Ukraine: Unpleasant Truth

On July 17 this year I posted a blog demanding, West must stop its unconditional support for Zelensky. Today I am presenting excerpts from a report by Amnesty International, which also supports my mantra.

Ukrainian forces have threatened civilians by setting up bases and operating weapons systems in populated areas, including schools and hospitals, as they battled the Russian intervention that began in February, Amnesty International said in a statement.

“Such a tactic violates international humanitarian law and endangers civilians, as it turns civilian objects into military targets. The Russian strikes that followed in populated areas killed civilians and destroyed civilian infrastructure,” the statement said.

Amnesty International has documented a pattern of Ukrainian forces putting civilians at risk and violating the laws of war when conducting operations in populated areas – said Agnes Callamard, Secretary General of Amnesty International.

He pointed out that the defensive position does not free the Ukrainian army from respecting international humanitarian law.

The organization’s researchers spent several weeks from April to July investigating Russian attacks in Kharkiv, Donbass and the Mykolaiv region.

The organization inspected the attacked sites, interviewed survivors, eyewitnesses, relatives of the victims of the attack, and carried out remote detection and analysis of weapons.

During those investigations, evidence was found that Ukrainian forces were firing from heavily populated areas and were themselves inside civilian buildings in 19 towns and villages in these regions. The organization analyzed satellite images to further confirm some of these incidents – it is emphasized.

According to Amnesty International, most of the residential areas where the soldiers were located were kilometers away from the front.

Viable alternatives were available that would not endanger civilians, such as military bases or densely wooded areas nearby, or other structures further away from residential areas. In the cases it has documented, Amnesty International is not aware that the Ukrainian military, located in civilian structures in residential areas, asked or helped civilians to evacuate, which is a failure to take all feasible precautions to protect civilians.

Amnesty says survivors and eyewitnesses of Russian attacks in Donbass, Kharkiv and the Mykolaiv region told researchers that the Ukrainian military was conducting operations near their homes at the time of the attacks, exposing the areas to counterfire from Russian forces. Amnesty International researchers have witnessed such behavior in numerous locations.

International humanitarian law requires all parties to a conflict to avoid locating, to the greatest extent possible, military targets within or near densely populated areas. Other obligations to protect civilians from the effects of attacks include removing civilians from the vicinity of military targets and providing effective warning of attacks that may affect the civilian population.

The army was stationed in the house next to ours and my son often brought food to the soldiers. I begged him several times to stay away, because I feared for his safety. That afternoon, when the attack happened, my son was in our yard and I was in the house. He died on the spot. His body was mutilated. Our house was partially destroyed – said the mother of a man (50), who was killed in a rocket attack on June 10 in a village south of Nikolaev.

Nikola, who lives in the block in Lisichansk in Donbass, which the Russians regularly targeted and killed at least one person, said that it is not clear to him why our army fires from the cities and not from the fields.

Another resident said that “there is definitely military activity in the neighborhood.”

Amnesty International teams saw soldiers using residential buildings located 20 meters from the entrance to the underground shelter, which was used by residents and where an elderly man was killed.

In one Donbas town on May 06, Russian forces used cluster munitions over a neighborhood of mostly one- or two-story houses where Ukrainian forces were manning artillery. Shrapnel damaged the walls of the house where Ana (70) lives with her son and 95-year-old mother.

In early July, a farm worker was injured when Russian forces attacked an agricultural warehouse in the Nikolayev area. Hours after the attack, Amnesty International researchers witnessed the presence of Ukrainian military personnel and vehicles in the grain storage area, and witnesses confirmed that the military was using the warehouse, which is located across from a farm where civilians live and work.

As researchers surveyed damage to residential and public buildings in Kharkiv and villages in the Donbass and east of Mykolaiv, they heard gunfire from nearby Ukrainian military positions.

In Bakhmut, several residents said the Ukrainian military was using a building barely 20 meters across the street from the high-rise. On May 18, a Russian rocket hit the front of the building, partially destroying five apartments and damaging nearby buildings.

Amnesty International researchers witnessed Ukrainian forces using hospitals as de facto military bases in five locations. In the two cities, dozens of soldiers rested and ate in hospitals. In another town, soldiers fired from near a hospital.

A Russian airstrike on April 28 injured two workers at a medical laboratory in the suburbs of Kharkiv after Ukrainian forces set up a base in the compound. Using hospitals for military purposes is a clear violation of international humanitarian law.

The Ukrainian army routinely set up bases in schools in the cities and villages of the Donbass and in the Mykolaiv region. Schools have been temporarily closed to students since the beginning of the conflict, but in most cases the buildings were located near civilian settlements.

In 22 of the 29 schools visited, researchers either found soldiers using the premises or found evidence of current or previous military activity – including the presence of military equipment, ammunition, military ration packs and military vehicles.

Russian forces attacked many schools used by Ukrainian forces. In at least three cities, after Russian bombing of schools, Ukrainian soldiers moved to other schools nearby, putting surrounding neighborhoods at risk of similar attacks.

In a city east of Odessa, Amnesty witnessed Ukrainian soldiers using civilian areas for accommodation and staging areas, including basing armored vehicles under trees in residential areas and using two schools located in densely populated residential areas.

 

 

Logistic issues limiting Tehran Dhaka trade

Gholam-Hossein Shafeie, Head of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), has said tariff barriers and transportation problems are the main factors that are hindering Iran-Bangladesh trade relations.

Shafeie made the remarks in a meeting with Iran's new Ambassador to Dhaka Mansour Chavoshi in Tehran. Chavoshi, who has been newly appointed as Iran’s envoy in Bangladesh, visited ICCIMA to discuss ways to strengthen trade and increase the volume of trade exchanges between Iran and Bangladesh, before leaving Tehran for his mission.

During the meeting, Shafeie mentioned Bangladesh’s acceptable economic growth in recent years and assessed the future economic prospects of the country as positive. He emphasized the need to improve the trade infrastructures of the two countries for the development of mutual cooperation.

The ICCIMA Head further pointed to common areas for economic cooperation such as transportation, construction materials such as bitumen and cement, fuel, investment, clothing and textile, agriculture, herbal medicines, and medical devices, saying that the two sides should take all the necessary measures to benefit from these capacities.

According to Shafeie, Bangladesh has established tariff exemption treaties with some countries including the members of the European Union, and therefore, in order to facilitate trade with the Islamic Republic, it is necessary to implement a similar preferential trade agreement that has already been approved by the two countries.

Referring to the recent trip of an Iranian trade delegation to Dhaka to participate in the meeting of the chambers of commerce of the D-8 organization, he said, “This delegation discussed cooperation programs, including the reduction of trade tariffs and the cancellation of business visas among the members of this organization. It was also announced that the next round of the meeting of the D-8 Chambers of Commerce would be held in Tehran, and it was welcomed by other chambers.”

“One of the measures that the ICCIMA has had on its agenda was the formation of a joint Iran-Bangladesh trade committee, which fortunately was approved by the chamber's board of directors this week, and this committee will be formed soon,” he announced.

Chavoshi for his part emphasized the importance of Iran-Bangladesh relations and pointed to the great advantages that Iran can benefit from cooperation with this country.

“One of the positive factors in cooperation with Bangladesh is the fact that the people of this country have a very good attitude towards Iranian goods and the country’s businessmen, and this can be built upon to strengthen and develop relations between the two countries,” the envoy said.

 

 

Will the US allow Putin to attend G20 summit?

Indonesia is the host of G20 Summit scheduled in November this year. Presidents of three rival countries, Russia, China and Ukraine have been invited. Indonesian has been accepted as a bridge of peace.

Chinese and Russian leaders Xi Jinping and Vladimir Putin will attend the G20 summit in Bali in November, Indonesian President Joko Widodo told Bloomberg News on Thursday.

“Xi Jinping will come. President Putin has also told me he will come,” Jokowi, as he is popularly known, told the news agency.

The Chinese foreign ministry did not immediately respond to a Reuters request for comment. Indonesian presidential palace officials did not immediately respond to requests for comment.

Indonesia is chairing the Group of 20 major economies and has faced pressure from Western countries to withdraw its invitation to Putin over his country's invasion on Ukraine, which his government calls a "special military operation".

Jokowi has sought to position himself as mediator between the warring countries, and has travelled to meet both Ukrainian and Russian presidents. This week, Jokowi said both countries have accepted Indonesia as a "bridge of peace".

Leaders of major countries, including US President Joe Biden, are set to meet in Indonesia's resort island of Bali in November. Indonesia has also invited Ukrainian leader Volodymyr Zelenskiy.

 

 

Do not blame OPEC for high energy prices

Policymakers, lawmakers and insufficient oil and gas sector investments are to be blamed for high energy prices, not OPEC told the producer group's new Secretary General Haitham Al Ghais to Reuters on Thursday.

The lack of investment in the oil and gas sector following a price slump sparked by COVID-19 has significantly reduced OPEC's spare production capacity and limited the group's ability to respond quickly to further potential supply disruption.

The price of Brent crude came close to an all-time high of US$147 a barrel in March, after Russia's ordering of troops into Ukraine exacerbated supply concerns. While prices have since declined, these are still painfully high for consumers and businesses globally.

"Don't blame OPEC, blame your own policymakers and lawmakers, because OPEC and the producing countries have been pushing time and again for investing in oil and gas," Al Ghais, who took office on August 01, said in an online interview.

Oil and gas investment is up 10% from last year but remains well below 2019 levels, the International Energy Agency (IEA) said last month, adding that some of the immediate shortfalls in Russian exports needed to be met by production elsewhere.

The OPEC official also pointed the finger at a lack of investment in the downstream sector, adding that OPEC members had increased refining capacity to balance the decline in Europe and the United States.

"We are not saying that the world will live on fossil fuels forever ... but by saying we're not going to invest in fossil fuels ... you have to move from point A to point B overnight," Al Ghais said.

“OPEC exists to ensure the world gets enough oil, but it's going to be very challenging and very difficult if there is no buy-in into the importance of investing," he said, adding that he hopes investors, financial institutions, policymakers as well globally seriously take this matter and take it into their plans for the future."

Oil has tumbled since March and Brent hit a six-month low below $92 a barrel this week. The slide reflects fears of economic slowdown and masks physical market fundamentals, Al Ghais said as he took a relatively optimistic view on the outlook for 2023 as the world tackles rising inflation.

"There is a lot of fear," he said. "There is a lot of speculation and anxiety, and that's what's predominantly driving the drop in prices."

Whereas in the physical market we see things much differently, demand is still robust. We still feel very bullish on demand and very optimistic on demand for the rest of this year."

"The fears about China are really taken out of proportion in my view," said Al Ghais, who worked in China for four years earlier in his career. "China is a phenomenal place of economic growth still."

The Organization of the Petroleum Exporting Countries, plus Russia and other allies, known as OPEC Plus, has unwound record oil output cuts made in 2020 at the height of the pandemic and in September is raising output by 100,000 barrels per day.

Ahead of the next meeting which OPEC Plus holds on September 05, Al Ghais said it was premature to say what it will decide, although he was positive about the outlook for next year.

"I want to be very clear about it - we could cut production if necessary, we could add production if necessary."

"It all depends on how things unfold. But we are still optimistic, as I said. We do see a slowdown in 2023 in demand growth, but it should not be worse than what we've had historically."

"Yes, I am relatively optimistic," he added of the 2023 outlook. "I think the world is dealing with the economic pressures of inflation in a very good way."

OPEC Plus began to restrain supply in 2017 to tackle a supply glut that built up in 2014-2016 and OPEC is keen to ensure Russia remains part of the OPEC Plus oil production deal after 2022, Al Ghais said.

"We would love to extend the deal with Russia and the other non-OPEC producers," he said.

"This is a long-term relationship that encompasses broader and more comprehensive forms of communication and cooperation between 23 countries. It's not just in terms of production adjustment."

 

US Fed minutes hint more rate hikes but at slower pace

US Federal Reserve officials saw little evidence late last month that US inflation pressures were easing and steeled themselves to force the economy to slow down to control an ongoing surge in prices, according to the minutes of their July 26-27 policy meeting.

While not explicitly hinting at a particular pace of coming rate increases, beginning with the September 20-21 meeting, the minutes released on Wednesday showed US central bank policymakers committed to raising rates as high as necessary to tame inflation - even as they began to acknowledge more explicitly the risk they might go too far and curb economic activity too much.

"Participants agreed that there was little evidence to date that inflation pressures were subsiding," the minutes said.

Though some reduction in inflation, which has been running at four-decade highs, might occur through improving global supply chains or drops in the prices of fuel and other commodities, much of the heavy lifting would have to come by imposing such high borrowing costs on businesses and households that they would spend less, the minutes stated.

"Participants emphasized that a slowing in aggregate demand would play an important role in reducing inflation pressures," the minutes said.

Yet despite that arch tone on inflation as their top concern, the minutes also flagged what will be an important dimension of the Fed's debate in coming months - when to slow down the pace of rate increases, and how to know if rate hikes have gone past the point needed to beat rising prices.

While judged as generally dovish by traders who increased their bets the Fed would approve just a half-percentage-point hike at the September meeting, Bob Miller, Head of Americas Fundamental Fixed Income at BlackRock, said the minutes seemed to be giving the Fed more scope to react as data flowed in.

"The intended message was much more nuanced and reflected a need to optionality by a central bank trying to assess conflicting economic data and shocks”, he said. "Staking out some conditionality going forward seems sensible given the unprecedented nature of this particular cycle."

The pace of rate increases indeed could ease as soon as next month, with the minutes stating that, given the need for time to evaluate how tighter policy is affecting the economy, it would become appropriate at some point to move from the large, 75-basis-point increases approved at the Fed's June and July meetings, to half-percentage-point and eventually quarter-percentage-point hikes.

Some participants said they felt rates would have to reach a sufficiently restrictive level and remain there for some time in order to control inflation that was proving far more persistent than anticipated.

Many, on the other hand, noted the risk that the Fed could tighten the stance of policy by more than necessary to restore price stability, particularly given the length of time it takes for monetary policy to change economic behavior.

Referring to the rate increases already telegraphed by the Fed, participants generally judged that the bulk of the effects on real activity had yet to be felt, the minutes stated.

As of the July meeting, Fed officials noted that while some parts of the economy, notably housing, had begun to slow under the weight of tighter credit conditions, the labor market remained strong and unemployment was at a near-record low.

The Fed has lifted its benchmark overnight interest rate by 225 points this year to a target range of 2.25% to 2.50%. The central bank is widely expected to hike rates next month by either 50 or 75 basis points.

For the Fed to scale back its rate hikes, inflation reports due to be released before the next meeting would likely need to confirm that the pace of price increases was declining. Inflation by the Fed's preferred measure is more than three times the central bank's 2% target.

Data since the Fed's July policy meeting showed annual consumer inflation eased that month to 8.5% from 9.1% in June, a fact that would argue for the smaller 50-basis-point rate increase next month.

But other data released on Wednesday showed why that remains an open question.

Core US retail sales, which correspond most closely with the consumer spending component of gross domestic product, were stronger than expected in July. That data, along with the shock-value headline that inflation had passed the 10% mark in the United Kingdom, seemed to prompt investors in futures tied to the Fed's target policy interest rate to shift bets in favor of a 75-basis-point rate hike next month.

Meanwhile, a Chicago Fed index of credit, leverage and risk metrics shows continued easing. That poses a dilemma for policymakers who feel that tighter financial conditions are needed to curb inflation.

Job and wage growth in July exceeded expectations, and a recent stock market rally may show an economy still too hot for the Fed's comfort.

 

 

Britain: Felixstowe port workers’ strike set to begin on August 21

According to a Seatrade Maritime News, a planned strike by dockworkers at the Britain’s largest container port – Felixstowe – could disrupt US$800 million in trade. Some 1,900 members of the Unite Union are set to go strike from 21 to 28 August at the Port of Felixstowe after talks between employers and the union broke down a week ago.

Felixstowe, Northeast of London, is a key hub for imports as well as some exports from Britain, and accounts for nearly half the country’s container trade. The strikes will have a huge effect on supply chains and cause severe disruption to international maritime trade, according to the union, which is vowing a full shutdown of the port.

In late July 92% of union members voted for strike action over Felixstowe Dock and Railway Company offering a 5% pay increase to its workers.

With workers now set to walk out of the Britain’s largest port on 21 August, Russell Group has used its ALPS Marine analysis to calculate the value of goods that will be impacted by the strike action.

The total impact was put at US$800 million in trade, with clothing accounting for some US$82.8 million of that figure, and electronic components a further US$32.3 million. The figures are based on analysis of previous August trade flows at the Port of Felixstowe.

Suki Basi, Russell Group Managing Director said, "The disruption at Felixstowe spells more uncertainty for businesses, consumers and governments alike. Ports across the globe are facing congestion, due to a large backlog caused by the pandemic.

“As our analysis has shown, these strikes could increase the backlog and in doing so, create even more delays, and the effects of this will only be registered in the coming weeks and months."

Disruption has dogged the global supply chain since the onset of the Covid pandemic over two years ago and this year in Europe has been exacerbated by port worker strikes in major ports such as Hamburg.

Felixstowe not only handles large volumes of British imports but also exports with US$108 million moved to Rotterdam and US$138 million to Hamburg. Smaller ports in Britain are seen as potentially benefitting from the strike with volumes and services diverted to other terminals in the country

 

Pakistan: What will be SBP decision regarding policy rate?

Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) is scheduled to meet on August 22, 2022. It has three options: 1) increase, 2) decrease and 3) let unchanged at 15%.

May I request you to first read two of my blogs: Central banks around the world raising interest rates to tame inflation and Get ready for another interest rate hike and then the brief prepared by one of Pakistan’s leading brokerage houses.

Topline Securities says, signs of a slowdown have begun to emerge, with several high frequency growth indicators recording a sharp drop on MoM readings – although some of the same can be attributed to the ongoing monsoon season in the country too.

Nevertheless, sectors posting decline are Cement (61%MoM), Automobile (58%MoM), POL products (26%MoM) have all posted significant drop in sales as per latest data, along with 23%MoM drop in exports during July 2022 as well.

Moreover, the industrial sector has been struggling due to: 1) restrictions on imports including plant & machinery; 2) higher interest rates amid record inflation; 3) soaring fuel and power cost; 4) squeeze on margins; 5) volatile Rupee and 6) flattish or falling demand for their products as purchasing power diminishes due to higher taxes and record surge in headline inflation.

The brokerage house believes hiking interest rates would have limited effect on curbing headline inflation, which is being largely driven by supply-side factors including higher fuel and energy prices, with lagged effect on core inflation.

The pressure on Rupee has subsided significantly with Pakistan inching closer to the next IMF disbursement  as well as enhanced monitoring of exchange operations by the SBP.

The SBP and the Ministry of Finance have also assured that Pakistan’s gross financing needs will be more than fully met for FY23. Support from friendly countries: 1) China—roll over of US$4.3 billion in deposits and commercial loans; and 2) Saudi Arabia—renewal of US$3 billion deposit, with the possibility of extending KSA’s SDR’s to Pakistan, have also boosted confidence in the Rupee.

The yields in the primary market have remained almost unchanged since the last MPC was announcement in July 2022. However, secondary market yields have increased in line with the movement in the policy rate since the last MPC announcement, and do not seem to reflect expectations of another rate hike for now.