Can Yuan Replace US Dollar?

Chinese entrepreneur Wang Min is delighted about Russia's embrace of the yuan. His LED lights company can price contracts to Russian customers in yuan rather than dollars or euros, and they can pay him in yuan. It's win-win, he says.

Wang's plans have been transformed by the conflict in Ukraine and the subsequent Western sanctions on Moscow that have shut Russia's banks and many of its companies out of the dollar and euro payment systems.

His contract manufacturing business with Russia has been small in the past, but now he's preparing to invest in warehousing there.

"We hope that next year sales in Russia can account for 10-15% of our total sales," said the businessman from China's southern coastal province of Guangdong, whose annual revenue of about US$20 million mainly comes from Africa and South America.

Wang is seeking to capitalize on a rapid "yuanization" of Russia's economy this year as the isolated country seeks financial security from Asian powerhouse China. He sees a win-win situation in Chinese exporters reducing their currency risks and payment becoming more convenient for Russian buyers.

While the yuan, or renminbi, has been making gradual inroads into Russia for years, the crawl has turned into a sprint in the past nine months as the currency has swept into the country's markets and trade flows, according to a Reuters review of data and interviews with 10 business and finance players.

Russia's financial shift eastwards could boost cross-border commerce, present a growing economic counterweight to the dollar and limit Western efforts to pressure Moscow by economic means.

Total transactions in the yuan-rouble pair on the Moscow Exchange ballooned to an average of almost 9 billion yuan (US$1.25 billion) a day last month, exchange data analyzed by Reuters showed. Previously, they rarely exceeded 1 billion yuan in an entire week.

"What happened was that it became suddenly very risky and expensive to keep traditional currencies - dollar, euro, British pounds," said Andrei Akopian, Managing Director of Moscow-based investment firm Caderus Capital, citing the potential danger of a bank that keeps foreign currency deposits being sanctioned.

"Everybody was motivated and even pushed towards the rouble or other currencies including, and first of all, the renminbi."

Indeed, yuan-rouble trading totalled 185 billion yuan in October, more than 80 times the level seen in February when Russia launched what it refers to as a special military operation in Ukraine near the end of the month, according to exchange data.

The surge of interest has seen the yuan's share of the currency market jump to 40-45% from less than 1% at the start of the year, said Dmitry Piskulov, international projects head at the Moscow Exchange's foreign-exchange market department.

By comparison, the dollar/rouble pair, which commanded more than 80% of trading volumes on the Russian market in January, has seen its share drop to about 40% as of October, according to exchange data and the central bank.

Until April, Russia didn't even make the top 15 list of countries using the yuan outside mainland China, in terms of the value of inbound and outbound flows, according to data from global financial networking system SWIFT.

It has since jumped to No. 4, lagging only Hong Kong, the city's former colonial ruler Britain and Singapore.

To put this in a global context, though, the dollar and euro are still by far the dominant currencies, representing more than 42% and 35% of flows respectively as of September this year. The yuan has risen to almost 2.5% from below 2% two years earlier.

Wang's business optimism is echoed by Shen Muhui, who heads a trade group for small exporters to Russia in neighbouring Fujian province. He said more and more Russian buyers were opening yuan accounts and settling transactions directly in the Chinese currency, which he said was a big advantage.

"The Russia-Ukraine conflict has brought opportunities for Chinese businessman," said Shen, adding that his association had received many inquiries from Chinese companies interested in doing business in Russia.

It's not only Chinese companies, or small companies, joining the yuan train. Seven Russian corporate giants, including Rusal, Rosneft and Polyus, have raised a total of 42 billion yuan in bonds on the Russian market, according to Reuters calculations, and the list could grow with No.1 lender Sberbank and oil firm Gazpromneft saying they're also considering renminbi debt.

Aluminium producer Rusal, which buys raw materials from China and then sells a large chunk of its finished goods there, told Reuters it had stepped up the share of yuan used in those purchases and sales this year, and that the share would continue to rise, though it declined to provide a detailed breakdown.

While President Vladimir Putin has long sought to reduce Russia's reliance on the dollar, geopolitics has turbo-charged this trend in 2022.

China, the world's No. 2 economy, is the biggest global power not to join economic sanctions against Russia. Indeed, Putin and Chinese President Xi Jinping sealed a no limits partnership in February, weeks before Moscow launched what it describes as a "special military operation" in Ukraine.

The yuan comprised about 19% of Russia's trade settlements with China in 2021 versus the dollar's 49% share, Andrey Melnikov, deputy director at international cooperation department at the Russian central bank, said in September.

While 2022 figures haven't been published yet, the Chinese currency is gaining ground, according to Melnikov, who told a conference that demand for yuan liquidity had risen sharply due to reduced access to traditional payment methods and the freezing of its overseas gold and foreign exchange reserves.

The central bank declined to comment for this article.

Bank governor Elvira Nabiullina is tracking the growth, telling lawmakers this month that the influx of yuan illustrated a transformation of the currency composition of our economy.

Regulators are also aware of potential perils, such as a disparity between a growing number of yuan-held current accounts and deposits of the currency, with yuan-denominated lending only starting to develop.

The central bank has said lenders should seek to reduce the growing risks of yuanization of their balance sheets - or gaps between yuan assets and liabilities - by increasing payments in yuan for imports, investing in yuan-denominated securities or using yuan in trade transactions with other countries.

Regulators do not plan to limit yuan usage now and may encourage banks to use more by relaxing provisioning requirements for the currency while tightening them for dollars and euros, Elizaveta Danilova, director at the central bank's financial stability department, told a conference this month.

Tehreek-e-Taliban ends ceasefire with Government of Pakistan

Reportedly, the armed group Tehreek-e-Taliban Pakistan (TTP) has announced the end of an indefinite ceasefire agreed with the Government of Pakistan in June 2022 and issued orders to its fighters to carry out attacks across the country.

“As military operations are ongoing against mujahideen in different areas, … so it is imperative for you to carry out attacks wherever you can in the entire country,” the group said in a statement on Monday.

The group said it is facing a rising number of attacks by the Pakistani military, particularly in the Lakki Marwat district of Pakistan’s northwestern province of Khyber Pakhtunkhwa.

“We submit to the people of Pakistan that we have repeatedly warned you and continued to be patient so that the negotiation process is not sabotaged at least by us, but the army and intelligence agencies do not stop and continue the attacks, so now our retaliatory attacks will also start across the country,” the statement said.

The TTP has been waging a rebellion against the state of Pakistan for more than a decade. The group demands the imposition of hardline Islamic law, release of key members arrested by the government and a reversal of the merger of Pakistan’s tribal areas with Khyber Pakhtunkhwa province.

On November 16, the TTP claimed responsibility for an attack on a police patrol in Lakki Marwat, about 200km (125 miles) southwest of the provincial capital, Peshawar. Six policemen were killed.

The TTP made its declaration hours after the government said the state minister for foreign affairs, Hina Rabbani Khar, will visit Afghanistan on Tuesday.

According to the foreign ministry, Khar will hold talks on regional security with the Taliban government in Kabul.

Security specialist Asfandyar Mir of the United States Institute of Peace told Al Jazeera that while the TTP has been escalating its violence recently, it has also exercised restraint by not carrying out attacks outside tribal areas.

“I have inferred the targeting as a function of Afghan Taliban pressure on the TTP to calibrate their escalation,” he saId. “Now if the TTP follows through in its declaration of countrywide attacks, the key question is how will the Taliban respond.”

The government and the TTP have held multiple rounds of talks facilitated by the Afghan Taliban, the last of which took place in June. The talks began weeks after the Taliban took control of Kabul last year.

Despite the ceasefire, the TTP continued its attacks this year, saying they were defensive in nature and only in retaliation for operations carried out by Pakistan’s military.

According to data compiled by the Pakistan Institute for Peace Studies, an Islamabad-based research organization, at least 65 such attacks took place in Khyber Pakhtunkhwa through the end of October. These killed at least 98 people and wounded 75, it said.

 

Iran publishes list of sensitive sites in Israel

Under the guise of reporting on reports by Beirut-based Al Mayadeen, a pan-Arabist satellite news channel, media outlets close to the Islamic Revolutionary Guard Corps (IRGC) have published a list of “sensitive” sites that could be targeted in a future war. The reports listed a number of buildings and sites in Israel in what was clearly intended as a threat, reported The Jerusalem Post.

Iran’s Tasnim News Agency on Monday reported, “In this regard, Al Mayadeen network has published a report on the analysis of Israel’s target bank and the sensitive positions of this regime that can be targeted in any war. At the beginning of this report, the general situation of the Zionist regime at the military level and its equipment has been examined.”

The article included a list of sites in Israel, such as the Knesset, the Prime Minister’s Office and the Defense Ministry. It included what Tasnim characterized as nuclear sites and facilities. In the list of warehouses and facilities, the report included a Rafael Advanced Defense Systems site in Haifa, the Weizmann Institute of Science in Rehovot and the Technion-Israel Institute of Technology in Haifa.

The report also examined airports and military and intelligence bases. It mentioned civilian airports, such as Ben-Gurion Airport and Ramon Airport near Eilat. A list of military bases followed.

This appears to be one of the few times that Iranian media close to the regime have so openly published what it claims is a list of Israeli sites that could be targeted in a future war. This appears to point to Iran and its proxies’ estimates of their targeting ability.

In the last conflict with Hamas, the terrorist group claimed to have targeted Ramon Airport. Operations at the airport were briefly suspended during that conflict. Hamas also appeared to target other sites that have infrastructure, using large-scale salvos of rockets to try to overwhelm the Iron Dome air-defense system.

Hezbollah has also made threats regarding targeting Israel’s infrastructure, including threatening gas rigs off the coast and industrial sites near Haifa.

The overall context of Iran can be seen as merely bragging and threatening. But it also illustrates the shift in thinking in Tehran and among Iran’s proxy groups. The proxies include Hezbollah, Islamic Jihad, the Houthis in Yemen and members of Hashd al-Shaabi in Iraq.

Recent reports that an Iranian IRGC member linked to Iran’s drone program was killed in Syria, and that Iran wants to move air-defense systems to Syria, show Iran’s possible concerns regarding these latest tensions and threats.

Publishing the kind of list that Iran’s pro-regime media published on Monday, listing sites that Iran thinks are sensitive, can be seen as a message to Israel.

It can also be seen as illustrating that Tehran believes the conflict with Israel is entering a strategic stage in which Iran would like to supply proxy groups in Lebanon and Syria with more advanced weapons, including drones and precision-guided munitions that can target the sites Al Mayadeen listed.

Iran has increased its drone threats against Israel in recent years, and Tehran works closely with Hamas and Hezbollah to try to learn from past conflicts and tensions with Israel.

 

 

 

Israelis being shunned at Qatar World Cup

According to a report by The Jerusalem Post, multiple Israelis have claimed to have been met by an atmosphere of hostility and hatred at the World Cup in Qatar, with fans refusing to speak to Israeli journalists, waving Palestinian flags in the background of their videos and yelling at them.

Moav Vardy, KAN’s foreign affairs reporter was yelled at by a Saudi fan who told him, “You are not welcome here. This is Qatar. This is our country. There is only Palestine; no Israel.”

Other videos from Qatar show people immediately walking away when they find out the person interviewing them is Israeli.

In one particular video, N12’s Ohad Hemo begins to interview a group of Lebanese men who then walk away when Hemo tells them he’s Israeli. One of them then turns back and asks Hemo what he’s doing there and then tells him that Israel doesn’t exist.

In other videos, people stand behind various Israeli reporters and raise Palestinian flags.

Israeli soccer legend and KAN World Cup panel member Eli Ohana also faced anti-Israel sentiments when he was on a golf cart being driven by a Qatari policeman. When Ohana said he is Israeli, the officer asked him if he was joking, and Ohana then said he was really Portuguese in order to avoid trouble.

The officer told him that if he had been Israeli, he would have turned the car around and refused to drive him.

Raz Shechnick, Yediot Ahronoth’s reporter for the World Cup, wrote on Twitter about his experiences in Qatar, describing an atmosphere of rejection and hostility from both locals and foreigners attending the games.

“We didn’t want to write these words, we are not the story here. But after 10 days in Doha, we cannot hide what we are going through. We are feeling hated, surrounded by hostility, not welcomed,” the journalist wrote.

He also described an incident in which he and his colleague had lied about their country of origin, saying they were Ecuadorian in order to prevent them from being harassed by fans.

Israeli journalist Dor Hoffman reported that a Qatari taxi driver kicked him out of his cab when he discovered he was Israeli, refusing to take his money.

He later continued to a restaurant on a beach, where he was escorted out of the restaurant by security, with the owner demanding that he delete every photo taken in his restaurant. Hoffman said the owner took his phone and that he felt threatened.

On Saturday, Tunisian fans waved a banner saying “Free Palestine,” despite Qatar and FIFA’s policy of not allowing political protests at matches, a policy that led to the confiscation of rainbow-colored items in support of the LGBTQ community and Iranian anti-regime signs.

Jerusalem resident Michael Janekowitz, a former spokesman for the Jewish Agency who is attending the World Cup, refuted the claims that Israelis were being targeted, and said his experience has been without incident.

“Qatar is very welcoming to the Israeli visitors,” he said.

These Israeli journalists are going with magnifying glasses to find haters of Israel. Most of these Israel-bashers have come to the World Cup from outside of Qatar. They are being provoked by headline-seeking Israeli journalists.

“Qatar has a population of about 3.3 million of whom only 300,000 are Qataris. The other 3 million are mostly workers from mainly India, Bangladesh, Kenya, Uganda, Philippines and Sudan,” he added, saying that was where the antagonism against Israelis was emanating from.

 

Pakistan: Banking sector posts robust performance during H1CY22

Banking sector has shown robust performance and steady resilience during H1CY22, says Mid-Year Performance Review of the sector by State Bank of Pakistan (SBP).

The review covers the performance and soundness of the banking sector for the period January-June 2022 (H1CY22). It also covers the performance of financial markets and Microfinance banks (MFBs) as well as the results of Systemic Risk Survey (SRS), which represents independent respondents’ views about key risks to financial stability.

The Review reveals that sustained economic activity during H1CY22 supported the expansion of banking sector balance sheet by 16% during H1CY22. Substantial increase in the asset base was mainly driven by the flows of private sector advances and increase in investments, particularly the Government securities.

Besides sizable mobilization of deposits, banks’ reliance on borrowings increased significantly to finance the expanded balance sheet.

The pace of private sector advances growth during H1CY22 was the highest in comparable periods of previous three years. Improved manufacturing activity, as reflected in double digit growth in Large Scale Manufacturing (LSM) index during H1CY22, higher input prices and SBP’s refinance schemes augmented the overall flow of advances. Individuals and sugar sector availed major chunk of financing followed by textile sector.

Besides noteworthy growth, banks’ asset quality indicators further improved. Gross Non-Performing Loans (NPLs) ratio moved down to 7.5% by end June 2022, from 7.9% at end December 2021. However, recent catastrophic flooding in many parts of the country may impact the repayment capacity of agri-borrowers of banks’ and Microfinance borrowers.

The Review highlights that baseline profitability indicators moderated — despite strong growth in incomes — mainly due to the impact of sharp increase in tax charges.

Capital Adequacy Ratio (CAR) of the banking sector slightly edged down to 16.1% due to faster growth in asset base and advances. Nonetheless, the ratio remains well above the minimum regulatory requirement of 11.5% and banking sector in general has adequate capital buffers and resilience to withstand the impact of severe stress of macroeconomic conditions and shocks to key risk factors.

The Review also covered the results of 10th wave of SRS (July-2022) based on perceptions of independent market participants. The respondents perceive that the key risks for the financial system are mostly exogenous in nature i.e. global and macroeconomic risks. Majority of the respondents expressed confidence in the stability of the financial system.

Recent catastrophic flooding in many parts of the country may impact the repayment capacity of agri borrowers of banks and microfinance borrowers, and that of other borrowers as a second round effect. As such, banks as well as MFBs need to make prudent assessment of the possible impact on lending portfolios and take necessary measures for maintaining the asset quality and resilience of financial strength of their institutions, the Review adds.

Iran's Joining Shanghai Cooperation Organization

Iranian Foreign Minister Hossein Amirabdollahian praised Iran’s decision to move forward with an accession bill to the Shanghai Cooperation Organization (SCO), noting that a recent vote on the bill for the accession of the Islamic Republic of Iran to the SCO shows the determination and seriousness of our country to develop regional, international, and economic cooperation and strengthen its view of Asia.

The SCO includes countries in Central Asia, including Kazakhstan, Tajikistan, Russia, Pakistan, Uzbekistan and China. These are important countries because Russia and China tend to position themselves at odds with the US. This is increasingly true with Russia after the Ukraine invasion. Russia and the West appear to have completely destroyed their relations, and Iran would like to swoop in and benefit.

Iran calls this multilateralism. Recently in an interview with the Chinese People’s Daily Online published on Saturday, Mohammad Keshavarzzadeh stated that the SCO seeks to assist in providing better answers to the problems faced by member states as well as the region.

He argued that there was great “significance of Iran joining the bloc by pointing out that the organization includes members from Central and Eastern Asia in addition to other regions, and this can give Iran a platform to make overtures with all of these countries.”

The reason Iran likes the SCO is that it views it as an organization that has no Western members. “On a question that some Western nations equate the SCO with NATO, Keshavarzzadeh said such a comparison is wrong because the SCO is an inclusive bloc and not a military alliance,” a report in Tehran Times noted. These are pro-regime publications and reflect Iran’s stance.

An article at the Carnegie Endowment for International peace notes that Iran joining the SCO will bring some benefits to Tehran, but there are also hurdles.

“Iranian officials still maintain that officially joining the SCO – which is slated to occur by April 2023 – will bring benefits in the economic, commercial, and strategic sectors. Furthermore, from the perspective of the SCO itself, Iran’s political cooperation may be useful for the organization’s relations with the Islamic world,” the report noted.

It also notes that trade between Iran and SCO countries surpassed US$651 billion last year. But Iran will need to modernize its infrastructure to take advantage of any new opportunities. Also, the new China-Iran partnership will take a while to be realized in terms of benefits for Tehran.

 

US Soccer scrubs emblem from Iran flag at World Cup

The United States Soccer Federation briefly displayed Iran’s national flag on social media without the emblem of the Islamic Republic, saying the move supports protesters in Iran ahead of the two nations’ World Cup match scheduled for Tuesday.

Iran’s government reacted by accusing America of removing the name of God from their national flag.

The decision by the US Soccer Federation adds yet another political firestorm to the Middle East’s first World Cup, one which organizers had hoped would be spared of off-the-field controversies.

It also comes as the US faces Iran in a decisive World Cup match, which was already freighted by the decades of enmity between the two countries and the nationwide protests now challenging Tehran’s theocratic government.

The US Soccer Federation said in a statement Sunday morning that it decided to forego the official flag on social media accounts to show support for the women in Iran fighting for basic human rights.

The Twitter account of the U.S. men’s team displayed a banner with the squad’s matches in the group stage, with the Iranian flag only bearing its green, white and red colors. The same could be seen in a post on its Facebook and Instagram accounts laying out the point totals so far in its group.

By Sunday afternoon, the normal flag with the emblem had been restored in the Twitter banner as attention to it grew.

“We wanted to show our support for the women in Iran with our graphic for 24 hours,” the federation said.

The U.S. Soccer Federation displayed the official Iranian flag in a graphic showing Group B standing on its website.

The brief absence of the emblem comes as monthslong demonstrations have challenged Iran’s government since the Sept. 16 death of 22-year-old Mahsa Amini, who had been detained by the country’s morality police.

The protests have seen at least 450 people killed since they started, as well as over 18,000 arrested, according to Human Rights Activists in Iran, an advocacy group following the demonstrations.

Iran has not released casualty or arrest figures for months and alleges without providing evidence that the protests have been fomented by its enemies abroad, including the US

Tehran also restricts press access and has detained over 63 reporters and photographers since the demonstrations began, according to the Committee to Protect Journalists, making covering the unrest that much more difficult.

Iran’s mission to the United Nations and its soccer federation did not respond to a request for comment from The Associated Press. As comments raged online, Iranian state television described the US federation as “removing the symbol of Allah” from the Iranian flag.

Iran’s semiofficial ISNA news agency quoted Safiollah Fagahanpour, an adviser to the Iranian Football Federation, saying that the measures taken regarding the Islamic Republic of Iran flag are against the law of FIFA competitions.

“They must be held responsible,” Fagahanpour said. “Obviously they want to affect Iran’s performance against the US by doing this.”

The Islamic Republic emblem, designed in 1980, is four curves with a sword between them. It represents the Islamic saying: “There is no god but God.” It also resembles a tulip or lotus.

At the top and the bottom of the flag, there are 22 inscriptions of “God is Great” as well, which honors the date on the Persian calendar when the Islamic Revolution took hold.

The flag has become a point of contention at the World Cup. Apparent pro-government supporters have waved it, shouting at those demonstrating over Amini’s death. Others at matches have waved Iran’s lion and sun flag, an emblem of its former ruler, the late Shah Mohammad Reza Pahlavi.

More security forces could be seen at Iran’s last match against Wales. In the capital Tehran, anti-riot police — the same ones cracking down on protests — waved the Iranian flag after the Wales win, angering demonstrators.