West Asia & North Africa Digest by Ambassador Mahesh Sachdev | May 2020

1. I) Political Developments

   Regional Impact of Covid-19:
   
   During April 2020 the WANA region continued to be plagued by Covid-19 pandemic, stretching the regional countries’ socio-political systems to face an enormous and multi-dimensional challenge. It brutally exposed the region’s countries’ various inadequacies such as governance failings, incompetent healthcare systems and haphazard social mobilisation. It also laid bare various attempts to leverage the ongoing humanitarian disaster for ulterior ends from power-grab to ceasefire. As the month ended, the regional countries were in various phases of their respective response cycles comprising of the social-distancing, lockdown and gradual and painful limp back to normalcy. These efforts were complicated by internal and external preoccupations such as civil wars, oil price turbulence, foreign aid and regional cooperation – or lack of it. As of May 3 2020, the Coronavirus pandemic had 327,109 confirmed cases and over 11,426 deaths in the region.
    

Covid-19 Pandemic: Cumulative Cases in WANA
(as of May 3 2020)

                          Source: Johns Hopkins University Coronavirus Resource Center & WHO
Covid-19 and Individual WANA Countries:

• By end of the month, Turkey had replaced Iran as the most affected country of the region with Covid-19. Even as their populations were comparable and the number of cases significantly higher, Turkey managed to keep the number of deaths at roughly half of Iran’s.
• Although Iran’s epic battle with the pandemic continued, it decided to gradually open its economy from April 20 onwards. 
• The New York Times reported on April 9 that around 150 members of Al-Saud, the ruling family of Saudi Arabia, were Corona Positive leading to the emergency measures for their treatment. The affected members included Prince Faisal bin Bandar bin Abdulaziz, Governor of Riyadh province. The NYT report went on to suggest that King Salman and Crown Prince Mohammed bin Salman had socially distanced themselves on the Red Sea locations. Islam’s holy cities of Makkah and Madinah were put under indefinite curfew from April 2 – mainly to contain the pestilence in their slums inhabited largely by the stateless migrants. Authorities revealed that 83% of CV infections were among the foreigners who constituted a third of the Kingdom’s 33 million inhabitants. Saudi Arabia’s Grand Mufti Sheikh Abdul Aziz Al-Sheikh ruled on April 17 that the faithful should perform the prayers during Ramadan and Eid al-Fitr at home if the Covid-19 continues. 
• The UAE decided to suspend marriages and divorces due to Covid-19. It also imposed a fine of $5,500 for dissemination of unauthorised information about the pandemic. 
• Amnesty International reported (15/4) that Qatari authorities have summarily deported dozens of Nepali labourers in the garb anti-CV measures. Qatar denied the allegations. 
• Yemen, a country with dubious distinction of being world’s worst ongoing humanitarian disaster due to simultaneous civil war, malnutrition and cholera epidemic had its first Coronavirus case on April 10. The month ended with first two CV deaths in Aden.  
• The UN Secretary General issued multiple appeals, endorsed by the Security Council, for ceasefires in Yemen, Syria and Libya to enable better handling of Covid-19 epidemic in these war-torn countries. WHO also warned (April 3) the Middle East countries to act quickly to contain the disease.

 
Yemen:    
Saudi-led coalition against al-Houthis announced a ceasefire with effect from April 9 in response to the appeals for end to hostilities to handle imminent Covid-19 pandemic. The coalition subsequently extended its ceasefire for a month on account of Islamic holy month of Ramadan. On both occasions, al-Houthis rejected the ceasefire – the first in five year old conflict – “as it was without removal of the economic siege imposed by the coalition.” This led to continuation of the sporadic fighting, particularly in Jawaf and Marib theatres. 
 
Comment:
 
Coalition’s declaration of ceasefire and its subsequent extension revealed realisation in Riyadh that the conflict was unwinnable and was draining resources (- which were increasingly scarce after oil price plunge) and creating a public relations disaster for Kingdom as it planned to host the G20 Summit in six months time. 
 
On April 26, the Southern Transitional Council (STC) declared “self rule” in Aden and five provinces in Southern Yemen, thereby breaking the peace agreement signed in Riyadh in November 2019 with the Internationally Recognised Government (IRG) led by President Abd Rabo Mansur Al-Hadi. The STC declaration brought South Yemen closer to becoming a separate country as it existed during 1967-1990. In justification of its declaration, the STC accused al-Hadi government of reneging on the terms of Riyadh Agreement as well as maladministration particularly during recent floods in Aden which wrecked much of the city and killed 10 people.  IRG, as well the five Governors appointed by it in the southern provinces predictably rejected STC declaration. On April 29, Saudi Arabia called upon STC to rescind it declaration.
 
Comments: 

• While the separatist sentiments have long existed in southern Yemen largely due to the perceived overbearance and neglect by the northern elite, it has been fanned by the UAE during the ongoing five year long civil war. Abu Dhabi formed the STC and trained and equipped the “Security Belt” militia which is currently estimated to be 90,000 strong. The UAE largely withdrew her forces from Yemen last November leaving the Security Belt personnel in place. Significantly, the STC declaration was made when its leader Aidarus al-Zoubaidi, former Governor of Aden, was reportedly visiting Abu Dhabi. 
• The STC declaration lends itself to two interpretations depending upon if this move is in concert with the coalition or supported by the UAE alone. In the first instance, it indicates coalition’s Plan B to partition the country if al-Houthis cannot be militarily defeated. The coalition then hopes to contain Al-Houthis between Saudi Arabia and the resurgent Aden. In case of the second scenario being panned out, it can be seen as part of a grand plan conceived by Abu Dhabi to increase its influence in strategic Baab al-Mandeb strait. Relevant to note that the UAE has also been actively seeking bases and port facilities in Somaliland, Sudan and Djibouti. 
• While the UAE remains a nominal member of the Saudi led coalition, Riyadh and Abu Dhabi putatively differ with regard to the al-Islah Party the biggest political entity in Yemen based mostly in the north. While Saudi’s back it as their political mainstay against al-Houthis, the UAE considers it to be an outfit allied to Muslim Brotherhood and disapproves of it. 
• Further Reading: 

http://go.pardot.com/e/827843/tion-point-article29442597-ece/h43p/32919832?h=xZPOjoVuGD-fMSPK0HMTolQnd4TgwDOK_rvppnjWDZo
http://go.pardot.com/e/827843/fiting-from-chaos-of-civil-war/h43r/32919832?h=xZPOjoVuGD-fMSPK0HMTolQnd4TgwDOK_rvppnjWDZo
 
Iran:
The pyrotechnics between Iran and the United States continued during the month. On April 1, President Trump publicly warned Iran that it would pay a heavy price for any “sneak attack” on the American forces in Iraq. Iran responded by castigating the US for deploying the Patriot missiles in Iraq without Baghdad’s approval. On April 16, the US accused Islamic Revolutionary Guard Corps (IRGC) of “dangerous and provocative acts” in close proximity of US Navy ships in the international waters of the Gulf. On April 22, President Trump ordered the US Navy to “shoot and destroy” the Iranian ships if they pose a threat. This Presidential order gave short blip to the global oil prices.
 
IRGC announced on April 22 that it has successfully launched a military satellite called Nur using a domestically build 3-stage Qased rocket. This first ever successful launch by Iran was described by US Secretary of State Mike Pompeo as a violation of the UN resolutions prohibiting Iran from launching an ICBM.  
 
Iraq:
On April 9, Iraqi President appointed Mustapha al-Kadhimi as the Prime Minister (designate) with a mandate to obtain Parliament’s endorsement within next 30 days. He was third such appointee, his two predecessors having failed to obtain approval of the fractious Parliament.
 
Comment: 

• Inability of Iraqi political elite to come up with a consensual candidate for Prime Minister’s post for nearly six months grievously impaired  the country’s capacity to handle its myriad challenges including resurgent ISIS, youth agitation for politico-economic reforms, the US-Iran conflict, Kurdish separatism, Shia-Sunni divide and expanding Covid-19. 
• Appointment of al-Kadhimi, hitherto Head of Iraq’s National Intelligence Service – supposedly adept in balancing various influences, was perhaps last flush of this draw.

 
On April 29, the United States extended a waiver to Iraq from anti-Iran sanctions for import of natural gas and power from Iran. The waiver was only for 30 days instead of 120 days earlier.
 
Syria:
On April 8, the Organisation for the Prohibition of Chemical Weapons (OPCW) published its finding blaming the Syrian Air Force of using Sarin and Chlorine during its bombing raids on rebel held Latamina village in March 2017. Syrian government rejected the findings calling them “misleading”.
 
A truck bomb attack in Afrin town in north-east of Syria controlled by pro-Turkish forces on April 28 caused over 47 casualties. Turkey, predictably, blamed SDF and PKK. 
 
During the month two German courts began hearing the charges human rights violations in Syria. The first case involved two Syrian intelligence agents who had sought asylum in Germany. They were accused of torture. Separately an ISIS fighter was accused of keeping a Yazidi woman as slave and killing her baby. These were first such cases in Germany.
 
Libya:
After being on defensive for past one year to Gen. Khalifa Haftar’s Libyan National Army (LNA) military campaign to take over Tripoli, forces of Government of National Accord (GNA) turned the table and reconquered three cities (Sabratha, Surman and Ajaylat) on April 14. They claimed to have shot down two fighter jets and a helicopter of the LNA in the fighting. Next day, GNA President Fayez al-Serraj ruled out any resumption of negotiations with Haftar. On April 28, Gen. Haftar declared 2015 UN-backed Libyan Unity Deal (which set up the GNA) to be “a thing of the past” adding that new institutions were needed. Recent military setback, however, prompted Gen Haftar, who had in past spurned all appeals to end hostilities, to declare a Ramadan ceasefire from April 30. This was, predictably, rejected by the GNA.
 
Decisive Turkish intervention in Libyan civil war escalated a war of words between Ankara and Abu Dhabi, one of the main backers of Gen Haftar.
 
Comment:
 
This turn-around in the Libyan battlefront was credited to intervention by Turkey (particularly its Drone Force) and approximately 4,000 Syrian fighters gang-pressed by Ankara which bolstered GNA’s rag-tag ensemble of militias. Despite its multiple travails in its own precincts, Turkey’s remarkable military foray in Libya was reportedly lubricated by the gas exploration deal signed during President Erdogan’s visit to Tripoli in November 2019.
 
Israel:
Following expiry of the mandate given to the “Blue and White” coalition leader Benny Gantz on April 13, President Revlin asked Knesset members to form a majority government within next three weeks so as to avoid the fourth general election. Accordingly, a “unity deal” to form an emergency coalition government comprising of elements of Blue and White and Likud was reached. Under this arrangement, Benyamin Netanyahu will continue as Prime Minister till October 2021 when Benny Gantz would take over. Till then Mr Gantz would serve as the defence minister.
 
On taking over, PM Netanyahu reiterated his plan to annex parts of the West Bank into Israel, hinting that the Trump administration would give its endorsement to the proposed move within next two months or so. This set off a storm of protests from Palestinian Authority, the UN and the Arab League about illegality of the move. 
 
Saudi Arabia:
A report by Amnesty International disclosed that in 2019 the Kingdom executed 184 persons during 2019 – new record for the country. Half of those executed were foreign nationals. Iran executed 251 persons. While China did not disclose the number, it was believed to have executed thousands of persons every year. In a reform of Saudi Sharia-based penal system, the Kingdom prohibited public flogging and execution of any person convicted of crimes committed as minor.
 
A Saudi Consortium’s bid to purchase New Castle football club of the UK for nearly 300 million Pounds came in against some resistance, notably from the Turkish fiancée of Jamal Khashoggi, a Saudi dissident murdered inside Saudi Consulate in Istanbul in 2018.  
 
The UAE:
The UAE Government tersely warned on April 12 that it would review bilateral relations with the countries which refuse to allow their repatriated migrants to return as a part of anti-Covid drive. It offered to conduct tests to preclude corona-positive migrants who would be treated in local hospitals. This action followed demonstration by some Pakistani expatriates at their consulate in Dubai demanding arrangements for repatriation. Some 20,000 Pakistanis have petitioned for return. In the event, special PIA flights to bring back stranded Pakistanis commenced on April 18.
 
Egypt:
 
A blast at Bir al-Abed in northern Sinai killed or injured ten Egyptian soldiers. Although the area has been a hotbed of Islamic militancy, no one claimed to have carried out the act.
 
Lebanon: 
Germany banned Hezbollah, and raided its establishments in that country. No specific reason was ascribed for this move. Hezbollah is a prominent political party and powerful militia in Lebanon.

II) Economic Developments

Oil Matters:  
April 2020 would be remembered in the history of oil for three records set during the month:

1. Biggest Collapse and Biggest Rally in the Oil Market
2. Biggest Deal to curtail Production (OPEC+ targeted 9.7 mbpd production cut)
   And
3. First Ever Negative Price for Crude (WTI was quoted at -37.63 dollars on April 20)

 
The world oil scene witnessed unprecedented turbulence following the expiry of OPEC+ deal on March 31 due to differences between Saudi Arabia and Russia regarding further production cuts. Riyadh decided, not for the first time, to flood the oil market by ramping up its production to record 12 mbpd and offload much of it at basement prices in Western Europe, Russia’s traditional market currently in demand meltdown due to the Coronavirus. This resulted in collapse of oil prices, hurting not only Russia, but even more the Shale oil producers in the US, with high production costs. President Trump’s declaration on April 1 that a Russia – Saudi Arabia deal was in the work shored up oil price dramatically for a while before it resumed the fall due to collapsed demand in a locked down world and wanton over production.

Eventually, on April 10 after long haggling an imprecise agreement was announced under which 9.7 mbpd production cuts were to be undertaken by OPEC+. Additional measures to sponge extra crude swilling around included promised cuts by non-OPEC+ producers (expected to contribute 4 to 5 mbpd) and boosting demand by filling up of the strategic petroleum reserves of various consuming countries. The OPEC+ cuts were to begin from May 1 2020 and would taper off gradually by April 2022 as global demand was expected to pick up after the Covid-19 pandemic passes.   

The global oil markets were not impressed by the smoke-and-mirrors type agreement and the oil prices continued to be in doldrums as IEA estimated on April 15 the global demand collapse due to Covid-19 at 29 mbpd. The nadir came on April 20 when the monthly cash future market for the WTI ended with scarce storage capacity chasing huge cache of crude: it led to negative 37.63 dollars price per barrel – a collapse of $55.90 during the day! Apart from being a freaky development, it made oil investors realise that they could lose more than what they invested for.

Other Country-Specific Economic Developments:

•    On April 10, the World Bank put the cost of twin crises (Covid-19 and Oil price collapse) for MENA region at $110 billion. 

•    According to an analyst quoted by Reuters, Saudi Arabia’s annual revenue losses from the new agreement could be in the tune of $40 billion. 

•    The US media reported that during a phone-call, President Trump threatened Saudi Crown Prince Mohammed bin Salman with withdrawal of the US military assistance and tariff on Saudi oil exports to US to persuade him to agree to cutting oil production. 

•    On April 29, Paris-based Financial Action Task Force (FATF) decided to put the UAE under observation for one year as it has done too little to curb money laundering and terrorism financing.

•    On April 5, UAE Central Bank boosted the size of economic stimulus from $27 bn to S70 bn.

•    On April 30 Lebanon made a request for $10 bn aid from the IMF; while announcing this request amidst plummeting value of the local currency, Prime Minister Hassan Diab said that he would also attempt to realise $11 bn pledged in a donors’ conference two years ago.

•    On April 8, Iran urged the International Monetary Fund (IMF) to approve a $5bn emergency loan to help fight the coronavirus pandemic.

III) Bilateral Developments

During the month, Prime Minister Narendra Modi and External Affairs Minister Dr S Jaishankar held frequent conversations with some of their WANA counterparts to discuss cooperation in combating Covid-19 pandemic. At their requests, India despatched Hydrochloroquine tablets to the UAE and a medical team to Kuwait. India also sought to ensure the welfare of 9 million strong Indian community in the GCC countries which is affected by economic consequences of Covid-19 and the slump in global oil prices.

Comment:
 
Please see: http://go.pardot.com/e/827843/nomic-ties-article31302542-ece/h43t/32919832?h=xZPOjoVuGD-fMSPK0HMTolQnd4TgwDOK_rvppnjWDZo
 
•    India’s oil imports during 2019-20 averaged 4.5 mbpd, 0.9% less than the previous year – a drastic reduction in world’s third largest consumer with consumption hitherto growing faster than any other major economy. Fuel demand itself grew by 0.2% – weakest in past two decades. The International Energy Agency predicted that India would consume 5.6% less oil in 2020.  Further, shares of supplies from the OPEC and the Middle East in India’s global oil imports fell to 78.3% and 60% respectively. This was partly because of growing differential between Brent and WTI making the western hemisphere crudes relatively cheaper to offset the longer freight costs. Despite this decrease in dependence, India remained among the largest consumers of OPEC crude, importing 3.53 mbpd from the cartel, or over 12% of OPEC’s total production. India’s top four crude suppliers were Iraq, Saudi Arabia, UAE and Venezuela. While US sanctions made India cut her oil imports from Iran drastically, the US itself became seventh largest supplier to India.

•    India imposed world’s largest lockdown as anti Covid-19 measure from March 25, banning all transport and most economic activity. Consequently, the fuel consumption slumped by nearly half. Major Indian oil refiners reacted to this plummeting demand by invoking force majeure provisions to defer/reduce imports from Iraq, Saudi Arabia, UAE and Kuwait, trying to export more of their refined products and diverting the imports to India’s Strategic Petroleum Reserves. They also rescheduled their maintenance schedule and up-gradation to BS-VI norms.

•    On April 19, Independent Permanent Human Rights Commission (IPHRC) of the Organisation of Islamic Countries (OIC) tweeted its condemnation of “unrelenting vicious Islamophobic campaign in India maligning Muslims for spread of #Covid-19 as well as their negative profiling in media subjecting them to discrimination & violence with impunity”  and urged “the #Indian Govt to take urgent steps to stop the growing tide of #Islamophobia in India and protect the rights of its persecuted #Muslim minority as per its obligations under int”l HR law.” The IPHRC is an expert body of the OIC with advisory capacity.

•    The board of Reliance Industries Ltd decided on April 30 to hive off oil-to-chemicals business into a separate vertical. This was being done in preparation for sale of a fifth of this entity to Saudi Aramco.

•    On April 15, Mr Bhavaguthu Raghunath (B.R.) Shetty,  a UAE-based Indian tycoon, and his New Medical Centre (NMC) Group were accused of fraud and forgery by his creditors, mostly UAE based banks. This followed a damning investigation (published on Dec 17 2019) by “Muddy Waters”, a US-based short seller and investigator. NMC group, earlier listed at London, is not only the largest healthcare provider in the UAE, its activities in a number of verticals such as foreign exchange, remittances, pharmaceuticals, etc. After a string of denials, NMC Group finally admitted to its undisclosed debts of $6.6 billion comprising “over 75 debt facilities from over 80 financial institutions”. The disclosures led to the Group being put under administration by the UAE authorities and charges being filed against BR Shetty and others. Mr Shetty, 77, arrived in India in February 2020; he issued a statement on April 28 stating that he had done nothing wrong and small number of staff was responsible. He claimed to have launched his own legal and forensic investigations and would share the results with appropriate authorities. “I am absolutely determined to bring to light the full facts, and the whole truth around what has transpired as soon as possible,” he said.

Comment:

For further details, please see: http://go.pardot.com/e/827843/naire-articleshow-75381757-cms/h43w/32919832?h=xZPOjoVuGD-fMSPK0HMTolQnd4TgwDOK_rvppnjWDZo

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(The views expressed are personal)