Pakistan Prime Minister calls for lifting sanctions on Iran to combat coronavirus

Prime Minister Imran Khan, in an interview with Associated Press has called for lifting of sanctions on Iran to enable it to combat coronavirus.

In a call for action from the international community, Imran Khan said it was time to end US sanctions on Iran, where one of the worst coronavirus outbreaks in the world has unfolded. 

Iran has struggled to respond in part because of crippling sanctions imposed by the Trump administration.

Khan further added that Iran is a “classic example” of a place where the humanitarian imperative to contain the outbreak outweighs political rivalries or economic dogmas.   

The prime minister said he fears the new coronavirus will devastate the economies of developing nations and warned richer economies to prepare to write off the debts of the world’s poorer countries. 

“It’s not just Pakistan. I would imagine the same in India, in the subcontinent, in African countries,” the prime minister said, referring to the virus, “If it spreads, we will all have problems with our health facilities. We just don’t have that capability. We just don’t have the resources.”

Falling oil prices, biggest threat to US shale producers

The week ended on 13th March 2020 can be termed one of horrific weeks for crude oil producers and traders as prices went down about 50 percent since the start of the year. 

Oil rebounded a bit on Friday following movement in the U.S. Congress to pass a coronavirus economic relief bill. Nevertheless, the near-term looks dire for oil markets, with supply rising quickly as demand continues to collapse. The added threat is likely hike in output by OPEC and Russia.  

Analysts anticipate oil prices to remain at current depressed levels for months amid a price war and the fight for market share. They fear WTI Crude prices to hover around US$30/barrel in the near term. On Friday, WTI traded at US$33, but down by a massive 25 percent on the week for what is shaping up to be the worst week for oil prices since the financial crisis in 2008. Brent prices are also likely to remain range bond in the near term.

After the collapse of the OPEC+ production cut deal, major banks slashed their oil price forecasts, expecting an enormous oversupply in the market as Saudi Arabia, the United Arab Emirates (UAE), and Russia are turning on the taps and looking out for their own interests instead of trying to fix the prices.

Goldman Sachs has warned oil price may plunge to US$20, Standard Chartered says WTI Crude will average just US$32 a barrel in 2020, and ING slashed its Q2 Brent Crude forecast to $33, from US$56, to name a few.

Saudi Arabia has promised to flood the oil market with an extra 2.6 million bpd of oil from April, while its fellow OPEC producer and ally, the United Arab Emirates (UAE), pledged an additional one million bpd in supply. This will result in a total increase of 3.6 million bpd in global oil supply from OPEC’s heavyweights at a time of depressed oil demand due to the coronavirus outbreak. Russia indicates to raise production up to 500,000 bpd.   

According to the Wall Street Journal, Russia believes that low oil prices can damage U.S. shale producers. Outwardly, Moscow does not link its motivations to an intention to harm U.S. oil companies, but Russia had grown wary of the OPEC+ cuts, which contributed to a 4 million bpd increase in U.S. shale over the past three years. Western analysts believe that U.S. sanctions on Nord Stream 2 and Rosneft stoked ire in Moscow. 

 A study of 30 shale drillers accounting for 38 percent of total U.S. oil production finds that roughly 50 percent of their output is hedged at an average price of US$56. If WTI averages US$40 this year, the hedges would save the companies a combined US$10.5 billion or US$17 billion if WTI averages US$25. “There is definitely a significant amount of default risk,” said Michael Anderson, a strategist at Citi.

Western media annoyed with Russia for not joining Saudi Arab in production cut

As usual the western media is putting pressure on Organization of Petroleum Exporting Countries and Russia, commonly known as OPEC plus to opt for deeper production cut. After the inconclusive meeting of the group on 6th March 2020, the media is projecting a rift between OPEC, led by Saudi Arabia and Russia, but has not said a word to demand United States to cut production. It is on record that now United States has attained the status of largest oil producing country, followed by Russia and Saudi Arabia.  

On Friday, Brent price witnessed its biggest daily loss in more than 11 years, after Russia didn’t support a production cut by OPEC to stabilize prices hit in the aftermath of coronavirus outbreak. Prices plunged because the OPEC conference remained inconclusive. The split between OPEC and Russia revives fears of a 2014 oil price crash, when Saudi Arabia and Russia fought for market share with US shale oil producers of United States; it is on record that United State has never participated in any output limiting pact.

Now there is uncertainty about whether the OPEC plus alliance will survive. A day earlier, OPEC issued a call to cut production and also indicated that there would be no deal without Russia. It is believed that Moscow didn’t agree at production cuts not only because it has a stronger stomach for lower prices than Riyadh, but also because the oil market is suffering from a demand trap.

There is talk that if OPEC plus has failed to agree on additional production cuts, would the current agreement – the one  agreed in December 2019 and set to expire in March in 2020 be adhered to or producers will be at liberty to raise output. The fate of the alliance is now on the rocks, although the group pledged to continue to talk going forward. 

There was pressure on Russia to agree, but Moscow has been skeptical of additional cuts for quite some time. A few days ago, Russian President Vladimir Putin said that his country was more or less contented with where oil prices were, noting that the Russian budget had taken into accounts the possibility of low oil prices.

Western analysts find it hard that Russia didn’t agree to further production cut. They believe it required only a modest reduction on Moscow’s part that would have boosted crude prices. They also believe that no-deal would almost surely lead to further decline in prices.

Another twist appeared when Iranian Oil Minister, Bijan Namdar Zanganeh told reporters that if Russia does not sign there will be no deal. Western experts term this a hollow threat. They insist, OPEC has shown signs of a determination to cut output even without Russia. The pressure on government budgets from low oil prices is already pinching.

“OPEC is making the cuts conditional on Russia joining. What Moscow perhaps is underestimating is that Saudi Arabia may be ready to walk away if it doesn’t get a positive answer,” said Amrita Sen, chief oil analyst at consultant Energy Aspects, reported Bloomberg.

Russia, for its part, sees US shale on the ropes, with financial stress deepening for small and medium-sized drillers. US oil production growth has slowed dramatically in recent weeks and months, and if WTI lingers below US$50/barrel for a long period, first output will flatten and then decline.

Keeping crude oil prices has facilitated the US in boosting production. Time has come for Saudi Arabia and Russia to snatch the title of largest oil producing country from United States. This target can’t be achieved without plunging crude oil prices below US$40/barrel that will force many US Shale companies to shutdown their operations.

Is Coronavirus reporting merely a media driven plot to topple President Trump?

Reportedly, Acting White House chief of staff Mick Mulvaney has refused to take responsibility for the Trump administration's response to Coronavirus spread and crafted a new conspiracy theory that the news coverage on the novel virus is merely a media-driven plot to take down Donald Trump.

"They think this will bring down the president," Mulvaney said at the Conservative Political Action Conference, regarding news reporting on the spread. The virus and its spread have caused panic among investors, who fear the disease could have lasting impacts on the economy.

On Thursday (27th February 2020), the Dow Jones Industrial Average fell nearly 1,200 points, the worst one-day drop in history. On Friday, the index fell by another 1,190 points, dropping 4.4%. As a consequence, equities are likely to witness their worst week since the 2008 financial crisis, according to the Wall Street Journal.

When asked how the administration could calm the markets, Mulvaney again blamed the media — the go-to strategy Trump and his aides employ when faced with criticism over their policies. "What I might do to calm the markets is turn the television off for 24 hours," Mulvaney said. "This is not Ebola. It's not SARS."

While Trump and his appointed officials are trying to calm fears, experts within the Centers for Disease Control and Prevention are warning of community spread of virus, saying cities should plan to implement "social distancing measures," including closing schools and asking businesses to have employees work from home.

Because Trump fears the impact the virus may have on his reelection hopes, he's trying to control the amount of information that gets to the public on the disease, putting Mike Pence solely in charge of the communications response. Pence, has a checkered record on public health crises, overseeing the worst outbreak of HIV in Indiana when he served as state governor.

And in even worse news for the administration, a whistle blower came forward to say that public health workers in the federal government are not well trained or properly equipped to deal with the disease, saying workers were "improperly deployed" to military bases where people infected with the disease are being quarantined.

There is a talk also that Congress and the White House need to rise above their usual partisan sniping and name-calling and show a little unified leadership as the United States readies itself for the spread of the new virus.

It seems hard, given the level of bitter polarization in Washington, but Democrats and Republicans owe it to the American people to shun their differences. That’s what rational, responsible governments do in cases of war, natural disaster and, yes, a mass outbreak of infectious disease.

It is being said that the outbreak in the United States seems all but inevitable. Transmission without a known connection to someone who is sick or traveled to a place where people are sick marks a concerning turning point in any disease outbreak.

One thing that needs to happen now is the accelerated production of millions of masks needed to protect healthcare providers; another is to get working testing kits out to the states to confirm suspected cases.

President Trump made the same point about working together in a news conference Wednesday night. He tried to assure the country that he and his team had things completely under control. To make that point he waved a printout that he said was a list from the Johns Hopkins Hospital in Baltimore ranking the U.S. as the most prepared country to handle an epidemic.

“We should be working together,” he said when asked about criticism by House Speaker Nancy Pelosi and the partisan debate about the right amount of federal funds needed to properly prepare. “Pelosi shouldn’t be making statements like that because it’s so bad for the country,” he said.

The president then undercut his own point by trash-talking Pelosi, Sen. Chuck Schumer (D-New York) and all of the Democratic candidates on whom he inexplicably placed blame for the recent stock market drops.

Boosting Pakistan Iran Trade

A Trade delegation from Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIMA) recently visited Pakistan to discuss strengthening trade ties between the two countries.

In a meeting with their Pakistani counterparts, the Iranian delegation expressed concerns over the low level of trade between the two countries and suggested taking measures like holding exhibitions, exchanging business delegations and the use of non-bank channels for money transfers, for boosting trade between the two nations.

The delegation, Led by TCCIMA Head Masoud Khansari also visited Federation of Pakistan Chambers of Commerce & Industry (FPCCI). Mian Anjum Nisar, President, FPCCI said the level of economic relations between the two countries was insufficient keeping in view the existing capacities and cultural closeness between the two sides.

“Although the two countries have signed a preferential trade agreement a few years ago, none of them has used this opportunity properly,” Nisar regretted.

There are growing realization that the US sanctions against Iran are a major part of the obstacles to the development of economic cooperation between the two countries, and both sides need to take serious measures to resolve this issue. 

During the visit to Pakistan, the Iranian delegation also met with Arif Ahmed Khan, Chief Executive, Trade Development Authority of Pakistan (TDAP) in Karachi.

In the meeting, the two sides emphasized the need to use solutions such as the preferential trade agreement, free trade agreement, and removing customs barriers for boosting trade relations between the two countries. 

Speaking on this occasion, the head of the Tehran chamber pointed out some of the obstacles in the development of economic cooperation between the two countries. Annual trade between Iran and Pakistan is as paltry as US$1.5 billion. 

Ahmad Khan noted that both Iranian and Pakistani authorities should realize that the development of trans-regional trade is subject to a boom in regional trade. Therefore, the two countries must take operational steps to improve trade relations.

Why is war in Iraq still going on, despite the massive economic costs?

The war in Iraq from the outset was very controversial in the United States and other Western countries.The opponents considered the cost of the war in Iraq as a heavy burden on the US taxpayers and wanted to prevent the invasion of Iraq in 2003, and have called for a halt to the war in Iraq repeatedly since its beginning.

Lately, various US groups and institutions have rallied to highlight this issue once again. “The Costs of War Project” is one of the research projects on the costs of the war in Iraq that begun its evaluation of the costs since 2011. The project is being observed and managed by Dr. Neta C. Crawford, Professor and Chair of Political Science at Boston University, examining the key features and effects of the Iraq War on the federal budget. 

According to the latest report says that even if the US administration decides to pull out all of its troops in Iraq immediately, the war has already cost US$1,922 billion to the US tax payers voters from 2003 to the end of 2019. This amount not only includes funding appropriated by the US Department of Defense (DoD) for the war, but also the costs of the care of Iraq War veterans and interests on debt incurred for the 16 years of the US military's involvement in the country. 

The DoD had allotted approximately US$838 billion for military operations in Iraq from the fiscal year 2003 to 2019, including operations fighting ISIS in Iraq and Syria. Aside from the Defense Department costs, the State Department added approximately US$59 billion to the total costs of the Iraq War for The United States Agency for International Development (USAID) on Iraq and Syria. Since 9/11 attacks, about US$4.1 billion has been spent on medical and disability care of war veterans and compensation. 

These costs came at the time when the Pentagon has been trying to cut its expenditures for the past decade after its annual US$140 billion funds for the Iraq War heightened in 2008. In some cases, Congress has appropriated funding required for the war in Iraq apart from previous approved plans.

It is worth mentioning that the EU budget with 27 member countries and a population of 446 million people was set at US$175 billion in 2018. Therefore, a question is being asked, why is the war in Iraq still going on, despite the massive economic costs?

Some experts consider the ideological orientation of US foreign policy to be one of the main reasons for the continued war in Iraq. From this point of view, Washington is trying to confront its ideological opponents rather than adopting short-term approach toward issues and the costs and benefits of the implementation of its policies.

On top of all Washington considers Islamic Republic of Iran as its most important ideological opponent, which has been openly defying the US policies. Therefore, White House leaders find it necessary to continue the war in Iraq to confront Iran.

Therefore, withdrawal of US troops from Iraq is being considered as a major defeat for the United States. That is the reason the US continues to insist on maintaining its presence and even expanding its military bases in Iraq, despite the massive financial costs and the Iraqi parliament’s resolution for expulsion of foreign troops. 

Washington knows it very well that the withdrawal of its troops from Iraq will be taken as a sign of its defeat. It also knows that this defeat will be the opposite of the "America First" populist slogan.

Need to end Saudi-Iran animosity

One completely fails to understand why even a thought of ending Saudi-Iranian animosity make the supporters of monarch jittery. If one could recollect lately Iraq made an attempt to ease tension between the two arc enemies, but turmoil was created in Iraq. Soon after two top military strategist, one each from Iran and Iraq were killed, the probability of war in the region increased manifold.

Recently, Iranian Foreign Minister Mohammad Javad Zarif, who traveled to Germany to attend the 2020 Munich Security Conference, said that after the martyrdom of commander Soleimani, we received a message from Saudi Arabia calling on talks with Iran. Zarif also reiterated that although he replied to the Saudis' response, he received no further messages.

Following the remarks by the Iranian foreign minister, Saudi Foreign Minister, Prince Faisal bin Farhan Al Saud claimed that Riyadh had not sent any private messages to Tehran. On the issue of talks between Iran and Saudi Arabia, there seem divergent thoughts, which must be explored to end the enomsity.

First, it is being said that Saudi Arabia is trying to compare the dialogue between Riyadh and Tehran with the US-Iran negotiation and is constantly changing its stance on Iran. The nature of the negotiations between Iran and the US differs from that between Iran and Saudi Arabia. Iran has repeatedly stated that it is willing to hold talks with the Saudis without any preconditions, as the proximity of the two countries is in favor of stabilizing the region and reducing tensions.

Second, the Saudis have always set mostly general and vague preconditions for starting talks with Iran, such as the need for Iran to change its behavior in the region. The foreign policies of the countries are defined by their foreign interests, so Saudi Arabia expects to change all of Iran's behavior and policies in the region, which is totally inappropriate.

Third, Saudi officials have been at odds over developments in the region; on the one hand, they know that the US and the West cannot provide the country’s security forever, which led Riyadh to the dialogue with Tehran, and on the other hand, they are still looking forward U. support. The recent regional developments have led Saudi Arabia to face new developments in the region.

Fourth, remarks by Zarif indicate that the Saudis are deeply afraid of escalating tensions in the region. Whenever military tensions are heightened in the region the Saudis reduce their provocative actions against Iran, but once the situation is settled down they resume their actions. The most notable sample of this behavior is Saudi Arabia’s reaction to the assassination of General Qassem Soleimani, as it was trying to not take a provocative stance against Iran.

Fifth, Saudi Arabia needs to restore its ties with Iran to deal with the regional cases. The first issue is the attrition warfare in Yemen that began in March 2015 with the invasion of the Saudi-led coalition and has continued until now. There are clear thoughts a war that had nothing but destruction for the Yemeni people and defeats and lots of military costs for the Saudis.

In its recent actions toward Damascus, Saudi Arabia has shown that it is seeking to improve its relations with Syria, a country that has strong ties with Iran and is a part of the axis of resistance. In this regard, Syria’s permanent representative to the United Nations, Bashar Al-Jaafari, recently attended a special ceremony held in honor of the Saudi Minister of State in New York, Fahad Bin Abdullah Al Mubarak, which drew lots of controversy.

Diplomatic sources in New York said the Saudi delegate to the UN, Abdullah bin Yahya al-Muallami had intentionally met with Bashar al-Jaafari during the visit, which was unexpected for the attendees. During their celebration Saudi officials expressed their love for Syria and said that it remained in their hearts, adding that what had occurred between the two countries was nothing but a summer cloud that will inevitably pass.

Ankara has become a relentless rival to Riyadh in all aspects these days. This issue has been worsened following the Persian Gulf crisis, Saudi Arabia's cut of relations with Qatar and the assassination of Jamal Khashoggi inside the Saudi consulate in Istanbul. Saudi Arabia needs to improve its relations with Iran to be able to prevent Turkish influence, especially in African countries and Libya.

Improving relations between Iran and Saudi Arabia can undoubtedly be helpful in settling the crisis between Saudi Arabia and Qatar, as Doha has gotten closer to Tehran and Ankara since the crisis.

 The point is that some parties will certainly be dissatisfied with the close relations between Iran and Saudi Arabia and will make every effort to obstruct it.