US Congress approves weapons sale to Saudi Arabia

According to Aljazeera, the United States Senate has blocked a resolution that would have banned a US$650 million sale of missiles and missile launchers to Saudi Arabia.

The sale was approved by the administration of President Joe Biden in November. It is the first major arms deal between the United States and Saudi Arabia since Biden took office in January this year.

The chamber on Tuesday voted 67 to 30 against the resolution, which represented the latest attempt by legislators to block US weapons transfers to Saudi Arabia over its involvement in the continuing war in Yemen. It had been introduced by Republicans Mike Lee and Rand Paul, as well as Bernie Sanders, an independent who caucuses with Democrats.

In a speech, Sanders said, “Exporting more missiles to Saudi Arabia does nothing but further this conflict and pours more gasoline on already raging fire.”

A military coalition assembled by Saudi Arabia and the United Arab Emirates intervened in Yemen’s conflict 2015 in support of President Abd-Rabbu Mansour Hadi’s internationally recognized government shortly after the Houthis took control of the capital, Sanaa.

Both sides have been accused of committing atrocities over seven years of fighting, resulting in an estimated 233,000 deaths and five million people on the brink of famine.

“We could stop this war if we really had the will to do it,” Paul said on the Senate floor. “All of America should be appalled at the humanitarian disaster caused by the Saudi blockade of Yemen.”

The Biden administration had promised a reset of relations with Riyadh over human rights concerns and the 2018 killing of journalist Jamal Khashoggi, which US intelligence linked directly to Saudi Crown Prince Mohammed bin Salman (MBS). Saudi officials have denied MBS was involved in Khashoggi’s murder.

But Washington has also taken a more pragmatic approach towards Riyadh, whose influence over oil markets and strategic significance in the region continue to make it a key US ally.

In February, Biden announced an end to support for all “offensive operations” by Saudi-led forces in Yemen, but pledged to continue to support the kingdom’s ability to defend itself.

Lately, the Biden administration had said it strongly opposed the resolution to prohibit the weapons sale.

Passage “would undermine the President’s commitment to aid in our partner’s defenses at a time of increased missile and drone attacks against civilians in Saudi Arabia”, the White House Office of Management and Budget said in a statement.

The Wall Street Journal reported that Riyadh is currently appealing to the US and other allies to supply “hundreds more” Raytheon Missiles and Defense-made Patriot missile interceptors to repel drone and ballistic missile attacks from the Houthis, citing a dwindling supply.

The State Department is considering a direct sale, according to the newspaper.

 

Iranian satellite launch

Despite disagreements with Israel about strategy, the United States is worried about Iran getting nuclear weapons. Analysts believe the US should be more concerned about the Islamic Republic making nuclear missiles with a range that could hit the US rather than these missiles reaching Israel.

If during the current nuclear negotiations Iran carries out an expected satellite launch – which may have dual technology eventually applicable to launching an intercontinental ballistic missile – it will be directly aimed at inflaming this US fear in order to pummel Washington into new concessions and submission.

If Iran’s Supreme Leader Ayatollah Ali Khamenei makes the political decision to go for a nuclear weapon, he could have sufficient weaponized uranium within three weeks.

Since the mid-1990s, Iran has had ballistic missiles with a range that could hit Israel, once it masters some additional detonation and delivery issues that would still take some undefined amount of time, Jerusalem might be under threat.

In contrast, the US is nowhere near the range of the ballistic missiles that Khamenei has at his disposal. Iran would need to develop ICBMs in order to put the US in range – something that could take an estimated three years, according to multiple experts.

That is also a different set of skills and processes beyond what Iran would need to fire a potential short- or medium-range nuclear weapon.

Dating back to negotiations in 2019, the offer the Iranians had made to the US was essentially, “Cut a deal with us now, before we develop an ICBM that could also hit you.”

True, the US is worried about the 90% uranium enrichment red line as is Israel, but putting the US in range is the real red line.

If Iran had nuclear weapons but could “only” hit Israel, it would be one of several major security issues in regions far from the US borders. It would not actually physically threaten the US.

Launching a satellite at this sensitive stage of the Vienna talks, when both sides are playing chicken and trying to get the other side to blink, would be Khamenei playing a potential trump card against America’s soft underbelly.

And the threat may feel more credible given that Tehran is closer to the 90% uranium enrichment line than it has ever been.

However, based on the Biden administration’s policy to date, this gambit probably would not work.

US President Joe Biden is ready for a mutual return to the 2015 JCPOA nuclear deal even if it upsets Israel, and even with some minor changes favoring Iran.

But politically, he has already looked weak in his handling of Afghanistan, Ukraine and other global crises and he cannot afford to cut a long-term deal with Khamenei that is worse than the nuclear deal. He would jump at cutting a “less for less” partial sanctions-lifting for a partial return to a nuclear-limits deal, but Tehran has so far been cool to this idea.

Because of that posture, another Iranian satellite launch will definitely alarm the US, but will probably not be a game-changer in negotiations.

In the meantime, the Islamic Republic will have continued to make progress on multiple tracks of skills it needs to perfect for nuclear weapons. And the jury will still be out on who will make the first concession in the nuclear standoff – or whether the situation will escalate into greater confrontation.

US administration urges domestic oil producers to raise output

The US administration is offering its strongest public support to domestic oil producers for boosting output by drilling on existing leases. It is also ruling out the possibility of reinstating a decades-old ban on crude exports.

Lately, US Energy Secretary, Jennifer Granholm told oil executives the administration was not "standing in the way" of oil and gas production and supported increased output. She noted that the administration has approved drilling permits on federal land at a faster pace than the prior administration. It is also pursuing other policies that could bring down retail gasoline prices that went close to seven-year high.

"Consumers as you know are hurting at the pump," Granholm said at a meeting of the National Petroleum Council, a group of high-level oil executives that offer advice to the US Energy Secretary. "I hope you will hear me say that please, take advantage of the leases that you have, hire workers, get your rig count up."

The change in tone comes amid growing frustration from US oil executives, who have bristled at what they see as a lack of support from the administration. Biden in one of his first acts in office blocked the 830,000 b/d Keystone XL pipeline and spent this summer unsuccessfully asking OPEX Plus to accelerate plans to boost output. Chief Executive of US independent producer, Pioneer Natural Resources, Scott Sheffield last week said he has yet to meet another oil executive who has received a call from the administration asking them to increase drilling.

But the administration has become increasingly vocal in saying it supports domestic production, as voter frustration over fuel prices becomes a growing threat to Democratic passage of a US$1.85 trillion budget package. US senator Joe Manchin has cited high inflation rates as a reason to slow work on the budget bill, which includes hundreds of billions of dollars in support for clean energy.

Granholm said it would make "little sense" for the administration to stand in the way of oil and gas production as the US recovers from the effects of COVID-19, echoing remarks that US Deputy Energy Secretary, David Turk made to the industry officials last week. She also more definitively ruled out the possibility that the administration would reinstate a ban on crude exports, something the White House said last week it was not considering. Granholm said she had heard from industry officials last week that it was important to take "off the table" the uncertainty of a potential crude export ban.

"I have heard you loud and clear, and so has the White House, and we wanted to put that rumor to rest," Granholm said.

US crude production reached 11.7 million barrels per day (bpd) during the week ended on December 03, 2021, the highest output levels since May 2020, according to the US Energy Information Administration. However, the domestic production is still down from record-high levels of 13 million bpd in the months before the pandemic heavily reduced demand. US oil executives say that a demand by shareholders to prioritize profits over output growth have been the primary driver of their investment decisions, rather than policies set by the administration.

The administration has made other attempts to lower gasoline prices for consumers. Biden has asked the US Federal Trade Commission to look at whether "illegal conduct" is contributing to higher gasoline prices. Biden also accelerated the sale of 18 million barrel crude oil from the US Strategic Petroleum Reserve and last week agreed to loan out 4.8 million barrel crude from the strategic reserve to ExxonMobil.

 

State Bank of Pakistan raises policy rate by 100bps

On Tuesday, the Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) decided to raise the policy rate by 100 basis points to 9.75%. The goal of this decision is to counter inflationary pressures and ensure sustainable growth.

Since the last meeting on November 19, 2021, indicators of activity have remained robust, while inflation and the trade deficit have risen further due to both high global prices and domestic economic growth. In November, headline inflation increased to 11.5%YoY.

Core inflation in urban and rural areas also rose to 7.6 and 8.2 percent, respectively, reflecting domestic demand growth. On the external side, despite record exports, high global commodity prices contributed to a significant increase in the import bill. As a result, November trade deficit rose to US$5 billion.

The MPC noted that recent data releases confirm that the emphasis of monetary policy on moderating inflation and the current account deficit remains appropriate. Following Tuesday’s rate increase and given the current outlook for the economy, and in particular for inflation and the current account, the MPC felt that the end goal of mildly positive real interest rates on a forward-looking basis was now close to being achieved. Looking ahead, the MPC expects monetary policy settings to remain broadly unchanged in the near-term. The MPC key trends and prospects in the real, external and fiscal sectors and the resulting outlook for monetary conditions and inflation continue to upset.

Real sector

High-frequency indicators of domestic demand released since the last meeting, including electricity generation, cement dispatches, and sales of fast-moving consumer goods and petroleum products, and continued strength in imports and tax revenues suggest that economic growth remains robust. The outlook for agriculture continues to be strong, supported by better seed availability and an expected increase in the area under wheat cultivation. Meanwhile, robust growth in sales tax on services also suggests that the tertiary sector is recovering well. While some activity indicators are moderating on a sequential basis, partly as a result of recent policy actions to restrain domestic demand, growth this fiscal year is expected to be close to the upper end of the forecast range of 4 to 5 percent. The emergence of the new Coronavirus variant, Omicron, poses some concerns, but at this stage there is limited information about its severity. The MPC noted that Pakistan had successfully coped with multiple waves of the virus, which supported a positive outlook for the economy.

External sector

Despite strong exports and remittances, the current account deficit has increased sharply this year due to a rise in imports, and recent outturns have been higher than expected. Imports rose to US$32.9 billion during July-November period of FY22 as compared to US$19.5 billion during the same period last year. Around 70% of this increase in imports stems from the sharp rise in global commodity prices, while the rest is attributable to stronger domestic demand. Due to the higher recent outturns, the current account deficit is projected at around 4% of GDP, somewhat higher than earlier projected. In the near term, monthly current account and trade deficit figures are likely to remain high, but expected to gradually moderate in the second half of FY22 as global prices normalize with the easing of supply disruptions and tightening of monetary policy by major central banks. In addition, recent policy actions to moderate domestic demand―including policy rate hikes and curbs on consumer finance―and proposed fiscal measures should help moderate growth in import volumes through the rest of the year.

The MPC emphasized that the monetary policy response to arrest the deterioration in the current account deficit has been timely. Together with the natural moderating influence of the flexible and market-determined exchange rate, the MPC felt that the response would help achieve the goal of a sustainable current account deficit this fiscal year. Moreover, the MPC noted that the current account deficit is expected to be fully financed from external inflows. As a result, foreign exchange reserves should remain at adequate levels through the rest of the fiscal year and resume their growth trajectory as global commodity prices ease and import demand moderates.

Fiscal sector

During July-November FY22 period, revenue growth has been strong, driven by a broad-based and above-target increase in FBR tax collections. However, lower petroleum development levy (PDL) collection led to a decline in non-tax revenues. On the expenditure side, development spending and subsidies and grants have increased significantly during this period. The government intends to introduce legislation to increase revenues through elimination of certain tax exemptions and reduce current and development expenditures. These measures would help moderate domestic demand, improve the current account outlook, and complement recent monetary policy actions.

Monetary and inflation outlook

Since the last meeting, despite a moderation in consumer loans, overall credit growth has remained supportive of growth. Meanwhile, across all tenors, secondary market yields, benchmark rates and cut-off rates in the government’s auctions have risen significantly. The MPC noted that this increase appeared unwarranted.

The momentum in inflation has continued since the last MPC meeting, as reflected in a significant increase in both headline and core inflation in November. Due to recent higher than expected outturns, SBP expects inflation to average 9 – 11 percent this fiscal year. The pick-up in inflation has been broad-based, with electricity charges, motor fuel, house rent, milk and vegetable ghee among the largest contributors. On a sequential basis, inflation rose 3 percent (MoM) in November. Looking ahead, based on this momentum and the expected path of energy tariffs, inflation is likely to remain within the revised forecast range for the remainder of the fiscal year. Subsequently, as global commodity prices retrench, administered price increases dissipate, and the impact of demand-moderating policies materializes, inflation is expected to decline toward the medium-term target range of 5 to 7 percent during FY23. The MPC will continue to carefully monitor developments affecting medium-term prospects for inflation, financial stability and growth.

 

No punishment for those involved in fatal Kabul drone strike

No military personnel involved in a botched drone strike that killed 10 civilians in Kabul, Afghanistan, earlier this year will face punishment, the Pentagon said Monday.

Defense Secretary Lloyd Austin approved recommendations from US Central Command head Gen. Kenneth McKenzie and US Special Operations Command leader Gen. Richard Clarke not to take any administrative action against those involved in the August 29 strike, press secretary John Kirby told reporters.  

Kirby said that when McKenzie and Clarke listed their recommendations to Austin “there was no recommendation by either of them about accountability.”

“The recommendations were more about procedure and process and the secretary reviewed them and has accepted them,” Kirby told reporters. “And again, most of them are of a classified nature. ... but there was no overt recommendation made by either specific to accountability or any punishment for anyone.”

The Defense Department admitted in September that the drone strike — which came in the final days of the chaotic US withdrawal from Afghanistan — was a “tragic mistake” that killed the civilians, including seven children. Prior to that, Pentagon officials had said the strike was necessary to prevent “an imminent ISIS-K threat” to US forces evacuating people at Kabul’s airport.

The Pentagon, which initially defended the targeting as a “righteous strike,” carried out the bombing after commanders errantly thought the driver of a white Toyota Corolla — 37-year-old Zemerai Ahmadi, a longtime aid worker for a US-based group — was an ISIS-K operative with explosives.

After a high-level Pentagon review into the incident, no violation of the laws of war were found but it was discovered there were “execution errors” in the lead-up to the strike. 

The investigation, revealed last month, concluded that the errors were not caused by misconduct or negligence and doesn't recommend disciplinary action, but gave commanders the power to decide on what accountability, if any, there would be.

But both McKenzie and Clarke found no grounds for punishing any of the military personnel involved, a Pentagon official told the Times.

In a statement, Kirby said the department takes seriously “our obligation to avoid civilian harm in the execution of our operations, and as the secretary made clear, we will not be afraid to make necessary changes to our processes and procedures to that end.” 

The US military has killed hundreds, possibly thousands, of civilians by accident in war zones in places including Afghanistan, Iraq, Syria and Somalia in the past 20 years but has rarely held specific individuals accountable. 

Public outcry has grown over such killings, including a recently revealed US airstrike in Syria in 2019 that killed dozens of women and children, which military officials tried to conceal. 

 

Israeli Defense Minister presents Iran attack timeline to US officials

Israeli Defense Minister Benny Gantz updated the US officials that he has set a deadline for when the IDF will need to complete preparations for an attack against Iran.

The Americans did not voice opposition to the Israeli preparations when presented with the date by Gantz on Thursday, a senior diplomatic source said the following day.

The IDF has intensified planning for an attack against its arch enemy. Last week, American sources revealed that Austin and Gantz were expected to discuss joint military preparations and a report on Kan said that the IDF was planning a massive mock strike aerial drill for this summer.

Gantz met with Defense Secretary Lloyd Austin and Secretary of State Antony Blinken on Thursday. The conversations focused mainly on Iran and its continued pursuit of nuclear capability, but some of the US officials also brought up Israeli settlement activity and their concern that building in the West Bank will block a future two-state solution.

Jerusalem consulted with Washington on two previous strikes on Iran, one in June against a facility producing centrifuges in Karaj, and another on a missile production site outside Tehran, The New York Times reported.

US President Joe Biden asked his National Security Adviser Jake Sullivan two months ago to review plans to attack Iran if diplomatic efforts fail, as well as the possibilities for increasing sanctions.

That leak comes as the US and Israel are increasingly at odds in their evaluation of the Iranian threat. Israeli officials continue to be deeply concerned that in the recently resumed negotiations in Vienna, Washington will seek an interim deal lifting sanctions on Tehran while insufficiently restricting its nuclear program.

According to the State Department, Blinken spoke with Foreign Minister Yair Lapid on Friday. They discussed topics “including the enduring importance of the US-Israel bilateral relationship, Israeli-Palestinian issues, and regional developments, such as our shared conviction that Iran must not be allowed to acquire a nuclear weapon.”

According to the Foreign Ministry, Lapid told Blinken, “Even if there is a return to negotiations, sanctions on Iran must not be lifted. The money the Iranians will receive will reach our doorstep in the form of terrorism and missiles.”

The conversation was “warm, productive and open,” Israel’s MFA said in a readout, and included topics such as “joint efforts to stop Iran from becoming a nuclear threshold state, Minister Lapid’s visit to Cairo, the arrival of new US Ambassador to Israel Tom Nides, and expanding the circle of peace.”

State Department Spokesperson Ned Price commented on Thursday on US-Israel discussions of alternative ways to counter the Iranian nuclear threat if negotiations in Vienna collapse.

“I wouldn’t want to speak to what we might be contemplating if the path to diplomacy toward a mutual return to compliance isn’t viable in the near term,” Price said. “But we are discussing those alternatives. We are discussing those options with our close partners, with our close allies, and that includes with the Israelis. We have already had good discussions with the Israelis about the path forward, and how we can work together to ensure that Iran is never able to acquire a nuclear weapon.”

Gantz addressed the Israel American Council summit in Miami on Friday, saying that Iran is a great threat to Israel but first and foremost to the world.

“This is why the international community, with US leadership, must stand together and act forcefully against Iran’s hegemonic aspirations and nuclear program and restore stability for the sake of global peace,” he said.

The consultations in Washington were “excellent,” the defense minister said, and they included ways to ensure Israel’s qualitative military edge in the Middle East.

Gantz said he spoke with the Americans about how to keep the pressure on Iran with the aim of keeping them away from a nuclear capability, and to take advantage of Iranian vulnerabilities – particularly economic – that could be used to persuade them to suspend nuclear activity.

His impression from the meetings in Washington was that the fate of the negotiations in Vienna would be determined in the near future. “I think that in the coming weeks we will know where we stand,” Gantz said.

Iran capable of exchanging electricity with six neighbors

According to an IRNA report quoting Iranian Energy Minister Ali-Akbar Mehrabian reported the country is currently able to exchange electricity with Afghanistan, Iraq, Azerbaijan, Turkmenistan, Armenia and Turkey.

As reported, developing energy diplomacy and exchange of electricity with the neighboring countries has been among the top priorities of the energy minister. Mehrabian has underlined the synchronization of the country’s electricity network with that of Russia as well as joining the power grid with the Persian Gulf Arab nations among the plans during his tenure.

Speaking in a gathering with the representatives of the Foreign Affairs Ministry on Saturday, Mehrabian said Iran has great potential for exporting electricity and power equipment to the countries in the region and the energy ministry has had good success in this area over the years.

Referring to the country's ability to produce F-class turbines, Mehrabian said, “The Islamic Republic of Iran is one of the few countries in the world that produces electrical equipment, turbines, generators etc. at the highest level of technology. Iran is capable of producing a variety of turbines, especially class F turbines, which have the highest efficiency in the power plant industry.”

According to the energy minister, significant power projects, especially hydropower plants, have been implemented in Iraq, Syria, Sri Lanka, Tajikistan, Russia and other countries.

“Iran has a very good position in the world in the field of water projects, including water systems, dams, and hydropower plants,” Mehrabian said.

According to Mehrabian, currently, 100% of the country’s urban population has access to the electricity network, while 99.5% of the rural population is also connected to the national power grid.

“Over the past few years, investment in this sector has declined and the supply and demand balance became negative, which resulted in some restrictions and blackouts, but with a precise plan to compensate we are solving problems,” said Mehrabian.

The official noted that the energy ministry is planning to add 30,000 megawatts to the country’s electricity generation capacity over the next four years.

He stated that one of the energy ministry’s concerns is to pass the next summer’s peak consumption period. He said, “We must be able to work in such a way that people see fewer restrictions and if we can use hydropower plants to some extent, hopefully, we will not experience blackouts.”

Mehrabian further noted that currently 6,000 megawatts capacity of power plants are under different phases and will come on stream by the next summer peak consumption period

“For the summer peak of 1401 (the next Iranian calendar year) it is planned to add 6,000 MW to the country's electricity generation capacity, which will be a record,” he said.

Of the mentioned capacity, so far four power plant units have joined the country’s power network and the rest will be constructed by the mentioned date.