Iran-Saudi détente beginning of new era

Alireza Enayati, who has been confirmed as the new Iranian ambassador to Riyadh, told reporters on Monday that the reconciliation deal between Iran and Saudi Arabia will benefit all countries in the region.

When asked about who would benefit most from the deal, Enayati said, “The benefits of Iran-Saudi rapprochement are not polarized”. 

Both countries showed equal willingness to restore ties, he pointed out. 

He added no country can guarantee its own security if it decides to disregard its neighbors. 

The diplomat also hoped for a new order in the Persian Gulf where regional nations can take control and establish security without receiving assistance from any external power. 

Enayati said Iran and Saudi Arabia first sat down at the negotiating table two years ago in Baghdad, Iraq. Five rounds of talks followed the first one is the Omani capital Muscat with the presence of Iraqi mediators, he stated. 

The two countries were finally able to reach a deal in China, he added. 

Both countries are willing to start a new chapter in their ties and are planning to cooperate in various fields, including economy, military, culture and technology. 

The envoy added his country is also looking to strengthen ties with other Arab states. “Iran is looking to expand ties with other regional countries. It has already made constructive moves in case of Kuwait and the Emirates.” 

When asked about the main destabilizing actor in the region, Enayati pointed the finger at Israel. “The only seditious force in the region is Israel.” 

He warned that the Israeli regime is trying to grow its footprint in the Persian Gulf and urged countries to be weary of the regime’s destructive acts.

Iran and Saudi Arabia announced a détente in March 2023 after seven years of frozen ties. Iran’s embassy opened in Riyadh in May. Saudi Arabia has yet to open its embassy in Tehran. 

 

 

Buying Russian crude unviable for Pakistan

In one of my blogs I had questioned the economic viability of Pakistan importing Russian crude oil on three points: 1) longer distance, 2) higher freight and handling charges, 3) Pakistani refineries not tuned to refine Russian crude and on top of all 4) why to buy Russian oil on upfront payment when Saudi Arabia is supplying crude on deferred payment. Today, a Reuters report substantiated my apprehensions.

The report says, “Pakistan is unlikely to meet a target for Russian crude to make up two-thirds of its oil imports, despite attractive prices, hampered by a shortage of foreign currency and limitations at its refineries and ports”.

It also pointed, “The benefits are being offset by increased shipping costs and lower quality of refined products compared to the fuels produced from crude from Pakistan's main suppliers, Saudi Arabia and the United Arab Emirates”.

It goes to the extent of saying, “Added to the challenges, transportation costs for Russian crude are higher than for Middle Eastern crudes not only because of the longer distance traveled, but because Pakistan's ports cannot handle the large vessels departing Russia”.

According to the report, “Urals crude had to be transferred from a supertanker on to smaller ships, known as a lightering operation, in Oman before heading to Pakistan, unlike direct shipments from the Middle East”.

Even with that extra cost, it was worth importing Russian oil, said Viktor Katona, lead crude analyst at Kpler, as Saudi Arab Light crude is US$10 to US$11 per barrel more expensive for Pakistani refiners than Urals, while lightering operations add around US$2 to US$3 per barrel.

"Pakistani buyers would still be much better off," he said.

The key issue is, “Urals quality is a deterrent, as Pakistan's refineries cannot get as much gasoline and diesel out of Urals crude as they produce from Saudi and UAE crudes”.

It will take Pakistan Refinery (PRL) at least two months to fully process its first cargo of 100,000 tons (730,000 barrels) of Urals crude as it needs to be blended with Middle East crude to offset the high output of fuel oil from the Russian oil, Zahid Mir, chief executive of the refinery.

"Our optimum processing solution is to blend Urals with Middle Eastern imported crude while not exceeding 50% Ural in the blend," Mir said.

The residual fuel produced from Urals crude has to be mixed with diesel and kerosene to meet specifications for local use while the remainder is exported, but the deal was still commercially viable for Pakistan, Mir said.

PRL has no plans to upgrade its refinery to process fuel oil into higher quality fuels, he added.

Kpler's Katona expects Pakistan's liquidity issues and technical challenges to weigh on its appetite for Russian crude.

"Russian imports into Pakistan will not grow into anything bigger than one cargo per month," he said.

 

 

Crude oil on track for biggest monthly gains

According to Reuters, crude oil prices hovered near three-month highs on Monday, set to post their biggest monthly gains in over a year on expectations that Saudi Arabia would extend voluntary output cuts into September and tighten global supply.

Brent crude futures dipped 9 cents to US$84.90 a barrel by 0005 GMT while US West Texas Intermediate (WTI) crude was at US$80.41 a barrel, down 17 cents.

The September Brent contract will expire later on Monday. The more active October contract was at US$84.23 a barrel, down 18 cents.

Brent and WTI settled on Friday at their highest levels since April, gaining for a fifth straight week, as tightening oil supplies globally and expectations of an end to US interest rate hikes supported prices. Both the benchmarks are on track to close July with their biggest monthly gains since January 2022.

Saudi Arabia is expected to extend a voluntary oil output cut of one million barrels per day (bpd) for another month to include September, analysts said.

"Oil prices are up 18% since mid-June as record high demand and Saudi supply cuts have brought back deficits, and as the market has abandoned its growth pessimism," Goldman Sachs analysts said in a July 30 note.

"We still expect the extra 1 million bpd Saudi cut to last through September, and to be halved from October."

The bank maintained its Brent forecast at US$86 a barrel for December and expects prices to rise to US$93 in the second quarter of 2024.

Goldman Sachs estimated that global oil demand rose to a record 102.8 million bpd in July and it revised up 2023 demand by about 550,000 bpd on stronger economic growth estimates in India and the United States, offsetting a downgrade for China's consumption.

"Firmer demand is driving a moderately larger deficit in H2 2023 than expected, averaging 1.8 million bpd, and a modest 0.6 million bpd deficit in 2024," it said.

Exxon Mobil CEO Darren Woods said the company expects record oil demand this year and next year, and that this may help boost energy prices in the second half of the year.

In the US, energy firms in July cut the number of oil rigs for an eighth straight month by one to 529, Baker Hughes said in its weekly report on Friday.

 

 

 

Iranian oil exports to China triple

Iranian oil shipments to China have more than tripled over the past three years despite the US sanctions on the country and the increase in Russia’s shipments to the Asian country, data released by data analytics firm Kepler show.

According to the data Iranian crude exports to its major trade partner have been hovering around one million barrels per day (bpd) in 2023, while the figure was roughly 325,000 bpd in 2020.

Iranian oil shipments to China have been on upward trajectory since 2019. In 2021 the exports reached 585,000 bpd and in 2022 the figure was reported at 766,000 bpd.

The International Energy Agency (IEA) in a recent report titled "Oil 2023" confirmed Iran's daily export of one million barrels oil to China saying, “Despite severe financial restrictions, Iran managed to increase its crude oil production by about 140,000 barrels per day in 2022 to an average of 2.5 million barrels per day. It seems that Tehran has maintained its crude sales to China, which has been around one million barrels per day since the third quarter of last year.”

Iranian oil production also increased in the current year, in May the country’s oil output reached 2.9 million bpd, 350,000 bpd more than in 2022.

Back in April, Bloomberg reported that Chinese private refineries are buying more Iranian oil despite the rising competition for supplies from Russia.

“The teapot refineries are prioritizing the flows, with Russian supplies getting more pricey as mainstream buyers such as state-owned Chinese refiners and Indian processors take a greater share,” the report read.

In March, Chinese import of Iranian crude and condensate jumped 20%MoM to 800,000 barrels a day, and are on track to extend gains in coming months, Emma Li, an analyst with data intelligence firm Vortexa told Bloomberg.

While Iranian oil has long been sanctioned by the US, refiners in China have proved to be a consistent outlet.

Most Iranian oil used to go to state-owned refineries but the private refiners in Shandong especially are now running the show, said Homayoun Falakshahi, senior crude oil analyst at Kpler.

Earlier this year, Iranian President Ebrahim Raisi said that the oil and gas sector experienced a growth of 9% in the Iranian calendar year 1401.

Oil Minister Javad Oji has also said recently that a new record high will be reached in the country’s oil export in the current Iranian calendar year.

Despite the negative impacts of the US sanctions, Iran has been ramping up its oil production and exports over the past few months.

In his remarks in November 2022, President Raisi highlighted the failure of the enemy’s policy of maximum pressure, saying the country’s oil export has reached the pre-sanction levels.

Back in January, the EIA in a report put Iran’s average oil production in 2022 at 2.54 million bpd, 140,000 bpd more than a year ago.

Iran's oil production in 2021 was about 2.4 million bpd.

Benjamin Netanyahu’s day of infamy

I have selected this write up from The Jerusalem Post, the leading newspaper of Israel. I want every Pakistani to read this and share with other fellow Pakistanis. According to The Jerusalem Post, on Monday, July 24, 2023 is a date that will live in infamy – the Zionist enterprise was attacked by enemies from within, led by an emperor of lies. 

At midday, Israel’s legislature fired a cannonball at the Jewish state’s Supreme Court. As civil wars often begin, it was actually a limited attack – a single shell with a lightweight payload. Even so, it was announced as a broad offensive’s prelude, and absorbed like a declaration of war. 

Yes, the original plan, a legislative blitzkrieg, was abandoned. It had to be abandoned because the war’s prospective victims – multitudes who gave the Zionist project their best years – took to the streets, shouted in anger, and shook their fists. 

That’s why the assault’s mastermind – the justice minister, of all people – was forced by his emperor to veer to blitzkrieg’s alternative, the strategy of indirect approach. The redesigned assault would target one outpost at a time, while the war’s victims were to be sedated by fake peace talks. 

For several months, the strategy worked. The victims really thought they prevented civil war and saved the court. But then came Monday’s cannonball, and the prime minister’s implied statement: My civil war is here. 

The civil war was sowed three years ago, when our Netanyahu emerged at the courthouse where his trial was set to begin, and publicly attacked the judiciary, libeling its prosecutors for having allegedly conspired with the press and the police to unseat him. 

That was the battle cry. Behind the scenes, a battle plan was being devised. The idea was to conquer the courts in a pincer movement: from one flank, the judges would be appointed directly by the ruling coalition’s politicians; and from the opposite flank, the courts’ wings were to be clipped. That’s how the judges would become subservient to the politicians.

 

Israel Settlers considering returning to their countries of origin

According to a survey more than a quarter of Israelis in the occupied Palestinian territories are considering returning to their countries of origin. The survey comes as credit rating agencies reported that the mounting domestic uncertainty will reduce Israel's economic growth this year. 

The Times of Israel has cited a poll conducted by the regime's channel 13 as saying 28% of respondents were weighing a move abroad while an additional 8% were unsure.

“The survey reflected the impact of the coalition passing the law, despite sustained mass protests, vehement opposition from top judicial, security, economic and public figures, and thousands of Israeli military reservists vowing to quit service,” the newspaper reported.

Highlighting the strong opposition against Netanyahu's cabinet and signs of protests to continue, only 33% respondents said they believe the Israeli prime minister's claim that he wants to compromise on the rest of the judicial overhaul law. 

Among other aspects that the poll found was that 54% of Israelis fear that the judicial overhaul will harm the security of the occupation regime.

Another 56% said that they were worried about a civil war erupting between opponents and supporters of Netanyahu's cabinet judicial reforms. 

The newspaper, also citing the same poll, indicated that “Gantz’s National Unity party would win 30 seats in the 120-seat Knesset, the most of any party, if elections were held today, surpassing Likud, which ranked next with 25 seats.”

Netanyahu - who is facing corruption charges - has resisted pressure from the occupation's staunchest allies, including the United States, which is looking with concern at the crisis unfolding in the occupied Palestinian territories, to drop his judicial overhaul measures.

The plan has also seen the biggest polarization among Israeli settlers in the regime's history with more than seven months of mass protests that saw violent clashes between the Israeli police and settlers after Netanyahu passed the bill on July 24. 

It comes as protests against the bill saw a forum of around 150 of the regime's largest companies holding a strike on Monday. Two of the largest Israeli malls also closed the stores in their shopping centers. 

Israeli President Isaac Herzog and the head of the occupation’s largest labor union failed to mediate a compromise between the coalition and opposition ahead of the vote in a bid to ease the crisis. 

After news emerged that the compromise talks had collapsed the early gains for the Israeli currency were and sent the shekel weaker, with losses deepening further after the vote.

In a sign that the situation could get worse, the head of Israel's Histadrut labor federation has declared that he will be consulting with union officials about declaring a general strike.

"From this moment on, any unilateral progress in the reform will have serious consequences ... Either things will progress with broad agreement, or they will not progress at all," he said.

That has all sent Israeli financial markets tumbling with economists predicting there could also be an effect on inflation and interest rates. 

The shekel has weakened by around ten percent versus the dollar since late January, when the cabinet unveiled its controversial judicial overhaul plan, which harmed foreign inflows.

A report on Thursday by the S&P Global Ratings said the controversy over Netanyahu’s plans to limit the powers of the judiciary is increasing domestic political uncertainty and will lead to lower economic growth for the entity this year. 

"If government and opposition do not achieve an agreement on the topic, this could further exacerbate domestic political confrontation and weigh on medium-term economic growth," S&P said. 

With a deep divide in Israeli society and strained loyalties by thousands of army reservists and foreign investors have been left frightened.

Political watchdog groups have appealed to the Supreme Court to overturn a new law passed by parliament in the first of the changes to trim Supreme Court powers, paving the way to a showdown among branches of government when it hears the arguments in September.

Israeli Finance Minister Bezalel Smotrich, a strong supporter of the judicial changes, pinned the blame on the Israeli protesters and not the cabinet for the warning by the rating agencies.

"S&P, like Moody's ... does not warn of damage to the economy due to the legal reform, but because of the protest that creates instability," Smotrich said in a statement.

S&P said that its ratings for the regime have in the past been consistently constrained by domestic and regional political and security risks. 

Israel, it added, has a history of frequent elections and changes in cabinet composition, which makes future policy direction harder to predict.

The calls by Israeli settlers and unions for further strikes, in addition to more than 10,000 reservists joining the protest movement, have split the regime. 

Experts believe the economic outlook is likely to slow further, adding more fuel for settlers to leave the occupied Palestinian territories where they fear of the possibility of a civil war amid a rise in violent protests on one hand and the increasing retaliatory operations

carried out by the resistance on the other. These have added to the woes of their security concerns. 

On Friday, the Israeli Air Force chief warned that enemies may exploit the internal crisis, saying his forces need to remain vigilant and prepared.

Tomer Bar said, "It is possible that at a time like this, they (Israel's enemies) will try to test the frontiers, our cohesion, and our alertness," he said without elaborating. 

As the crisis escalated further after the July 24 vote, Israeli media have reported that Netanyahu had received at least four letters from the regime's military intelligence warning of serious security ramifications and historic weaknesses as a result of his judicial overhaul measures.
 

 

Hydropolitics: A new term coined in Asia

Most of Asia's major rivers originate in China and flow into countries like India, Bangladesh and Vietnam. China has earned the title of "upstream superpower," but concerns over the weaponization of water, the responses of nations downstream, and climate change are stirring up water politics and stoking tensions.

The visually rich three-part Nikkei Asia series titled Asia's Age of Hydropolitics explores the effects that the actions of upstream nations -- exacerbated by climate change -- have on countries downstream.

The first story focuses on Asia's rivers that originate in the Indo-Tibetan plateau in China. They flow into 18 other nations, delivering water to a quarter of the world's population.

As China gets ambitious about managing its own water shortages by drawing on these rivers -- and allows its foreign policy to dictate its actions upstream -- many nations downstream are feeling its presence.

The second story frames Bangladesh -- and the geopolitically significant Brahmaputra River -- as a proxy of Sino-Indian conflict. The story follows the Brahmaputra as it enters India through the disputed border with China, and explores the effects of dams and upstream politics on the region's most disenfranchised.

As the Brahmaputra makes its way into Bangladesh, the lowest riparian country in the region finds itself at the center of China-India hydropolitical hostility.

The third and final piece in the series focuses on the Mekong -- one of the world's longest and most biodiverse rivers. Dams being built upstream, 22 by China alone, combined with climate change and human activity, have contributed to the sinking of the Mekong Delta. Half of the river-strewn region could be underwater before the century is through.

But locals are adapting -- and emerging innovative strategies offer hope of mitigating the worst.

Courtesy: Nikkei Asia