United States fails in deterring Houthis

After half a year of conflict, the United States has failed to deter the Houthis from attacking merchant ships in the Red Sea as the Yemeni fighters continue to attack commercial boats and disrupt global trade, posing an increasingly difficult challenge for the far larger American military.  

Repeated US bombardments on Houthis positions have done little to stop the group that has managed to employ advanced weapons like surface-water drones and anti-ship ballistic missiles to fluster US troops. They have kept up the pace of attacks with more than 190 drone and missile launches since the effort began in October 2023. 

While the US has thwarted most Houthi attempts to damage merchant ships, the Yemeni fighters have now sunk or heavily damaged at least four commercial vessels, along with hijacking one. They have also killed four commercial sailors. 

The latest successful attack came on June 23, when the Houthis struck the Liberian-flagged and Greek-owned merchant ship the Trans World Navigator. The last vessel to sink, another Greek-owned ship, the Tutor, was on June 12.  

Bruce Bennett, an adjunct senior international defense researcher at RAND Corporation, said the Houthis are being fed by religious determination and a political motivation that embraces sacrifice, while their insurgent warfare, with weapons scattered across Yemen, pose a big challenge. 

“The US military is designed for regular warfare. It’s designed to take out an adversary who’s out there and targetable,” he said. “It’s really a very hard kind of military threat to get under control.” 

The conflict’s impact on global trade is only growing as it drags on. Earlier this month, the shipping industry sent out a scathing condemnation of the Houthis attacks, calling it “an unacceptable situation” and pushing for stronger international action to ensure the attacks “stop now.” 

While economic costs have largely been absorbed by the shipping industry and direct sellers for now, that could change. 

Adnan Mazarei, a nonresident senior fellow at the Peterson Institute for International Economics who focuses on the economies of the Middle East and Central Asia, said traffic is down by 50% in the Red Sea corridor. The impact is regional, he added, mainly hitting Egypt, which collects shipping revenues through the Suez Canal, along with reducing port traffic for countries like Israel. 

An extended conflict could begin to impact other parts of the world, especially Europe, as increased shipping costs trickle down to the average consumer. That could significantly worsen if a possible approaching war between Israel and Hezbollah in Lebanon is realized, Mazarei added. 

“Unless there is a war in Lebanon, we are in a somewhat stable situation” he said. “Not a good situation, but I think things are somewhat stabilized.” 

The Houthis are launching drones and missiles daily from sites in Yemen, using fishing boats for radar-tracking and relying on advanced weapons shipments and other targeting assistance from Iran. 

The scope of their efforts has also expanded outside of the maritime corridor, with the Houthis in the past few months kidnapping dozens of United Nations relief works, Human Rights Watch said in a new report. 

The US Navy has been constantly on the alert since full engagement began in January to quickly shoot down drones and launch counterattacks on the rebel group’s assets.  

But the Houthis need to slip just one drone or missile through defenses to do damage, while the U.S. cannot miss once or risk a hit, said Cmdr. Eric Blomberg with the USS Laboon, a destroyer ship that has taken on the Houthis, who told The Associated Press that people may be unaware of “how deadly serious it is what we’re doing and how under threat the ships continue to be.” 

The USS Eisenhower aircraft carrier strike group, made up of four ships and some 6,000 sailors, this month left the Middle East. The US is sending reinforcements to the region for the Eisenhower group, which has been deployed since October to deter regional escalation and counter the Houthis. 

Washington believes it can damage the rebels enough to stop the effectiveness of their campaign, though officials are now stressing the challenge of accomplishing that goal. 

White House national security spokesperson John Kirby told reporters on Wednesday that the Houthis “miss a whole hell of a lot more than they hit” because of the Navy’s vigilance. 

Kirby explained the U.S. was focused on “taking away their capability to conduct the attacks” but also acknowledged the Houthis remain determined and well-supplied, despite the military working to intercept Iranian skiffs headed to Yemen. 

“They have instilled this sort of religious fervorness and made it some sort of cause célèbre, and when you do that, it becomes even more difficult,” he said. “We’re doing everything we can to try to degrade their capabilities, but they’re still getting supplied. They’re still getting resourced by Iran.” 

Neither Biden nor Trump fit to be US President

US President Joe Biden’s main opponent on the debate stage in Atlanta on Thursday night wasn’t the rambling, falsehood-filled former president who refused to admit he lost the last election or commit to respecting the result if he loses the next one. 

The 81-year-old Democrat’s real foe was himself. Biden’s disjointed performance shocked and angered many loyal Democrats, some of whom began openly questioning whether he should continue to seek a second term.

Donald Trump, 78 is just three years younger to Biden, largely avoided the kind of outbursts for which he is famous.

He did however remain consistent in using the debate stage to pour forth a steady stream of lies on everything from tariffs on China, abortion and the failed 2021 effort to block the transfer of power. Neither the moderators nor Biden offered much fact-checking. 

Biden’s Friday performance had sent parts of the Democratic political establishment into a tizzy. “DEFCON 1,” said former President Barack Obama’s campaign manager, David Plouffe.

A steady drumbeat of talking heads took to cable urging Biden to make way for a younger candidate—though it’s late in the game for such a strategy. 

Biden’s Congressional allies stood by him Friday, but the talk among doubters was centered on Vice President Kamala Harris, Michigan Governor Gretchen Whitmer and California Governor Gavin Newsom.

Harris would be the only candidate able to inherit Biden’s large campaign war chest. Newsom however topped many informal lists.

He’s “arguably best equipped—in fundraising chops, in messaging and in campaign infrastructure—to step up in an emergency,” Erika D. Smith wrote in Bloomberg Opinion.

But by Friday afternoon, the president had moved to quell the panic. Following a morning of Republican glee and Democratic handwringing, a decidedly more energetic Biden took to the stage at a rally in North Carolina.

“I don’t walk as easy as I used to. I don’t walk as smoothly as I used to. I don’t debate as well as I used to,” he conceded to a cheering crowd. “But I know what I do know—I know how to tell the truth, I know right from wrong and I know how to do this job.” 

Iran rejects statements made by US official

Iran has firmly rejected recent statements made by a US administration official concerning the country's presidential election, labeling the remarks as "worthless" and "meddlesome." 

On Friday, Nasser Kanaani, the spokesman for Iran's Foreign Ministry, responded forcefully to comments by Abram Paley, the deputy special envoy for Iran at the US State Department. Paley had taken to his X social media account to accuse Iran of "suppressing election coverage" and asserted that the election was neither "free nor fair," among other allegations deemed false by Iranian authorities.

Kanaani criticized these comments, stating, "American authorities gain nothing from such worthless statements. The Iranian people will firmly respond to these interventionist remarks by participating effectively and enthusiastically in the polls, as they have done in the past."

He emphasized the significant role that the Iranian populace plays in shaping their political future, an aspect he described as an "obvious principle" that has been consistently demonstrated in practice.

He further asserted that the integrity and fairness of Iran's electoral processes have been validated in previous elections.

"The Islamic Republic of Iran and its election organizers view the people's vote as a trust and a fundamental right, which they are obligated to protect," Kanaani said.

He suggested that the American officials' understanding of this principle might be limited by what he described as their "totalitarian mentality."

Kanaani also took the opportunity to critique the state of American democracy, both domestically and internationally.

He highlighted the "bitter taste" of American democracy experienced by global nations, particularly pointing to the situation in the occupied territories.

"The outcome of American democracy and human rights there includes criminals known for occupation, racism, war, bloodshed, and terrorist acts," he remarked.

He continued by saying that if the US democratic system allowed it, American citizens would undoubtedly elect better leaders. 

Additionally, Kanaani condemned the U.S. treatment of pro-Palestine students and professors in American universities, citing it as clear evidence of Washington’s poor track record on human rights and freedom of expression. "The world is witnessing how discussions on human rights in America have turned into an empty slogan, marred by beatings, illegal arrests, and dismissals," he said.

In Iran, over 61 million people are eligible to vote, with the election headquarters reporting that voting took place at 58,640 polling stations, mainly located in schools and mosques. Early projections of the election results are anticipated by Saturday morning, with official results expected by Sunday.

The new administration, the 14th since the victory of the Islamic Revolution in 1979, is expected to assume power in late June or early July and will hold office for four years.

 

Iran to hold presidential run-off on July 5

According to Reuters, a moderate lawmaker will face Iran supreme leader's protégé in a run-off presidential election on July 05, 2024 after the country's interior ministry said on Saturday that no candidate secured enough votes in the first round of voting.

Friday's vote to replace Ebrahim Raisi after his death in a helicopter crash came down to a tight race between a low-profile lawmaker Massoud Pezeshkian, the sole moderate in a field of four candidates, and former Revolutionary Guards member Saeed Jalili.

The interior ministry said neither secured the 50% plus one vote of over 25 million ballots cast required to win outright, with Pezeshkian leading with over 10 million votes ahead of Jalili with over 9.4 million votes.

Power in Iran ultimately lies with Supreme Leader Ayatollah Ali Khamenei, so the result will not herald any major policy shift on Iran's nuclear program or its support for militia groups across the Middle East.

But the president runs the government day-to-day and can influence the tone of Iran's policy.

The clerical establishment hoped for a high turnout as it faces a legitimacy crisis fuelled by public discontent over economic hardship and curbs on political and social freedom. However, turnout in Friday's vote hit a historic low of about 40%, based on interior ministry count released on Saturday.

The election comes at a time of escalating regional tension due to the war between Israel and Iranian allies Hamas in Gaza and Hezbollah in Lebanon, as well as increased Western pressure on Iran over its fast-advancing nuclear program.

With Iran's supreme leader now 85, it is likely that the next president will be closely involved in the process of choosing a successor to Khamenei, who seeks a fiercely loyal president who can ensure a smooth eventual succession to his own position, insiders and analysts say.

Anti-Western views of Jalili, Iran's former uncompromising nuclear negotiator, offer a contrast to those of Pezeshkian. Analysts said Jalili's win would signal the possibility of an even more antagonistic turn in the Islamic Republic's foreign and domestic policy.

But a victory for mild-mannered lawmaker Pezeshkian might help ease tensions with the West, improve chances of economic reform, social liberalization and political pluralism.

Pezeshkian, faithful to Iran's theocratic rule, is backed by the reformist faction that has largely been sidelined in Iran in recent years.

"We will respect the hijab law, but there should never be any intrusive or inhumane behaviour toward women," Pezeshkian said after casting his vote.

He was referring to the death of Mahsa Amini, a young Kurdish woman, in 2022 while in morality police custody for allegedly violating the mandatory Islamic dress code.

The unrest sparked by Amini's death spiraled into the biggest show of opposition to Iran's clerical rulers in years.

Malaysia and Thailand keen in joining BRICS

According to NIKKEI Asia, two Southeast Asian nations, Malaysia and Thailand, have recently revealed their plans to join the BRICS grouping of emerging nations as middle power countries seek to maneuver amid growing geopolitical uncertainties, including the US-China tensions.

What kind of organization is BRICS?

BRICS, an acronym for Brazil, Russia, India, China and South Africa, was launched in 2009 as BRIC and later renamed BRICS in 2010 when South Africa joined the group. It was formed to foster economic, political and cultural cooperation among its members.

Compared to the Association of Southeast Asian Nations (ASEAN), the group operates without a formal charter or secretariat -- akin to an informal group that meets annually to allow for flexibility and prompt responses to global challenges.

Alicia Garcia-Herrero, a senior research fellow at the Brussels-based think tank Bruegel, argued in her article on the East Asia Forum that at the start of the group's formation, China dominated the bloc, and most of the growth in trade has been China-centric. However, the recent increase, mostly driven by India, has "experienced an acceleration in economic growth" of the group.

The five countries combined accounted for gross domestic product of US$25.8 trillion last year, or about a quarter of the global total, whereas Group of Seven (G7) developed nations had a combined US$46.8 trillion.

Why do Malaysia and Thailand want to join?

Participation in BRICS would foster economic cooperation with peer emerging economies, such as trade and investment.

In addition, Malaysia views this as an opportunity to engage in rising multilateralism, according to Hoo Chiew Ping, a senior fellow at the East Asian International Relations Caucus. She said joining BRICS would support a multipolar world order rather than being drawn into a new Cold War centered on the US-China rivalry.

Thailand has said a BRICS membership would enhance Thailand's role as a leader among emerging countries.

A foreign ministry spokesperson told reporters last week that the country wants to play more roles, promoting Thai potentials to co-play the roles with developed nations and underdeveloped nations to provide guidelines for global community development to promote justice and equality, adding that being a BRICS member does not mean Thailand is taking sides.

Will other countries in Southeast Asia follow?

Indonesian Foreign Minister Retno Marsudi said earlier this year that Jakarta was still assessing the benefits of joining BRICS. This follows President Jokowi Widodo's attendance at the BRICS summit in South Africa in August last year, during which he called for stronger cooperation among developing nations to fight trade discrimination.

Jokowi told reporters afterward that despite Indonesia's good economic relationships with the group's members, we don't want to rush joining the bloc.

Observers describe Indonesia's reluctance to join BRICS as a desire to avoid being seen as too close to China, already its biggest source of foreign direct investment and trading partner in recent years. China has also been the biggest trading partner to most ASEAN countries in the past decade.

This is amid Indonesia's ambition to join the OECD instead. The rich-country club opened accession discussions with Indonesia in February that, if realized, will make it the first OECD member from Southeast Asia.

Rahul Mishra, an associate professor at the Center for Indo-Pacific Studies of Jawaharlal Nehru University, said that Malaysia's and Thailand's moves will motivate Indonesia to revive its BRICS plans. Vietnam could be the next member, and a bigger BRICS would mean a collective of more voices from the Global South, he added.

Vietnam sent a delegation to attend the BRICS Dialogue with Developing Countries in Russia's Nizhny Novgorod this month. The country is watching the BRICS expansion but has not made any comments on joining the bloc. Thailand and Laos took part in the forum as well.

What would Thailand's and Malaysia's BRICS memberships mean for Southeast Asia?

The shift could put a strain on the unity and centrality of Southeast Asia's own multilateral framework, ASEAN, and the Southeast Asian bloc needs to adapt to remain relevant as its members explore other alignments, experts say.

"It is high time for ASEAN to prepare the necessary, to complement the appetite of its member states in bolstering action and crafting solutions, in which ASEAN seems to be counterproductive," said Fikry A Rahman, the head of foreign affairs at Malaysia's research institute Bait Al-Amanah.

Fikry said that ASEAN will continue to take center stage for Southeast Asia, and its members will not undermine the values, although he also pointed out that the nature of the Southeast Asian bloc limits its role in serving regional goals.

What does a bigger BRICS mean for the world?

The expansion of BRICS would amplify the voice of the Global South and point to a further disparity of a more polarized world.

In January 2024, BRICS expanded its membership to include more prominent Global South countries: Egypt, Ethiopia, Iran and the United Arab Emirates (UAE), with more countries potentially joining the group.

"The expanded BRICS membership is a direct response to heightened bipolar rivalry, which has significantly increased global geopolitical uncertainties," Hoo said, highlighting how middle powers maneuver amid the tension between superpowers.

However, Hoo cautioned that the inclusion of more countries, especially with Russia's involvement in the grouping, could send a problematic signal to the US and its allies, as membership can be viewed as adversarial to Western interests and values.

Pakistan Stock Exchange experiences lack luster week

Pakistan Stock Exchange experienced a subdued week, posted a nominal decline of 365 points (0.46%WoW), primarily due to weakness in the banking sector following news of the continuation of the ADR-based tax.

Average daily trading volume also declined to 356 million shares for the week, down 13%WoW.

The incidence of futures rollover, coupled with it being the last week of the fiscal year overall contributed to the lack luster performance.

Several important data points came in during the week, including a CAD of US$270 million, below expectations of a slight positive balance. This was due to the SBP acting swiftly to clear the backlog of overdue outward dividend repatriations, impacting the balance negatively.

Monthly FDI was reported at US$271 million, up 95%YoY, taking 11MFY24 FDI to US$1.73 billion, up 15%YoY.

Federal Budget for FY25 was approved by the National Assembly on Friday, with several amendments in previously presented finance bill.

These included introduction of a 15% FED on sales by builders/developers, continued concessions on HEV imports, and increased FED on cement, among other changes.

On the external front, foreign exchange reserves held by State Bank of Pakistan (SBP) declined by US$239 million to US$8.9 billion.

The domestic currency continued to strengthen against the greenback, ending the week at PkR278.34/US$ (up 0.06%WoW).                    

Other major news flows during the week included: 1) World Bank approved US$535 million for social protection, livestock development, 2) No cut in gas tariff, 3) Finance Minister issues warning to retailers, 4) the GoP raises PKR908 billion new debt via T-Bills, PIB, and 5) Foreign investors repatriate record US$918 million in May.

The best performing sectors included: Tobacco, Jute and Vanaspati & allied, while ETFs, Refinery and Property were amongst the worst performers.

 Major selling was recorded by mutual funds with net sell of US$5.8 million and other organizations with net sell of US$2.2 million. Brokers and companies absorbed most of the selling with a net buy of US$4.9 million and US$1.5 million, respectively.

Top performing scrips of the week were: MUREB, FABL, PAKT, UNITY and HGFA, while the laggards included: YOUW, MCB, EPCL, CNERGY and CEPB.

With the approval of the Federal budget, clarity on new budgetary measures has emerged, and the market is anticipated to sustain positive momentum as new fiscal year commences.

The focus will now shift to upcoming discussions with the IMF regarding the next EFF program, with a keen eye on their assessment of the approved budget.

The anticipated easing of inflation figures for May 2024 is expected to reinforce positive market sentiment further.

 

 

Iran: Presidential election and there after

In the Iranian presidential election being held today, six handpicked candidates are participating. Though, the scanty details have started pouring in, these are mostly tweaked. The details coming from western media are aimed at proving that elections are eyewash. The western media is also busy in creating discontent among the Iranians and using a few dissent voices.

Ironically, the presidential debate in the United States is engrossed in self-created issues of United States, i.e. trade war with China, Russia-Ukraine conflict and above all on going genocide in Gaza by Israel. All these issues have been created and garnered by military complexes that are the key donors of election campaigns in United States for ages.

One may recall that once there was a ban on export of oil from United States, now the country has attained the status of major oil and gas producing and exporting country. The lust for getting complete control over energy trade is touching new highs.

Therefore, the United States wants to keep Iran out of energy trade. However, the bigger objective is, not to allow Iran to become a regional power. Saudi Arab – Iran animosity has been used for more than five decades to keep Iran out of energy trade and luring Saudi Arabia to buy more and more lethal weapons.

Since Islamic revolution in Iran, United States has tried to sponsor anti-cleric groups but failed miserably. The US has killed many of the Iranian scientists and commanders, with close coordination with Israel. The elimination of President Ebrahim Raisi was an attempt to disrupt the process of choosing the successor of Rahbar Ali Khamenei.

The United States is also annoyed by the growing cordial diplomatic relations with Saudi Arabia. The biggest disturbing point is that in case these two countries become friend, not only US hegemony in the region will be reduced but the two countries will get control over oil and gas moving through Strait of Hormuz and Red Sea.

Whatever may be the outcome of Iranian elections, United States remains adamant at imposing new sanctions of Iran, keeping it out of energy trade and disrupting normalization of Saudi-Iranian relations. The bigger objective is to support Israel in killing Gazans and get control over the tiny piece of land extra rich in oil and gas.