Need to check Israeli attempts

The Iran-Israel shadow war has very much come out into the open. Tel Aviv had been targeting Tehran’s assets for over a decade, particularly in Syria, taking advantage of the chaos engendered by that country’s civil war. A number of Iranian scientists, especially those associated with the Islamic Republic’s nuclear program, had been assassinated within Iran in hits widely considered to have been orchestrated by Israel.

While the Iranians are known for their strategic patience, and for playing the long game, the April 01 Israeli strike on an Iranian diplomatic facility in Damascus, in which a number of senior Iranian generals were killed, had crossed a red line. There was tremendous pressure on Iran from within to reply to this Israeli transgression, and the ayatollah and his generals had to respond without triggering a major regional war.

Tehran’s response came in the shape of the April 13 assault on Israel, a barrage that was short on destructiveness, yet scored a major strategic and PR victory for Iran. The suspected Israeli strikes targeting Iranian facilities in Isfahan early on Friday are the latest move on this dangerous chessboard.

While Tel Aviv has officially kept mum about the Isfahan misadventure — Israel rarely owns up to subterfuge outside of its borders — some politicians in the Zionist state have celebrated the attacks, while American media, quoting sources, have said this is Israel’s handiwork. The Iranians themselves appear to be downplaying the event, and an airbase and nuclear facilities in the area seem to be safe.

Once again, the clamour for de-escalation has been echoing from global capitals. Surely a wider war is in no one’s interest — except perhaps for the extremists in Israel — but true de-escalation means Israel must start behaving like a normal state, not a rogue nation that threatens the entire region, as well as the forsaken Palestinians captive in the occupied territories.

The UN secretary general has said “one miscalculation … one mistake, could lead to the unthinkable”. But this is perhaps just what Benjamin Netanyahu and the cabal of zealots in the unruly coalition that backs him may want. After all, Israel has been facing global opprobrium for its butchery in Gaza, while Netanyahu is facing significant domestic opposition for his handling of the debacle.

Thus, a war with Iran may be a useful distraction to shift the focus from Palestine, and rally Israel’s Western friends behind it to protect the Middle East’s ‘only democracy’ against Tehran.

Suffice to say, any scenario pitting the Israeli-Western collective against Iran and its ‘axis of resistance’ allies will result in an explosion in the Middle East, causing oil prices to skyrocket, and global trade to be upended. To avoid this, Washington, London and Brussels need to check Israel’s destabilizing behaviour.

Courtesy: Dawn

Warmongers approve US$95 billion package

The US House of Representatives on Saturday with broad bipartisan support passed a US$95 billion legislative package providing security assistance to Ukraine, Israel and Taiwan, over bitter objections from Republican hardliners, reports Reuters.

Passage of the long-awaited legislation was closely watched by US defense contractors, who are in line for huge contracts to supply equipment for Ukraine and other US partners.

The legislation now proceeds to the Democratic majority Senate, which passed a similar measure more than two months ago. US leaders from Democratic President Joe Biden to top Senate Republican Mitch McConnell had been urging embattled Republican House Speaker Mike Johnson to bring it up for a vote.

The Senate is set to begin considering the House-passed bill on Tuesday, with some preliminary votes that afternoon. Final passage was expected sometime next week, which would clear the way for Biden to sign it into law.

The bills provide U$60.84 billion to address the conflict in Ukraine, including US$23 billion to replenish US weapons, stocks and facilities; US$26 billion for Israel, including US$9.1 billion for humanitarian needs, and US$8.12 billion for the Indo-Pacific, including Taiwan

Ukrainian President Volodymyr Zelenskiy expressed his thanks, saying US lawmakers moved to keep "history on the right track."

"The vital US aid bill passed today by the House will keep the war from expanding, save thousands and thousands of lives, and help both of our nations to become stronger," Zelenskiy said on X.

The Biden administration is already finalizing its next assistance package for Ukraine so it can announce the new tranche of aid soon after the bill becomes law in order to meet Ukraine’s urgent battlefield needs, a White House official said.

Biden, who had urged Congress since last year to approve the additional aid to Ukraine, said in a statement, "It comes at a moment of grave urgency, with Israel facing unprecedented attacks from Iran and Ukraine under continued bombardment from Russia."

The vote on passage of the Ukraine funding was 311-112. Significantly, 112 Republicans opposed the legislation, with only 101 in support.

"Mike Johnson is a lame duck ... he's done," far-right Republican Representative Marjorie Taylor Greene told reporters afterward.

Marjorie has been a leading opponent of helping Ukraine in its war against Russia and has taken steps that threaten to remove Johnson from office over this issue. Greene stopped short of doing so on Saturday.

During the vote, several lawmakers waved small Ukrainian flags as it became clear that element of the package was headed to passage. Johnson warned lawmakers that was a "violation of decorum."

The House's actions during a rare Saturday session put on display some cracks in what generally is solid support for Israel within Congress.

Recent months have seen progressive Democrats express anger with Israel's government and its conduct of the war in Gaza.

Saturday's vote, in which the Israel aid was passed 366-58, had 37 Democrats and 21 Republicans in opposition.

Johnson this week chose to ignore ouster threats by hardline members of his fractious 218-213 majority and push forward the measure that includes Ukraine funding as it struggles to fight off a two-year Russian invasion.

The unusual four-bill package also includes a measure that includes a threat to ban the Chinese-owned social media app TikTok and the potential transfer of seized Russian assets to Ukraine.

Some hardline Republicans voicing strong opposition to further Ukraine aid argued the United States can ill afford it given its rising $34 trillion national debt. They have repeatedly raised the threat of ousting Johnson, who became speaker in October after his predecessor, Kevin McCarthy, was ousted by party hardliners.

"It's not the perfect legislation, it's not the legislation that we would write if Republicans were in charge of both the House, the Senate, and the White House," Johnson told reporters on Friday. "This is the best possible product that we can get under these circumstances to take care of these really important obligations."

Representative Bob Good, chair of the hardline House Freedom Caucus, told reporters on Friday that the bills represent a "slide down into the abyss of greater fiscal crisis and America-last policies that reflect Biden and (Democratic Senate Majority Leader Chuck) Schumer and (House Democratic leader Hakeem) Jeffries, and don't reflect the American people."

But Republican presidential candidate Donald Trump, who carries huge influence in the party, on April 12 voiced support for Johnson and in a Thursday social media post said Ukraine's survival is important for the US.

United States targets Chinese steel, maritime and logistics sectors

President United States, Joe Biden has called for tripling the existing tariff rate on Chinese steel and aluminium, just as the US Trade Representative’s (USTR) office announced the launch of yet another Section 301 investigation into China’s maritime, logistics, and shipbuilding sectors.

Biden told the USTR to raise the tariff on steel and aluminium imports from China – already under Trump-era duties – from 7.5% to 22.5%, according to a statement by the White House.

He also sent senior envoys to pressure Mexico to prevent Chinese steel and aluminium from transferring through Mexico to evade tariffs.

Biden’s move was made public just ahead of his visit to the headquarters of the United Steelworkers Union in Pittsburgh as part of his re-election campaign in the swing state of Pennsylvania.

The new investigation under Section 301 of the Trade Act of 1974 was launched after reviewing a “serious and concerning” petition by five national labour unions accusing China of using “unfair, non-market policies and practices” to “dominate the maritime, logistics, and shipbuilding sectors”, the USTR office said.

“The allegations reflect what we have already seen across other sectors, where China utilizes a wide range of non-market policies and practices to undermine fair competition and dominate the market, both in China and globally,” US trade representative Katherine Tai was quoted as saying.

“I pledge to undertake a full and thorough investigation into the unions’ concerns.”

A Section 301 investigation examines whether a foreign government’s acts, policies, or practices are unreasonable or discriminatory, and whether they burden or restrict US commerce.

If the investigation determines foreign practices have unfairly affected US commerce, the USTR may take “appropriate and feasible action” to remedy the unfair practices, including imposing duties and other import restrictions such as fees.

The USTR was seeking public comments and would hold a public hearing in connection with the investigation, the statement said.

The USTR added that it had requested consultations with the Chinese government about the investigation.

The 137-page petition, along with hundreds of supporting documents, was presented to the USTR office on March 12.

The petition lists the Chinese government’s actions, including providing loans from state-owned banks, equity infusions and tax preferences as well as provisioning steel at below-market prices and issuing loans to support the construction of thousands of vessels in China for export.

It highlights some unfair practices by Beijing, including ordering Chinese companies to buy and use Chinese-built products, directing mergers, and blocking alliances with foreign companies.

The coalition of labour unions includes the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union; the International Association of Machinists and Aerospace Workers; the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers; the International Brotherhood of Electrical Workers; and the Maritime Trades Department.

The petition was also endorsed by two US senators, Democrats Tammy Baldwin of Wisconsin and Bob Casey of Pennsylvania.

During his administration from 2017 to 2021, former US president Donald Trump launched various Section 301 investigations into Chinese imports and imposed punitive tariffs, which triggered retaliation by China and began a trade war that continues today.

 

Pakistan Stock Exchange closes at highest level

At Pakistan Stock Exchange trading session during the week ended on April 19, 2024 remained erratic. However, concluded on a stronger note on the Friday with the benchmark index posted highest-ever closing at 70,909 points posting 0.85%WoW gain.

Overall, average trading volume was reported at 492.37 million shares, up 43.51%WoW, clocking in at 2.46 billion shares, as compared to 1.72 billion shares traded in the earlier week.

The volatility may be attributed to the general uncertainty surrounding over international crude prices, primarily due to the ongoing rifts in the Middle East, with the tensions largely emanating due to the scuffle between Iran and Israel. The key highlight of the week was the successful visit of the Saudi delegation to Pakistan, promising major investments in various sectors. Additionally, KSA’s acquisition of a 25% minority stake in the Reqo Diq Mining project for US$1.0 billion appears to be progressing well, with the deal anticipated to finalize soon.

With regards to FIPI flows, net foreign investments remained consistent throughout the outgoing week, culminating to US$33.86 million by Friday close.

Finally, authorities repaid the maturing US$1.0 billion Eurobond on April 12th, resulting in the SBP’s FX reserves to end the week at US$8.0 billion.

With regards to fuel price, Motor Gasoline and Diesel prices were raised, attributed to rising crude oil prices.

Other major news flows during the week included; 1) PIB sale falls short, yields dip on shorter maturities, 2) Pakistan claimed to complete gas pipeline project with Iran, 3) Wheat production target of 32.2 million tons set for the current season is at high risk due to rainfall, 4) Government does not anticipate any significant currency devaluation.

Sugar & Allied industries, Refinery, Synthetic & Rayon, Vanaspati & Allied Industries, Textile Weaving were amongst the top performing sectors, while laggards included Miscellaneous, Woolen, and Paper & Board.

Major net selling was recorded by Individuals (US$14.43 million) & Banks (US$10.97 million). Brokers absorbed most of the local selling with a net buy of US$1.23 million.

Top performing scrips of the week were: PSX, FABL, FATIMA, AKBL, NRL, while top laggards included: PTC, ISL, KTML, SEARL, and MUGHAL.

Going forward, market is expected to return its focus to negotiations with the IMF regarding The EFF program, upcoming monetary policy announcement, and the corporate results which are expected to be announced throughout the coming two weeks.

Despite the market reaching its new highest, the forward P/E continues to remain below 5.0x, which instills positivity regarding the market's fundamentals.

Israel has just handed Iran a major victory

What was supposed to be an attack to restore deterrence, the Israeli attack on Iran managed to do the opposite; it further proved to the Islamic Republic that the United States, Israel, and their allies are alien to this concept, an op-ed published in The Telegraph on Friday concluded.

The piece titled, “Israel has just handed Iran a major victory,” considered that the early Friday attack on Isfahan and Tabriz, which according to latest reports included several small drones that were launched from within Iran and were shot down by the country’s air defenses, has emboldened Iran even more to carry out a larger strike against the occupation entity any time in the future.

The writer accused the entity’s international allies of muting its attack and trying to contain it by attaching limited to it in fear of escalation, pointing out that this would hardly strike fear in the heart of the Islamic Republic.

Additionally, by not publicly claiming responsibility, Israel stuck to deniability with an inbuilt exit from the spiral of escalation.

He expressed frustration over the scope and extent of the Israeli aggression, comparing it to Iran’s massive operation.

Was that really it? Was that really the only response to hundreds of missiles and drones fired at Israel last week, costing a reported US$1 billion in defenses and demanding an international response?

“If the price for such a major assault is one limited jab at an air base, then that is extremely favorable to Iran. The lesson for the Ayatollah is clear: next time, double the payload. It’s worth it.”

The United States, following years of appeasement to Iran, is happy to play defense, the author said, criticizing Washington’s role in the event.

He mocked the US’ temerity to dub the operation they led to repel Iran’s retaliatory attack as a win, stressing that when it comes to hitting back, it is cowardly.

According to the publication, Iran’s foreign policy approach is gradual and strategic. It advances its agenda slowly and cautiously, testing the limits of what it can achieve. This incremental approach allows Iran to make gains over time while avoiding a decisive confrontation that could jeopardize its objectives.

But in the case that adversaries try to sneak up on the Islamic Republic, it would intervene decisively to deter further advances.

In conclusion, the author said that the West, including the United States, has failed to effectively counter Iran’s action policy, and thus Tehran was able to advance its plans with relative impunity.

Israel-Iran playing 'ping pong' under US supervision

Israel has carried out a military strike inside Iran; a US official told CNN Friday, the latest move is a dangerous escalation that threatens to push the already volatile region into all-out war.

The US was given advance notification Thursday of an intended Israeli strike in the coming days, but did not endorse the response, the senior US official said.

Iran’s air defense systems were activated in several locations after three explosions were heard close to a major military airbase near the Iranian city of Isfahan, state media reported early Friday morning. Iran’s semi-official FARS news agency said fighter jets were located at the airbase and that military radar was a possible target.

Multiple state-aligned news agencies reported that sites associated with Iran’s nuclear program were “completely secure” and the attack appeared to be limited in scope.

“Following the activation of air defense in some parts of the country to deal with some possible targets, reports indicate that so far, no large-scale strikes or explosions caused by any air threat has been reported,” Iranian state-run media reported.

Reports of Friday’s strike came hours after Iran’s Foreign Minister Hossein Amir-Abdollahian told CNN that if Israel takes any further military action against Iran, its response would be “immediate and at a maximum level.”

“If the Israeli regime commits the grave error once again our response will be decisive, definitive and regretful for them,” he added, noting that this warning had been communicated to the White House via the Swiss Embassy in Tehran.

Tensions across the Middle East remain on a knife edge, following Iran’s unprecedented direct strike against Israel late Saturday. The attack, during which Iran launched more than 300 drones and cruise missiles toward Israel, came in response to a suspected Israeli strike on an Iranian diplomatic complex in the Syrian capital, Damascus, on 01 April, which killed a top commander, and several others.

Outgoing flights from several Iranian airports were briefly canceled or suspended early Friday but aviation authorities later lifted all restrictions.

Iran’s National Cyberspace center spokesperson Hossein Dalirian said on X that three drones “have been successfully shot down by the country’s air defense, there are no reports of a missile attack for now.”

Senior Iranian military commander Second Brigadier General Mihandoust said the sound of a loud explosion near Isfahan was caused by “air defense firing at a suspicious object” and that there was no “damage or incident,” according to the state-aligned Tasnim news agency.

Prior to Friday’s Israeli strike, the US expectation was the country would not target Iran’s civilian or nuclear facilities, another senior US official told CNN.

CNN has previously reported that Israel told the US its response would be limited in scope. US intelligence had suggested Israel was weighing a narrow and limited strike inside Iran because they feel like they have to respond with a kinetic action of some kind given the unprecedented scale of the Iranian attack.

The range of targets was “never specified in precise terms but nuclear and civilian locations were clearly not in that category,” the second official added.

Israel’s Western allies have both rallied to its defense in the wake of Iran’s attack Saturday, while also urging restraint.

Pakistan: Likely impact of Middle East conflict

Iran’s unprecedented drone/missile attacks on Israel on April 13 has raised the risk of a wider regional conflict in the Middle East. The attacks by Iran were largely intercepted by Israel. Still, any further retaliatory exchanges between the two countries could worsen the disruption of shipping routes through the region and thus lift global freights – in turn leading to higher commodity prices in the coming months. The escalation is likely to affect Pakistan in multiple ways.

From the Pakistan market’s standpoint any escalation will test two key expectations that have driven the YTD rally at Pakistan Stock Exchange, monetary easing and Pakistan’s negotiation with the IMF for another program.

On the flipside, the market will draw comfort from the prospect of fresh bilateral assistance and investments from Saudi Arabia and the release of final tranche of US$1.1 billion by end April.

Global shipping costs and commodity prices are likely to rise. Even in case of a de-escalation of the conflict, it threatens to worsen the disruption of shipping routes through the region, similar to that through the Red Sea. There is an increased risk of the following in the near term:

Surge in global oil prices toward US$100/bbl: The Red Sea disruption since November 2023, along with the extension of OPEC Plus supply cuts, has lifted Brent from US$78/bbl at the start of 2024 to nearly US$90/bbl, despite a weak global economic recovery.

Surge in the global shipping costs, through elevated insurance premiums on shipments through the region.

Global food prices could also rise, because of the rise in shipping costs and higher fertilizer prices, which the region exports. Food exports from South Asia, such as rice from India and Pakistan, to the rest of the world could be disrupted as well.

Potential delay in the start of interest rate cuts: An escalated conflict will have negative implications for Pakistan’s CA balance and inflation. In a scenario where global prices of crude oil, chemicals and food commodities rise by 10% in the coming months, Pakistan’s trade and CA deficit could expand up to US$300 million per month.

It is also likely that, in an escalated conflict, Pakistan’s exports and remittances may shrink, due to a disruption in shipping routes and economic concerns in the GCC, respectively.

Together these could spell a reversal in the exchange rate parity which has been stable around 280 since the start of year 2024. Note that, as per the SBP, Pakistan has a funding gap of around US$3 billion until June 2024, excluding the US$1 billion Eurobond repaid on April 12, 2024.