Expansion of BRICS: What are the economic implications?

In late August it was announced that from 2024, the BRICS—a political grouping that currently comprises Brazil, Russia, India, China and South Africa—will admit six new members: Iran, Saudi Arabia, Egypt, Argentina, the UAE and Ethiopia.

The eleven countries combined represent around 45% of the planet’s population, over 40% of world oil production and roughly a third of global GDP. The BRICS average economic growth rate is likely to be notably above the global average. That said, the G7’s GDP is still substantially larger at market prices, and should remain so over the medium term.

The group’s key economic institution, the New Development Bank (NDB), is still tiny in comparison to other multilateral lenders. The Bank has financed projects worth around US$33 billion since 2015; in contrast, the World Bank alone committed around US$50 billion each year over the same period.

Other overarching economic structures are lacking, and a BRICS trade deal seems difficult to fathom given members’ vastly different stages of development and policy priorities.

Internal geopolitical disputes could further complicate economic rapprochement between members: Egypt and Ethiopia are at loggerheads over a dam on the Nile River, relations between Iran and its Gulf neighbors are still strained, and there are tensions between India and China over their shared Himalayan border and Indian restrictions on Chinese imports and technology.

The expansion of the BRICS could encourage greater political overtures and financial generosity from the G7 towards emerging markets going forward; the G20 summit later this year will be key to watch, with the UN calling on US$500 billion of annual financing from wealthy nations.

More countries are likely to join the BRICS in the coming years, as current members—particularly China and Russia—look to bolster an alternative to the G7-led world order.

BRICS members will increasingly conduct intra-member trade in local currencies to reduce dependence on the dollar, with the yuan and rupee set to be major beneficiaries.

That said, the US dollar will remain the global reserve currency for the foreseeable future - incumbency, dollar liquidity, the strength of the US economy, and the reliability of the US government as a debt issuer are key advantages. As for the BRICS grouping as a whole, it is likely to remain more of a political than an economic force.

On the BRICS’ prospects, EIU analysts said, “The BRICS group will not become a solid construction, regardless of how many bricks are added to the wall, and it will continue to face internal tensions and divisions. However, the expansion will bolster its geopolitical significance and its combined economic power, and the organization will continue to evolve. The relatively trouble-free and productive BRICS summit will enhance South Africa’s standing without damaging its relations with key Western partners.”

On the future of the dollar, ING analysts said, “Until international issuers and investors are happy to issue and hold international debt in non-dollar currencies – and the take-up of CNY Panda bonds has been very slow indeed – we suspect this will be a decade-long progression to a multi-polar world, a world in which perhaps the dollar, the euro and the renminbi become the dominant currencies in the Americas, Europe and Asia respectively.”

Courtesy: Focus Economics

Truth and Lies in the War on Terror

Six months after the invasion of Iraq in March 2003 and two years after the invasion of Afghanistan in October 2001, John Pilger’s documentary “Breaking the Silence: Truth and Lies in the War on Terror” highlighted the hypocrisy and double standards of the United States and British adventures of 2001-3, which led to the deaths of more than a million people.

The film opens with a series of haunting war photographs. Over the carnage, George W Bush says, ‘The United States will bring to the Iraqi people food and medicines and supplies, and freedom.’ His voice dissolves into the high-pitch of his co-conspirator, Tony Blair, who exalts his actions as ‘a fight for freedom’ and ‘a fight for justice’.

Pilger asks ‘What are the real aims of this war and who are the most threatening terrorists?' In a remote village in Afghanistan, he interviews Orifa, who lost eight members of her family, including six children, when an American plane dropped a 500-pound bomb on her mud-brick home. This is juxtaposed with Bush telling Congress that the United States is ‘a friend to the Afghan people’. Few countries have been helped less by the United States – less than three per cent of all aid to Afghanistan is for reconstruction from war damage. 

Kabul, the capital, is a maze of destruction, with cluster bombs not cleared from the city center and families living in abandoned buildings. ‘I’ve spent much of my life in places of upheaval, but I’ve rarely seen such a ruined city as Kabul,’ says Pilger, standing in a shoe factory where the populations of two villages have squatted, destitute. 

Most of the damage was inflicted not by the ‘official enemy’, the Taliban, but by warlords backed, trained and funded by the United States, who restored the poppy harvests and opium trade, which the Taliban had banned. 

Recalling the 1979 Soviet invasion of Afghanistan, Pilger reveals that President Jimmy Carter signed a secret presidential decree authorizing the bank-rolling of the warlords, known as the mujahedin, to fight the Red Army. Among them, the CIA and Britain's MI6 trained Islamic extremists, including Osama bin Laden, as part of what was called Operation Cyclone. From this, says Pilger, ‘came the Taliban, Al-Qaeda and the attacks of September 11’. 

The Taliban were also secret friends the United States. Shortly after they took power in Afghanistan, they were offered a bribe by the administration of President Bill Clinton if they backed a plan for an oil pipeline from central Asia through Afghanistan. However, when George W Bush became President, the connection between Al-Qaeda and the Taliban was an embarrassment, and the tie was cut. 

Pilger's interviews with administration officials – described by former CIA analyst Ray McGovern as ‘the crazies’ – are perhaps the highlight of a film made when 9/11 and the invasion of Iraq were raw.

He interviews Under Secretary of State John Bolton, who was Donald Trump's National Security Adviser. Bolton tells Pilger that the United States has done more ‘to create conditions in which individuals can be free around the world than any other country’.

When Pilger points to the US record of bombing countries into submission, Bolton says, ‘Are you a Labour Party member… or a Communist Party member?’ When Pilger replies that Tony Blair's Labour Party are his allies, he says, ‘Oh, really?’

Of all Pilger's films about American foreign policy, Breaking the Silence achieved something of a ‘cult’ status as counter-history and was shown across the United States – thanks in part to Ray McGovern, who took the film on a tour of campuses and small towns. ‘We warn people,’ he said, ‘about the crazies.’ Nothing, he might add today, has changed.

 

China tells India to stay calm in map row

According to the Saudi Gazette, China has told India to stay calm over a new Chinese map that Delhi says lays claim to its territory. India protested after Beijing released the map showing the north-eastern Arunachal Pradesh state and the disputed Aksai Chin plateau as China's territory.

Beijing responded by saying its neighbours should refrain from over-interpreting the issue.

Meanwhile, media reports say Chinese President Xi Jinping is likely to skip next week's G20 leaders’ talks in Delhi.

Unconfirmed reports suggest Premier Li Quang will attend instead. Xi had earlier confirmed he would travel to Delhi for the meeting from 9-10 September, but China's foreign ministry did not confirm his attendance when asked to do so at a regular press briefing on Thursday.

India is not the only country to object to the map — on Thursday, the Philippines and Malaysia issued protests against China's claim of ownership over most of the South China Sea in the map. Taiwan — which China says is a breakaway province that will eventually be under Beijing's control — also objected to its inclusion in the map.

A politician from Nepal also cancelled a visit to China, saying the new map did not take into account the country's revised map, which has already sparked tensions with India.

The escalation over the 2023 edition of China's standard national map comes just days after Indian Prime Minister Narendra Modi and President Xi spoke on the sidelines of the BRICS summit in South Africa.

Indian foreign minister, Foreign Minister Jaishankar called China's claim absurd. An Indian official said afterwards that the two countries had agreed to intensify efforts at expeditious disengagement and de-escalation along the disputed border.

On Thursday China indicated it wasn't budging on the map — the disputed border is an issue which has bedevilled relations for years.

"It is a routine practice in China's exercise of sovereignty in accordance with the law," foreign ministry spokesperson Wang Wenbin said.

"We hope relevant sides can stay objective and calm, and refrain from over-interpreting the issue."

India has often reacted angrily to China's attempts to stake claim to its territory.

The source of the tension between the neighbours is a disputed 3,440km (2,100 mile)-long de facto border along the Himalayas - called the Line of Actual Control, or LAC — which is poorly demarcated and soldiers on either side come face to face at many points.

China says it considers the whole of Arunachal Pradesh its territory, calling it South Tibet — a claim India firmly rejects. India claims the Aksai Chin plateau in the Himalayas, which is controlled by China.

Relations between India and China have worsened since 2020, when their troops were involved in a deadly clash at the Galwan valley in Ladakh - it was the first fatal confrontation between the two sides since 1975. 

Iran: Mahsa Amini Death Anniversary

Two weeks before the first anniversary of Mahsa Amini’s death in police custody and the many months of uprisings that followed Iran’s Islamic Republic has bared its iron fist towards the families and other Iranians preparing to pay their respects to the dead—over 500 women and men who sacrificed their lives and futures for the cause of “Woman, Life, Freedom.”

According to the critics, the regime has opted for a massive show of force and drastic measures to intimidate and crush all possible anti-government demonstrations. A month ago, it sent the Morality Police back to the streets of Iranian cities, which were quietly withdrawn last October, and is putting in place additional security forces to ensure women observe the Islamic head covering, or hijab.

The regime’s message is that not only will women who don’t cover properly be targeted, but all demonstrations and protests on the streets, universities, and other public places will be crushed. Supporters of Mahsa say the regime fears it will be unable to contain or control a revival of the protest movement ignited last September. Nor, apparently, does the regime feel it can afford once again to arrest thousands and kill several hundred of its young citizens. Thus, early preparation of preventive measures is essential.

Lately, the BBC reported widespread arrests of women activists by judiciary and security forces in Gilan, Mahabad, Oshnouyeh, Tehran and Tabriz. The Gilan activists, with the usual hyperbole, were accused of “Preparing the ground for fomenting riots and insurrection in the Gilan province and some cities in the Kurdistan province.”

Families who sought information about where their women were being held were given none. Over 200 gender and political researchers, artists and journalists in Iran and the diaspora have protested the arrest of the activists in Gilan and other provinces, as well as the false accusations brought against them.

The regime is also threatening the families of the protestors killed during the demonstrations last year. These families are, by implication, being warned not to hold observance ceremonies, visit the graves of their loved ones, or pay their respects to those who lost their lives during the uprisings.

Reports are circulating that shopkeepers and businesses have been warned not to close their premises to mark the anniversary.

The deputy head of the judiciary also warned protestors who were pardoned by the Supreme Leader and freed from prison not to participate in any new demonstrations; if arrested for a second time, they would have to face harsh punishment, he said.

According to the opponents, the regime has been purging academics from universities across the country that supported the students who participated in last year’s demonstrations and protested the arrests and imprisonment of their colleagues.

The targeted institutions include Tehran University, Iran’s ‘mother’ institution of higher education, and Sharif University, a technical institution widely considered Iran’s MIT, where the country’s leading engineers and scientists are trained. A substantial number of students have also been barred from attending classes and completing their studies.

These measures represent a throwback to the so-called ‘cultural revolution’ of the early days of the Islamic Republic when large numbers of professors were dismissed from universities.  

Iran’s syndicate of university professors has publicly condemned the “destructive interference” of security and intelligence forces in university affairs.

The regime is replacing dismissed professors with less qualified academics. One professor compared this purge to the thirteen-century Mongol invasion of Iran, spreading waste and destruction everywhere.

Meanwhile, the Ministry of Higher Education is revising the humanities curriculum of subjects like Western philosophy and dropping several topics, including English language and literature, cinematography, and sculpture. It also expands the teaching of Islamic philosophy, Islamic law and Islamic ethics.

According to some reports, a number of universities across the country will admit fewer women and are considering total segregation of women and men in university classes.

Even athletes and athletics have not been spared in this new crackdown. Last week, the people of Tehran woke up to astonishing news. On the eve of a popular national soccer tournament, whose matches are attended by tens of thousands of Iranians, bulldozers were busy demolishing the spectator stands in Tehran’s largest stadium.

Only last July, under pressure from international soccer organizations, the government decided women could attend these games – albeit sitting in segregated stands. The reason behind the recent demolition seems clear, the government cannot afford to have tens of thousands of male and female spectators under one roof.

The regime also cannot risk the probability that the majority of women will remove their hijabs or the high likelihood that the spectators will not only cheer the players but convert their cheering into slogans against the regime.

 

 

Commemorating the day Iranian President and Prime Minster were assassinated

Iranians commemorate National Day of Fight against Terrorism on August 30, which is considered a dark day in their country’s history. On a Sunday afternoon in 1981, only three years after the Islamic Revolution and amidst a full-scale war against Iran by its neighbor Iraq, a terrorist attack sent shockwaves throughout Iran. The country’s President Mohammad Ali Rajai and Prime Minister Mohammad Javad Bahonar were assassinated in an attack on a high-ranking meeting. 

The two figures who had dedicated their lives to serving their country were attending a council meeting at the Islamic Republic Party's building, discussing the pressing issues facing the country. Little did they know that a security personnel, entrusted with protecting them, would betray that trust and proceed to assassinate them.

The security man, named Massoud Kashmiri, entered the room with a briefcase that contained a bomb. In an instant, lives were lost, and the two senior officials were killed. The explosion also took the lives of two servicemen and a woman who happened to be passing by the building.
Mujahedin-e-Khalq, a terrorist organization, proudly claimed responsibility for the cowardly attack. They admitted to giving Kashmiri the mission to assassinate the two top officials. 

The news of the loss quickly spread across the country. The Tehran Times was one of the outlets that covered the tragedy and the countless reactions to it. According to a report published by the Tehran Times on September 01, hundreds of thousands of people attended the funeral ceremony of Bahonar and Rajai to bid farewell to the two beloved officials.   

Iran’s parliament released a statement after the attack urging people to not lose hope and to continue their mission toward full freedom. “Once again people like Banisadr, Bakhtiar, the MKO, and other hypocrites, have used their political and military fronts to undermine the Islamic Revolution. They have used all their powers to shatter the power and firmness of the Islamic republic, but to no avail, for the ship of the revolution is sailing at full speed ahead,” read the statement. 

Other officials congratulated the two men’s martyrdom, saying “No power can stain divine light” and that the revolution will continue despite “plots of the enemies”.

“The martyrdom of these two pure sons of Islam took place to show once again the feebleness and the wickedness of terrorism,” said the then Defense Minister Mousa Namjoo.

More than four decades after Bahonar and Rajai’s assassination, the two figures are still regarded as role models for their sincerity, perseverance, enthusiasm, and hard work. That’s while the terror organization responsible for their killing has not been able to take a breather from nonstop misery ever since.

The MKO, which was once on Washington’s list of terrorist organizations, began an unsuccessful quest to find safety soon after the Iran-Iraq war ended. 

The terrorists were first relocated from their primary camp, Ashraf, in Iraq’s Diyala Province to Camp Hurriyet, a former US military base in Baghdad, where they lived under constant fear of getting targeted by Iranian forces. They were later sent to another camp in Albania until 2023 when their residence was raided by Albanian police. Some reports suggest the group should be looking for a new shelter as their kingpin, Maryam Rajavi, was banned from entering the Eastern European country and the group was put under investigation by Albania’s judiciary. 

It seems that the terrorists who thought they would be able to change the course of Iran’s history by assassinating top figures and killing innocent civilians have finally reached their end. 

 

 

PetroChina posts record profit

State-owned energy giant PetroChina, reported a record-high net profit for the first half of the year 2023, driven by increased oil and gas output and resurgent refined fuel sales.

Net profit attributable to shareholders was 85.3 billion yuan or US$11.70 billion, up 4.5% for the same period last year, according to a filing with the Hong Kong Stock Exchange on Wednesday.

Total revenue was down 8.3% to 1.48 trillion yuan, due to a sustained fall in global oil prices after an initial spike in the immediate aftermath of Russia's invasion of Ukraine in February 2022.

The company reported realized crude oil prices of US$74.15 per barrel, having slid 21.7% on the average for the same period last year.

However, PetroChina's total crude oil and natural gas equivalent output was 893.8 million barrels, representing a 5.8% increase on last year, supporting a 3.7% increase in operating profit for the group's upstream segment.

Domestic crude output rose 1.2%, whilst the development of key projects in Central Asia and the Middle East saw overseas crude production leap 27.8% over the period.

Total domestic refinery throughput for the first half was 673 million barrels, a 12.6% increase as compared to last year when extensive COVID-19 lockdowns hammered demand for refined fuel products in the country.

The group previously announced to raise crude throughput to 1.29 billion barrels this year, up 6.6% from 2022.

Operating profit from the group's sales segment jumped 28.4% as compared to last year. Total sales volume of gasoline, kerosene and diesel increased 12.9% to 80.7 million metric tons, with domestic sales accounting for around 74% of this.

While domestic demand for transport fuels such as kerosene and gasoline has rebounded with the removal of travel restrictions, the group saw weaker earnings from petrochemical products such as polypropylene, amid a glut of domestic supply.

Capex for the first half was 85.1 billion yuan, down 7.8% as compared to last year. PetroChina had previously set a capex target of 243.5 billion yuan for 2023, which would represent an 11% drop as compared to last year.

Looking forward to the second half of the year, the group stated it will further deepen cooperation in overseas oil and gas markets, actively acquire large-scale and high-quality projects and continuously optimize asset structure.

 

 

European energy crisis may be back soon

According to the Financial Trend Forecaster, European natural gas prices soared almost 40% on the risk of a global liquefied natural gas shortage. European wholesale power prices remain below the record highs of the energy crisis but have steadily climbed as the volatility in the international commodity spectrum underscores the fragility of the European energy system.

Unfortunately, the European Union bureaucrats declared the end of the energy crisis as if it were the result of decisive policy action, but the reality is that the energy problem in the EU was only diminished by purely external factors: a very mild winter and the decline in global commodity prices due to the central bank rate hikes. Thus, the energy crisis remains, and the problems of security of supply and affordability of the system persist.

The European Union’s dependency on Russian gas has not been solved; it has only been disguised by a massive increase in dependency on coal (lignite) in the case of Germany and expensive liquefied natural gas imported from the rest of the world.

At the end of 2022, Germany’s energy mix was the clearest example of its energy policy failure. Hard coal and lignite accounted for 31.2%, natural gas 13.8%, and mineral oil 0.8%, with nuclear at 6.0%. After almost 200 billion euros in renewable subsidies, Germany needs more coal and imported natural gas.

What did the government decide after facing the mistake of shutting down almost all its nuclear fleet? Double down and continue with the process of closing the remaining ones. No wonder Germany is in recession. Its industrial model requires abundant and affordable energy, and the different governments have made the cost of energy uncompetitive.

Same is the problem with Spain, the government decided to implement an “Iberian exception” that eliminates the cost of gas from the wholesale power price only to charge it back to consumers as a surcharge in the bill. The result is Spain has the fifth highest electricity bill in Europe, which sent hundreds of millions of euros to France and Portugal that purchased the subsidized energy while the Spanish consumer paid the bill to natural gas producers, and its imports of Russian liquefied natural gas (LNG) soared, but the government tried to convince citizens that LNG from Novatek is not Russian gas because it is not a pipeline Gazprom supply, even when the supplier is a leading Russian energy multinational.

Even worse, the consumers have not seen the improvement in commodities in their bills. If we look at the latest reported Eurostat figures of household electricity prices, these increased in all but two EU Member States in the second half of 2022, compared with the second half of 2021, just as commodities slumped in international markets.

The average for the EU stands at 252 euros per MWh and 261 euros per MWh for the euro area. This is 20% to 30% higher than the average residential electricity rate in the United States, according to data from Energy Sage.

The European energy crisis was not solved. It was disguised thanks to a mild winter and the slowdown in coal and gas imports from China. European governments continue to place all their bets on a misguided energy transition that ignores security of supply and competitiveness and will make the EU depend on China for rare earths and metals as well as the US and OPEC for commodities.

The European Union should have abandoned ideological decisions and allowed technology, competition, and industry to provide the optimal solution that delivers a competitive and secure supply of energy.

Deciding to forbid the development of domestic resources and focus on intermittent and volatile sources of energy before the battery technology is fully operational is an enormous mistake that condemns the European Union to suffer higher costs and lower growth. Environmental policies must be considered from a global perspective.

The EU accounts for less than 10% of global emissions but almost 100% of the cost. It needs to focus on competitiveness, security of supply, and respect for the environment from an industrial perspective. Ignoring the importance of making the most of nuclear, hydroelectric, gas, and all other available sources is dangerous.

In China or the United States, affordability, security of supply, and competitiveness are the drivers of energy policy.

In Europe, it is a misguided view of “not in my backyard” that is making the continent more dependent on others, not less. Subsidies are delaying the necessary development of intermittent and volatile energy sources because policymakers reject the importance of creative destruction and competition as driving forces of progress. Interventionism is not delivering better or cheaper energy; it is making the European Union lose in the technology and energy security race.