IA) Political Developments: Regional Issues
Impact of Omicron Covid-19:
Discovery of a new and more virulent strain of the SARS-Coronavirus in South Africa and its designation of Variant of Concern by the WHO on November 26 sent a wave of panic throughout the world, including the WANA region. Apart from the renewed threat of infections, it was also seen as a potential disruptor of the post-Covid global economic recovery on which the vital oil and gas exports of the region depended. In particular, the following important Covid-19 related developments took place in the WANA region during November 2021:
- On Nov 2, Iranian foreign minister Hossein Amir Abdollahian tested positive for Coronavirus and went into quarantine. This postponed his scheduled visit to India later in the month for co-chairing a session of the bilateral joint commission.
- Following the discovery of Omicron strain, many WANA countries put restrictions on the entry of persons from 7 countries in Southern Africa. These included the UAE, Turkey, Saudi Arabia, Bahrain, Iran, Egypt, Morocco and Kuwait. Some of them, such as Israel and Morocco took the extreme step of banning all incoming flights. In the case of Saudi Arabia, there was considerable confusion: On Nov 25, Riyadh announced the lifting of the condition of two weeks outside stay in transit for nationals of six countries (including India and Pakistan) to be replaced by 5 days quarantine on arrival. This was changed two days later Saudi Arabia will allow entry to travellers “from all countries” as long as they have received one dose of a COVID-19 vaccine inside the kingdom subject to quarantine for 3 days.
- On Nov 28, Egypt authorised vaccination of 12 to 15-year olds by Pfizer Covid-19 vaccine.
WANA and Afghanistan:
- There were signs of large movements of Afghans across the 921 km common border. Norwegian Refugees Council estimated that nearly 300,000 Afghans had crossed into Iran since the Taliban take over and up to 5.000 people may be crossing over daily. On other hand, IOM estimated that Iran had been deporting a large number of them back to Afghanistan putting the number at one million this year alone. In 2020, UNHCR had put the number of Afghans in Iran at around 3.4 mn, including 2 mn undocumented migrants and 800,000 refugees.
- The United States and Qatar signed an accord on Nov 12 for Qatar to represent U.S. diplomatic interests in Afghanistan through an interest section within its embassy in Kabul. In a second agreement with Washington, Qatar agreed to temporarily host up to 8,000 at-risk Afghans pending the US decision on their visa cases.
- In a speech in Bahrain on Nov 21 during a trip to the Gulf, U.S. Defence Secretary Lloyd Austin sought to reassure allies in the Middle East that President Biden’s administration was committed to the region despite the US withdrawal from Afghanistan and its increased attention towards countering China.
- On Nov 30 Saudi Arabia announced opening of its consular section in its embassy in Kabul to provide consular services to Afghan citizens.
- In an exclusive report on Nov 24, Reuters quoted diplomatic sources that the UAE was in talks with the Taliban to run the Kabul international airport, Afghanistan’s main link with the world.
WANA Refugees in Eastern Europe:
The surge of the Middle Eastern asylum seekers, mainly from Iraq and Syria to Poland via Belarus created a pesky situation on the bilateral border during the month. This led to Turkey and Syria banning the flights to Minsk, the UAE prohibited Afghans, Iraqis, Syrians and Yemenis from boarding flights to Minsk and Iraq sending planes to repatriate its stranded citizens.
IB) Political Developments
The indirect talks between the US and Iran mediated by the other five signatories of the JCPOA finally resumed at IAEA in Vienna on Nov 29 amidst growing signs of brinkmanship between the two antagonists. These were suspended five months ago at Tehran’s behest to give the new Iranian government of hard-line President Raisi to recalibrate its stance. In the run-up to the resumption, both sides sought to raise the ante. Iran insisted on full withdrawal of the US economic sanctions imposed by President Trump in 2018 under his “maximum pressure” policy with President Raisi emphasising on Nov 4 that Iran would not back down. It also sought the US to guarantee that it would never abandon the JCPOA again and re-impose such sanctions. The US, on other hand, demanded Iran’s full compliance with the terms of the JCPOA before any relaxation in its sanctions and warned that it would not allow Tehran to acquire nuclear weapons. Other stakeholders, including the JCPOA signatories, the GCC states and Israel stuck to their traditional positions. At the end of the month under review, Iran presented two proposals on the complete lifting of sanction at one go and nuclear limitations. On the technical side, IAEA director Rafael Grossi visited Tehran on Nov 23 to sort out some supervisory issues before the resumption of talks. IAEA estimated that Iran’s stockpile of enriched uranium had reached 2.5 tons, more than 12 times the 202.8-kg limit imposed by the deal, but less than the more than five tonnes it had before the deal. Iran now has around 17.7 kg of uranium enriched to up to 60%. It takes around 25 kg of weapons-grade (90% enriched) uranium to make one nuclear bomb.
Comment: By asking for the lifting of the economic sanctions, President Raisi has sought to wrest the initiative and shift the focus of the negotiations from JCPOA compliance. It has also sought to create new facts by highlighting the technical achievements of producing highly enriched uranium in large quantities. It seems to calculate that with radicals in control of all instruments of power at home, it has nothing to lose from a high wire act. If it succeeds, it would have revived the economic fortunes of the country, while a failure would be externalised to the doors of the great and small Satans.
Turkish Foreign Minister Mevlut Cavusoglu visited Tehran on Nov 15 to talk with his Iranian counterpart Hossein Amirabdollahian. He was also received by President Raisi. This was first high level bilateral contact since the change of government in Tehran and seemed a prelude to an Iran visit by President Erdogan in near future.
Iranian Deputy FM Ali Bagheri Kani visited Dubai on Nov 24 to meet with Anwar Gargash, a diplomatic advisor to the UAE president, and Emirati MoS for foreign affairs Khalifa Shaheen.
On Nov 7, Iran held military exercises near the mouth of the Gulf.
On Nov 11, Iran released “Sothys”, a Vietnamese tanker it had detained a month ago for stealing Iranian oil following a confrontation with the United States Navy in the Sea of Oman.
On Nov 4, PM Naftali Bennett’s ruling coalition succeeded in getting Knesset’s approval for the national budget, a feat that defied the previous government for the past three years. The budget passage also removed the threat of a fresh round of elections in the country.
On the eve of the resumption of JCPOA talks, PM Naftali Bennett expressed his worries on Nov 28 that Iran would secure the sanctions relief without having to sufficiently roll back projects with bomb-making potential.
On Nov 3, the US Commerce Department blacklisted Israel’s NSO Group as “they sold spyware to foreign governments that used the equipment to target government officials, journalists and others.” Three days later, Israeli FM Yair Lapid distanced the government from NSO claiming “it has nothing to do with the policies of the Israeli government.” On Nov 23, Apple, US mobile vendor and world’s largest market cap company, filed a lawsuit against NSO Group and its parent OSY Technologies for alleged surveillance and targeting of American Apple users with its Pegasus spyware. In face of ongoing opprobrium about the misuse of Israel cyber hack-ware by foreign agencies, an Israeli financial newspaper Calcalist on Nov 25 claimed that the Israeli government has curtailed the list of countries to which such software could be exported to 37 from 102 before with Morocco, Saudi Arabia and the UAE being excluded. The report was not officially confirmed.
Further Reading: “A lawsuit from Apple piles pain on NSO Group” The Economist, 27/11/2021 https://www.economist.com/middle-east-and-africa/2021/11/25/a-lawsuit-from-apple-piles-pain-on-nso-group
The “Lone Wolf” type attacks continued in Jerusalem. Two Israeli policemen were stabbed on Nov 17 and an Israeli citizen was killed by a Hamas gunman on Nov 21. In both cases, Israeli police shot dead the assailants. Separately, the police busted up an Arab gang engaged in the smuggling of firearms and arrested 65 persons including Israeli Arabs.
On Nov 27, the Pakistani cabinet formally approved the terms of a Saudi Arabia loan of $3 bn as a deposit facility for one year with the State Bank of Pakistan. This paved the way for the transfer of the loan amount from Saudi Arabia. In addition, Pakistan was also to get, from various Saudi sources $1.2 bn for the supply of refined Petroleum Oil Lubricants (POL) products, an $800 mn Islamic Development Bank oil facility and $1 bn raised through the issuance of Sukuk bonds. These financial arrangements were expected to alleviate the pressure on existing import bills of the country.
On Nov 4, Biden Administration approved its first arms sale package to Saudi Arabia by agreeing to supply $650 mn worth of air-to-air missiles.
Saudi Arabia remained China’s largest source of oil for the 11th month running in October 2021 when it supplied 1.67 mbpd of crude, up 19.5% y/y even as China’s overall import of the commodity was the lowest in three years.
Saudi stock market index fell by 1.6% on Nov 21 on the reports about al-Houthi militia having launched 14 missile and drone attacks on Saudi targets, including a Saudi Aramco facility in Jeddah.
Following a royal decree issued on Nov 11, Saudi Arabia granted citizenship to a group of expatriates including doctors, clerics and academics on Nov 15. The Kingdom thus followed the UAE in introducing a formal naturalization programme for foreigners with exceptional skills.
The US decision to release 50 mn barrels of crude from their strategic reserves on Nov 23 was seen by some observers as being caused by Saudi Crown Prince Mohammed bin Salman ignoring the pleas by the US and other major consumers due to perceived lack of access to the White House.
(Further Reading: “Flush with cash, Saudi Prince snubs Joe Biden and sends a message” Bloomberg 24/11/2021; https://economictimes.indiatimes.com/industry/energy/oil-gas/flush-with-cash-saudi-prince-snubs-joe-biden-and-sends-a-message/articleshow/87901561.cms)
The Emirati leadership continued to push across a wide wave-front to improve its economic attractiveness. The measures announced included initiatives to improve bilateral ties with Syria and Turkey, FTA talks with India, Indonesia and Israel, legal changes to civil code for non-Muslim residents, easing of visa rules and labour laws. The following are the details:
- Sheikh Mohammed bin Zayed Al Nahyan, de facto ruler of the UAE, visited Ankara on Nov 24 to meet Turkish President Recep Tayyip Erdogan in the first high-level bilateral interaction for over a decade among the two leaderships which have been at odds over political Islam and regional alliances with Israel, Qatar, Libya, etc. Several agreements to boost their economic ties were signed during the visit. The UAE established a $10 bn fund to support mainly strategic investments in Turkey, including in the health and energy fields. The resumption of bilateral economic synergy with the UAE briefly reversed the ongoing decline of the Turkish currency.
- The UAE’s Foreign Minister Sheikh Abdullah bin Zayed Al-Nahyan visited Damascus on Nov 9 to meet Syrian President Bashar al-Assad. This was the first high level bilateral political interaction for nearly a decade and indicated Abu Dhabi having reconciled to al-Assad regime in Syria. Comment: Although the UAE’s political overtures towards Turkey and Syria have developed gradually over the past few months, they seemed to be part of a profound and timely shift to less muscular regional foreign policy towards a more accommodative stance. Abu Dhabi’s charm offensive is largely motivated by the need to creation of economic opportunities as well as to have allies for the foreseeable future made uncertain by shifting regional alliances, uncertainty over Iran, Yemen and Libya. Abu Dhabi, which has waged a campaign against the so-called political Islam for over a decade, has now begun pursuing a foreign policy driven more by its national interest.
- In a groundbreaking initiative even in the UAE, Abu Dhabi emirate decided on Nov 7 that it would allow the option of Islamic law to be replaced by the civil law for the personal status procedures of non-Muslim residents for marriages, divorces and child custody cases.
- The federal government stated on Nov 27 that it had undertaken reforms to 40 laws this year on issues such as commercial companies, online security, trade, copyright, residency, narcotics and social issues. In particular, a new federal crime and punishment law, effective from Jan. 2, 2022, is designed to better protect women, domestic staff and public safety.
Comment: The UAE wants to reform its legal system to stay ahead in the race to attract the global talent vis a vis its Gulf neighbour Saudi Arabia, being the “Custodian of the Two Holy Shrines of Islam” has conservative baggage to carry. Separately, Abu Dhabi may be competing with not only Riyadh but also Dubai and Doha. This competition is qualified good news for the expatriates in the Gulf, long subject to the rough edge of the local legal system and prejudice.
The Wall Street Journal reported on Nov 21 that the US intelligence agencies learned this spring that China was secretly building what they suspected was a military facility at Khalifa port near Abu Dhabi. Alarmed, the Biden administration warned the Emirati government that this development could threaten ties between the two nations, including the supply of the coveted state of art F-35 jet to the UAE. After intense US pressure, the Chinese project was recently halted, at least tentatively. (Further Reading: “Secret Chinese Port Project in Persian Gulf Rattles U.S. Relations With U.A.E.” Gordon Lubold and Warren P. Strobel, WSJ News Exclusive, Nov 21 2021; https://www.wsj.com/articles/us-china-uae-military-11637274224)
Navies of the UAE, Bahrain, the US and Israel held maritime exercises in the Red Sea on Nov 11.
The UAE was selected to host the Conference of Parties (COP28) on climate change in 2023 while Egypt was to host COP27 in 2022. Although the UAE has been active in reducing its carbon footprint through solar and nuclear energy, it still has among the world’s highest per capita emissions.
After a hiatus in 2020 due to the pandemic, Dubai Air Show was inaugurated on Nov 14 with over a hundred companies participating. Israel was participating for the first time. The event was overshadowed by the global civil aviation industry still licking its wounds over $138 bn in losses in 2020 due to a near-global travel freeze.
On Nov 25, Interpol, the global police agency, elected Emirati Inspector General Ahmed Nasser Al-Raisi as its president, despite accusations from human rights groups that he failed to act on allegations of torture of detainees in the UAE.
For details of the Ankara visit by Sheikh Mohammed bin Zayed, please see the UAE section above.
Following the release of an Israeli couple held in Turkey for a week for taking pictures of the Presidential Palace in Ankara, Israeli President and PM held teleconversations with President Recep Tayyip Erdogan on Nov 18. This was one of the infrequent contacts between the two countries in recent years as President Erdogan has followed a pro-Palestine stance.
A Reuters report on Nov 10 quoted a source as saying that Turkey had made a “huge leap” in creating its defence industry over the last 20 years, expanding from 17 companies to nearly 17,000. It particularly cited Baykar as a producer of state of art drones which proved their battle worth in Syria, Libya and Azerbaijan- Armenia conflicts and are being currently exported to 13 countries.
Mr Abdalla Hamdok was reinstalled as Prime Minister on Nov 21 following the signing of a 14-point agreement providing for the release of all political prisoners detained during the coup of Oct 25 and stipulating that a 2019 constitutional declaration be the basis for a political transition.
However, the agreement failed to assuage the street demonstrations organised by the Sudanese Professional Association (SPA) and the Forces of Freedom and Change (FFC) both of which rejected it demanding that the military quit the politics and return to the barracks. Moreover, 12 ministers from Hamdok’s previous cabinet resigned in protest against the deal, which received qualified support from the UN and other powers. Earlier on Nov 3, the US, the UK, Saudi Arabia and the UAE issued a joint statement calling for a civilian-led government in Sudan. The installation of a new military-dominated Governing Sovereign Council on Nov 11 was also widely criticised both within and outside Sudan.
Comment: Continuing protests in Sudan against the reinstalled PM Hamdok puts a big question mark on the future political course of Sudan. While most stakeholders seem to know what they do not want, almost no one has a fit-all solution. The prognosis seems to lie between a political battle of attrition on one hand or a fast-forwarded transition to a civilian rule, which may resuscitate the old ghosts of sectarian and religious frictions which have accosted Africa’s largest country and led to its partition.
Sudan announced on Nov 28 that an Ethiopian military attack in the disputed al-Fashaqa region on the bilateral border has left at least six Sudanese soldiers dead. The region borders the troubled Tigray region of Ethiopia. Sudan claimed to have repelled the Ethiopian forces.
Oman’s Sultan Haitham visited Qatar for a bilateral summit with Emir Tamim on Nov 22. Six bilateral agreements on military cooperation, taxation, tourism, ports, labour and investment were signed during the visit.
Comment: Both Qatar and Oman are outliers to the Saudi-led Gulf Cooperation Council mainstream. They maintain good neighbourly ties with Iran and have avoided military engagement in Yemen. They each also have some neighbourly issues with the UAE. Yet they do have nuanced differences among themselves: while Qatar has retained ties with Sunni movements, such as Muslim Brotherhood, Oman has kept them away. Economically, Qatar has prospered, despite a 4-country boycott that ended recently, owing to its smaller population and large gas exports. Oman, on other hand, is coping with a serious economic downturn, due to much smaller oil production and policy paralysis during the last decade marked by the ill-health of Sultan Qaboos.
As the year to the FIFA World Cup in Doha approached, there was a marked rise in pressure on Qatari authorities from the international organisations alleging that they had maltreated the migrant labour force to build the stadiums and other infrastructure for the mega-event. Amnesty International issued a 48-page report titled Reality Check 2021 which stated that practices such as withholding salaries and charging workers to change jobs were still rife, despite labour reforms in 2014. On Nov 19, the International Labour Organisation (ILO) said that Qatar was not adequately investigating and reporting worker deaths including unexplained fatalities among seemingly healthy labourers. In their responses to these and other reports criticising their treatment of expatriate labour, mostly from Asian countries, Qatari authorities adopted a nuanced approach: while rejecting the main charge, they admitted that their labour reform process was a “work in progress.”
Israeli defence minister Benny Gantz paid an official visit to Morocco on Nov 23-24, the first such publicly acknowledged bilateral event. An MoU on security cooperation was signed putting the bilateral cooperation on security, intelligence sharing, and future arms sales on a formal footing.
On Nov 22, US Secretary of State Antony Blinken praised the Moroccan autonomy proposal on Western Sahara as “serious, credible and realistic, and one potential approach to satisfy the aspirations of the people of Western Sahara.”
Earlier Speaking on Nov 6, the 46th anniversary of the Green March by 350,000 Moroccans into Western Sahara in 1975, Moroccan King Mohammed VI said: “Today as in the past, Moroccan sovereignty over Western Sahara will never be up for negotiation.”
Comment: Morocco was once home to the largest Jewish community in the Arab world, most of whom migrated since to Israel creating a human bridge of sorts. The timing of the Israeli defence minister’s visit and the US statement was hardly coincidental. They were also contextually important against the backdrop of rising tensions between Algeria and Morocco and the resumption of the hostilities by the Polisario Front to liberate Western Sahara most of which is currently under Moroccan control. The US was also significant as it was the first public indication on the Western Sahara issue by the Biden Presidency, which reportedly wanted to review the recognition of Rabat’s sovereignty by the preceding Trump administration as a quid pro quo to Morocco recognising Israel. Currently, the United States is the only P-5 country that recognises Moroccan sovereignty on the territory.
There were tentative signs of Saudi-led military coalition extracting its forces on two fronts during the second week of the month: firstly, the Saudi forces reportedly abandoned Burayqah base near Aden, leaving by the sea and air. Secondly, the coalition forces retreated from the Hodeidah port area as per the 2019 mutual withdrawal agreement. Meanwhile, fighting continued in the oil-rich Marib region with al-Houthis making slow advances.
Comment: Six years after Saudi-led forces intervened in the Yemeni civil war, the conflict has become a liability for the coalition: It appears militarily unwinnable and a politico-economic millstone. The UN estimates that by end of 2021, 377000 Yemenis would have died of war-related causes, among which 70% would be children below 5 years of age. On other hand, the al-Houthi militia has defied the odds of an asymmetric conflict and have used drones and missiles effectively to bring the war to the Saudi mainland. They have insisted on the lifting of the air and sea blockade imposed by the coalition forces as a pre-condition to any ceasefire. As the coalition exit strategy takes shape, it is likely to throw Yemen into a new convulsion, with some observers predicting a fall back to a north-south division, status quo ante before the Yemeni unification in the mid-1990s with al-Houthis ruling the north and Southern Transitional Council ascendant in the south.
Further Reading: “Saudi Arabia cannot find a way out of Yemen” The Economist Nov 27 2021; https://www.economist.com/middle-east-and-africa/2021/11/25/saudi-arabia-cannot-find-a-way-out-of-yemen
The political temperature continued to rise with the civil-war ravaged country gingerly approaching its first presidential election scheduled on Dec 24. The LNA leader Khalifa Haftar as well as interim PM Abdul Hamid Dbeibah declared their respective candidatures. The candidature of Saif Qaddafi, son of former Libyan dictator, was disallowed by the electoral commission, but was re-instated by the court later. Eastern parliament’s speaker Aquila Saleh was also in the fray.
France hosted a high profile international Summit conference on Libya in Paris on Nov 12 which was attended by HoS/HoGs of Libya, Germany, Egypt, and the US Vice President. Russia and Turkey sent lower level delegations. The conference backed the Dec 24 presidential elections and called for withdrawal of the foreign forces from Libya.
US special Envoy for Libya Jan Kubis resigned from his six month old job on Nov 23.
On Nov 7, Prime Minister Mustafa al-Kadhimi survived an assassination attempt by three drones attacking his residence in Baghdad. No claim of responsibility was made for this brazen and unprecedented attack.
Further Reading: “Why drones are becoming Iran’s weapons of choice” The Economist, 12/11/21; https://www.economist.com/middle-east-and-africa/why-drones-are-becoming-irans-weapons-of-choice/21806199
On Nov 30, Iraqi electoral commission declared the final results of the elections for the 329-seat parliament held on Oct 10. Accordingly Moqtada al-Sadr’s movement emerged as the biggest bloc, with 73 seats, followed by Taqaddum Party (a Sunni outfit with 37 seats, Former PM Nouri al-Maliki’s State of Law group (33), and the Kurdistan Democratic Party (31). Pro-Iran Shia parties performed poorly and have refused to accept the results alleging frauds. Their supporters organised violent protests in Baghdad and elsewhere in the country leading to several deaths.
Comment: Despite several shortcomings, holding of a largely peaceful parliamentary election should be considered a landmark achievement by both authorities and the public. More than 9.6 mn people cast their ballots to choose from at least 167 parties and more than 3,200 candidates. While the voter turnout of 44% was slightly lower than the previous elections and the results were inconclusive, the exercise could mark the beginning of a healing process in a society convulsed for past four decades of wars, US occupation and Iranian dominance, Al-Qaeda and ISIS insurrections, sectarianism, rampant corruption and Muhasasa, the sect-based quotas system. However, successful elections were only half the victory: the hung parliament would require weeks of the intense horse-trading among various political parties before a ruling coalition would emerge.
A New York Times expose on Nov 13 claimed that the US military had hid the US airstrikes on Baghuz, Syria, killed up to 64 women and children in 2019. On Nov 29, the US Secretary of Defence ordered an internal review of the incident.
On Nov 24, the US Department of Treasury allowed American NGOs some latitude in dealing with the Syrian government to coordinate the humanitarian assistance. In particular, it permitted not-for-profit actions in Syria including new investment, purchase of refined petroleum products of Syrian origin for use in Syria and certain transactions with parts of the government.
Comment: Despite posturing to the contrary, Washington seemed to be softening its approach towards the Assad regime, which has survived a decade of civil war in which the US backed the motley opposition groups such as Sunni and Kurdish militias.
On Nov 11, Sayyed Hassan Nasrallah, leader of the Hezbollah, rejected calls for the resignation of George Kordahi, Lebanese minister of Information for sparking a diplomatic rift between Beirut and Riyadh (and some other GCC countries) by criticising its military intervention in Yemen. (Mr Kordahi finally resigned on Dec 5, to help French President bring reconciliation between Lebanon and Saudi Arabia during his short visit to the Kingdom.)
Further Reading: “Rich Gulf patrons turn the screws on a bankrupt Lebanon, FT, 3/11/21; https://www.ft.com/content/fc36ad5b-bbbb-4e3f-b2de-1cc5f19245e?desktop=true&segmentId=d8d3e364-5197-20eb-17cf-2437841d178a#myft:notification:instant-email:content
On Nov 17, Qatar and Egypt agreed to a tripartite arrangement under which Gaza would receive fuel and basic building material to alleviate the social misery left after the Israel Hamas conflict six months ago. The proceeds of the fuel would be used to pay the pending salaries of the civil servants in Gaza.
On Nov 22, Bahrain’s interior ministry stated to have arrested several suspects, and confiscated weapons and explosives ahead of a planned attack. While no further details were provided, the statement described them as “linked with terrorist groups in Iran”.
On Nov 22, Jordanian Parliament began debating the wide ranging reforms to the country’s constitution to move towards a constitutional monarchy. These include removing the King’s prerogative to select the prime minister and binding him to invite the leader of the party enjoying the majority support in 138-member parliament. The minimum age to become an MP was also to be reduced to 25 years.
The elections for the local bodies, held on Nov27, elicited tepid response from the public.
On Nov 3, Algerian presidency accused Morocco for bombing of a truck travelling between Mauritania and Polisario Front controlled part of the Western Sahara leading to death of three Algerian nationals in the preceding week. It warned that the act would not go unpunished. Morocco denied any involvement.
The State of Kuwait took long-pending measures to resolve its crisis of confidence between the government and the parliament which has created a politico-administrative stalemate. On Nov 13, Emir Nawaf Al-Ahmed Al-Sabah granted pardons and reduced sentences of 35 dissidents which was the key demand of opposition lawmakers. While most of the dissidents were in Kuwait jails, some had fled abroad.
The Emiri actions paved the way to formal reconstitution of the cabinet. Accordingly, on Nov 23, Sheikh Sabah al-Khaled Al-Sabah was reappointed by the Emir as the Prime Minister and asked to propose a cabinet.
II) Economic Developments
Oil Related Developments:
- Stakeholders continued to spar about demand-supply equilibrium even as crude prices remained high during the first three weeks of the month. On Nov 3, BP claimed that the global oil demand had bounced back above the key level of 100 mbpd last seen before the Covid-19 pandemic. A combination of high consumption of oil and gas at higher unit prices resulted in BP’s Q3/21 net earnings soaring to $3.36 bn. OPEC monthly bulletin of Nov 11, however, continue to pare the consumption figure this time by 330,000 to 99.49 mbpd in Q4/21. It estimated the demand growth in global oil consumption in 2021 to be 5.65 mbpd, down by 160,000 bpd over its previous estimate. It now expects the demand to cross 100 mbpd only in Q3/22 and the 2022 average consumption to stand at 100.6 mbpd. The OPEC SG claimed on Nov 16 that the global oil market could have a surplus from December 21 onwards. However, the consumers differed with this optimistic prognosis. Their lobbying group, the IEA, urged OPEC on Nov 24 to take necessary steps to cool the oil prices. The US, India and other main consumers pressed OPEC and OPEC+ to increase the production beyond its programmed monthly increment of 400,000 bpd for a balanced oil market. (There were also signs that the OPEC+ was collectively unable to increase in production even by this quantity, due to production bottlenecks in Nigeria, Libya and others.) However, in their monthly ministerial meeting on Nov 4, OPEC+ snubbed consumers’ exhortations and maintained the course.
- Eventually on Nov 23, the US (50 mn barrels), India (5 mn) and other consumers decided to release oil from their respective strategic reserves. Even this did not cause any significant decline in oil prices. The commodity prices dipped by nearly 10% on Nov 26 on the reported discovery of Omicron, a more infectious variant of SARS Coronavirus in South Africa, but by the end of the month, they were marching upwards again. The OPEC+ technical committee postponed its Nov 28 meeting pending a better evaluation of Omicron’s impact on the global economy.
Comment: The dramatic surge in oil prices and their stickiness underline the return of the oil demand with a vengeance, even when most of the air travel is nixed and much of the world, including Europe, is under Covid restrictions. One can only imagine the yawning demand-supply gap if the pre-pandemic “normal” situation was to return.
- As the price differential between Brent premium and Dubai widened to $5.24 a barrel on Nov 1, the highest since 2013, the Asian buyers switched to Middle Eastern crudes. It also made Saudi Aramco raise its price for Asian consumers by $1.40/b on Nov 5
- At Glasgow COP26, the Saudi oil minister and OPEC SG stoutly defended hydrocarbons as one of the main sources of energy for the foreseeable future. They argued that the lack of upstream investment in this sector under the belief that it was moribund would be a counterproductive and self-fulfilling prophecy. Instead, they sought greater investment and research in carbon capture and sequestration.
- On Nov 9, the Iraqi cabinet authorised the National Oil Company to negotiate with the US oil major Chevron over the development of the oilfields in Nassiriya, in the southern Iraqi province of Dhi Qar. It was also announced that the exploration work is underway at four sites in the country’s western desert.
Following economy-related developments took place in individual WANA countries:
- The official economic data on Turkey’s economy, largest in WANA (Q3/21 GDP $795 bn), was released on Nov 30. Accordingly, the GDP grew by 7.4% in Q3/21 y/y and the figure for the previous quarter was raised to 22.0%. President Recep Tayyip Erdogan expects a 10% GDP growth for 2021. However, the high growth was mired in high inflation currently running at over 20% level. Against the conventional economic wisdom, President Erdogan has pressed the Central Bank to lower the bank rate by 400 points since September 2021 to 15% sending Lira, the national currency, to depreciate against the US Dollar by 28% since and 45% during the current year. However, on Nov 23, President Erdogan described his campaign for lower interest rates as the “Economic War of Independence” and on Nov 29 said that he would never compromise on this issue.
Further Reading: “Erdogan’s zany monetary experiment is impoverishing Turkey” The Economist, 27/11/21 https://www.economist.com/finance-and-economics/erdogans-zany-monetary-experiment-is-impoverishing-turkey/21806459
- Saudi GDP grew by 6.8% in Q3/21, the highest quarterly growth since 2012. The country’s non-oil output was also the highest in 4 years. The economic performance led Moody’s to raise Saudi Arabia’s outlook to “stable” from “negative” and the country rating to A1. The Public Investment Fund, Kingdom’s SWF, applied for a qualified FII licence in China, Saudi Arabia’s biggest trading partner and top oil customer.
Further Reading (for a contrarian viewpoint): “The reinvention of the Saudi economy is going slower than planned, The Economist Nov 8th 2021; https://www.economist.com/middle-east-and-africa/the-reinvention-of-the-saudi-economy-is-going-slower-than-planned/21806192
- Dubai emirate took several measures to tweak its flagging stock market. On Nov 2 it announced the creation of a Dh2 bn “Market-Makers’ Fund” to boost trading on its stock market. A one billion dirham fund was also approved to encourage technology companies to list on the local bourse. A goal to double the financial market’s size to 3 trillion dirhams, primarily through IPOs of 10 state and state-related firms. A $25 bn IPO by DEWA (Dubai Electricity and Water Authority) was proposed to be among those to be listed on the Dubai bourse. Among other business facilitation measures announced by Dubai during the month were merging the departments of economy and tourism targeting 25 million tourists in 2025. The emirate also wants to attract 100,000 companies in 3 years, and organise 400 global economic events annually by 2025. It also announced setting up a law enforcement committee for its financial markets and two new courts within its Commercial Court to expedite the resolution of disputes related to securities.
- Qatar and Rolls-Royce are to team up in a multi-billion pound project to develop and invest in green technology start-ups in the UK and the Gulf Arab state which they hope will grow into the “unicorns.”
III) Bilateral Developments
- On the sidelines of Glasgow COP26, Prime Minister Narendra Modi had separate meetings with his Israeli and Palestinian counterparts on Nov 2. PM invited Naftali Bennett to visit India in the first quarter of 2022 to mark the 30th anniversary of the establishment of bilateral diplomatic relations. After meeting PM Modi, Palestinian Prime Minister Mohammad Shtayyeh issued a statement urging India to play “a well-established and distinguished role” in helping the Palestinians realise their statehood.
- On Nov 28, PM Modi tweeted his greetings to PM Naftali Bennett, Israeli and Jewish people on Hanukkah.
- Minister of Petroleum and Natural Gas Hardeep S. Puri visited the UAE on Nov 15-17 to participate in Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC). In a media interview, he expressed concern about high oil prices, emphasising that the price volatility could harm the world’s energy transition. In a TV appearance on Nov 26, he advised the oil producers that “if you don’t exercise caution you will be in a situation where your desire to maximise profit in the short run will undermine the global economic recovery.”
- Dr Nayef Falah Mubarak al-Hajraf, Secretary-General of the Gulf Cooperation Council (GCC) paid his first official visit to India on November 10-11. He and the EAM decided to institutionalise the annual meeting between the Foreign Minister of India and the GCC troika. During his meeting with the Minister of Commerce & Industry, it was decided to set up a working group to work out a free trade agreement with the six GCC states as a group.
- General MM Naravane, the Chief of the Army Staff, paid a visit to Israel during Nov 15-19.
- An OIC team led by its Assistant Secretary-General, and comprising of OIC Special Envoy on Kashmir and delegates from Morocco, Sudan, Saudi Arabia and the Maldives visited Pakistan Occupied Kashmir on Nov 11.
- On Nov 4, India asked Pakistan to permit GoFirst airlines’ scheduled Srinagar–Sharjah commercial flights to overfly Pakistani airspace.
- Official figures showed that India’s fuel consumption dropped in November 2021 to 17.13 MT, down 4% from the previous month and was 11.4% lower than a year before. The decline was partly due to seasonal factors such as festivities, but could also be rooted in higher prices. In a related development, the automobile sales during the festival season failed to live up to expectations largely due to subdued demand and the chips shortage affecting the manufacturers.
- On Nov 3, India’s central government decided to lower the excise duty on petrol by Rs 5/litre and on diesel by Rs 10/litre to give respite to the consumers from rising prices, which has affected consumption. The move is expected to lead to the loss of $7.38 bn in government revenue. Some state governments also followed by lowering their taxes. Before the reductions, the taxes comprised 52% of the petrol price and 47% of the diesel price at the pump in Delhi.
- Reliance Industries Ltd decided on Nov 19 to “re-evaluate” the proposed $15 bn stake sale of its oil-to-chemicals business to Saudi Aramco due to valuation differences.
- Egypt’s ban on three-wheeler taxis on the ground of safety was to affect the export of these vehicles from India.
- An RIL subsidiary was set to acquire a franchise in the Emirate Cricket Board’s proposed UAE T20 League
The previous issues of West Asia & North Africa Digest are available here: LINK
(The views expressed are personal)