Sunday 8 September 2024

Bangladesh: One month of hope and despair

A month ago, as Bangladesh teetered on the brink of chaos after the downfall of Sheikh Hasina, Nobel Laureate Muhammad Yunus returned home to steer the nation through political turbulence.

It was a dramatic turnaround for Yunus, who faced relentless legal peril at home but ultimately emerged as the savior of a scarred nation. Many feared that Yunus, the nemesis of Hasina, would land in jail during her tenure, but on August 08, 2024 he came back from Paris to a hero’s welcome and headed to the presidential palace to take over the helm of Bangladesh, a country in flux. His long-time tormentor, Hasina, had fled three days earlier.

The students, who had spearheaded the protests and catalyzed the people’s uprising, championed Yunus as their choice for the head of an interim government. People were relieved that he had indeed agreed to take charge. And as such, the economics professor came to personify the hopes and aspirations of Bangladesh.

His arrival ended a four-day power vacuum. He spoke to the media as if he was already in charge, celebrating what he said was a “second liberation”, imploring the countrymen to keep faith in him and sending a message of unity to the nation in times of an unprecedented crisis.

At Dhaka airport, he shared words of empathy with anti-government protesters. At times, he struggled to fight back tears, a rare display of grief, when he remembered Abu Sayed, who died in a hail of bullets fired by the police.

The first few days, as expected, were steeped in symbolism. His carefully chosen words – the rebirth of Bangladesh and renewal after a period of turmoil – resonated deeply with the audience.

Then came the hardest part. The interim government nervously began the heavy task of restoring law and order after weeks of deadly protests. A month went by, but the morale of the police force was still low. The police administration underwent major reshuffles in the past month. Officers largely stayed away from work and appeared to be reluctant to respond to disturbances.

Reprisal attacks spiked in the immediate aftermath of Hasina’s downfall, although it has now come down. But extortion and murder cases against journalists continue to be a big concern.

All of this means that maintaining law and order remains a formidable challenge for the interim government, as various groups try to exploit the social disorder to their advantage.

Yunus has initiated a major clean-up of key institutions, appointing a former IMF economist as the central bank governor to bring discipline to the banking sector.

Additionally, he has tasked another prominent economist with drafting a white paper on the entrenched corruption during Hasina’s 15-year tenure.

While the economy is still facing challenges, businesses are gradually recovering. The advisory council now faces the crucial task of implementing effective economic policies and reforms to rebuild public trust and attract foreign direct investment, ensuring long-term stability.

In the decades since the end of HM Ershad’s military rule in 1990, Bangladesh experienced an “economic miracle” that lifted tens of millions out of poverty, driven largely by a booming garment sector.

However, since emerging from the COVID-19 pandemic, the country has suffered from high inflation, particularly in food prices, and shortages of foreign currency.

These issues are largely attributed to corruption and government mismanagement.

For political reasons, Hasina’s administration was reluctant to pursue serious economic reforms. The recent unrest has only exacerbated the country’s economic problems, with garment buyers cancelling orders, which require serious and urgent attention.

One priority for Yunus should be re-establishing the independence of the Election Commission to build confidence in the forthcoming polls with the top bosses gone. Under the former prime minister, parliament became a rubber stamp, the civil service and judiciary were highly politicized, and the media and civil society were closely controlled.

“While some of these institutions will quickly flourish in a more open environment, others will bear the scars of subordination for years to come,” the Crisis Group said in a report.

It’s a race against time for Yunus who took over on August 08 with a fledgling team. He brought swift changes to the civil administration, police, the Rapid Action Battalion, the Detective Branch and the Directorate General of Forces Intelligence that Hasina exploited to create a culture of fear and intimidation. They enjoyed almost total impunity under Hasina’s administration.

It’s a monumental task for Yunus to make sure people have confidence they will not be arrested, abducted or even killed extrajudicially for political reasons.

Yunus also faces significant challenges in navigating the evolving geopolitical landscape, especially considering the aspirations of the Bangladeshi people. The relationship with India, traditionally seen as Hasina’s strongest supporter, has been strained due to Dhaka’s push for her extradition.

Although the interim government has stated that Hasina’s stay in New Delhi won’t affect bilateral relations, the changing public sentiment in Bangladesh requires careful management to maintain strategic cooperation with India and adopt a more balanced approach in foreign relations.

“In supporting her administration so staunchly despite its clear unpopularity, India has badly damaged itself in Bangladeshis’ eyes. If it now seems to be standing in the way of reform, it will only amplify anti-India sentiment, which could linger to the detriment of neighbourly relations,” the Crisis Group said.

India should instead support the interim government, and revive links with other parties too as part of a political renewal in Bangladesh.

The interim government faces numerous challenges as citizens demand justice on multiple fronts. It must priorities addressing the grievances of those affected by Hasina’s 15-year rule, implement necessary reforms and manage a smooth political transition. The new administration, at least for now, seems focused on “managing expectations from all sides.”

The domestic political landscape is fraught with challenges, as the uprising reflects deep dissatisfaction with the current system. The interim government, recognizing the urgency of the situation, has initiated dialogues with established political parties, civil society members, development partners and journalists to pursue reforms to create a more stable political environment.

One key option could be the revival of the caretaker government system, which was abolished by Hasina’s administration in 2011. This system could help ensure fair and transparent elections, reducing the risk of another autocratic leader emerging.

Hasina’s departure offers a unique opportunity to move beyond the hyper-partisan, winner-take-all electoral dynamics that have harmed Bangladeshi politics for the past three decades. It’s an opportunity to undo the past wrongdoings.

Courtesy: Daily Star

 

 

Saturday 7 September 2024

Erdogan calls for Islamic alliance against Israel

Turkish President Tayyip Erdogan said on Saturday Islamic countries should form an alliance against what he called "the growing threat of expansionism" from Israel, drawing a rebuke from the Israeli foreign minister.

He made the comment after describing what Palestinian and Turkish officials said was the killing by Israeli troops of a Turkish-American woman taking part in a protest on Friday against settlement expansion in the Israeli-occupied West Bank.

"The only step that will stop Israeli arrogance, Israeli banditry, and Israeli state terrorism is the alliance of Islamic countries," Erdogan said at an Islamic schools' association event near Istanbul.

He said recent steps that Turkey has taken to improve ties with Egypt and Syria are aimed at "forming a line of solidarity against the growing threat of expansionism," which he said also threatened Lebanon and Syria.

Israeli Foreign Minister Israel Katz said in a statement that Erdogan's remark was "a dangerous lie and incitement," and that the Turkish leader has been working for years with Iran to undermine the region's moderate Arab regimes.

Erdogan hosted Egyptian President Abdel Fattah al-Sisi in Ankara this week and they discussed the Gaza war and ways to further repair their long-frozen ties during what was the first such presidential visit in 12 years.

Ties between them started thawing in 2020 when Turkey began diplomatic efforts to ease tensions with estranged regional rivals, including the United Arab Emirates and Saudi Arabia.

Erdogan said in July that Turkey would extend an invitation to Syrian President Bashar al-Assad "any time" for possible talks to restore relations between the two neighbours, who severed ties in 2011 after the outbreak of the Syrian civil war.

Israel's military said after Friday's incident that it was looking into reports that a female foreign national "was killed as a result of shots fired in the area. The details of the incident and the circumstances in which she was hit are under review."

 

Zangezur Corridor red line for Iran

The head of National Security and Foreign Policy Committee of the Iranian parliament has reiterated that the Zangezur Corridor is a critical red line for Iran, warning that any attempts to alter its status or make unilateral moves in the region will be met with a firm response.

In an interview with ISNA News Agency on Saturday, Ebrahim Azizi emphasized that Iran has conveyed its position to regional countries through various diplomatic channels, stressing that the corridor's status is non-negotiable for Tehran.

In response to recent statements from Russian officials advocating for the opening of the Zangezur Corridor and their cooperation with Azerbaijan and Turkey in this matter, Azizi expressed Iran’s strong opposition.

"The geopolitical developments surrounding the Zangezur Corridor are not in the best interest of the region, and Iran is vehemently opposed to such moves," Azizi stated.

While underscoring Iran's commitment to regional stability, he made it clear that any threat to Iran’s territorial integrity would be met with resolute action.

"The Islamic Republic of Iran has always pursued peace and avoided escalating tensions in the region. However, if our territorial sovereignty is compromised, we will stand firm and will not allow any country to infringe upon us."

The strategic importance of the South Caucasus region was also highlighted by Azizi, who described it as a key axis in Eurasian geopolitics.

"Historically, this region has been part of Iran's civilizational sphere and has witnessed numerous geopolitical shifts over the centuries. Its role in energy transfer, peace, stability, and regional balance is undeniable, and we are closely monitoring all developments," he said.

Azizi also referred to the Leader of Islamic Revolution's position on the issue, recalling a meeting between Ayatollah Seyyed Ali Khamenei, Russian President Vladimir Putin, and Turkish President Recep Tayyip Erdogan, during which Iran’s firm stance against any geopolitical changes in the Caucasus was reiterated.

"We have repeatedly communicated to regional nations that the Zangezur Corridor is a red line for Iran, and any alterations will provoke a strong and serious response."

Concluding his remarks, Azizi underscored the active role of Iran's parliament in monitoring the situation. "The National Security and Foreign Policy Committee of the Iranian parliament is closely following the geopolitical developments related to the Zangezur Corridor. We expect the president and the foreign minister to address these critical issues with urgency and sensitivity, using diplomatic channels to resolve the matter in a way that protects Iran's national interests." 

Additionally, the Deputy Speaker of Parliament issued a tweet advising Russia and Azerbaijan to respect international borders.

"Iran's strategic policies regarding borders, neighboring countries, and corridors are stable and rooted in our national interests. As I emphasized during the recent Parliamentary Assembly in Baku, we do not accept any changes to borders. My advice to Russia and Azerbaijan is to respect these boundaries,” Ali Nikzad, the Deputy Speaker, posted on the social media platform X.
 

 

South Sudan Considers New Pipeline Route

South Sudan and China National Petroleum Corporation (CNPC) are discussing the idea to build an alternative oil pipeline from the landlocked African country to Djibouti via Ethiopia to boost export capabilities.

The statement came during the visit of South Sudan’s President Salva Kiir to China and the CNPC offices to discuss reforms in South Sudan's oil sector, including improving oil production through establishing a new refinery and building distribution networks. 

Kiir also took part in the 1st South Sudan-Zhejiang Economic, Investment, and Trade Forum, where he invited Chinese companies and potential investors to explore some of the untapped investment opportunities in South Sudan.

During talks with CNPC in China, an alternative pipeline through Djibouti via Ethiopia was proposed, aiming to enhance export capabilities of expanding extraction in Blocks 3 and 7.

CNPC holds 41% of Dar Petroleum Operating Company, the biggest oil operator in South Sudan.

CNPC assured the South Sudanese president that the Chinese state oil corporation would work closely with the local teams in the development of infrastructure projects and continue oil exploration in the country.

South Sudan’s oil exports have plunged since the beginning of the year. The country is struggling to get any money in its budget as its oil exports, on which it depends for 90% of state revenues, are stalled by a ruptured pipeline in neighboring Sudan that is currently the only outlet for South Sudan to sell its crude. 

In March, Sudan declared force majeure on crude oil exports from its landlocked neighbor South Sudan, following a major rupture in the pipeline carrying crude from South Sudan to a port in Sudan in an area with active military activity.   

The latest conflict in Sudan erupted in April last year, when the Rapid Support Forces (RSF), a paramilitary group, took up arms against the Sudanese army in the capital Khartoum.

Many of South Sudan’s oilfields cannot send their oil north via the pipeline in Sudan and revenues for South Sudan are plummeting.

Courtesy: oilprice.com

 

 

 

Friday 6 September 2024

Iran can become an LNG superpower

Liquefied natural gas (LNG) has become the world’s most sought-after emergency energy source following Russia’s invasion of Ukraine on February 24, 2022. This is because it is readily available in the spot markets and can be moved quickly to anywhere, unlike gas or oil sent through pipelines.

Unlike pipelined energy as well, the movement of LNG does not require the build-out of a vast acreage of pipelines across varying terrains and the associated heavy infrastructure that supports it.

Iran is the largest gas producer in West Asia, having tripled production over the past decade to around one billion cubic meters per day (bcmd). It also holds the second-largest gas reserves on the planet after Russia, at about 34 trillion cubic meters (tcm).

The Islamic Republic has long planned to become a global LNG superpower through a variety of methods, including one that involves longstanding ally Oman.

Iran’s plan to use Oman in its LNG plans was part of the broader cooperation deal made between Oman and Iran in 2013, extended in scope in 2014, and fully ratified in August 2015. It was centered on the Sultanate’s importing at least 10 billion cubic meters of natural gas per year (bcmy) from Iran for 25 years. The deal was to have begun in 2017, valued at roughly US$60 billion at that time. The target was then changed to 43 bcmy to be imported for 15 years, and then finally altered to at least 28 bcmy for a minimum period of 15 years.

According to a statement at the signing of the 2014 deal from the then-managing director of the National Iranian Gas Export Company (NIGEC), Mehran Amir-Moeini, the Iranian company was already working on the different contract mechanisms for the key phases of the project.

Specifically, the land section of the project would comprise around 200 kilometers of 56-inch pipeline (to be constructed in Iran), to run from Rudan to Mobarak Mount in the southern Hormozgan province.

The sea section would include a 192-kilometre section of 36-inch pipeline along the bed of the Oman Sea at depths of up to 1,340 meters, from Iran to Sohar Port in Oman.

In broad terms, this deal was intended to allow for the completely free movement of Iranian gas (and later oil) via Oman through the Gulf of Oman and out into the world oil and gas markets.

The route was designed to allow Iran the same sanctions-free flows that it was operating via Iraq at that time, and to this day.

From Oman’s side, all the preliminary work related to seabed surveys, design of the pipeline and its accessories and the compressor stations was completed some time ago.

The depth of the subsea pipeline had been increased in August 2016 due to the heightened political tensions between Saudi Arabia and Iran resulting in a plan modified to avoid the territorial waters of the then US ally, the United Arab Emirates (UAE).

Once the gas had made its way to Oman, the technicalities of Iran becoming an LNG producer were extremely straightforward. The original plan, according to Alireza Kameli, managing director of the National Iranian Gas Export Company (NIGEC), would have entailed Tehran utilizing about 25 percent of Oman’s then-total 1.5 million tons per year LNG production capacity to produce Iranian LNG.

This would then have been loaded on to the specialized LNG transport vessels for export to European and Asian markets, in return for commission payments to Oman.

Overall, the Islamic Republic’s plan was to become the largest exporter of gas – including that in LNG and liquefied petroleum gas (LPG) forms – to Europe and Western Asia, with a focus on China, South Korea and Pakistan.

Prior to the withdrawal of the US from the Joint Comprehensive Plan of Action (JCPOA) or colloquially ‘the nuclear deal’) in May 2018, there had been no shortage of international oil and gas firms companies looking to take part in the Iran-Oman pipeline.

France’s Total, Germany’s Uniper and EON, South Korea’s KOGAS, Japan’s Mitsui, and Shell had all expressed serious interest in being involved, among others.

Given the potentially sanctions-busting nature of the project, though, the US included the Iran-Oman LNG project in its efforts to prevent Iran from meaningfully expanding its hydrocarbons export routes into the booming market of Asia.

Before the dispute between Saudi and Qatar erupted again, Washington’s main alternative for Oman was that it increased its uptake of gas from Qatar, via the existing Dolphin Pipeline that runs from Qatar to Oman through the UAE, or in LNG form, but it refused.

Oman’s desire to re-energize the plans for the Iran-Oman gas pipeline was fanned by the UAE’s demands for an increasingly large fee for allowing the transit of gas from Iran through its waters, again part of the US strategy to persuade Oman to take its gas from Qatar.

With U.S. sanctions firmly back in place in 2018, though, Oman backed away from the plan, to be replaced by Russia’s Gazprom in Iran’s LNG program, which duly signed two memoranda of understanding with the NIOC concerning the rollout of a two-fold joint strategy regarding gas.

The first part concerned a gas cooperation roadmap between the two companies, and the second part detailed the construction of Iranian LNG facilities in partnership with Iran’s Oil Industry Pension Fund. Initially, this would allow Gazprom to effectively take over from Germany’s Linde on its own then-60 percent complete Iran LNG complex, and later to be integral in the construction of mini-LNG complexes.

Gazprom would take payment for its work from the sale of gas both from this complex and from part of the output from fields feeding gas into it.

These plans, though, were again put on hold due to increased US sanctions against both Iran and Russia, and a relatively poor global LNG price outlook at the time. Additionally, China was again interested in taking part in the LNG project as part of its wider 25-year deal with Iran.

That said, the middle of April last year saw Oman Energy Minister, Salim al-Aufi, state that the long-stalled Iran-Oman pipeline was finally progressing once again, with expectations that it will commence operations late this year or early 2025.

Less than a month ago Oman announced the construction of a new LNG plant in Qalhat, with an annual production capacity estimated at 3.8 million metric tons, raising the Sultanate’s LNG production to 15.2 million metric tons per year. It is expected to be fully operational by 2029.

Beneficially for Iran, and China, is that the Iran-Oman gas route and adjunct infrastructure will complement Iran’s sanctions-busting Goreh-Jask pipeline, which has the capacity to transport at least one million bpd of oil from Iran’s major oil fields and runs from Goreh in the Shoaybiyeh-ye Gharbi Rural District of Khuzestan Province 1100 kilometres to the port of Jask in Hormozgan province on the Gulf of Oman.

Muscat is happy to be a conduit for the gas pipeline that would begin in Iran’s supergiant South Pars gas field and run to Sohar in the north of Oman. This pipeline would then link up to the existing pipeline that runs from there to Salalah near the Yemeni border.

 

Israel wants Philadelphi corridor control

The status of a narrow stretch of land known as the Philadelphi corridor on Gaza's border with Egypt has emerged as a stumbling block in efforts to secure a deal for a ceasefire between Israel and Hamas after 11 months of war.

Netanyahu has been accused of raising new demands as a pretext for continuing the war. He has rejected a withdrawal from the corridor in the first phase of a ceasefire deal. Israel would only agree to a permanent ceasefire after that with guarantees the corridor would be secured.

Prime Minister Benjamin Netanyahu says Israel needs to keep forces in the corridor to prevent it from becoming a lifeline for Hamas to smuggle weapons into Gaza. Egypt says Israel must pull out, and Hamas is demanding an Israeli withdrawal from the whole of Gaza.

Here are some facts about the corridor.

The corridor is a strip about 14km (9 miles) long, running from the Mediterranean Sea at its north-western end to near the Israeli-controlled Kerem Shalom crossing at its south-eastern end.

Israel gave it the code name Philadelphi, while the Palestinians and Egypt commonly call it the Salah al-Din route or axis.

Securing the border has long been a concern for Israel. Before it withdrew forces and settlers from Gaza in 2005, attacks on Israeli soldiers patrolling the corridor were common.

As part of the pull-out, Israel signed an agreement with Egypt which allowed for a 750-strong Egyptian border guard that was meant to tackle smuggling and militancy on the border. Control of the Gazan side passed to the Palestinian Authority until Hamas took over Gaza in 2007.

Israel seized control of the Philadelphi corridor in May 2024 as part of its advance into Rafah, in southern Gaza. It says it needs to secure the corridor because Hamas used tunnels linking Gaza with Egypt's Sinai Peninsula to smuggle weapons and banned material.

Long after Israel withdrew from Gaza, a large network of tunnels remained in use. In May, an Israeli delegate at the International Court of Justice said about 50 such tunnels had been identified in Rafah after the entry of Israeli forces.

Egypt says it destroyed the tunnel network from its side of the border as it began to push back against an Islamist insurgency in northern Sinai almost a decade ago, and that it later created a buffer zone and border fortifications that prevent smuggling.

Since Hamas took over Gaza, Israel along with Egypt enforced a blockade on the territory. That included tightly controlling movement through the Rafah crossing, which is located on the Philadelphi corridor and was the only crossing on Gaza's borders not directly controlled by Israel.

Despite the restrictions, it remained a lifeline for Palestinians, allowing those with security approval to leave and re-enter the territory and serving as a gateway for trade.

After the outbreak of war on October 07 last year the Rafah crossing became the main entry point for humanitarian aid and an evacuation route for those in serious need of medical treatment.

Israel's advance in May resulted in the closure of the crossing, sharply reducing aid deliveries and medical evacuations.

Egypt says the corridor is guaranteed by its 1979 peace treaty with Israel, that Israel must withdraw, and that a Palestinian presence at Rafah should be restored.

The Israeli advance deprived Egypt of its role brokering access over the border, a position that had given Cairo leverage over Hamas.

Security at the border is highly sensitive for Egypt because of its history of conflict with Israel, fears that Israel's military offensive could create a breach of the border and push large numbers of Palestinians into Sinai, and the risk of militancy.

While Egypt has developed extensive contacts with Hamas, the Palestinian Islamist movement is an offshoot of the Muslim Brotherhood, which was banned in Egypt after then-army chief Abdel Fattah al-Sisi led the 2013 overthrow of its democratically elected president, Mohamed Mursi.

Early in the current conflict, Sisi raised the prospect of Sinai becoming a base for attacks against Israel if Palestinians were forced across the border en masse.

Israel's desire to keep troops deployed in the Philadelphi corridor and the Netzarim corridor, which cuts across the Gaza Strip south of Gaza City, have recently emerged as sticking points in ceasefire talks.

Over months of negotiations Hamas's core demands have been a guarantee of a permanent ceasefire and a full withdrawal of Israeli forces from Gaza. The group wants Palestinians, many of whom were displaced from northern to southern Gaza, to be able to move through Netzarim from the first phase of any ceasefire deal.

Egypt is a mediator in ceasefire talks together with the United States and Qatar, and has reacted angrily to Israeli suggestions that its border with Gaza is not secure.

Negotiators have discussed surveillance systems that could allow Israel to pull back its troops if a ceasefire was agreed. There has also been discussion of deploying international monitors at the border.

Netanyahu has been accused of raising new demands as a pretext for continuing the war. He has rejected a withdrawal from the corridor in the first phase of a ceasefire deal. Israel would only agree to a permanent ceasefire after that with guarantees the corridor would be secured.

PSX benchmark index up 0.5%WoW

Pakistan Stock Exchange remained range-bound during the week ended on September 06, 2024 as investors opted for wait and see policy and unfolding of the key events, including IMF executive board’s approval and the rebalancing of the FTSE. The market movement was largely influenced by corporate results. The benchmark index was up 410 points or 0.5%WoW to close at 78,898 points on Friday.

On the macro front, GoP kept on exploring every possible option to bridge the external financing gap, including approaching commercials banks.

The outflows related to FTSE rebalancing began as changes will become effective from September 23, 2024.

The inflation eased to a single digit after almost 3 years, to 9.6% for August 2024. Consequently, real positive interest rate was reported at nearly 10%, and a differential between policy rates and 3-month secondary yield at 1.74%, leading the market to expect a rate cut in upcoming Monetary Policy Committee meeting.

Furthermore, a 16% annual rise in exports during August 2024 led to a 21%YoY contraction in trade deficit to US$1.68 billion.

Declining international oil prices, with WTI falling below US$70/bbl mark raised hopes for a reduced oil import bill and lower POL prices, which could help further in controlling inflation.

With the FBR missing its tax collection target in August 2024, a mini-budget remains a possibility if the shortfall persists. The finance minister has hinted a further reduction in the revised Federal PSDP budget of PkR1.1 trillion due to fiscal constraints.

Market participation declined by 18%WoW, with the average daily traded volume dropping to 493 million shares from 600 million shares in the previous week.

On the currency front, PKR largely remained flat against the greenback throughout the week, closing the week at 278.6/US$.

Other major news flows during the week included: 1) Sales of POL products dropped by 14% in August, 2) GoP debt rose to PKR69.9 trillion, 3) Saudi deal on Reko Diq 'nears completion', and 4) Cotton arrivals slump 60% as of August 31, 2024.

The top performing sector were Jute, Cable & electrical goods, and RIETs, while Woollen, Textile spinning, and Textile weaving were amongst the worst performers.

Major net selling was recorded by foreigners with a net sell of US$6.7 million. Individuals absorbed most of the selling with a net buy of US$5.7 million.

Top performing scrips of the week were: KOHC, SHFA, PIBTL, MARI, and PAEL, while laggards included: YOUW, BNWM, NRL, APL, and NATF.

According to AKD securities, IMF executive board approval, along with continuation of monetary easing, would keep equities in limelight.

An improving external account position and a better country credit rating, would keep foreigners’ interest alive.

Although the upcoming FTSE rebalancing may raise some short-term concerns, these are expected to be mitigated by the minimal holdings in FTSE Emerging Markets-related funds and the increasing weight in the MSCI FM Index.

Brokerage house recommends sectors that would benefit from monetary easing and structural reforms.