Britain, Canada, France threaten sanctions against Israel

The leaders of Britain, Canada and France threatened sanctions against Israel on Monday if it does not stop a renewed military offensive in Gaza and lift aid restrictions, piling further pressure on Prime Minister Benjamin Netanyahu, reports Reuters.

The Israeli military announced the start of a new operation on Friday, and earlier on Monday Netanyahu said Israel would take control of the whole of Gaza. International experts already have warned of looming famine.

"The Israeli Government's denial of essential humanitarian assistance to the civilian population is unacceptable and risks breaching International Humanitarian Law," a joint statement released by the British government said.

"We oppose any attempt to expand settlements in the West Bank ... We will not hesitate to take further action, including targeted sanctions."

In response, Netanyahu said, "The leaders in London, Ottawa and Paris are offering a huge prize for the genocidal attack on Israel on October 7 while inviting more such atrocities".

He said Israel will defend itself by just means until total victory is achieved, reiterating Israel's conditions to end the war which include the release of the remaining hostages and the demilitarization of the Gaza strip.

Israel has blocked the entry of medical, food and fuel supplies into Gaza since the start of March to try to pressure Hamas into freeing the hostages the Palestinian militant group took on October 07, 2023, when it attacked Israeli communities.

"We have always supported Israel's right to defend Israelis against terrorism. But this escalation is wholly disproportionate," the three Western leaders said in the joint statement. They said they would not stand by while Netanyahu's government pursued "these egregious actions."

They stated their support for efforts led by the United States, Qatar and Egypt for an immediate ceasefire in Gaza, and said they were committed to recognising a Palestinian state as part of a two-state solution to the conflict.

Hamas welcomed the joint statement describing the stance as "an important step" in the right direction toward restoring the principles of international law.

Israel's ground and air war has devastated Gaza, displacing nearly all its residents and killing more than 53,000 people, many of them civilians, according to Gaza health authorities.

The war began with the October 07, 2023, Hamas-led attack in which the militants killed about 1,200 people, mostly civilians, and seized 251 hostages, according to Israeli tallies.

 

Lifting US sanctions on Iran could crush Chinese teapot oil refineries

The possible lifting of US sanctions on Iran's oil exports could deal a fatal blow to independent Chinese refineries that have thrived by processing Tehran’s discounted crude, while also putting further downward pressure on oil prices, reports Reuters.

President Donald Trump has taken a dual-track strategy with Iran, applying a "maximum pressure" campaign of tightening economic sanctions, while simultaneously engaging in direct high-level talks over Tehran’s nuclear program. Last week, Trump indicated the sides were getting very close to a deal.

Of course, nuclear talks between Iran and Western powers have always been extremely complex – full of stops and starts – and Trump’s recent statements surrounding a potential deal include much hedging.

If there is a breakthrough deal, it would almost certainly include a repeal of many US economic restrictions on Iran’s oil industry, which would have a profound impact on global energy markets.

Strict US sanctions on Iran’s oil industry have been in place since Trump pulled out of an UN-backed nuclear deal in 2018. While sanctions have dented Tehran’s exports – the country’s major source of revenue – they have never succeeded in reducing exports to zero, as Trump vowed seven years ago.

Iranian exports reached 2.8 million barrels per day (bpd) in May 2018 and hit a low of just 150,000 bpd in May 2020, before steadily recovering to an average of around 1.65 million bpd so far in 2025, according to analytics firm Kpler.

Chinese privately owned refineries, commonly known as teapots, have been the main buyers of Iranian crude in recent years, attracted by the heavy discounts. Concentrated in the eastern Shandong province, these small independent refineries have capacity of around 4 million bpd, or roughly one-fifth of China’s total refining capacity.

Large volumes of sanctioned crude have made their way into China in recent years through a complex web of shell companies and a so-called "dark fleet" of tankers that transfer oil between different vessels to obscure the origin.

The precise total volumes involved in this trade are unclear as official Chinese customs data suggests the country does not import any Iranian oil. However, Kpler, using ship tracking and satellite technology, estimates that China imported 77% of Iran’s 1.6 million bpd of exports last year.

Iranian production could also likely be ramped up quickly.

Its oil sector has proven surprisingly resilient in the face of mounting Western sanctions, with crude oil production averaging 3.3 million bpd in 2024, according to OPEC data. Production could be ramped up by 500,000 bpd within six months of lifting sanctions.

Not only would the rapid return of Iranian crude to global markets likely put further downward pressure on oil prices that have fallen from a high of US$82 a barrel in January to around US$65 today, but it would also deal a heavy blow to China’s teapot refineries.

These independent outfits typically have very slim profit margins because most run at utilization rates of around 50% or less due to overcapacity in the sector and restrictions on exporting fuels overseas.

Plants have faced fierce competition in recent years, and those that have survived have done so largely because they have been able to generate lucrative profits by processing cheap Iranian as well as Venezuelan feedstock.

The removal of US sanctions on Iranian crude could therefore undermine their business models, meaning many plants would likely have to sharply pare back operations or, in some cases, shut down entirely.

A drop in output from Chinese teapots, in turn, could provide a boost to large state-owned Chinese refineries that will pick up the slack in the domestic market.

More broadly, a decline in global refining capacity should boost the sector at a time of increasing uncertainty over demand for fuels such as gasoline and diesel due to the ongoing trade war and energy transition.

The return of Iran into global oil markets would create headaches for many – not least Saudi Arabia, which is in the middle of a price war – but the biggest losers would likely be the independent Chinese refiners. And the biggest beneficiary, outside of Iran itself, would be the refining industry – whether or not that’s what Trump has in mind.

 

 

Pakistan: Encouraging IMF Staff Level Report

The recently released IMF staff level report praises Pakistan’s strong program implementation and stresses the need to prioritize reforms going forward.

These include reforms to strengthen competition and productivity, improve SOEs and public services, increase energy sector viability, broaden the tax base, and build climate resilience.

Several new structural benchmarks have been introduced, which will impact multiple sectors such as Energy and Autos, and these may be part of the upcoming FY26 Budget.

Pakistan’s macroeconomic recovery has been cemented by growing foreign exchange reserves and sharply lower inflation, enabling the State Bank of Pakistan (SBP) to halve the policy rate to 11.0%.

GDP growth in FY26 is expected to reach the long-term average, and modestly accelerate thereafter. The current account is expected to remain in control, aided by lower oil prices and strong remittances.

This may limit pressure on the PKR, even as the IMF has encouraged a more flexible exchange rate.

Containing the fiscal deficit, as ever, will likely prove to be the most challenging. The projected improvement on the fiscal deficit is contingent on tax collection, including the effective implementation of the newly introduced Agriculture Income Tax laws.

That said, climate-related funding by the IMF (US$1.4 billion over the course of the program) can be used for budgetary support, which is a positive. 

As of December 2024, Pakistan had met all seven quantitative performance criteria and five of eight indicative targets. Compliance with structural benchmarks was also generally strong.

Important structural benchmarks that have already been met include approval of the National Fiscal Pact, and introduction of Agriculture Income Tax laws at the provincial level. However, others are still pending including eliminating captive power use in the gas sector. The IMF has now introduced additional structural benchmarks.

Chinese economy remains resilient in April

Chinese economy mostly remained resilient in April, despite feeling the effects of the astronomical tariffs in effect before last week, when Washington and Beijing agreed to remove or pause most of the duties imposed as part of their tempestuous trade war, reports South China Morning Post.

With the new agreement providing a 90-day reprieve in the conflict, last month was the only period where the full force of the triple-digit tariffs could be observed in economic data – at least for now,

Last month, China’s industrial output grew by 6.1% from a year earlier, compared to 7.7% growth in March, according to data released by the National Bureau of Statistics on Monday, higher than the 5.21% growth estimate from a poll of economists by financial data provider Wind.

At a meeting of the country’s Politburo in late April – a Communist Party conclave which typically sets the tone for the country’s economic work in the second quarter – the high-level political body vowed to “resolutely focus on doing our business, steadfastly expand high-level opening up and focus on stabilizing employment, businesses, markets, and expectations” in a statement.

The rhetoric was seen as affirmation of the need to shore up domestic consumption in an environment where the future of global trade is less than certain.

In a research note previewing the data release, investment bank Goldman Sachs said retail growth was driven by strong home appliance and automobile sales, boosted by an ongoing consumer goods trade-in program.

Automobile retail sales volume grew by 14.5%YoY in April, according to data from the China Passenger Car Association.

Official data also showed that during the three-day Ching Ming Festival holiday period, the number of domestic travellers nationwide and domestic tourism revenue were 6.3% and 6.7% higher, respectively, than the same period last year.

China’s overall fixed-asset investment rose by 4% in the first four months of 2025, falling short of Wind’s estimate of 4.26%, following a rise of 4.2% for the period from January to March.

The overall urban unemployment rate for April, meanwhile, stood at 5.1%, compared with 5.2% a month earlier.

 

Dollar edges lower after US rating downgraded

The US dollar trimmed a four-week gain in early Asian trade as markets digested a surprise downgrade of the US government's credit rating and as lingering trade frictions weighed on sentiment, reports Reuters.

The greenback advanced 0.6% against major currencies last week after a temporary trade truce between the United States and China eased fears of a global recession. But economic data pointed to rising import prices and waning consumer confidence.

Moody's cut America's top sovereign credit rating by one notch on Friday, the last of the major ratings agencies to downgrade the country, citing concerns about the nation's growing US$36 trillion debt pile.

"The focus on US growth risks and the US administration's policy agenda may have put the US safe-haven status in question," said Mahjabeen Zaman, head of foreign exchange research at ANZ.

US Treasury Secretary Scott Bessent said in television interviews on Sunday that President Donald Trump will impose tariffs at the rate he threatened last month on trading partners that do not negotiate in "good faith."

Trump is facing resistance within his own party in pushing forward a sweeping tax cut bill that would add an estimated US$3 trillion to US$5 trillion to the nation's debt over the next decade.

The dollar lost 0.3% to 145.22 yen. The greenback was also 0.2% lower against the Swiss franc, another safe-haven currency.

The Australian dollar edged up 0.1% to US$0.6409 after three days of losses. The euro stood at US$1.1185, up 0.2%. Sterling traded at US$1.3299, up 0.1%.

 

US Allies Reject Trump’s Trade War

In recent political developments, close allies of the United States—Australia, Singapore, and Canada—have pushed back against former President Donald Trump’s aggressive trade policies. Last year was politically turbulent, with ruling parties in the United States, Britain and other nations losing elections, while governments in countries like Japan and India suffered setbacks. This year, however, the trend appears to be reversing.

Within a single week, Australia, Singapore, and Canada—despite their geographic and cultural differences—held critical elections. All three countries delivered remarkably similar outcomes: victories for incumbent parties that campaigned on strong opposition to Trump’s tariff threats and his transactional approach to global alliances.

Although foreign policy typically plays a minor role in national elections, this time was different. Voters went beyond domestic issues to send a clear message: they reject Trump's combative trade tactics and support leaders who are willing to stand up to them.

The broader takeaway from these elections is the emergence of a new political consensus among America's allies. Public opinion is coalescing around leaders who oppose Trump’s “America First” doctrine, which has disrupted global supply chains, strained diplomatic relationships, and undermined decades of multilateral economic cooperation. This shift signifies not just electoral continuity, but a popular mandate for resisting a zero-sum approach to international relations.

In Japan, Prime Minister Shigeru Ishiba’s ruling Liberal Democratic Party faces another electoral test this summer, with elections for the less powerful—but still influential—upper house of the Diet. Ahead of this, Japan is eager to secure a trade agreement with the US.

Tokyo is preparing for a third round of tariff negotiations this month, though analysts remain skeptical about a breakthrough. Unlike Brirain, which recently secured a limited deal, Japan faces steeper challenges. It starts from a higher baseline tariff rate and must contend with the Trump administration’s firm stance on automotive trade—one of Japan’s most vital export sectors.

On the cybersecurity front, Sergiy Korsunsky, former Ukrainian ambassador to Japan and now a senior adviser at Nihon Cyber Defence Corporation, warns that excessive data accumulation poses serious risks in the age of artificial intelligence.

Diplomatically, Julia Longbottom, the British Ambassador to Japan, highlights recent British trade deals with India and the United States as evidence of shared values with Japan—particularly a mutual commitment to open and free trade.

Saudi Arabia rejects Palestinian displacement

Saudi Arabia has reaffirmed its unequivocal rejection of the forced displacement of Palestinians “under any circumstances,” Minister of State for Foreign Affairs Adel Al-Jubeir said Saturday during the 34th Arab League Summit in Baghdad, reports Saudi Gazette.

He reiterated the Kingdom’s commitment to the establishment of an independent Palestinian state with East Jerusalem as its capital.

“The exceptional circumstances facing the Palestinian cause require us to intensify joint efforts to alleviate the humanitarian suffering of the Palestinian people and to stop the crimes and violations committed by the Israeli occupation forces,” Al-Jubeir said.

He described these acts as flagrant violations of the UN Charter and international law.

Al-Jubeir emphasized the need for a sustainable ceasefire in Gaza and condemned any attempts to impose solutions that undermine Palestinian aspirations for self-determination and statehood within 1967 borders.

He also denounced Israeli attacks on Syrian territory, and stressed the importance of supporting Syria’s sovereignty and stability.

Al-Jubeir praised US President Donald Trump’s recent decision to lift sanctions on Syria during his visit to the Kingdom, calling it “a great opportunity for recovery, development, and reconstruction.”

Turning to other regional conflicts, Al-Jubeir reaffirmed Saudi Arabia’s continued efforts to mediate peace in Sudan, calling for a complete ceasefire, humanitarian access, and the preservation of Sudan’s sovereignty and unity.

He reiterated Saudi Arabia’s support for a comprehensive political resolution in Yemen, and stressed the importance of maritime security and freedom of navigation in international waters.

Addressing Lebanon, Al-Jubeir voiced support for President Joseph Aoun’s efforts to reform state institutions and consolidate all arms under the authority of the state. He expressed hope that Lebanon’s government would meet the aspirations of its people and preserve national stability and unity.

Al-Jubeir concluded by urging stronger Arab cooperation and development to achieve a secure and prosperous future for the region.