Oil production cut decision is precautionary, Saudi Energy Minister

Saudi Energy Minister Prince Abdulaziz bin Salman said that the decision to cut oil production is a precautionary one. “We will continue to hedge as long as we do not see clarity and stability in the market and our mission is to give the oil market clear data for stability,” he said while speaking to reporters after the end of the OPEC Plus meeting.

Prince Abdulaziz pointed out that independent agencies will work with OPEC Plus countries with regard to evaluating their production in 2024, “Independent agencies will end the previous controversy over production data in OPEC Plus.”

Regarding Russia’s data, Prince Abdulaziz said, “we discussed with Russia the issue of its production and asked it to clarify its data, and we have strengthened the concept of transparency with Russia about its oil production figures.”

In a press conference following the meeting of the OPEC Plus coalition on Sunday, the minister said that the OPEC Plus agreement that was reached on Sunday is unprecedented, and that independent agencies will be assigned to verify the production capacity of each country.

He emphasized that the OPEC meeting was constructive and contributed to the stability of oil markets. “The recent measures reflect our responsibility as a mature central bank for oil. We want to prove to the world that we have the tools to stabilize the oil market and our decision helps to enhance the stability of the markets and prevents volatility, because the stability of the markets is the most important thing we have,” he said.

“We are not worried about supplies in the coming year. We do not target specific oil prices, but rather we aim to reduce market volatility,” the minister said while stressing that Russia is adhered to its commitments regarding oil production.

On Saudi-American relations Prince Abdulaziz said, “Our relationship with the United States has been going on for 80 years, and we look forward to more cooperation. All American officials are welcome to Saudi Arabia,” he said.

The Organization of the Petroleum Exporting Countries (OPEC) announced that the OPEC Plus group decided at its meeting on Sunday to adjust the bloc’s production level to 40.4 million barrels per day, starting from January 2024 and for a period of one year.

The alliance said, in a statement published by OPEC on its website, that it was agreed to hold the ministerial meeting of the group that includes OPEC members and non-OPEC producers, including Russia, every six months. The statement added that it was also agreed to hold the next meeting of the OPEC Plus group in Vienna on November 26.

OPEC Plus reached a deal on output policy after seven hours of talks and decided to reduce overall production targets from 2024 by a further total of 1.4 million barrels per day.

Venezuelan president arrives Saudi Arabia

Venezuelan President Nicolas Maduro arrived in Saudi Arabia on Monday, state media reported, as the kingdom continues to expand its diplomatic outreach beyond traditional Western alliances.

Maduro was received at the airport of the Saudi Red Sea city of Jeddah by Deputy Governor of Mecca region Prince Badr bin Sultan and other officials, Saudi state news agency SPA reported.

Venezuela's Maduro is the latest US foe to visit Saudi Arabia as the kingdom rebuilds alliances without the blessing of the United States, its long-time ally.

Riyadh has restored ties with Iran and Syria over the last months and strengthened its cooperation with China and Russia.

SPA did not give a reason for Maduro's visit but the fellow OPEC nation had sought coordination in the past with Saudi Arabia on falling oil prices and US sanctions.

Maduro's visit comes a day before US Secretary of State Antony Blinken lands in Saudi Arabia for talks with the Saudi leadership.

Since taking office, US President Joe Biden has eased some sanctions on Venezuela - many imposed by his predecessor Donald Trump in a maximum pressure campaign - to encourage dialogue. But negotiations have stalled again.

The United States says it will ease sanctions on the OPEC nation only in return for concrete steps toward free elections there

World spy chiefs meet in Singapore

According to Reuters, senior officials from about two dozen of the world's major intelligence agencies held a secret meeting on the fringes of the Shangri-La Dialogue security meeting in Singapore this weekend.

Such meetings are organized by the Singapore government and have been discreetly held at a separate venue alongside the security summit for several years. The meetings have not been previously reported.

The US was represented by Director of National Intelligence Avril Haines, the head of her country's intelligence community, while China was among the other countries present, despite the tensions between the two superpowers.

Samant Goel, the head of India's overseas intelligence gathering agency, the Research and Analysis Wing (RAW), also attended.

"The meeting is an important fixture on the international shadow agenda," said one person with knowledge of the discussions. "Given the range of countries involved, it is not a festival of tradecraft, but rather a way of promoting a deeper understanding of intentions and bottom lines.

"There is an unspoken code among intelligence services that they can talk when more formal and open diplomacy is harder - it is a very important factor during times of tension, and the Singapore event helps promote that."

A spokesperson for the Singapore Ministry of Defence said that while attending the Shangri-La Dialogue, participants including senior officials from intelligence agencies also take the opportunity to meet their counterparts.

"The Singapore Ministry of Defence may facilitate some of these bilateral or multilateral meetings," the spokesperson said. "Participants have found such meetings held on the sidelines of the (dialogue) beneficial."

The United States, Britain, Canada, Australia and New Zealand operate what is called the Five Eyes network to gather and share a broad range of intelligence, and their intelligence officials meet frequently.

Larger meetings of the intelligence community are rarer, and almost never publicized.

Although few details were available on the specific discussions in Singapore, Russia's war in Ukraine and transnational crime figured in the talks on Friday. On Thursday evening, the intelligence chiefs held an informal gathering.

No Russian representative was present, one of the sources said. Ukraine's deputy defence minister, Volodymr V. Havrylov, was at the Shangri-La Dialogue but said he did not attend the intelligence meeting.

Another of the sources said the tone at the meeting was collaborative and cooperative, and not confrontational.

At the main security dialogue, more than 600 delegates from 49 countries held three days of plenary sessions, as well as closed-door bilateral and multilateral meetings at the sprawling Shangri-La Hotel.

Australian Prime Minister Anthony Albanese gave the keynote address while US Secretary of Defense Lloyd Austin, Chinese Defence Minister Li Shangfu and counterparts from Britain, Japan, Canada, Indonesia and South Korea also spoke.

Haines was among the official US delegates to the Shangri-La Dialogue. At a discussion on cybersecurity in the main meeting, she said in response to a question from a Chinese military officer that cooperation between countries was essential.

"It is absolutely critical, even when there is distrust, and even when you are facing in effect adversaries, that you still try to work through and cooperate on issues of mutual interest and also try to manage the potential for escalation," she said.

US officials said on Friday that CIA Director William Burns visited China last month for talks with Chinese counterparts as the Biden administration seeks to boost communications with Beijing.

 

Challenges facing Tayyip Erdogan

Turkish President Recep Tayyip Erdogan has been sworn in as head of state after winning an historic run-off election to extend his two-decade rule for another five years.

The 69 year old leader has to select a Cabinet, which will be tasked with handling an economic crisis that has witnessed runaway inflation and the collapse of the lira.

“I, as president, swear upon my honor and integrity before the great Turkish nation and history to safeguard the existence and independence of the state,” Erdogan said in a ceremony at the parliament in Ankara, broadcast live on television.

Erdogan, took the oath of office on Saturday, ushering in his third presidential term that followed three stints as prime minister.

President Erdogan was sworn in during a session in parliament before an inauguration ceremony at his sprawling palace complex. Supporters waited outside parliament despite the heavy rain, covering his car with red carnations as he arrived.

Erdogan defeated opposition challenger Kemal Kilicdaroglu in a runoff vote held on May 28, after he narrowly failed to secure an outright victory in a first round of voting on May 14.

Kilicdaroglu had promised to put Turkey on a more democratic path and improve relations with the West. International observers deemed the elections to be free but not fair.

Saturday’s inauguration was followed by a lavish ceremony at the presidential palace in the capital attended by dozens of world leaders. Turkey’s longest-serving leader faces considerable diplomatic challenges amid tensions with the West.

78 members of the international community attended the oath-taking ceremony. Some of the guests include Venezuelan President Nicolas Maduro, Hungarian Prime Minister Viktor Orban, and Armenian Prime Minister Nikol Pashinyan, according to the state-run Anadolu news agency.

Addressing the country’s economic troubles will be Erdogan’s priority with inflation running at 43.7%, partly because of his unorthodox policy of cutting interest rates to stimulate growth.

Analysts have warned if current policies continue, the economy is heading for greater turmoil given depleted foreign reserves, an expanding state-backed protected deposits scheme, and unchecked inflation expectations.

The lira has undergone a series of crashes in recent years and hit new all-time lows in the days after the vote.

Turkey’s new members of parliament started being sworn in on Friday in their first session after the May 14 election, also attended by Erdogan. His alliance holds a majority in the 600-seat parliament.

Meanwhile, NATO allies are anxiously waiting for Ankara to green light Sweden’s attempt to join the United States-led defense alliance before a summit in July.

Erdogan has been dragging his feet on approving the application, accusing Stockholm of sheltering terrorists of the outlawed Kurdistan Workers’ Party (PKK), which is listed as a terror group by Ankara and its Western allies.

NATO chief Jens Stoltenberg attended Erdogan’s inauguration and scheduled to hold talks with him.

Sweden’s Foreign Minister Tobias Billstrom said on Twitter a clear message emerged at a NATO meeting in Oslo for Turkey and Hungary to start the ratification process.

His Turkish counterpart, Mevlut Cavusoglu, responded, “A crystal clear message to our Swedish Friends! Fulfill your commitments arising from Trilateral Memorandum and take concrete steps in the fight against terrorism.”

Erdogan was sworn in amid a host of domestic challenges ahead, including a battered economy, pressure for the repatriation of millions of Syrian refugees and the need to rebuild after a devastating earthquake in February that killed 50,000 and levelled entire cities in the south of the country.

Turkey is also grappling with a cost-of-living crisis fueled by inflation that peaked at a staggering 85% in October 2022 before easing to 44% last month. The Turkish currency has lost more than 10% of its value against the US dollar since the start of the year.

Unconfirmed media reports say Erdogan plans to reappoint Mehmet Simsek, a respected former finance minister and deputy prime minister, to the helm of the economy.

The move would signify a return by the country — which is the world’s 19th largest economy according to the World Bank — to more orthodox economic policies

Iran, Saudi Arabia to form naval coalition in northern Indian Ocean

Iranian Navy Commander Shahram Irani announced on Saturday that a naval coalition will be formed in the northern Indian Ocean with the involvement of Iran, Saudi Arabia, the UAE, Bahrain, Iraq, Pakistan, India, and other countries in the region.

“In line with this purpose new coalitions are being formed in the region and beyond,” the admiral added.

“Today regional countries have reached the conclusion that if there is going to be security in the region, definitely it can be done through convergence and cooperation with each other,” Shahram Irani said in a televised interview.

Earlier, the website of the Emirati foreign ministry said Abu Dhabi had withdrawn from the Joint Maritime Forces that operate in the Red Sea and the Persian Gulf.

Analysts say Abu Dhabi has made the decision in line with its ambition to diversify its security relationships.

A Qatari news website reported on Friday that Iran, Saudi Arabia, the United Arab Emirates (UAE), and Oman are to form a joint naval force under China's support in line with increasing maritime security in the Persian Gulf.

Al-Jadid said China had already begun mediating negotiations among Tehran, Riyadh, and Abu Dhabi aimed at reinforcing navigation's safety in the strategic body of water.

Back in March, China successfully helped broker a deal between Tehran and Riyadh according to which Iran and Saudi Arabia agreed to reestablish diplomatic ties after seven years of estrangement.

According to analysts, the consent of the Persian Gulf states to Beijing's mediation in such sensitive matters shows China's growing influence in the region as opposed to Washington's declining influence.

 

 

UN agency for Palestine refugees on verge of financial collapse

The United Nations has appealed for sustainable funding for its agency that supports Palestine refugees, UNRWA, which is on the brink of financial collapse.

Chronic underfunding over the past decade, and resultant severe austerity measures, mean UNRWA is already operating with a US$75 million shortfall, putting its lifesaving programs across the Middle East at risk.

“As I address you today, I do not have the funds to keep our schools, health centers and other services running as of September,” Commissioner-General Philippe Lazzarini told a pledging conference at UN Headquarters in New York.

UNRWA was established in 1949 as a temporary agency to provide aid to Palestinians following mass displacement from land that became Israel, making it one of the first UN humanitarian operations.

Today, nearly six million people in the West Bank and the Gaza Strip, and in Syria, Lebanon and Jordan, depend on its services, which are almost entirely funded by voluntary contributions. Nearly a third of registered Palestine refugees live in camps.

UNRWA is seeking US$1.6 billion for its operations this year. Lazzararini said an additional US$75 million is urgently needed to provide food for over a million people in Gaza. Another US$30 million is required to maintain cash and food assistance to 600,000 people in Syria, Lebanon and Jordan.

UN Secretary-General António Guterres has urged the international community to ensure the agency is fully funded.

Despite its essential role, “we allow UNRWA to remain trapped in financial limbo,” he said in remarks delivered by his Chef de Cabinet, Courtenay Rattray.

The UN chief was also deeply concerned that some of the largest and most reliable donors have indicated that they might be reducing their support.

“Let’s be clear: UNRWA is on the verge of financial collapse. The consequences of further budget cuts would be catastrophic,” he warned.

More than a half a million young Palestinians are enrolled in UNRWA schools, two of whom made impassioned pleas at the pledging conference.

Ahmad Abu Daqqa attends a boys’ school in the Gaza Strip, where a blockade has been in place for more than 15 years.

“We, the students of the Gaza Strip, seek hope amidst despair,” he said, conveying a message from his peers.

“We only find it in education and learning, despite the numerous difficulties and obstacles we face, like living in a conflict and war zone.”

UNRWA students are proud of their education, heritage and culture, added Leen Sharqawi, 15, who attends a girls’ school in Jordan. They also have big dreams.

“We are not just Palestine refugees,” she said. “We are children who dream of becoming global citizens and who want to help the world become a better place. Good education is what will allow us to do this.” 

Pakistan: Likely facets of Federal Budget FY24

Most challenging times to present the Federal Budget for next year (FY24) amid stagflation and lots of uncertainties related to upcoming elections and how Pakistan will bridge its external account funding gap.

This uncertainty on financing US dollar funding gap is creating nervousness in currency, bond and stock markets as Pakistan faces very high probability of default.

Moreover, on the political front with Imran Khan's PTI being sidelined, it is possible that a weak coalition government may come to power in elections. It will be interesting to see how aggressive and competent the new setup will be to deal with this economic crisis.

To create good optics, it is possible that the government may set an unrealistic revenue target to create space for spending in the budget.

The present Government is scheduled to announce Federal Budget FY24 on June 09, 2023. It seems highly unlikely that the government headed by Shehbaz Sharif will be able to complete the current IMF program on time.

The general perception is that regardless of the status of the current IMF program, Pakistan will have to enter another and a bigger IMF program.

The incumbent government is under immense pressure due to an Economic slowdown and high inflation and could take steps to appease the public in the upcoming budget through some sort of expansionary policies including direct cash subsidies for the underprivileged and increase in minimum wages. Any excessive spending would be ill-advised without substantial tax collection measures.

The Budget outlay for FY24 is estimated up to PKR15 trillion as against PKR9.6 trillion proposed for FY23 assuming record high mark up cost due to high interest rate.

The Government is likely to set tax revenue collection target at above PKR9 trillion for FY24 or 8.6% of GDP, as against a target of PKR7.5 trillion for FY23 and 29% higher than expected tax collection for FY23.

The Revenue targets in the past have also varied on an average by 8% in last 5 years from actual and analysts expect the same to happen in FY24 amid economic slowdown.

The Non-tax revenue target for FY24 is estimated at PKR2.5 trillion or 2.4% of GDP as against PKR1.6 trillion or 2% of GDP estimated for FY23. This seems achievable given higher SBP profit share and significant jump in PDL.

The Federal Public Sector Development Program (PSDP) is estimated at PKR0.9 trillion for FY24. However, analysts fear major cuts in this due to fiscal constraints. Consolidated PSDP (Federal and Provincial) is anticipated at PKR2.6 trillion or 2.5% of GDP for FY24.

Some of the taxation measures under consideration include: 1) Tax on undistributed reserves, 2) Continuation of Supertax, 3) Shift from Final Tax Regime to Minimum Tax Regime, 4) Asset Tax/Wealth Tax, 5) Higher tax on Non filers, 6) Tax on rental income, and 7) Additional Tax on Banks, Tobacco and Beverage sectors.

Budget is anticipated to be Neutral to Positive for Stock Market as analysts don’t expect major steps in budget that can affect the market and key listed sectors.

Courtesy: Topline Securities