Iran Emerging Regional Transit Hub

For thousands of years, Iran has been an important route for the transit of foreign goods due to its geopolitical position. The country played a significant role in transporting commodities from west to east as one of the main stations along the ancient Silk Road.

In the modern day, this huge capacity became dormant due to war, political conflicts, and sanctions and consequently lack of infrastructure. Now the global conditions are changing in Iran’s favor and new opportunities have appeared on the horizon.

The Ukraine war, despite its grave consequences for many countries, has presented Iran with a golden opportunity to realize the long-awaited goal of becoming the global transit hub it once was.

The row between Europe and Russia over the Ukraine war, which resulted in harsh sanctions being imposed on the country, cornered the Russian government economically and many European countries closed their borders on Russian goods making it very hard for its traders to be able to access their destination markets. As a result, the country started looking for new ways for distributing its goods across the world, especially in Asia and the International North-South Transit Corridor (INSTC) once again came under the spotlight.

The agreement for launching INSTC was signed by Iran, India, and Russia in 2000. Despite all the interest and hype, the attention to the route faded due to geopolitical hurdles including the global economic stagnation, the US sanctions on Iran, the conflict in Karabakh, and the pandemic.

Now the multi-modal network of ships, rail, and roads is once again gaining its importance, as the most important trade link between Asia and Europe.

According to official data, one of the major advantages of this transportation route is that the cost of transporting goods through this corridor is 30% cheaper. It also halves the time it takes to transport Indian goods to Russia via the Suez Canal.

Iran can use this transit route to distribute European commodities in the shortest possible time and at a lower cost than other routes to the Indian Ocean and the Persian Gulf.

It is predicted that after the full operation of INSTC, Iran will be able to earn US$20 billion in transit profits annually, something helping it reduce its dependence on oil revenues amid the American ban on the sector.

Iran has been taking serious measures for the development of its railway network as well as its ports and shipping infrastructure in order to encourage more countries to join the project.

Using the capacities of INSTC, Iran will be able not only to expand the volume of trade with Russia and the countries of the region; it can also gain a huge share of the mentioned countries’ annual transit.

Currently, Russia has proposed to take part in some railway projects in Iran in order to accelerate the development of the Islamic Republic’s railway network along the mentioned route.

Last week, Igor Yevgenyevich Levitin, aide to the president of the Russian Federation, visited Iran on top of a high-ranking delegation to meet with Iranian Transport and Urban Development Minister Rostam Qasemi and discuss the expansion of transport ties.

According to the Iranian Transport Ministry, Levitin was tasked by Russian President Vladimir Putin to take the necessary measures for the implementation of Iran’s Rasht-Astara railway and the signaling of the country’s Incheh Borun-Garmsar railway line (both of which are along the INSTC route).

Besides linking India to Europe via this corridor, Iran can connect Central Asia to the Indian Ocean and the Persian Gulf. Landlocked countries in Central Asia can use the corridor's railway to access the high seas. Over time, Iran's place in the corridor would become known to all.

Kazakhstan, Turkmenistan, Turkey, Iraq, and Afghanistan have also shown interest in joining the huge project by linking their railways to that of Iran.

Earlier this month, Kazakhstan reached an agreement with the Islamic Republic of Iran for using the country’s rail network and the southern Shahid Rajaee Port for transiting goods to the Central Asian and Commonwealth of Independent States (CIS) regions.

Iran has also been seeking to join its railway with Iraq in order to use the Arab country to facilitate access to the Syrian market, this way Syria can also be somehow linked to the INSTC.

The rail and sea route can also join the Chinese Road and Belt project, which seeks to revive the ancient Silk Road. As one of Iran’s major trade partners China has also shifted to Central Asia and the Caspian Sea to transit its goods to Europe after the eruption of the Ukraine crisis and Iran could play a significant role in delivering Chinese goods to their destinations.

The current international conditions have presented Iran with a proper opportunity to play a bold role in the broader implementation of the INSTC and to transform into a regional trade hub by developing its rail and transit infrastructure.

Given the lower costs and shorter time of trade via this route, Iran can become the main trade link between Asia and Europe and effectively neutralize the US measures aimed to isolate Iran from the global economy.

 

 

Disconnect in US foreign policy

The Ukraine war is just one symptom of a bigger disease. The war in Ukraine began with the 2014 US-backed coup d’état in Kiev and the weaponzing by the United States and NATO of an anti-Russian regime over eight years.

Absurd disconnect in US foreign policy, extraordinary provocations toward Russia, the scam of nuclear weapons and US military defense doctrine, and the stunning hubris of American national myth-making propaganda invoking a God-given right to control the world. This is the scope of US problems that threaten world peace.

Former Marine Corps intelligence officer Scott Ritter served as a United Nations weapons inspector in Iraq during the 1990s following the First Gulf War. He controversially challenged the official US and British narrative back then claiming Iraq had weapons of mass destruction.

Those claims were later exposed as lies and fabrications but they were used to launch the Second Gulf War in 2003. A criminal war with massive repercussions that still haunts today.

In this interview, Ritter calls out the absurdity of the United States voicing concerns about the danger of nuclear conflict with Russia while at the same time fueling a war in Ukraine on Russia’s doorstep.

“One has to question who is the power seeking to turn this into a nuclear conflict. Because I don’t think it is Russia.”

He says the US has abandoned diplomacy and respect for other nations. “We view Russia as a defeated enemy from the Cold War… we want to dictate to Russia” and others.

Ritter compares the Cuban Missile Crisis in 1962 and the present tensions and dangers between the United States and Russia. He says it’s like comparing a knife fight with a machine-gun battle in the present. “We had a handful of nukes back then which would have destroyed cities. We now have nation-destroying nuclear arsenals that would end the planet”.

Ritter says the US leadership no longer fears or respects Russia as the John F Kennedy administration and previous administrations did. The stunning hubris in Washington makes the danger of war spinning out of control.

He also calls out the policy of ambiguity about under what circumstances the US would use nuclear weapons as a form of terroristic behavior.

Unlike Russia or China, the US deliberately refuses to adopt a sole-use purpose for defense and deterrence. This preemptive-use option is a form of blackmail on the rest of the world. Ultimately, the logic being used is, “Do what we say or we’ll nuke you”.

Ritter says a major structural problem is the money-making scam of the US nuclear and military-industrial complex where American politicians are bought and paid for to lobby for military profits; and therefore never adopt a more sane, peace-making and democratic policy in the interests of the majority of American citizens.

If the United States were to align its policy with that of Russia and China, that is, to adopt a sole-use purpose of defense then that would transform international relations, lower tensions and make eventual disarmament possible.

Ironically the United States is a hostage of its own nuclear blackmail against the world. It can’t adopt a saner, peaceful policy because of the propaganda narrative of depicting the world as full of enemies and because of the vested interests of the military-industrial complex and its politicians in Washington.

Ritter warns that America has to shed its supremacist thinking in the same way it has struggled for generations to overcome systematic racist attitudes. “Until we stop viewing ourselves as the exceptional people and start viewing ourselves as just another person, there isn’t going to be peace and harmony in the world.”

IRISL sets up offices in India

The Islamic Republic of Iran Shipping Lines (IRISL) has opened representative offices in various regions of India in order to facilitate shipping activities along the International North-South Transit Corridor (INSTC), Mehr News Agency reported.

Transit Trade

As reported, IRISL will ship India’s export products that have been transported from the east via railway to the western ports of the country, to deliver them to Russia and Commonwealth of Independent States (CIS) markets.

Considering that the Indian government and businessmen are very interested in developing business activities with Russia, CIS and Iran through the INSTC, the Islamic Republic of Iran Shipping Lines has launched regular container shipping lines from the western ports of India to the southern ports of Iran.

In the meantime, executive and marketing measures have been also taken to strengthen and develop cooperation with the Indian sides to transport the country's export and import goods to Russia and the CIS markets.

IRISL has taken effective steps in recent months to strengthen its shipping activity along the North-South corridor by managing the Russian port of Solyanka on the shores of the Caspian Sea as well as making huge investments in developing this port.

In early April, IRISL formed an operational working group for the development of transportation along INSTC and the company allocated 300 vessels to the transportation of goods through this corridor.

Currently, most of the commodities that are transported through Iran along the INSTC are shipments from Russia for India.

To be transited through the north-south corridor, cargos enter northern Iranian ports on the Caspian Sea shores and then transferred by road to the southern ports of the country on the Persian Gulf. From there they are loaded onto a ship and sent to their destinations in East Asia.

Trade between Iran and India

The value of Iran’s export to India increased by 40% in the first eight months of 2022 as compared to the same period in 2021, IRNA reported citing the data released by the Indian Ministry of Commerce and Industry.

As reported, Iran exported commodities worth US$407 million to India in the eight-month period of this year as compared to US$290 million in the same period.

Petroleum products and fruits were the major products Iran exported to India. Iran exported US$102 million worth of petroleum products and US$101 million of fruits to India.

During January-August of the present year, India’s export to Iran also increased by 56% to US$1.384 billion, while the figure was US$886 million in the first eight months of 2021.

Rice and tea were India’s major products exported to Iran, these included US$913 million worth of rice and US$63 million worth of tea to the Islamic Republic.

According to the Indian Ministry of Commerce and Industry, the value of trade between Iran and India was reported at US$1.791 billion during January-August 2022, rising 52% from US$1.176 billion.

Based on the mentioned data, India's imports from Iran in August doubled compared to the same month in 2021 reaching US$46 million. India imported US$23 million worth of goods from Iran last August.

Indian exports to Iran in August 2022 also increased by 80% to US$141 million from US$78 million in August 2021.

In late May, Iranian Ambassador to India Ali Chegeni said that Iran and India are trying to diversify the channels of payments to expand bilateral trade.

In an exclusive interview with Financial Express Online, Chegeni said, “We are trying to diversify the channels of payments and accordingly wish to extend and expand an already existing mechanism in order to cover all of the goods and services including all of the non-oil goods and to achieve this”.

“During the past two years, because of Covid restrictions, we pursue the issue via virtual dialogues and currently, our officials are following the matter through the exchange of delegations”, the envoy stated.

“We want to develop our economic and trade relations beyond energy and petrochemical products. Due to the complementarities of Iran and India's economies, an extensive range of non-oil trade exists between the two sides including trade on goods and services, investment, tourism, education, and … which may pave the way for multiplying our economic relations ten times more than current relations in mid and long terms”, Chegeni said.

 

 

 

 

China and US face changing power dynamics

According to the South China Morning Post, political events in China and America have given rise to new power dynamics. While the 20th Chinese Communist Party congress has solidified the policies of President Xi Jinping, the midterm election has further muddied the already chaotic political waters in the United States.

With an already shaky hold on some of the partners that he is courting, Biden faces a weaker position in terms of congressional support, and it remains to be seen whether that will further undermine his alliance building.

The austere choreography of Beijing’s twice-a-decade leadership reshuffle contrasted with the bruising political campaigns of the US midterms, which have yet to reveal how much power Republicans will have starting in January and what that will mean for President Joe Biden’s China policy or Indo-Pacific Strategy.

While the world more or less knows what to expect from Beijing, those with a stake in the success or failure of Biden’s effort to build a strategic environment that makes it tough for China will be watching closely for indications that the new US political landscape will undermine it. 

With that in mind, now might be a good time to take stock of the alliances and partnerships that Biden has built or bolstered during his first two years in office, a network of overlapping groups and policies so sprawling that they sometimes come into conflict with each other.

One of the most recent successes on this front was Canada’s decision to join Biden’s Indo-Pacific Economic Framework (IPEF), an initiative that was initially portrayed by some as a poor substitute for the Comprehensive and Progressive Trans-Pacific Partnership and came under attack for its lack of a market-access component.

After a more tenuous approach to countering Beijing compared with Washington, Ottawa has taken more pointed steps that align with the Biden administration’s efforts to chip away at China’s dominance in the production of key industrial materials needed to manufacture electric vehicles and other products that are essential to meeting the world’s carbon-reduction targets.

Just this month, Canadian government ordered three Chinese companies to divest from a handful of lithium miners based in the country, after introducing tougher rules on foreign investments in the nation’s critical minerals sectors. Days later, Canadian Foreign Minister Melanie Joly accused China of adopting an increasingly disruptive stance on the world stage as she referenced her government’s eagerly awaited Indo-Pacific strategy.

Biden has also drawn closer to the European Union through the US-EU Trade and Technology Council established last year in a bid to reduce its members’ shared reliance on China’s manufacturing juggernaut, while strengthening their respective domestic supply chains involving strategic technologies.

As with NATO and the G7, Russia’s war on Ukraine managed to give that alliance an additional sense of urgency. The group announced during their second formal gathering, just weeks after the Kremlin launched its attack that trade in technologies can be pivotal to the ability of autocratic countries to implement authoritarian policies, perpetrate human rights violations and abuses, which analysts said could be used as a justification for further restrictions on certain technology exports to China.

In addition to the interest that China’s neighbours in Asia have expressed in the IPEF, Biden has also had a degree of success in shoring up military ties with the Philippines, whose relations with Washington on defence have not been as robust as they have been with Japan and South Korea. Citing concerns about China’s military modernization, US Deputy Defence Secretary Kathleen Hicks confirmed the Pentagon’s objectives on this front earlier this year.

During a meeting with his American counterpart Lloyd Austin, Philippine Defence Secretary Delfin Lorenzana said then-president Rodrigo Duterte had decided to renew the 23-year-old Visiting Forces Agreement, which many expected Manila would opt to scrap after Duterte abrogated the accord in 2020.

The Quadrilateral Security Dialogue, also known as the Quad, with India, Japan and Australia – revived and invigorated by Biden – also appears to strengthen Washington’s hand with respect to the country that it has identified as its most consequential geopolitical challenge.

The Quad has also taken on more significance owing to Russia’s aggression against Ukraine and Biden’s frustration over Beijing’s refusal to condemn the war. However, a trip by India’s foreign minister to Moscow just days ago underscored how little control the US leader may have in nurturing new alliances.

Subrahmanyam Jaishankar hailed New Delhi’s strong and steady relationship with Moscow lately and declared India’s intention to continue to buy Russian oil, disregarding US appeals to allies and partners to isolate Russia from the global markets.

Launched in Biden’s first year in office, Washington’s new military alliance with Britain and Australia, or Aukus, also presents uncertainties over his efforts to counter Beijing’s more assertive military posture.

While Aukus will deliver advanced nuclear submarine technology to Canberra, it has also enraged the prime minister of the Solomon Islands, Manasseh Sogavare, helping to push the island nation closer to China after it switched diplomatic recognition from Taipei to Beijing. 

In a United Nations speech that echoed Beijing’s rhetoric, Sogavare said that his country had been maligned over its closer relationship with China to the point of intimidation.

As all of this plays out, Republicans are preparing to take control of the House of Representatives, where California’s Kevin McCarthy will most likely become the chamber’s leader. In an indication of how cooperative McCarthy will be with the president of China, he has already dismissed the Biden administration’s effort to investigate the origins of Covid-19 with a vow to start a new probe.

Masto victory: Democrats to control Senate

Democratic US Senator Catherine Cortez Masto has won re-election in Nevada on Saturday; a victory that guarantees the Senate will be controlled by Democrats in 2023.

Cortez Masto defeated Republican challenger Adam Laxalt, a former state attorney general who was endorsed by former President Donald Trump.

With Masto's victory on the heels of Democratic Senator Mark Kelly winning re-election in Arizona late on Friday, Democrats now control 50 Senate seats.

That is enough to cement Democrats' control of the Senate in 2023-24, as Democratic Vice President Kamala Harris can break ties in the 100-member chamber, securing victories for President Joe Biden.

If Democratic Senator Raphael Warnock were to win the December 06, 2022 Georgia runoff election against Republican challenger Herschel Walker, that would expand Democrats' majority to 51-49. That, in turn, would give Democrats an additional edge in passing a limited number of controversial bills that are allowed to advance with a simple majority of votes, instead of the 60 needed for most legislation.

Currently, Democratic Senators Joe Manchin in West Virginia and Kyrsten Sinema in Arizona are swing votes who have blocked or delayed some of Biden's major initiatives, including expansions of some social programs.

But with 51 Democratic seats in the Congress that convenes next year, Manchin's and Sinema's influence could be slightly diluted.

 

 

 

US Election: Military-Industrial-Congressional Complex Wins Again

With Veterans Day in mind, if one is asked to comment on the 2022 election outcome, the reply is, the winner in 2022 is the same as has always been, the military-industrial-congressional complex. It is a sad result to contemplate with Veterans Day looming.

In this election cycle, people have heard nothing about peace; have heard nothing about strengthening and preserving democracy by downsizing our military and imperial presence around the globe. Not from Democrats and Republicans.

When both political parties pose as pro-military, when both are pro-war, when both are enablers of record-high Pentagon spending, when both act as if a new cold war with China and Russia is inevitable, do election results even matter? No matter which party claims victory, the true victor remains the military-industrial-Congressional complex.

To paraphrase Joe Biden, nothing fundamentally changed in the 2022 elections when it comes to colossal military spending, incessant wars and preparations for the same and non-stop imperialism around the globe. There is no new vision for lower Pentagon spending, for fewer wars and weapons exports, and for a smaller, less domineering, imperial mission.

As General and President Dwight D. Eisenhower warned in 1961, the military-industrial-Congressional complex represents a disastrous rise of misplaced power that is profoundly anti-democratic. Collectively, we’ve failed to heed Ike’s warning. The result has been one unnecessary and disastrous war after another, even as democracy in America withers.

The Vietnam War—disaster. The Iraq War—disaster. The Afghan War—disaster. The War on Terror—disaster. Even the war US ostensibly won, the Cold War against the USSR, is now apparently about to be refought. May be the US needs to refight the Cold War which it won thirty years ago so that it can lose that one too.

With the Democrats doing somewhat better than expected at the polls, war business should continue to grow in Washington, D.C. Most political commentators seem to think this is a good thing, when they think about it at all. Few seem to recall Ike’s warning that a military establishment of vast proportions is antithetical to democracy.

 

Pakistan Auto Industry a victim of limited foreign exchange availability

State Bank of Pakistan (SBP) has set a quota on imports for car assemblers, assigning 50%/60%/70% of the average import during the March-June period for July/August/September, respectively.

The 70% quota has continued for the time being, although OEMs are pushing for the government to increase the quota. Consequently, PSMC has had to pay PKR2.2 billion in port charges as imported kits could not be cleared.

The local auto part manufacturers have recently stated their fears of going bankrupt given the lackluster pricing from OEMs. Unless the margins incorporated in the pricings are unfrozen, production lines for these part manufacturers may come to a halt, adversely affecting the localized supply for Assemblers.

On the flipside, in case the pricings are revised, already depressed margins for OEMs may be further pressured due to increasing Cost of Sales. On a QoQ basis, sales of passenger cars and LCVs have dropped by 53% in 1QFY23 as compared to the previous quarter.

INDU had run its production plant for 9 days in July, with two weeks off in August and September each. The same negative impact of delayed deliveries is experienced by other OEMs, with PSMC shutting down its plant for 25 days between August and October along with closure of bookings.

HCAR showed better inventory management, not having to shut down plants in Q1, although the company has closed down its plant for 12 days in October. In August, auto assemblers have hiked prices by 15% at an average from previous revision. This is on top of the 15% hikes experienced in the last quarter.

The reduction in demand for auto-financing can be expected to impact INDU lesser, as it remained protected compared to HCAR and PSMC, with merely 20% of sales through auto-financing previously, lesser compared to 35-45% of the other two.

As disposable incomes remain stagnant and auto-financing getting out of reach, coupled with exuberant hikes in prices in the past 5 months, analysts expect demand for automobiles to decline substantially in FY23.