US denies Syria-Lebanon-Israel gas deal

The official Twitter account of the US State Department’s Bureau of Near Eastern Affairs denied a claim that there was a secret deal that would see Israel supply gas to Lebanon.

This raises many questions because the media had not reported that the US had brokered a deal between Israel and Lebanon; reports had merely indicated that Israel could supply gas to Jordan and that gas would find its way onward, perhaps to Syria or Lebanon in some complex arrangement.  

The overall perception is that the deal may not take place; in fact it is not clear if the deal is real. The deal involves too many ifs and buts. The gas might have been for Jordan, a country that does not have large energy supplies, and supply to Syria and then to Lebanon may be loud thinking. Experts believe that the gas line would take years to be repaired from Syria to Lebanon; other reports said an energy swap might be involved.  

Who would come up with a complex deal involving moving gas from Israel to Egypt, Jordan and Syria by pipeline? The whole concept was only to stop Lebanon from taking Iranian energy products. 

Lebanon is in the middle of a financial and energy crisis. This is caused partly by Hezbollah’s stranglehold on the government and the fact that wealthy Lebanese keep their money abroad and don’t pay taxes. Like many countries, Lebanon has plenty of wealth but wants other countries to foot the bill so its elites can enjoy restaurants in Paris and sports cars.

Lebanon probably has more fancy villas, sports cars, servants and maids for its middle and upper class than Israel does, but the country is “poor” because too much of the money has been siphoned off and sent abroad. This is a traditional model of governance where money is taken abroad and then Lebanese demand that the US and others pay for everything. 

Meanwhile, American taxpayers who can’t afford the sports cars and servants that are common in Beirut have to pay for Lebanon’s army because the billionaires and millionaires who run Lebanon’s sectarian feudal political system are too busy partying with supermodels and owning yachts.

This isn’t conjecture, a Lebanese political leader, who doesn’t seem to pay any taxes in Lebanon, gave US$16 million to a model, according to The New York Times. But Americans, Israelis, Jordanians and other people who work for a living and see their earnings evaporate due to inflation are being asked to “save” Lebanon from Iran so that its upper class can continue the good life. Is this really a realistic plan? 

At the end of the day, the idea of bailing out Lebanon’s elites to keep Iranian gas off the streets of Beirut may not come to pass because of its complexity, not because people in the US or Israel or other countries might think the idea boorish and crass. Washington has slapped sanctions on Damascus, but media reports asserted that the Syrian regime might benefit from the gas deal by positioning itself to supply Lebanon’s energy needs.

The Assad regime, which floods the region with narcotics, hosts Hezbollah and is an ally of Iran, was supposed to be a conduit for the energy needs of Lebanon, to supposedly counter the Islamic Republic. This is like the proverbial “robbing Peter to pay Paul” where you work with one Iranian ally to supposedly counter another. If the Syrian regime and Hezbollah benefit, why was the United States, Israel and Jordan or Egypt supposed to be involved in the deal?

The US denial of the reports indicates these were leaked to scuttle the deal in the first place. Lebanon’s ruling elite officially dislike Israel and they are held hostage by Hezbollah, which threatens anyone who has any contact with the Jewish state. Lebanese law even makes it illegal to send an email to or converse with Israelis.

If Beirut hasn’t been able to sort out a maritime dispute with Jerusalem, how can media reports indicate that Israeli gas might somehow benefit its northern neighbor? Such a concept seems far-fetched. And even if it was floated as some kind of energy swap – where gas flows to one country and that country swaps it for other gas from a third country and this goes to Lebanon – the whole idea would require more regional stability than currently exists.

Smugglers from Syria gunned down a Jordanian soldier and wounded other Jordanians over the weekend. The idea that Amman will agree to work with a Syrian regime that is empowering drug smugglers may not be a reality.

While it is true that Egypt, Jordan, the Gulf States and Russia want a more stable Syrian regime – and it’s also true that Israel has interests in not having Lebanon become more poor and chaotic – the ability to get all these interests aligned seems difficult. If the US could pull it off, it would be an accomplishment of the Biden administration.

The question is whether the deal would actually reduce Iran’s role in Lebanon, or simply give Tehran breathing space to spend resources on Hezbollah’s arsenal, rather than see Iran trying to sort out Lebanon’s gas and electric mess. Perhaps Iran will benefit either way.  

bp and Oman enter strategic partnership

bp and the Ministry of Energy and Minerals in Oman have signed a Strategic Framework Agreement (SFA) and a Renewables Data Collection Agreement which will support the potential development of a multiple gigawatt, world-class renewable energy and green hydrogen development in Oman, by 2030. 

As part of the agreement, bp will capture and evaluate solar and wind data from 8,000km2 of land – an area more than five times the size of Greater London. The evaluation will then support the Government of Oman in approving the future developments of renewable energy hubs at suitable locations within this area to take advantage of these resources. The renewable energy resources could also supply renewable power for the development of green hydrogen, targeting both domestic and global export markets.

This partnership represents a significant evolution of bp’s business in Oman and is aligned with bp’s strategy, which includes rapidly growing our developed renewable generating capacity and to take early positions in hydrogen. 

bp Chief Executive Bernard Looney said, “Today’s agreement represents what bp is able to offer as an integrated energy company. These projects will build on our gas business, and bring wind, solar and green hydrogen together in a distinctive and integrated way supporting Oman’s low carbon energy goals. 

“And we’re not just investing in energy. We are investing in Oman to create and develop infrastructure, support local supply chains and cultivate the skills and talent needed to usher in this next generation of energy leaders.  We look forward to working closely with the Omani government to take this forward.”

His Excellency Dr Mohammed Al Rumhy, Minister of Energy & Minerals of the Sultanate of Oman, said, “This is a proud moment for Oman and a significant step towards delivering our 2040 Vision. In partnership with bp, we will progress the development of new, world-class solar and wind resources – generating renewable power for the grid and powering the manufacture of green hydrogen to supply domestic demand and to export to global customers. Over the past 50 years, we’ve advanced our hydrocarbon production. Today’s agreement signals the next step in our energy journey – unlocking the potential for Oman as a low-carbon energy hub”.

The UK’s Minister for Investment Lord Gerry Grimstone added, “Following the signing last week of the UK-Oman Sovereign Investment Partnership, this investment by bp into Oman’s renewable energy sector is a shining example of our countries’ joint ambition to facilitate strategic and commercial bilateral investment. The project demonstrates our shared vision for future prosperity through clean growth, further strengthening the partnership between the United Kingdom and the Sultanate of Oman”.

Under the SFA, bp and Oman will also consider ways to collaborate in a number of areas, including a renewables strategy, regulation, the establishment of a renewable energy hub and the development and reskilling of the local workforce.

Oman has a strong track record in the oil and gas industry, which it has grown over recent years. Today’s announcement, which is subject to final agreement of commercial terms, is an important step towards the country’s 2040 Vision and an opportunity to become a leading low-carbon energy hub. And it would further support the Oman government’s goals of diversifying the economy and bolstering investment. 

bp is committed to growing its business and building on its 15-year history in Oman, where it operates Block 61, which produces a third of the country’s gas demand. In 2020, bp’s Oman business spent US$610 million with Omani-registered companies – 90% of its total spending. And in 2021, bp joined Oman’s national hydrogen alliance, Hy-Fly, to promote the hydrogen industry in Oman, and established a net zero taskforce to help develop a ‘roadmap’ for bp in Oman.

Kazakhstan from stability to turmoil

Dozens of people have died and thousands have been detained in Kazakhstan over the past week during the worst violence seen in the Central Asian nation since it became independent in the early 1990s. 

Security forces appeared to have reclaimed the streets of the country's main city a day after Russian paratroopers arrived to help quash the uprising.

Kazakhstan, located between Russia and China and also sharing borders with three other ex-Soviet republics, is the largest economy in Central Asia, with rich hydrocarbon and metal deposits. It has attracted hundreds of billions of dollars in foreign investment since becoming independent in 1991.

Strategically, it links the large and fast-growing markets of China and South Asia with those of Russia and Europe by road, rail, and a port on the Caspian Sea. It has described itself as the buckle in China's huge 'Belt and Road' trade project.

Kazakhstan is the top global producer of uranium and the recent unrest prompted an 8% jump in the price of the metal that fuels nuclear power plants. It is the world's ninth biggest oil exporter, producing some 85.7 million tons in 2021, and its 10th largest producer of coal.

It is also the world's second largest miner of bitcoin after the United States.

The uprising began as protests in oil-rich western regions against the removal of state price caps on New Year's Day for butane and propane, which are often referred to as 'road fuels for the poor' due to their low cost.

The reform, aimed at easing oil shortages, quickly backfired as prices more than doubled. The protests spread, tapping into a wider sense of discontent over endemic state corruption, income inequality and economic hardships that have all been compounded by the coronavirus pandemic.

Although the richest of the Central Asian republics in per capita income, half of the population in Kazakhstan - the world's ninth largest country by territory - live in rural, often isolated communities with poor access to public services.

While the country's vast natural resources have made a small percentage of elites incredibly wealthy, many ordinary Kazakhs feel left behind. About a million people out of a total population of 19 million are estimated to live below the poverty line.

Annual inflation is running at close to 9%, the highest in more than five years, prompting the central bank to hike interest rates to 9.75%.

Career diplomat Kassym-Jomart Tokayev, 68, was elected president in 2019 on promises to continue the broadly pro-business policies of his long-serving predecessor, Nursultan Nazarbayev. But Nazarbayev, a former Soviet Politburo member who led Kazakhstan for nearly three decades, was widely seen as the real power behind the throne.

Tokayev has used the protests - which have sometimes targeted symbols of the Nazarbayev era including statues - to fire the 81-year-old former president from his post as chief of the powerful Security Council.

Nazarbayev has made no public comments or appearances since the protests erupted and it remains unclear to what extent the uprising will weaken the considerable influence he and his family have continued to wield in politics and business.

Tokayev also sacked Nazarbayev's nephew, Samat Abish, as second-in-command of the security police. Nazarbayev's eldest daughter Dariga, a former speaker of the Senate and still a lawmaker, has been spoken of in the past as a possible future president.

Kazakhstan’s per capita gross domestic product in 2020 was US$9,122, World Bank data show, slightly above that of Turkey and Mexico but below its annual peak of nearly US$14,000 in 2013.

Tokayev's government introduced a stimulus package worth 6% of national output to help smaller and medium-sized businesses weather the COVID-19 pandemic.

The World Bank has forecast economic growth of 3.5% in 2021, rising to 3.7% this year and 4.8% in 2023. It has urged Kazakhstan to boost competition and limit the role of large state-owned enterprises in the economy, tackle social inequality and create a more level economic playing field.

Western countries and rights groups have long criticized Kazakhstan for its authoritarian political system, its intolerance of dissent, curbs on media freedoms and lack of free and fair elections, though it has also been viewed as less repressive and volatile than its ex-Soviet neighbours.

Amnesty International said this week's protests were a result of the authorities' "widespread repression of basic human rights" and it called for the release of all those arbitrarily detained and for investigations of past state abuses.

"For years, the government has relentlessly persecuted peaceful dissent, leaving the Kazakhstani people in a state of agitation and despair," said Marie Struthers, Amnesty's Director for Eastern Europe and Central Asia.

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.