India faces sanctions under CAATSA

Moscow has started supplying New Delhi with S-400 air defense missile systems said Dmitry Shugayev, the head of the Russian military cooperation agency. The deal between Russia and India, worth around US$5.5 billion was signed in 2018 for five long-range surface-to-air missile systems. New Delhi believes it is crucial for countering China.

The deal attracts attention of the experts to the US legislation called Countering America's Adversaries through Sanctions Act (CAATSA). It is the US Federal Law signed on August 02, 2017 that requires the US President to sanction Russian, North Korean and Iranian, punishing direct or indirect support of them. The three sections of CAASTA are aimed at curbing Iran’s nuclear program, reducing Russian growing influence in Europe and Eurasia and curbing North Korean weapons of mass destruction.

The US applied CAASTA on Turkey in January 2021 after it bought S-400 systems from Moscow. But sanctioning India under CAATSA appears to be a herculean task for Washington. New Delhi is not bothered about CAATSA, being considered a US law, and not one by the United Nations. In March 2021 Lloyd Austin, US Secretary of Defense raised concerns over India’s planned procurement of the S-400 air defense missile. He had accentuated that the US allies and partners ought to shun “any kind of acquisitions that will trigger sanctions”.

Austin soon after clarified that the question of sanctioning India was not under consideration as New Delhi had not taken delivery of the system; sanctions would be applied only when deliveries took place, Austin added.

Interestingly, India has purchased S-400 air defense missile systems from Russia. A few queries remain unanswered. Will the US impose sanctions against India under CAATSA? If sanctioned are applied what would be the Indian reaction?

India, arguably, is a robust bulwark of the US against the containment of China sanctioning would loss a strategic ally in the Indo-Pacific region. Meanwhile, India and Russia have a long history of military relations since the era of the Soviet Union.

Currently in the military services of India nearly 86% of the weapons, equipment, and platforms are of Russian origin. The US started selling weapons and equipment to India in 2001 after easing its relations with New Delhi.

Russian air defense system is extensively used in the Indian military; the latter is unlikely to compromise on the former’s sophisticated weapons. Sanctioning India will reduce Indian military buttress vis-à-vis China and will swing New Delhi to Moscow that the US never wants to happen. The US is fully cognizant of the fact that if sanctions are imposed will alienate India resulting in losing Indian arms market damaging the US military-industrial complex.

The fact of matter is that instead of sanctioning and alienating India, the US presumably will occupy the Indian arms market by competing with Russian weapons and equipment in terms of performance and price. 

On the other hand, there is a great deal of likelihood that CAATSA will bypass India, under the Act’s “modified waiver authority” for “certain sanctionable transactions’ granted by the US president Joe Biden. India has already been lobbying in Washington for CAATSA waiver over the S-400 air defense missile systems.

Indian diplomats and security officials reassured the US that both India and the US had a comprehensive global strategic partnership and both were having a threat from China and S-400 air defense missile systems were attributed to countering China. New Delhi had also guaranteed the protection of the US materiel and the US “technical and operational secrecy”.

India predominantly reassured Washington that the former was willing to reduce its dependency on the Russian defense equipment in the foreseeable future. India, as a result, was backed by three Republican senators presented an amendment in Congress to the National Authorization Act for Fiscal Year 2023 with the aim of making obstacles for the U.S. in the imposition of CAATSA on India.

The latest US legislation, called the Circumspectly Reducing Unintended Consequences Impairing Alliances and Leadership (CRUCIAL) Act, 2021 maintains that CAATSA will only weaken the US security in the Indo-Pacific region.

Ted Cruza a Republican senator argues that “Now would be exactly the wrong time for President Biden to undo all of that progress (in partnering India) through the imposition of these sanctions”.

S-400 obviously ushers a path to a diplomatic crisis for the Biden administration. Applying CAATSA on India will dilute the strategic coherence of Quadrilateral Security Dialogue QUAD in the Indo-Pacific undermining US diplomatic ties with India in the containment of China.

Moscow also looks forward to taking advantage of the sanctions reclaiming its role as an Indian bona fide military partner. Applying of sanctions would remain a geostrategic victory of Russia damaging the US Indo-Pacific strategy overwhelmingly.

Beijing remains a prime adversary of the US and India that forces both countries to be strategic allies in the region. However, the S-400 air defense missile somewhat caused a rift in the diplomatic ties of the US and India.

It can be argued that the irresponsible US withdrawal from Afghanistan and the non-inclusion of India in the AUKUS compelled India to move towards Moscow in a bid to pressurize the United States.

The US certainly hangs in the balance as far as CAATSA is concerned. On one hand, sanctioning India will bring New Delhi and Moscow further closer, weakening the US containment policy of China and the credibility of the Quad. On the other, non-imposition of CAATSA would tarnish the US image globally, showcasing its selective approach in punishment of the countries. 

Devaluation of Taka should be gradual, says Mostafa Kamal

Over the years I have been saying that Pakistan suffers from cost pushed inflation. The depreciation or devaluation of currency does not provide a sustainable solution to boost export or accelerate GDP growth rate. Today I am presenting the interview of Mostafa Kamal, a leading businessman of Bangladesh in support of my narrative.

The central bank should depreciate the taka against the US dollar gradually, if necessary, in order to avoid hurting the economic recovery and stocking inflationary pressures as Bangladesh is an import-dependent country, said Mostafa Kamal, chairman and managing director of Meghna Group of Industries.

“If the depreciation is not gradual, it will have a huge impact on every sphere of the economy and life,” he told The Daily Star in an interview.

Lately, the Bangladesh central bank brought about a major depreciation of the local currency to tackle pressure stemming from surging import payments and encourage remitters.

The interbank exchange rate hit Tk 86 per US$ for the first time in history, up from US$85.80 on Thursday, showed data from the central bank.

Kamal says the current interbank exchange rate is much lower than in the rate in the kerb market, where it stands at around Tk 90 per US$.

Importers used to buy US dollars for Tk 85 two months ago but it has gone past Tk 87 per US$.

Currency devaluation is preferred by exporters, but Kamal says depreciation is not a continuous solution.

“As Bangladesh is an import-based country, we have to strike a balance between the interests of importers and exporters.”

According to the noted businessman, any major devaluation of the taka will raise the prices of all goods. “It has a bigger effect on food and diesel prices and transport fare.”

“Policy-makers would have to find out whether the depreciation would be fast or gradual.”

Kamal says that most businessmen are importers. This is also true in the garment industry.

“We have been able to manufacture some accessories, but a majority of them are still imported.”

Speaking about the increased of commodity prices, he says the price of crude degummed soybean oil, or palm oil, has risen.

It used to cost US$500 to US$800 per ton in the past. Now it costs US$1,400. The duty has also increased.

“If the price increases by Tk 0.5 because of the currency devaluation, the price of the final goods will go up as well because import duties and other costs are added,” said Kamal.

He thinks it will not be a good idea to recommend curbing imports for the sake of keeping the foreign currency reserves stable as the move will rein in the growth of the economy.

Remittance flow to Bangladesh has slowed to some extent in recent months. But exports are performing well compared to the previous year.

A higher growth in the import of machinery means the economic stagnation has been over. It will generate jobs and accelerate economic activity.

“Imports have surged. Machinery imports have gone up after a lull for two years. There is no need to panic about rising machinery imports. Rather, it should be encouraged. People are returning to activities strongly.

“It is a good sign for the economy,” said Kamal.

He calls for looking at Turkey’s situation. The country’s currency, lira, has lost at least 35% of its value against US$. Inflation has touched a two-decade high. As a result, there is a crisis in the country.

“As we are import-dependent country, any major hike in the interbank rate will stoke inflationary pressure. The effects will be felt across the country,” Kamal said.

According to the entrepreneur, the economy has just started to return to normalcy from the coronavirus pandemic. “We, the businessmen, are optimistic.”

“Businessmen could not do well in 2020 and 2021. Now, they are more serious. Their business volume is growing. Businessmen hope that there will be a boom in the economy.”

Although the prices of imported goods and materials have gone up, the prices can’t be passed onto customers automatically, he said.

“Sometimes, we are compelled to raise prices. Sometimes, we keep the cost in the off-balance sheet. We will adjust the balance sheet when we make profit,” Kamal added.

 

US drillers add most oil and gas rigs in a week since April 2020

The US energy firms added the most oil and natural gas rigs in a week since April 2020 as rising oil prices prompt more drillers to return to the wellpad. The oil and gas rig count, an early indicator of future output, rose by 13 to 601 in the week ended on January 14, 2022, the highest since April 2020, energy services firm Baker Hughes Co. said in its closely followed report on Friday.

U.S. oil rigs rose 11 to 492 this week, their highest since April 2020, while gas rigs rose two to 109, their highest since March 2020.

The Eagle Ford in South Texas gained six rigs this week, the most of any basin, bringing its total to 50; it is highest since April 2020. The Haynesville shale in Texas, Louisiana and Arkansas gained three to 52; it is highest since November 2019.

The US crude futures were trading around US$84 per barrel on Friday, putting the contract on track to rise for a fourth week in a row for the first time since October.

With oil prices up about 12% so far this year after soaring 55% in 2021, a growing number of exploration and production (E&P) firms plan to enhance spending for a second consecutive year in 2022.

The rig count has climbed gradually for a record 17 months in a row, but US oil production slipped in 2021 as many energy firms focused more on returning money to investors rather than boosting output.

The US oil output was hit by the coronavirus pandemic which crushed demand and prices, and is only forecast to surpass 2019's record levels of 12.3 million barrels per day (bpd) next year. The government projects production will rise from 11.2 million bpd in 2021 to 11.8 million bpd in 2022 and 12.4 million bpd in 2023.

Rig activity across the five largest US oil plays would need to increase by about 13 weekly over next eight weeks to reach a sustainable plateau to hold current oil volumes in 2022, versus average rig gains of about two over the last four weeks, Mizuho said this week.

"We continue to believe drilling activity will be a put a ceiling on US supply growth, which is positive for the commodity and large cap E&Ps," the bank said.

 

 

Microsoft to invest in alcohol to jet fuel refinery

Microsoft is investing US$50 million in a LanzaJet facility in Georgia that will produce jet fuel from ethanol next year. Microsoft created the Climate Innovation Fund in 2020 to invest US$ one billion over the next four years to speed up the development of carbon removal technology.

The airline industry is considered one of the hardest to decarbonize. Renewable aviation fuel accounted for less than 0.1% of current global jet fuel demand of about 330 million tons in 2019, investment bank Jefferies said last year. Governments and investors are trying to boost incentives to produce lower-carbon emitting jet fuel.

LanzaJet, based in Chicago, said it has nearly completed on site engineering at its Freedom Pines Fuels Biorefinery, with plans to start producing 10 million gallons of sustainable aviation fuel (SAF) and renewable diesel per year from sustainable ethanol, including from waste-based feedstocks, in 2023.

Oil majors, airlines and other petroleum trading companies including Suncor Energy Inc., British Airways and Shell are also funding the company.

The White House said last year that it wants to lower aviation emissions by 20% by 2030, as airlines face pressure from environmental groups to lower their carbon footprint.

The Biden Administration has touted tax credits for production of sustainable jet fuel as part of its Build Back Better legislation, which is currently stalled in Congress.

The European Union is aiming to increase the amount of SAF blended in petroleum jet fuel to 63% by 2050.

 

Global shipping costs are moderating

Lockdowns, labor shortages, and strains on logistics networks led to shipping-cost increases and significantly lengthened delivery times, though those pressures are easing. The Chart of the Week shows global container rates began to pull back from their record in September 2021.

Since then the rates have declined by 16 percent, mostly due to falling rates for trans-Pacific eastbound routes, the main sea link from China to the United States.

According to IMFBlog, shipping costs soared over the past year as the consumers unleashed pent-up savings to buy new merchandise, while the pandemic continued to snarl the world’s supply chains. Container rates have more than quadrupled since the start of the pandemic, with some of the biggest gains concentrated in the first three quarters of last year.

The drop indicates that strong goods demand is diminishing after the traditional peak shipping season, which is typically from August to October. In addition, the US recently ordered some ports to expand operating hours and boost efficiency to reduce congestion and ease supply bottlenecks.

Although rates have subsided, they may remain elevated through the end of the year. Some underlying supply constraints do not have immediate fixes. Backlogs and port delays, labor shortages in related occupations, supply chain disruptions moving inland, and shipping industry challenges such as the slow capacity growth and consolidation that concentrated the market power of a few carriers. If the pandemic is controlled in the future, the demand for tradable goods might gradually decline as some service-providing sectors, such as travel and hospitality, recover.

Higher shipping costs and goods shortages are expected to boost merchandise prices. The United Nations Conference on Trade and Development (UNCTAD) projects that if freight rates remain elevated through 2023, global import price levels and consumer price levels could rise by 10.6% and 1.5%, respectively. This impact would be disproportionately larger for small, developing islands which heavily rely on imports that arrive by sea.

Higher freight rates will also result in larger increases in the final price of low-value-added products. Smaller developing economies that export many of these goods could become less competitive and face difficulties with their economic recoveries. Moreover, the final prices of products that are highly integrated into global value chains such as electronics and computers will also be more affected by higher freight rates.

Returning to pre-pandemic shipping rates will require greater investment in infrastructure, digitalization in the freight industry, and implementation of trade facilitation measures.

 

Hamas hails Iranian support for Palestinians

Palestinian resistance group Hamas has hailed the position of the Islamic Republic of Iran in support of Palestine. In a recent meeting with Iranian Foreign Minister Hossein Amir Abdollahian in Doha, a delegation of Hamas, headed by its Political Bureau Chief Ismail Haniyeh, appreciated the Iranian backing. 

The Hamas delegation addressed the developments related to the Palestinian cause, particularly with regard to the situation in occupied Jerusalem and the West Bank, Palestinian detainees in Israeli prisons, and the 15-year Israeli siege on Gaza. 

The Iranian minister discussed the developments concerning a number of matters, including regional alliances and the Vienna talks, reiterating his country's stance in support of the Palestinian people and resistance.      

Hamas delegation welcomed the endeavors being made to achieve unity among Arab and Muslim nations, especially the efforts being exerted by Iran and Saudi Arabia. 

Besides the Hamas chief, the meeting was attended by members of Hamas Political Bureau Khalil al-Hayya and Mousa Abu Marzouq, in addition to Majdi Abu Amsheh, Head of Haniyeh's office.

The Iranian Foreign ministry said in a statement that during the meeting, Amir Abdollahian outlined the Islamic republic’s principled policy toward the issue of Palestine as a plight in the heart of the Islamic Ummah created by the child-killing Zionist regime which enjoys support from the West.

He also condemned the brutal crimes of the Zionist occupiers against al-Quds, al-Aqsa Mosque, Gaza and occupied Palestinian territories as well as the regime’s aggression and atrocities against the Palestinian people and sanctities.

Amir Abdollahian reaffirmed Iran’s support for the legitimate defense of the Palestinian people and resistance against the occupation of the Zionist regime. 

Haniyeh, for his part, appreciated Iran’s support for the Palestinian people in their struggle against the Zionist regime’s continued aggression.

He also called on the Muslim and Arab world as well as the international community to adopt a decisive stance against the Israeli regime’s violations.

The meeting was part of Amir Abdollahian’s high-level meetings in Qatar, where he met with the emir and the foreign minister of the tiny Persian Gulf nation. 

In his meeting with Qatar’s Emir Sheikh Tamim bin Hamad Al Thani, Amir Abdollahian extended the Iranian President’s greetings to the Qatari leader. He examined the latest developments in bilateral ties in political, security, trade and economic areas. Amir Abdollahian referred to the existing capacities for expanding economic relations between Iran and Qatar, underlining the need for forging cooperation in economic areas given the existing advantages of Iran in this regard. 

The Iranian foreign minister further outlined the current Iranian administration’s approach to relations with neighboring countries and emphasized the exchange of delegations at high levels between the two countries for consultations.

Amir Abdollahian also underscored the regional views of Iran and declared Tehran’s readiness to develop interaction with regional nations in bilateral and multilateral ways.

The top Iranian diplomat then spoke about the Vienna talks over removing the oppressive sanctions against Iran as well as the issues related to Afghanistan and Yemen. The Qatari emir also outlined his views regarding these matters.

Need for resolving Kashmir conflict

Aizaz Ahmad Chaudhary has described the life of a Kashmiri in a unique manner. He asks the reader to imagine he/she is a Kashmiri born in Srinagar on January 05, 1949. By this time the reader is 73 years old and has completed nearly every phase of life. 

Decisions were taken on what to study, where to work, how to contribute, and preparing to retire, a full circle of life. But at every stage, the reminder was that he/she was not free and under Indian occupation, a kind of colonial rule. It is the story of every man and woman who lives in the Valley of Kashmir or the Jammu region, who feels helpless as well as angry.

For all Kashmiris, January 05 is a reminder that the promise was made to them on this date in 1949, which remains unfulfilled. It is the day, the United Nations Commission on India and Pakistan adopted a resolution calling for a free and fair plebiscite in Jammu and Kashmir. Ever since, like a ritual, the Kashmiris mark self-determination day, hoping that the world would listen. But year after year, the frustration has mounted. It is understandably getting hard for the Kashmiris to keep faith in international justice, or even stay optimistic. Yet the Kashmiris struggle goes on, the torch of freedom remains aloft.

The right of a nation or community to self-determination is an important principle of the UN Charter. When the UN was born in 1945, it had only 73 members. Over the years, scores of nations attained their independence thanks to the principle of self-determination, swelling the UN membership to 193. The two peoples that could not access their right to self-determination are the Palestinians and Kashmiris.

Most of the Kashmiris have close relations with the people living in central and northern Punjab. The rivers flow down from Kashmir to present day Pakistan for centuries. All roads from the Kashmir Valley head towards northern Punjab. Kashmir’s mandi (market) had traditionally been Rawalpindi. How can all these links be cut off simply because India does not want to let Kashmiris decide how they wish to live? One is completely surprised that even after seven decades of Kashmiri resistance against Indian rule, the Indian leadership is unable to deduce that the Kashmiris simply do not wish to live with India.

In the past two and a half years, the situation has taken an ugly turn. The Indian government abrogated Article 370 of the Indian constitution, robbed the Kashmiris of their statehood, and started inflicting further excesses on these freedom-loving people. Kashmiris often wonder what end goal India has in mind for Kashmir. Can it realistically maintain its colonial-like rule over eight million people? Perhaps not! India is already experiencing centrifugal tendencies in several parts of the country; how would India keep its internal stability by continuing its occupation of another 8m agitated souls?

Some analysts have argued that India does not wish to let Kashmiris exercise self-determination because if that happens, other regions in the country would also demand freedom. This argument contradicts the historical process. No nation can forever rule an unwilling population. Some strategists assert that Kashmir’s location is strategically important for India. Again, how can an unwilling population be a strategic asset for India? Some ambitious BJP enthusiasts are excited that after the actions of August 2019, and the introduction of a new domicile law, Kashmiris would no longer be a Muslim-majority community. This approach too would not work as all Kashmiris, including pro-India factions, have united in their opposition to the assault on Kashmiri statehood and identity.

It is important for the Indian leadership and its thought leaders to think this through. Ruling a population by force, undermining their identity, and suspecting each Kashmiri who aspires self-determination for his people, will never consolidate the Indian occupation of Kashmir.

A better alternative is to find ways to resolve the Kashmir dispute with Pakistan in accordance with the wishes of the Kashmiri people. The UN Security Council resolutions provide a reasonably good framework to resolve this conflict.

Can we all imagine how life would have been for every South Asian, if India had chosen the path of leading the region, not by coercion, but by mutual respect and nurturing interdependence? Today, South Asia is the least integrated and most conflict-ridden region. Can all this change? Perhaps a resolution of the Kashmir dispute could be a good beginning to defuse tensions, and let South Asia emerge as a region of peace and tranquility. Will India listen to the voice of Kashmiris? Not sure, but one does hope that one day it will.