China lifting oil to offset Venezuelan debt

According to a Reuters report, a Chinese company has been entrusted to ship millions of barrels of Venezuelan oil despite the US sanctions. This is part of a deal to offset Caracas' billions of dollars of debt to Beijing.

China National Petroleum Corp (CNPC) stopped carrying Venezuelan oil in August 2019 after Washington tightened sanctions on the South American exporter. But it continued to find its way to China via traders who rebranded it.

Since November 2020 China Aerospace Science and Industry Corp (CASIC) has been carrying Venezuelan crude on three tankers it acquired from PetroChina. The oil is stored on a tank farm it also took over from PetroChina.

The firm has taken 13 cargoes carrying a total of about 25 million barrels of oil, including two vessels due to arrive in China in September, according to the loading schedules of Venezuelan state oil firm PDVSA, and tanker tracking data from Refinitiv and Vortexa Analytics.

The 13 shipments, worth about US$1.5 billion at formula prices for Venezuela’s flagship-grade Merey crude, were declared "crude oil" at Chinese customs, without specifying origin.

" shipments are strictly under a government mandate, where CASIC was designated to move the oil as payment to offset Venezuelan debt to China.

Without commenting on debt offset, China's Foreign Ministry said on Friday the two nations are engaged in cooperation over oil for humanitarian goods.

“The cooperation meets Venezuela's current needs and is also in line with humanitarian principles," a Ministry spokesperson said, adding that China opposes US unilateral sanctions and long-arm jurisdiction.

Another source said that although part of each cargo pays down debt, other goods, such as COVID-19 vaccines, are also being subtracted from the crude sales.

All money from proceeds stays in China. Venezuela’s Foreign Affairs Ministry is in charge of conciliation and accountability.

At roughly 42,000 barrels a day, these shipments have increased total Venezuelan oil to China to about 420,000 bpd between January and July this year, equivalent to about 3% of China's consumption, according to Emma Li, analyst with Vortexa, which tracks such flows.

Venezuela's debt dates to 2007, the era of then-President Hugo Chavez, when the country borrowed more than US$50 billion from Beijing under loan-for-oil deals.

China, the world's top oil buyer, has over the past few years benefited from cheaper oil supplies from Iran and Venezuela, and has in recent months ramped up imports from Russia amid soured relations with Washington.

CASIC, which started in 1956 as a defence research arm that developed China's first missile has over the decades expanded into a defence conglomerate specializing in space technology.

It was picked for the oil job because it is politically powerful and has limited global financial exposure, making it less vulnerable to sanctions.

The company has since 2015 worked with state oil giants, including CNPC and Sinopec, in petroleum equipment manufacturing, digital technology and overseas projects.

The CASIC Venezuelan oil shipments are transported by three Very Large Crude Carriers - Xingye, Yongle and Thousand Sunny, according PDVSA's loading schedules and ship tracking by Vortexa and Refinitiv.

All Venezuelan oil cargoes received by CASIC were originally picked up at the Jose port by Cirrostrati Technology Co, a firm with no track record in oil trading, acting as intermediary for only these cargoes.

The oil shipped by CASIC is mostly consumed by China's independent refiners, which have increasingly relied on cheaper crude from Iran and Venezuela and more recently Russia to maintain operations.

One independent refiner said they were offered the oil at US$8 per barrel below benchmark Brent crude ex-storage basis, versus a discount of more than US$30 for similar-quality crude marketed as a Malaysian export.

"It is more costly, but it's good that the government is now taking charge of these Venezuelan supplies, which saves us lots of logistics headaches and sanction-related risks," said an executive with the refiner.

Japan seeks to organize meeting of creditors to Sri Lanka

Japan is seeking to organize a Sri Lanka creditors' conference, hoping it could help solve the South Asia nation's debt crisis, but uncertainties cloud the outlook for any talks.

Tokyo is open to hosting talks among all the creditor nations aimed at lifting Colombo from its worst debt crisis since independence, but it is not clear whether top creditor China would join and a lack of clarity remains about Sri Lanka's finances.

Japan would be willing to chair such a meeting with China if that would speed up the process for addressing Sri Lanka's debt, estimated at US$6.2 billion on a bilateral basis at the end of 2020.

President Ranil Wickremesinghe told Reuters last week that Sri Lanka would ask Japan to invite the main creditor nations to talks on restructuring bilateral debts. He said he would discuss the issue with Prime Minister Fumio Kishida in Tokyo next month, when he is expected to attend the funeral of the assassinated former premier Shinzo Abe.

Tokyo, the number two creditor, has a stake in rescuing Sri Lanka, not just to recoup its US$3 billion in loans but also its diplomatic interest in checking China's growing presence in the region.

S&P Global this month downgraded Sri Lanka's government bonds to default after it missed interest and principal payments. The island nation of 22 million people off India's southern tip, with debt at 114% of annual economic output, is in social and financial upheaval from the impact of COVID-19 pandemic on top of years of economic mismanagement.

An International Monetary Fund (IMF) team met Wickremesinghe on Wednesday to discuss a bailout, including restructuring US$29 billion in debt, as Colombo seeks a US$3 billion IMF aid program. 

The president met the same day with Japan's ambassador.

Tokyo believes a new platform is needed to pull creditors together.

Sri Lanka is running out of time since it defaulted on its debt. The priority is for creditor nations to agree on an effective scheme.

Japan is keen to move this forward. But it's not something Japan alone can raise its hand and push through, the cooperation of other nations was crucial.

Japan's Foreign Ministry declined to comment. Sri Lanka's central bank and Finance Ministry did not immediately respond to requests for comment. An IMF spokesperson declined to comment.

Concerns include rivalry and territorial tensions between big creditors China and India, while Sri Lanka would have to commit to reforming its finances and disclose more information about its debt, the sources said.

Last month, shortly after Wickremesinghe took office when his predecessor fled the country, Chinese President Xi Jinping wrote to him that he was ready to provide support and assistance to the best of my ability to President Wickremesinghe and the people of Sri Lanka in their efforts.

Getting Beijing's cooperation on a debt restructuring was complicated by factors such as a large number of lenders.

A Chinese foreign ministry spokesman told Reuters that Beijing was willing to stand with relevant countries and international financial institutions and continue to play a positive role in helping Sri Lanka respond to its present difficulties, relieve its debt burden and realize sustainable development.

Japan hopes to see a new debt restructuring framework resembling one set up by the Group of 20 big economies targeting low-income countries. Sri Lanka does not fall under this "common framework" because it is classified as a middle-income emerging country.

It must be a platform where all creditor nations participate to ensure they all shoulder a fair share in waiving deb. Until these conditions are met, it would be difficult for any talks to succeed.

The common framework, launched by the G20 and the Paris Club of rich creditor nations in 2020, provides debt relief mainly through extension in debt-payment deadlines and reduction in interest payments.

Some people involved think an initial creditors' meeting could be held in September, but one source said it would "take a little while, possibly several months".

Restructuring talks are only possible after the IMF scrutinizes Sri Lanka's debt, the sources said.

 

 

Poppy Cultivation in Afghanistan

According to an article by Ambassador, Mark Green, President, Director and CEO, Wilson Center, at a time when the majority of Afghan population struggles to afford food under the collapsed economy and severe drought, the “poppy pledge” threatens to devastate the livelihoods of entire communities. 

According to Green, Afghanistan is the world's largest producer of poppy. Its production grew during the years when United States and coalition forces were present, despite the US spending more than US$8 billion to eradicate the crop.

Production grew during Taliban’s years of insurgency, despite its public opposition to poppy  production because narcotics are contrary to Islam, and perhaps because the militant group reportedly imposed “taxes” on poppy farmers and others involved in the trade as a way of funding its operations.

As Taliban representatives negotiated over the drawdown of Western forces with, first, the Trump Administration and then, later, Biden representatives, they promised to end poppy production in Afghanistan once they regained power.

Even though observers say Taliban have broken many of its other pledges—on matters like the role of women in society and tolerance for diversity of opinion— the “poppy pledge” may be one they’re serious about trying to keep.

In April, Taliban issued a decree that banned poppy cultivation in Afghanistan, and government spokespersons said that offenders would be tried according to Shariah laws and courts.

A representative of the interior ministry told the Associated Press, “We are committed to bringing poppy cultivation to zero.” 

Farmers in Helmand, the center of poppy cultivation in Afghanistan, recently reported that armed Taliban officials have begun seizing farms and tearing up fields of poppies with tractors.

Taliban campaign to eradicate poppy cultivation poses significant challenges for millions of impoverished farmers and day laborers that rely on their earnings from the profitable crop.

In 2021, the value of Afghanistan's poppy production was 14% of the country’s GDP at US$1.8 billion to US$2.7 billion, and day laborers can make more than US$300 a month harvesting poppy.

 

Pakistan: Remittances continue to be the biggest source of foreign exchange

Remittances have remained high in June 2022. Eid festivity impact was restricted to the month, the inflow of US$2.5 billion depict a higher rate of remittance. Even though remittances were down 9%MoM, analysts expect growth during the year to remain tepid backed by increase in Pakistani worker registration in GCC countries.

As per Board of Emigration and Overseas Employment (BEOE), around 458,000 Pakistanis have expatriated during 7MFY22TD as against 288,000 and 225,000 during FY21 and FY20, respectively. Most of the expatriations have occurred towards Middle East countries which continue to enjoy better macros in a high oil price environment. 

Notwithstanding a better current account deficit (CAD) in July 2022, the overall Balance of Payment (BoP) position was reported at a negative US$1.8 billion. This is largely owing to the absence of financial flows from any country during the month. 

During June 2022, Pakistan received US$2.3 billion deposit from China while in July 2022 external debt repayments of US$748 million eroded foreign exchange reserves.

Pakistan’s monthly CAD nearly halved during the month under review to US$1.2 billion (3.7% of GDP), despite hefty oil payments as the free-fall in Pak Rupee (fall of 17%) continued to act as a key shock absorber, supported by administrative measures that reduced trade deficit to US$3 billion (21%MoM decline). 

Notwithstanding the fizzling out of Eid festivity impact, rate of remittance flows remained steady at US$2.5 billion for July 2022. 

Trend reversal in PBS-SBP import differential was witnessed owing to oil payments where most shipments, at high crack spreads and as under PBS data, were made during July 2022. Adherence to the renewed IMF program is imperative besides administrative measures to conserve energy in order to keep CAD within the targeted level of US$10 billion (3.0% of GDP).

Pakistan is poised to receive US$4 billion under friendly assistance from GCC countries, which will effectively put its external account at an over-financed status.

SBP has already indicated a pause in tightening with a few downside risks from exogenous factors and deviation from the path of fiscal consolidation. While the end of overheating of economy is in sight (June 2023), Pakistan needs stay adequately congruent to the Fund’s stipulations and implement energy conservation drives to reduce oil import bill.

Trade deficit has come off from its fresh peak of US$3.9 billion to US$3.1 billion, largely owing to demand moderation as well as administrative measures on restricting non-essential items, more specifically the CKD imports.

The biggest decline was seen in machinery and transport group. Infrequent trend reversal in the PBS-SBP import difference was also witnessed during the month, which was primarily on account of higher crack spreads booked in prior month and cash transactions being settled in July 2022. This also kept Pakistan’s average cost of oil import higher than oil prices.

 

United States takes help of poll to continue war in Ukraine

It is not new by a regular practice of the US administration to take help of pool to justify its acts. This time it has taken help of world’s leading news agency, Reuters, to continue arms supply to Ukraine. 

Before the readers go further I request them to first read one of my blogs titled Dying Ukrainians Thriving US Military Complexes dated August 20, 2022.

After half a year of war in Ukraine, a slim majority of Americans agree that the United States should continue to support Kyiv until Russia withdraws all its forces, according to a Reuters/Ipsos opinion poll released on Wednesday.

The polling suggests continued support for President Joe Biden's policy of backing Ukraine, despite economic worries and domestic political developments grabbing Americans' attention in recent months.

The Biden administration has provided weapons and ammunition for Ukraine's bid to repel Russian forces and is expected to announce a new security assistance package of about US$3 billion, a US official said, as Ukraine's marks its Independence Day on Wednesday.

Ukrainian President Volodymyr Zelenskiy has vowed to recapture territory seized after the February 24 invasion and in earlier incursions beginning in 2014, when Russia annexed Crimea.

Out of 1,005 people in the United States who took part in an online poll last week, 53% expressed support for backing Ukraine "until all Russian forces are withdrawn from territory claimed by Ukraine." Only 18% said they opposed.

That support came from both sides of the political divide, although Democratic voters were more likely to back the position, with 66% of Democrats in support compared to 51% of Republicans.

A slim majority, 51%, also supported providing arms such as guns and anti-tank weapons to Ukraine's military, compared with 22% who opposed.

In previous polls, higher numbers of Americans have backed providing arms to Ukraine but directly comparable polling was not available.

In line with past polling, there was little support among Americans from across the political spectrum for sending US troops to Ukraine.

Only 26% said they supported such an intervention, but 43% agreed with sending US troops to NATO allies neighboring Ukraine who are not at war with Russia.

 

Why fuss against Mahmoud Abbas?

At a press conference with German Chancellor Olaf Scholz in Berlin, Mahmoud Abbas, President, Palestinian Authority (PA) said Israel has caused 50 Holocausts against Palestinians. His remarks triggered outrage among certain world leaders, including Scholz.

"From 1947 to the present day, Israel has committed 50 massacres in Palestinian villages and cities," Abbas said in Arabic, according to CNN. Until today and every day there are killings by the Israeli military.

Abbas made the comments when asked if he would apologize for the 1972 Olympics incident in Munich, when members of the Israeli team were taken hostage by Palestinians linked to the Palestinian Liberation Organization (PLO).

Chancellor Scholz tweeted, "I am disgusted by the outrageous remarks made by Palestinian President Mahmoud #Abbas. For Germans in particular, any relativization of the singularity of the Holocaust is intolerable and unacceptable. I condemn any attempt to deny the crimes of the Holocaust."

It is true that the Holocaust has singular dimensions but the German leader and others who were outraged by the Palestinian Authority president’s remarks cannot deny nearly eight decades of occupation, land robbery, destruction of homes, burning of olive trees, imprisonment, injustice, genocide, displacement of families, etc.  Just in 1948, 700,000 Palestinians were forced to leave their homes.

Moreover, Abbas did not deny Holocaust that Scholz says condemns denial of it.

Also, deep down, Scholz and other current and former Western leaders are well aware that Israel’s behaviors are by no means excusable, otherwise they are bigoted.

Why the term Holocaust used by Abbas was taken literally. He was just trying to express incessant cruelty against Palestinians.

The interim Israeli Prime Minister Yair Lapid tried to abuse the situation and talked about morality of the remarks by the Palestinian Authority leader, something which is quite alien to Israeli officials.

"Six million Jews were murdered in the Holocaust, including one and a half million Jewish children. History will never forgive him (Abbas)," Lapid tweeted.

Lapid is better to be reminded that history will never forgive or forget the stealing of another nation’s land. Between August 5 and 7, Lapid killed 16 children in Gaza. 

Holocaust happened during World War II, from 1939 to 1945. But the Palestinians have been suffering since 1947 and there is no prospect for an end to their agonies.

Israelis are stealing the remaining Palestinian lands in the West Bank and don’t allow them to establish their own country. They have also imprisoned about two million people in Gaza.

Even Palestinians who were protesting inside the besieged Gaza were murdered in cold blood as they were holding symbolic “Great March of Return” demonstrations. 

Also, UN Security Council resolutions 242 and 338, which oblige Israel to return to the 1967 borders, carry no weight for the West.

In the Tuesday press conference Scholz also unexpectedly refuted the statement by Abbas that Palestinians are living under the apartheid practiced by the Israeli regime, saying he did "not think that is correct, to use the term to describe the situation. 

Manay groups, including Amnesty International and Human Rights Watch, have concluded that Israel's treatment of Palestinians amounts to apartheid.

In a commentary on August 18, Marwan Bishara, a senior political analyst at Al Jazeera, said, “Aggrieved and angry, the Palestinians have long believed that it was they who paid the price for the horrors inflicted upon Jews in Europe since it is they who were robbed of their homeland by the newly established Jewish state in 1948.”

Bishara adds “… the early Zionists chose to settle and build a homeland for Jews in Palestine nearly half a century before the Holocaust, knowing all too well that it is the homeland of another people. They wished it cleansed of its non-Jewish inhabitants. Israel’s founding father, David Ben-Gurion believed Zionism was not driven by victimhood but rather by the necessary emancipation of the Jewish people as a new nation in Palestine.”

The analyst goes on to say, “The Gaza Strip may not be the Buchenwald concentration camp, but for decades, this tortured and tormented open-air prison of two million Palestinians has had more than its share of sadistic Israeli aggression under the pretext of security.”

In a show of hypocrisy, over the past decades Western statesmen have not reacted to comparing certain Arab leaders to Adolf Hitler by Israeli leaders.

“Israeli leaders have called any Palestinian or Arab leader they disliked a ‘new Hitler’, to justify aggression and war against Palestine, Egypt, Lebanon and others. Before their trilateral attack on Egypt in 1956, Israel and its two co-conspirators, France and Britain, portrayed its pan-Arab leader, Gamal Abdel Nasser, as ‘Hitler on the Nile’,” Bishara says.

Moreover, Zionists have used the term “anti-Semitism” to attack the opponents of Tel Aviv’s behaviors toward Palestinians. They are using this term to justify their illegal acts.

“…, any journalist, scholar or peace activist who dares criticize Israeli policy is routinely denounced as an anti-Semite, Holocaust denier and neo-Nazi,” the Al Jazeera analyst writes.

He also says, “Such Zionist and Israeli abuse of the Holocaust’s memory and even its survivors was exposed by Israeli historian Tom Segev in his revelatory book The Seventh Million, The Israelis and The Holocaust, as well as by American Jewish scholar, Norman Finkelstein, in his daring book, The Holocaust Industry, Reflections on the Exploitation of Jewish Suffering.

“The latter is highly critical of the cynical calculus behind the persistent invocation of the Holocaust by American Zionist organizations, in order to portray Israel as a victim, despite its 1967 war and occupation of Palestine in its entirety.”

Courtesy: The Tehran Times

Colossal impact of Ukraine war on Germany

The adverse impact of Russia-Ukraine conflict leading to war is anticipated to last for years. One of the leading economists, Marcel Fratzscher of the German Institute for Economic Research told Reuters. He expressed fears that the turmoil could cost 3 percentage points of growth this year.

Fratzscher, whose institute advises the government of Europe's largest economy on macroeconomic policy, said the impact could last until 2025 when Germany expects to have freed itself from all exposure to Russian gas.

Germany, which for decades prospered from reliable flows of cheap Russian gas, is rushing to reorient itself after the outbreak of war in February.

"The war in Ukraine has done massive damage to the German economy," Fratzscher said, adding that perhaps only 1.5% would remain of the 4.5% economic growth he had expected at the start of the year.

The impact on inflation, through high energy prices, would also be sustained for a similar period, though he rejected suggestions that there was cause for wage restraint.

"Unions aren't as strong as they were in the 1970s," he said, noting that this year's forecast wage growth of 4.5% was well short of inflation at some 8%. "Even in coming years I see no sign of us falling into a wage spiral."