Critical Examination of Iranian Regional Policy

Despite continuous Israeli attacks targeting Iran's military doctrine in the wake of the regime’s brutal war in Gaza, the framework of that strategy remains largely intact and continues to operate across West Asia. However, in a recent article for Chatham House Bilal Y. Saab argues that the ceasefire in Lebanon has dealt a huge blow to Iran’s regional strategy. It may be said that the article fails to fully consider the current and delayed impacts of Israel’s unprecedented use of brute force on Tel Aviv. 

The military operations in the Gaza Strip and Lebanon have currently put huge burdens on the Israeli economy with long-term impacts expected to last for years. While unconditional US aid might temporarily alleviate investor concerns regarding Israel, the potential for renewed conflict poses a significant and lasting deterrent to investment.

The issue of settlers in northern occupied Palestine has not been yet solved and seems to be a problem in the foreseeable future for Israel. Also, the impacts of Israel’s action on Western public opinion cannot be undermined; this is being seen in some countries to put pressure on policymakers to take more progressive action against Israel. 

The author argues that Israel has achieved victory in its war with Hezbollah but the facts on the ground suggest differently. Tel Aviv since October 2023 has been targeting Hezbollah facilities and fighters across Lebanon but to no avail.

Hezbollah operations in northern occupied Palestine and even deeper in Haifa and Tel Aviv continued until the last moments before a ceasefire took effect last month. Israel’s limited, targeted operations in Southern Lebanon fell short of gaining significant territory and Hezbollah was successful in repelling those attacks. 

The Lebanon ceasefire, largely mirroring UN Resolution 1701, offers no significant changes. Hezbollah retains its weaponry and maintains the capacity to resume operations against Israel at any time. 

Bilal Y. Saab views the ceasefire as a setback for the Resistance Axis, arguing that it has left Hamas isolated. But this is not the case; factions in the Resistance Front have always contained autonomy in their decisions despite Western claims about Iran controlling it all. It is largely uncontested that Hamas started Operations Al-Aqsa Storm on its own without any prior notice to other groups and actors in the region yet, the whole front with a differentiating timetable joined Hamas in its fight against Israel.

For over a year, the conflict in Lebanon remained a relatively even exchange of attacks. Only after Israel significantly escalated its assaults, pursuing new objectives, none of which were achieved, did ceasefire talks commence. The ideology of creation of Hezbollah is based on confronting Israel and the current fragile ceasefire can be considered as a temporary tactical halt for the group in its fight against Tel Aviv. 

Furthermore, Saab prescribes renewed efforts for normalization of relations between Arab countries and Israel for what he calls a lasting victory for Tel Aviv. Saudi Arabia is one of the main players in the region which is reportedly eager to normalize ties with Israel. 

The regional landscape has shifted dramatically since the early Trump administration and the Abraham Accords. The Israeli onslaughts in Gaza and Lebanon have fueled widespread regional opposition to normalization with Israel. Also, Saudi Arabia's rapprochement with Iran suggests a decreased likelihood of Arab confrontation with Tehran.

Despite the author’s claims that an expanded Abraham Accords would lead to a Palestinian state, Israel has intensified settlement expansion in the occupied West Bank, particularly since the formation of the current far-right cabinet. All these factors point to one issue and that is the impossibility of a deal being in favor of Palestinians. 

Saab says “Iran also has to think twice about how Israel might react to even the attempt to resurrect its regional strategy.” However, Tehran’s response to Israeli provocations has been clear for over a year, any attack on Iran’s interests leads to retaliation. 

Contrary to Israeli actions, Iran's measured responses are not due to military concerns but rather reflect its defensive military doctrine—a fact often overlooked in Western assessments.

 Tehran does not seek regional war. Its doctrine which is based on two main pillars (inward and outward defense) has not wobbled despite being under constant attacks. Support for the Resistance Axis can be defined in outward defense and drone, missile advancements are in line with inward defense.

Should the regional status quo significantly change, Iran may employ alternative deterrent measures to counter threats to its national interests. This potential shift includes a reassessment of its nuclear doctrine, a subject of ongoing debate among Iranian scholars and policymakers.

 

PSX benchmark index up 7.6%WoW

Pakistan Stock Exchange (PSX) continued its bullish momentum throughout the week, leading to a major increase in the benchmark index, registering its highest ever weekly point gains of 7,697 and market closed at a record high of 109,054 points, up 7.6%WoW on Friday, December 06, 2024.

The bullish momentum was fueled by November 2024 inflation recorded at 4.9%YoY, lowest in nearly six and half years, fueling expectations for continued monetary easing in the upcoming Monetary Policy Committee scheduled for December 16, 2024.

Major contributing sectors to this rally were commercial banks, followed by Fertilizer, and Oil & Gas Exploration. Interest in the banking sector continued to rise, with gross advances increasing by 21%YoY as of November 15, 2024, taking the ADR to 46.9%, with expectations of crossing the 50% threshold before the year-end to avoid ADR-based taxation.

Meanwhile, fertilizer sector advanced on ENGRO’s agreement to acquire the Jazz Tower business, coupled with the Lahore High Court’s approval of the FFC-FFBL merger.

Saudi Fund extends term of US$3 billion deposits for another year.

Trade deficit for November 2024 was reported at US$1.6 billion, down 19%YoY.

Total debt dropped by 1%MoM to PKR69 trillion in October 2024.

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$620 million, following a US$500 million loan disbursement from the Asian Development Bank (ADB), taking total reserves held by SBP to US$12.0 billion as of November 29, 2024.

Market participation increased by 21.5%WoW to 1.7 billion shares, as compared to 1.4 billion shares traded in the earlier week.

PKR remained stable against the greenback, closing the week at PKR278.01 to a US$.

Other major news flow during the week included: 1) Saudi crown prince accepted invitation to visit Pakistan, 2) Oil sales surged to 25-month high, 3) Cement dispatches increased 5.58%YoY, 4) FBR decided to put more curbs on FATA/PATA steel sector and 5) Prime Minister hinted towards cut in policy rate.

Vanaspati & Allied Products, Transport, Refinery, Cable & Electrical goods and Engineering were amongst the top performing sectors.

Major selling was recorded by Individuals, Insurance companies, and foreigners with a net sell of US$26.0 million, US$21.0 million, and US$14.2 million, respectively. Mutual funds and companies absorbed most of the selling with a net buy of US$44.0 million and US$10.7 million, respectively.

Top performing scrips of the week were: CNERGY, Airlink, PABC, NML, and PAEL, while laggards included: EFUG, JVDC, HBL, AKBL, and PSEL.

Continuation of monetary easing due to disinflationary environment and improving macroeconomic environment would make investment in equities more appealing, currently trading at P/E of 5.0x and DY of 10.2%.

Moving forward, upcoming MPC meeting would remain in investor’s focus, also keeping cyclical sector attractive.

Aforementioned factors, along with declining external financing requirement under the IMF program, would keep foreigners’ interest alive.

Top picks of AKD Securities include: OGDC, PPL, MCB, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

 

 

What if Bashar government falls in Syria?

Donald Trump will formally take charge as president of United States on January 20, 2025. The strategic regions of the world are being trapped in a situation known as "tactical wars". These conflicts do not seek a definitive victory but rather aim to create a state of instability and uncertainty in key areas vital to US global interests.

The "America First" slogan, central to Trump's agenda, can only materialize if Washington succeeds in maintaining its hegemony over the major geostrategic regions. However, this dominance is only possible if one essential factor is guaranteed: an active and sustained military presence in these regions.

In these sensitive territories, the United States faces growing resistance from both local governments and popular movements demanding the withdrawal of American troops. If Washington were to yield to these demands and abandon Afghanistan, Iraq, Syria, or the Persian Gulf; renounce its intervention in Ukraine and the Caucasus under the pretext of NATO; or reduce its activities in the South China Sea, it would risk becoming just another power, unable to maintain its global hegemony.

The United States deems it necessary to maintain its presence in these strategic regions to avoid the decline of hegemony. Its military deployments, although costly and often unpopular, are seen as the only means to ensure its position as a dominant power in an increasingly competitive world.

As explained by Iranian diplomat Mohammad Rasoul Mousavi, the strategy to preserve the United States' military presence is based on fueling what are known as "tactical wars." These wars do not seek a definitive resolution but rather aim to prolong the conflict. On one hand, they weaken the countries involved, and on the other, allow the United States to justify and impose its presence in those regions.

Mousavi interprets the resurgence of the conflict in Syria as a clear manifestation of the United States' strategic approach. In the current context, it is evident how Washington is attempting to consolidate its presence in the region. Despite avoiding responsibility for the war led by extremist militants backed by Turkey, the United States insists that the solution to the conflict is inevitably tied to its military presence in Syria— a presence that would be difficult to justify without the conflict serving as a pretext.

Additionally, there is a clear contradiction in the United States' stance. In the current offensive against the government of Bashar al-Assad, the main units fighting alongside anti-Assad forces are primarily affiliated with Hay'at Tahrir al-Sham (HTS). This group, which separated from Al-Qaeda in 2016, has maintained a strong presence in Syria.

Since 2018, the US State Department has designated HTS as a Foreign Terrorist Organization. HTS remains a central player in the Syrian conflict, particularly in the regions of Aleppo and Hama. The group is led by Abu Muhammed al-Golani, who previously led the Nusra Front, Al-Qaeda's affiliate in Syria. In 2016, al-Golani announced HTS's separation from Al-Qaeda, claiming a distance from the global terror network.

However, his ties with Al-Qaeda remain a burden, continuously attracting international attention. For example, the US still offers a US$10 million reward for the capture of al-Golani, reflecting the ongoing mistrust toward the group and its ideology.

In general, Syria is a stage where various geopolitical interests converge. In the case of Turkey, the potential fall of Bashar al-Assad would have significant strategic implications. Through its allied groups in Syria, such as the self-styled Syrian National Army and HTS, Turkey could consolidate and significantly expand its power and influence in a territory that was part of the Ottoman Empire from 1516 to 1918.

A withdrawal of Russia, its historical rival in the region, would represent a key political victory for Recep Tayyip Erdogan, while constituting a defeat for Vladimir Putin and weakening Russian influence in the Middle East. Additionally, the weakening or elimination of Kurdish forces in Syria, a constant point of friction for Ankara, would be one of Turkey's primary strategic objectives.

Finally, once Syria was "pacified" by HTS and its allies, Erdogan could seize the opportunity to facilitate the return of the millions of Syrian refugees currently in Turkey, presenting Assad’s fall as the end of the war. This measure could potentially boost support for the Justice and Development Party (AKP) in future elections.

The potential fall of Bashar al-Assad would have profound consequences for Russia, as it could redefine both its influence in Syria and its projection in the Middle East.

The loss of its main ally in Damascus would signal the end of its political influence in the country, marking a strategic defeat that would alter the regional balance.

Additionally, Russia would be surpassed by Turkey, which would solidify its power and influence in Syria, leading to a geopolitical reshaping in favor of Ankara.

Russia's military presence, essential to its influence in Syria, could be significantly reduced or even eliminated, representing a substantial loss of power in the region.

Moreover, Moscow would lose control of the naval base in Tartus, a strategic facility it has controlled since 1971 during the Soviet era and it serves as its only permanent military base in the Mediterranean. The loss of Tartus would deal a major blow to Russia’s ability to project power in the Middle East.

The potential fall of Bashar al-Assad would also bring a series of strategic implications for Israel, directly impacting its security in the region.

For Iran, the fall of Bashar al-Assad would have political and strategic consequences. First, Iran would lose a key ally in the region.

However, the rise of Turkey as a regional power would be a blow to Iran’s interests, as it would witness its rival expanding its power while Iran's own political and military presence in Syria and Lebanon crumbles. This scenario would lead to the weakening of Shia interests in Syria, Lebanon, and even Iraq, disrupting the regional balance and undermining Iran's influence in these key countries.

Finally, for the United States, the fall of Bashar al-Assad would have significant strategic implications. First, it would mean Russia's withdrawal from Syria, which would considerably weaken Moscow's influence in the region, reducing its projection of power in the Middle East.

Additionally, the United States would achieve a key victory by seeing the fall of Assad's government, considered one of Iran's main allies, with whom Washington maintains an openly adversarial relationship. This would mark the end of a long struggle to displace a government that has been an obstacle to US policy in the region, consolidating the influence of Washington and its allies in Syria and the Levant.

 

OPEC Plus extend production cuts

Saudi Arabia and seven other OPEC Plus countries have decided on Thursday to extend their oil production cuts for another three months, until the end of March 2025.

Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, which previously announced additional voluntary adjustments in April 2023 and November 2023, held a virtual meeting on Thursday on the sideline of the 38th OPEC and non-OPEC Ministerial Meeting (ONOMM).

These countries will extend their additional voluntary adjustments of 2.2 million barrels per day, that were announced in November 2023, until the end of March 2025 and then the 2.2 million barrels per day adjustments will be gradually phased out on a monthly basis until the end of September 2026 to support market stability. This monthly increase can be paused or reversed subject to market conditions," OPEC Plus said in a statement carried by Saudi Press Agency.

The virtual meeting was held to reinforce the precautionary efforts of OPEC Plus countries, aiming to support the stability and balance of oil markets. These countries decided, in addition to the latest decisions from the 38th ONOMM, to extend the additional voluntary adjustments of 1.65 million barrels per day that were announced in April 2023, until the end of December 2026.

"In the spirit of transparency and collaboration, the meeting welcomed the pledges made by the overproducing countries to achieve full conformity and resubmit their updated compensation schedule to the OPEC Secretariat for the overproduced volumes since Jan 2024 before the end of December 2024 as agreed in the 52nd Meeting of the Joint Ministerial Monitoring Committee. The compensation period will be extended until the end of June 2026," the statement said.

  

Refusal of Spain to handle US munition

Outgoing Federal Maritime Commissioner Carl Bentzel told Seatrade Maritime News that in FMC meeting debate and vote ended in agreement that there should be an investigation into whether Spain’s reticence to handle US cargo involved violations of international agreements.

Bentzel confirmed that Spanish authorities had denied permission to dock in Spain to the Maersk Denver and the Maersk Seletar, which left New York on October 31 and November 04, respectively. The Spanish authorities suspected the vessels were carrying arms for Israel’s military.

On November 07, a Spanish foreign ministry spokesman confirmed that the vessels would not be allowed to call at Maersk’s southern Spanish hub at Algeciras.

Spanish politician, Enrique Santiago warned at the time that allowing these Maersk vessels to dock could violate Spain’s penal code, which prohibits the transit of military material that could exacerbate conflicts.

FMC discussions have concluded that Spanish authorities may be in violation of the Foreign Shipping Practices Act and/or Section 19 of the Merchant Marine Act, which looks at trade remedies.

“The FMC will initiate an investigation to see if they - the Spanish authorities - are in violation of these acts,” said Bentzel, adding that a formal announcement of the investigation is expected imminently.

Maersk operates around 20 vessels under the US Voluntary Intermodal Sealift authority, having acquired the lucrative contracts when the Danish carrier bought the major US container carrier Sea-Land in 1999.

Bentzel pointed out that these contracts can be for the carriage of all sorts of cargo, not just weapons, “including humanitarian aid, in support of the Gazan population."

It is not clear what freight was on board these ships, or whether other cargo destined for Mediterranean or other destinations was affected.

Spanish authorities have announced a ban on vessels carrying arms for Israel from its ports. 

A report from the Palestinian Youth Movement (PYM)’s Mask Off Maersk campaign, published on November 04 said it reviewed 2,110 US shipments on Maersk vessels, between September 2023 and September 2024, listed as shipped on behalf of Israel’s Ministry of Defense (IMOD), 827 of which were for armoured vehicles, tactical vehicles, weapons systems, or parts.

The report lists other hardware shipments totalling close to US$ one billion worth of military hardware and ammunition.

“Almost all of the military goods shipments examined (2104/2110) departed from the Port of Elizabeth, NJ, with the remainder (6/2110) departing from the Port of Houston, TX and while not all explicitly state that the destination country was Israel, the receiving agent is listed as the Government of Israel’s Ministry of Defense, such that it can be assumed they were ultimately delivered to Israel for military purposes. Approximately half (1238/2110) of these shipments transited through the Port of Algeciras, Spain,” reported PYM.

 

 

China imposes sanctions on US companies over weapons sales to Taiwan

Reportedly, China has targeted small to midsized American drone manufacturers and service providers in its sixth round of sanctions on US defence companies this year. Beijing has slapped sanctions on 13 US defence companies and six industry executives, the Chinese foreign ministry said on Thursday.

Among them are Kratos Unmanned Aerial Systems, developer of the low-cost XQ-58 Valkyrie combat drone, and Teledyne Brown Engineering, a defence solution subsidiary of industrial conglomerate Teledyne Technologies.

Beijing also imposed sanctions on Barbara Borgonovi and Gerard Hueber, president and vice-president of naval power at Raytheon, a major US defence company previously sanctioned by Beijing.

The list also included drone technology start-ups Firestorm Labs, Neros Technologies and HavocAI.

Lin Jian, a ministry spokesman, said the sanctions were a countermeasure for the “repeated announcement of arms sales to Taiwan”, which had seriously violated the one-China policy.

“We urge the United States to clearly recognize the serious danger that separatist acts of Taiwan independence pose to peace and security across the Taiwan Strait … and to stop sending wrong signals to Taiwan separatist forces,” he said.

From Thursday, the sanctioned entities’ assets in China will be frozen and they will be forbidden from any cooperation or transactions with Chinese organizations and individuals.

The sanctioned executives will also be prohibited from entering the country, including Hong Kong and Macau.

As cross-strait tensions have risen, Taiwan has increased its defence budget as well as its arms procurement from the United States. Unmanned platforms are believed to be a key asymmetric weapon that could help defend Taiwan in the event of a conflict with mainland China.

Beijing considers Taiwan to be part of China’s territory that must be reunified, by force if necessary, and is opposed to any official ties between the island and its diplomatic partners.

The United States, like most countries, does not consider Taiwan an independent country, but is committed to arming the self-ruled island and is opposed to any change in the status quo.

Song Zhongping, a military commentator and former People’s Liberation Army instructor, said Beijing had to take countermeasures as “drones bring a relatively bigger threat to mainland China”.

“These companies are related to drones and datalink technologies while their [products and services] are interrelated … so to sanction, you cannot just sanction one,” he said.

“That’s why the scope of sanctions is larger this time.”

Beijing has previously sanctioned US defence contractors including the missile and AI divisions of Lockheed Martin. In an earlier round of sanctions, it also targeted Anduril Industries, which has sold its multi-mission aerial vehicle Altius 600M-V to Taiwan.

The announcement came on the same day that Taiwanese leader William Lai Ching-te transited through Guam, a US territory and home to a key military base, after a stop in Hawaii this week.

Lai had a call with US House Speaker Mike Johnson on Wednesday, and called for collaboration during a speech at the Guam governor’s residence on Thursday, according to Taipei Times.

The US approved the latest arms sales deal with Taiwan – involving about US$385 million – last month.

Taiwan also signed contracts with the US to buy nearly 1,000 killer drones in October, valued at a total of NT$5.27 billion (US$162.4 million).

 

 

 

 

 

MBS Announces Red Sea Sustainability Strategy

Saudi Crown Prince and Prime Minister Mohammed bin Salman unveiled on Wednesday the National Red Sea Sustainability Strategy. This initiative aims to protect the Red Sea, empower local communities, and transition to a blue economy, aligning with Saudi Vision 2030 and the recently announced national priorities for research, development, and innovation (RDI), particularly in the areas of sustainable environment and essential needs.

Speaking on the occasion, the Crown Prince emphasized Saudi Arabia’s efforts to unlock its vast economic, geographical and cultural potential while championing sustainability and environmental conservation.

He described the strategy as pivotal in establishing the blue economy as a core component of the Kingdom’s diversified economy.

“The Kingdom aspires for the Red Sea region to become a global reference for leading blue economy activities and reaffirms its commitment to a sustainable future for the Red Sea,” he said, calling for collective efforts to safeguard the Red Sea coast and the communities that rely on it.

The Red Sea, covering 186,000 square kilometers with a coastline stretching 1,800 kilometers, is one of the world’s most bio-diverse regions. It is home to the fourth-largest barrier reef system, 6.2% of global coral reefs, and hundreds of islands.

The strategy outlines a comprehensive framework to preserve and regenerate these natural treasures while ensuring their enjoyment and sustainability for future generations. It also demonstrates how protecting the environment can unlock the economic potential of the region and initiate the transition to a blue economy.

This transition will create investment opportunities in various marine sectors such as ecotourism, fisheries, renewable energy, water desalination, shipping, and industry.

A key component of the strategy is its ambitious vision for 2030. It aims to expand marine and coastal protected areas from 3% to 30%, increase the contribution of renewable energy to 50% of the energy mix, and create thousands of new jobs linked to blue economy activities.

Furthermore, it seeks to safeguard Saudi Arabia’s substantial investments in coastal tourism, which are expected to make significant contributions to the national GDP.

The strategy is built around five main objectives: Environmental Sustainability, Economic Development, Social Development, Safety and Security, and Governance and Collaboration. Within this framework, 48 targeted initiatives have been developed to support the Kingdom’s aspirations for the blue economy.