Iran accuses US supporting ISIS in Afghanistan

Iran's special envoy for Afghanistan said on Monday that after the defeat in Afghanistan, the United States is trying to support the ISIS terrorist group.

"The aggressor country, which intended to rule Afghanistan for the past 20 years, is now trying to strengthen the takfiri groups in Afghanistan after its defeat," Hassan Kazemi Qomi said.

Arriving in Kabul, the Iranian diplomat told reporters that the purpose of his visit was to discuss political, economic, security and Afghan refugee issues with the officials of interim government.

"We respect the will of the Afghan people and our position is in line with the wishes of the Afghan people," Kazemi Qomi told a reporter when asked about recognizing the Taliban government.

Iran's special envoy for Afghanistan expressed hope that with formation of a strong government in Afghanistan, stability would prevail in the region.

The diplomat went on to say that "Afghanistan, like the Islamic Republic of Iran, is facing oppressive Western sanctions and the two countries will try to cooperate more by ensuring security in the borders."

The Iranian envoy in his remarks underlined that Iran had always stood by the people of Afghanistan and today stands by the people of Afghanistan in all aspects of security, economy and politics.

Referring to the US defeat in Afghanistan, the envoy said some countries are exploiting terrorism to launch a proxy war in Afghanistan.

Earlier, the embassy of the Islamic Republic of Iran in Kabul announced the trip. It said, "Kazemi is scheduled to talk with senior Taliban officials on various issues such as regional issues, refugees, humanitarian aid, formation of an inclusive government and especially economic issues. Helping the Afghan people is a priority before the cold season."

Speaking at his weekly press briefing on Monday, Saeed Khatibzadeh, the Iranian Foreign Ministry spokesman, said that Qomi’s trip to Kabul will address the current and future status of the people of Afghanistan.

He then said that Iran has tried to make the Afghan people bear the least impact from the developments in Afghanistan and the catastrophic departure of the United States from the country.

The diplomat noted that the responsibilities of this governing body will be discussed.

“We are concerned about extremism and terrorism, and we have witnessed the disgusting act of terrorism in attacking worshippers, and it is the direct responsibility of the governing body to protect the security of worshippers and the people of Afghanistan,” he insisted.

He then said that Iran has news of the presence of ISIS in Afghanistan, which is worrying and is one of the topics that will be discussed during the trip by the special envoy to Afghanistan.

ISIS has been targeting worshippers since the Taliban took power in August. Its suicidal attacks on worshippers in Kunduz (northern Afghanistan) on October 8 and Kandahar (southern Afghanistan) on October 15 were horrific.

It also attacked a military hospital in Kabul on November 2. At least 25 people were killed and more than a dozen were wounded during the attack.

The attack, which included armed gunmen and at least one suicide bomber, targeted the 400-bed Sardar Mohammad Daud Khan military hospital.

Zabihullah Mujahid, a spokesman for the Taliban, said the attack was carried out by several members of ISIS, including a suicide bomber who detonated his explosives at the gate to the hospital. A car full of explosives outside the hospital also exploded, wounding dozens, and several Taliban fighters were killed and wounded in the ensuing gun battle, Mujahid said.

Iran hosted the meeting of the foreign ministers of countries neighboring Afghanistan on October 27. The participants at the conference insisted on the need for security in Afghanistan and formation of an inclusive government among other issues.

Analysts forecast proving wrong

Mass vaccinations were supposed to spur a major shift in spending away from goods, toward services. The thinking was that as more people traveled, dined out and attended entertainment venues, the less they would spend on merchandise. That would, in turn, help remove some of the strains on the supply chain., but that didn’t happen.

In part because the delta wave of the virus kept massive pent-up demand skewed toward merchandise and added further strain to supply chains.

Jobs

Another basic assumption was that as the pandemic receded and schools returned to in-person learning — freeing up home-bound parents — millions more Americans than have done would return to the job market. More workers would mean fewer bottlenecks and more supply, validating the “transitory” predictions for high inflation. The bitter reality is as of October, the participation rate, which measures those employed or looking for work, has recovered less than half of its pandemic-related collapse. 

Energy

With the fossil fuel industry having cut back investment over the years, in part amid pressure from tilt toward ESG investing and in part thanks to having over-invested in the previous cycle, energy companies haven’t been able to meet rising global demand. Labor shortages have only made things worse. This led to energy prices rising 30% from a year earlier, the largest annual advance since 2005. Gasoline is up nearly 50%. The price of electricity in October increased 6.5% from the same month a year ago, the most since March 2009.

Pricing-Power

Global competition and consumer expectations for stable prices had long eroded companies’ ability to pass along higher costs. There was no US inflation surge during the escalating tariff hikes with China, for example. But that’s all changed. Large companies have pushed through price increases after having to boost wages to lure workers, along with pay for higher input costs.

Forecasting inflation “has been incredibly challenging,” says Matthew Luzzetti, Chief US economist at Deutsche Bank AG. “And risks remain skewed to the upside for the inflation outlook.”

The Federal Reserve has been off in its forecasts just like everyone else, and will need to reassess next month, when policy makers update their projections.

Credit, though, to Lawrence Summers and Mohamed El-Erian, both contributors to Bloomberg, who have been warning of a prices problem for a while. 

Pakistan likely to face food shortage and spike in prices

In the aftermath of COVID-19 lockdowns, port congestions and supply chain disruptions food prices around the world are on the rise. Whatever is happening around the world is having trickle down effect on Pakistan. The situation is not different in three of its immediate neighboring countries, India, Afghanistan and Iran.

The biggest fear is that food products are being smuggled to these countries in large quantities and sooner than later Pakistan will also face acute shortage of these products. Therefore, it is necessary that the governments of these countries sit together to evolve a sustainable strategy to overcome the looming shortage of staple food items.

According to the available information three of Pakistan’s immediate neighbors suffer from acute problems, due to internal and external reasons. Let me begin with Afghanistan, the war torn country faces the worst problem, United Stated has frozen its foreign exchange reserve and the country is not able to import staple food items. It is feared that due to highly porous borders and use of Pakistani currency for the procurement of these items from Pakistan, Afghans has no option but to take these from products Pakistan to save people from starvation.

Iran also suffers due to ‘economic sanctions’. There are enormous opportunities for barter trade the goods are exchanging hands at borders. Since United States is not ready to lift these sanctions Iran is forced to buy food and other items from its immediate neighbors, be it Pakistan and Afghanistan or Central Asian countries.

India has ample food supplies, but bad governance, particularly ‘hording’ is pushing prices higher. Without going in too many details Indian are in a position to offer certain most sought after goods to Pakistan in exchange for food items. Since both the countries, due to the presence of ‘hawks’ don’t enjoy cordial diplomatic and economic relations the field is open for smugglers.

In the abnormal conditions people and countries have to make ‘exceptional’ decisions. Under the prevailing conditions the representatives of all the three countries must sit together to find sustainable solutions.

In case of Afghanistan trade must be allowed in Pak Rupee, export of wheat, edible oil and rice may be allowed in exchange for fruits and vegetables.

In case of Iran, ‘gas for food’ option should be exercised. At present prices of natural gas are hovering at record high level and Iran is in a position to supply gas to Pakistan at very attractive prices. Due to geographical proximity lower freight cost and shorter sailing time are the two biggest incentives.

Let me warn the policy makers that if they fail in coming up with conducive policy, it will only proliferate smuggling. On one hand the governments of respective countries will not be able to monitor the quantum of goods being smuggled and on the other hand floodgate will be opened for the influx of ‘highly undesirable products’ into Pakistan. Act now to avoid regret later.

Qatar to represent US interests in Afghanistan

Qatar will formally represent the US interests in Afghanistan, according to a new agreement signed by the two countries on Friday. This creates a new pathway for the United States to assist American citizens and allies left behind in America’s chaotic exit.

Secretary of State Antony Blinken and Qatari Deputy Prime Minister and Minister of Foreign Affairs Mohammed bin Abdulrahman Al-Thani signed an agreement, effective next month, to make Qatar's embassy in Kabul a protecting power for the US, essentially hosting many of its consular functions. 

A State Department spokesperson confirmed that at the US-Qatar Strategic Dialogue, the secretary and Qatari foreign minister signed an agreement related to Afghanistan.

Under the agreement, first reported by Reuters, the Qatari Embassy will dedicate a certain portion of its staff to lead a US special interests section.

"Qatar has long been a great friend and strong partner of the United States and our cooperation on Afghanistan reflects the depth and strength of our bilateral relationship," a spokesperson said. "We are deeply thankful for Qatar’s close coordination on Afghanistan and its extraordinary support in facilitating the transit of US citizens and their families, Embassy Kabul personnel, at-risk Afghans, and other individuals from Afghanistan through Qatar."

Under the agreement, the US would address diplomatic relations in Afghanistan in a manner similar to how it does in Iran, where the US has no embassy but instead works through Switzerland’s embassy in Tehran.

Qatar has been a key player in the US evacuation, including by hosting a site for Afghan evacuees to be vetted before arriving in the US. 

"As the first and largest transit point in the world, Qatar has been at the forefront of our efforts to relocate people from Afghanistan to safety," the spokesperson added.

Qatar has committed to continue to allow individuals who are at risk in Afghanistan because of their affiliation with the US to transit its territory on their way to resettlement elsewhere. 

The State Department spokesperson also confirmed that according to the memorandum of understanding signed between the two countries on November 12, 2021 Qatar will continue to temporarily host Special Immigrant Visa applicants and eligible family members while their applications are processed.

"In addition, Qatar signed an arrangement today signaling its intention, effective December 31, 2021 to assume the role of protecting power for US interests in Afghanistan. Thanks to our strong partnership with Qatar, we are better positioned to serve US citizens in Afghanistan, whose safety and security is our top priority," the spokesperson added.

The move comes as the US has struggled to help its citizens leave Afghanistan. 

The arrangement could also help the US issue visas or other documents to those who assisted the US during its 20-year war in the country. 

Independent analysts estimate that more than 100,000 people deemed a priority for evacuation were left behind, including activists, those who assisted the military and individuals who worked with US aid and development organizations.

The State Department has been struggling with how to address consular issues without an on-site presence in Afghanistan, as visa applications have to be signed in front of US staff. 

In lieu of directly issuing visas on the ground, some refugee groups have pressed State to get some sort of document to those who are able to travel to nearby countries, signaling that they are likely to be able to secure passage to the US

Other requirements, like biometric screening, could then take place in Qatar.

A senior US official told Reuters it was "an important signal of potential direct engagement between Washington and Kabul in the future after two decades of war." 

The US Embassy in Kabul was evacuated on August 15, this year hours after the Taliban's takeover of the Afghan capital.

Is Iran the only supporter of Palestinians?

Reportedly, in a recent interview, Abu Jamal, a spokesperson for the Popular Front for the Liberation of Palestine’s Abu Ali Mustafa Brigades, stated the group and the ‘Palestinian Resistance’ benefited from Iranian support in its war against Israel.

“We and the Islamic Republic fought the Zionist enemy in Lebanon and we also fought them in Gaza and the West Bank with the support of the Islamic Republic of Iran,” Jamal stated.

Furthermore, Jamal lauded the relationship the group had with Iran and the Islamic Revolutionary Guard Corps (IRGC) by referring to them as ‘blood brothers’ and ‘comrades’ that shared a ‘common destiny’ in defeating Israel.

It’s unclear when Iran began supporting the group. However, in 2013, Iran reportedly resumed military and financial support to the group after leaders from both sides held several meetings in Tehran, Beirut and Damascus under the auspices of Hezbollah.

Hamas, Palestinian Islamic Jihad, PFLP, and Popular Resistance Committees have boasted about their relationship with Iran including military support they have received. After the May conflict in Gaza, the aforementioned groups praised Iran and Hezbollah for their military support during the eleven days of fighting. Additionally, smaller Palestinian factions have benefited from some Iranian aid including the now defunct Harakat al-Sabireen.

The close relationship between Iran and the PFLP was also on display when a PFLP delegation met with President Ibrahim Raisi after his swearing in ceremony in August. As expected, Raisi affirmed the Islamic Republic’s continued support for the ‘Palestinian Resistance’ and the ‘liberation of Palestine.’

It is difficult to say to what extent Iran has supported the PFLP militarily and financially. The group has purposely been ambiguous about what it exactly receives in terms of funding and arms from Iran.

However, it’s likely larger groups such as Hamas and Palestinian Islamic Jihad receive the lion share of military guidance, weapons and funding from the assistance Iran has allocated for the ‘Palestinian Resistance.’

Despite what it may or may not receive in military and financial support, the PFLP has made no qualms about showing its support and allegiance to the Islamic Republic and other members of the ‘Resistance Axis.’

After the May 2021 Gaza-Israel conflict, the PFLP held a military parade where its fighters showed their support for Iran and the IRGC by displaying pictures of former Quds Force Lieutenant-General Qasem Soleimani.

 

Oil prices driving Russian equities

Oil continues to hover near multi year highs with the recent surprise inventory draw numbers only adding to the bullish posture of the market. Although, the Biden administration has made several attempts to jawbone the price of oil lower, first by appealing to OPEC to increase production and then hinting that it may release some stockpiles from the SPR reserve

Most of the analysts believe that crude and the whole hydrocarbon complex will at very minimum remain steadily bid for the foreseeable future.

• Global demand for oil favors oil rich RSX ETF
• Russian equities are in a tug of war between inflation and commodity spike
• Yield harvesting RSX offers a low risk way to play the trend

Global demand for oil is almost at pre-pandemic levels of 100 million barrel per day and the re-opening of major business travel routes should boost demand further. In Europe, with natural gas prices already at very high levels, any deep freeze conditions this winter could exacerbate the already elevated price levels.

All of this bodes well for Russia which stands as one of the pre-eminent hydrocarbon exporters in the world and whose oil and gas complex has already locked in massive gains on the production due to the 80% rally in crude.

The easiest and most natural way to play this theme is through the RSX ETF which provides a broad exposure to the Russian oil and gas industry and trades more than 3 million shares each day. The stock has responded well to the rising price of oil gaining 15% since the summer. Although, this is a respectable move it is rather muted in nature given the outsized gains in the underlying commodities. 

The reason for the modest gains in Russian equities has more to do with underlying turbulence in the Russian economy which has tempered the buoyant recovery in hydrocarbon demand. Russia continues to suffer from the scourge of COVID registering an average of 1000 deaths per day this month. More importantly the country is facing serious inflation pressures as it continues to import a vast array of goods that are now subject to supply chain constraints from many Asian producers.

The Russian central bank has already raised the benchmark rate to 7.5%, one of the highest amongst the EM - and has threatened to hike another 100bps in December if inflationary pressures do not abate. All of that has created tight credit conditions for the Russian economy and has compressed P/E spreads for equities.

The push and pull between higher commodity prices and elevated inflation has clearly curbed some of the upward momentum in the RSX nevertheless the ETF may be an excellent instrument for a low risk yield stripping play.

At current levels the RSX provides a very respectable 2.75% yield and given the fact that most of the Russian oil majors are seeing 14-18% Free Cash Flow yields at current commodity spot prices chances are good that many of the Russian companies in the ETF will raise their dividend payouts over the course of the next year. Meanwhile the RSX offers listed options on the instrument and investors could sell near or at the money calls on a bi monthly basis to enhance their return. 

As long as the price of oil remains within the $70-$90 range for 2022 the value of RSX is likely to remain stationary at worst and appreciate at best. Investors therefore could harvest dividend yield and option premium in a relatively low risk trade with possibility of double digit annual returns.

 

Overcrowding of warships in South China Sea

Senior Chinese diplomats have called on the United States not to show off its power over the South China Sea and warned of the risk of a misfire in the disputed waters with increasing presence of naval vessels.

Speaking to a South China Sea forum in Sanya, on the Southern Chinese island province of Hainan, via video link, Chinese Foreign Minister Wang Yi blamed an unspecified country for seeking to show off its power and maritime dominance.

“We must adhere to multilateralism and jointly maintain maritime order. The ocean is not a zero-sum game of competition, and no one should use the ocean as a tool to impose unilateral power,” Wang said.

“We oppose that certain countries, for the purpose of safeguarding maritime hegemony, flaunt their forces and form cliques at sea, and continue to infringe on the legitimate and lawful rights and interests of other countries.”

China and the US have been stepping up their military presence in the disputed waters, with increasing risks of an accidental clash. Concerns have escalated as the US has teamed up with its allies, including Britain and France, to send naval vessels to the South China Sea. Diplomatic observers have warned the consequences would be more serious if there was a clash between nuclear submarines.

Last month, the USS Carl Vinson carrier strike group and the British carrier HMS Queen Elizabeth conducted a series of exercises in the South China Sea. It was the USS Carl Vinson’s ninth visit to the area this year.

The South China Sea is heavily contested between China, the Philippines, Vietnam, Malaysia, Brunei and Taiwan. The US is not a claimant, but accuses Beijing of stoking military tensions and restricting freedom of navigation there, and has said its presence is needed to provide security backup to its Asian allies.

“China calls on the United States to actively consider joining the convention and take concrete actions to participate in the defence of the international maritime rule of law,” he said.

Gloria Macapagal Arroyo, former president of the Philippines, said the tensions and troubles in the South China Sea were posing “grave threats” to stability, and Southeast Asian nations were seriously concerned.

“Imagine what an exchange of fire between warships of the People’s Liberation Army and the US Seventh Fleet would do to stock, currency and commodity markets worldwide,” she asked the forum.

“The world hopes that such an unwelcome event remains pure imagination. But there are reasons to worry. For the first time in years, if not ever, aircraft carrier groups of China and America deployed in the South China Sea at the same time; so did French and British warships. Earlier this year, the presence of hundreds of Chinese vessels near Whitsun Reef led to Philippine diplomatic protests and the exchange of unfriendly words between Manila and Beijing.”

Arroyo said the South China Sea disputes had previously been managed by the expansion of economic and diplomatic ties among the nations involved, and with a balance of power.

“Now, the balance of power approach is increasingly being taken with the growing presence of American and allied forces in the South China Sea, which will get even more formidable with the Aukus, to which the PLA may feel the need to respond,” she said, referring to the deal struck with the US and Britain to help Australia acquire a nuclear submarine fleet.

A Pentagon report last week said China’s navy had expanded to 355 ships and submarines by 2020. It said the Chinese navy had placed a high priority on modernizing its submarine forces, operating six nuclear-powered ballistic missile submarines (SSBNs), six nuclear-powered attack submarines (SSNs), and 46 diesel-powered attack submarines (SSs).

But Wu Jianghao, assistant Chinese foreign minister, said China had engaged in discussions with other South China Sea claimants on joint exploration of its resources and a code of conduct.

“We must oppose maritime hegemony, division and confrontation, and build the ocean into a territory where all parties expand cooperation, rather than a zero-sum arena,” he told the forum.