US dollar dominance eroding fast

The end of the dominance of the United States dollar is nigh as the Chinese yuan rises and the rest of the world sees the peril of the West's failed attempt to bring Russia to its knees over Ukraine, one of Moscow's most powerful bankers told Reuters.

Andrei Kostin, the CEO of state-controlled VTB, Russia's second largest bank, said the crisis was ushering in sweeping changes to the world economy, undermining globalization just as China was taking on the mantle of a top global economic power.

Asked if he thought the world was in a new Cold War, Kostin said that it was now a hot war that was more dangerous than the Cold War.

The United States and the European Union, he said, would lose from moves to freeze hundreds of billions of dollars of Russian sovereign assets as many countries were moving to settling payments outside the US currency and the euro while China was moving towards a removal of currency restrictions.

"The long historical era of the dominance of the American dollar is coming to an end," Kostin, told Reuters on the 59th floor of the gleaming VTB skyscraper overlooking southern Moscow. "I think that the time has come when China will gradually remove currency restrictions."

"China understands that they will not become world economic power Number one if they keep their yuan as a non-convertible currency," Kostin said, adding that it was dangerous for China to keep reserves invested in US sovereign bonds.

The US dollar has been dominant since the early 20th Century when it overtook the pound sterling as the global reserve currency, though JPMorgan said this month that signs of de-dollarization are unfolding in the global economy.

China's spectacular economic growth over past 40 years, fallout from the war in Ukraine and wrangling over the US debt ceiling has put the dollar's status under fresh scrutiny.

A former diplomat who served in Australia and Britain and went into banking just after the Soviet Union collapsed, Kostin is one of Moscow's most powerful and experienced bankers, having served previously as head of Vneshekombank, known now as VEB.

After President Vladimir Putin sent troops into Ukraine in February last year, the West unfurled what it said were the toughest sanctions ever imposed in an attempt to weaken the Russian economy and punish Putin for the war.

Kostin was sanctioned by the United States in 2018 over what it called Russia's malign activity around the world. After the war, he was sanctioned by the EU and by Britain which called him "a close associate of Putin".

He said the sanctions were unfair and a political decision that would backfire on the West, quipping that he had read interesting articles about the laundering of drug money through major Western banks.

"We have already entered into a hot war," Kostin said of the crisis with Ukraine. "It is not cold when there are so many Western weapons and a lot of Western services and military advisers involved. The situation is worse than in the Cold War, it is very difficult and alarming."

Kostin said VTB would see a profit of 400 billion roubles (US$4.9 billion) in 2023 after a bumper first five months of the year and a record loss last year.

Russia's economy, he said, would not be broken by the West. The International Monetary Fund in April raised its 2023 Russian GDP forecast to growth of 0.7% from 0.3%, but lowered its 2024 forecast to 1.3% from 2.1%.

"Sanctions are bad, and we suffer from them, of course. But the economy has adapted," he said. "At the same time, we expect that sanctions will intensify, they will be tightened, some windows will be closed, but we will also find other opportunities."

Asked if Russia's economy would remain a free economy, Kostin said: "I very much hope so."

(US$1 = 82.0000 roubles)

 

Iraq agrees to pay Iran US$2.76 billion

Iraq has agreed to pay about US$2.76 billion in gas and electricity debt to Iran after receiving a sanctions waiver from the United States, a senior Iraqi foreign ministry official said.

Iraqi Foreign Minister Fuad Hussein was given the clearance during a meeting with US Secretary of State Antony Blinken on the sidelines of the Riyadh Conference, the foreign ministry source, who spoke on condition of anonymity because he is not authorized to speak to the media, told Reuters.

Due to decades of conflict and sanctions, Iraq is dependent on imports from Iran for a lot of its gas needs. However, US sanctions on Iranian oil and gas have hampered Iraq's payments for imports, putting it in heavy arrears and leading Iran to retaliate by cutting gas flows regularly.

Iraqi Foreign Ministry spokesperson Ahmed Al-Sahhaf said in a brief statement that Hussein had made progress regarding financial dues between Iraq and Iran during his discussion with his American counterpart in Riyadh" when asked about the funds. He did not give further details.

Yahya Al-e Eshaq, head of the Iran-Iraq chamber of commerce, was quoted by Iranian news agencies as saying, "Part of Iran's blocked funds in Iraq has been earmarked for haj pilgrims and portions have been used for basic goods."

The Iraqi foreign ministry source said that the funds will be transferred through the Commercial Bank of Iraq and confirmed that the money will be used for Iranian pilgrims' expenses and foodstuffs imported by Iran.

Iran has been unable to access billions of dollars in assets in several countries due to US sanctions.

The United States has insisted that oil-rich Iraq, the OPEC group's second-largest producer, moves towards self-sufficiency as a condition for its exemption to import Iranian energy, yet Baghdad has struggled to do so.

 

Saudi Arabia: LuLu Hypermarket offering gold reward

LuLu Hypermarket in Saudi Arabia has added a golden shine to shopping with its latest Gold Reward, up to half kilo of gold to shoppers.

Shoppers who do their vacation shopping at any of the LuLu Hypermarkets in Riyadh, Hail, Jeddah, Al Kharj and Tabuk LuLu where the best deals have been designed for affordability and quality, can now enter a Gold Raffle Draw to win the half kilo gold bumper prize which will be divided among 63 top winners. Each winner will get an 8-gram gold coin.

Sixty-three lucky winners will win up to 8 grams of gold each from the half kilo of precious metal up for bumper prize. Each shopper gets a raffle ticket in this exciting "Visit and Win Gold" promotion which is valid until July 07, 2023. The Grand Gold Draw will be held on July 13, 2023 at the designated stores.

To make the shopping truly attractive, LuLu has unveiled a series of Vacation Fest promotions on holiday essentials such as luggage, electronics, mobiles, electrical appliances etc. as well as special offers on home furnishing, household, and supermarket sections.

For shoppers looking for an updated summer wardrobe, the hypermarket has launched its trendy high-street fashion collection for Summer 2023 and also the popular Half Pay Back Deal under which for every SR200 spent on Fashion, Footwear, Ladies Bags, Baby Accessories customers will get SR100 back in shopping vouchers.

“We are excited to bring this super Gold promotion to our valued shoppers,” said Bashar Naser Al Basher, Public Relation Manager, LuLu hypermarkets, Saudi Arabia.

“Every LuLu shopper is worth their weight in gold for us and rewarding them when they are shopping with us for their summer holidays is a great way to make wonderful memories for all.”

Iran economy to grow at more than 2% in 2023

World Bank in its latest report dubbed “Global Economic Prospects” has estimated a 2.2% growth for Iran's economy in 2023, a figure which is higher than the average growth forecast for the global economy and despite the fact that the country is still under sanctions imposed by the United States.

The Bank has predicted that due to the contractionary monetary policy adopted by many countries this year, the average economic growth in the world is expected to decrease to 2.1% in 2023, from 3.1% in 2022.

Based on the Report, Iran’s Gross Domestic Product (GDP) grew by 4.7% in the last quarter of the previous year, while the average GDP growth for most of the advanced countries like the US, China and many European countries was less than the said figure.

In terms of economic growth, Iran ranked 15th among the world’s 72 major economies in Q42022, which means that only 14 countries had higher economic growth than Iran in this period.

Iran's 4.7% GDP growth in Q4 2022 was achieved, while the average economic growth of developed countries was only 1.2 percent in this period.

The US economy grew by only 0.9% in the mentioned period, the Eurozone by 1.8% and Japan by 0.4%.

China’s economy also grew by 2.9% and India registered a 4.5% economic growth in this period. The average economic growth for West Asia and North Africa region was estimated at 4.9% in the last quarter of 2022.

According to the data, Iran's economy had experienced a 2.9% growth in 2022; the average growth rate in West Asia and North African economies in 2022 was 5.9%.

 

Can Israel succeed in stopping new Iran deal?

It seems that Israel might once again try to replica ‘2010 moment’ which on the surface may seem like a path to war but a bluff aimed at seeking attention.

More than 13 years later, the events of 2010 are still something of a mystery in Israel. Then, Prime Minister Benjamin Netanyahu and his defense minister, Ehud Barak, regularly threatened military action against Iran but stopped short of launching a strike.

Today, the ministers who were members of the security cabinet back then and the IDF officers who briefed them regularly are still conflicted about what happened. Were Netanyahu and Barak serious about attacking Iran and simply stopped – as they later claimed - due to the opposition they met within the defense establishment, or were they bluffing all along, using threats against Iran to stir panic in Washington, London and Berlin and get the world to ratchet up sanctions against Tehran?

Based on comments by senior Israeli politicians and military officers in recent weeks, it seems that Israel might once again be in a bit of a “2010 moment”, one which, on the surface, seems like a path to war, but on the other hand might be again a bluff aimed at getting the world’s attention.

There is no denying the escalation in the rhetoric. Last month, IDF Chief of Staff Lt.-Gen. Herzi Halevi said that Israel is not indifferent to what is happening in Iran and might need to take action to stop it.

This week, Prime Minister Benjamin Netanyahu convened a war drill and issued a public threat at a meeting of the security cabinet, saying that Israel can handle the threat from Iran on its own.

And then there was Defense Minister Yoav Gallant, who said Tuesday that Israelis did not need to worry themselves with the new hypersonic missile that Iran unveiled earlier that day and that if a war were to break out with Tehran’s proxy, Hezbollah, Israel would send it back to the Stone Age.

One would be forgiven for thinking that the beating of war drums means that war is coming. What we have learned over the last couple of decades in Israel is that sometimes war drums mean the exact opposite and are used to deliver messages, oftentimes to allies and not just adversaries.

It seems Israel is using its threats to put pressure on the Biden administration as it negotiates a new interim deal with Iran as a way to stop its enrichment of military-grade uranium. Based on the intensity of the Israeli rhetoric, it seems that the US-Iran talks are proceeding at a faster pace than initially anticipated, and might even be on the verge of an agreement.

As a result, it is interesting to compare the way Netanyahu and his government spoke in 2015 against the original Iran deal with the way they are speaking now. Then, as is well known, Netanyahu accepted an invitation from the republicans and spoke before Congress in direct opposition to the deal, and somewhat to then-president Barack Obama.

While Netanyahu felt the need to do everything possible to stop the bad deal – as can be expected from an Israeli leader - his decision to speak in 2015 in Congress went against the president’s wishes and is still a raw nerve for many democrats.

Would Netanyahu do the same today? The reply is most ‘Unlikely’. The reason is twofold. On one hand, while Speaker of the House Kevin McCarthy said during his visit to Israel last month that he would invite Netanyahu to Washington DC if President Joe Biden did not, Netanyahu understands that a fight with the administration will not succeed in stopping a new interim deal and will become highly politicized as the 2024 presidential election race heats up.

The second reason is because deep down, Israel wants a diplomatic resolution to the Iran nuclear challenge. It knows that a military option – while viable – will only delay Iran’s pursuit of a bomb and pave the way for the mullahs to gain the legitimacy they need to plow ahead under the claim that a bomb is needed to protect the republic.

While there are some in the Knesset and the defense establishment who are enamored by the military option and cite the success of the destruction of the Iraqi reactor in 1981 and the Syrian reactor in 2007, they would do well to remember that in both cases the reactors were built by external actors – France in Iraq and North Korea in Syria. That is not the case in Iran where the nuclear technical know-how is domestic and knowledge, as is known, is not something that can easily be destroyed.

Israel has always wanted a diplomatic resolution to the threat but one that took Israel’s concerns into consideration and dealt with the fundamental issues – not only Tehran’s nuclear program, but also its development of long-range ballistic missiles as well as the regime’s support of terrorist proxies throughout the region.

The talks that the Americans are engaged in now with Iran are unlikely to meet any of those criteria. From the little details that have leaked about the pending deal, Iran will be able keep its enriched uranium while committing to suspending all high-level enrichment.

In other words, it gets to keep all the uranium it has already enriched, all of its nuclear infrastructure and technical knowledge. What this means is that in the best-case scenario, Iran will only suspend its high-grade enrichment but will not abandon its desire to one day get the bomb. In exchange for this enrichment freeze it will see significant economic benefits.

Can Israel realistically stop this deal or at the very least sweeten it? That remains to be seen and is currently the Israeli objective. Like in 2015, Jerusalem understands that it is unlikely that it will succeed in stopping a new deal.

Netanyahu knows that he has sway in Washington, especially within Republican circles where Israel is looked to as a stamp of approval when it comes to US moves on Iran. Biden might want an interim deal, but he also does not want to do something that will simply give his republican opponents ammo to use against him on the campaign trail.

Can Israel maneuver through this complicated terrain? Can it improve the framework of the deal or receive some other benefit from the US, like security assurances, new weapons systems or maybe even some form of rapprochement with Saudi Arabia?

That remains to be seen. In the meantime, Israel would be negligent not to escalate its own talk against Iran right now. It might not be as glamorous as a speech before Congress or an invitation to the White House, but everything does need to be done to stop Iran.

 

Bangladesh clarifies its stance on Human Rights to US congressmen

To clear its position on human rights and elections, Bangladesh will communicate with six US congressmen, who recently wrote to President Joe Biden, said State Minister for Foreign Affairs Shahriar Alam.

Speaking to reporters at the foreign ministry, he said there were exaggerations, inconsistencies and information gap in the issues mentioned in the letter.

Congressmen Scott Perry, Barry Moore, Warren Davidson, Bob Good, Tim Burchett and Keith Self wrote to the US president on May 25 requesting urgent actions to stop the human rights abuses by the government in Bangladesh and give its people the best possible chance for free and fair parliamentary elections.

The letter said, “The well-documented abuses by the Hasina government are not confined to her political opponents; the government has also persecuted ethnic and religious minorities in Bangladesh.”

Shahriar said such letters were sent by US congressmen in the past and more letters may be sent in future as the national election is approaching.

“But, as I said, we will reach out to all these members. Not only them, we will regularly update all those who have interest in the issues covered in the letter.”

Asked for comments on Japanese Ambassador Iwama Kiminori’s meeting some BNP leaders in Dhaka and the discussion on the next parliamentary polls, Shahriar said he had no details on that.

He, however, said there was a time about six months ago when foreign ambassadors started talking about Bangladesh’s internal issues. “If they do it again and go beyond their limits, the government will take necessary measures.”

The state minister said the government has not noticed any such comments recently.

About speculations that some other countries may follow the new US visa policy, he said these are nothing but rumours and propaganda.

Under the visa policy, the US will restrict visas for Bangladeshis believed to be responsible for, or complicit in, undermining the democratic election process in Bangladesh.

Shahriar said as the general election approaches, more propaganda will be carried out and the mainstream media should verify all those information before publishing.

He the government does not believe in the policy of continuing relationship with a country while being under pressure.

Asked about Dhaka’s reactions to the setting up of a mural in India’s new parliament building that has triggered concerns in Nepal and Pakistan as it is being interpreted as a map of “Akhand Bharat” comprising parts of several neighbouring countries, the state minister said Dhaka has asked its mission in New Delhi for clarification.

The mural, as explained by the Indian foreign ministry, is the map of the Ashoka Empire which existed 300 years before Christ, he added. “It has nothing to do with politics. This is not the map of 2023. There is nothing to be confused about,” said Shahriar.

 

Iran accused of supplying drones to Russia

The White House said on Friday that Russia appeared to be deepening its defense cooperation with Iran and had received hundreds of one-way attack drones that it is using to strike Ukraine.

Citing newly declassified information, the White House said the drones, or Uncrewed Aerial Vehicles (UAVs), were built in Iran, shipped across the Caspian Sea and then used by Russian forces against Ukraine.

"Russia has been using Iranian UAVs in recent weeks to strike Kyiv and terrorize the Ukrainian population, and the Russia-Iran military partnership appears to be deepening," White House spokesman John Kirby said in a statement.

"We are also concerned that Russia is working with Iran to produce Iranian UAVs from inside Russia."

Kirby said the US had information that Russia was receiving materials from Iran required to build a drone manufacturing plant that could be fully operational early next year.

"We are releasing satellite imagery of the planned location of this UAV manufacturing plant in Russia’s Alabuga Special Economic Zone," he said.

The US has previously sanctioned Iranian executives at a defense manufacturer over drone supplies to Russia. Iran has acknowledged sending drones to Russia but said these were sent before Russia's February invasion. Moscow has denied its forces used Iranian drones in Ukraine.

A White House official said Iran had transferred several hundred drones to Russia since August last year.

Support between Iran and Russia was flowing both ways, Kirby said, with Iran seeking billions of dollars worth of military equipment from Russia including helicopters and radars.

"Russia has been offering Iran unprecedented defense cooperation, including on missiles, electronics, and air defense," he said.

"This is a full-scale defense partnership that is harmful to Ukraine, to Iran’s neighbors, and to the international community. We are continuing to use all the tools at our disposal to expose and disrupt these activities including by sharing this with the public – and we are prepared to do more."

Kirby said the transfers of drones constituted a violation of United Nations rules and the United States would seek to hold the two countries accountable.

Britain, France, Germany, the US and Ukraine say the supply of Iranian-made drones to Russia violates a 2015 UN Security Council resolution enshrining the Iran nuclear deal.

Under the 2015 UN resolution, a conventional arms embargo on Iran was in place until October 2020.

Ukraine and Western powers argue that the resolution includes restrictions on missiles and related technologies until October 2023 and can encompass the export and purchase of advanced military systems such as drones.

"We will continue to impose sanctions on the actors involved in the transfer of Iranian military equipment to Russia for use in Ukraine," Kirby said.

He said a new US advisory issued on Friday aimed "to help businesses and other governments better understand the risks posed by Iran’s UAV program and the illicit practices Iran uses to procure components for it."

The advisory highlighted key items sought by Iran for its development of drones, including electronics such as processors and controllers.