HIGHLIGHTS
• Political Developments
• Economic Developments
• Bilateral Developments
IA) Political Developments: Pan-Regional and Global Issues
Russian Invasion of Ukraine:
- On an Italian TV programme on May 2, Russian Foreign Minister Sergei Lavrov was asked how Russia can claim that it is fighting to “de-Nazify” Ukraine when President Volodymyr Zelensky is himself Jewish. His reply, “I could be wrong, but Hitler also had Jewish blood. [That Ukrainian President Zelensky is Jewish] means absolutely nothing. Wise Jewish people say that the most ardent anti-Semites are usually Jews.” The statement caused a huge outcry in Israel and was condemned by Prime Minister Naftali Bennett and Foreign Minister Yair Lapid. Three days later, PM Bennett said that during a phone call, Russian President Vladimir Putin had apologised for his foreign minister’s comments. However, this contretemps jagged the Israeli leadership’s emotive nerves leading to Israeli Foreign Minister Yair Lapid condemned on May 5 Russia’s “war crimes” in Ukraine, departing from Israel’s studied neutrality on the conflict.
- During the month, Russian Foreign Minister Sergei Lavrov visited Algiers, Rabat and Muscat (May 10-11). He was in Manama and Riyadh on May 31, for a meeting with the GCC Foreign Ministers the next day. After meeting the Russian FM, the GCC FMs had a virtual meeting with the Ukrainian FM Dmytro Kuleba. This was seen as an act to demonstrate the GCC states’ equidistance in the Russia-Ukraine conflict. Lt. Gen. Hans Werner Wiermann, head of the NATO International Military Staff, also visited Algeria in the second week of May.
Covid-19 and Other Pandemics:
- Israel and Oman ended mandatory Covid-19 testing requirements for foreign visitors from May 8, and 22 respectively. At the same time, Israel and the UAE confirmed the detection of their first cases of Monkeypox on May 21 and 24 respectively.
- On May 22, Saudi Arabia banned its citizens from travelling to 16 countries including India because of the local Covid-19 outbreaks.
- On May 27, the World Bank approved a $500 special finance facility for Turkey in support of its efforts to combat the Covid-19 pandemic.
Regional Security and Extremism:
- During the second week of May, the US CentCom Chief General Michael “Erik” Kurilla, appointed a month ago, paid his first visit to Saudi Arabia, Egypt and the UAE. In his meeting with the heads of State of Egypt and the UAE and the Deputy Defense Minister of Saudi Arabia, he sought to assure about the American commitment to the security of her regional allies.
- On May 20, the United States removed Kahane Chai (called “Kach” earlier) and four other Jewish extreme groups from the list of the proscribed Foreign Terrorist Organisations.
- The US’ insistence to keep the Iranian Islamic Republican Guards Corps (IRGC) as an FTO continued to be the major sticking point stalling progress towards concluding the JCPOA revival agreement.
- Two terrorism-related incidents took place in Israel during the month. On May 5, Israel’s Independence Day, a Palestinian wielding axe killed 3 persons in Elad. On May 8, two Palestinians were killed in the West Bank and two others were apprehended after sneaking into Israel. Since March, Palestinians and Israel’s Arabs have killed 18 people, including three police officers and a security guard, in attacks in Israel and the West Bank that have mostly targeted civilians. Israel has carried out arrest raids in the West Bank which have often sparked clashes and brought the number of Palestinians killed by Israeli forces or armed civilians since the beginning of the year to at least 42.
- On May 3, HaMoked, an Israeli rights group revealed that as of April 10, there were 4,450 Palestinians held in Israeli jails. These included 530 administrative detainees, held without charge or trial.
WANA and Afghanistan:
- On May 29, Qatar urged the west to engage with the Taliban to stem the socio-economic crisis in Afghanistan.
IB) Political Developments
Iran:
President Ebrahim Raisi paid a one-day visit to Oman on May 23 during which he conferred with Sultan Haitham. Iranian President was accompanied by ministers of foreign, affairs, defence, industry, transport and oil as well as the governor of the Central Bank. Among the major decisions announced was the revival of the bilateral pipeline, first mooted in 2013, to supply Iranian gas to Oman. Later on May 22, the two countries agreed to jointly develop the Hengam oilfield, straddling bilateral sea borders.
In a TV interview on May 9, President Raisi gave a blueprint of his plans to reform the welfare system for the Iranian people. He promised, “The prices of bread, medicine and petrol will not increase under any circumstances.” By the next morning, the central bank said an overwhelming majority of the country’s 85-mn population had received Raisi’s promised cash subsidies – totalling 460 tn rials ($1.6 bn open market rate) for two months – in their bank accounts. However, by May 15, Iranians began protesting in the streets about the high prices. These further escalated following the death of a multi-storied building in Abadan killing 32 persons as corruption and laxity in safety measures were blamed.
Iranian oil minister Javad Oji visited Venezuela and was received by President Nicolas Maduro on May 3. During the visit, the two sides entered into a €110 mn contract under which an Iranian state company is to repair and restart Venezuela’s 146,000 bpd oil refinery located at El-Palito. Iran also began supplying heavy crude to feed its domestic refineries.
There was more heat than light about the stalled indirect negotiations over the revival of the JCPOA accompanied by the lifting of the Trump-era economic sanctions. On May 10, Enrique Mora, the EU’s special envoy for Iran nuclear talks, visited Tehran to try and jump-start the nuclear negotiations. Encouraged by the positive outcome of the visit, the EU foreign policy chief Josep Borrell told the G7 foreign ministers’ meeting on May 13: “Let’s say the negotiations were blocked and they have been de-blocked”, with the prospect of “reaching a final agreement”. However, the contretemps over IAEA inspections of Iranian nuclear installations continued during the month. On May 10, the IAEA declared that Iran has not offered a satisfactory explanation about IAEA teams having found the uranium particles at three old but undeclared sites. The IAEA repeated its complaint on May 30 which led Iran to call the IAEA report “unfair”. Outside the technical realms, the JCPOA talks were also stuck on the Iranian demand for the US to lift the tag of Foreign Terrorist Organisation (FTO) on the Islamic Republican Guard Corps (IRGC). The US has refused to do so. The Israeli government, not a party to the JCPOA, nevertheless, addled the witches’ brew further. On May 17, the Israeli defence minister alleged that Iran was working on installing 1000 advanced centrifuges at a new underground site at Natanz. On May 31, Israeli PM Naftali Bennett accused Iran of stealing IAEA documents. At the same time, some media analysts reported that both American and Israeli decision-makers seem to conclude that “No Agreement is worse than a Bad One.” (Further Reading: Analysis: Subtle shift in U.S. rhetoric suggests new Iran approach Reuters, May 24; https://www.reuters.com/world/subtle-shift-us-rhetoric-suggests-new-iran-approach-2022-05-24)
On May 22, Col Sayad Khodai of the IRGC was shot dead in Tehran by two persons on a motorcycle. According to Iranian sources, he was “one of the defenders of the shrines” an epithet to describe military personnel or advisers who fight to protect Shi’ite sites in Iraq or Syria against groups such as the Islamic State. While the Iranian foreign ministry spokesman blamed “The sworn enemies of Iran” for this assassination, the Israeli Prime Minister’s Office, which oversees Mossad, declined to comment. However, in an elliptical comment a week later, Israeli Prime Minister Naftali Bennett said that Iran would not go unpunished for instigating attacks through its proxies and that Iran’s days of immunity were over. At least six Iranian scientists and academics have been killed or attacked since 2010.
Iran seized two Greek tankers in the Gulf waters in apparent retaliation for Greek authorities’ impounding of the Iranian-flagged Pegas last month due to European Union sanctions. The tanker was eventually released later, but after the US confiscated the Iranian oil cargo held onboard the tanker.
On May 28, an Iranian state TV report showed off an underground base at an undisclosed site in the Zagros mountain range where 100 military drones were being kept.
Turkey:
In a major policy pronouncement on May 13, President Recep Tayyip Erdogan accused Sweden and Finland of being “home to many terrorist organisations” and therefore Turkey would not support the two Nordic countries’ plans to join the NATO. As Turkey is one of the 30-member of NATO requiring all new entrants to be approved by all existing members, its objection blocked the membership bids by Sweden and Finland. President Erdogan’s statement a day before the NATO foreign ministers’ meeting in Brussels threw the gathering into disarray and prevented it from collectively approving the membership bids. Maintaining the pressure, on May 16 President Erdogan rejected the proposal to hold the delegation-level talks on this matter with Sweden and Finland, publicly telling them that “they should not bother to come to Ankara.” These talks were eventually held at the senior officials level in Ankara on May 25 but yielded no progress. (Comment: The move by Sweden and Finland to join NATO represents one of the biggest geopolitical ramifications of Russia’s war in Ukraine and could rewrite Europe’s security map. Although Turkey has not made public its demand list from the two, the coverage in informed media has mentioned the refuge given by the two countries to the sympathisers of the Kurdish militant group PKK and Fethullah Gulen (a Turkish Islamic scholar in exile in the US, regarded by Ankara as anti-government subversive) and the two Nordic governments’ refusal to extradite them to Turkey as the casus belli. Some conspiracy theorists put the Turkish position as a favour to Moscow, as a quid pro quo for future Russian concessions on Syria, wheat exports from Ukraine via Turkey, etc.)
Turkish foreign minister Mevlut Cavusoglu visited Palestine Authority (PA) on May 24 before visiting Israel the next day. During his visit to PA, he met President Mahmoud Abbas and FM Riyadh al-Maliki, assuring them of Ankara’s continued support. He also promised to raise the bilateral trade to $2 bn. However, this was the first visit by the Turkish foreign minister to Israel in 15 years and followed a pathbreaking visit by the Israeli President to Turkey two months ago.
On May 9, President Erdogan announced that Turkey would not expel from the country the Syrian refugees, estimated to number around 3.6 mn. Only a week ago, he had unveiled plans to build enough local infrastructure in northwestern Syria to house 1 million refugees – in addition to the tens of thousands of units already built. In wake of growing socio-economic hardships, the Syrian refugee presence in Turkey is being resented.
Five Turkish soldiers were killed by Kurdish fighters in northern Iraq on May 24, taking the total Turkish military fatalities in the ongoing offensive to 17.
Yemen:
Two positive components of the ceasefire package were implemented during the month. On May 6, the Saudi-led coalition transferred 117 al-Houthi prisoners to the ICRC. On May 15, the first civilian flight out of Sanaa international airport took off for Amman. The airport has been closed since 2015. Encouraged by these developments, the head of al-Houthi Supreme Political Council, Mahdi al-Mashat, said on May 22 that although the UN-brokered truce was “not encouraging enough”, the group was not against extending it.
Saudi Arabia:
On May 7-8, King Salman bin Abdulaziz underwent a colonoscopy operation in Riyadh.
In a joint statement issued on May 1 on the conclusion of Pakistani PM Shahbaz Sharif to Saudi Arabia, the two countries agreed to discuss the possibility of supporting the Pakistani economy by extending the term of the Saudi deposit of $3 bn in Islamabad’s Central Bank. On May 24, Saudi Finance Minister told Reuters that the Kingdom was finalising the extension of the deposit to Pakistan.
Saudi foreign minister said on May 24 that there had been some progress in talks with Iran but “not enough” and that the kingdom’s hands remain outstretched to Tehran.
On May 1, Saudi General Authority for Statistics announced that by its flash statistics, the Kingdom’s economy grew by 9.6% in Q1/22 year-on-year. This was the highest growth rate since 2011 and was attributable to both a low base last year due to the pandemic and a dramatic surge in oil prices.
The UAE:
Sheikh Khalifa bin Zayed Al-Nahyan,74, President of the United Arab Emirates, died on May 13. In 2004, he succeeded his father Sheikh Zayed, founder and the first President of the UAE federation. Sheikh Khalifa was incapacitated by a stroke in 2014 and while he continued to be formally the head of state, the de facto power was exercised by his half-brother Sheikh Mohammed bin Zayed Al-Nahyan (MbZ). The day after, the Federal Supreme Council, comprising of the rulers of the seven constituent emirates, unanimously “elected” MbZ as the new President of the UAE. Several world leaders, including President Macron, PM Boris Johnson, US VP Kamala Harris, Indian Vice President Shri M. Venkaiah Naidu, Saudi Crown Prince Mohammed bin Salman and Iranian FM Hossein Amirabdollahian visited Abu Dhabi to commiserate with Sheikh Khalifa’s passing away and anointment of MbZ as his successor. (Comment1: During his active years as the UAE President (2004-14), Sheikh Khalifa can be credited for several achievements. With his low-key, harmonious and consensual style, he fitted his legendary father’s shoes well and steered the UAE towards modernity and launched several economic reforms. He also laid the foundation of Abu Dhabi’s economic diversification. During the global economic crisis in 2009, he rescued the Dubai emirate with nearly $20 bn of cash injection. Abroad, he progressively opened his country’s options to go beyond the Arab-Islamic world and pursued a pro-west foreign policy. Comment2: The prompt anointment of MbZ, 61, as the third President of the UAE, seals the ascendence of “Bani Fatima” (the six sons of Sheikha Fatima bint Mubarak al-Ketbi, third wife of Sheikh Zayed. These are MbZ, Hamdan, Hazza, Tahnoun, Mansour and Abdullah. They currently occupy high and influential positions, either at the federal level or in the Abu Dhabi emirate. During the nearly a decade as de facto head of state, MbZ is seen to have followed a muscular foreign policy, punching well above the UAE’s intrinsic weight. He steadfastly opposed political Islam in general and Arab Spring in particular. With him at the helms, the UAE waded into several regional flashpoints and conflicts, such as civil strife in Yemen, Syria, Libya, Sudan and Somalia; the ostracization of Qatar, etc. His policies have seen some moderation during the past three years as the limits of outreach were felt. The relations with Saudi Arabia have also cooled as economic competition has taken off. Other notable foreign policy initiatives include normalising relations with Israel in 2020 and greater emphasis on ties with Russia and Asian countries, including India. As the UAE’s third President, MbZ would need to pay closer attention to domestic socio-economic issues as well as manage ties with Saudi Arabia, Iran and the Biden administration. Much attention would also be focused on his eventual selection of a deputy for himself.)
Greece Prime Minister Kyriakos Mitsotakis met with Crown Prince Sheikh Mohammed bin Zayed in Abu Dhabi on May 9. They agreed to jointly fund investments worth €4 bn ($4.2 bn) in Greece.
On May 9, UAE VP & PM Sheikh Mohammed bin Rashid Al-Maktoum announced several major economic decisions by the federal cabinet. The UAE will introduce a form of unemployment insurance, without specifying if it would apply equally to citizens and non-citizen residents. The authorities would soon begin revealing the identities of violators of stock market rules. The cabinet also announced new quota targets for the employment of Emirati citizens in the private sector – a long-standing policy known as “Emiratization”. It wants to see Emirati nationals representing 10% of private sector staff in companies with more than 50 employees by 2026, with rates increasing 2% a year until then. On the same day, the Dubai government established a Debt Management Office to streamline debt issuance and improve transparency. The IMF estimates Dubai government debt to be around $49.4 bn, but if state-linked entities’ debt is included that figure would expand to about $153 bn.
The Expo 2020 Dubai world fair, which ran from October to March, saw 24 mn visits by domestic and international tourists, an official report on May 10 said. The report also showed average hotel occupancy at 82% in Q1/22, versus 64% last year. In 2021, Dubai hosted 7.28 mn visitors compared with 16.73 mn in 2019 before the pandemic. The Omani visitors displaced India as Dubai’s top source of foreign tourists in Q1/22.
Israel
For two fateful days, May 20-22, the ruling coalition was reduced to a minority as an Arab MP left it, but decided to rejoin. (Comment: This case of “Aayaram – Gayaram” showed how precariously perched the one-year-old ruling coalition is!)
Al-Jazeera TV reporter Shireen Abu Akleh was killed by gunshot while covering the Israeli security forces’ raid on an alleged Palestinian hideout in Jenin on May 11. The death of this well-known American-Palestinian TV personality resulted in Palestine Authority (PA) leadership accusing Israel of her targeted killing, which Israel denied but parried the US call for a thorough investigation. PA referred the case to the International Criminal Court.
On May 29, flag-waving Israelis held a noisy and aggressive march in Jerusalem to mark the anniversary of the capture of the old city by the Israeli defence force in the 1967 war. The event led to a violent clash with the Palestinians.
During the month, the Israeli government took steps to approve the building of nearly 4,000 new housing units in the settlements located on the West Bank. Between 600,000 and 750,000 Israeli settlers live in at least 250 such settlements in the West Bank and East Jerusalem. Such settlements in occupied Arab territories are widely perceived as in violation of international law.
Lebanon:
The elections for the 128-seat Parliament were held on May 15 with 41% of the eligible voters participating, among the lowest ever. The results, as given in the graphic above, showed that both pro-Hezbollah and anti-Hezbollah groups lost ground as a nebulous anti-establishment group emerged. On May 31, the Shia party Amaal leader Nabih Beri, 84, was elected as the Speaker of the new parliament for the seventh time, albeit with the smallest (65/128) margin possible.
(Comments: Although the election conveyed deep popular angst against the long-entrenched ruling elite, the confession-based voting allowed the latter to largely continue with their cynical political game of the musical chairs. While Shia parties (such as highly militarised pro-Iran Hezbollah and Amaal) were able to retain all their seats, their smaller backers, including President Michael Aoun’s Free Patriotic Movement (Christian) party and the (Sunni) Future Movement led by former PM Sa’ad Hariri (who did not stand), lost heavily. On the anti-Hezbollah side, though the picture was complicated. Although the traditional anti-Hezbollah presence in the new parliament was smaller, the Maronite Christian Lebanese Forces party, a doggedly Hezbollah-sceptic party gained. The entry of 22 pro-change MPs was a significant development as it manifested the three-year-long agitation, spearheaded by the youth, against the political elite accused of mismanaging the economy. How this nebulous and fledgling group of MPs would behave may decide the political direction of Lebanon at this critical juncture. Even in the normal time, it usually takes the politicians weeks to form a government in Lebanon. With no coalition with a majority of seats in the parliament, the task borders on being impossible. At the regional level, the downsizing of Hezbollah might be seen as a zero-sum game: a loss to Iran and Syria, but a corresponding gain for Israel and Saudi Arabia. However, with fewer chairs on the deck of the proverbial Titanic, the musical chairs game becomes even more unpredictable! Further Reading: “Lebanon’s shock election result shows deep anger at the elite” The Economist, May 28; https://www.economist.com/middle-east-and-africa/2022/05/19/lebanons-shock-election-result-shows-deep-anger-at-the-elite)
On May 9, the World Bank approved a $150 mn food security loan to Lebanon.
In its last session before going into caretaker capacity following May 15 elections, the Lebanese Cabinet passed a policy document which included several prerequisites measures needed to unlock funds from a preliminary deal with the IMF agreed in April that could help pull the country out of a three-year financial meltdown.
Libya:
Fighting broke out in Tripoli on May 17 as the militia backing Fathi Bashagha, the Prime Minister appointed in February 2022 by the Tobruk-based parliament, sought to take over the capital from the forces of Abdel Hamid Dbeibeh, the UN-recognised PM. As the former was unsuccessful in dislodging PM Dbeibeh, Mr Bashagha announced the next day that he would establish his government in Sirte. The UN and the US state department urged calm. (Comment: Oil-rich Libya has been wracked by conflict since a NATO-backed uprising ousted longtime leader Muammar Gaddafi in 2011. The current impasse is rooted in the country having two rival administrations since 2014, viz. the Government of National Accord (GNA) in Tripoli and the Libyan National Army (LNA) led by the warlord Gen Khalifa Haftar, based in Benghazi. Till May 17 violence in Tripoli, the UN-backed efforts have restored a modicum of cease-fire but have failed to push forward reunification of the country. The fledgling political process was aborted in December 2021 when the planned general elections failed to materialise. The stalemate has not only caused a politico-military suspended animation, but it has also affected oil production as LNA militias reportedly prevented upstream operations of the country’s National Oil Company at several of the major oil fields.)
Sudan:
On May 29, the ruling Transitional Sovereign Council led by the military leader General Abdel Fattah al-Burhan decided to lift the state of emergency declared on October 25 last year. The Council said in a statement the decision was taken to create the right atmosphere for “a fruitful and meaningful dialogue that achieves stability during the transitional period” and promised to release the people imprisoned under an emergency law be freed. (Comment: The state of emergency was declared following the military coup that dismissed the civilian-military cohabitation. The coup and the emergency were deeply unpopular, both within the country and abroad. Nearly a hundred people were killed in violent demonstrations demanding an immediate end to military rule. The military junta also lost support abroad and the promised western and multilateral economic assistance was held back. The lifting of emergency was largely seen as a prelude to the resumption of the political negotiations toward an eventual civilian-led administration. However, given Sudan being ruled mostly by the military dictators since its independence in the mid-1950s, it was difficult to be optimistic about the progress being either rapid or linear.)
Qatar:
During the middle of the month, Emir Sheikh Tamim bin Hamad Al-Thani paid a multinational tour which included Iran, Germany, the United Kingdom and Spain. In Tehran (May 12), he sought to revive the stalled JCPOA negotiations during his meetings with Supreme Leader Ali Khamenei and President Ebrahim Raisi. In Madrid (May 18) Sheikh Tamim announced that Qatar’s $300 bn sovereign wealth fund planned to invest $5 bn in Spanish projects. In Berlin (May 20) the two sides signed a declaration to deepen their energy partnership envisaging plans to start supplying Qatari liquefied natural gas (LNG) to Germany in 2024. This would substantially reduce German dependence on Russian gas. In London (May 24) Sheikh Tamim announced plans to invest £10 bn in the UK during the next ten years.
On May 1, Amnesty International called for the creation of a World Cup Workers’ Fund with a corpus of £350 mn, or equal to the prize money for the tournament.
Syria:
President Bashar al-Assad visited Tehran on May 8. He was received by Supreme Leader Ali Khamenei and President Ebrahim Raisi. The mutual platitudes made public during the visit offer no hints about the substantive motives of the visit, only his second to Iran since the beginning of the Syrian civil war in 2011. Iran has played a strategic role in defending the Syrian regime during the strife.
An international donor conference held in Brussels on May 10 succeeded in raising $6.7 bn for Syria and its neighbours on Tuesday despite what the European Union’s foreign policy chief said was “a certain fatigue” with the 11-year-old conflict. 55 countries and agencies participated in the conference. Of the total raised on Tuesday, $6.1 billion is specifically for refugees, asylum seekers and stateless people and would largely benefit Turkey, Lebanon, Jordan, Iraq and Egypt. The funding is not designed to rebuild Syria. According to the UN, more than 6.9 mn people have fled their homes inside the country, and over 6.5 mn remain outside Syria, of whom 5.7 mn are refugees in the region.
On May 12, the U.S. Treasury Department approved some foreign investment in areas of northern Syria that are outside government control activities in 12 sectors including agriculture, construction, finance and hydrocarbons. The US continues to bar investment in government-controlled areas. The Syrian government criticised the move.
On May 7, the Syrian government declared a general amnesty for political prisoners without providing any further details.
Iraq:
Nearly 8 months after the parliamentary elections, Iraqi MPs were still unable to form a new government. It is essentially due to their inability to have a two-thirds consensus for electing a new President of the Republic, who in turn would invite the majority coalition leader in the parliament to form the government. Popular Shia religious leader Muqtada al-Sadr, whose Sadrist Movement emerged as the biggest party in the October elections with only 73 out of 329 seats, has put together a coalition which has 180 seats, which is still significantly short of a two-third majority of 220 seats. Moreover, even within this coalition, there is no unanimity over the presidential candidate, who has to be a Kurd. But this stalemate did not prevent the parliament to pass a law banning normalizing relations with Israel!
On May 8, Iraq’s Ministry of Defence signed contracts with the United States and France to import advanced weapons and strengthen artillery. No other details were provided.
On May 11, Iran’s Islamic Revolutionary Guard Corps (IRGC) shelled an area in Erbil in Iraq, targeting positions it said were held by “terrorist groups”.
Tunisia:
On May 20, President Kais Saied formed an Advisory Committee led by a law professor to draft the new Constitution. However, the process met with considerable resistance, with a number of nominees declining their membership. Moreover, two powerful entities, Tunisian General Labor Union (UGTT) as well as Ennahada political party rejected the Presidential invitation for a national dialogue. The UGTT initiated moves for a general strike.
On May 25, the European Union approved Euro 300 mn loan to Tunisia, the first such move since the declaration of emergency in July 2021.
Somalia:
On May 15, the Somali Parliament voted to elect Hassan Sheikh Mohamud as the country’s next President. He defeated the incumbent Mohamed Abdullahi Mohamed (aka Farmaajo), who had taken over from him in 2017 after a five-year term. His term is to be inaugurated on June 9. (Comments: The indirect election of the new president was widely seen as a rare positive development in a strategically located country riven with resurgent al-Shabab Islamic insurgency and piracy as well as the de facto divisions into statelets such as Somaliland, Puntland and Jubaland. The new president would have the second try at unifying and pacifying the country that has withered away since the deposal of Gen Siad Barre in 1991. He is expected to realign and diversify Somalia’s foreign policy away from alliances with such countries as Eritrea, Qatar and Turkey. However, his biggest challenge would be to tame the al-Shabab Islamic militancy, which has wrecked anarchy in the country as well as in Kenya. Further Reading: “Somalia’s new president vows to beat back jihadists, then talk to them” The Economist June 4; https://www.economist.com/middle-east-and-africa/2022/06/02/somalias-new-president-vows-to-beat-back-jihadists-then-talk-to-them)
Kuwait:
On May 10, Kuwait’s Crown Prince Sheikh Meshal al-Ahmad al-Sabah formally accepted the resignation of the cabinet led by Prime Minister Sheikh Sabah Al-Khalid but asked them to continue in a caretaker capacity. (Comment: The turf battle between an elected parliament and the Royal family-dominated cabinet has been a perineal and recurring feature of Kuwaiti polity for many years. For instance, the current cabinet was appointed in December, the third in 2021 as the standoff with the elected parliament dragged on. It also showed that reconciliation measures by the Emir Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah late last year were unsuccessful at diffusing the confrontation, which has greatly hindered urgently needed fiscal reform in the Gulf oil producer.)
Jordan:
King Abdullah II met President Joe Biden on May 13 at the White House. A subsequent official US statement said: “The leaders consulted on recent events in the region and discussed urgent mechanisms to stem violence, calm rhetoric and reduce tensions in Israel and the West Bank.”
On May 24, an IMF mission concluded a visit to Jordan with a recommendation for an extra $165 mn, raising the funding disbursed this year to $550 mn. It downgraded the country’s economic growth forecast this year to 2.4% from 2.7%. Higher growth is seen as key to easing the country’s high unemployment, which stands at around 23%. Although the economy is likely to meet the fiscal deficit target of 3.4% of the GDP, inflation is expected to rise to 3.4%.
On May 19, King Abdullah II placed his half-brother and former Crown Prince Hamzah bin Hussein under house arrest. In a strongly worded public letter, King Abdullah II said that the measures were on account of Hamzah’s “erratic behaviour and aspirations.”
(Comment: The feud between two half-brothers, Abdullah II and Hamzah, dates back to 2004 when the latter was removed as the Crown Prince after five years in that position. In 2009, King Abdullah II named his son the Crown Prince. The simmering tensions surfaced into open last year when Prince Hamzah was implicitly accused of planning a coup against King Abdullah. While Prince Hamzah denied the charge and pledged fealty to King Abdullah, the current development shows that the contestation has not gone away. Prince Hamzah may also have felt encouraged by the powerful tribal groups’ dissatisfaction with King Abdullah’s handling of the affairs of the state, particularly the stalled economy with high unemployment and rampant corruption. However, most influential outsiders, such as the US, Israel and Syria feel comfortable with the status quo. Hence, the White House Summit and IMF mission overshadow the domestic developments.)
Egypt:
On May 29, an Egyptian court sentenced former presidential candidate Abdel Moneim Aboul Fotouh and several prominent figures from the banned Muslim Brotherhood to lengthy jail terms. The charges included plotting to overthrow the state.
A Daesh (Islamic State militia) claimed an attack in the restive Sinai Peninsula killed 11 troops on May 7. In incident framed the context of the meeting of the US Centcom Chief’s meeting with President al-Sisi on May 9.
II) Economic Developments
Oil & Gas Related Developments:
- During the month, although the global oil prices were buffeted by several factors on both bullish and bearish sides, the overall trend was towards higher prices. The price rise was spurred by Ukraine war-related disruptions and the inability of OPEC and OPEC+ to boost their production even to the modest increases promised. On other hand, the lockdowns in China, the world’s largest consumer, tapering of global economic growth and localised glut in some Asian markets acted as dampeners. At the same time, a stronger dollar, in which oil is mostly priced, also meant firmer prices for the consumers. The global oil prices have risen by nearly 50% since the beginning of 2022 (Further Reading: “Why the oil price is spiking again”, The Economist May 31; https://www.economist.com/finance-and-economics/2022/05/31/why-the-oil-price-is-spiking-again)
- On May 4, OPEC+ decided to stick with a 432,000 bpd production increase among its members from June 1. However, the group’s April actual production was 2.6 mbpd below its collective ceiling, with Russia’s production shortfall of 1.28 mbpd being responsible for nearly half of this under-performance. Russian production plunged 9% y/y to 9.16 mbpd during April, largely due to Ukraine war-related disruptions and economic sanctions. Overall, the OPEC+ production cuts were 220% higher than intended in its schedule.
- The head of the International Energy Agency (IEA) said on May 9 that its members have committed to releasing 120 mn barrels from their crude strategic stockpiles since the beginning of the Ukraine war. He said that if needed, more releases would be made. (Comment: Last month’s releases were much crude off the duck’s back and the price rise has continued unabated, fuelled mostly by geopolitical risks associated with the Ukraine war.)
- The 10-member Organisation of the Petroleum Exporting Countries (OPEC) pumped 28.58 mbpd in April, a Reuters survey found on May 2, up 40,000 bpd from the previous month and short of the 254,000 bpd increase called for under the supply deal. The outages in Libya and Nigeria largely offset the below-par production rises by Saudi Arabia and the UAE. In its monthly report on May 12, the OPEC said world demand would rise by 3.36 mbpd in 2022, down 310,000 bpd from its previous forecast. It cited the impact of the Ukraine war, global economic travails and resurgence of Covid-19 in China as the reasons for the likely decline.
- On May 30, after more than a month of discussions, the EU summit agreed to tighten the sanctions against Russia. The package included banning purchases of Russian crude oil and refined products, such as diesel, by the end of the year. There would be a “temporary” exemption for oil delivered through pipelines. Russia’s crude exports were already disrupted by the Ukraine war and related Western economic sanctions and their increased flow to Asia, in turn, disrupted the local markets. It pressed supplies from Iran, and Saudi Arabia. On May 8, Saudi Aramco lowered the June prices of its Arabian Light crude meant for Asia and Europe. Reuters reported on May 19 that competition from Russian crude and lower Chinese demand due to Covid-19 lockdowns had resulted in the anchoring of 20 oil tankers loaded with Iranian crude off Singapore. There were reports about the Russian crude entering the global oil market via crude hubs in Greece and Fujairah (UAE).
- Saudi Arabia’s energy minister said on May 16 that the Kingdom was working to raise its production capacity by 1 mbpd by 2026-27 to 13 mbpd. Even as Saudi exports remained flat during Q1/22, its oil revenue jumped 58% y/y on a low base, yielding a budgetary surplus of $15.33 bn. As a result of higher oil prices, on May 11, Saudi Aramco regained the title of the world’s most valuable company from Apple. The oil company’s market capitalisation rose to $2.42 tr, or nearly 80% of India’s GDP. Its profit in 2021 was $110 bn, more than double of $49 bn in 2020. Further on May 15, it reported an almost 82% y/y rise in Q1/22 net profit with a net income of $39.5 bn from $21.7 bn a year earlier. On May 23, Saudi Aramco Chairman warned that the lack of upstream investment now could lead to an oil crunch. (Comment: Several factors, from the unsustainability of high oil prices to ESG considerations have meant the global investors shying away from E&P activities in the hydrocarbon sector.
- Iraq’s oil minister said on May 16 that his country’s current oil production capacity was 4.9 mbpd and there were plans to raise it to 6 mbpd by 2027. Iraq is currently the second-highest producer of oil in OPEC. In continued contestation over oil assets between the Iraqi central government and Kurdistan Regional Government, on May 14, Kurdish forces reportedly took over some oil wells in the Bai Hassan oilfield run by Baghdad-linked North Oil Company. KRG denied that it had done so. On May 19, the Iraqi government formally asked all oil and gas firms operating in Kurdistan to sign new contracts with SOMO and not KRG – as per a recent federal court ruling. However, on May 24 KRG PM Masrour Barzani rejected the ruling as “political” and not constitutional. A Reuters report on May 17 revealed that in 2021 Iraqi oil ministry had dissuaded Lukoil, Exxon Mobil and BP from selling their upstream assets in Iraq to Chinese state-run oil companies as it was wary of ceding more control over the country’s key resources. (Further Reading: “Iraq baulks at greater Chinese control of its oilfields”, Reuters, May 17; https://www.reuters.com/business/energy/iraq-balks-greater-chinese-control-its-oilfields-2022-05-17)
- On May 19, ADNOC announced three new onshore oil discoveries in Bu Hasa, Block 3 and al-Dafra oil fields with total reserves estimated at 650 mn barrels.
- On May 30, Israel announced the reversal of its previous policy decision to push for renewable energy instead of the development of offshore gas reserves. It cited the need to meet Europe’s gas requirements in place of the Russian gas supplies as the reason for this switch.
- On May 29, Iran claimed that its energy export revenues in the first two months of the Iranian calendar (March 21 to May 21) this year were 60% higher than the last year’s.
- On May 26, Italian oil major Eni and Algeria’s state-owned Sonatrach signed to boost both gas exploration and the development of green hydrogen in Algeria. The agreement was reached during a state visit by Algerian President Abdelmadjid Tebboune to Rome, which followed some weeks after Italian Prime Minister Mario Draghi made his trip to Algiers.
Following economy-related developments took place in WANA countries:
- Macro-economic news from Turkey, WANA’s largest, continues to be a mixed bag. The official data released on May 31 showed that the economy grew 7.3% year-over-year in Q1/22. Foreign arrivals surge 226% in April y/y kindling the hope that the country will get tourism revenue worth $32 bn and host 39 mn tourists, despite losing around 3 mn Russian and 1 mn Ukrainian tourists this year. The Lira’s slide made Turkey more attractive while the tourism sector’s income was crucial to reining in the current account deficit. On the negative side, the Turkish Lira plunged 9% against the USD in May, having declined 44% in 2021 and 20% in 2022 so far. On May 5, the annual consumer inflation rate was 69.9%, the highest since Erdogan took over the helms in 2004. The forex reserves were negative $55 bn after excluding the currency swap arrangements with various countries. Yet after its MPC meeting on May 26, the Central Bank left the rate of interest unchanged at 14%.
- On May 6, Saudi Arabia’s ministry of industry and mineral resources unveiled nine new projects to attract investments worth $32 bn for supplying inputs to local and international markets. It was also currently studying 145 applications for exploration licenses from foreign companies. On May 22, Prince Alwaleed bin Talal sold 16.87% of his flagship Kingdom Holdings to the Public Investment Fund (PIF) of Saudi Arabia. He still retains 78.13% of the ownership. On May 5, Prince Alwaleed publicly welcomed Elon Musk’s bid to take over Twitter and agreed to roll his $1.89 bn stakes in the company. Only three weeks ago he had opposed the takeover bid.
- The ministers of economy of UAE and Israel signed a bilateral Comprehensive Economic Partnership Agreement (CEPA) in Dubai on May 31, the first between an Arab country and the Jewish state. It provides for the tariffs being removed or reduced on 96% of goods traded bilaterally. Most duties are to be eliminated immediately, while others will be removed over 3-5 years. Some products will still be subject to customs tariffs but at a lower rate. The UAE foresaw the CEPA boosting annual bilateral trade to more than $10 bn within five years from $1.2 bn in 2021. The UAE-Israel Business Council predicts there will be almost 1,000 Israeli companies working in or through the UAE by the end of the year. The UAE signed its first CEPA with India in March 2022 and is in trade talks with several other countries, including Indonesia and South Korea. (Comment: The impact of the UAE-Israel CEPA would be felt well beyond the bilateral economic exchanges. Apart from boosting the bilateral exchange of goods, services and capital, it would enable both sides to tap other’s respective economic networks: from the global Jewish businesses to much of the far-flung Third World markets and capital (some of which with questionable roots) that use Dubai as their semi-formal hub. While the signing of CEPA with various global economies may work to globalise the UAE’s economy, it could also muddy waters and could entail some costs. For instance, the Saudi boycott of Israeli goods has already resulted in complications. Iran would see it like a red rag. From an India-specific perspective, the impact of the UAE’s two CEPAs’ with India and Israel would impinge on each other – from the precious stones to the Jaffa oranges would need studying carefully.)
- Among other economic developments concerning the UAE announced during the month were:
i. In its first-ever local currency-denominated bond sale, Dh 1.5 bn were raised on May 11;
ii. On May 11, Abu Dhabi-based SWF Mubadala Reported a record income of $33 bn in 2021;
iii. Abu Dhabi-based investment firm ADQ plans to invest $10 bn in Egypt and Jordan;
iv. Dubai World Financial Dispute Panel, established during the 2009 financial crisis was dissolved on May 20 as the last settlement was reached;
v. On May 4, the Central Banks of the UAE and other GCC countries raised their interest rates by 50 base points, following the move by the US Federal Reserve.
vi. On May 13, Emirates Airlines posted an annual loss of $1.1 bn for the year ending on 31.3.22, a sharp improvement on the $5.5 bn loss in the previous year, as air travel improved. It reported a 91% jump in revenue to $16.1 bn and a tripling of passengers to 19.6 mn.
- Egypt’s foreign debt climbed by $8.1 bn in Q4/21totalling up to $145.5 bn or nearly a third of the GDP. The inflation rate hit 13.1% on May 7. On May 28, the German group Siemens Mobility signed an $8.7 bn contract with Egypt to build about 2000 kms of the high-speed railway network.
- Israeli economy contracted by 1.6% during Q1/22 over the previous quarter due to the high base effect. The national economy had grown by 8.2% in 2021, the highest in this century. As the annual inflation crossed 4% in April for the first time since 2011, on May 23, the Bank of Israel raised the interest rate by 0.4% to 0.75%.
- Qatari Central Bank Governor expected the national economy to grow by 3.5% in 2022.
- Thanks to higher oil and gas prices, Oman’s budget swung back to a surplus in Q1/22.
- The month saw public protests against falling living standards in Iran, Lebanon, Sudan and Tunisia.
III) Bilateral Developments
- Prime Minister Shri Narendra Modi sent a message of congratulation to Sheikh Mohammed bin Zayed Al-Nahyan (MbZ) on his taking over as the President of the UAE. Vice President Shri M. Venkaya Naidu represented India at the ceremonies marking the last rites of Sheikh Khalifa bin Zayed Al-Nahyan and the appointment of MbZ as his successor. CIM and EAM both issued appropriate statements on this occasion. On May 14, India observed a day of official mourning for the demise of Sheikh Khalifa.
- A large UAE delegation led by Minister of Economy Abdulla bin Touq Al-Marri and Minister of State for Skill Development & Entrepreneurship Dr Ahmad Belhoul Al-Falasi visited India for India-UAE Economic Partnership Summit under the rubric “India-UAE CEPA: Unleashing the Golden Era.” The Ministers were received by Finance Minister, CIM. During the visit, a Memorandum of Understanding (MoU) was exchanged between NSDC International (NSDCI) and the Indian unit of DP World, Hindustan Ports Private Limited to develop a Skill India International Centre at Varanasi and to skill Indian youth for pursuing overseas employment opportunities in logistics, port operations and allied areas. On May 26, the Indian Minister of Environment, Forest and Climate Change, Shri Bhupender Yadav had a meeting with Dr Sultan Al Jaber, UAE’s Climate Envoy and Minister of Industry and Advanced Technology. An MoU on Climate Action was also signed during the meeting. The UAE is bidding to host COP28 in 2023.
- The 11th meeting of the India-UAE Joint Defence Cooperation Committee (JDCC) was held on May 24 at the Joint Secretary level with the UAE side being led by Maj. Gen. Staff Hassan Mohamed Sultan Bani Hammad, Chief of the Force Development Authority at the Ministry of Defence. He was also received by the Indian Defence Secretary.
- International semiconductor Consortium (ISMC), a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor, will invest $3 bn in India’s southern Karnataka state to set up a chip-making plant, the state government said on May 1.
- In mid-May, the London-based International Dispute Resolution Centre for Arbitration and Mediation (IDRC) dismissed Raas al-Khaimah Investment Authority’s $273 mn claim against the Indian government due to lack of jurisdiction. The case refers to the non-fulfilment of the commitment to supply the bauxite input by the AP Mineral Development Corporation for the $900 mn Alumina plant put up in Vishakhapatnam by RAKIA a decade ago.
- Indian Minister of Agriculture and Farmers’ Welfare Shri Narendra Singh Tomar paid an official visit to Israel on May 8-11.
- Oman’s Commerce, Industry and Investment Promotion Minister Qais bin Mohammed al-Yousef led a 48-member delegation to India on May 10-14. The program for the visit included the 10th Session of the India-Oman Joint Commission Meeting (JCM) on 11 May 2022 in New Delhi. It was co-chaired by Shri Piyush Goyal, Indian Minister of Commerce & Industry and the visiting Omani minister. On May 12, a meeting of the India-Oman Joint Business Council (JBC) was held jointly organised by FICCI and the Oman Chamber of Commerce and Industry. The bilateral trade between the two countries has risen by 82 per cent to $9.94 bn in 2021-22.
- A delegation led by Dr Mansukh Mandaviya, Minister of Chemicals and Fertilizers, visited Jordan on May 13-15 2022 for securing fertilizers and raw materials, both for short and long terms. MOUs were signed with Jordan Phosphate Mining Company (JPMC) for supplies of 30 LMT Rock Phosphate, 2.50 Lakh MT of DAP, and 1 LMT phosphoric acid for the current year with the Indian public, cooperative and private sector companies. India also signed a 5-year MOU with Jordan for annual supplies of 2.75 LMT of MoP which will uniformly increase every year up to 3.25 LMT.
- India’s contretemps with the Jeddah-based Organisation for Islamic Co-operation continued during the month with India rejecting various OIC statements. Thus, there were exchanges on the electoral delimitation in Jammu & Kashmir (May 16) and the Life Sentence awarded to Yassin Malik by a Delhi court (May 27).
- On May 15, Egypt contracted to buy 0.5 mn tons of Indian wheat. India exported 1.4 mn MT of wheat in April 2022. Among the main buyers were Egypt, Israel and Turkey. On May 29, the Turkish authorities rejected an Indian consignment of 56,877 MT of durum wheat citing Rubella disease. The wheat was originally sold by ITC to a Dutch company. (Comment: According to media reports, the consignment was subsequently ricocheted to Egypt before being finally accepted by Israel. Some reports hinted at political motives in rejection by Turkey as Rubella is not a disease associated with wheat by FAO. Ankara has also been negotiating with Moscow to permit the lifting of the sea embargo over the export of the Ukrainian wheat to Turkey, which could then become a hub of that commodity’s export. So, this narrative, alleging that the Indian wheat was phyto-sanitarily unsuitable was meant to help Turkey to buy more time.)
- Indian naval ships of the First Training Squadron arrived in Jeddah (Saudi Arabia) on May 8 on a visit as part of their five-nation Overseas Deployment.
- On May 23, Bahrain’s Investcorp revealed its plans to invest $400 mn in India’s school infrastructure and warehousing sectors.
- On May 24-26, India’s Directorate of Revenue Intelligence (DRI) recovered 52 kg of cocaine, estimated to be valued at over Rs 500 crore in the international illicit market, at Mundra port from a consignment of common salt from Iran.
- On May 12, India’s Petronet LNG began talks with Qatar to renew a multi-year gas deal. India, among the top buyers of Qatari LNG, has the option before the end of 2023 to extend its existing purchase contract till 2028.
- Although India’s fuel consumption jumped 23.8% in May from a year earlier, the seeming surge was largely due to a relatively low base in 2021 when India was in the grip of the second wave of COVID-19. The consumption grew only by 0.4% over the previous month. Another noteworthy feature of Indian crude imports was the surge in imports from Rusia, which became the second largest source of supplies to India in May, overtaking Saudi Arabia. India imported 840,645 barrels per day (bpd) of Russian crude in May, up from 388,666 bpd in April and 136,774 bpd in May last year, Kpler data showed. According to a Finland-based report, Indian refiners bought 18% of all the crude Russia exported in May, up from 1% before the Ukraine invasion. The total value of Russian crude bought by India since the Ukraine war started on February 24, however, was only €3.4 bn a minuscule portion of total Russian exports of €93 bn.
The previous issues of West Asia & North Africa Digest are available here: LINK
………………………………………………………………………………………………
(The views expressed are personal)
………………………………………………………………………………………………
