Hydropolitics: A new term coined in Asia

Most of Asia's major rivers originate in China and flow into countries like India, Bangladesh and Vietnam. China has earned the title of "upstream superpower," but concerns over the weaponization of water, the responses of nations downstream, and climate change are stirring up water politics and stoking tensions.

The visually rich three-part Nikkei Asia series titled Asia's Age of Hydropolitics explores the effects that the actions of upstream nations -- exacerbated by climate change -- have on countries downstream.

The first story focuses on Asia's rivers that originate in the Indo-Tibetan plateau in China. They flow into 18 other nations, delivering water to a quarter of the world's population.

As China gets ambitious about managing its own water shortages by drawing on these rivers -- and allows its foreign policy to dictate its actions upstream -- many nations downstream are feeling its presence.

The second story frames Bangladesh -- and the geopolitically significant Brahmaputra River -- as a proxy of Sino-Indian conflict. The story follows the Brahmaputra as it enters India through the disputed border with China, and explores the effects of dams and upstream politics on the region's most disenfranchised.

As the Brahmaputra makes its way into Bangladesh, the lowest riparian country in the region finds itself at the center of China-India hydropolitical hostility.

The third and final piece in the series focuses on the Mekong -- one of the world's longest and most biodiverse rivers. Dams being built upstream, 22 by China alone, combined with climate change and human activity, have contributed to the sinking of the Mekong Delta. Half of the river-strewn region could be underwater before the century is through.

But locals are adapting -- and emerging innovative strategies offer hope of mitigating the worst.

Courtesy: Nikkei Asia

 

 

 

Iranian LPG export to exceed 9 million tons

Iran's average monthly LPG export in the first half of this year was 784,833 tons. It is expected that if the loading rate is at the current level or more, the total export this year will reach 9.42 million tons.

Iran’s LPG exports mostly go to China despite the US sanctions, facilitated by Chinese shipowners who have developed an armada of very large gas carriers since sanctions were imposed on Iran in 2014 and then in 2018.

Iran’s LPG exports could be higher without the restrictions that international shipping and trading firms face due to the sanctions and allow Iranian exporters to resume access to the global markets.

Iran exported 4.71 million tons of liquefied petroleum gas (LPG) in the first six months of 2023, according to the data released by S&P Global Platts.

Based on the Platts data, Iran's LPG exports loading in June were estimated at around 696,000 million tons, 28.5% less than May when 973,260 million tons of LPG was shipped.

 

 

 

Pakistan-Saudi Arabia to create a refinery

Four Pakistani state-owned petroleum companies (SoEs) have signed on Thursday a memorandum of understanding (MoU) to facilitate US$10 billion Saudi investment in a new oil refinery at Gwadar, Baluchistan with a refining capacity of 300,000 barrels per day – the first in more than a decade and the largest in the country.

The government is reportedly in the advanced stages of negotiations with Saudi giant Aramco to execute the Greenfield refinery project at the strategic Gwadar Port and wanted to complete the initial paperwork before its tenure ends in two weeks.

Oil and Gas Development Company (OGDCL), Pakistan State Oil Company (PSO), Pakistan Petroleum (PPL), and Government Holdings (GHPL) signed the MoU to join hands and provide comfort to the Saudi firm to enter Pakistan with a major investment. The four SoEs would join the project through equity participation.

The project envisions setting up an integrated refinery petrochemical complex with a crude oil processing capacity of a minimum 300,000 bpd along with a petrochemical facility. The integrated complex shall comprise various components such as marine infrastructure, petrochemical complex, storages for crude oil and refined products, pipeline connectivity etc.

According to the Petroleum Division, despite being integral to the growth of the economy, no new refinery project has materialized in Pakistan for more than a decade and only two refineries have been added in the last 40 years. Compared to the 20 million tons of refining capacity, the actual capacity utilization is at around 11 million tons.

This is mainly due to the decreasing furnace oil demand in the country as a result of a change in the energy mix in the power sector and the fixed production slate of refineries that cannot produce just petrol and high-speed diesel and all products are produced simultaneously. Thus, as furnace oil demand declines, refineries have to lower their overall production and struggle to maintain their throughput at optimal levels.

This is despite the fact that independent consultants forecast Pakistan’s demand for petrol and diesel to grow beyond 33 million tons per annum by 2023.

To facilitate the Saudi investment in refining, the government has recently passed a new policy under which a new deep conversion oil refinery of a minimum 300,000 bpd achieving financial close of the project within five years shall be eligible for a customs duty of 7.5% for 25 years on petrol and diesel of all grades produced effective from the date of commissioning of the refinery.

The said refinery shall also enjoy a 20-year tax holiday and would also be entitled to exemption from levy of customs duties, surcharges, withholding tax, general sales tax, any other ad valorem tax or any other levies and duties on import of any equipment to be installed, or material to be used in the refinery projects without any precondition for obtaining certification by the Engineering Development Board.

These fiscal incentives and other facilitation would be recorded and protected under the project agreements between the project company, the key sponsors, investors and the concerned government and would be protected through a grant to Special Economic Zones Act.

Minister for State Musadiq Malik, who witnessed the MoU signing ceremony, said the Saudi oil firm showed a willingness to inject the entire equity into the multibillion-dollar refinery project, leading the Pakistani government to decide on a joint venture with key SoEs.

 

 

Can Wang Yi improve US-China relations?

According to Nikkei Asia, Chinese President Xi Jinping's decision to recall senior diplomat Wang Yi to head the Ministry of Foreign Affairs reflects a misstep, but it could be a crucial move ahead of US-China summit in November 2023.

"Qin Gang's fall from grace was as unexpected and abrupt as his elevation over the heads of many experienced diplomats," said Daniel Russel, a former diplomat who now is an expert at the Asia Society Policy Institute, United States. "Since both moves are attributed to China's leader, this episode will be seen as an embarrassing lapse in judgment at the top."

By and large, analysts do not expect any change to the direction of China's foreign policy, guided by Xi's thinking on diplomacy, aimed at seeking to assert global influence in line with the country's development achievements.

"Whether this is, in fact, effectively a placeholder appointment until a younger official gets the nod is unclear, but for now Wang is the most dominant foreign affairs official in China for a very long time," said Bill Bishop, a China expert at sinocism.com.

Known for his tough-talking style, the 69-year-old Wang held the ministerial portfolio for a decade before being promoted in October last year to head the Communist Party's Foreign Affairs Commission in charge of policymaking. He is also a member of the party's top decision-making body, the Politburo.

"Wang's oversight of policy implementation is therefore likely to strengthen the consistency of Beijing's diplomatic messaging and actions, while further cementing the party's already strong guidance of foreign affairs," US consultancy Eurasia Group wrote in a note.

His return, while signaling a comeback for more aggressive "wolf warrior" diplomacy, is seen as crucial ahead of a series of international events, notably the Asia Pacific Economic Cooperation summit to be hosted by the United States later this year.

"A key agenda item in US-China relations is whether the working and ministerial level can set the conditions for a successful visit of Xi to San Francisco for APEC in November," said Rorry Daniels, a senior fellow at the Asia Society Policy Institute's Center for China Analysis.

Reappointing Wang also reflects Xi's preference for someone with a track record of defending China's positions, such as its stance on Taiwan, well as asserting the country's interests amid geopolitical tensions with the United States and its allies.

"This could complicate the Biden administration's efforts to maintain and build on the recent detente in the bilateral relationship," Eurasia Group wrote.

Wang's reappointment has been broadly welcomed in Indonesia. "Wang Yi's return could even be bringing a sense of predictability and ease to Indonesian ministers, who already have good relations with him for a long time," said one analyst, who spoke on condition of anonymity.

Pakistan Stock Exchange index up 2.5%WoW

The week ended on July 27, 2023 continued its bullish run at Pakistan Stock Exchange (PSX). The benchmark index started the week at 45,920.73 points, remained on upward trajectory and closed at 47,076.99 points, gaining 1,156.26 points or 2.5%WoW. Investors’ sentiments remained positive after the approval of the IMF Standby Agreement for US$3 billion and expectations that the general elections would be held in time.

Average daily traded volume was reported 125.64 million shares as compared to 325.12 million shares a week ago, down by 61.4%.

The PKR parity appreciated to PKR286.45 to a US$.

Results announcements for the period ended June 30, 2023 continued during the week. Several companies posted results below past performances mainly owing to the lingering global and local economic headwinds resulting in record high interest rates, deteriorating exchange rate, imposition of super tax, amongst other reasons.

Monetary policy announcement is scheduled for July 31, with market consensus remaining at a 100bps hike.

In other positive news, 5 state owned enterprises (SOEs) have signed  MoUs to finance their 30% portion in the development of a Greenfield refinery project with Saudi Aramco, and establishment of a Sovereign Wealth Fund worth PKR2.3 trillion by including 7 SOEs (where UAE has shown interest in acquiring shares) to fund capital investments. Abu Dhabi Investment Authority has provided technical assistance to finalize the law.

Other news for the week were: 1) global crude oil remained higher owing to production cuts amidst sluggish demand from China, 2) Pakistan scheduled to repay US$2.44 billion during July; 3) an electricity tariff hike for PKR7.50 per unit announced, barring consumers using up to 200 units and partial subsidy for consumers up to 300 units; 4) prolonged wet spell threatens cotton crop output; 5) POL products worth US$1.182 billion imported on deferred payment basis from Saudi Arabia; 6) Petroleum dealers margins increase by PKR1.64 per liter; 7) US FED announced rate interest rate hike by 0.25bps.

Flow-wise, major selling was recorded by Mutual Funds with a net sell of US$5.98 million. Other Organization absorbed most of the selling with a net buy of US$5.22 million.

Top performing scrips during the week were: HGFA, AICL, HBL, NBP, and SHEL, while top laggards included: SML, BNWM, DAWH, MUGHAL, and ENGRO.

In brokers’ opinion, the market shall maintain it’s positive uptick owing to news relating to Chinese loans rollovers, fresh funding from GCC and other bilateral allies, chances of political stability post general elections towards the end of the year and a possible re-entry into a bigger IMF program to address any lingering default concerns.

However, it is imperative to see which direction the policy rate goes in the July 31, announcement, which will further determine market sentiments.

Brokers reiterate their stance to follow a cautious approach while taking new positions and we continue to advocate dollar-denominated revenue stream scrips (Technology and E&P sector) to hedge against currency risk or high dividend yielding scrips.

 

 

 

 

North Korea, China and Russia commemorate victory 70 years ago

Delegations from Russia and China, North Korea’s key allies in the Korean War, gathered in Pyongyang this week to celebrate North Korea’s Victory Day in the war that ravaged the Korean Peninsula seven decades ago.

North Korean leader Kim Jong Un gave Russian Defense Minister Sergei Shoigu – an architect of Moscow’s assault on Ukraine – a tour of a defense exposition in Pyongyang on Wednesday, with images from North Korean media showing them walking past an array of weaponry, from Pyongyang’s nuclear-capable ballistic missiles to its newest drones.

At a state reception for Shoigu and the Russian delegation, in a reference to the war in Ukraine, North Korean Defense Minister Kang Sun Nam expressed Pyongyang’s full support for the just struggle of the Russian army and people to defend the sovereignty and security of the country, according to a report from the state-run Korean Central News Agency (KCNA).

In remarks of his own, Shoigu then said the Korean People’s Army (KPA) has become the strongest army in the world and pledged continued cooperation to keep it that way.

Also Wednesday, at a reception for the Chinese delegation led by Politburo member Li Hongzhong, senior North Korean official Kim Song Nam thanked Chinese forces for joining in the Korean War, saying North Korea “would not forget forever the heroic feats and merits of the bravery soldiers who recorded a brilliant page in the history.”

Ankit Panda, Stanton senior fellow in the Nuclear Policy Program at the Carnegie Endowment for International Peace said the presence of the Chinese and Russian delegations at the armistice anniversary underscores the importance Pyongyang attaches to its relationships with both countries.

“Shoigu’s presence is particularly notable, a sign of just how close Pyongyang and Moscow have become since Russia’s invasion of Ukraine last year,” Panda said.

The gathering in Pyongyang illustrates a weakness too, said Blake Herzinger, a research fellow at the United States Studies Center in Australia.

“It’s really representative of how short both China and Russia’s lists of friends are, and the willingness of both to show support for a rogue regime,” Herzinger said.

Thursday was the 70th anniversary of the end of the 1950-1953 Korean War, one of the first international conflicts of the Cold War era.

In the fall of 1950, China sent a quarter million troops into the Korean Peninsula, supporting its North Korean ally and pushing back the combined forces of South Korea, the United States and other countries under the United Nations Command.

More than 180,000 Chinese troops died in the Korean War, Beijing calls the War to Resist US Aggression and Aid Korea.

Russia’s predecessor, the Soviet Union, also supported North Korea during the war, with combat support like Soviet aircraft engaging US jets and with supplies of heavy weaponry like tanks.

Despite Pyongyang’s claims of a victory, the war it launched in 1950 ended in a stalemate, with the current demilitarized zone along the 38th parallel in much the same location as it was before the war.

The Korean War armistice was signed on July 27, 1953, ending hostilities although a true peace deal has never been signed.

After the war, the US, which anchored the UN Command that supported South Korea, kept a large contingent of troops in the South at a range of Army and air bases. The US Camp Humphreys in Pyeongtaek, south of Seoul, is the largest overseas US military base.

Meanwhile, Moscow over the decades has been a staunch ally for North Korea, especially as the two share a joint animosity toward the West. The same can be said for the Chinese Communist Party, especially under China’s current leader Xi Jinping.

Panda noted how both Moscow and Beijing, permanent members of the UN Security Council, have defended Pyongyang’s interests before the world body as Western powers led by the US have tried to put further sanctions on North Korea.

Now the three authoritarian nuclear powers are putting up a united front over Ukraine, a former Soviet state which Russia invaded in February 2022 after Russian President Vladimir Putin declared it was historically Russian territory.

That invasion soon stumbled as Ukrainians put up a fierce defense of their homeland and as Western powers scrambled to send weapons and ammunition to Kyiv while Moscow burned through its own stocks and looked to allies like Iran and North Korea to resupply.

US officials said last year that North Korea was selling millions of rockets and artillery shells to Russia for use on the battlefield in Ukraine.

China has not supplied Russia with weaponry, but remained steadfastly in Moscow’s corner as the war in Ukraine drags into its 18th month, with Xi deepening his relationship with Putin and echoing the Kremlin’s rhetoric over the conflict.

After the brief mutiny in Russia by the Wagner mercenary group last month, a Chinese Foreign Ministry spokesperson expressed support for the Putin regime.

“As Russia’s friendly neighbor and comprehensive strategic partner of coordination for the new era, China supports Russia in maintaining national stability and achieving development and prosperity,” an online statement said.

Russian and Chinese militaries have been active in the waters off the Korean Peninsula, with their latest joint exercise, Northern/Interaction-2023, bringing together naval and air forces from both countries in drills aiming to “strengthen both sides’ capabilities of jointly safeguarding regional peace and stability and responding to various security challenges,” according to the People’s Liberation Army’s English website.

Those exercises in the waters between the Korean Peninsula and Japan occurred as South Korea and the US were conducting military displays of their own, including a US Navy nuclear-capable ballistic missile submarine making a port call in South Korea for the first time in four decades.

Pyongyang’s armistice commemorations were expected to continue Thursday with a military parade in the capital. North Korea typically marks key moments in its history with displays of its newest weaponry.

One such weapon that may be on display is the Hwasong-18 ICBM, a solid-fueled, nuclear-capable missile that North Korea claims could hit anywhere in the United States. It has tested that missile twice this year, most recently earlier this month.

Saudi Arabia welcomes UN initiative to resolve decaying oil tanker issue

Saudi Arabia has welcomed United Nations initiative to implement an operational plan to solve the problem of the Saffer floating oil tanker and to start unloading its crude oil, which is estimated at 1.14 million barrels.

“The Kingdom would continue its efforts to work with the United Nations and the Yemeni government to end the oil tanker problem,” the Ministry of Foreign Affairs said in a statement.

The ministry welcomed the success of the international efforts and endeavors of the United Nations during the past years that culminated in the start of unloading the floating tanker and averting a marine environmental disaster that threatens maritime security and the economy in the Red Sea region.

Saudi Arabia appreciated the efforts of the UN Secretary General Antonio Guterres and the UN working team, who worked to harness all efforts to end this huge environmental problem. Saudi Arabia is one of the first donor countries to provide financial grants to Yemen through the King Salman Humanitarian Aid and Relief Center (KSRelief) as part of its efforts along with the international community to solve this problem.

The ministry expressed the Kingdom’s hope that the unloading of the tanker will soon be completed through using an alternative ship in line with the UN operational plan. It also thanked the leadership of the Arab Coalition to Support Legitimacy in Yemen for its support to facilitate the arrival of the ship to start the unloading process.

It is noteworthy that the UN recently announced the purchase of an alternative tanker to empty the crude oil. The UN Development Program had signed an agreement with the Euronav Company operating in the field of maritime transport to purchase a large crude oil tanker.

The rusting oil tanker Saffer is located less than five nautical miles off the coast of Yemen. After plying the seas for six years, the ship was converted in 1987 into a floating storage-and-offloading facility — cheaper than an onshore terminal — linked by pipeline to the Yemeni oilfields in Marib. Since 2015, operations have been disrupted by the country’s civil war. A skeleton crew maintains the ship, which is steadily corroding and could break apart at any moment.