Time to reject Israeli manta that Iran is top menace of Middle East

A massive campaign is going on for some time that the recent moves by the US administration are aimed at creating peace in the Middle East. The multiple US-brokered deals between Israel, UAE, Bahrain, Sudan and Morocco, known as the Abraham Accords are creating a new reality in one of the world’s most combustible neighborhoods.

The US leadership promises a more prosperous and securer future for Arabs and Jews alike. The Western plays the trumpet that impetus behind this historic normalization of relations between the Jewish state and its Muslim neighbors is practical. The media portrays Iran as phantom, a common threat labeled by the US State Department as the world’s leading state sponsor of terrorism for nearly four decades. 

Western media portrays that Iran has been metastasizing across the region since its founding in 1979. From funding and arming anti-Israel terrorists, to blowing up Saudi oil facilities, to pirating commercial vessels in the Persian Gulf. They go the extent of saying Iran is the Middle East’s preeminent menace. 

Western media also says that the regime in Tehran does not represent the Iranian people. They quote the example of this chasm was on display after a US drone strike killed Iran’s top terrorist, Qasem Soleimani. Despite the mullahs’ efforts to turn this murderer into a martyr, Iranians ripped down the propaganda posters glorifying him. They also rejected the regime’s attempts to stir up hate against the United States and Israel. Videos from Iran showed average citizens going out of their way to avoid stepping on the US and Israeli flags printed on the ground outside of shopping malls, schools, and mosques – even on the day of Soleimani’s funeral.

The fact of the matter is that the Iranian people have more pressing issues at hand than the regime’s clumsy attempts at propaganda. Tehran’s sponsorship of terrorism, pursuit of nuclear weapons and long-range missiles to deliver them, and unconscionable hostage taking triggered the most crushing economic sanctions in history, crippling Iran’s energy, financial and industrial sectors, among others. Despite the immense resources of Iran, Iranians cannot even find the basics of food and housing, let alone dream of economic opportunities.

The biggest deception behind the Abraham Accords is that the Arabs are more interested in pursuing hi-tech and entrepreneurial opportunities rather than hating the Jews – and that Israel is actually the regional partner of choice in these areas. The biggest prove of this dichotomy is ongoing construction of settlements in the West Bank and other occupied territories.

The Jerusalem Post terms Turkey ‘spoiler’

The Jerusalem Post in one of its editorials has accused Turkey and President Recep Tayyip Erdogan of playing the role of ‘spoiler’ when efforts are being made to normalize relations with various Muslim countries. One may recall that Turkey was the first Muslim country to recognize and establish diplomatic relations with Israel soon after its creation. I have pick up several paragraphs from the editorial to let the readers know how much Israel hates Turkey and Erdogan.

Turkey is again rolling out media narratives about reconciliation with Israel. The latest attempt by Turkey to influence media narratives on this so-called reconciliation were articles that appeared in Turkish and Israeli media suggesting an exchange of ambassadors might be in the air. However, an Israeli Foreign Ministry representative informed that Turkey has not requested that Israel agree to an exchange of ambassadors.

This is not the first time Turkey has done this under the ruling AK Party and its leader President Recep Tayyip Erdogan. In the spring of 2020, Turkey said it wanted reconciliation around the time that France, Greece, Egypt, Cyprus and the UAE were all condemning Turkish threats in the Eastern Mediterranean. Turkey’s attempt to push for a largely mythical reconciliation was underpinned by Ankara’s attempt to block an Israel-Greece-Cyprus deal on a pipeline and to stop Israel from joining the Eastern Mediterranean gas forum.

Turkey again claimed it wanted reconciliation after US President Donald Trump lost his election last year. Turkey’s Erdogan was close to Trump and had gotten the US to allow Turkey to invade and ethnically cleanse Kurds in Syria. Turkey used the Trump administration to threaten NATO allies, harass France, encourage Islamist extremism and send mercenaries to Libya and Syria. Trump’s loss led Turkey to decide that the only way to decrease an emerging Israel-Greece-UAE-Egypt alliance was to try to isolate Israel away from its new friends. Turkey had even threatened to break relations with the UAE if Abu Dhabi normalized relations with Israel. How can a country pretend to want normalization with Israel at the same time that it tries to isolate Israel and ruin Israel’s friendships with Greece, Cyprus and the UAE?

This is why Israel must always be wary of the press reports – usually fed to media from the highest levels in Ankara – about reconciliation. Turkey’s sole goal under Erdogan over the last decade has been to isolate Israel and empower Hamas terrorists and Israel’s enemies. Turkey has done this quietly through funding of Islamic organizations and attempts to take leadership of anti-Israel voices globally. Even as Saudi Arabia and the Gulf have moderated and rapidly improved relations with Israel, Turkey has become a leader – along with Iran – of anti-Israel propaganda. The hosting of Hamas has included terror plots hatched from Turkey. Turkey’s Erdogan has compared Israel to Nazi Germany on numerous occasions, a mix of genocidal antisemitism that has no place in international relations.

Erdogan must make amends for calling Israel a Nazi country if Ankara ever hopes to improve relations. Ankara must also expel Hamas members and stop the flirtation with anti-Israel extremist groups, whether those groups may be in Iran or Gaza. Turkey’s drift towards Iran is worrying for the region. It prefers to work with Iran and Russia to discuss Syria, rather than the US. This is despite Ankara’s media sometimes claiming that Turkey might be willing to work with Israel against Iran.

The real Turkish regime agenda was set out in an article in Turkey’s state-run Turkish Radio and Television Corporation that reflects Turkey’s government thinking. In it, the author denied that Jerusalem is the capital of Israel and claimed that “Israel needs Turkey” and that Israel must “compromise.” Turkey never has to compromise. Turkey never does anything for Israel. This is the real agenda. Turkey wants Israel to beg and come to Ankara on a bended knee and this attitude has always underpinned Ankara’s recent treatment of Israel. It thinks that it can host Hamas terrorists, host plans to murder Israelis, give a red carpet to the Hamas commanders who have blood on their hands, who are welcomed with hugs by Erdogan, and also threaten Gulf countries against normalization with Israel, try to destroy Israel’s links to Greece and Cyprus and then order Israel to “compromise.”

The Next Giants

I am inclined to refer to writing by Shigesaburo Okumura, Editor-in-chief, Nikkei Asia. This, not only hints towards shifting paradigm, but also that world economic growth will be driven by Asia and not by United States or Europe. I quote below:

For the first time in 10 years, yellow sand from the deserts of Mongolia and Kazakhstan has blown into Tokyo. The arrival of the "Asian dust" is a traditional indicator of the coming of spring. It may only be a grain of sand, but seeing that tiny piece of earth makes me feel like I'm a part of Asia. That is not a bad feeling.
 
As the first Big Story of Japan's fiscal New Year, we look at a ranking of Asia's 500 fastest-growing companies, prepared in collaboration with the Financial Times of the UK and Statista of Germany.
 
Of those high performers, our story focuses on seven. That includes the top-ranked company, Carro, a Singapore-based online used-car sales platform. We also highlight its Malaysian competitor, Carsome, which stands at 17th in the ranking.
 
The secret of Carro's success is that it provides detailed reports of any flaws found with its vehicles.
 
In the world of microeconomics, used-car markets are considered a typical "market for lemons," in which buyers cannot judge the real value of the fruit based on its appearance. Removing information asymmetry between sellers and buyers is crucial if the market mechanism is to work effectively. It makes sense, then, that Carro's strategy is so popular among its customers: With the information gap removed, clients are able to buy used cars at a fair price.
 
Other than online car dealers, the story also features Indian mattress seller Wakefit; Singapore-based delivery company Ninja Logistics; South Korean robotics startup Twinny; Japanese software startup AI Inside, whose technology converts handwritten documents into digital data; and New Zealand electricity retailer Electric Kiwi.
 
The ranking is based on the companies' compound annual revenue growth rate between 2016 and 2019. The performances do not reflect the impact of COVID-19, but reading these entrepreneurial success stories, I am convinced that such "animal spirits" will drive the revival of the post-COVID world.
 
Market Spotlight this week is a story on Appier, the first Taiwanese startup to list in Japan since Trend Micro went public in 1998, while our Business Spotlight looks at Bilibili, known as "China's YouTube."
 
Asia Insight is an examination of the Tokyo Olympics. According to the latest Kyodo News poll, only 23.2% of Japanese support holding the games this year.
 
As for the mounting costs amid the diminishing enthusiasm, a professor at College of the Holy Cross in the United States points out in the story that the Tokyo Olympics are "basically the last in the old world where the concept was you spend an unlimited amount, and everyone should be all right with that because it's the Olympics."
 
While we're on the subject, there is talk of a possible boycott within the Western world of the Beijing Olympics in 2022, because of human rights issues related to the Xinjiang Uyghur Autonomous Region.
 
Some apparel brands, including Muji, are facing potential criticism for using Xinjiang cotton, which has become a focus of attention amid claims of forced labor. The Japanese company maintains its cotton is ethically produced. The story describes the difficulties that private companies must navigate in dealing with this highly sensitive issue in China.
 
I also recommend our stories on Myanmar's Generation Z, and the reopening of the Suez Canal.
 
Please do not miss our opinion piece on the #StopAsianHate movement. The author writes that "'Asian hate' has also long encompassed stereotypes and discrimination against ethnic and religious minorities as well as against indigenous peoples, including within Asia" and that "the need to 'Stop Asian Hate' is not just a US or European challenge."
 
I agree that we have to discuss this issue in a broader context, so that more people regard this problem as their own.
 

Bangladesh GDP anticipated to grow by 5.6% in current fiscal year

Bangladesh gross domestic product (GDP) is anticipated to grow by as high as 5.6% in the current fiscal year, subject to three factors, says a World Bank report. These critical factors are: 1) outcome of ongoing vaccination campaign, 2) likely restrictions on mobility, and 3) pace of recovery of world economy.

While there are bright chances of growth during FY21, significant uncertainty surrounds both epidemiology and policy development,” said the “South Asia Economic Focus South Asia Vaccinates” report. “Thus, growth in FY21 could range from 2.6% to 5.6%.

Over the medium term, growth is projected to stabilize within a 5% to 7% range as exports and consumption continues to recover.

The prospects for economic rebound in South Asia are firming up as growth is set to increase by 7.25% in 2021 and 4.4% in 2022, said the report, creating hopes for substantial recovery from historic lows in 2020, putting the region on a path to recovery.

“But the growth is uneven and economic activity remains well below pre-COVID-19 estimates.”

Following a sharp GDP growth deceleration in FY20 due to the pandemic, the economy started recovering in the first half of FY21, as movement restrictions were lifted and international buyers reinstated export orders.

Going forward, a gradual recovery is expected to continue; particularly if the government’s COVID-19 recovery programs are implemented swiftly.

With growth firming up, poverty is projected to decline marginally in FY21.

The pandemic impacted the economy profoundly. A national shutdown from March to May last year resulted in severe supply-side disruptions in all sectors of the economy.

The government’s COVID-19 stimulus provided firms with access to working capital and low-cost loans to sustain operations and maintain employee wages in FY20 and FY21.

From June 2020 onward, movement restrictions have been progressively lifted, and transit and workplace movement patterns returned to pre-pandemic levels by October.

According to the report, the downside risks are likely to persist if new waves of COVID-19 re-emerge in Bangladesh or its trading partner countries.

“This could necessitate additional movement restrictions, dampen demand for readymade garment, and/or limit the outflow of migrant workers.”

Bangladesh is expected to graduate from the UN’s least-developed country status in coming years, which will present opportunities but also challenges, including the eventual loss of preferential access to advanced economy markets, the report said.

Estimated poverty rose sharply in the fiscal year 2019-20 amidst substantial job and income losses.

However, household surveys point to a gradual recovery in employment and earnings and a decline in poverty in the first half of the fiscal year 2020-21.

Food security improved across the country, with the most significant increase in Chattogram.

The report stated that risks to the outlook might persist.

It identified fiscal risks, including weak domestic revenue growth (if tax reforms are delayed) and higher expenditure for COVID-19 vaccination (if external financing is limited) and for supporting the Rohingya refugees (if donor fatigue sets in).

In the financial sector, contingent liabilities from non-performing loans combined with weak capital buffers could necessitate recapitalization (resulting in higher domestic government debt) and depress credit growth.

While external demand for RMG appears to be stabilizing, the recovery is fragile and could be vulnerable to new waves of COVID-19 infections.

Demand for Bangladesh’s overseas workforce in the Gulf region may also be impacted by the ongoing recession in the region, impairing future remittance inflows.

OPEC plus decision to ease production dictated by United States

On Thursday, OPEC plus once again succumbed to pressure from the United States to gradually ease its oil output cuts from May. This should not be a surprise for the world because the Biden administration did exactly what Donald Trump had been doing in the past. 

Just to recall, it was Trump’s practice to call OPEC leaders, particularly Saudi Arabia to keep energy affordable.

The group, which has implemented deep cuts since a pandemic-induced oil price collapse in 2020, agreed to ease production curbs by 350,000 barrels per day (bpd) in May, another 350,000 bpd in June and further 400,000 bpd or so in July.

Under Thursday’s deal, cuts implemented by the Organization of the Petroleum Exporting Countries, Russia and their allies, a group known as OPEC plus, would be just above 6.5 million bpd from May, compared with slightly below 7 million bpd in April.

“What we did today is, I think, a very conservative measure,” Saudi Energy Minister Prince Abdulaziz Bin Salman told a news conference after the OPEC plus meeting, adding that output levels could still be adjusted at the next meeting on April 28.

He said Thursday’s decision had not been influenced by any talks with US officials or any other consuming nations.

The Saudi minister also said the kingdom would gradually phase out its additional voluntary cut that have been running at one million bpd, by adding 250,000 bpd to production in May, another 350,000 bpd in June and then 400,000 bpd in July.

“We reaffirmed the importance of international cooperation to ensure affordable and reliable sources of energy for consumers,” Jennifer Granholm, the new energy secretary appointed by US President Joe Biden, said on Twitter after her call with the Saudi energy minister.

News of the call coincided with signs of a changing mood in informal discussions between OPEC plus members. A few days before Thursday’s talks, delegates had said the group would likely keep most existing cuts in place, given uncertainty about the demand outlook amid a new wave of coronavirus lockdowns.

But in the 24 hours before the meeting started, sources said discussions had shifted to the possibility of output increases.

In the past, Trump had used his influence to force Saudi Arabia to adjust policy. When prices spiked, he insisted OPEC raise production. When oil prices collapsed last year, hurting US shale producers, he called on the group to cut output.

Until this week, Biden’s administration had refrained from such an approach, keep a distance from Riyadh and imposing sanctions on some Saudi citizens over the 2018 murder of Jamal Khashoggi.

Even when OPEC plus decided on 4th March to keep output steady, triggering a price rise, the White House had made no direct comment.

Biden administration considers West Bank occupied territory, says Ned Price

Biden administration clarified that it considers the West Bank to be occupied territory, but ducked a question as to whether it held that settlements were illegal. "It is a historical fact that Israel occupied the West Bank, Gaza, and the Golan Heights in the 1967 War," US State Department spokesman Ned Price told reporters in Washington on Wednesday.

The issue was raised after the Biden administration published on Tuesday the 2020 Country Reports on Human Rights Practices. It is the first of the annual reports released since US President Joe Biden took office in January 2021. The report affirmed steps taken by the previous Trump administration, which had both recognized Jerusalem as Israel's capital and Israeli sovereignty over the Golan Heights.

It also kept in place a description change made to the report by former US president Donald Trump, in which he replaced the phrase "Israel and the occupied Palestinian Territories" with "Israel, West Bank and Gaza."

But within the report, the Biden administration reintroduced the word "occupied" to describe Israel's seizure of territory during the 1967 Six Day War. 

When questioned by a reporter as to whether the US considered that Israel occupied the West Bank, Price affirmed that it did.

"In fact, the 2020 Human Rights Report does use the term 'occupation' in the context of the current status of the West Bank," Price said. "This has been the longstanding position of previous administrations of both parties over the course of many decades."

Israel has long argued that the West Bank does not meet the standard of occupied territory, because it captured the area from Jordan, whose sovereignty there from 1948-1967 was not recognized legally and which itself was considered to be occupying it.

Prior to the 1948 War of Independence, the territory was held by Great Britain; prior World War I, it was part of the Ottoman Empire.

The Trump administration believed that Israel had historic and religious rights to portions of that territory and did not refer to it as occupied. Its top officials agreed with the Israeli Right, that the proper term was Judea and Samaria and not the West Bank, terminology linked to the time when the territory was under Jordanian rule.

Trump also changed US policy toward Israeli West Bank settlements. It rejected a 1978 memo by then US State Department legal advisor Herbert J. Hansell declaring that the settlements were illegal, declaring instead that they were not inconsistent with Israeli law.

The United Nations holds that Israel's settlements are illegal and that the West Bank is occupied Palestinian territory.

The Biden administration has yet to clarify its stance on the settlements, even though it is presumed to support a two-state solution at the pre-1967 lines.

At Wednesday's press conference, a reporter asked Price, "Does the US consider, for example, Israeli settlements in the occupied territories to be illegal as a result of this stance?"

Price responded that the US position had not changed, but he clarified that stance in his own way.

"We – as you have heard me say before – we continue to encourage all sides to avoid actions – both sides, I should say – to avoid actions that would put the two-state solution further out of reach. 

"Again, our ultimate goal here is to facilitate – to help bring about – a two-state solution because it is the best path to preserve Israel’s identity as a Jewish and democratic state while bestowing on the Palestinians their legitimate aspirations of sovereignty and dignity in a state of their own," he said.

These lines are often his and other Biden official's standard response to many questions about the Israeli-Palestinian conflict.

Pakistan Stock Exchange remains under pressure during March 2021

Weak market sentiments at the end of result season were further dampened by political ambiguities (senate elections, changes in cabinet). As a result, benchmark index of Pakistan Stock Exchange (PSX) closed March 2021 on a negative note, down 2.8%MoM to close at 44,588 points.

Even improving external account position (rupee appreciation, IMF disbursement of US$500 million, successful issuance of Eurobond) failed to lift the sentiments. Average volume declined to 598.3 million shares as compared to previous two-month average of 772.4 million shares and 8MFY21 average of 624.4 million shares. Average traded value was in line with previous two-month average of Rs36 billion, signaling shift to top tier stocks.

Amongst major sectors, OMCs and Chemicals were the leaders with a gain of 2.8%MoM and 2.4%MoM respectively. Performance of OMCs was linked to margin expansion (EPCL margins up 36.7%CYTD whereas that of LOTCHEM was up 54.2%CYTD). Textile composites experienced the heaviest decline, down 11.2%MoM. All-Sector chart was topped by Glass & Ceramics with a gain of 22.5%MoM followed by Leather & Tanneries +17.8%MoM, while Cable & Electrical goods were the laggards, down 11.5%MoM.

Flow wise foreigners remained net seller with net disposal of US$8.47 million in March 2021, taking CYTD net to US$16.5 million. However, selective foreign buying was witnessed in the latter part of the month in the wake of rupee appreciation. Mutual Funds and Companies also emerged net seller with US$16.9 million and US$10.7 million respectively which was absorbed mainly by Insurance and Individuals with net buy of US$15.8 million and US$11.1 million respectively. Excluding last day’s net buy of US$7.41 million, individual’s net buy during the month under review was reported at US$3.7 million as compared to 12-month net buy of US$26 million indicating anchoring role of individual participants to have subdued in the recent month.

With political frenzy in the background, attention in April 2021 is likely to be centered on four key inputs: 1) corporate earnings, 2) economic data points, 3) interest rates, and 4) budgetary measures in the near term. Earnings are likely to continue their strong run for the quarter ended on 31st March 2021, following rupee appreciation (up 4.3%QoQ), and raw material inventory built up by manufacturing players (evident from Rs189 billion increase in working capital loans in last quarter of CY20) countering pressure from bull-cycle in global commodities (+11.0%QoQ) on 1QCY21 input costs.

On the flip side, increasing inflationary pressures could boost expectation of interest rate hikes snowballed by potentially tough budgetary measures where Government of Pakistan has already agreed Rs6 trillion FBR target with IMF for FY22 as against Rs4.7 trillion for FY21, which could keep market range-bound in the coming months.

That said, Pakistan’s long term growth story remains intact with additional support coming from robust external account position and improving prospects of trade with India. Analysts continue to like Cements, Steel and other Construction and allied sectors. Their top picks include LUCK, MLCF, DGKC, and MUGHAL. They also like Chemicals (on margin expansion) and Autos (rupee appreciation and strong demand).