became redundant’.

Khashoggi was working for one of the most famous and powerful media house of the United States and his prime target was MbS, who already has enough enemies within his family and kingdom. MbM’s most dangerous trait is ‘Iron man’ who just can’t tolerate criticism. Therefore, assassination of Khashoggi can be termed ‘killing two birds with one stone’. Elimination of MbS may have become all the more necessary because the United States finds him the biggest hurdle if economic sanctions have to be imposed on Saudi Arabia.

Killing of Khashoggi in Turkey and making the details public through the courtesy of Turkish president can also be termed a point worth probing. The United States does not like Tayyib Erdogan, as he is emerging as a leader of Muslim Ummah and biggest threat for Israel.  If one can recall King Faisal of Saudi Arabia had emerged as a leader of Muslim Ummah in seventies, but very soon he was assassinated by his own nephew within the Kingdom.

To the utter disappointment of the United States and Israel manta ‘Iran is a bigger threat for Saudi Arabia as compared to Israel’ has failed. Iran applied all the restraints and gave Saudi Arabia the status of leader of OPEC, whenever there was any discussion about increasing/decreasing crude oil output. It is necessary to remind the readers that it is often alleged that during Iraq-Iran war, Saudi Arabia finance Iraqi assault and also didn’t make any effort to stop the war between two Muslim countries.

Now coming to the most important part, who killed Khashoggi? Though, MbS may not like this expression, Saudi Arabia does not have the capacity to undertake such assault in another country. The two prime suspects can be CIA and Mossad, which have been undertaking such operations in other countries. Two stories which hit headlines of international media are killing f Iranian nuclear scientists in UAE and killing of ObL in Pakistan. It is alleged that the first operation was done by Mossad and the second operation was undertaken by CIA.

The logical conclusion of killing of Khashoggi seems to be that it was aimed at eliminating MbS, the assassination was done in Istanbul to initiate a war between Saudi Arabia and Turkey and to also impose economic sanctions Saudi Arabia. The Donald Trump has recently claimed that Saudi Arabia can’t live more than two weeks without the support of United States. The sole surviving super power no longer needs Saudi oil but remains adamant at selling more arms to the monarchy by dragging it in a direct war. Proxy wars seems to be getting over because in most of the countries the prime supporter of wars is facing humiliating defeat, these include Afghanistan, Iran and Syria.   

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Bailing out Pakistan by IMF or plunging it deeper into debt trap

The critics of Prime Minister Imran Khan are firing all sorts of shots at him. The biggest blame is that the person who didn’t want to approach International Monetary Fund (IMF) has conveniently bowed down rather than making an effort to live without the crutches of lender of last resort. Khan has been critical of borrowing during his election campaign, might be that he failed in understanding the gravity of situation. Let everyone try to find a logical reply to the basic question, will abstaining from borrowing from IMF save Pakistan from committing default? The immediate and logical reply is a big no because the countries that were most likely to extend supporting hands have done the contrary.

Therefore, it is imperative for the ruling regime to strike the best deal and it is also the responsibility of the opposition to help the incumbent government to have consensus on a home grown plan to make debt servicing sustainable. Let PML-N and PPP leadership not forget that they ruled the country for 10 years and supported each other under the much talked about ‘Charter of Democracy’. The country would have not faced the present crisis, had they followed ‘prudent policies’, contained extravaganzas and corruption and supported flight of capital from Pakistan. The ongoing investigations indicate that Pakistanis have parked billions of dollars outside Pakistan, own properties and doing thriving business in many neighboring countries.

After the victory in election, Khan was assured support by United States and Saudi Arabia and told not to approach Iran. Now it is evident that that these countries were willing to extend financial support to Pakistan, only if it agrees to support their geopolitical agenda. The US was prompt in instructing IMF not to lend any money to Pakistan to pay off Chinese debt. The much talked about Saudi oil facility and credit has not come to Pakistan, till this article is going into print. In such a hostile environment Pakistan has no option but to approach IMF and accept its stringent conditions.

Two of the most contentious issues faced by Pakistan are growing current account deficit and shrinking foreign exchange reserves. Therefore, the first target is establishing a ‘lifeline’ before the patient goes into coma and chances of recovery diminish. It may also be kept in mind that issue of ‘Certificate of Health’ by IMF also facilitates in borrowing from other multilateral lenders that include the World Bank, Asian Development Bank (ADB) and International Finance Corporation (IFC). This may also pave way for disbursement of loan by Islamic Development Bank.

Those who do not believe in my narrative, should look at the movement of US$-Rupee parity over the last few days. Till it was not clear that Pakistan will approach IMF and would also receive an encouraging reply, stock market kept plunging and the benchmark index of Pakistan Stock Exchange kept registering erosion of a magnitude that was hardly witnessed in the recent years. However, the situation started reversing after Finance Minister, Asad Umar met IMF Chief. Though, a lot of clarifications are yet to be made, the commitment by multilateral lenders have started pouring in. Someone has said it right that the markets are impervious to emotional appeals, and investors cannot be inspired or persuaded, other than through the cold inducements of gain and loss.

The likely IMF bailout package is certainly not enough to pull Pakistan out of the ‘default like situation’.  However, it offers the space to take corrective steps and put the economy on track. The next but biggest challenge will be to undertake much delayed structural reforms. Almost all the previous governments have promised that while approaching IMF but many failed in fulfilling the commitments.

I will not hesitate for a second in saying that Imran Khan is the propagator of change but he is still surrounded by those who are known for maintaining status quo. Pakistan suffers from ‘confidence deficit’ that is a far bigger threat as compared to budget or current account deficit. What needs to be done is comparatively straightforward and the best path forward can be mapped out quickly as well as the PTI leadership has no shortage of competent people to make Imran Khan’s dream come true.

Khan has a strong social media team that can play a pivotal role in changing the perception, but the real issue is to change the ground realities. What need to be managed urgently right now are the fundamentals not the perceptions. That is where the prime minister’s focus is immediately required.

To put the country on the fast growth trajectory, it is necessary to point out that IMF recipe of raising electricity and gas tariffs, hiking interest rate and withdrawing subsidies could prove fatal blow to country’s economy. It is known to all and sundry that Pakistan suffers from cost pushed inflation that also renders ‘Made in Pakistan’ goods uncompetitive in the global markets. Unless exports are boosted containing current account is not possible. Boosting remittances may bring some additional dollars, but producing exportable surplus and attaining competitive advantage is a must.

PML-N and PPP regimes are known for extravaganzas and wastages; PTI has to follow austerity by discouraging import of luxury items. In a country where a huge percentage of population lives below the poverty line, there is no room for import dog food, luxury cars, expensive mobile phone. Let Pakistan follow the models that enabled Turkey and many other countries to bid farewell to IMF. The citizens of Pakistan ought to thank IMF for the 18 assistance program, but will also have to learn to live within means. It is not difficult but needs solid commitment and support by all the political parties.

Can re-imposition of sanctions on Iran by United States cause any disruption in oil trade?

With 4th November 2018, the date for re-imposition of U.S. sanctions against Iran drawing closer, uncertainty about how much of global oil supply will be affected is running high. Mixed signals are coming from some of Iran’s biggest oil customers. Analysts fear that uncertainty is likely to linger on even after the sanctions become effective. There is a need to understand the motive behind the US decision.

There is growing consensus that the US decision is based on achieving three key objectives: 1) weakening Iran economically to stop it from becoming a regional power. Both the US and Israel have learnt that an economically strong Iran is the biggest hurdle in maintaining their hegemony in the region, 2) by creating rift between Saudi Arabia and Iran, the US also succeed in selling more arms to Saudi Arabia, which has been brainwashed to an extent where the monarch considers Iran a bigger threat as compared to Israel and 3) the biggest beneficiary of high oil price is the US that has attained the status of largest oil producing country.

According to energy sector analysts, if crude price plunge below US$50/barrel most of the US shale companies will go bankrupt. It is on record that in the past when crude price touched US$147/barrel the number of active rigs rose to around 1,600. When the price plunged to less than US$40/barrel the number of active rigs declined to less than 600. Therefore

One of the objectives of western media, controlled by the Zionists, is to keep the level of uncertainty high by promoting geopolitical crises. By keeping level of uncertainty high, speculators are facilitated and one thing has been proved without any doubt that even the hawkish statements of the US present keeps oil prices volatile.

This volatility also keeps many economic super powers subservient to the US. There are credible evidences that the association of Japanese refiners has suspended its crude oil purchases from Iran and South Korean refiners have also stopped buying Iranian crude in the hope that Washington will grant the heavily import-dependent nation a sanction waiver.

Reportedly, India’s largest refiners have not ordered any Iranian crude for November deliveries, which suggest that India might follow other countries buying oil from Iran. One can’t ignore a fact that the deadline for purchasing oil cargoes for November delivery is still a couple of weeks away. Earlier, India had indicated to use its currency to settle oil transactions with Iran.

The European Union has come up with a mechanism to continue buying oil and oil products from Iran, but analysts are skeptical about how effective it will be. The mechanism basically means transactions will use the barter principle rather than money—a mechanism the USSR used during the Cold war. Since a transaction is a transaction, with or without money, the U.S. could expand sanctions to cover barter deals also.

Some close observers of the situation warn that despite all the rhetoric from Washington, things in Iran are not as bad as being portrayed by the western media. The country has the resources to withstand the crisis. Reportedly Iran has enough to handle 1.85 million bpd in exports, and Iranian insurers are sure to provide coverage, the uncertainties continue.

After entering into different controversies, the US president has hit Saudi monarch below the belt by saying that its rule could no last beyond two weeks without the US support. Analysts say that after facing defeat in Syria and Iraq, the US seems adamant at dragging Saudi Arabia into some proxy war and putting all the blame on Iran.