Isn’t United States acts open declaration of war against Russia?

The US Senate voted 86-11 Thursday to approve a US$40 billion Ukraine aid package. This would replenish US stockpiles of weapons transferred to Ukraine, as well as allocate billions of dollars to help the Ukrainian government continue operating and provide humanitarian assistance.

President Biden is expected to immediately sign the legislation, which exceeds his US$33 billion request to Congress.

The House passed the legislation overwhelmingly earlier this month by a vote of 368-57.

The bill would authorize the transfer of American weapons and equipment to Ukraine and provide $9 billion to replenish depleted US weapons stockpiles. It would also provide nearly US$9 billion for continued operations of the Ukrainian government and
US$4 billion in international disaster assistance.

Pentagon Chief Lloyd Austin and Secretary of State Antony Blinken had urged Congress last week to pass the bill by Thursday if the US wanted to continue sending aid to Ukraine at the current pace.

The administration had predicted that the US$100 million leftover in presidential drawdown authority—which allows the Pentagon to send weapons from its own stockpile — would last through the middle of May.

Eleven Republican senators led by Sen. Rand Paul voted against the measure. These were: Marsha Blackburn, John Boozman, Mike Braun, Mike Crapo, Bill Hagerty, Josh Hawley, Mike Lee, Cynthia Lummis, Roger Marshall and Tommy Tuberville.

The Biden administration also announced US$100 million in military assistance to Ukraine on Thursday; moments after the Senate sent a US$40 billion supplemental aid package to the president’s desk.

The equipment will include additional artillery, radars and other equipment to Ukraine, President Biden said in a statement following passage of the Ukraine aid.  

In a separate statement, Secretary of State Antony Blinken said the weapons will be coming from the Pentagon’s existing inventories.

“These weapons and equipment will go directly to the front lines of freedom in Ukraine, and reiterate our strong support for the brave people of Ukraine as they defend their country against Russia’s ongoing aggression,” Biden said.

Thursday’s package is the 10th shipment of weapons to Ukraine under presidential drawdown authority, which allows the Pentagon to dig into its existing stockpiles. It also brings the total military assistance that the U.S. has provided to the country to US$3.9 billion since Russia’s invasion began.

The equipment includes: eighteen 155 mm howitzers; eighteen tactical vehicles to tow those howitzers as well as eighteen artillery tubes; three AN/TPU 36 counter-artillery radars; and field equipment and spare parts, the Pentagon said. The US has previously provided shipments of this equipment to Ukraine.

Pentagon spokesman John Kirby said the weapons will start to flow “very, very soon.”

“I cannot give you an exact date of when it’s all going to show up in Ukraine, but you can imagine, having seen us do this in the past, that we’re not going to sit on our hands and will start flowing that stuff immediately,” he said.

Blinken and Defense Secretary Lloyd Austin urged Congress last week to advance the supplemental aid bill by Thursday in order to continue sending security assistance at the current pace.

Kirby said the package uses up the remaining US$100 million of the US$3.5 billion in drawdown authority that was passed in March as part of a US$1.5 trillion bill to fund the government through September.

The US$40 billion supplemental, which Biden is expected to sign, includes US$9 billion for the Pentagon to replenish the weapons it sent to Ukraine, exceeding the administration’s request of US$5 billion.

Container players expect more chaotic peak season

According to a survey, forwarders, traders and shippers expect the 2022 container peak season to be even more chaotic than 2021. The Survey found that 51% expect the traditional peak season in the third quarter to be worse in 2022 than in 2021, 26% expect it to be less chaotic and 22% expected about the same level of chaos.

The pandemic disrupted the usual seasonal swings in the container market as factories were closed, lockdowns spread and congestion followed. Faced with another disrupted year, respondents were turning to multiple strategies to get goods to retailers in time for the fourth quarter shopping season.

Container line reliability dropped to 35.8% in 2021 and fell even further in the first quarter of 2022.

Some 37.5% of respondents said they were shipping early in 2022 to ensure volumes, 25% were using alternative shipment routes and 18.8% were contracting long-term slot agreements with carriers.

Despite the difficulties in 2021 and expectation of chaos to come, 62.5% of respondents were still relying on the spot market or had no specific plans to ensure shipments make it to destination in time.

Turning back to the current situation, 58% of respondents said China’s Covid lockdowns had made it “hard to produce/ship as much product as planned.” That feedback adds to growing concerns that the release of lockdowns in China could lead to a surge of exports, further disrupting supply chains to Europe and North America.

“Predicting exactly what will happen in this year’s peak season is harder than normal because there are so many contradictory signs and intangibles,” said Christian Roeloffs, co-Founder and CEO, of Container xChange.

“One big question is whether China is going to sacrifice its zero Covid-19 policy to get trade and its economy moving again. 

“If it does, then there’s every sign that we’ll see a substantial surge as backlogs of exports is shipped. If lockdown rules are relaxed soon and truckers are allowed to get back to work, then those backlogs will be arriving at the same time as peak season orders which could cause a lot of supply chain blockages at ports in Europe and the US where congestion is already widespread.

“However, there are very few indicators so far that President Xi is willing to compromise health policy to boost trade. Indeed, it might not be politically expedient for him to do so with the Communist Party National Congress set for later this year when he is expected to be endorsed for a third term. “

 

European Union needs €210 billion to free itself from Russian energy

According to the European Commission, the Union will have to invest an additional €210 billion (US$220 billion) to free itself from Russian energy imports by 2027. 

The extra investment comprises of €29 billion to adapt the power grid, €10 billion to ensure sufficient LNG and alternative pipeline gas imports, €2 billion for security of alternative oil supplies, €56 billion on energy efficiency and heat pumps, and an extra €113 billion on developing renewable energy sources, almost a quarter of which would be earmarked for key hydrogen infrastructure.

The commission suggests tackling existing bottlenecks at oil supply infrastructure in the region such as the Transalpine, Adria or SPSE pipelines. It also proposes targeted investment on upgrading refineries that are configured to run on Russian Urals crude. The commission made no direct reference to Hungary, which has said it cannot switch to solely using non-Russian crude without up to €750 million of investment in refinery upgrades and pipeline capacity expansion.

The investment recommendations presented on Wednesday complement previous proposals from the Commission aimed at cutting EU imports of Russian gas by two-thirds, or over 100 billion cubic meters per year, by the end of 2022. The EU is also trying to hammer out an agreement among member states to phase out Russian oil imports this year, although it faces pushback from Hungary among others.

The €210 billion of additional spending would be on top of investment required to implement the EU's climate and energy policies by 2030. The Commission’s latest recommendations together with the 2030 policies will allow the EU to save some €80 billion on gas imports, €12 billion on oil imports and €1.7 billion on coal imports.

EU officials confirmed that the proposed target for the share of renewables in the bloc's energy mix will increase to 45% by 2030, up from 40% previously. This would bring total renewable energy generation in the EU to 1,236GW by 2030, as compared to 511GW at present. The Commission points to solar panels as key to accelerating out of fossil fuel imports. It is eyeing 300GW of installed solar photovoltaics by 2028, double the present installations.

EU officials also confirmed a proposal for an EU-wide gas price cap. The cap would be a measure of "last resort" in the case of full disruption of Russian gas supplies, a senior official said, adding that it would be combined with curtailment of supply to industry and would require additional legislation.

"A price cap is an emergency measure," European Commission Executive Vice President Frans Timmermans told Argus. "It will be taken when there's massive disruption. But with one measure you can't make cheap out of expensive energy."

 

Pakistan: SBP and IFC join hands to promote Agriculture Finance through Warehouse Receipts Financing

Deputy Governor State Bank of Pakistan (SBP) Ms. Sima Kamil while addressing a two-day specialized training workshop on Electronic Warehouse Receipt Financing (EWRF) for banks observed that the training program will be instrumental to support SBP’s recent initiative to promote EWRF in the country.

Banks will be able to get hands on knowledge about EWRF product development, understanding the risk analysis, price determination mechanism and the international best practices.

She encouraged senior bankers to use the relevant knowledge of EWRF gained during the session and disseminate it in the industry for its smooth implementation.

EWRF is a mechanism whereby farmers can avail financing facility from banks by placing their produce and agricultural commodities. By doing so, farmers can avoid selling their produce on unfavorable prices just to ensure cash flows to meet input requirements of next crop. It will also help in reducing Pakistan’s high post-harvest losses.

Adoption of EWRF by banks and its enhanced uptake will not only facilitate banks to achieve higher levels of agriculture credit disbursement but will also help them enhance credit outreach.

Ms. Kamil noted that agriculture contributes almost a quarter to our GDP and employs half of the labor force. However, she regretted that people associated with agriculture sector face challenges in access to finance and modernize infrastructure that may facilitate them either in storing or timely disposal of their agricultural produce.

She added that SBP took the initiative of EWRF in view of the role of warehousing regime in increasing food security, reducing post-harvest losses and allowing bank financing to farmers against commodities as collateral. She hoped that it will facilitate traders and processors to purchase inputs they need, including seeds, fuel and fertilizers, before and during the harvest, when their seasonal financing needs are significant.

Parallel it will encourage investment in agricultural infrastructure in terms of building new, modern and commercially viable warehousing infrastructure. At outset, 25 banks signed System Usage Agreements (SUAs) with Naymat Collateral Management Company and SBP assigned indicative financing targets to these banks for FY 2021-22 and 2022-23. Now, these banks have started financing against maize crop in various districts of Punjab under the EWRF regime.

The Deputy Governor acknowledged the support extended by IFC in terms of technical assistance to Government of Pakistan and other key stakeholders to make building blocks for EWRF in Pakistan.

She expressed gratitude for IFC team led by its Country Manager for Afghanistan and Pakistan, Zeeshan Ahmed Sheikh and Ms. Nouma who has been coordinating an IFC-collaborated project for the promotion of EWRF in Pakistan. She also encouraged senior bankers to use the relevant knowledge of EWRF and disseminate in the industry for its smooth implementation.

Speaking on the occasion Zeeshan observed that innovative financing models, such as electronic warehouse receipts, are extremely important as they can unlock a massive amount of capital, bolstering the farming sector and, over the long run, supporting job creation and economic growth. He also acknowledged the Government of Japan for supporting the EWR work.

SBP organized the two-day training workshop in line with the EWRF Uptake Action Plan in collaboration with IFC. During the workshop, global experts from IFC and Pakistan shared their knowledge and experiences with senior banking officials regarding different modalities of collateralized commodity financing and EWRF. The program provided a deeper understanding of EWRF to banks that will help them to extend financing to farmers against agricultural commodities as alternate collateral.

This article was originally published in Eurasia Review

United States-Japan at Tokyo Summit to commit to jointly deter China

According to Nikkei Asia, the Japanese and United States governments have begun coordinating on the wording of a joint statement to be released during their summit meeting on Monday in Tokyo. 

The statement will clearly state a policy of cooperation to deter and respond to China's activities in the Indo-Pacific region.

The statement will also outline a policy of keeping Japan under the US nuclear umbrella, and the sharing of security strategies between the two countries. The partners will confirm the launch of the Indo-Pacific Economic Framework (IPEF), led by US and clarify Washington's involvement in Asia.

This will be the first face-to-face meeting between Japan's Prime Minister Fumio Kishida and US President Joe Biden. The two leaders' expected reference to deterring China's hegemonic behavior reflects their concern that Russia's invasion of Ukraine has implications for Asia.

The US is deepening its military commitment to Europe to deal with Russia, and, for the time being, the US will be forced to conduct a three-front strategy -- in Europe, the Middle East and East Asia. Despite the challenges, the US will again stress both domestically and internationally that its top priority is China, which the US believes is its only strategic competitor.

The previous joint statement published last year and delivered by then-Prime Minister Yoshihide Suga and Biden spoke of the importance of peace and stability in the Taiwan Strait for the first time in almost half a century. It also included the phrase ‘the importance of deterrence’ in the region.

This time they will strengthen the wording to include the statement that they will deter China's actions that undermine stability in the region, and if necessary, will cooperate to respond. The statement will also emphasize that they will not allow the status quo to be changed by force, and it will maintain the previous wording regarding the Taiwan Strait.

The two countries will maintain economic sanctions against Russia, which continues its aggression against Ukraine, and will condemn threats to use nuclear weapons. The statement will also again call for the complete denuclearization of North Korea.

The US will clarify its stance on protecting Japan under the nuclear umbrella. The US has been unable to dissuade Russia, which possesses nuclear weapons, from invading Ukraine, and concerns about the effectiveness of nuclear deterrence are spreading. Washington will reaffirm that if Japan is threatened with nuclear weapons, it is willing to defend Japan not only with conventional forces but also with nuclear weapons if necessary. This will be included in the joint statement.

The two countries will also confirm that they plan to share security goals and strategies, specifically, the National Security Strategy to be formulated by the end of the year. They will pledge to strengthen cooperation between the Japan Self-Defense Forces and the US military in areas such as troop operations, joint use of bases, and procurement of equipment, as they prepare for a possible emergency in Taiwan.

Prime Minister Kishida will also discuss with Biden the Japanese government's intended increase in defense spending, which had previously been limited to about 1% of gross domestic product, and its moves to develop a strike capability against enemy bases. That is, the ability to hit missile launch sites and other targets.

Regarding economic strategy, the US will establish a mechanism to deepen its involvement in Asia. The two countries will agree to hold the first economic version of a "2 plus 2" ministerial meeting, with the Japan-US ministerial talks serving as a command post, at an early date. They will also outline their basic policy of creating a stable supply chain for semiconductors among friendly countries and regions.

During his visit to Japan, President Biden will announce the launch of the Indo-Pacific Economic Framework, a new type of economic bloc, which more than 10 countries, including South Korea, Australia, the Philippines and Thailand are, expected to participate in. The US is deeply cautious about rejoining the Trans-Pacific Partnership (TPP) and will first use the IPEF as a forum to establish rules for digital trade and other areas.

 

United States makes attempt to mend relations with United Arab Emirates

US President Joe Biden seems to have initiated efforts to mend its relationship with Abu Dhabi. Lately, some cabinet members led by Vice President visited to the United Arab Emirates, an oil-rich nation in the midst of a critical leadership change.

Rejection and perceived disinterest from Washington has led the UAE to recently act more boldly on the global stage. It abstained from a US-led resolution at the United Nations that condemned Russia’s invasion of Ukraine. Emirati officials have also refused to increase oil production in an effort to lower gas prices and continue to pursue closer ties with China.  

Following the death of Sheikh Khalifa bin Zayed al-Nahyan, the country’s second president, who had officially ruled since 2004, Biden this week dispatched his most senior cabinet officials led by Vice President Kamala Harris. She was joined by Secretary of State Antony Blinken, Defense Secretary Lloyd Austin and CIA Director William Burns.

The visit by the Biden administration’s top brass was one to express condolences — and congratulations — to the new leader, Crown Prince Sheikh Mohammed bin Zayed al-Nahyan. Known as MBZ, he is the late president’s half-brother.

Harris, in remarks after a meeting said the purpose of the trip was to reaffirm the shared commitment we have to security and prosperity in this region and also how the American people have benefited from this relationship in terms of security and prosperity.” She called the UAE a friend and partner.

The trip came as US officials attempted to woo the monarchy amid a long list of strains between Abu Dhabi and Washington. Another issue is that of a longtime American foe Iran, as the UAE has rejected the Biden administration’s pursuit of a nuclear deal with Tehran. The tensions stand in stark contrast to the close ties the UAE held with the former administration.

Abu Dhabi welcomed then-President Trump’s exit from the Iran nuclear deal. Most notably, the Gulf state benefited from normalizing relations with Israel through American proposed military sales and Washington pulling its support from Israeli plans to annex the West Bank. 

“MBZ, because he sees himself as a man of vision, and Abu Dhabi of being a significant and important country, he expects respect and certainly under Biden, doesn’t think he’s been treated with respect,” said Simon Henderson, Director of the Bernstein Program on Gulf and Energy Policy at The Washington Institute.

“Trump and Jared Kushner the president’s son-in-law and senior advisor sort of treated him with respect.”

Experts said that the trip by Biden officials signals the administration knows it has some work to do.

“I think the high level delegation signals that Washington would like to repair the relationship and it’s really important that they do that,” said Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington.

Mohammed, 61, has been considered the de-facto ruler of the Emirates for nearly 10 years, since then-President Khalifa suffered a stroke in 2014 and was largely sidelined from power up until his death. 

Mohammed has held tremendous sway throughout the region during his time as crown prince of Abu Dhabi and is described by regional watchers as having a vision, focused on growing the Emirates wealth, making its economy an important global player and pushing back against what it views as the threat of political Islam, in particular in neighboring Iran and Qatar.

Gerald Feierstein, former ambassador to Yemen and a distinguished senior fellow on US diplomacy at Middle East Institute, said Mohammed’s influence on the Trump administration’s Abraham Accords — the normalization agreements between Israel, the UAE and Bahrain — signaled the crown prince’s desire to be a driver of events of the region more broadly, than just the Gulf.  

The UAE has also garnered greater independence from the US

“For the Emirates, they consider the US a less reliable security and regional partner than it has been considered in the past and so they’re willing to craft their own independent foreign policy,” said Courtney Freer, nonresident fellow with the Brookings Institution.

Abu Dhabi took issue early on in the Biden administration with what it viewed as a weak response to threats and attacks the Emirates faced from Yemen’s Iran-backed Houthi rebels, including Biden removing the Houthi terrorist designation.

Ibish, of the Arab Gulf States Institute, said the robust US response to support Ukraine following Russia’s invasion underscored the feeling that Washington was abandoning its security commitments in the Middle East.  

“They look at the firm and united and resolute response to the invasion of Ukraine and compare it to those missile attacks by the Houthis and they feel very second best and not particularly looked after,” he said.

That has left leaders in the Emirates looking for help elsewhere.

“Whatever Washington wants, MBZ will make his own deal with Iran because they’re neighbors across the waters of the Gulf. And Dubai in particular, has important contacts with Iran at least on a commercial level,” Henderson said. 

Also at issue are negotiations that were reportedly rejected by the UAE to buy 50 F-35 fighter jets from the US amid defense security conditions for the acquisition, a UAE official told Reuters in December. 

A State Department spokesperson, requesting anonymity, told The Hill. “The administration remains committed to the sales and are continuing consultations with the UAE to ensure that we have a clear, mutual understanding with respect to Emirati obligations and actions before, during, and after delivery.” 

Before the Biden administration visit this week, the US had already started to take steps toward repairing the diplomatic relationship, Ibish noted, in the form of an apology by Blinken to MBZ last month for the Biden administration’s delay in responding to Houthi attacks in Abu Dhabi this year.

“It’s the apology that goes a long way because the response really did seem insufficient and particularly in the light of the Ukraine invasion, where the difference of the Western response is very stark,” Ibish added.

Feierstein added that the Blinken-MBZ meeting in Morocco was a step in the right direction that cleared away a lot of the underbrush in the relationship.

“No two states ever see anything eye to eye, there are always differences in opinion and of position. But what you do want is a strong institutional link that allows you to work through those issues,” he added.

 

Deliberations on payment mechanism in Afghanistan-Pakistan trade

During the first deliberation session on barter trade and other irritants facing Afghanistan-Pakistan trade, members from various relevant trade bodies and Chambers, the house unanimously resolved, “It is better to use banking channels for financial transactions”. 

The barter can be added as an alternative, umpteenth number of countries trade with Afghanistan and use third party payment method via international corresponding banks and face no sanctions and problems from any international agency like FATF.

These countries include CARs, Turkey, South Korea and some Far eastern countries, UAE, some European countries, China and India. The foremost action expected from State Bank of Pakistan is to discuss this with international corresponding and local commercial banks with support of Ministries and OFAC (A US Treasury sub agency) to remove barriers for Pakistan to bring in much needed foreign currency. This has been pending since a year and business community has voiced the issue at all levels.”

Later house deliberated all aspects relating to barter trade mechanism with Afghanistan and agreed that the process shall be developed carefully keeping in view the matters of credibility, integrity, efficiency, legality, government’s role, dispute resolution and arbitration, matters of sales tax refund and duty drawback, readiness of PSW, FBR, Pakistan Customs and where necessary the role of SBP to amend the needed clauses to support barter trade mechanism.

The house suggested that barter trade shall be started on trial basis for 3 months and re-evaluated for its feasibility. The matters of deficit and surplus, starting with zero rated categories like pharma and food items, relaxing and reducing duties on Afghan products to bring competitiveness with other countries like India and identification of 10 or more items initially for barter from both sides to ensure balance of trade were discussed.

To manage payments, it will require escrow account which must have multiple signatories to ensure transparency and formation of check and balance system.

Sales tax refunds and duty drawback are already a big issue in case of trade via land which will enhance in case of barter, to counter this, Jawed Bilwani, President PAJCCI, suggested to process barter trade under “Export Processing Zones” mechanism to make it better organized and easily monitored with less stress for business community.

The legality and framework for this alternate will be worked out and proposed to the Ministry accordingly. Additionally a SRO needs to be finalized prior to ensure the mechanism of Sales tax refund and duty drawbacks without further regulatory requirements else the interest of business community in this arrangement will be lost and a lucrative trading opportunity will not realize the full potential.

 

Barter trade shall only be used as alternate and shall not include products and companies which are already trading in dollars. Use of foreign exchange companies was not well received as it will increase the element of illegal payments and may fall under FATF regulations.

PSW & FBR system must have special module under this category for efficient management and to be linked with PAJCCI to reduce duplication of efforts and paper work while verifying transactions and arranging payments.

Zubair Motiwala said, “Detailed report of the session will be shared with participants, further cross border sessions will be held in coming weeks and later with Afghan side as joint session to finalize the proposal to be presented to both governments”.

He stated that PAJCCI strongly believes that using established banking procedures is preferable for trading but will use its experience to bring about viable barter trade mechanism while keeping in view all legal and practical requirements.