John Kerry demands action against 'Petrostate Dictators'

According to a report by Reuters, US Climate Envoy John Kerry said on Tuesday Russia's invasion of Ukraine was a warning to nations around the world that they cannot be hostage of oil-rich autocratic governments to meet their energy needs.

Speaking to Reuters on the sidelines of the UN Ocean Conference in Lisbon, Kerry said Russia has been using energy as a weapon and would continue to do so in the future but Europe was committed to put an end to its dependency.

"It's a warning to everybody that you do not want to be prisoners of petrostate dictators who are willing to weaponize energy," Kerry said.

Russia launched a large-scale invasion of Ukraine on February 24 this year, which Moscow calls a "special operation".

Kerry said the world was "running out of time" to tackle climate change but governments should not use the war in Ukraine as an excuse to delay the process even further.

"We have seen people choosing short-term (solutions) in order to respond to the challenge of losing gas for Russia," he said.

"And we cannot allow the war in Ukraine to alter the reality that we need to reduce emissions and we need to deal with speeding up the transition to alternative renewable energy."

Soaring energy costs and supply shocks triggered by the Russian invasion have spurred some countries to bet more on renewables but others to burn more coal, buy up non-Russian gas or pause efforts to reduce fossil fuels.

The European Union (EU) relied on Russia for 40% of its gas before Moscow invaded Ukraine.

"We have to make up some gas for Europe, which the US will work to do with others, but it has be a one for one replacement - not a whole series of new infrastructure with a 20- or 30-year horizon because that will crush the ability to respond to the climate crisis," he said.

He added, "We do not need to have new liquefied natural gas projects that require new drilling."

Germany drew criticism from the United States and others, including EU member states, for supporting the planned Nord Stream 2 gas pipeline, designed to deliver Russian gas directly to Germany. The project was halted two days before the invasion started.

Kerry said it was not worth "going backwards" and described the European Union as a "terrific leader" on renewable energies that has set higher goals than many other countries in the world.

 

World Bank happy over Padma Bridge opening

The World Bank that pulled out of financing Padma Bridge, citing a never-proven “corruption conspiracy”, has now congratulated Bangladesh and its people on completion of the much-awaited bridge.

“We are happy that the bridge is complete and Bangladesh will benefit from it,” World Bank Country Director for Bangladesh Mercy Tembon told the media during the inauguration event on the Mawa end of the bridge.

Now is the time to move Bangladesh-World Bank relations forward. The Padma Bridge will make a huge contribution to the economic growth of Bangladesh, she said.

“This bridge will contribute to accelerating integrated growth in the country and reducing poverty,” she added.

The World Bank, which initially agreed to co-finance the construction of Padma Bridge, cancelled its loan alleging corruption over the appointment of consultants for the bridge.

The Washington-based agency had a loan deal amounting to US$1.2 billion with Bangladesh for the project involving an initial estimated cost of US$2.9 billion.

Other lenders, such as the Asian Development Bank, Japan International Cooperation Agency, and the Islamic Development Bank also backed out of financing the bridge, leaving the government quite off-guard and embarrassed.

But, neither a case by the Anti-Corruption Commission nor another in a Canadian court failed to prove the corruption allegations.

It was Prime Minister Sheikh Hasina who stood alone and decided to go ahead with the nearly US$4 billion project with the country’s own funds.

The government took a challenge and proceeded with the self-financing plan, keeping aside money in the annual budget for the Padma Bridge project. The construction began in December 2015.

Dispelling all clouds of uncertainties, Prime Minister Sheikh Hasina finally inaugurated the long-awaited Padma Bridge, the longest in Bangladesh, connecting people on both sides of the Padma River.

The Padma Bridge project has been implemented at a cost of Tk30,193.39 crore with almost 100% internal funding which is believed to bring a new world to the country’s economy by connecting 21 southwestern districts through roads and railways with the capital.

The construction of the 6.15km (3.82 miles) bridge began in November 2015 to connect 21 districts of the country’s southwest with Dhaka via road and rail, thereby cutting travel time considerably.

The double-layer steel truss bridge incorporates a four-lane highway on an upper level along with a single-track railway on the lower level.

This is one of the largest mega projects Bangladesh has ever undertaken and the entire amount is financed by the Bangladesh government. 

Qatar to host Iran United States talks on reviving 2015 nuclear deal

According to a Reuters report, Qatar will host indirect talks between Iran and the United States in coming days. Iranian media also reported on Monday that amid a push by the European Union to break a months-long impasse in negotiations to reinstate a 2015 nuclear pact.

"Iran has chosen Qatar to host the talks because of Doha's friendly ties with Tehran," Mohammad Marandi, a media adviser to Iran's top nuclear negotiator, told the ISNA news agency.

A source briefed on the visit said that US Special Envoy for Iran, Robert Malley, was expected to arrive in Doha on Monday and meet with the Qatari foreign minister. An Iranian official told Reuters that Iran's chief nuclear negotiator, Ali Bagheri Kani, would be in Doha for the talks on Tuesday and Wednesday.

Iran's foreign ministry was not immediately available for comment and the Qatari government didn’t comment. Later, however, Iran's Tasnim news agency cited a source at Iran's foreign ministry as saying that "Bagheri will travel to Doha on Tuesday".

The pact appeared close to being secured in March when the European Union invited foreign ministers representing the accord's parties to Vienna to finalize an agreement after 11 months of indirect talks between Tehran and President Joe Biden's administration.

But the talks have since been suspended, chiefly over Tehran's insistence that Washington remove the Islamic Revolutionary Guard Corps (IRGC), its elite security force, from the US Foreign Terrorist Organization (FTO) list.

Last week, one Iranian and one European official told Reuters that Iran had dropped its demand for the removal of the IRGC's FTO sanctions, but still two issues, including one on sanctions, remained to be resolved.

"Nothing is agreed until everything is agreed," Iran's Foreign Ministry spokesman, Saeed Khatibzadeh, said on Monday.

The 2015 nuclear pact imposed restrictions on Iran's nuclear activities in exchange for the lifting of international sanctions. Then-President Donald Trump pulled the United States out of the deal in 2018, reimposing tough economic sanctions on Tehran.

Iran's clerical establishment responded by breaching the pact's nuclear restrictions, including a 3.67% cap on the level to which it could purify uranium and a 202.8-kg limit on its enriched uranium stock.

Joe Biden to ask G7 nations to ban import of Russian gold

US President, Joe Biden said Sunday that the Group of Seven (G7) nations will ban Russian gold imports to further impose financial costs on Moscow for its invasion of Ukraine.  

“The United States has imposed unprecedented costs on Putin to deny him the revenue he needs to fund his war against Ukraine,” Biden tweeted on Sunday. “Together, the G7 will announce that we will ban the import of Russian gold, a major export that rakes in tens of billions of dollars for Russia.” 

Biden’s announcement came on the first day of a G7 meeting in Germany; a formal announcement is expected later on during the summit.  

While it does not bring in as much money as energy, gold is a major source of revenue for the Russian economy. Restricting exports to G7 economies will cause more financial strain to Russia as it wages the war in Ukraine.  

The G7 includes the United States, France, Canada, Germany, Japan, the United Kingdom and Italy.  

The US and its allies have been searching for more ways to punish Russia for the bloody war that recently entered its fifth month. Biden has announced waves of penalties coordinated with allies that range from sanctions on Russian officials and oligarchs to export controls to sanctions on major Russian banks.  

Still, Europeans are limited in what they can do because of their dependence on Russian energy imports. European countries have vowed to phase out Russian oil but have not taken steps like the US to do so immediately.  

Biden administration officials teased new announcements to squeeze Russia ahead of Biden’s trip to Europe and it is possible there will be more announcements beyond the plan to ban Russian gold imports.  

Biden embarked on the trip to Europe for the G7 meeting and, later, a North Atlantic Treaty Organization (NATO) summit with the goal of demonstrating unity with allies on keeping up pressure on Russia even as the war roils the global economy. 

Biden spent Sunday morning meeting with German Chancellor Olaf Scholz and later participated in a working lunch with other leaders.  

A White House readout of Biden’s meeting with Scholz indicated Ukraine was a main topic of conversation.  

“The leaders underlined their commitment to Ukraine’s sovereignty and territorial integrity, as well as their continued provision of military, economic, humanitarian, and diplomatic support to help Ukraine defend its democracy against Russian aggression,” the White House readout said. “The leaders also discussed efforts to alleviate the impacts of Russia’s war in Ukraine on global food and energy security.” 

Biden also thanked Scholz for committing to boosting Germany’s defense spending above NATO’s 2% of gross domestic product target.  

A White House official characterized the meeting as “very warm and friendly” and said there was “very broad alignment on all of the issues that they discussed and all the common challenges that our countries are working on together.”

 

Russia-Azerbaijan-Iran-Pakistan railway route

Chairman of the Russia-Iran Joint Trade Council has said Moscow is pursuing the development of trade and transit through the Russia-Azerbaijan-Iran-Pakistan railway route, the portal of the Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) reported.

Speaking in a meeting with ICCIMA Head Gholam-Hossein Shafeie on Saturday, Vladimir Abedinov proposed to form a working group between the representatives of the chambers of commerce of Russia, Azerbaijan, Iran, and Pakistan to explore various aspects of the trade through the mentioned route.

Expressing Russia’s willingness to strengthen trade relations with Iran, the official pointed to the western sanctions against Russia and said, "These sanctions have changed the transit and logistics routes in the region. Since the impact of sanctions has caused Russia's trade relations to undergo significant changes. In this regard, we are looking for new transportation routes in the region.”

“Completion of the Rasht-Astara route is of great importance for Russia's trade purposes. This route paves the way for Russia to access Pakistan,” Abedinov said.

He further noted that Russia can also access Pakistan and India by sending its cargoes to Iran’s northern ports by vessel and then transit them through Iran to Pakistan and India.

"This is a complex route; therefore, Russia seeks to replace it with the railway through Azerbaijan to Iran, Pakistan, and India,” he added.

Shafeie for his part pointed to the current conditions as special for the whole region and considered it necessary to make special decisions in accordance with these conditions.

According to the ICCIMA head, considering the current situation, the Iranian government has made the issue of transit a priority in its goals and plans, although there are infrastructural problems in the port area on both the Iranian and Russian sides.

He further mentioned some of the problems regarding rail transportation to Pakistan, saying, “The railway problems in Pakistan are not easily solved despite Iran's efforts. For example, a shipment was sent by rail from Iran to Lahore, Pakistan, which took 35 days to arrive to the destination.”

 

Pakistan being pushed to imminent default

Having followed the rhetoric of the economic team headed by Prime Minister Shehbaz Sharif and spending hours in listening to trade and industry and economic analysts, I am forced to arrive at the conclusion that all the steps being taken are hastening Pakistan’s default process.  

If anyone is still living under some kind of illusion, he/she must understand that the foreign exchange reserves held by Pakistan have almost exhausted, whatever, numbers are being quoted are ‘borrowed’ not ‘owned’ by Pakistan.

Therefore, the top of the agenda item should be getting the US$ one billion IMF trance released. Once this amount is released only then other friendly countries and multilateral financial institutions will start disbursing the count.

Along with this, the ‘disaster recovery plan’ has to be supported by taking measures for luring remittances, boosting exports and containing import.

I believe the worst deficit being faced by the incumbent government is ‘confidence deficit’. Without mincing words, it may be said that most of the decisions taken since coming into power are not aimed at strengthening the economy but creating ‘financial chaos’.

For boosting exports, Pakistan’s competitive advantage has to be restored. Hike in interest rate, electricity and gas tariffs and POL prices will only erode competitiveness of the local manufacturers. If they can’t compete in the global markets, the objective of boosting exports just can’t be achieved.

It has become a must that economic team must learn to remain silent and avoid giving funny statements i.e. taking lesser tea. They just can’t deny the fact that no reduction has been made in the salary and perks of elected representatives, bureaucracy and judiciary. On the contrary there are proposals to increase their salaries and perks.

There is a lot of talk about ‘circular debt’ but no admission that the root cause of this menace is ‘blatant theft’ going on with the connivance of high officials of the utility companies.

Prime Minister was prompt in imposing 10% super tax on companies, but there was no is mention about taxing income from agriculture.

Always a refuge is taken behind ‘taxing income from agriculture being a provincial subject’. If taxing all income is the responsibility of the federal government why taxing income from agriculture is a provincial subject?

If the provincial governments keeps on failing in collecting tax on income from agriculture, these should be ‘stripped off’ this right.

Last but not the least; indiscriminate load shedding in the name of saving fossil oil/gas is the most illogical approach.

Therefore, there is an urgent need to produce exportable surplus by boost working of industrial units, attaining synergy and optimizing cost of production.

 

Pakistan Stock Exchange posts 2.6%WoW decline

During the week ended on June 24, 2022, news flow was dominated by the accord between the Government of Pakistan (GoP) and the International Monetary Fund (IMF). 

On Friday, the Prime Minister announced that a 10% super tax will be imposed on large sectors in FY23, causing the Pakistan Stock Exchange benchmark index to lose 1,665 points in one day, closing the market at 41,052 points or 2.6%WoW decline.

Earlier on Tuesday, it was announced that an agreement had been reached, in which the GoP revised the FBR collection target for FY23 to PKR7.4 trillion from PKR7.0 trillion.

Average volume for the Index surged to 300.5 million shares, up 72.6%WoW mainly due to Friday’s grand sell-off.

Other major news flows during the week were: 1) loan agreement signed with consortium of Chinese banks for US$2.3 billion, 2) FDI shrank 29%YoY in May, 3) cost of power generation surges by 131% YoY due to high fuel costs, 4) May banking spread plunges 42bpsMoM, 5) GoP mulled pledging five federal assets to issue Sukuk, and 6) ECC approved PKR149 billion in payments to IPPs and KE.

The top performing sectors were: Vanaspati & Allied industries, Power, Tobacco, Insurance, and Refinery, while the least favorite sectors were: Automobiles, Textile, Cement, Close-end mutual fund, and Banking.

Stock-wise, top performers were: POML, EFUG, KEL, SML, and PAKT, while laggards were: CHCC, KTML, GATM, MLCF, and JVDC.

Flow-wise, Insurance companies remained as the net sellers, offloading US$8.4 million followed by Foreigners (US$2.4 million), Mutual funds (US$1.1 million), NBFCs (US$0.7 million), and Companies (US$0.1 million), while Individuals (US$7.0 million), Banks (US$2.1 million), Brokers (US$0.2 million), and Other organizations (US$3.4 million) were on the buying side.

The super tax imposed on large sectors has come as a major shock to all players in the market. With profitability of these sectors decreasing by 10%, the market sentiment is surely negative as players look to liquidate their positions. Add inflationary pressure and rising interest rates to the mix, and this creates a strong bearish environment for the market. With that being said, the agreement with IMF is crucial for the country, with further financing now expected to be available from World Bank, China, and Saudi Arabia which will alleviate the downward pressure on the currency along with supporting the depleted foreign exchange reserves, hence having the potential to trigger a bull-run in the short term.