Miftah Ismail sounds too amateur

Finance Minister Miftah Ismail said on Thursday that he was leaving for Washington to meet International Monetary Fund (IMF) officials for the revival of a loan facility. In the same breath he added to travel to London on the way, where he would meet PML-N supremo Nawaz Sharif.

He disclosed his intension to meet the IMF Managing Director, Chief Executive Officer of the World Bank, Ministers of Turkey, Saudi Arabia and China. If he has planned so many meeting, was any agenda prepared or it will be just saying hello to each other?

On Wednesday, he had told media persons that his priority was to secure one tranche of US$1 billion from the IMF and prepare for the coming budget and not to club two quarterly reviews.

He didn’t bother to thank overseas Pakistanis who have sent more than US$23 billion in nine months of the current financial year. One may recall, his government has decided not to give voting rights to overseas Pakistanis, despite their longstanding demand.

He was a bit ruthless in saying that the IMF program was stalled following the premature end of the Imran Khan government. He was not cognizant of the fact that the no-trust motion, which brought Imran Khan Term to an abrupt end, was initiated by his party in collaboration with political parties?

Ismail revealed that the IMF wanted Pakistan to do away with subsidies extended by the previous government, including those on fuel prices and power tariffs — two relief measures that former Prime Minister Imran Khan had announced right before the filing of a no-trust motion against him. The move had invited criticism with many describing it as going against Pakistan's commitments to the IMF for the US$6 billion Extended Fund Facility.

He failed to recall that soon after coming into power Shehbaz Sharif, refused to approve a summary of hike petroleum prices prepared by Oil& Gas Regulatory Authority (OGRA).

It may be worth reminding that the single-point maiden meeting of the Economic Coordination Committee (ECC) of the newly formed federal cabinet on Tuesday approved Rs69 billion for immediate reimbursement of price differential claims (PDCs) to the oil industry on account of cheaper sales of petroleum products than the cost of purchase. Wasn’t this a violation of commitment with the IMF?

In an attempt to contain budget deficit he expressed intention to save by cutting the development budget to Rs600 billion, instead of Rs900 billion, which might not be spent in any case by the ministries.

He was delighted to inform, “We will not cut a penny out of Benazir Income Support Program”. He went to the extent of saying to compensate; wheat flour price has been reduced by Rs150 per 10kg, while sugar would be sold at Rs70 per kg through utility stores. Edible oil price has also been reduced. Has he any realization that selling at reduced price, means providing subsidy?

 

Russia faces imminent default

According to a Bloomberg report, Russia faces imminent default. The Credit Derivatives Determinations Committee—which includes Goldman Sachs, Barclays and JPMorgan—said Wednesday that a “potential failure-to-pay” event occurred for credit-default swaps when Russia paid rubles after foreign banks declined to process US currency transfers. 

If Russia doesn’t pay up in US currency by the time its grace period expires on May 04, 2022, it would be the country’s first default on external debt in more than a century. Holders of the swaps could then start the process of getting paid on contracts covering about US$40 billion of debt.

Bloomberg says, this potential financial calamity for Russia is of course tied to Vladimir Putin’s bloody war on Ukraine and the subsequent storm of sanctions that’s rained down upon him. Some eight weeks after he sent troops across his southern border, Putin has failed to take Kyiv and reportedly lost thousands of soldiers and untold amounts of equipment. Now a small but growing number of senior Kremlin insiders are quietly questioning his decision to go to war. They believe the invasion was a catastrophic mistake that will set the country back for years, if not decades.

But most Russians (fear of voicing dissent  notwithstanding) tell pollsters they support Putin’s war, one in which thousands of civilians have likely been killed through seemingly indiscriminate bombing and alleged mass executions.

As Russian forces now move on the Donbas, Moscow is seeking to dissuade NATO from increasing its flow of weapons. On Tuesday, Putin Deputy Sergei Lavrov said Russia was against using nuclear weapons in Ukraine, but failed to give a direct answer about whether Putin might use them anyway.

And on Wednesday, Russia tested a new nuclear-capable intercontinental ballistic missile, an event Putin used to issue yet another thinly veiled threat against NATO.

In its new assault in Ukraine’s east, Russia has yet to gain significant ground, Ukraine officials contend, though surrounded defenders in the blasted port city of Mariupol have warned they are close to the end. But while Russia seeks to consolidate gains along the Sea of Azov, the potential expansion of NATO along its northern border is getting closer to reality.

Finland’s parliament began debate on policy changes that may pave the way for a bid to join the alliance. Putin still has friends in Beijing, at least. China said it will continue to strengthen its strategic ties with the Kremlin.

 

Israeli weapon seen used by Ukrainian unit against Russia

An anti-armor weapon jointly developed by Israel, Singapore and a German company has been seen in use by the Neo-Nazi Azov Battalion against Russian military forces.

In a video released by the Azov Battalion, a Ukrainian fighter, ostensibly affiliated with the controversial unit, can be seen firing the portable anti-tank weapon at what appears to be a Russian armored personnel carrier (APC).

As Western countries have undertaken massive arms transfers to Ukraine to support it in its war against Russia, critics such as The Intercept’s Sara Sirota have expressed concern that these weapons could end up in the Azov Battalion, which was integrated into Ukraine’s National Force in 2014.

Anti-tank and armor weapons such as the Javelin, NLAW and MATADOR have been a mainstay of arms transfers to Ukraine. In a March 16, 2022 briefing, White House Press Secretary Jen Psaki said “Anti-armor and air-defense systems, they are effectively defending the country.”

The German Defense Ministry listed 2,650 MATADORs for purchase by Ukraine, Süddeutsche Zeitung reported in March. Euromaidan Press reported that they had been purchased for €25 million, along with another 2,450 that will be produced.

The recently released video shows that these partly Israeli-developed weapons are now in the hands of the Azov Battalion, which has been widely characterized as a neo-Nazi militia. While CNN and other media analysis have weighed the possibility that Azov has reformed, the group still has prominent neo-Nazis in its ranks and features white supremacist symbols.

The Battalion’s logo still has the Black Sun, a common white supremacist symbol, and the Wolfsangel symbol used by the Nazi SS.

This is not the first time concerns have been raised about Israeli weapons and Ukraine. In February, Interfax Ukraine reported that the Israeli Defense Ministry told Baltic states that it wouldn’t meet requests for third-party transfer of Israeli-made weapons to Ukraine.

In 2018, Haaretz reported that human rights activists filed a petition to the High Court of Justice demanding an end to arms exports to Ukraine over concern they would reach Azov militants.

Haaretz published an image showing an Israel Weapons Industry Tavor sub-machine gun being held by an Azov Battalion soldier. Tavors have also been seen wielded by Ukrainian fighters in the recent conflict, produced under license by Ukrainian company RPC Fort as the FORT-221, according to The Warzone.

The MATADOR, also known in European markets as the RGW 90, is an unguided short-range shoulder-fired anti-armor rocket launcher jointly developed by Israeli government-owned defense firm RAFAEL Advanced Defense Systems, Singapore’s armed forces and Defence Science and Technology Agency, and German defense company Dynamit Nobel.

The MATADOR platform was developed for the confined spaces of urban warfare environments and is capable of penetrating the armor of most APCs and light tanks, according to the Singaporean Defense Ministry.

The weapon has a “dual-capability” warhead beyond normal anti-tank weapons, a delay action mode designed to blow open walls and create an entry into buildings. When fighting in urban environments, the ability to avoid entering though doors and windows can mean avoiding ambush or booby traps.

The weapon is “among the lightest in its class,” according to the Singaporean Defense Ministry, and extremely versatile.

According to Dynamit Nobel Defense, the MATADOR is capable of firing smokescreen and illumination munitions in addition to its anti-armor, vehicle and tank functions.

It has a maximum effective range of 500 meters, according to technical specifications published by the Singaporean Defense Ministry.

The MATADOR is in use by several states, including the Israel Defense Forces, where it has seen effective and active service. Among some IDF soldiers, the weapon is considered too expensive to fire in training. The wall opening function is particularly valued by IDF soldiers, who have used it in heavily built-up environments such as the Gaza Strip.

 

Iranian President issues stern warning to Israel

Iranian President Ayatollah Seyed Ebrahim Raisi has issued a strong warning against any Israeli move to harm Iran, making sure that his country is aware of Israel’s possible plans to take the battle into Iran. 

The timing and the venue from which the warning was issued could not be more meaningful. President Raisi made the remarks during a military parade held on the occasion of the Iranian Army Day. Flanked by Army generals in an elevated stand, Raisi told parading troops that Iran will respond to any Israeli aggression against Iran in Israel’s depth. 

Underlining that Iran will never start a war, but will face any aggression with a remorseful and decisive response; President Raisi announced the high readiness of the country's military forces and the high intelligence elite of these forces in the face of regional and international developments.

He asserted that the slightest movement of the enemy will not be hidden from the sharp eyes of Iran’s armed forces, noting, “The Zionist regime (Israel) that is seeking to normalize relations with some regional countries must know that the slightest move it makes will not be hidden from the sharp eyes and intelligence of the Armed Forces and intelligent forces of the Islamic Republic of Iran.”

Stressing that any movement of the Zionist regime against Iran will lead to a decisive response from the Armed Forces of the Islamic Republic of Iran, Ayatollah Raisi warned the leaders of the regime, “Beware that the great and formidable power of the Armed Forces of the Islamic Republic of Iran will not leave you as you are for a second.”

This is the highest-level warning after the Iranian missile strike in March against a “Mossad headquarters” in Erbil, northern Iraq, which was reportedly a response to a previously announced Israeli drone attack in the western Iranian province of Kermanshah.

Iran’s Al-Alam news television said the missile attack, launched by the Islamic Revolution Guard Corps (IRGC), came in response to a recent Israeli drone attack in the Mahidasht region in western Iran.

Little is known about the Mahidasht strike but it apparently marked a significant stage in what Israelis call the “Octopus doctrine,” which happens to be a brainchild of Israeli Prime Minister Naftali Bennett.  

The doctrine means that Israel should take the battle to Iran instead of fighting Iran’s allies across the West Asia region. Bennett outlined the doctrine at the Herzliya Conference in May 2018 when he was education minister. 

“While we’re shedding blood fighting their tentacles, the octopus’s head is lounging in its chair enjoying itself,” he said of Iran, adding that it was time for Israel “to aim at the head of the octopus and not its tentacles.”

Bennett reiterated the doctrine when he became defense minister, saying in February 2020 that “when the tentacles of the octopus strike you, do not fight only against the tentacle, but suffocate its head, likewise with Iran.”

But Bennett has largely failed in carrying out his doctrine due to Iran’s vigilance. Israel was unable to mount a significant attack inside Iran. And the Mahidasht attack was so minor in its effect that Israel was unwilling to highlight it at the media level just as it does with the attacks that it does not claim responsibility for. 

Anyway, Iran seems more vigilant than ever vis-a-vis Israel’s moves. Iran has long said it is watching all the steps Israel makes in the region whether through its new allies or directly. And has the will to respond to any aggressive move, as Raisi said.

Interruption in Libyan oil supply: A cause of concern or bluff only

Contrary to the wishes of US fund managers price of crude oil could not be jacked up. The United States caused a war like situation in Ukraine to keep oil prices at an elevated level. When the strategy failed US supported forces in Libya caused virtual shut down of production and loading facilities.

I have preferred to term this strategy a bluff only because Libya’s share in global oil markets is paltry. Export or no export is hardly of any consequence. Dissemination of such reports by the Western media facilitates the fund managers to drive the market and make windfall profit.

 Reportedly, Libyan National Oil Company (NOC) has declared force majeure on another key Libyan oil field, the 300,000 bpd Al Sharara, amid protests that had shut down production at two ports and the El Feel oilfield on Sunday.

NOC said, “A group of individuals put pressure on workers in the Al-Sharara oil field and forced them to gradually shut down production and made it impossible for the NOC to implement its contractual obligations”. 

The NOC said it was “obliged” to declare a state of force majeure on Al Sharara “until further notice”. 

Al-Sharara is Libya’s biggest oilfield, and the move effectively suspended all Libyan oil production and exports. 

On Sunday, the NOC said that loadings of crude oil at two Libyan ports had been suspended amid anti-government protests that were interfering with oil industry operations.

Loading from the Mellita terminal was suspended following a shut down in production at the El Feel oil field, with the NOC stating that individuals were preventing the field’s workers from continuing production. 

Also on Sunday, the NOC shut down operations at the Zueitina export terminal over protests calling for the resignation of incumbent Prime Minister Abdul Hamid Dbeibah.  

The NOC has been eyeing a ramp-up in production to 1.4 million bpd for Libya, but a new political battle is setting the stage for potential return to civil war. Libya has been producing around 1million bpd since the beginning of this year. 

Two rival governments have now emerged in Libya, with incumbent Prime Minister Deibah refusing to step down for newly sworn-in eastern Prime Minister Fathi Bashaga, who last week said his forces would take over the capital Tripoli peacefully. 

The latest protests that have led to force majeure appear to be engineered by supporters of the Bashaga to gain control of the oil industry from supporters of the incumbent Dbeibah. 

Early on Monday, the initial force majeure declarations pushed oil prices higher, with Brent trading above US$111 per barrel.

With the latest force majeure declaration for Al-Sharara, oil prices are pushing higher still, with Brent at US$113 at the time of writing and WTI above US$108. 

 

Safeen Feeders inks agreement with Saif Powertec of Bangladesh

According to Seatrade Maritime News, UAE-based Safeen Feeders has inked an agreement with Bangladesh’s Saif Powertec for the delivery of bulk cargoes from Fujairah to Chattogram and Mongla. 

The new bulk shipping offering will also oversee cargo operations to the Indian subcontinent, South-East Asia, and other global destinations, Abu Dhabi’s AD Ports Group, which owns Safeen Feeders, said.

 “Leveraging Safeen Feeders’ expertise as a leading maritime service provider, as well as the advanced capabilities of its modernized fleet, Saif is well-positioned to accelerate the trade of dry construction materials between the UAE and Bangladesh, along with other dry cargo goods to key markets across the region and beyond,” Capt. Maktoum Al Houqani, CEO Maritime Cluster, AD Ports Group, said.

The International Monetary Fund forecasts real GDP growth of 6.5% for Dhaka in 2022. With a population of 168 million people, Bangladesh’s economy was booming until the coronavirus pandemic hit, after witnessing real growth of 8.2% in 2019, and is now preparing for a new burst of development. Platts said that Bangladesh was the world’s fifth-biggest wheat importer in 2019.

Set up in 2020 in a tie-up with Singapore’s Bengal Tiger Line, Safeen Feeders has launched two main container services. The weekly UAE Indian Sub-Continent Gulf (UIG) service is a “pendulum” service of three 1,700 teu vessels on a 21-day rotation calling at Khalifa Port, Sharjah, Bahrain, Dammam, Umm Qasr, Karachi, Mundra, Kandla, and Nhava Sheva. Its weekly UAE Coast & Oman (UCO) service offers a 1,000 teu vessel calling at Khalifa Port, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah, and Sohar.

In a fact sheet shared with Seatrade Maritime News, Safeen Feeders said that, as of March, its container fleet consisted of nine container ships, eight owned and one chartered in.

“We are pleased to announce the start of our close partnership with AD Ports Group’s Safeen Feeders, which has greatly enhanced our capabilities as Bangladesh’s sole terminal operator to facilitate the movement of dry cargo at the international level,” Tarafder MD Ruhul Amin, Managing Director Saif Powertec, said.

According to Safeen Feeders’ own website, in addition to 18 tugs, its fleet also includes seven pilot boats, seven speedboats, one buoy maintenance vessel, one diving supply vessel and two oil spill response boats. Safeen Feeders’ bulk carriers will be offered on a bareboat or time charter basis.

 

Sri Lankan default should be an eye opener for Pakistan

As Sri Lankan officials arrive Washington to meet with the International Monetary Fund amid an economic and political crisis, the main question they’ll need to answer is how the country plans to manage its billions in debt.

Reportedly, Sri Lanka is seeking up to US$4 billion this year to help it import essentials and pay creditors. To get any of that through the IMF’s various programs, the government of President Gotabaya Rajapaksa must present a sustainable debt program. That’s a standard requirement for aid from the lender of last resort, even if a shortage of food, fuel and medicine is pushing the country toward a humanitarian crisis.

The downward economic spiral — dwindling foreign reserves and soaring inflation — has triggered political unrest in Colombo, where Rajapaksa has resisted calls to step down despite growing protests and a loss of coalition partners in parliament. Over the weekend, the army denied speculation it planned to crack down on protesters, while the local stock exchange announced it would shut this week amid the uncertainty.

The outlook makes a default inevitable, as  acknowledged by S&P Global last week when it downgraded Sri Lanka’s credit rating and warned of another cut if the nation misses coupon payments due on Monday. Meanwhile, investors are trying to figure out how much they might recover on $12.6 billion of foreign bonds, and if there’s even profit to be made.

The country’s dollar bond due July 2022 indicated 5.2 cents higher on Monday to trade at 46 cents on the dollar, after a sharp drop Friday.

Here are some IMF funding options in play as talks are due to start this week:

Emergency Assistance

IMF members can access one-off emergency loans, with few conditions, through the lender’s Rapid Credit Facility and Rapid Financing Instrument. However, this payout is capped at 50% of a state’s quota for a year, which in Sri Lanka’s case works out to US$395 million — or 289 million in special drawing rights, the IMF’s unit of account. The nation has declared that it will prioritize payments for food and fuel imports over debt servicing.

But even for that, Colombo needs to take steps toward restructuring its debt, which the IMF staff last month determined was unsustainable.

“When the IMF determines that a country’s debt is not sustainable, the country needs to take steps to restore debt sustainability prior to IMF lending,” Masahiro Nozaki, the IMF’s mission chief for Sri Lanka, said in an emailed response to questions. “Thus, approval of an IMF-supported program for Sri Lanka would require adequate assurances that debt sustainability will be restored.”

Meeting the criteria could include even initial steps like hiring advisers, which the government is pursuing. The administration has set a Friday deadline for applications from financial and legal advisers, extending its original date by a week. That makes Finance Minister Ali Sabry’s stated goal of securing emergency funds as early as a week after negotiations start look optimistic.

Given Sri Lanka has a US$1 billion bond maturing in July and more repayments over the course of 2022, it will probably need access to the IMF’s Stand-By Arrangement. Termed as its “workhorse” instrument, Sri Lanka would be eligible for a loan of as much as 435% of its quota — roughly US$3.4 billion, net of repayments — for up to 36 months.

The payout can be front-loaded if the need is dire, but is contingent upon the borrower agreeing to conditions such as specific revenue and deficit targets.

Central bank Governor Nandalal Weerasinghe said last week that it was too early to estimate a value of the lending that Sri Lanka could get from the IMF or to confirm the type of program that the lender could agree to.

While he said that an Extended Fund Facility — which allows longer repayment periods — may be best suited to the country, it typically requires deeper structural reforms. Sri Lanka had that facility approved in 2016, and a Stand-By Arrangement before it during the financial crisis of 2009.

Weerasinghe noted that Sri Lanka in the 2009 loan was approved for access to 400% of its quota.

“I do not see why we cannot get at least that amount,” he said. “Now the financial gap is much much higher.”

Keeping deficits in check will entail extending the maturity of existing debt and smaller interest payments. When the government last week announced it would halt debt payments and warned it was heading for an unprecedented default, Weerasinghe said authorities were seeking to negotiate with creditors.

Nomura Holdings Inc. envisions an Ecuador-style restructuring where Sri Lanka will swap notes for longer-dated bonds with lower coupon rates and some reduction to principal. Barclays Plc said Sri Lanka could roll all of its debt into a new bond with a final maturity in 2037 and semi-annual amortizations starting in 2027; coupons could be in the range of 4% to 5%, lower than its current average 6.6%.

Rajapaksa’s government has also appealed to China, one of its biggest creditors, for an additional US$2.5 billion in support. While President Xi Jinping has pledged to help, an apparent reluctance reflects both a rethink in its external lending practices and a hesitancy to be seen interfering in messy domestic political situations.

Earlier this month, Jin Liqun, President of the China-backed Asian Infrastructure Investment Bank, encouraged Sri Lanka to turn to the IMF. Neighbor India is also assisting Sri Lanka with credit lines to purchase food and fuel.

Sabry, the Finance Minister, said last week that the country will hold talks with other lenders, including the World Bank and Asian Development Bank, adding that the country is committed to honoring its debt. “We will pay every dollar we borrowed,” he said.

As Sri Lanka is set to start IMF talks, what are its options?

Sri Lanka is seeking up to US$4 billion to pay for essentials and pay creditors, but it must show IMF a sustainable debt plan.