Joe Biden is here to stay

Joe Biden, President of United States is sticking with his White House team despite lagging poll numbers that have contributed to rising Democratic worries about the party's prospects in next year’s midterm elections.  

Biden’s core team has remained largely intact, and there are few signs of a looming shake-up. The White House and its allies have also signaled they see little reason to make changes.

“I don’t think the problem is staffing,” said Jim Kessler, Executive Vice President for Policy at Democratic think tank Third Way.

“I don’t think there’s any need to make staffing changes,” added Basil Smikle, a Democratic strategist and Director of Hunter College’s Public Policy Program.

The end of Biden’s first year in office has been difficult, with the key item in his legislative agenda stuck in the Senate largely because of an impasse with Sen. Joe Manchin.

The White House is also dealing with a nagging pandemic as COVID-19 case rise and the omicron variant threatens to create a new wave of the virus in the United States. The pandemic has also fed Biden’s economic problems, from inflation to supply chain crisis that has frustrated businesses and consumers.

These are all real challenges but are not symptoms of a staffing problem. They pointed instead to the deep polarization in Congress and a pessimistic electorate that is tired of the pandemic and related economic issues.

Smikle said the 50-50 Senate equally divided between Democrats and Republicans is the reason for Biden’s difficulties legislatively and that staffing would not make much of a difference.

“The challenges with the legislation are less about his own administration and more about the political landscape in the Senate and the small majority there as well as the broader polarization within Congress,” he said.

Kessler said that while the White House is hearing a lot of criticism on its messaging, Biden’s problems aren’t that unusual.

“Democrats have historically had a hard time crowing about good economic news when they’re in charge because there is a belief that if people think the economy is good then they don’t need democratic programs,” he said.

“Meanwhile, Republicans are saying the economy is bad because they want to take power. Democrats need to take a page from Ronald Reagan and be talking about the positives in this economy.”

Sources pointed to Biden’s history as a loyal boss who enjoys a tight-knit inner circle of aides he has known for years, including White House chief of staff Ron Klain, Secretary of State Antony Blinken, and senior advisers Steve Ricchetti and Mike Donilon.

Asked about Biden’s legislative team, Sen. Chris Coons, a Biden ally, said they “do a great job.” “I like them personally, I respect them professionally and I think they’re doing a really good job of managing some really tough dynamics,” Coons said. “Our Framers intended the executive and legislative branches to have different priorities and to have a contest of ideas. There are 635 of us over here. It’s not easy. Given that, they do about as good a job as they could.” 

Former President Trump presided over unprecedented turnover among White House staff and across his administration. He was prone to firing and replacing high-level officials, cycling through multiple chiefs of staff, press secretaries and national security advisers in his first year, which led to further dysfunction. 

Vice President Harris’s office has also seen staff churn during her first year, which has contributed to a perception of dysfunction within her operation.

Roberta Jacobson, who was tapped to oversee issues surrounding the US-Mexico border, left in April after a brief stint in what she said was a planned departure. Tyler Moran, a senior adviser on migration, is set to leave in January after spending roughly six months in the administration.

Andy Slavitt departed the White House coronavirus response team in June as previously planned, and Anita Dunn, who held a senior role in the communications team, also made a planned exit over the summer.

Biden’s first Staff Secretary left in October and the Director of the Presidential Personnel Office left last week for the top job at UNICEF. A handful of lower-level communications aides have also departed. None of the departures so far have been attributed to a deliberate effort by Biden to shake up his staff. 

There are Democrats who look at the poll numbers and privately question why Biden hasn’t taken a closer look at replacing some aides around him. 

"Voters have had enough and the Biden team keeps doubling down," said one Democratic strategist, pointing to the President's low approval ratings. "Begs the question, when does Biden stop listening to a team that has tanked his presidency in less than 12 months?"

A strategist said the New Year would be an ideal time for a transition.  “As they approach year two of the presidency, it might be a good time to change things up and bring in fresh perspectives in order to help with some of the unplanned challenges that have come up in the last part of the year,” the strategist said. “Phase two happens in every administration, and it's a way they could pivot from the past few months."

Others dismissed such suggestions. One person familiar with Biden World’s thinking said it was best to “do the opposite” of what anonymous strategists were suggesting. 

“Biden has surrounded himself with people he’s worked with for decades,” said Chris Whipple, author of “The Gatekeepers,” a book about White House chiefs of staff. “That lends real stability when you’ve got people like that.”

The messy withdrawal from Afghanistan prompted questions about whether Biden would fire one of his advisers, and there were rumblings that National Security Adviser Jake Sullivan was on rocky footing. But Biden ultimately did not make changes, a signal that the withdrawal was his decision and he would own it.

“I’d say it’s remarkable that in the wake of Afghanistan there were no changes at all,” said Bill Galston, Chairman of the Brookings Institution’s Government Studies Program. “That may reflect the fact that almost everything that happened was driven from the president down and not the staff up.” “What’s he going to do, fire himself?” he added.

Still, some departures could be on the horizon. White House press secretary Jen Psaki has said she expects to leave her post next year, though she hasn’t laid out a timeline. 

Others may serve out their positions until at least the midterm elections. 

“You try to get the administration through the midterms, make sure their agenda, which in the first two years would be the most ambitious, you try to get that pushed through, especially when you have the House and the Senate as allies,” Smikle said.

 

US and EU support for Taiwan deepens ideological fault line

The global ideological fault line running between mainland China and Taiwan deepened in recent weeks owing to support for the self-governing island in Washington and Europe. 

US President Joe Biden’s plan for a Summit for Democracy, announced shortly before he took office, looked certain to become a thorn in Beijing’s side. 

The announcement was one of the first signals that he would keep hard-line policies against Beijing introduced by the administration of his predecessor Donald Trump.

Soon after, Washington suffered setbacks at home and abroad that allowed Beijing to treat the summit more as farce than threat.

Just two weeks before Biden took office, Trump’s supporters ransacked the US Capitol building, incited by a fiery speech from the then-president which was full of unsubstantiated claims about election fraud that few in his Republican Party have disavowed.

The fall of Kabul to the Taliban in Afghanistan in August as well as humanitarian crises in countries including Lebanon, Ethiopia and Sudan further underscored Washington’s uphill battle against what the US Secretary of State has called the world’s “democratic recession”.

However, news that Taipei would be at the virtual summit table crossed a red line that raised the stakes for Biden’s event. The move enraged Beijing after a long-awaited summit between Biden and his counterpart Xi Jinping that appeared to have at least stabilized a bilateral relationship strained by a trade war, export restrictions and defence posturing in the South and East China Sea.

The online gathering of more than 100 heads of state, which pointedly excluded China and Russia, was billed as an allied effort to counter the rise of authoritarians and convened at a time when Beijing was dispatching record numbers of military jets to Taiwan’s airspace and a build-up of Russian troops on the country’s border with Ukraine.

While criticizing Biden’s summit, Chinese Foreign Minister Wang Yi promised to work with Iran, another country not invited to the forum, “to oppose any unilateralism and bullying acts, and uphold the principle of non-interference in internal affairs”.

Washington isn’t the only Western country expressing such explicit support for Taipei. Lithuania’s decision to host the first de facto Taiwanese embassy in Europe to bear the name “Taiwan” has also deepened the ideological rift between Beijing and the West.

Investigating reports of an embargo on Lithuania’s exports to and imports from China, apparently as a result of the representative office’s name, the European Union confirmed that it was looking into the accusations and warned that Lithuania’s relationship with China “has an impact on overall EU-China relations”.

Digging in, Beijing rejected a request by the EU to discuss the alleged trade block on Lithuanian firms, claiming it is too preoccupied with the coronavirus pandemic.

Days later, Vilnius pulled its Beijing embassy staff from the country and, almost simultaneously, Xi pledged to support efforts by Lithuania’s historical rival Russia to protect its long-term security amid rising international pressure over Moscow’s attitude to Ukraine.

Xi made the pledge in a video call with his Russian counterpart Vladimir Putin, where the Chinese leader also said China and Russia opposed attempts to divide the two nations and called for more joint actions to safeguard their security interests.

As if to underscore the growing divide between the democratic world that Biden is trying to solidify into a more determined and closely aligned bloc and nations on Beijing’s side, Xi said “China and Russia are both major nations with global influence”.

United States drops over 100,000 bombs across Syria

I am shocked to read a revelation by The New York Times (NYT) that a top secret US cell known as Talon Anvil sidestepped safeguards and repeatedly ordered airstrikes that killed an untold number of civilians in Syria under the guise of targeting ISIS fighters.

According to the report published on 12 December, the shadowy group operated from anonymous rooms “cluttered with flat screens” in three shifts around the clock between 2014 and 2019.

Among US officials, Talon Anvil was known to disregard safeguard procedures to function at the “speed of war,” and obscured a countless number of civilian deaths including farmers trying to harvest, children in the street, families fleeing fighting, and villagers taking shelter in buildings.

The NYT report also claims that Talon Anvil played an “outsize role” in the dropping of over 100,000 bombs in the war-torn country.

“They were ruthlessly efficient and good at their jobs … but they also made a lot of bad strikes,” a former Air Force intelligence officer who worked on hundreds of classified Talon Anvil missions told the NYT.

Among the many bombing campaigns that Talon Anvil was responsible for is the 2019 airstrike in the eastern Syrian governorate of Dayr al-Zawr which killed over 60 civilians, including dozens of women and children. This particular attack has been described as being “part of a pattern of reckless strikes that started years earlier.”

US Air Force officials who spoke with the NYT on condition of anonymity said that over the years they notified their commanding officers several times about Talon Anvil’s disregard for civilian lives. However, the military leaders seemed reluctant to scrutinize the strike cell as it was “driving the offensive” on the battlefield.

According to Larry Lewis, a former Pentagon and State Department adviser, every year that Talon Anvil operated in Syria the civilian casualty rate increased significantly.

Lewis also claims that US military commanders “enabled the tactics by failing to emphasize the importance of reducing civilian casualties.” He singles out General Stephen J. Townsend, who commanded US troops in Syria in 2016 and 2017, as being “dismissive of widespread reports from news media and human rights organizations describing the mounting toll.”

Talon Anvil’s operations were highly classified and the strike cell as a whole never existed in an official manner. It was run by a classified Special Operations unit called Task Force 9, whose other tasks included training allied Syrian and Kurdish armed groups.

The strike cell reportedly worked out of “bland office spaces” both in Iraq and Syria and was in control of a “fleet of Predator and Reaper drones that bristled with precision Hellfire missiles and laser-guided bombs.”

They carried out most of their operations based on tips from allied forces, secret electronic intercepts, drone cameras, and other information to find enemy targets.

A former member of Talon Anvil told the NYT that the strike cell often decided that something was an enemy target with scant supporting evidence. But as suspicion mounted over their tactics, Talon Anvil began to classify nearly all of its attacks as defensive – even when targets were 100 miles away from the front lines.

“It’s more expedient to resort to self-defense,” said Lewis. “It’s easier to get approved.”

The drone operators were also known to turn away the drone cameras away from targets before launching bombs or missiles to avoid accountability.

The operators also pressured analysts, who watched drone footage after strikes had taken place, to report that they had seen weapons or other evidence that would justify a strike hit. If they refused, the cell would simply ask for another analyst.

 

 

US Congress approves weapons sale to Saudi Arabia

According to Aljazeera, the United States Senate has blocked a resolution that would have banned a US$650 million sale of missiles and missile launchers to Saudi Arabia.

The sale was approved by the administration of President Joe Biden in November. It is the first major arms deal between the United States and Saudi Arabia since Biden took office in January this year.

The chamber on Tuesday voted 67 to 30 against the resolution, which represented the latest attempt by legislators to block US weapons transfers to Saudi Arabia over its involvement in the continuing war in Yemen. It had been introduced by Republicans Mike Lee and Rand Paul, as well as Bernie Sanders, an independent who caucuses with Democrats.

In a speech, Sanders said, “Exporting more missiles to Saudi Arabia does nothing but further this conflict and pours more gasoline on already raging fire.”

A military coalition assembled by Saudi Arabia and the United Arab Emirates intervened in Yemen’s conflict 2015 in support of President Abd-Rabbu Mansour Hadi’s internationally recognized government shortly after the Houthis took control of the capital, Sanaa.

Both sides have been accused of committing atrocities over seven years of fighting, resulting in an estimated 233,000 deaths and five million people on the brink of famine.

“We could stop this war if we really had the will to do it,” Paul said on the Senate floor. “All of America should be appalled at the humanitarian disaster caused by the Saudi blockade of Yemen.”

The Biden administration had promised a reset of relations with Riyadh over human rights concerns and the 2018 killing of journalist Jamal Khashoggi, which US intelligence linked directly to Saudi Crown Prince Mohammed bin Salman (MBS). Saudi officials have denied MBS was involved in Khashoggi’s murder.

But Washington has also taken a more pragmatic approach towards Riyadh, whose influence over oil markets and strategic significance in the region continue to make it a key US ally.

In February, Biden announced an end to support for all “offensive operations” by Saudi-led forces in Yemen, but pledged to continue to support the kingdom’s ability to defend itself.

Lately, the Biden administration had said it strongly opposed the resolution to prohibit the weapons sale.

Passage “would undermine the President’s commitment to aid in our partner’s defenses at a time of increased missile and drone attacks against civilians in Saudi Arabia”, the White House Office of Management and Budget said in a statement.

The Wall Street Journal reported that Riyadh is currently appealing to the US and other allies to supply “hundreds more” Raytheon Missiles and Defense-made Patriot missile interceptors to repel drone and ballistic missile attacks from the Houthis, citing a dwindling supply.

The State Department is considering a direct sale, according to the newspaper.

 

Iranian satellite launch

Despite disagreements with Israel about strategy, the United States is worried about Iran getting nuclear weapons. Analysts believe the US should be more concerned about the Islamic Republic making nuclear missiles with a range that could hit the US rather than these missiles reaching Israel.

If during the current nuclear negotiations Iran carries out an expected satellite launch – which may have dual technology eventually applicable to launching an intercontinental ballistic missile – it will be directly aimed at inflaming this US fear in order to pummel Washington into new concessions and submission.

If Iran’s Supreme Leader Ayatollah Ali Khamenei makes the political decision to go for a nuclear weapon, he could have sufficient weaponized uranium within three weeks.

Since the mid-1990s, Iran has had ballistic missiles with a range that could hit Israel, once it masters some additional detonation and delivery issues that would still take some undefined amount of time, Jerusalem might be under threat.

In contrast, the US is nowhere near the range of the ballistic missiles that Khamenei has at his disposal. Iran would need to develop ICBMs in order to put the US in range – something that could take an estimated three years, according to multiple experts.

That is also a different set of skills and processes beyond what Iran would need to fire a potential short- or medium-range nuclear weapon.

Dating back to negotiations in 2019, the offer the Iranians had made to the US was essentially, “Cut a deal with us now, before we develop an ICBM that could also hit you.”

True, the US is worried about the 90% uranium enrichment red line as is Israel, but putting the US in range is the real red line.

If Iran had nuclear weapons but could “only” hit Israel, it would be one of several major security issues in regions far from the US borders. It would not actually physically threaten the US.

Launching a satellite at this sensitive stage of the Vienna talks, when both sides are playing chicken and trying to get the other side to blink, would be Khamenei playing a potential trump card against America’s soft underbelly.

And the threat may feel more credible given that Tehran is closer to the 90% uranium enrichment line than it has ever been.

However, based on the Biden administration’s policy to date, this gambit probably would not work.

US President Joe Biden is ready for a mutual return to the 2015 JCPOA nuclear deal even if it upsets Israel, and even with some minor changes favoring Iran.

But politically, he has already looked weak in his handling of Afghanistan, Ukraine and other global crises and he cannot afford to cut a long-term deal with Khamenei that is worse than the nuclear deal. He would jump at cutting a “less for less” partial sanctions-lifting for a partial return to a nuclear-limits deal, but Tehran has so far been cool to this idea.

Because of that posture, another Iranian satellite launch will definitely alarm the US, but will probably not be a game-changer in negotiations.

In the meantime, the Islamic Republic will have continued to make progress on multiple tracks of skills it needs to perfect for nuclear weapons. And the jury will still be out on who will make the first concession in the nuclear standoff – or whether the situation will escalate into greater confrontation.

US administration urges domestic oil producers to raise output

The US administration is offering its strongest public support to domestic oil producers for boosting output by drilling on existing leases. It is also ruling out the possibility of reinstating a decades-old ban on crude exports.

Lately, US Energy Secretary, Jennifer Granholm told oil executives the administration was not "standing in the way" of oil and gas production and supported increased output. She noted that the administration has approved drilling permits on federal land at a faster pace than the prior administration. It is also pursuing other policies that could bring down retail gasoline prices that went close to seven-year high.

"Consumers as you know are hurting at the pump," Granholm said at a meeting of the National Petroleum Council, a group of high-level oil executives that offer advice to the US Energy Secretary. "I hope you will hear me say that please, take advantage of the leases that you have, hire workers, get your rig count up."

The change in tone comes amid growing frustration from US oil executives, who have bristled at what they see as a lack of support from the administration. Biden in one of his first acts in office blocked the 830,000 b/d Keystone XL pipeline and spent this summer unsuccessfully asking OPEX Plus to accelerate plans to boost output. Chief Executive of US independent producer, Pioneer Natural Resources, Scott Sheffield last week said he has yet to meet another oil executive who has received a call from the administration asking them to increase drilling.

But the administration has become increasingly vocal in saying it supports domestic production, as voter frustration over fuel prices becomes a growing threat to Democratic passage of a US$1.85 trillion budget package. US senator Joe Manchin has cited high inflation rates as a reason to slow work on the budget bill, which includes hundreds of billions of dollars in support for clean energy.

Granholm said it would make "little sense" for the administration to stand in the way of oil and gas production as the US recovers from the effects of COVID-19, echoing remarks that US Deputy Energy Secretary, David Turk made to the industry officials last week. She also more definitively ruled out the possibility that the administration would reinstate a ban on crude exports, something the White House said last week it was not considering. Granholm said she had heard from industry officials last week that it was important to take "off the table" the uncertainty of a potential crude export ban.

"I have heard you loud and clear, and so has the White House, and we wanted to put that rumor to rest," Granholm said.

US crude production reached 11.7 million barrels per day (bpd) during the week ended on December 03, 2021, the highest output levels since May 2020, according to the US Energy Information Administration. However, the domestic production is still down from record-high levels of 13 million bpd in the months before the pandemic heavily reduced demand. US oil executives say that a demand by shareholders to prioritize profits over output growth have been the primary driver of their investment decisions, rather than policies set by the administration.

The administration has made other attempts to lower gasoline prices for consumers. Biden has asked the US Federal Trade Commission to look at whether "illegal conduct" is contributing to higher gasoline prices. Biden also accelerated the sale of 18 million barrel crude oil from the US Strategic Petroleum Reserve and last week agreed to loan out 4.8 million barrel crude from the strategic reserve to ExxonMobil.

 

State Bank of Pakistan raises policy rate by 100bps

On Tuesday, the Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) decided to raise the policy rate by 100 basis points to 9.75%. The goal of this decision is to counter inflationary pressures and ensure sustainable growth.

Since the last meeting on November 19, 2021, indicators of activity have remained robust, while inflation and the trade deficit have risen further due to both high global prices and domestic economic growth. In November, headline inflation increased to 11.5%YoY.

Core inflation in urban and rural areas also rose to 7.6 and 8.2 percent, respectively, reflecting domestic demand growth. On the external side, despite record exports, high global commodity prices contributed to a significant increase in the import bill. As a result, November trade deficit rose to US$5 billion.

The MPC noted that recent data releases confirm that the emphasis of monetary policy on moderating inflation and the current account deficit remains appropriate. Following Tuesday’s rate increase and given the current outlook for the economy, and in particular for inflation and the current account, the MPC felt that the end goal of mildly positive real interest rates on a forward-looking basis was now close to being achieved. Looking ahead, the MPC expects monetary policy settings to remain broadly unchanged in the near-term. The MPC key trends and prospects in the real, external and fiscal sectors and the resulting outlook for monetary conditions and inflation continue to upset.

Real sector

High-frequency indicators of domestic demand released since the last meeting, including electricity generation, cement dispatches, and sales of fast-moving consumer goods and petroleum products, and continued strength in imports and tax revenues suggest that economic growth remains robust. The outlook for agriculture continues to be strong, supported by better seed availability and an expected increase in the area under wheat cultivation. Meanwhile, robust growth in sales tax on services also suggests that the tertiary sector is recovering well. While some activity indicators are moderating on a sequential basis, partly as a result of recent policy actions to restrain domestic demand, growth this fiscal year is expected to be close to the upper end of the forecast range of 4 to 5 percent. The emergence of the new Coronavirus variant, Omicron, poses some concerns, but at this stage there is limited information about its severity. The MPC noted that Pakistan had successfully coped with multiple waves of the virus, which supported a positive outlook for the economy.

External sector

Despite strong exports and remittances, the current account deficit has increased sharply this year due to a rise in imports, and recent outturns have been higher than expected. Imports rose to US$32.9 billion during July-November period of FY22 as compared to US$19.5 billion during the same period last year. Around 70% of this increase in imports stems from the sharp rise in global commodity prices, while the rest is attributable to stronger domestic demand. Due to the higher recent outturns, the current account deficit is projected at around 4% of GDP, somewhat higher than earlier projected. In the near term, monthly current account and trade deficit figures are likely to remain high, but expected to gradually moderate in the second half of FY22 as global prices normalize with the easing of supply disruptions and tightening of monetary policy by major central banks. In addition, recent policy actions to moderate domestic demand―including policy rate hikes and curbs on consumer finance―and proposed fiscal measures should help moderate growth in import volumes through the rest of the year.

The MPC emphasized that the monetary policy response to arrest the deterioration in the current account deficit has been timely. Together with the natural moderating influence of the flexible and market-determined exchange rate, the MPC felt that the response would help achieve the goal of a sustainable current account deficit this fiscal year. Moreover, the MPC noted that the current account deficit is expected to be fully financed from external inflows. As a result, foreign exchange reserves should remain at adequate levels through the rest of the fiscal year and resume their growth trajectory as global commodity prices ease and import demand moderates.

Fiscal sector

During July-November FY22 period, revenue growth has been strong, driven by a broad-based and above-target increase in FBR tax collections. However, lower petroleum development levy (PDL) collection led to a decline in non-tax revenues. On the expenditure side, development spending and subsidies and grants have increased significantly during this period. The government intends to introduce legislation to increase revenues through elimination of certain tax exemptions and reduce current and development expenditures. These measures would help moderate domestic demand, improve the current account outlook, and complement recent monetary policy actions.

Monetary and inflation outlook

Since the last meeting, despite a moderation in consumer loans, overall credit growth has remained supportive of growth. Meanwhile, across all tenors, secondary market yields, benchmark rates and cut-off rates in the government’s auctions have risen significantly. The MPC noted that this increase appeared unwarranted.

The momentum in inflation has continued since the last MPC meeting, as reflected in a significant increase in both headline and core inflation in November. Due to recent higher than expected outturns, SBP expects inflation to average 9 – 11 percent this fiscal year. The pick-up in inflation has been broad-based, with electricity charges, motor fuel, house rent, milk and vegetable ghee among the largest contributors. On a sequential basis, inflation rose 3 percent (MoM) in November. Looking ahead, based on this momentum and the expected path of energy tariffs, inflation is likely to remain within the revised forecast range for the remainder of the fiscal year. Subsequently, as global commodity prices retrench, administered price increases dissipate, and the impact of demand-moderating policies materializes, inflation is expected to decline toward the medium-term target range of 5 to 7 percent during FY23. The MPC will continue to carefully monitor developments affecting medium-term prospects for inflation, financial stability and growth.