Turkish plane comes under attack in Sudan

A Turkish evacuation plane coming into land at an airbase outside Sudan's capital, Khartoum, has been fired at, Turkey's defense ministry confirms.

No-one was injured and it landed safely at Wadi Seidna, where it was being checked.

Sudan's army blamed paramilitary fighters for firing at the aircraft and damaging its fuel system.

The Rapid Support Forces (RSF) denied the allegation, saying it was committed to the extended humanitarian truce.

The rival military factions agreed to an extension of their ceasefire at midnight local time (22:00 GMT on Thursday) for a further three days.

It has had only a limited effect, with army jets continuing to pound RSF positions in Khartoum during the night.

The previous truce allowed thousands of people to attempt to flee to safety, while dozens of countries organized evacuations.

Turkey's Defence Minister said efforts would continue to rescue Turkish citizen from Wadi Seidna and the city of Port Sudan on the Red Sea coast.

Since the clashes began 14 days ago, hundreds of people have been killed and tens of thousands forced from their homes.

The fighting is devastating the capital and its surrounds, which until recently had a population of around 10 million - leaving people without supplies of food, water and fuel. 

Pakistan Stock Exchange benchmark index posts 1.4%WoW gain

The week ended on April 28, 2023 was marred with political uncertainty. The United States asked Pakistan to move ahead on stalled reforms by the IMF, while promising technical help in worst economic times. The IMF awaits clarity on the cross fuel subsidy scheme. In addition to this, foreign exchange reserves inched by US$30 million to US$4.5 billion as on April 20, 2023, culminating to an import cover of less than a month.

The KSE-100 index closed the week at 41,581 points, posting 1.40%WoW gain. Participation in the market was a pleasant surprise, daily trading volumes averaging a little above 208 million shares during the week as compared to around 105 million shares in the prior week depicting 98%WoW gain.

Other major news flows during the week included: 1) Saudi Arabia expected to sign deal for US$2 billion deposits after Eid, 2) GoP cuts growth rate to 0.8 percent, 3) profit repatriation during first 9 months of the current financial year plunges by 82% to US$233 million, 4) CPPA-G seeks positive adjustment of PKR1.17/unit, 5) regulator asks DISCOS to freeze capacity payments and 6) GoP bank borrowings surge 182% to PKR3 trillion.

Top performing sectors were: Vanaspati & Allied Industries, Tobacco, and Investment Banks, while the least favorite sectors included: Close End Mutual Funds, Leasing Companies, and Glass & Ceramics.

Top performing scrips were: POML, SRVI, DAWH, UBL, and MUREB, while laggards included: PGLC, HGFA, KAPCO, BOP, and PIBTL.

Flow wise, Companies were the major buyers with net buy of US$15.9 million, followed by individuals with net buy of US$14.17 million, while Mutual Funds were major sellers during the week, with a net sell of US$1.63 million.

According to media reports, Saudi Arabia and UAE have intimated IMF on financing support giving a relief on external financing shortfall of US$6 billion will dictate the market performance in near term. Moreover, political situation will be in limelight till general elections are held. Keeping that in view, analysts continue to advise scrips that have dollar-denominated revenue streams which hedges the investor against the currency risk, that include the Technology and E&P sectors.

Implications of Saudi-Iran deal for Pakistan

Implications of the apparent rapprochement between Saudi Arabia and Iran extend even further, with significant consequences for vital neighboring regions like South Asia and other populous Muslim countries, including, notably, Pakistan.

The recent announcement of a China-brokered peace deal between Saudi Arabia and Iran initially took the world by surprise. The debate persists concerning whether this deal will last, its potential implications for the United States, what it means for the Middle East region (including Israel), and what brokering this agreement indicates about China’s rising power.

Pakistan has for decades been an arena in the proxy war between Riyadh and Tehran that was sparked soon after the Iranian Revolution in 1979.

Saudi Arabia provided financial and ideological backing to many Sunni militant groups trained in Pakistan that the US Central Intelligence Agency (CIA) was arming to wage a jihad against the Soviets in Afghanistan. Some of these groups, such as Sipah-e-Sahaba, and its offshoot, Lashkar-e-Jhangvi, later turned their guns on the sizeable Shi’a minority in Pakistan.

Iran responded by offering support to Pakistani Shi’a militants to counter this Sunni militancy. Iran also began to cooperate with India in Afghanistan after the Soviets withdrew in 1989 and US attention shifted away from the region.

New Delhi and Tehran notably both supported the Northern Alliance — comprised of a mixture of ethnic minorities, including the Shi’a — in the latter’s resistance to the predominantly Sunni Pashtun Taliban, which enjoyed good relations with Riyadh and Islamabad.

The post-9/11 US-led intervention in Afghanistan caused a seismic shift in regional alliances. Motivated, in part, by its longstanding rivalry with the United States, Iran began cultivating ties with the Taliban as they waged war against the US and North Atlantic Treaty Organization (NATO).

Pakistan’s relations with Iran also improved during this time. Despite some friction along their shared border, Iran and Pakistan broached the possibility of regional energy cooperation, which ultimately led to the two countries signing a bilateral natural gas pipeline deal in 2013. Nonetheless, Pakistan continued dragging its feet on completing its portion of the pipeline, fearing both Saudi and American displeasure over cooperation with its heavily sanctioned western neighbor.

Pakistan’s relations with the US, meanwhile, have been tenuous at best, soured by their divergent strategic objectives in Afghanistan and America’s increasing reliance on India to counteract Chinese influence across South and Southeast Asia.

Pakistan has doubled down on its military and diplomatic ties with China, and the two have significantly boosted their economic ties by launching the US$62 billion China-Pakistan Economic Corridor (CPEC) in 2015, dubbed a flagship project of China’s ambitious Belt and Road Initiative (BRI).

China included many Middle Eastern countries in the BRI, and it inked a 25-year strategic trade and investment accord with Iran in 2021, estimated to be worth between US$200 billion and US$300 billion. China’s move to involve Iran in the BRI may partly have been prompted by its desire to undermine India’s investment in the Iranian Chabahar deep-sea port on the Indian Ocean, viewed as a rival to the Chinese-controlled Pakistani deep-sea port in Gwadar.

For its part, Iran is trying to balance its relations with India and China. India used the Chabahar seaport to send shipments to Afghanistan, bypassing the need to cross Pakistani territory. Despite facing constraints due to the international sanctions regime, India had secured US waivers to buy Iranian oil and to invest in Chabahar.

Whether India will be able to maintain those relations with the Islamic Republic as its ties with the US continue to grow remains to be seen, but the increasing acrimony between China and India certainly makes it unlikely that Chabahar and Gwadar can become ‘sister ports’ to help enhance broader regional trade and connectivity.

Beijing’s attempt to simultaneously loop Iran and many of its arch-rival Arab states into the BRI may have been a key factor that informed its decision to step in to mediate one of the thorniest rivalries between Muslim nations in the Middle East. Other Muslim countries in the Gulf region and beyond, such as the United Arab Emirates, Turkey, and Pakistan, have applauded this high-profile Chinese diplomatic maneuver.

For Pakistan, in particular, the tempering of the protracted Saudi-Iran rivalry could not only help lessen long-running domestic sectarian frictions but also alleviate pressure on Pakistani decision makers to involve Islamabad in contentious proxy tussles elsewhere in the Muslim world, as happened in Yemen.

Even if the still fragile Saudi-Iranian rapprochement holds, Pakistan’s ability to improve its ties with the Islamic Republic will still be kept in check by concerns over further antagonizing the United States.

Biden administration officials have cautiously welcomed Chinese efforts to try to de-escalate tensions in the troubled region while expressing reservations about Iran’s likelihood to stick to the deal.

For many Muslim-majority countries, including Pakistan, Beijing’s diplomatic endeavors are more immediately relevant and beneficial than those undertaken by Washington to bring the Gulf states and Israel together to deter Iran.

Courtesy: Middle East Institute

Iranian exports to Turkey up 23%

The value of Iran’s export to Turkey increased by 23 percent in the past Iranian calendar year 1401, an official with Iran’s Trade Promotion Organization (TPO) announced.

Farzad Piltan, Director General of TPO's Office of West Asian Countries, said based on the data released by the Islamic Republic of Iran Customs Administration (IRICA), Iran exported commodities worth US$7.45 billion to its neighbor in 1401, while the figure was US$6.079 in 1400.

Turkey was Iran’s third top export destination in the past year, the official named natural gas, aluminum, urea, polyethylene, copper cathode and cathode parts, copper wires, iron and steel ingots, and polyethylene as the major products Iran exported to Turkey in the previous year.

Iran’s import from Turkey also rose 15% to about US$6 billion in 1401, from US$5.2 billion in 1400.

Turkey was the third source of import for Iran in the previous year, the official named sunflower seed oil, road tractors, corn, bananas, generators, barley, soybeans, synthetic fibers, crude soybean oil, and solid acrylic polymers as the main items Iran imported from its neighbor in 1401.

The value of Iran’s exports to neighboring Turkey increased by 19% to US$3.35 billion in 2022.

Turkey had imported over US$2.82 billion worth of commodities from the Islamic Republic in 2021.

Iran's trade balance with Turkey has been $280 million positive in favor of Iran in the past year.

In last July, Iran and Turkey discussed ways of expanding economic relations along with political ties at the Turkish-Iranian High-Level Cooperation Council in Tehran.

During the meeting, which was co-chaired by Iranian President Ebrahim Raisi and Turkish President Recep Tayyip Erdogan, the two sides negotiated the extension of the gas export contract between the two sides for the next 25 years.

In the meeting, President Raisi noted that the Islamic Republic of Iran is determined to expand economic relations with neighboring countries.

The president also evaluated Tehran-Ankara ties as positive and progressive, saying that the two countries should pursue appropriate policies to move towards increasing their annual trade exchanges to US$30 billion.

On the sidelines of the mentioned meeting, Iranian Energy Minister Ali-Akbar Mehrabian also held talks with Turkish Minister of Energy and Natural Resources Fatih Dönmez in which the two sides exchanged views on cooperation in energy fields.

Later on, Head of Turkey’s Small and Medium Enterprises Development Organization (KOSGEB) Hasan Basri Kurt met with Head of Iran Small Industries and Industrial Parks Organization (ISIPO) Ali Rasoulian to discuss ways of expanding cooperation between the small and medium-sized enterprises (SMEs) of the two countries.

In this meeting Rasoulian referred to the signing of a memorandum of understanding (MOU) between the two countries on cooperation between SMEs, saying, “President Raisi has emphasized setting up joint industrial parks in the country’s special economic zones, considering the good infrastructure for setting up such parks in the free and special economic zones and the active presence of economic enterprises in these areas.”

 

First Republic Bank may be next to collapse

The San Francisco-based bank could be the next financial institution to collapse, signaling that last month's banking crisis isn't over yet. Its shares plummet 43% on Friday and 75% on the week as investors feared it would be shuttered by regulators.

Since Silicon Valley Bank’s (SVB) failure last month, First Republic’s stock is down roughly 97%.

Federal regulators are reportedly trying to figure out ways to prevent First Republic, which is headquartered in San Francisco, from failing — including asking other banks to step in and make bids.

The regional bank may ultimately be taken over by the Federal Deposit Insurance Corporation (FDIC), like SVB and New York's Signature Bank.

The selloff was triggered by a terrible earnings report revealing that First Republic lost more than US$100 billion in deposits following the SVB collapse. The outflow came even as a group of megabanks attempted to rescue First Republic by depositing US$30 billion. 

First Republic’s depositors were concerned that the bank would get hit with a similar bank run. The bank also had large unrealized losses on its balance sheet that raised the risk of a collapse.

The extended banking crisis has ramifications for the US economy.

Regional banks such as First Republic are key lenders for area businesses. Even banks that aren’t struggling are pulling back their lending to reduce risk, hurting employers’ ability to hire and grow.

 

What ails Argentina economy?

Argentina’s crucial agriculture sector—which accounts for over half of exports and around 9% of GDP—is being hammered by unprecedented dry weather. Soybean production is expected to be 40% below the 5-year average this year, and wheat production is forecast to fall by around a quarter in the 2022/23 marketing year from 2021/22.

But the country’s economic problems run far deeper than circumstantial bad weather. Government interference in the private sector is considerable, in the form of taxes and other restrictions on imports and exports, and multiple exchange rate practices—in March this year the government announced a specific ‘Malbec dollar’ rate for wine and other agriculture products for instance. 

This interference, coupled with the lack of an overarching, comprehensive structural reform blueprint—in 2020 the president said in an interview “Frankly, I don’t believe in economic plans”—has sapped investors’ confidence.

The combination of weak confidence in government policymaking and lower inflows of foreign currency due to drought have weighed on the peso in recent months; the official exchange rate is now over ARS 200 per US dollar, compared to just over ARS 100 per US dollar this time last year. The black-market peso is priced at a much higher ARS 460 per US dollar. As a result, inflation is in triple figures and rising. And the central bank has jacked interest rates up to 91% in response, heaping more misery on the economy.

The consensus forecast forewarns the GDP to contract 2% this year, and for inflation to end the year around 110%. These figures are already bad enough, but risks are still stacked to the downside. The drought could intensify. Social unrest may bubble over as economic conditions worsen. And as the October 2023 general election approaches, the government could enact populist measures in a bid to gain public support, putting the country’s IMF deal in jeopardy. Even if the opposition Together for Change coalition wins the elections as expected, recovery will be slow. Economic instability has been a feature of the Argentinian landscape for a century or more; it is likely to remain so for some time.

 

Sudan conflict threatens supply of key soft drink ingredient

Sudan's eruption into conflict has left international consumer goods makers racing to shore up supplies of gum arabic, one of the country's most sought-after products and a key ingredient in everything from fizzy drinks to candy and cosmetics.

About 70% of the world's supply of gum arabic, for which there are few substitutes, comes from the acacia trees in the Sahel region that runs through Africa's third-largest country, which is being torn apart by fighting between the army and a paramilitary force.

Wary of Sudan's persistent insecurity, companies dependent on the product, such as Coca Cola and Pepsico, have long stockpiled supplies, some keeping between three-to-six-months’ worth to avoid being caught short, exporters and industry sources told Reuters.

However, prior conflicts have tended to be focused in far-flung regions such as Darfur. This time, the capital Khartoum has been brought to a standstill in the fighting that broke out on April 15, 2023 paralyzing the economy and disrupting basic communications.

"Depending on how long the conflict continues there may well be ramifications for finished goods on the shelf - branded goods made by household names," said Richard Finnegan, a procurement manager at Kerry Group, a supplier of gum arabic to most major food and beverage firms.

Finnegan estimated that current stockpiles will run out in five-to-six months, a view echoed by Martijn Bergkamp, a partner at Dutch supplier FOGA Gum who estimated between three-to-six months.

Cloetta AB, a Swedish confectioner which makes Lakerol lozenges that use gum arabic, has ample stock of the ingredient, a spokesperson said in an email.

Global production of gum arabic is about 120,000 tons a year, worth US$1.1 billion, according to estimates cited by Kerry Group. Most is found in the gum belt that stretches 500 miles from the East to the West of Africa where the arable land meets the desert, including in Ethiopia, Chad, Somalia and Eritrea.

Twelve exporters, suppliers and distributors contacted by Reuters said trade in the gum, which helps bind together food and drink ingredients, has ground to a halt.

Right now it’s impossible to source additional gum arabic from rural parts of Sudan because of the turmoil and road blockages, said Mohamad Alnoor, who runs Gum Arabic USA, which sells the product to consumers as a health supplement.

Kerry Group and other suppliers, including Sweden's Gum Sudan, said communicating with contacts on the ground has been difficult and Port Sudan - from where product is shipped - has been prioritizing civilian evacuations.

“Our suppliers are struggling to secure necessities because of the conflict," Jinesh Doshi, managing director of Vijay Bros, an importer based in Mumbai, said. "Both buyers and sellers are clueless on when things will normalize.”

Alwaleed Ali, who owns AGP Innovations Co, a gum arabic exporting business, said his customers are looking for alternative countries to source gum arabic.

He said he sells the gum to Nexira SAS, based in Rouen, France, and Westchester, Illinois-based Ingredion Inc., two major ingredients suppliers to makers of products such as pet food, fizzy drinks and nutrition bars.

A spokesperson for Ingredion said in an email, "We have proactive measures in place across our business to ensure the continuity of supply for our customers."

PepsiCo declined to comment on supply chain and commodity issues, while Coca-Cola did not return a request for comment.

"For companies like Pepsi and Coke, they can't exist without having gum arabic in their formulations," Dani Haddad, marketing and development director of Agrigum, a global top-ten supplier, said.

In their manufacturing process, food and drink companies use a spray-dried version of the gum that is powder-like, industry sources said. While cosmetics and printing manufacturers may be able to use substitutes, there is no alternative to gum arabic in fizzy drinks, where it prevents ingredients from separating.

In a sign of its importance to the consumer goods industry, gum arabic has been exempt from U.S. sanctions against Sudan since the 1990s, both because it's a critical commodity and for fear of creating a black market.

Sudanese nomads tap the pebbly, amber-colored gum from acacia trees, which is then refined and packaged throughout the country. It accounts for the livelihoods of thousands of people and the more expensive variety can cost about US$3,000 a ton, according to Gum Sudan.

There is a poorer quality, cheaper gum from outside of Sudan, but the preferred ingredient is only found in acacia trees in Sudan, South Sudan and Chad, Alnoor said.

Fawaz Abbaro, the general manager of Savannah Life Company in Khartoum, said he had purchase orders and plans to export 60 to 70 tons of gum arabic but doubts he'll be able to due to the conflict.

"It's not stable even to get food or drink. It's not going to be stable for business," Abbaro said. "All trading will be jammed for the time being."