Iran aspires to become a gas hub with Russian support

Iran is currently under sanctions and involved in nuclear deal discussions with the United States and the West. It is also positioning itself to work with China and Russia.

The investment by Gazprom in Iran’s National Iranian Oil Company was announced during a recent visit by Russian President Vladimir Putin to Iran. This creates hope that Russian investment could help Iran become a regional gas hub.

Analyst and energy expert Habibollah Zafarian was quoted in an article at Iran’s Fars News arguing that the country could become a gas hub based on gas trade with neighboring countries. “Iran's gas reserves and privileged geographical location allow the country to play an influential role in the gas trade of the region.” 

Zafarian said “Iran's strategy should be defined in such a way that it buys the surplus gas of the countries of the region as much as possible and exports gas to the requesting countries at a higher price.”

Those like Zafarian, quoted in Iran pro-government media, are part of a push for the Islamic Republic to get out from under the West’s shadow and increase energy independence. 

Iran is well positioned to trade with Qatar, Azerbaijan and Turkmenistan, which have a surplus of gas, the article said, adding that gas is currently being exported by various countries to Armenia, Turkey, Iraq, Kuwait and the Persian Gulf countries – especially the UAE – and Oman, Pakistan and Afghanistan. 

“Everyone wants to import gas,” Zafarian said. “As a result, there is a great opportunity for Iran to become a regional gas hub with gas trade between exporting and importing countries.” 

Iran wants to take advantage of the war in Ukraine and the global economic crisis to work closely with Qatar and also improve its gas fields and its liquefied natural gas (LNG) infrastructure

“Also, in the recent developments of the gas market, Russia has minimized gas exports to Europe, and America is trying to increase its LNG exports in order to replace a part of Russian gas in the European market,” an expert told Fars News.

Iran can now purchase Russian gas and then export it. There could even be an export pipeline. Gas could be exported to Turkey, Armenia, Georgia and Syria.

"In return, we can also help Russia and buy Qatar gas, which is one of the most serious options to replace Russian gas in the European market, and sell it to our destination markets."  

Clearly Iran is plotting to take advantage of the global crises, openly saying what it wants to do. The regime has been trying to develop north-south rail and transport lines for years so that it can hook up Turkey with southern Iran and also develop links to Central Asia and Pakistan or even India.  

Supporters of Iraqi cleric Sadr storm Baghdad Green Zone

Storming Baghdad twice in a week by supporters of Moqtada al-Sadr and chanting anti-Iran slogans can fuel turmoil in the country. Iraqis linked neither to Sadr nor to his opponents say are they caught in the middle of the political gridlock.

Analysts have reasons to suspect the riots are being sponsored and supported by the elements who don't want any reduction in animosity between Iran and Saudi Arabia. Lately, Iraq has played a key role in bringing Iran and Saudi Arabia closer.  

Thousands of supporters of populist cleric Moqtada al-Sadr stormed Baghdad’s fortified government zone on Saturday for the second time in a week, escalating a political stand-off that is hitting ordinary Iraqis hardest.

Protesters rallied by Sadr and his social-political Sadrist Movement tore down concrete barriers and entered the Green Zone, which houses government buildings and foreign missions, heading for Iraq’s parliament, a Reuters witness said.

The scenes followed similar protests on Wednesday, although this time several protesters and police officers were hurt as Sadr’s supporters threw stones and police fired teargas and stun grenades, according to security officials and medics.

Sadr’s party came first in a general election in October but he withdrew his lawmakers from parliament when he failed to form a government which excluded his rivals, mostly groups backed by Iran.

Sadr has since made good on threats to stir up popular unrest if parliament tries to approve a government he does not like, saying it must be free of foreign influence and the corruption that has plagued Iraq for decades.

The Sadrists chanted against Sadr’s political rivals who are now trying to form a government. Iraq has been without a president and prime minister for a record period because of the deadlock.

Sadr maintains large state power himself because his movement remains involved in running the country — his loyalists sit in powerful positions throughout Iraqi ministries and state bodies.

Iraqis linked neither to Sadr nor to his opponents say are they caught in the middle of the political gridlock.

While Baghdad earns record income from its vast oil wealth, the country has no budget, regular power and water cuts, poor education and healthcare, and insufficient job opportunities for the young.

Indian Army Chief visits Bangladesh

The chief of army staff of India, General Manoj Pande completed his Bangladesh visit recently (from July 18 to July 20) as part of the outstanding bilateral defense relations between Bangladesh and India.

General Manoj Pande was on his first trip abroad since taking over the post. First day of his visit, the army chief laid a wreath at Shikha Anirban to honor the valiant souls who made the ultimate sacrifices during the Liberation War of 1971.

Indian Army chief General Manoj Pande received a Guard of Honour at a convention centre of Bangladesh Armed Forces.

Indian Army Chief General Manoj Pande paid a courtesy call on his Bangladesh counterpart General SM Shafiuddin Ahmed at the Army Headquarters in Dhaka.  The two discussed ways to enhance and strengthen bilateral defense cooperation.

Manoj Pande met with senior members of the security establishment several times throughout the day to discuss defense-related topics. In Dhanmondi, at the Bangladesh’s Father of the Nation Bangabandhu Sheikh Mujibur Rahman Memorial Museum, he also paid respects. He met with Bangladesh PM Sheikh Hasina on Tuesday and focused on strengthening bilateral ties.

The army chief spoke the Defense Services Command and Staff College, Mirpur, professors and students on the second day of his visit.

He met with staff at the Bangladesh Institute of Peace Support and Operation Training, a prestigious institution in Bangladesh that prepares peacekeepers for work in a variety of UN peace operations, and engaged in conversation with them. After that, he visited the Bangabandhu Military Museum in Mirpur.

Manoj Pande’s visit has strengthened relations between the two armies on a bilateral level and served as a catalyst for improved coordination and collaboration between the two nations on a variety of strategic problems.

In South Asia, Bangladesh is an important ally of the India. The two nations work closely together on problems like climate change, counterterrorism, and regional security. This visit may serve to cement bilateral defense ties. Defense cooperation between nations could strengthen bilateral ties.

Both India and Bangladesh are essential to the region. Despite some bilateral issues, both countries are greatly interested in further solidifying their bilateral ties, which was made clear by this visit.

This could assist in bolstering bilateral ties and reflecting better bilateral understanding. This visit is highly important for Bangladesh and India in the region. Bangladesh and the India must work together as reliable partners to address some shared issues. Through this visit, India and Bangladesh have further reinforced their defense ties.

India played a significant role in the Bangladesh War of Liberation in 1971, helping the then-East Pakistan transform into the new country of Bangladesh, which permanently altered the dynamics of South Asia. India and Bangladesh agreed to a “Treaty of Friendship and Cooperation” that would last for 25 years.

Given the numerous cultural, diplomatic, economic, and security linkages that exist between India and Bangladesh today, the two nations’ bilateral ties are now stronger than ever. Bangladesh occupies a special place in India’s heart as a close neighbor and an essential part of the country’s “Neighborhood First Policy.”

In March this year, two Indian naval ships—INS Kulish and INS Sumedha—visited Bangladesh’s Mongla Port, making it the first naval visit India had made in the previous 50 years.

Bangladesh is still India’s “closest neighbor,” and relations with it are at a “golden age.” India wants to strengthen its relationship with Bangladesh just as the US wants to engage with it more strategically. Of sure, both nations would benefit from the situation.

In recent years, India and Bangladesh’s defense and security relations have improved. The 50th anniversary of Bangladesh’s Liberation was in 2021. Both India and Bangladesh have highly trained, experienced military, and they work together to keep the Eastern region peaceful.

The Bangladeshi and Indian militaries are increasingly collaborating on defense. Through a variety of initiatives, such as joint training and drills and defense discussions, the two countries’ armed forces have been working together more and more.

In order to achieve self-sufficiency in defense manufacturing in Bangladesh, India will assist Bangladesh in setting up manufacturing and service facilities for the defense platforms that both nations currently possess. Additionally, India will offer the Bangladesh military specialized training as well as technical and logistical support. India also gave a neighboring nation, Bangladesh, its first ever line of credit for defense-related purchases, in the amount of US$500 million.

India’s determination to combat terrorism in all its manifestations was echoed by Bangladesh’s resolute stance against terrorism. India is aware of Bangladesh’s efforts to prevent terrorist organizations from using space to conduct activities against India. In response, India should keep up its efforts to stop any terrorist group from using its territory to harm Bangladeshi interests.

India had encountered challenging circumstances in some of the States bordering Bangladesh, but since Prime Minister Shiekh Hasina’s government came to office in 2009, it has provided all assistance.

 

US oil companies the biggest beneficiaries of sanctions on Russian energy companies

The US super-majors ExxonMobil and Chevron both reported their highest-ever quarterly profits on Friday. Higher oil and gas prices, the highest refining margins, increased production, and aggressive cost control all contributed to the record-breaking profits at Exxon. Chevron also reported record-breaking profits, announcing an increase in share buybacks.

ExxonMobil results were far above analyst expectations and posted second-quarter earnings of US$17.9 billion, or US$4.21 per share assuming dilution. This is nearly quadruple the US$4.69 billion earnings for the second quarter last year, and more than triple the earnings from the first quarter of this year. Exxon’s per share earnings easily beat the analyst consensus of US$3.84.

Higher oil and gas prices, the highest refining margins in years, increased production, and aggressive cost control all contributed to the record-breaking profits at Exxon, were higher than its previous quarterly earnings record in 2012 and the quarterly profits in 2008, when Brent prices hit a record US$147 per barrel.

“Second-quarter earnings were driven by a tight supply/demand balance for oil, natural gas, and refined products, which have increased both natural gas realizations and refining margins well above the 10-year range,” Exxon said.

Another US super-major, Chevron, also posted record earnings beating analyst forecasts, thanks to high oil and gas prices and tight fuel markets driving multi-year high refining margins.

Chevron recorded adjusted earnings of US$11.4 billion, or US$5.82 per share, for the second quarter, up from US$3.3 billion earnings, or US$1.71 per share, for the same period of 2021. The analyst consensus was for US$5.08 EPS for this past quarter.

Chevron increased the top end of its annual share repurchase guidance range to US$15 billion, up from the US$10 billion guidance from March.

Following the results release, Chevron stock was up by more than 3.5% pre-market on Friday, while Exxon was advancing by 2.5%.

The record earnings from the US super-majors add to similarly strong earnings from the European majors, each of which reported much higher profits as commodity prices rallied.

 

 

 

United States GDP falls for second straight quarter

Economy of the United States appeared to shrink for the second consecutive quarter, according to federal data released Thursday, amid growing concern the country could be slipping into a recession.

US gross domestic product (GDP) shrunk between April and June, the Commerce Department reported, marking the second-straight quarter of economic contraction.

GDP fell at a yearly pace of 0.9% in the second quarter, according to the Commerce Department’s first estimate of economic growth over the previous three months.

“The US economy is struggling,” Scott Hoyt, senior director at Moody’s Analytics, wrote in a Thursday analysis.

“We now expect growth to struggle to reach potential both this year and next. However, we don’t believe the economy is in a recession,” he continued.

Many economists expected GDP to fall for a second consecutive quarter as the economy faced more pressure from high inflation, rising interest rates, slowing job growth, falling home sales and other headwinds. 

While the economy was almost certain to slow after growing 5.7% in 2021, experts have become more fearful of the US slowing into a recession after GDP fell at an annualized rate of 1.6% in the first quarter.

Two straight quarters of negative economic growth have long been used as a rule of thumb to determine when the US is in recession and is the formal threshold for a recession in other countries. But economists in the US consider a broader range of data when determining if the US is in recession.

“The headline of a second straight decline in real GDP highlights the abrupt change in the path of the US economy, but the ongoing strength in the job market and other signs of growth make it unlikely that this will be categorized as a recession at this point,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association, in a Thursday analysis.

A steep decline in business investment and a 3.1% surge in imports, which detract from GDP in calculations, were the two major forces behind the second quarter decline.

 “The data fits with our view that the rate of US economic growth will slow noticeably this year, as households and businesses grapple with record high inflation and a steep rise in interest rates,” Cailin Birch, a global economist at the Economist Intelligence Unit, said in a Thursday analysis.

President Biden and White House officials have tried to convince Americans that the US economy is not yet in a recession thanks to a strong job market. They’ve focused heavily on the NBER’s definition of a recession to show Americans that the economy is not as weak as it may seem.

“It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation. But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure,” Biden said in a Thursday statement.

Republican lawmakers were quick to release their own declarations of recession. They blamed Biden for driving the economy into ruin and accusing the White House of trying to dupe the American people.

“As Biden and his Democrat allies in Congress busy themselves with changing the definition of a recession, Americans continue to shoulder the burden of troublesome economic conditions,” Rep. Blaine Luetkemeyer, the ranking member on the House Small Business Committee, said in a Thursday statement.

The Federal Reserve is likely to keep boosting interest rates as inflation rises, which will continue to slow the economy, as the war in Ukraine and pandemic-related supply chain challenges threaten to make inflation worse.

 “Whether the economy meets the conventional or formal definition of recession is in many respects immaterial. Either way, households and firms are reeling from combined energy, inflation, and rate shocks that have damped individuals’ purchasing power and are in the process of reducing household living standards,” wrote Joe Brusuelas, chief economist at audit and tax firm RSM.

“That is the toll levied by the inflation tax and is why it is critical to restore price stability to the economy as soon as is reasonably possible,” he continued.

 

Pakistan Mild Respite Ahead

Pakistan ended FY22 with a 4-year high current account deficit (CAD) of US$17.4 billion (4.6% of GDP) as against US$2.82 billion (0.8% of GDP) a year ago.

CAD for June 2022 swelled 59%MoM to US$2.3 billion as imports hit a record high of US$7.04 billion on the back of energy imports. This was despite the second highest monthly exports and seasonal rise in remittances.

In the absence of adequate foreign exchange liquidity, the disruption in goods imports along with administrative ban on non-essential items is likely to trim CAD to a sizeable extent in the coming months.

However, Pakistan’s leading brokerage house Inter Market Securities sticks to its base case estimate of US$12.6 billion (3.0% of GDP) for FY23. The most contraction in import bill will be led by absence of TERF-related machinery and COVID-19 vaccinations in addition to the respite from palm oil imports.

Trade deficit hit an all-time high of US$3.9 billion in June 2022 owing to record imports of US$7.04 billion, despite second highest monthly exports of US$3.1 billion, up 26%MoM.

Pakistan’s energy requirements surged tremendously during June 2022, as country’s monthly oil import bill hit the highest mark of US$2.9 billion.

Going forward, imports are likely to stay lower than FY22 monthly average of US$6.0 billion owing to low machinery and vaccination imports, coupled with relatively lower international oil prices and crack spreads.

Some savings will also likely emerge from Foods imports as international palm oil prices have come off by 50% recently. All this is in addition to bottlenecks created by inadequacy of foreign exchange liquidity and administrative measures to curb non-essential imports.

A against this , export of textiles and clothing remained high in FY22 owing to summer demand and adequate energy availability, but home textile demand growth may unlikely stay put in FY23.

Remittances during June 2022 increased 18% to US$2.8 billion on account of seasonal rise from Eid-festivity-flows, managing to remain above FY22 monthly average of US$2.6 billion.

Cumulatively, remittances have risen 6%YoY to US$31.2 billion in FY22. The brokerage house believes, remittance growth is likely to remain tepid as the normalized travel, opening up avenues of non-banking channels.

Despite the US$2.3 billion rollover from China in June 2022, Reserves held by State bank of Pakistan (SBP) increased by a meager US$420 million June 2022 amid elevated imports keeping import cover around 1.5 months.

The IMF staff level agreement is through and the US$1.17 billion tranche is subject to Board approval, and likely to be released by end August 22.

The brokerage house believes, Pakistan’s attempts towards overcoming the foreign exchange liquidity constraints will be difficult, more specifically in terms of bond issuances in the current scheme of things.

This will garner an approval for executing an express transaction to sell government stake in State-Owned Entities (SOEs).

Pakistan: Uncertainty continue to mar economic performance

The Supreme Court of Pakistan has announced its verdict in favor of Ch. Pervaiz Elahi, who has finally assumed the charge of Chief Minister Punjab.

Punjab’s economic and political importance is unparalleled for any party looking to form a government in the center. The province has a population of about 110 million, making up 52% of the country’s populace.

In the FY23 budget, Punjab had budgeted a surplus of PKR125 billion, and federal allocations of PKR1.7 trillion were envisaged for the province (50% of the divisible pool). Any alterations to the budgeted provincial surplus, though unlikely, can result in trouble for future tranches from the IMF.

PTI Chairman, Imran Khan, has repeatedly asked for fair and free elections ever since his ouster in April this year. Following the recent events, PML-N Chief, Nawaz Sharif, also stated that he was in favor of holding early general elections as delaying the same would be disadvantageous to the country.

With Punjab firmly under the PTI coalition and its nominee Pervaiz Elahi at the helm of the provincial government, PTI is now expected to make a move towards the National Assembly and make its government in the center.

The political crisis in the country which started after the dismissal of Imran Khan from his office has seen Pak Rupee depreciate by 27% against the Greenback.

The current political uncertainty comes at a time when the country is already struggling with soaring current account deficit and colossal foreign debt repayments which in confluence with the political uncertainty had put serious pressure on the currency.

The current political and economic uncertainty has resulted in markets starting to price in default risk, resultantly the yields on Eurobonds/Sukuks have reached all-time high, with the December 2022 maturity instrument yields soaring to 45.6%.

At the same time, the PKR depreciation has continued unabated, despite Pakistan having reached an SLA, where concerns over filling a US$4 billion funding gap identified by the IMF remain.

Analysts expect the IMF program to resume soon irrespective of political developments, toning down the uncertainties surrounding Pakistan’s external vulnerability.

However, domestic issues (elections, inflation, interest rates) are likely keep Pakistan’s equities market under pressure.