Israeli analysts raise 10 fears after victory of Joe Biden

Israel emerges as the first country to raise fears after the victory of Joe Biden in the US Presidential Election. Its biggest fear is that the US policy in the Middle East, especially the Israeli-Palestinian conflict and Iran, is likely to undergo a dramatic sea-change, after Joe Biden enters the White House in January 2021.

1. Trump’s "Deal of the Century"

Israel’s biggest fear is that Biden will end any possibility that Trump’s plan to resolve the Israeli-Palestinian conflict, known as “Peace to Prosperity” or by its nickname as the “Deal of the Century”. The plan had offered a radical break from past initiatives and allowed Israel to eventually annex up to 30% of the West Bank and promised to recognize Israeli sovereignty over most of east Jerusalem. As part of the plan, Trump had also included the first ever published map of suggested borders for a two-state resolution to the conflict. The plan was unveiled only in January 2020, with an invitation to the Palestinians to negotiate, which they rejected. The Trump administration itself sidelined the initiative this summer in favor of prioritizing Israeli-Arab normalization deals, with the idea that solving the Israeli-Palestinian conflict would come at a later stage. Now Israel fears Biden will not adopt it.

2. West Bank annexation

A Biden victory removes any possibly of unilateral West Bank annexation, even a minor one. Biden will not support it and the Trump administration is unlikely to move on it during the time it has left, because his administration promised to suspend it in exchange for normalization deals with the United Arab Emirates and Bahrain. Biden will want any sovereignty moves to wait until a final status agreement is reached with the Palestinians. His map of a two-state solution is unlikely to include all the settlements, and as a result, the fear of future settlement evacuations and a possible settlement freeze now returns to the discourse. The settlers and the Israeli Right had warned that the first 10 months of this year represented an unprecedented window of opportunity to annex the settlements. That window has now closed.

3. Onus on Israel to resolve the conflict with the Palestinians

The former Obama administration had held Israel liable for continuation of the conflict, holding that its continued settlement activity was a stumbling block to peace. The Trump administration flipped that calculation. It placed the onus for the conflict on the Palestinian Authority (PA) for failing to negotiate and for incitement. It held in particular that terrorism was a stumbling block to peace and took the PA to task for its continued support of terrorist activity through the payment to individuals jailed for terror activity and to family members of terrorists. The Trump administration also divorced settlement activity from the peace process either with the Palestinians or with Arab states. The onus will now flip back to Israel to resolve the frozen peace process, with renewed emphasis on the connection between the peace process and settlement building, which will once again become a stumbling block to peace.

4. Settlements will once again be considered illegitimate

Biden is likely to reverse the Trump administration’s dramatic upending of longstanding US policy, which held that Israeli activity over the pre-1967 lines in the West Bank and east Jerusalem was illegitimate. The Trump administration had recognized Israel’s historic and religious rights to that territory. While it never recognized Israeli sovereignty there, it held that such settlement activity was not inconsistent with international law and allowed for the building and expansion of Jewish settlements. To underscore the deep Jewish roots in the territory, US Secretary of State Mike Pompeo and US Ambassador to Israel David Friedman spoke of that area as Judea and Samaria. Concepts that were eliminated as part of the blanketed US support for all the settlements, such as settlement blocs, isolated settlements and the pre-1967 lines, will all be resurrected.

5. US embassy in Jerusalem

Biden is among the signatories to the US Embassy Act of 1995 that recognized Jerusalem as the capital of Israel and mandated its embassy be relocated from Tel Aviv to Jerusalem. The embassy was only moved in 2018, under the Trump administration. During the campaign, Biden said he had no intention of reversing that move. To date, only the US and Guatemala have embassies in Jerusalem. The Trump administration has actively campaigned and enticed a small number of other countries to follow suit. His loss brings an end to that campaign. It is now unlikely that other countries, even ones who have pledged to do so, will move their embassies to Jerusalem.

6. Revival of Palestinian Authority

A Biden win breathes new life into the Palestinian Authority, which had been on the verge of financial collapse. It’s expected the Biden administration would restore ties with the Authority that had been severed during the Trump administration. This would include reopening the PLO mission in Washington and the US Consulate General in Jerusalem that served the Palestinians. Biden is expected to restore much of the financial assistance to both the Palestinians and to the United Nations Relief and Works Agency which services Palestinian refugees, all of which had been cut by the Trump administration. The absence of those funds had created a financial crisis that was compounded by the COVID-19 pandemic, as well as the PA’s decision to protest Trump’s peace initiatives by refusing to accept the tax revenues which Israel has collected on its behalf. It had also cut security ties. News of Biden’s victory allows it to restore security ties with Israel and to receive the tax revenues.

7. Israeli-Palestinian negotiations

A Biden administration would likely be able to revive the frozen Israeli-Palestinian talks by leveraging the shelving of the Trump administration’s peace plan and any possibility of West Bank annexation to entice the PA back to the table. It would be difficult for the PA to refuse Biden, after taking such a harsh step against Trump. PA President Mahmoud Abbas’s age would also be a factor, he is 85 and can’t afford to wait out the Biden administration, like he did the Obama and Trump administrations.

8. Israeli-Arab normalization

Biden supports the Israeli normalization deals with Bahrain, the United Arab Emirates and Sudan and is expected to work to advance them. But he is less likely than Trump to be able to advance new ones, since some of the impetus for the deals was the creation of a regional alliance against Iran. Still, the basic paradigm shift that divorced Israeli-Arab ties from the fate of Israel’s conflict with the Palestinians will remain in place.

9. US Israel bonding

Under a Biden administration the United States still stands with Israel at the United Nations. This show of solidarity has been a main feature of US policy for at least the last three administrations. The Obama and Bush administrations stood with Israel at the UN due to the body’s bias against Israel, even though they philosophically agreed with many of Israel’s opponents. The Trump administration stood with Israel both on the grounds of bias and because it philosophically supported Israel on many of the issues. Biden is more likely to go the way of the Obama and Bush administrations. Biden’s anticipated elimination of the Trump Administration’s paradigm understanding of the Israeli-Palestinian conflict will likely weaken the impact of his administration’s support for Israel at the UN.

10. Iranian deal

Biden victory may reverse the Trump administration’s policy towards Iran and restores it to that of the Obama administration, which had brokered a 2015 deal to curb Tehran’s nuclear program. Trump withdrew the US from that deal, known as the Joint Comprehensive Plan of Action, between Iran and the six world powers. It has re-imposed US sanctions on Iran and fought – albeit unsuccessfully – to restore the international ones as well, including the arms embargo. Now Biden may work to rejoin and revive the deal, which still has the support of the other five world powers.

Would Joe Biden victory change Israeli politics?

When Donald Trump won the election in 2016, Benjamin Netanyahu became his favorite and best student. The Israeli prime minister had known Trump for years – he was at the president’s wedding to Melania in 2005 in Palm Beach – and paid close attention. When he started to see how Trump’s tactics were working in the US, he adopted some for himself.

Following his mentor’s lead, Netanyahu perfected the art of right-wing populism. He copied the president’s use of social media, launched a weekly Trump-like webcast to counter alleged fake news, and attacked the police, the attorney-general, the courts, the media and the elites. Everything became fair game, nothing off limits.

Like Trump on race, Netanyahu played up Israel’s ethnicity card, trying to drive a wedge between Ashkenazim and Mizrahim. He surrounded himself with people who never hesitated to wander beyond his circle, and who did Netanyahu’s bidding in the media, the Knesset or the cabinet.

Netanyahu was often the first and most vocal defender of the Supreme Court. In 2012, for example, he spoke about how a “strong and independent justice system is what allows for the existence of all the other institutions in a democracy.” He also refrained from unilateral moves vis a vis the Palestinians. Annexation? That was never an option. Instead, he was always the one urging caution.

But all that changed in 2016, and Trump is partially to thank for it. Netanyahu saw the movement Trump created, and tried to fashion the same thing in Israel. There was one point in 2017 when he even started dying his hair different colors.

Yes, we have a different electoral system (which is far worse for determining the prime minister than what is happening in America), but when it comes to rhetoric and tactics, we have in recent years pretty much duplicated what happened across the Atlantic. That is why it will be interesting to see how Joe Biden election as President wills Israel’s domestic political system.

The first person who will be directly impacted by a Biden presidency is Netanyahu, who is reportedly debating whether to cave to Blue and White’s demands and pass a 2021 budget, or refuse, and take Israel to a new election.

While Biden does not play a direct role in that consideration - another election is more about internal polling and Netanyahu’s bribery trial - a Democratic administration is something to think about.

What then could Netanyahu argue under a Biden presidency? For one thing, he could do to Biden what he did to Barack Obama: portray him as an adversary.

While Biden is a known political commodity and has a strong record among Democrats when it comes to Israel, there will almost definitely be disagreements over issues like the Iran deal, the settlements and the Palestinians, and any one of those could be used to ignite a crisis with a clear political benefit.

That is what he did with Obama, and then used it as part of his election campaign in 2019 that showed Netanyahu flaunting the infamous “lecture” he gave Obama in the Oval Office during a visit there in 2012. The message was simple: only a strong leader like Netanyahu can stand up to a president like Obama.

Could he do that as well with Biden? It’s possible. Right-wing pundits and Netanyahu supporters are already mourning what appears to be the end of the Trump administration. Tzachi Hanegbi, a Likud minister close to Netanyahu, went as far on Thursday as to warn of a possible Israeli war with Iran if Biden becomes president.

Is such a war possible? Who knows? But warning about it now serves one purpose: presenting Biden as a potential danger. And that, in a corrupt way, could be beneficial for Netanyahu’s political survival.

On the other side of all of this is Blue and White leader Benny Gantz, who has issued a public ultimatum that he will not allow this government to continue without a 2021 budget.

Interestingly, a Biden win has the potential to help Gantz. The reason is because Biden, obviously, is the polar opposite of Trump. He is not a populist but a veteran politician whose message is one of unity, compassion and reconciliation, ideas that Gantz has tried to push since entering politics two years ago.

One of the problems was that until now, a significant number of Israelis found it hard to imagine an Israel without Netanyahu – an 18-year-old army recruit has never been conscious of any other prime minster – and all his shtick. It was as if the division that Netanyahu brought with him to the job was a necessary requirement.

Soon enough, Israelis might see a different kind of president in the White House, one who doesn’t attack the police, the courts, the attorney-general and the media. One who speaks about unity, positive change and coming together.

That might radiate back here and give Gantz a boost in a future election. While Gantz’s Blue and White currently polls at only nine seats, he is confident that the party will pull in double that figure in the next election, one that could happen as early as March.

The reason he might be right is because the defense minister rarely attacks Netanyahu right now as part of the coalition, and when he does it is usually with soft shots. A collapse of the government – especially one initiated by his party – would give the former IDF chief of staff the offensive once again.

It would also give him a chance to explain why he joined Netanyahu’s government in April, and why it took him until now to bring it to an end.

If articulated well, he has some good points to make. While it is true that Gantz had promised over three campaigns not to sit with Netanyahu, that was before COVID-19 entered our lives. Once it did and brought with it the economic crisis that has upended nations, Gantz’s calculus changed as well.

What he didn’t fully realize in April was that Netanyahu did not change with him. Gantz’s mistake was thinking that Netanyahu would rise to the occasion. Sadly, he did not, and instead Netanyahu continued to put politics before the pandemic, and to work consistently to undermine his coalition partner.

Privately, Gantz tells party members that he knows there is almost no chance Netanyahu will abide by the rotation agreement that is supposed to see the defense minister become prime minister next November. But he does feel that it is important to provide a chance for a 2021 state budget to pass, since ultimately that is what the Israeli people need: financial stability and a government that works for them.

Expect a decision on this in the coming two weeks, but also expect a Biden win to give Gantz a feeling that a politician like him can succeed. Israelis will see that someone who comes across as decent, moral and honest can be president of the largest superpower in the world. Hopefully, Gantz will think, they can believe the same about their own country.

In a year like 2020 though, it has been learnt that anything is possible. But one thing is for sure that Trump and his style of politics is not going away so quickly. If there were people who thought that Trump’s election in 2016 was a “mistake” or a “malfunction,” that was proven wrong on Tuesday when he collected close to five million more votes than in 2016.

America is split. It is split geographically and it is split even within those battleground states – Michigan, Wisconsin and more. Traditionally, a president does not speak out publicly about policy, politics or party when he steps down. That was the case with Bill Clinton, with George W. Bush, and until recently, also with Obama. This could be tricky for Israel, which will need to navigate between making inroads with a Biden administration and the Democratic Party, but also at not upsetting an influential former president.

“Electoral College Undemocratic”, says Robert Smith, a US professor

"The electoral college, which is partly rooted in slavery, is a thoroughly undemocratic institution and makes a mockery of democracy in America," declares Robert Smith, a professor of political science at San Francisco State University, while talking to Tehran Times. 

Americans voted on Tuesday for the presidential election. The incumbent president, Donald Trump from the Republican Party, faced Democratic rival vice president Joe Biden. It seems that the elections would not run smoothly this time given the potential threat to the smooth running of the vote. 

Some Americans believe that antiquated and outdated constitutional institutions like the Electoral College can undermine the voices of ordinary people. In the 2016 presidential election, Democratic candidate Hillary Clinton garnered more national votes; however, she lost to Trump due to Electoral College. Professor Smith believes that such an electoral system should have been abolished before. 

"It should have been long ago abolished, but it takes an amendment to the Constitution which makes it virtually impossible to abolish, given the supermajorities required in Congress and the states," Smith said, adding, "It may, along with the unrepresentative Senate, pose a major threat to the legitimacy of the democracy and a system crisis in America."

Asked about some factors that call into question whether America is a democracy, the San Francisco State University professor notes that the election does not call into question democracy in America, "but the issues of voter suppression, Trump's unwillingness to say he will accept the outcome of the election if he loses, his unwillingness to assure a peaceful transfer of power, the possibility the outcome will not be known on election night, the prospect of Supreme Court intervention all make this an unusual, controversial and messy election, but the American-such as it is- is not in question."

Describing the Supreme Court lawyers as "politicians in robes," Smith argues that the court has a role in US elections inconsistent with democratic principles, and more so than the historical normal, is highly partisan.

Some restrictions were put on voters in Texas, a move which got some experts to say that battle playing across America is, in some ways, a continuation of a centuries-long fight over access to the franchise.

Last month, Texas's governor, Greg Abbott, a Republican, abruptly issued an order that limited each county in the state to offer one ballot drop box. 

In this regard, the American academic believes that "what happens in Texas and elsewhere in the nation is part of a long, sordid history of vote denial and suppression in the US, which has become increasingly blatant in recent elections."

Overall, it seems that the Tuesday election did not proceed as was predicted, and no one knows what will happen. 

However, Smith emphasizes that "the polls are generally accurate and trustworthy; they accurately predicted the popular vote outcome in 2016."

Underneath it all, many see a Machiavellian approach by the ruling party. It wants to preserve power by making it harder for certain groups like minorities, young people, and the poor to vote.

Investors not likely to pay attention to FOMC and BoE announcements

The 2020 US Presidential Election hangs in the balance with an outcome that is too close to call. No winner has been declared at the time of publication and it could be days before the new President is announced. Trump’s campaign has already requested a re-count of ballots in Wisconsin and the same could be asked for other states.

An uncertain election outcome with a split government was worse case scenario for Wednesday but instead of crashing lower, stocks rallied hard with the Dow Jones Industrial Average up more than 700 points at one stage.  While this rally may seem counterintuitive, the two most likely outcomes are positive for the markets.

With a split government, even if Biden wins, sweeping policy changes like tax increases or more regulation are unlikely.  If Trump wins, investors can expect more business friendly policies.  The markets also liked the decision by Illinois voters to reject the fair tax amendment that would have introduced gradually higher taxes for those making over US$250,000 instead of their flat 4.95% tax regardless of income level. In California, voters rejected the push to provide benefits to drivers for food delivery and ride hail companies like Uber, Lyft and DoorDash. All of these decisions are good for corporate America and equities.  

Yet currencies did not follow equities higher. Most of the major currency pairs including EUR/USD, USD/JPY, USD/CHF and USD/CAD were unchanged on Wednesday. GBP/USD fell ahead of Thursday’s Bank of England Quarterly Inflation report and monetary policy announcement but AUD/USD and NZD/USD extended recent gains. 

The greenback is mixed as investors wait for the final tallies which may not be delivered until Friday. Counting in Pennsylvania is expected to go on until Friday and the secretary of the state of Michigan also said it could take until the end of the week for a winner to be declared.

Complicating matters further, Trump filed a lawsuit to halt ballot counting in Michigan. Typically currencies take their cue from Treasuries but USD failed to follow ten year Treasury yields, which are down more than 10%. 

The US Fed and the Bank of England have monetary policy announcements tomorrow and the question is will they even matter? The latest US economic reports haven’t been terrible. Manufacturing activity is up; service sector activity is flat but not contracting. Equities are holding steady and the latest decline in yields makes lending conditions easier. All of this gives the central bank little reason to act, especially with investors focused more on the election than stimulus. They’ve made it clear that interest rates will remain on hold for the next few years and that’s the message they’ll reinforce at Thursday’s meeting. 

The Bank of England on the other hand is widely expected to ease monetary policy. PMIs were revised lower today, underscoring the overall weakness of the economy. Very little progress has been made on Brexit talks and as the clock ticks towards next week’s soft deadline, the probability of a no deal Brexit is high.

The central bank also meets on the same day the country enters its four week long lockdown. The closure of pubs, restaurants, gyms and non-essential shops will have a severe impact on an economy that was already sputtering.  The central bank will not only lower its economic projections but will be taking steps tomorrow to avoid a double dip recession. More asset purchases are likely but the market wants to know if negative interest rates are next. 

World Health Organization selects Iran regional base for cooperation in the nutrition science and food industry

According to reports, World Health Organization (WHO) has selected National Institute of Nutrition and Food Industry Research of Iran as the regional base for cooperation in the nutrition science and food industry for Eastern Mediterranean countries.

The importance of food and nutrition in the world these days is felt more than ever. Even in some developed countries the issue of establishing the Ministry of Food and Nutrition has been raised, Jalaledddin Mirzaei Razzaz, head of the Nutrition and Food Technology Research Institute said.

In Iran, the ministries of health and agriculture were commissioned to make arrangements for food independence.

Iran was in close competition with countries such as Saudi Arabia and the United Arab Emirates, and finally, Iran was selected with the efforts made by the Ministry of Health, he explained.

He expressed hope that such international cooperation will improve food and nutrition in addition to people's health.

A report jointly prepared by FAO, IFAD, UNICEF, WFP and WHO shows that currently around 690 million people or 9% of the world population are hungry. Compared to the previous figures, this number is up by 10 million people in one year and by nearly 60 million in five years.

“The State of Food Security and Nutrition in the World 2020” also indicates that the number of people affected by severe food insecurity has experienced a similar upward trend over the last five years. In 2019, close to 750 million—or nearly one in ten people in the world—were exposed to severe levels of food insecurity. The figures reveal that about 2 billion people in the world did not have regular access to safe, nutritious, and sufficient food in 2019.

Considering the widespread impacts of the COVID-19 pandemic, it is estimated that the pandemic may add between 83 and 132 million people to the total number of undernourished in the world in 2020 depending on the economic growth scenario.

Also, the nutritional status of the most vulnerable population groups is likely to deteriorate further due to the health and socio-economic impacts of COVID-19.

While the burden of malnutrition in all its forms remains a challenge for the world, current estimates reveal that in 2019, 21.3% (144 million) of children under 5 years of age were stunted, 6.9% (47 million) wasted, and 5.6% (38.3 million) overweight.

The report states that healthy diets are unaffordable to many people, especially the poor, in every region of the world. The most conservative estimate shows they are unaffordable for more than 3 billion people in the world. Healthy diets are estimated to be, on average, five times more expensive than diets that meet only dietary energy needs through a starchy staple.

Under current food consumption patterns, diet-related health costs linked to mortality and non-communicable diseases are projected to exceed $1.3 trillion per year by 2030.

On the other hand, the diet-related social cost of greenhouse gas emissions associated with current dietary patterns is estimated to be more than $1.7 trillion per year by 2030.

According to the report, Iran experienced a relative reduction in the prevalence of undernourishment in its total population, dropping from 5.2% in the period of 2004-2006 to 4.7% in the period of 2017-2019. However, despite this improvement, the net number of people experiencing undernourishment increased to 3.9 million, from 3.6 million.

Israel the biggest resistance in easing US Iran conflict

In 2018, soon after becoming President of the United States Donald Trump withdrew from the 2015 Iran nuclear deal, calling it “the worse deal ever.” In response, Iran’s supreme leader, Ayatollah Khamenei, vowed never to renegotiate another nuclear deal with the United States. Iran must accept that if Trump is reelected, it will have no choice but to reengage in negotiations with the United States.

Based on his recent statements, including uttering during the peace ceremony between Israel, Bahrain and the United Arab Emirates, Trump appears eager to get back to the negotiating table. He may even try to get Senate approval (67 votes) to convert his deal into a treaty.

Former vice president Joseph Biden, if elected, is also expected to quickly negotiate a new deal with Iran, with the help of other participants of the deal. Some of his advisers have circulated working papers with the aim of getting “back to the JCPOA,” the 2015 Joint Comprehensive Plan of Action.

Many in Israel believe that Biden would offer up-front sanctions relief to bring Iran back to the table, without getting much in return. They insist, it was a bad idea in 2013, 2015 and would be problematic 2021. They openly say that since the United States withdrew from the JCPOA in 2018, the Iranian regime has engaged in nuclear blackmail, enriching more uranium, installing new centrifuges, enhancing its R&D efforts, and taking many other dangerous steps.

International Atomic Energy Agency (IAEA) has issued several reports expressing its concern, backed by Israeli findings that the Mossad captured during its daring raid on Iran’s then-secret atomic archive. They say, the international community has failed in taking any decision or decisive action. Europeans have contributed to this inaction. Iranians, meanwhile, have played their cards well, deferring any major decision until after the elections in United States.

In Israel there is a perception that no matter who negotiates, the dangers are clear. They allege, Iranians have a demonstrated history of fleecing American counterparts at the negotiating table. The American negotiators failed to seize the advantage, despite the fact that Iranian President Hassan Rouhani telegraphed his negotiation strategy in his 2010 book. They also say that the errors of the 2013–2015 negotiations, which yielded Iran massive sanctions relief and sunsetting restrictions, made that abundantly clear.

Israel insists that the new agreement must address all core weaknesses of the JCPOA. Indeed, it cannot be more of the same with some minor improvements. The goal must be to establish clear new terms so that the JCPOA’s vagueness does not persist. The deal should include an end to Iran’s support for terrorism, regional destabilization and other malign activities. This was all articulated by US Secretary of State Mike Pompeo in his “12 points” plan. It demands the new agreement should also include all three elements of Iran’s illicit nuclear program: fissile materials, weaponization, and means of delivery.

Israel insists that a new deal should be achieved only after the regime comes clean about its past, admits to previous violations and declares its past inventory. Even then, it will not be enough. The JCPOA included dangerous sunset clauses that expired over the course of a decade. Those must be removed for decades, with stricter monitoring and verification.

Some say the right agreement would never be accepted by Tehran. Acquiescence to such an agreement would tantamount to regime change given that it would run counter to the “revolutionary” aims of the Islamic Republic. But that does not mean that America’s president, Democrat or Republican, should accept anything less.

In a nutshell Israel demands, regardless of who wins this November, there should be a “sanctions wall” in place, and it should not be easy to take down. These sanctions should punish the wide range of Iranian terrorist activities, human rights violations and aggressive behavior.

No matter who wins, there is a risk that the next administration will be too occupies with concerns about China, followed by Russia and North Korea, relegating Iran to a lesser priority. This might soften the ground for a less stringent nuclear deal. More must be done to avoid this.

Israel believes, Trump if wins has an opportunity between now and January 2021 to sanction Iran’s entire energy sector as part of its “maximum pressure” scheme. It can also blacklist all of Iran’s nuclear agency workers.

The Biden team has indicated that it may lift sanctions on Iran. Some of his advisers believe that sanctions relief will help achieve an agreement that can help in avoiding war. It is being opposed on the pretext that sanctions can help reach the right agreement and prevent war. Propagators of this philosophy insist that the threat of war can be helpful. Indeed, without a credible military threat, the Iranians won’t come to the table willing to negotiate real changes to the JCPOA.

One significant change since the last round of talks is the peace agreements between Israel and three Arab countries (the United Arab Emirates, Bahrain and now Sudan). These countries and others strongly object to granting any concessions to Iran, in the nuclear file or with any of its other malign activities. The concerns of America’s regional partners were ignored last time but should not be ignored again. Their decisions to make peace with Israel were driven, in part, by their shared concerns about Iran and a future flawed deal.

Some former Israeli officials have recently suggested offering other red lines in a future Iran deal. However, others insist red lines do not yield desired results. They demand Israeli government should reject any compromises that give Iran the benefit of the doubt. The priority should be to convince the international community that business with Iran is off limits as long as its policies do not change.

US Elections: Likely Impact on Pakistan

The much anticipated elections in United States will come to a close on 3rd November 2020. The Republican President, Donald Trump, is being challenged by Democratic Party nominee Joe Biden, who is best known as Barack Obama's Vice-President but has been in US politics since 1970s.

Biden is leading National Presidential Polls by 52% to 43%. National polls are a good guide as to how popular a candidate is across the country, but these are not necessarily a good way to predict the outcome of the election.

In 2016, for example, Hillary Clinton led in the polls and won nearly three million more votes than Donald Trump, but she still lost – that is because the US uses an Electoral College system, so winning the most votes does not always win the election.

According to a report by Topline Securities, the outcome of US Elections 2020 is unlikely to have major repercussions on Pakistan unlike the past. Key areas that Pakistan will keep a close eye on, if Biden wins, will be his 1) trade policy with China, 2) ties with India, (3) policy on troops pull-out from Afghanistan and 4) financial assistance to Pakistan (including IMF).

Biden is likely to ease stance on China adopted by President Trump, who has termed China as the biggest threat to the US right now. This in turn is likely to be a positive for Pakistan, given long standing relationship between Pakistan and China and also the China Pakistan Economic Corridor (CPEC).

President Trump and Prime Minister Imran Khan have enjoyed a strong relationship, where President Trump in January 2020 hailed the growing relationship between the US and Pakistan. However, Trump’s close relationship with India has somewhat left a sour taste with Pakistan, where PM Imran Khan had recently said in an interview that Pakistan wants ‘even-handed treatment’ from the US with respect to India.

The brokerage house expects Biden to continue with Trump’s policy of US troops pull-out from Afghanistan, however in a more gradual and measured way.

Historically, Pakistan and Democrats have held a relatively more fruitful relationship, where it was under the Democrats that the Kerry-Lugar-Berman Act was approved – the largest civilian assistance package to Pakistan. However, it is under President Trump that Pakistan signed the latest IMF program. The US is the largest cumulative contributor to the IMF and the largest voting bloc – holding effective veto power for many decisions. 

Topline believes Financial Markets are likely to see a relief rally on the conclusion of the US elections given that uncertainty is likely to end.

Both the parties have failed reaching an agreement over a fiscal stimulus package, which it believes will be passed after the elections irrespective of the outcome of the elections.

The markets will be keen to see the structure of the government (President and the Senate).

At present, the US has a Republican President and a Republican Senate (though the House is Democrat).

A unified government is likely to be appreciated by the financial markets as a divided government is likely to result in policy standoff between the President and the Congress.

The US market’s reaction to a Republican win has been much better compared to a Democrat win. The PSX has largely mirrored US equities performance post the outcome of the US Elections