Iran: Drones Attack Military Factory

A loud explosion was heard at a military industry factory near Iran's central city of Isfahan. Tehran said it was a drone strike by unidentified attackers.

There was no immediate claim of responsibility for the attack, which came amid tension with the West over Tehran's nuclear work and supply of arms for Russia's war in Ukraine, as well as months of anti-government demonstrations at home.

The extent of the damage could not be independently confirmed. Iran's Defence Ministry said the explosion caused only minor damage and no casualties.

Iranian media video showed a flash of light at the plant, which the official IRNA news agency described as an ammunitions factory. Footage showed emergency vehicles and fire trucks outside the complex.

"Around 2000 GMT on Saturday night, an unsuccessful attack was carried out using micro Aerial Vehicles (MAVs) on one of the ministry's workshop sites," the Defence Ministry said in a statement carried by Iran's state TV.

It said one drone was shot down and the other two were caught in defence traps and blown up. It caused only minor damage to the roof of a workshop building. There were no casualties."

The attack has not affected our installations and mission...and such blind measures will not have an impact on the continuation of the country's progress.

Separately, IRNA reported early on Sunday a massive fire at a motor oil factory in an industrial zone near the northwestern city of Tabriz. It gave no information about the cause of that blaze.

Iran has in the past accused its arch enemy Israel of planning attacks using agents inside Iranian territory. In July 2022, Tehran said it had arrested a sabotage team made up of Kurdish militants working for Israel who planned to blow up a sensitive defence industry centre in Isfahan.

An Israeli military spokesperson declined comment when asked if Israel had a connection to the latest incident. Israel has long said it could attack Iran if diplomacy fails to curb Tehran's nuclear or missile programs, but has a policy of withholding comment on specific incidents.

Several Iranian nuclear sites are located in Isfahan province, including Natanz, centre piece of Iran’s uranium enrichment program, which Iran accuses Israel of sabotaging in 2021. There have been a number of explosions and fires around Iranian military, nuclear and industrial facilities in recent years.

Talks between Tehran and world powers to revive a 2015 nuclear pact have stalled since September 2022. Under the pact, abandoned by Washington under President Donald Trump, Iran agreed to limit nuclear work in return for easing of sanctions.

Iran has acknowledged sending drones to Russia but says they were sent before Moscow's invasion of Ukraine last year. Moscow denies its forces use Iranian drones in Ukraine, although many have been shot down and recovered there.

 

Iran 3rd train of South Pars refinery goes operational

The third train of the South Pars phase 14 refinery has gone operational, according to the operator of the phase 14 development project, Mohammad-Mehdi Tavasoli-Pour.

Tavasoli-Pour told Shana that the fourth and last train of the refinery is also scheduled to be put into operation by the end of the current Iranian calendar year.

The first train of the phase 14 refinery went operational in mid-March 2022 and the second train was inaugurated in late November last year.

Phase 14 development is aimed at producing 56.6 million cubic meters per day of rich gas, 75,000 barrels/day of gas condensate and 400 tons/day of sulfur, and 1 million tons/year of liquefied petroleum gas and one million tons/year of ethane to be fed to petrochemical plants.

South Pars Phase 14 Refinery can be considered the final refinery to be completed in the South Pars complex. Before the construction of this refinery, 12 refineries received gas from the offshore platforms of the field and processed it.

However, after the inauguration of four offshore platforms of phase 14, the need to create more refining capacity in this complex was felt more day by day. Accordingly, the 13th government has put it on the agenda to complete the South Pars Phase 14 refinery by the end of the current Iranian calendar year and make it fully operational.

South Pars gas field, which Iran shares with Qatar in the Persian Gulf water, is divided into 24 standard phases of development in the first stage. Most of the phases are fully operational at the moment.

The huge offshore field covers an area of 9,700 square kilometers, 3,700 square kilometers of which are in Iran’s territorial waters in the Persian Gulf. The remaining 6,000 square kilometers, called North Dome, are situated in Qatar’s territorial waters.

The field is estimated to contain a significant amount of natural gas, accounting for about 8% of the world’s reserves, and approximately 18 billion barrels of condensate.

 

Brazil and Argentina planning common currency for the region

Brazil and Argentina are planning on a common currency for the region in a bid to distance themselves from the US dollar. Brazil and Argentina are the first and second largest economies in Latin America respectively. How the plan will be implemented remains to be seen, but the statement of intent is a very powerful move itself.

Washington has been using its currency as a weapon to advance its own hegemony around the world. As a result, many civilian populations have suffered from unilateral American sanctions imposed on countries that are independent or have taken the course toward independence.

President Lula, who has made Buenos Aires his first foreign trip since taking office, says that early talks are focused on developing a shared unit of value for bilateral trade to reduce reliance on US dollar.

Under the plan, the Brazilian currency (the real) as well as the Argentine currency (the peso), for example, would continue to exist, with the new tender aimed at trade transactions between different Latin American countries.

In a joint letter, the new Brazilian President Luiz Inacio Lula da Silva and Argentine leader Alberto Fernandez said they wanted to advance discussions on a common South American currency to be used for financial and trade flows.

South America’s two biggest economies will try to advance the plan during talks at a summit in Buenos Aires this week and will invite other Latin American nations to participate.

Not only Lula is reversing the policies of his predecessor, Jair Bolsonaro, by distancing Brazil from the United States he is also putting more focus on the region itself.

The idea of making trade transactions in local currencies as opposed to the US dollar is not limited to Brazil and Argentina, or Latin America for that matter.

Over the past decade, more countries have made or started similar initiatives to trade in their own currencies in a bid to ditch the US dollar.

Where the US cannot create instability through invasions, it wages wars through proxies or using other hybrid warfare mechanisms. It has also resorted to sanctions to fuel unrest in countries that don’t see eye to eye with Washington. The US goal is to destroy the economy of its adversaries with the hope of turning local populations against their governments.

Last year, the governor of the central Bank of China said Beijing will work with Asian countries to beef up the use of local currencies in trade and investment, as part of plans to strengthen regional economic resilience.

For the first time, Saudi Arabia and China have also discussed pricing oil deals in the Chinese yuan instead of US dollar.

Iran and Russia have already started trading in their national currencies after Tehran first decided to reduce use of dollar in its foreign trade.

India, among other countries, has also decided to allow rupee payments for imports and exports, which could also boost trade with other countries under American unilateral sanctions.

India's central bank has also unveiled a rupee settlement system for international trade; a move which many have said will reduce New Delhi’s demand for US dollars.

Tehran has been subjected to unprecedented unilateral sanctions by Washington. The measures, which include sanctions on Iran’s banking sector, have prevented the country from importing vital humanitarian supplies for cancer patients and children with rare diseases.

Likewise, the West has imposed unprecedented sanctions on Russia over the Ukraine war. Analysts have said that the US sanctions against Moscow could speed up the move by countries to reduce their reliance on the American currency.

The United States and its allies froze about US$300 billion belonging to Russia’s central bank’s foreign currency reserves and severely limited Russia’s access to the SWIFT payment system. Similar measures have been taken against other countries including Afghanistan, Iran, and Venezuela.

In a report, Bank of America analysts led by Michael Hartnett pointed out that US dollar debasement is the ultimate outcome as dollar weaponized in new era of sanctions.

As a result of Washington’s sanctions, countries have been seeking alternative monetary systems which have dealt a blow to the dollar itself. The role of the American currency has been declining over the past two decades, with reports indicating its share of reserve currencies have gone down to 60% from 70% over that period.

In the summer of 2021, the International Monetary Fund issued a report warning that the share of US dollar reserves held by central banks fell to 59% - its lowest level in 25 years - during the fourth quarter of 2020, according to the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) survey.

Some analysts say this partly reflects the declining role of the US dollar in the global economy, in the face of competition from other currencies. 

Despite multiple warnings, the US has been pursuing illegal economic policies by weaponizing its currency.

A Washington-based think tank says the US has been extremely happy with its economic measures, and central banks may decide to diversify their foreign reserves instead of relying on the US dollar.

The co-director of the Institute for the Analysis of Global Security, Gal Luft has said that central banks are beginning to ask questions, and that they are wondering if their dependence on the dollar and putting all their eggs in one basket is an intelligent idea.

The removal of the US dollar as a dominant foreign currency will save more civilian lives around the world and help bring about global peace and security.

 

What if United States fails in honoring its payment obligations?

In China, Beijing maintains capital controls. The Chinese Communist Party (CCP) has been tightening its influence over the economy for years, raising questions about just how secure it is to use the yuan. This is good news for the US, but it may soon be old news. Failure by the US to honor its payment obligations, or even the possibility, would put such concerns in a very different perspective.

An outright default by the Treasury Department on US government debt would be enormously disruptive to the global financial system. Michael Feroli, Chief US Economist at JPMorgan Chase says, “It is quite plausible that it would precipitate a severe financial crisis.”

If Congress doesn’t raise the debt limit, the Treasury can employ a variety of highly questionable maneuvers to keep honoring US obligations. But doing that might shake investor confidence in the rule of law in the US, Feroli wrote in a note to clients Friday. By autumn, Wall Street analysts predict, the Treasury will be forced to decide whether to use those tricks or default on payments.

Biden and Xi Jinping have been sparring over whose political-economic system is a better model for human development. In his first address to a joint session of Congress as president two years ago, Biden said, “Xi and other autocrats think that democracy can’t compete in the 21st century with autocracies because it takes too long to get consensus”.

Washington has gone through debt-limit battles repeatedly over the years, and yet the role of the US$ and broader credibility of the US in the global financial system has remained strong. What’s different this time is the leverage far-right Republicans in the House have thanks to concessions by Kevin McCarthy in his desperate fight to become speaker. 

“Even the best case will probably see the sort of brinksmanship that occurred in the 2011 debt ceiling crisis,” Feroli said. And that episode resulted in a stock-market selloff that went global.

As compared to 2011, China today offers a much more attractive alternative to US financial markets. For one thing, it’s now open to foreign bond and equity inflows in a way that it wasn’t back then. After China finishes its abrupt, wrenching and catastrophically deadly reopening, the economy ought to be humming. It is near US$4 trillion central government bond market has plenty of scope to boost overseas ownership.

The potential contrast could have long-term effects, at a time when even some Western money managers question the relative merits of the two systems.

“Given the bickering in the US, it is no longer clear that the US form of democracy clearly works better than the autocratic CCP approach,” said Stephen Jen, who runs Eurizon SLJ Capital, a hedge fund and advisory firm in London.

US political partisanship is a major factor from which the Chinese Communists have derived considerable confidence in themselves.

Ukraine: Fighter jets to follow tanks

Ukraine’s breakthrough in securing heavy tanks from the United States and Germany has paved way for talks about sending the US F-16 fighter jets to Ukraine to defend its airspace.

The government of Ukraine quickly renewed its calls for world-class fighter jets after it secured the victory on tanks, arguing it needed the help to defend itself against Russia.

Shortly after the US announcement on tanks, Yuriy Sak, an adviser to Ukraine’s defense secretary, told The Hill that Kyiv would do everything possible to secure the fighter jets.

And Dymytro Kuleba, Ukraine’s minister of foreign affairs, tweeted Wednesday morning that Ukraine has new tasks ahead, naming western fighter jets as one of them.

ArmyINFORM, an information agency for Ukraine’s ministry of defense, also published an article Wednesday suggesting that Ukrainian pilots are already training in the US, but there has been no public announcement on such a program.

Asked to comment on the possibility of fighter jets going to Ukraine, National Security Council spokesperson John Kirby  on Wednesday said he had no news to share.

“Can’t blame the Ukrainians for wanting more and more systems,” Kirby said. “It’s not the first time they’ve talked about fighter jets, but I don’t have any announcements to make on that front.”

Kyiv operates a fleet of aging Soviet aircraft and has requested western, modern fighter jets since the onset of the war — but so far it has remained out of the nation’s grasp.

Supplying jets would be another escalation in terms of US support for Ukraine, and the Biden administration has been careful in offering support that might intensify the conflict with Russia — particularly with the fear of nuclear weapons hovering over the war.

Yet the supplying of jets seems much less unlikely after the Biden administration made a major u-turn by agreeing to send 31 Abrams tanks to Ukraine. The administration did so to convince Germany to send Leopard tanks to Ukraine. Germany also gave its blessing for other allies to send the German-made Leopards to Kyiv.

Germany has expressed opposition to sending fighter jets to Ukraine.

“There will be no fighter jet deliveries to Ukraine. This was made clear very early, including from the US President,” Germany Chancelor Olaf Scholz said in remarks to his country’s parliament after the tanks decision. “This position has not changed at all and will not change.”

Despite such remarks, a number of experts think the supplying of jets to Ukraine by the U.S. is now likely to happen.

Ukraine has slowly secured more and more advanced weaponry from the US and European allies, and they say American-made F-16s will probably follow that same course.

Tomasz Blusiewicz, a research fellow at the Hoover Institution, said most of the concerns over sending the jets are probably over logistical questions, such as training and getting the aircraft and related systems delivered.

“I think it’s now really more down to the nitty-gritty, logistical servicing and delivery and training,” he said.

The fighter jets would make a huge difference in the skies over Ukraine in combat against Russian fighter jets, which are much more outdated than western aircraft.

Both Ukraine and Russia are currently using MiG-29 fighter jets and various different models of the Sukhois aircraft, which are extremely inferior to advanced western technology.

Those advocating for sending western aircraft to Ukraine also say the US public would accept it as a means to defend Ukrainian skies and protect civilians from Russia’s relentless bombardments.

Blusiewicz explained the fighter jets, which he described as “Guardians,” would be “even more of a game-changer” for Ukraine than the battle tanks.

“In terms of air superiority, western tech … is light years away,” he said. “And for Ukrainian civilians, it now becomes more realistic to make sure these drones and rockets don’t fall on them.”

The US-made F-15s and F-16s are the cream of the crop, but other advanced fighters such as the Eurofighter Typhoon, Swedish Gripens and French-made Dassault Rafale would all be decisive on the battlefield.

US lawmakers, most of whom have prodded the Biden administration to support more and more advanced weaponry for Kyiv, also appear to show early signs of supporting this next push for the fighter jets.

A statement released by Democratic, Richard Blumenthal, Sheldon Whitehouse, as well as Republican Lindsey Graham on Wednesday applauded the Biden administration for sending tanks to Ukraine but quickly pivoted to a push for fighter jets and long-range artillery systems.

“The combination of tanks, fighter aircraft, and ATACMS will help Ukraine confront the upcoming Russian offensive and go on offense in both the east and the south in an attempt to further erode Russia’s capability to continue fighting in Ukraine,” the statement read. “Let’s give the Ukrainians everything they need to win — now.”

Most of the concerns around supplying advanced weaponry before — from the HIMARS rocket launchers to the western battle tanks — revolved around escalating tensions with Russia. 

But an increasing number of voices say that after the tanks, the F-16s are not likely to be seen as more of an escalation. 

Asli Aydintasbas, a visiting fellow at the Brookings Institute, told The Hill that Russia “defines everything as an escalation.” 

“In reality I think there are some guardrails that have been established between the United States and Russia and there is a tacit understanding not to cross the lines,” she said.

At the same time, Adyintasbas said the US still probably won’t supply the F-16s anytime soon.

“We know the reason why,” she added, “Escalation management.”

 

Intel historic collapse erases US$8 billion from market value

Intel Corp saw about US$8 billion wiped off its market value on Friday after the US chipmaker stumped Wall Street with dismal earnings projections, fanning fears around a slump in the personal-computer market.

The company predicted a surprise loss for the first quarter and its revenue forecast was US$3 billion below estimates as it also struggled with slowing growth in the data center business.

Intel shares closed 6.4% lower, while rival Advanced Micro Devices and Nvidia ended the session up 0.3% and 2.8%, respectively. Intel supplier KLA Corp settled 6.9% lower after its dismal forecast.

"No words can portray or explain the historic collapse of Intel," said Rosenblatt Securities' Hans Mosesmann, who was among the 21 analysts to cut their price targets on the stock.

The poor outlook underscored the challenges facing Chief Executive Pat Gelsinger as he tries to reestablish Intel's dominance of the sector by expanding contract manufacturing and building new factories in the United States and Europe.

The company has been steadily losing market share to rivals like AMD, which has used contract chipmakers such as Taiwan-based TSMC to make chips that outpace Intel's technology.

"AMD's Genoa and Bergamo (data center) chips have a strong price-performance advantage compared to Intel's Sapphire Rapids processors, which should drive further AMD share gains," said Matt Wegner, analyst at YipitData.

Analysts said that puts Intel at a disadvantage even when the data center market bottoms out, expected in the second half of 2022, as the company would have lost even more share by then.

"It is now clear why Intel needs to cut so much cost as the company's original plans prove to be fantasy," brokerage Bernstein said.

"The magnitude of the deterioration is stunning, and brings potential concern to the company's cash position over time."

Intel, which plans to cut US$3 billion in costs this year, generated US$7.7 billion in cash from operations in the fourth quarter and paid dividends of US$1.5 billion.

With capital expenditure estimated to be around US$20 billion in 2023, analysts said the company should consider cutting its dividend.

Pakistan: IMF hopes keep stock market alive

With a controlled hike in the policy rate, along with some positive news flow regarding the start of negotiations between the GoP and the IMF, the market witnessed a rally of 2,400 points from Tuesday to Thursday.

This culminated to the KSE-100 index gaining 5.3%WoW to close at 40,451 points for the week ended on January 27, 2023. As a results average daily trading volume spiked significantly by 76.2%WoW, to 252 million shares.

During the week, the GoP decided to let go of the artificially controlled interbank exchange rate, with PKR subsequently plunging downwards from a US$/PKR parity of 230 to 263, losing 12.5%WoW.

Major news flows during the week were: 1) foreign exchange reserves held by State Bank of Pakistan (SBP) dropped to US$3.7 billion due to external debt repayments, 2) general elections likely to be held in October this year, 3) country to repay US$3 billion debt over the next five months, 4) banks told to give one-time facilitation to importers for release on consignments, 5) currency dealers removed cap on US$-PKR exchange rate, 5) PKR300 billion taxation measures through mini-budget on the way, and lastly 6) IMF team to arrive Pakistan on January 31, 2023.

The top performing sectors were: Miscellaneous, Refinery, E&Ps, Vanaspati & Allied, and Cement, while the least favorite sectors were: REITs, Pharmaceuticals, Textile Weaving, Woolen, and Automobile parts & accessories.

The top performing scrips were: KTML, HBL, SML, KOHC, and CHCC, while laggards were: HINOON, THALL, INDU, ABOT, and SYS.

Flow-wise, Insurance Companies topped the net sellers, offloading US$8.8 million followed by Companies (US$3.9 million), Mutual funds (US$3.7 million) and NBFC (US$0.0 million).

On the buying side Banks emerged top buyers with US$5.0 million, followed by Individuals (US$4.1 million), Brokers (US$3.8 million), Foreigners (US$2.8 million) and Other Organizations (US$0.7 million).

Incoming news regarding developments on the IMF front is bound to invoke a short-term rally, although the longer the agreement takes the more uncertainty will creep back in, keeping investors away.

The PKR eroded value significantly after it was left to market forces, depreciating to PKR263/US$, while country’s foreign exchange reserves dropped to alarming levels (an import cover of merely 3 weeks). Inflation is expected to remain persistent.