United States losing grip over Middle East

The events of October 07, 2023, marked a significant turning point for both Israel and the Arab world. The attack by Hamas has initiated a new era in regional dynamics. In the years leading up to this, four Arab League members—Bahrain, Morocco, Sudan, and the United Arab Emirates—had begun normalizing diplomatic relations with Israel. As of late 2023, Saudi Arabia was also considering a similar move.

However, the attack by Hamas and Israel’s subsequent military action in Gaza has halted progress toward normalization. Saudi Arabia announced it would not proceed with normalization until Israel takes steps toward establishing a Palestinian state. Additionally, Jordan recalled its ambassador to Israel, and a planned visit by Israeli Prime Minister Benjamin Netanyahu to Morocco was canceled.

Arab leaders are increasingly concerned as public opposition to the war in Gaza grows. Protests have erupted in many Arab countries, with demonstrators in Jordan and Morocco demanding the end of their countries' peace treaties with Israel. This public sentiment highlights frustration over perceived government inaction.

October 07 may also prove pivotal for the United States. The Gaza conflict has significantly damaged Arab public opinion of the US, complicating its efforts to resolve the Gaza crisis, manage Iran, and counter China's influence in the Middle East.

Arab Barometer’s surveys reveal a significant drop in favorable views of the US across the Arab world, reversing a trend of improved opinions seen up to 2022. In contrast, views of China have improved, driven by dissatisfaction with US policies rather than specific approval of Chinese actions regarding Gaza.

For US leaders, resolving the Gaza conflict and fostering a permanent Israeli-Palestinian settlement are crucial. Additionally, securing the Red Sea and building a regional alliance to counter Iran and limit China’s influence are key objectives. However, achieving these goals requires the cooperation of Arab states, which is difficult with the current level of public skepticism toward the US.

The belief that Arab leaders are indifferent to public opinion is a misconception. The Arab Spring and subsequent protests have shown that public sentiment can influence leadership changes. Hence, US policymakers must consider Arab public opinion to effectively engage with the region.

Surveys indicate that Arab skepticism towards the US can be reversed through policy changes. Measures such as advocating for a ceasefire in Gaza, increasing humanitarian aid, and supporting a two-state solution could improve perceptions of the US. Ultimately, demonstrating concern for Palestinian suffering as much as for Israeli suffering is crucial for the US to regain trust among Arab citizens.

Iran: Candidates receive mixed response

Schedules of the six candidates running for president in the June 28 elections were abuzz with activities and interviews, as they faced conflicting views on their announced policies

Each of the six candidates has selected a campaign manager. Notably, Ali Nikzad, the former Iranian minister of housing and urban development, has been chosen by Mohammad Baqer Qalibaf to lead the candidate's promotional efforts. Nikzad was unable to secure approval from the Guardian Council to run as a candidate.

The candidate who garnered the most attention on Tuesday was Masoud Pezeshkian, seen as the reformists' sole chance to reclaim influence. Pezeshkian's earlier statements on national television drew backlash from conservatives, who argued that the candidates appear to lack concrete strategies for crucial matters such as the economy, housing, and foreign policy.

Pezeshkian’s supporters and prominent figures holding moderate and reformist views were quick to come to his defense. The secretary general of the Servants of Construction Party argued that even though Pezeshkian has outlined no plans, he would never do something “detrimental” to the general public as he is “close to the masses”.  

Notably, former Vice President Is’haq Jahangiri, another face among the 74 failing to run for president this year, announced his full support for Pezeshkian. “He is the epitome of sincerity, assertiveness, courage, and moral living,” Jahangiri wrote in a post on X. 

Jahangiri was the vice president under Hassan Rouhani, who won the presidential elections twice with high votes. While the former vice president is undoubtedly considered to be a valuable source of support for Pezeshkian, analysts argue that the collapse of the Joint Comprehensive Plan of Action (JCPOA) has caused many voters to decouple from Rouhani and his allies, potentially limiting Jahangiri's influence in helping Pezeshkian collect votes. 

Remarks by conservatives on national television did not seem to stir much debate on Tuesday. Reformists and moderates mostly drew on previous assumptions to portray some of them as politicians with no flexibility. 

A prominent analyst suggested that none of the four conservatives stand a chance of winning the presidency unless some of them withdraw in support of others. Similar cautionary signals suggest that Pezeshkian may still present a significant challenge to his conservative rivals, despite uncertainties surrounding his popularity.

Mostafa Pourmohammadi, who is believed to hold somewhat moderate views, also spoke to the people on Tuesday. In his remarks, he had a vague emphasis on “happiness”, stating that the government should prepare means of becoming and staying happy for the citizens.

Courtesy: Tehran Times

 

Netanyahu and Gantz two sides of same coin

The resignation of Benny Gantz from Prime Minister Benjamin Netanyahu’s war cabinet has laid bare widening cracks within the Israeli establishment as the regime’s global isolation deepens over its genocidal war on the Gaza Strip.

"Unfortunately, Netanyahu is preventing us from approaching true victory, which is the justification for the painful ongoing crisis," Gantz said in a televised statement on Sunday evening as he announced his resignation. 

Undoubtedly, it is a fallacy that Gantz would have acted any differently than Netanyahu if he had been in Bibi’s shoes following the October 07 Hamas attack. Gantz is playing the blame game when he accuses Netanyahu, known as Bibi, of denying Israel “true victory” because both of them want to see the elimination of Hamas from Gaza.

Gantz is Netanyahu’s chief political rival. Polls suggest if snap elections were held today, he would be the winner. 
Hence, making such critical remarks is not surprising. 

Both Netanyahu and Gantz are criminals who have the blood of a large number of Palestinians on their hands.   

The slaughter of more than 37,000 Palestinians in Gaza since October 07, 2023 is just the tip of the iceberg.  

Gantz had already threatened to step down if Netanyahu did not lay out how Israel would achieve its “six strategic goals” in Gaza which include the end of Hamas rule in Gaza.

More than eight months have passed since Israel declared war on Gaza following Hamas’ surprise military operation in southern Israel on October 07. Israel has not only failed to bring Hamas to its knees but the regime has suffered major defeats at the hands of resistance fighters on the battlefield. 

Laying out plans for defeating Hamas is just wishful thinking because the resistance movement has become stronger and support for it has grown in the Palestinian territories over the past months. 

True victory for them means defeating Hamas, but this dream will remain elusive even if Gantz or others succeed Netanyahu. 

Netanyahu and his coalition partners still have 64 of the Israeli parliament’s 120 seats. His cabinet will not collapse following the resignation of Gantz if far-right ministers, namely National Security Minister Itamar Ben-Gvir and Finance Minister Bezalel Smotrich do not make good on their threats to leave the cabinet. 

Netanyahu could safely stay in office till elections are due in October 2026. But he will become more heavily reliant on far-right ministers who now want a spot in the war cabinet to replace Gantz.  

Gantz’s decision to quit the war cabinet could be a clever ploy because he wants to shirk responsibility for Israel’s failure to achieve its military goals in Gaza. He wants to appear as a savior and woo voters in a future election. 

Netanyahu, criticized his move, saying in a post on X, “Benny, this is not the time to quit the campaign, this is the time to join forces."

Far-right ministers made a blistering attack on Gantz too.

 “There is no act less stately than withdrawing from the government during a war,” Smotrich said.

He accused Gantz of fulfilling the demands of Hamas, Lebanon’s Hezbollah, and Iran by his decision to leave the war cabinet. 

Netanyahu regime has vowed to continue the Gaza war in defiance of growing international calls to reach a deal with Hamas.  

The United States and its allies blame Netanyahu for the continuation of the Gaza war. They have depicted Gantz as a centrist politician who can end the onslaught. 

A question arises, is Gantz different from Netanyahu?

Undoubtedly, it is a fallacy that Gantz would have acted any differently than Netanyahu if he had been in Bibi’s shoes following the October 07 Hamas attack.

Gantz is a former chief of staff of the Israeli military and also a former war minister. 

He was the army chief when the regime launched war on Gaza in 2012. The Israeli rights group B’Tselem said the Israeli army under Gantz’s leadership killed nearly 170 Palestinians during the war. 

In another war against Gaza in 2014, more than 2,000 Palestinians including over 500 children were butchered by Israeli forces while Gantz was still the army chief. 

The Israeli army also killed hundreds of Palestinians in Gaza in May 2021 and August 2023 when Gantz was the regime’s war minister. 

In his 2019 campaign for the Israeli Keneseth, Gantz put out a video of destruction in Gaza in the 2014 war. In that video, he bragged about sending parts of Gaza “back to the Stone Age”. 

This is in addition to the killings of Palestinians in the West Bank at the hands of Israeli forces during the era that Gantz held top military posts. 

The comments made by Gantz and the Israeli military’s brutalities when he was the chief of staff and war minister clearly show how he thinks about Palestinians. 

Now it seems Netanyahu is playing the role of the bad cop and Gantz is the role of the good cop.

But, in essence, they are members of the bogus apartheid regime. 

As long as the US and its Western allies continue to support Israel, the regime will not end acts of genocide in the Palestinian territories. The regime seeks to make the Palestinian territories uninhabitable for Palestinians and force them to leave their homes, which amounts to ethnic cleansing. 

 Courtesy: Tehran Times

Forecasting gold price movement

Gold prices hit a record of over US$2,400 per troy ounce in mid-May. The commodity is up by around 20% over the last year and is up by close to 50% since late 2022, and is now nearly double the level that prevailed for much of the 2010s.

Two key factors are at play behind this Bull Run. The first is smoldering geopolitical tensions amid US-China frictions and wars in the Middle East and Europe, which have stoked safe-haven demand. The second—and perhaps most important—is central bank purchases.

Monetary authorities snapped up more than 1,000 tons of the metal in 2022 and 2023, around double the average of the prior decade, and gobbled up a record amount in Q1 2024 as they looked to diversify their reserves and hedge against potential currency depreciation. These drivers outweighed a strong US dollar and high interest rates, which generally tend to weigh on gold prices.

Analysts have become increasingly optimistic on the outlook of yellow metal so far this year. The average gold prices forecast for 2024–2028 are about 10% higher now than back in January. The metal in the coming years will remain—for the first time in history—comfortably above US$2,000 per troy ounce.

The drivers of this bright projection are manifold. Firstly, gold jewelry consumption is set to rise globally as emerging market consumers become ever-wealthier. Moreover, geopolitical risk will likely remain, spurring safe-haven demand.

Furthermore, the growth of high-tech manufacturing will also require more gold; the metal is used in most automobiles and consumer electronics.

Finally, production of the metal is seen as fairly stagnant ahead, as declining grades and the depletion of mine reserves offset the impact of new mines and expansions.

The outlook for silver prices is also upbeat

Gold and silver prices tend to move in close correlation, given that both are used in jewelry and as investment and safe-haven assets. As with gold prices, silver prices peaked in mid-May at an over-decade high, and are seen at historically elevated levels of over US$25 per troy ounce over forecast horizon to 2028. But silver has one crucial difference to gold. It is more widely used in industry, particularly in high-growth sectors such as solar panels and electric cars, which will give an extra boost for silver prices in the coming years. Couple this with the metal’s currently high price discount with gold and silver looks even more appealing. Gold may be capturing most of the headlines right now, but prospects for silver prices are at least as bright.

 

Democrats to Boycott Netanyahu Speech

A growing number of House Democrats plan to boycott Israeli Prime Minister Benjamin Netanyahu's upcoming speech to Congress on July 24, criticizing his approach to the Hamas conflict and his disregard for President Biden's preferred strategies.

Netanyahu's upcoming speech to Congress has deepened existing divisions among House Democrats. While some plan to boycott in protest of his policies and actions, others will attend to demonstrate their support for Israel as a vital ally. This event underscores the broader debate within the party over the best approach to the Israeli-Palestinian conflict and US foreign policy in the Middle East.

Several lawmakers, such as Hank Johnson, have explicitly stated their intention to avoid the event, reflecting a long-standing animosity toward Netanyahu's conservative policies and actions, including his criticisms of the Iran nuclear deal during Obama's presidency.

In 2015, Netanyahu's speech to Congress sparked a similar boycott due to his opposition to the Iran deal and Speaker John Boehner's coordination of the event without consulting the White House.

This year, at least 58 lawmakers plan to boycott again, among them Lloyd Doggett and Jan Schakowsky, both critical of Netanyahu's actions in the Gaza conflict. They argue that his approach has led to unnecessary loss of life and that he should focus on peace efforts rather than addressing Congress.

While some Democrats plan to boycott the speech, others intend to attend to show solidarity with Israel. Juan Vargas emphasized the importance of supporting Israel as a democratically, despite internal divisions within the Democratic caucus. Top House Democrats, including Pete Aguilar and House Minority Leader Hakeem Jeffries, acknowledge that each member must decide whether to attend based on their beliefs and the views of their constituents.

Netanyahu's visit highlights ongoing tensions within the Democratic Party regarding US policy toward Israel and the Palestinian territories. Pro-Israel Democrats often clash with pro-Palestinian progressives over civilian casualties in Gaza.

The announcement of Netanyahu's address by Speaker Mike Johnson and Senate Minority Leader Mitch McConnell excluded Senate Majority Leader Chuck Schumer and Jeffries, despite their earlier support for the invitation.

Former Speaker Nancy Pelosi expressed her disapproval of the invitation, arguing that she would not have extended it if she were still leading House Democrats.

Schumer, while critical of Netanyahu's policies, believes in the importance of maintaining strong US-Israel relations.

Supporters of the speech, like Josh Gottheimer, argue that hearing from a key ally like Israel is crucial, especially given the ongoing threats from groups like Hamas and Iran-backed proxies. They emphasize the need for continued collaboration between the US and Israel in combating terrorism and ensuring regional stability.

Pakistan: Central Bank Reduces Interest Rate

At its meeting on June 10, 2024, the Monetary Policy Committee (MPC) decided to reduce the policy rate by 150 bps to 20.5%, effective from June 11, 2024. The MPC noted that while the significant decline in inflation since February was broadly in line with expectations, the May outturn was better than anticipated earlier. 

The Committee assessed that underlying inflationary pressures are also subsiding amidst tight monetary policy stance, supported by fiscal consolidation. This is reflected by continued moderation in core inflation and ease in inflation expectations of both consumers and businesses in the latest surveys. At the same time, the MPC viewed some upside risks to the near-term inflation outlook associated with the upcoming budgetary measures and uncertainty regarding future energy price adjustments. Notwithstanding these risks and today’s decision, the Committee noted that the cumulative impact of the earlier monetary tightening is expected to keep inflationary pressures in check.

The MPC noted the following key developments since its last meeting. First, real GDP growth remained moderate at 2.4% in FY24 as per provisional data, with subdued recovery in industry and services partially offsetting the strong growth in agriculture. Second, reduction in the current account deficit has helped improve the FX reserves to around US$9 billion despite large debt repayments and weak official inflows. The government has also approached the IMF for an Extended Fund Facility program, which is likely to unlock financial inflows that will help in further build-up of FX buffers. Lastly, international oil prices have declined, whereas non-oil commodity prices have continued to inch up.

Based on these developments, the Committee, on balance, viewed that it is now an appropriate time to reduce the policy rate. The Committee noted that the real interest rate still remains significantly positive, which is important to continue guiding inflation to the medium-term target of 5 – 7 percent. The Committee also emphasized that the future monetary policy decisions will remain data-driven and responsive to evolving developments related to the inflation outlook.

Real Sector

Latest estimates indicate real GDP growth at 2.1% in Q3-FY24 against a contraction of 1.1% in the same quarter last year. While agriculture was already showing strong growth, industry also witnessed positive growth in Q3. Also, initial growth estimates for both Q1 and Q2 for FY24 were revised upward. Taking into account the developments in the first nine months, FY24 growth is provisionally estimated by PBS at 2.4% against a contraction of 0.2% in FY23. Almost two-thirds of this recovery was explained by improvement in the agriculture sector. These developments are in line with the Committee’s earlier expectations. For FY25, the MPC expects economic growth to remain moderate. This assessment takes into account the impact of expected moderation in agriculture output and ongoing stabilization policies.

External Sector

The current account posted a surplus for the third consecutive month in April on the back of robust growth in remittances and exports, which more than offset the uptick in imports. During July-April FY24, the current account deficit narrowed significantly to US$202 million. In the same period, exports grew by 10.6%, mainly driven by increased quantum of rice and higher value-added textile exports. Conversely, imports decreased by 5.3% during the same period due to lower international commodity prices, better domestic agriculture output and moderate economic activity. Workers’ remittances also remained robust in recent months, reaching an all-time high of US$3.2 billion in May 2024. The resultant lower current account deficit, along with improved FDI and the disbursement of SBA tranche in April, has facilitated ongoing large debt repayments and supported the foreign exchange reserves held by the central bank. Going forward, the Committee stressed that timely mobilization of financial inflows is essential to meet the external financing requirements and further strengthen FX buffers for the country to effectively respond to any external shocks and support sustainable economic growth.

Fiscal sector

Fiscal indictors continued to show improvement during July-March FY24. The primary surplus increased to 1.5% of GDP, while the overall deficit remained almost at last year’s level. A large part of this improvement reflected the impact of increase in tax and PDL rates, higher SBP profit, and lower energy sector subsidies. Considering there has been limited progress in addressing the structural weaknesses to broaden the tax base and initiate energy sector reforms, FY25 budgetary measures are also expected to be largely rate-based. In this backdrop, the Committee emphasized that fiscal consolidation through broadening the tax base and reforming loss-making public sector enterprises would help achieve fiscal sustainability on a more durable basis. This is also imperative to keep inflation on a downward trajectory and contain external account pressures.

Money and credit

The broad money (M2) growth decelerated to 15.2%YoY on May 24, 2024 from 17.1% as of end-March 2024. This reduction was primarily due to deceleration in growth of net domestic assets of the banking system. On the other hand, the growth contribution of net foreign assets in M2 remained positive.

From the liability side, deposits remained the mainstay in M2 growth, while currency in circulation growth decelerated. As a result, reserve money growth observed a steep decline from 10.0% to 4.3% during the period. The MPC noted that these developments in monetary aggregates are consistent with the tight monetary policy stance and have favorable implications for the inflation outlook.

Inflation outlook

Headline inflation decelerated to 11.8% in May 2024 from 17.3% in April. Besides the continued tight monetary policy stance, this sharp reduction was also driven by a sizeable decline in prices of wheat, wheat flour, and some other major food items, along with the downward adjustment in administered energy prices. Core inflation also decelerated to 14.2% from 15.6%. The Committee noted that the near-term inflation outlook is susceptible to risks emanating from the FY25 budgetary measures and future adjustments in electricity and gas tariffs. The MPC foresees a risk of inflation to rise significantly in July 2024 from current levels, before trending down gradually during FY25. The MPC also observed that sharp wheat price reductions have historically proved to be temporary. On balance, the Committee assessed that the current monetary policy stance remains appropriate to ensure that inflation stays on a downward trajectory.

 

 

US-Saudi Arabia to sign security treaty

The Biden administration is close to finalizing a treaty with Saudi Arabia that would commit the United States to help defend the Gulf nation as part of a deal aimed at encouraging diplomatic ties between Riyadh and Israel, the Wall Street Journal reported on Sunday.

The possible deal, widely telegraphed by US and other officials for weeks, is part of a wider package that would include a US-Saudi civil nuclear pact, steps toward the establishment of a Palestinian state and an end to the war in Gaza, where months of ceasefire efforts have failed to bring peace.

Approval of the treaty, which the WSJ said would be known as the Strategic Alliance Agreement, would require a two-thirds majority vote in the US Senate, a threshold that would be difficult to achieve unless the treaty were tied to Israeli-Saudi normalization.

The draft treaty is modeled loosely on Washington's mutual security pact with Japan, the newspaper cited US and Saudi officials as saying.

In exchange for the US commitment to help defend Saudi Arabia if it were attacked, the draft treaty would grant Washington access to Saudi territory and airspace to protect US interests and regional partners, the newspaper reported.

It is also intended to bind Riyadh closer to Washington by prohibiting China from building bases in the kingdom or pursuing security cooperation with Riyadh, the WSJ quoted officials as saying.

The White House, the US State Department and the Saudi embassy in Washington did not immediately respond to requests for comment.