IA) Political Developments: Pan-Regional and Global Issues
Gaza Conflict
Despite the US President personally unveiling the peace plan for Gaza at the turn of the month, its endorsement by the UN Security Council and G7 and both sides giving it their positive response initially, it could not be implemented during June as the negotiations ran through an obstacle course. While Israel accepted the provision for a temporary ceasefire to facilitate hostage exchange with Palestinian prisoners, it refused to rule out a subsequent resumption of hostilities to eliminate Hamas. On the other hand, Hamas was adamant in its demand for a complete ceasefire followed by a total Israeli withdrawal keeping Hamas in power in Gaza. The indirect negotiations throughout the month facilitated by Qatar, Egypt and the CIA Chief remained deadlocked over these existential differences. In the meantime, both Israel and Hamas traded blame for lack of progress. On June 12, US Secretary of State Anthony Blinken stated that Hamas had accepted the Biden Plan with some conditions, some of which were unworkable. Israeli Defence Minister said on June 5 that the negotiations with Hamas could only be undertaken “under fire.” In a speech to the Knesset on June 24, PM Benyamin Netanyahu welcomed Biden’s proposals and expressed Israel’s commitment to them, but insisted on Hamas being eliminated.
Israel Defence Force (IDF) pressed on with the campaign in Rafah, the last holdout of Hamas and Palestine Islamic Jihad (PIJ) in the southernmost fringe of the Gaza Strip bordering Egypt. However, as the Hamas and PIJ fighters exfiltrated from besieged Rafah to other areas of Gaza previously sanitised by the IDF, the latter had to redeploy its forces there. Meanwhile, depleted Hamas and PIJ (reduced to 9000 – 12000 fighters) switched their strategy from confrontation with the advancing IDF to insurgency and urban guerrilla warfare. Intense fighting yielded some tactical successes and losses to both sides. On June 8, IDF succeeded in rescuing 4 hostages alive in the al-Nuseirat camp in central Gaza, in an intense operation that led to the death of three other hostages and 274 Palestinians. On June 15, a hit on an IDF armoured personnel carrier led to the death of 8 IDF soldiers in Rafah. By June 26, the ongoing conflict had led to the death of at least 37658 Gazans. 314 IDF personnel were also killed.
On June 16, IDF unilaterally announced a daily tactical pause in fighting from 0500 hrs to 1600 hrs GMT “to facilitate entry of the humanitarian relief” in Gaza. However, this act was denounced by PM Netanyahu as unacceptable. The UN and other international aid agencies stated that the IDF gesture did not improve the situation due to increased lawlessness which Israel, as an occupying power, needs to control. (Comment: Although it was not explicitly stated, the IDF gesture seemed intended to create some goodwill during Eid al-Adha festivities.)
On June 7, the ILO released its fourth assessment of the impact of the war on employment revealing that combined unemployment rate of 50.8% in Palestinian territories. In particular unemployment in the Gaza Strip has reached nearly 80% since the war with Israel erupted last October while the West Bank has seen joblessness hit nearly 32%. In terms of the economy, the real gross domestic product (GDP) has contracted by nearly 33% in the Palestinian territories since the start of the war, with an estimated contraction of 83.5% in the Gaza Strip and 22.7% in the West Bank. Even before the war, half of Gaza’s population was living below the poverty line, the ILO noted. On June 25, IPC, a global hunger monitor, put the Famine Risk in Gaza at a “High” level.
On June 12, the UN Commission of Inquiry (COI) published its findings as two parallel reports, one focusing on the Oct. 7 Hamas attacks and another on Israel’s military response. These stated that both Israel and Hamas committed war crimes in the early stages of the Gaza war, adding that Israel’s actions also constituted crimes against humanity because of the immense civilian losses. Israel did not cooperate with the commission as it allegedly had “an anti-Israel bias.” Israel’s diplomatic mission to the U.N. in Geneva rejected the findings.
An opinion poll by the Palestinian Center for Policy and Survey Research (PSR) in the West Bank and Gaza Strip was published on June 13. It showed that support for armed struggle against Israel rose by 8% to 54% of those surveyed since the last similar survey three months ago. It also showed that support for Hamas climbed by 6% to 40%. Fatah, led by President Mahmoud Abbas, had only 20% backing. It found that two-thirds thought the Oct. 7 attack was a correct decision – a 4% drop from the previous poll. The decrease came from Gaza, where 57% of respondents said the decision was correct, down from 71% in March. Interestingly, Fatah leader Marwan Barghouti, jailed in Israel, came out as the most popular preference with 39% support to succeed 88-year-old President Mahmoud Abbas, followed by Hamas political leader Ismail Haniyeh with 23%.
For developments in the West Bank: Please see Palestine Authority and West Bank.
For details on the flare-up between Iran and Israel: Please see Iran.
For details on the Israel-Hezbollah tensions: Please see Lebanon.
For the Houthi missile attacks on Israel and the Red Sea area: Please see Yemen.
WANA and Multilateral Diplomacy:
On June 10, the UN Security Council adopted resolution No. 2735 proposed by the United States by a 14-0 vote with Russia abstaining. The following is its text:
“The Security Council,
Reaffirming the purposes and principles of the Charter of the United Nations,
Recalling all its relevant resolutions on the situation in the Middle East, including the Palestinian question,
Underscoring the importance of the ongoing diplomatic efforts by Egypt, Qatar, and the United States aimed at reaching a comprehensive ceasefire deal, consisting of three phases,
1. Welcomes the new ceasefire proposal announced on May 31, which Israel accepted, calls upon Hamas to also accept it, and urges both parties to fully implement its terms without delay and without condition;
2. Notes that the implementation of this proposal would enable the following outcomes to spread over three phases:
(a) Phase 1: an immediate, full, and complete ceasefire with the release of hostages including women, the elderly and the wounded, the return of the remains of some hostages who have been killed, the exchange of Palestinian prisoners, withdrawal of Israeli forces from the populated areas in Gaza, the return of Palestinian civilians to their homes and neighborhoods in all areas of Gaza, including in the north, as well as the safe and effective distribution of humanitarian assistance at scale throughout the Gaza Strip to all Palestinian civilians who need it, including housing units delivered by the international community;
(b) Phase 2: upon agreement of the parties, a permanent end to hostilities, in exchange for the release of all other hostages still in Gaza, and a full withdrawal of Israeli forces from Gaza; and
(c) Phase 3: the start of a major multi-year reconstruction plan for Gaza and the return of the remains of any deceased hostages still in Gaza to their families;
3. Underlines that the proposal says if the negotiations take longer than six weeks for phase one, the ceasefire will continue as long as negotiations continue and welcomes the readiness of the United States, Egypt, and Qatar to work to ensure negotiations keep going until all the agreements are reached and phase two can begin;
4. Stresses the importance of the parties adhering to the terms of this proposal once agreed and calls upon all Member States and the United Nations to support its implementation;
5. Rejects any attempt at demographic or territorial change in the Gaza Strip, including any actions that reduce the territory of Gaza;
6. Reiterates its unwavering commitment to the vision of the two-state solution where two democratic States, Israel and Palestine, live side by side in peace within secure and recognized borders, consistent with international law and relevant UN resolutions, and in this regard stresses the importance of unifying the Gaza Strip with the West Bank under the Palestinian Authority;
7. Decides to remain seized of the matter.”
(Comment: The US was largely motivated by the optics of diplomacy as it wished for the widest possible endorsement of the Biden Plan unveiled on May 31. After acting as a defender of Israeli interests for too long, the White House, conscious of the domestic and global pushback, wanted to be seen as a peacemaker.)
The final communique issued on June 14 after on June G7 Summit endorsed the Biden Planfor a ceasefire in Gaza. from the G7 Summit in Italy during the month. unanimously agree that UNRWA and other UN organisations and agencies’ distribution networks be fully able to deliver aid to those who need it most, fulfilling their mandate effectively. It also repeated concern at the “unacceptable number of civilian casualties” in the war. They again endorsed a truce and captive release deal. They also express their commitment to promote the India Middle East Europe Economic Corridor.
On June 11, the UN Secretary-General submitted his annual global list of offenders for violations against children. It added Israel’s armed and security forces, Palestinian militants Hamas and Islamic Jihad, and Sudan’s warring parties for killing and maiming children in 2023.
On June 4, the Chief of the UN Human Rights Commission condemned “unprecedented bloodshed in the Occupied West Bank.
On June 6, the ILO Chief asked Israel to resume permitting Palestinian workers on jobs in that country.
On June 3, the Palestine Authority joined the case at the International Court of Justice (ICJ) accusing Israel of committing genocide in Gaza brought by South Africa. On June 6, Spain became the 13th country to do so. On June 5 Aharon Barak, former president of Israel’s Supreme Court, resigned from his role as ad hoc judge on the ICJ panel weighing a genocide allegation filed over the country’s war in Gaza citing unspecified personal and family reasons for his decision.
Armenia recognised Palestine as a state on June 21.
On June 4 US-based charity “World Central Kitchen” claimed to have delivered more than 50 mn meals in Gaza overcoming the killing of 7 of its workers on April 1. Separately, the UN announced on June 4 that at least 196 humanitarian workers have been killed in Gaza since October.
The United Nations sponsored the third international conference on Afghanistan in Doha on June 29-30 which was attended by 25 countries, including India. For the first time, the Taleban government participated in such a gathering. The UN had earlier asserted that the conference was only aimed at engaging the Taleban government about the country and its people and was not intended to facilitate their recognition.
WANA and the United States:
On June 9, the Wall Street Journal published an article revealing the contours of a “Strategic Alliance Agreement” between the United States and Saudi Arabia. Calling it a “grand bargain” the proposed deal would involve the US providing a defence guarantee to Saudi Arabia, advanced weaponry and civilian nuclear technology. In return, Saudi Arabia would limit its ties with China and Russia largely to a transactional level. Riyadh agreed to recognise Israel and have normal ties with it provided the Gaza war is stopped and serious progress is made towards a two-state solution to the Israel-Palestine problem. (Further Reading: “The U.S.-Saudi agreement, from fist-bump to embrace” by Mahesh Sachdev, The Hindu, June 21.)
US Secretary of State Anthony Blinken made a tour of the region during the month, his eighth since October 7. He visited Cairo and Jerusalem on June 10.
On June 4, Israel and the US completed negotiations over a $3 bn deal to supply Israel with a fresh batch of F35 stealth fighters from 2028 onwards.
On June 13, the US Senate began a review of the ban on the sale of some weapon platforms to Saudi Arabia.
The US House of Representatives passed a Republican bill to sanction the International Criminal Court over its processing of arrest warrants against some Israeli leaders. While the bill was passed with an overwhelming 247-155 majority, it is unlikely to become law.
On June 24, Israeli Defence Minister Yoav Gallant began a visit to the US aimed at enhancing bilateral understanding over Israel’s war strategies in Gaza and Lebanon. He met Secretaries of State and Defence as well as the NSA where the US side emphasised the need for Israel to have an exit strategy for the Gaza conflict. They also cautioned Israel that skirmishes with Hezbollah could lead to a new conflict. At the end of the visit, the two sides talked about easing some bilateral bottlenecks. However, while the US agreed to review the pause in the supply of some weapons, it indicated that there was no immediate change in the policy.
During the first US Presidential TV debate on June 28 among the two candidates, Trump called Biden a “bad Palestinian” as Biden defended his support for Israel.
WANA and Russia-Ukraine War:
Saudi Crown Prince Mohammed bin Salman received Ukrainian President Volodymyr Zelenskiy in Jeddah on June 12 to discuss Saudi participation at the forthcoming conference on the Russia-Ukraine conflict hosted by Switzerland. In the event, the Saudi Foreign Minister participated in the conference held on June 15-16 but did not sign its final communique. (Comment: Saudi participation at the conference was yet another indication of Riyadh’s greater sensitivity to the US’s global concerns.)
On June 5, Ukrainian President Volodymyr Zelenskiy visited Doha and was received by Emir Tamim bin Hamad Al-Thani. Zelenskyy lauded Qatar’s role in helping broker deals to reunite some Ukrainian children with their families, including 16 in April and 6 last month.
WANA and China:
Reuters reported on June 5 citing Palestinian sources that in mid-June China is to host talks between Hamas and the Fatah. However, the proposed talks were postponed indefinitely on June 24 with the two Palestinian factions blaming each other for the delay. The two Palestinian factions have met twice recently for reconciliation in Russia and China respectively.
Iran summoned the Chinese ambassador on June 2 to remonstrate the mention of three disputed strategic islands near the Strait of Hormuz in the final communique issued after the Xi-MbZ Summit in Beijing on May 30 expressing China’s support for the efforts of the UAE to reach a “peaceful solution” to the issue. However, the next day a Chinese foreign ministry repeated its call for Iran and the UAE to resolve their differences through dialogue and consultation, describing China’s stance on the matter as “consistent”.
On June 3, Bloomberg reported that several executives from China’s $1.35 tr sovereign wealth fund had made their way to the Middle East in the hope of finding a way to invest in the region. On the other hand, Middle East sovereign wealth funds have invested $7 billion in China since June last year, five times the amount seen during the previous 12 months, according to industry data provider Global SWF. This inflow offsets a decline in the US funds flowing into the Chinese economy. In a related move, Qatar Investment Authority agreed on June 4 to take a 10% stake in China’s second-largest mutual fund company managing over $248 bn of assets.
IB) Political Developments
Israel:
On June 9, Benny Gantz, leader of the National Unity Party resigned from Israel’s war cabinet as Prime Minister failed to lay out a clear day-after strategy in Gaza within a month of his public ultimatum. Following this development, PM Netanyahu disbanded the War Cabinet replacing it with a 6-member Kitchen Cabinet on June 17. An opinion poll taken on June 14 revealed that PM’s Likud party gained public support narrowing the lead of Gantz’s National Unity party. However, Gantz remained more popular than Netanyahu and if the elections were held the ruling extreme right-wing coalition would lose its majority of 64/120 in the Knesset.
The controversial issue of exemption of the Haredi (ultra-orthodox) Jews from conscription to the army started moving towards its denouement during the month. On June 10, Knesset began debating a bill abolishing such exemptions, but prescribing a gradual phase-in and providing options for the Haredim to do other types of social services. Later, on June 25, Israel’s Supreme Court ruled that the state must begin drafting ultra-orthodox Jewish seminary students into the military as the law governing the exemption for seminary students expired last year, but the government continued to allow them not to serve. The Supreme Court ruled that in the absence of a new legal basis for the exemption, the state must draft them. The ruling also barred seminaries from receiving state subsidies if scholars avoid service without deferrals or exemptions. (Comment: The Haredim comprise 13% of the total population and their exemption from military service has divided the society, particularly now when the Gaza war is causing death and injuries to a large number of IDF personnel. While such sects, many of whom have lived in the Jerusalem area for centuries, claim to give Israel its Judaic character, many secular Israelis want them to share the national defence duty burden. The ultra-religious parties which underpin the ruling coalition are against the withdrawal of the exemption and have threatened to bring down the government on this issue.)
Despite the Gaza conflict, Israeli defence exports in 2023 reached $13.1 bn, a record. The figure has doubled over the past five years. On the other hand, according to an ICAN/SIPRI report, in 2023, Israeli military spending jumped 24%, driven by Israel’s large-scale offensive in Gaza to an estimated figure of 101.4 bn shekels. The country is believed to have spent around $1.1 bn on nuclear weapons in 2023. It increased its nuclear weapons spending by $25 mn last year. In comparison, the report estimated India, Pakistan and China spent $2.7 bn $1 bn and $11.9 bn respectively on their nuclear weapons programmes.
In a speech on June 25 at the Herzliya Conference, the Israeli NSA declared that his country preferred a diplomatic solution to its conflict with Hezbollah. He also said Israel was discussing with Washington a possible joint effort by the United States, Europe and some Arab countries to find a replacement for Hamas rule in the Gaza Strip.
In an implicit but direct criticism of PM Netanyahu’s vow to keep fighting in Gaza till Hamas was annihilated, an IDF spokesman said on June 20 that identifying the impossible task of defeating Hamas as Israel’s end goal in Gaza means ‘throwing sand in people’s eyes.’
In an English-language TV interview aired on June 20, PM Netanyahu said that it was inconceivable that the US withholds weapons needed by Israel. The White House expressed displeasure at such public airing of bilateral differences.
On June 9, Israel extended the ban on Qatari TV news channel Aljazeera from having a physical presence in Israel for another 45 days.
On June 2, Maldives banned Israeli passport holders from getting into the country. The ban was largely an optical move as there has already been an 88% drop this year in Israeli arrivals to Maldives from nearly 11,000 in 2023. In response to the ban, the Israeli Foreign Ministry urged its nationals to leave Maldives.
Palestine Authority and West Bank:
Israel’s finance minister has extended a waiver that allows cooperation between its banking system and Palestinian banks in the occupied West Bank on June 30, the last day before its expiry. The waiver allows Israeli banks to process shekel payments for services and salaries tied to the Palestinian Authority. Without it, the Palestinian economy would have taken a hit. Nearly $14 bn was exchanged in this manner at Palestinian banks in 2023. The US was pressing Israel to extend the waiver. Earlier on June 6, IDF too had expressed an alarm over the ongoing standoff over the transfer of funds to the Palestine Authority.
The IDF continued with its iron-fist policy to curb the rise of Palestinian militancy in the occupied West Bank (OWB). In one of the most violent incidents during the month in OWB, an IDF raid on June 11 in a village near Jenin killed six Palestinians. The IDF said four of the dead were armed militants, killed in an exchange of fire with its soldiers.
Lebanon:
During the month IDF-Hezbollah clashes escalated, peppered with increasingly shrill rhetoric. In the emerging pattern, IDF carried out targeted killing of field Hezbollah commanders with the Lebanese militia retaliating by firing missiles and drones at Israeli targets. According to Al-Jazeera, between Oct 7 and June 21, there were approximately 7400 attacks across a 120 kms long border with 6142 attacks by IDF and 1258 by Hezbollah. The IDF claimed to have killed more than 320 Hezbollah members, including at least 100 targeted senior commanders. 18 IDF personnel have also died in the hostilities. On June 1 and 10, Hezbollah successfully shot down two Hermes 900 Israeli-made UAVs using anti-aircraft missiles. On June 5, Hezbollah claimed to have fired guided missiles targeting Israel’s Iron Dome anti-missile system at Ramot Neftali.
On June 12, an IDF air attack killed the Hezbollah senior commander for the central border region, the highest-ranking officer killed so far. In retaliation, Hezbollah fired 250 rockets and drones on 9 Israeli military targets over the next two days.
As an apparent part of psychological warfare, Hezbollah TV station televised a 9-minute-long video clip claimed to have been taken by a drone of the Haifa area lying some 27 km from the Lebanese border. The next day Hezbollah chief Syed Hassan Nasrallah warned that in case of war, there would be no place in Israel safe from the militia’s rockets and drones. He also threatened Cyprus for allegedly allowing Israel to use its airports and bases for military exercises with Israel – a charge Cyprus denied, pointing out that these were British military bases in Cyprus on which Nicosia had no control.
Following the US-France summit on June 13, the two countries launched a joint initiative to de-escalate Israel-Lebanon tensions. However, the Israeli Defence Ministry asserted the next day that Israel would not participate in such efforts accusing Paris had hostile policies towards Israel. It, however, continues to engage with Amos Hochstein, a US diplomat shuttling for mediation between Lebanon and Israel.
In response to some Israeli leaders’ threats to make Beirut “another Gaza”, the UN Secretary-General asserted on June 21 that this cannot be allowed to happen.
Reuters reported on June 30 that Israeli tech startups raised $2.9 bn in Q2/24, the highest level in two years, showing that the sector’s cash-raising ability has not been affected by Israel’s war in Gaza. The tech sector accounts for 20% of Israel’s economic output and the country is widely regarded as one of the largest tech centres in the world. The report mentioned that of Israel’s 9,000 startups, more than 2,200 use artificial intelligence (AI) and Israel has 73 generative AI firms, the third most in the world. Israel plans to launch a tender in July to establish the country’s first supercomputer to ensure its lead in AI.
Iran:
The presidential election to replace Ebrahim Raisi who died in a helicopter accident on May 19 took place on June 28 with four contestants vying for votes. On June 9, the Guardian Council had approved six candidates, two of whom dropped out on the eve of the election. Of the remaining four contestants three were hardliners and only one moderate. In the event, the voting turnout was low at 40% despite exhortation by Supreme Leader Ali Khamenei. As none of the four candidates got over 50% of the votes polled, the top two contenders, viz. Masoud Pezeshkian, the moderate, and Saeed Jalili, a hardliner, were to face off in the second round to be held on July 5. (Comment: Although the Iranian President is head of the executive he is not head of state in the conventional sense as the Supreme Leader is the ultimate arbiter and decision maker. Moreover, powerful stakeholders such as theocracy, IRGC and the Parliament are all largely outside the Presidential purview. Nevertheless, as a visible face of the government, the President has an important role, particularly during the current period of domestic and regional turmoil. Moreover, with various personalities positioning themselves as potential successor to the 85-year-old Ali Khamenei, the President could be among those who would have a say in the important appointment. With multiple challenges at home and abroad and limited leeway, Iranian Presidents have, in general, not been able to make a success of their respective tenures.)
On June 5, the IAEA’s 35-nation Board of Governors passed a resolution calling on Iran to step up cooperation with the watchdog and reverse its recent barring of inspectors from some nuclear sites.
The E3 (Germany, France and the UK) sponsored resolution got twenty votes in favour and two against – Russia and China – and 12 abstentions. As a sequel to its passage, E3 made a reference to the UN Security Council detailing alleged Iranian violations of the JCPOA. Iran summarily rejected the complaint pointing out that as the US had reneged on JCPOA in 2018 and imposed sanctions on Iran, Tehran was free from its obligations. Following the IAEA resolution, Iran reportedly expanded its uranium enrichment programme. IAEA reported on June 28 that half of the new centrifuges were being installed at the underground facility at Fordow. In its final communique of June 14, G7 warned Iran about accelerating its nuclear programme and supplying missiles to Russia.
Bahrain’s foreign minister visited Tehran on June 23 as the two countries prepare to resume their diplomatic ties after an eight-year hiatus. He met his Iranian counterpart to discuss the resumption of bilateral relations, eight years after Manama severed its ties with Tehran. They agreed to establish “the mechanisms required for initiating talks aimed at resuming political relations between the two countries” during their meeting in Tehran, a joint statement released by the two countries reads. This was Bahraini FM’s second visit to Iran in a month as he was in Tehran in May to condole President Raisi’s death in a helicopter accident. (Comment: The island kingdom of Bahrain has a Shia majority ruled by Al-Khalifa, a Sunni dynasty which has in past accused Iran of inciting popular unrest. However, following the Chinese brokered reconciliation between Saudi Arabia and Iran last year, Bahrain was the only outstanding recalcitrant nation with Iran.)
Acting Iranian Foreign Minister was received by Syrian President Bashar al-Assad in Damascus on June 4.
A Russian spokesman said on June 11 that Russia and Iran were negotiating a comprehensive bilateral cooperation agreement which may take some more time for formalisation.
In a deal mediated by Oman, Sweden and Iran exchanged one prisoner each on June 15
Yemen:
Ansar Allah (aka al-Houthis) militia continued to make exaggerated claims about hitting ships in the Red Sea and the Gulf of Aden as well as attacking the southern Israeli port of Eilat. It also claimed that Haifa port city in Israel was hit by missiles and drones in collaboration with “Islamic Resistance of Iraq.” While some of these claims were factual, most were economic with truth and were meant for propagandistic purposes. Among the attacks which were verified were two hits on June 13 at a Liberian-flagged vessel named Tutor (it was abandoned and later sank) and a Palau-flagged Verbena cargo ship in the Gulf of Aden, respectively. In response, UK and US planes attacked 6 sites in Yemen on June 7.
From their beginning in Nov 2023 till June 19, al-Houthi attacked over 70 merchant ships, sinking two, seizing a vessel and killing 3 seamen. According to US intelligence sources, these attacks led to a 90% decline in container shipping through the Red Sea from Dec 2023 to Feb 2024. Al-Houthi counter-intelligence announced on June 10 that it had arrested 13 UN staffers for spying for the Western powers.
On June 11, 11 African migrants were killed and 140 were missing as the boat they were on capsized in the Gulf of Aden. Most of them were Somalians trying to crossover to Aden on their way to Saudi Arabia.
Turkey:
Among the foreign policy statements President Tayyip Erdogan made by the month were two: expressing solidarity with Lebanon against Israeli threats (on June 26, he spoke with Lebanese PM Najib Mikati) and on June 28 mentioning the possibility of a Summit meeting with President Bashar al-Assad to herald a reconciliation with Syria. Damascus, however, insists on Turkey respecting its sovereignty and commitment to anti-terrorism. (Comment: Turkey broke diplomatic ties with Syria in 2011 as it offered strong support to anti-Assad Sunni forces at the height of the civil war. It has been supporting their exclusion zone in Idlib. Moreover, Ankara has occupied a border strip inside Syria to contain the Kurdish forces which it regards as terrorists. On the other hand, Turkey hosts nearly 3 mn Syrian refugees whom it would like to send back to their country. All these complicate any attempt towards bilateral reconciliation.)
Foreign Minister Hakan Fidan began a visit to Beijing on June 5. During his meetings with Chinese interlocutors, he pressed for a greater trade balance between the two countries asking China to buy more agricultural and food items from Turkey. He also visited the far western region of Xinjiang, host to millions of Uyghurs and other Muslim minorities. (Comment: According to official data, in 2023 Turkey’s imports from China stood at $44.9 bn, while exports totalled only $3.3 bn.)
In an interview with a domestic TV channel on June 25, said that Turkey’s outreach towards joining BRICS was partly borne out of her frustration with the European Union.
On June 28, Turkey was removed from the FATF Grey List where it was put in October 2021 due to allegations of money laundering and funding ISIS. However, some Western financial sanctions on Turkey for its dealing with Russia continue.
Sudan:
On June 13, the UN Security Council adopted by 14-0, with Russia abstaining, resolution No. 2736 on the situation in civil war-ravaged Sudan. Its operative paras called for the following measures being taken: Rapid Support Forces (RSF) to halt siege of El Fasher; the full implementation of the Jeddah Declaration; protection of civilians; addressing the funding shortfall of the Humanitarian Response Plan; the combatant groups complying with their obligations under the international law; cessation of external interference; immediate cessation of hostilities, leading to a sustainable resolution to the conflict, through dialogue and coordinated engagement of the Secretary-General’s Personal Envoy for Sudan. IPC, a global hunger monitor stated on June 27 that 750,000 Sudanese were at risk of starvation and 8.5 mn were suffering food shortages. (Comment: The brutal civil war underway since April 15 2023 has made Sudan the biggest case of forced human displacement in the contemporary world. More than 10 mn of Sudan’s 48 mn population have been displaced with 2.8 mn of them taking refuge in the neighbouring countries. Estimates of deaths varied wildly – from 15,000 to nearly 150,000. Yet the UN Security Council Resolution was a bit “too little, too late” measure unlikely to make any impact on the conflict being waged in Sudan.)
On June 11, the International Criminal Court’s chief Prosecutor publicly sought evidence of war crimes in the Darfur region of western Sudan.
The SAF-RSF fighting in Sudan continued in several parts of Sudan, Africa’s second-largest country by area with none of the two sides being able to score a decisive victory. While SAF was able to tactically repel RSF from el-Fasher, it lost Singa, the capital of Sennar state allowing RSF to close in on Port Sudan, where SAF and the Sudan’s government are now based. RSF also captured el-Fula, the capital of west Kordofan state
Representatives of Sudan and the UAE clashed at the UN Security Council debate on June 18 over Abu Dhabi’s denial of allegation of supplies of weapons to RSF. Observers believe that Sudan Armed Forces (SAF) has been receiving weapons, including drones, from Iran which has allowed it to turn the tide in the war against RSF.
Syria:
The unacknowledged Israeli air attacks on Syrian targets aimed at degrading the military presence of Iran and Hezbollah continued unabated. A Reuters report of June 10 stated that the frequency of such attacks had doubled after October 7 and had led to the killing of at least 20 IRGC officers and 30 Hezbollah commanders. In particular, a series of such strikes on June 3 in southern Aleppo caused serious loss of men and material.
On June 11, Iraqi forces killed a senior Islamic State leader in Raqqah in Syria.
On June 27, France’s top appeals court ruled that an arrest warrant for Syrian President Bashar al-Assad issued last year by an investigating judge for their alleged complicity in crimes and humanity and war crimes is valid. This was despite al-Assad having immunity as the sitting Syrian President. The case pertains to the alleged use of chemical weapons against anti-regime rebels in 2013.
Iraq:
On several occasions during the month, various Iraq-based pro-Iran Shia militias claimed to have launched missile attacks on Israeli targets in Haifa, Tel Aviv and Eilat. At times, Yemen’s Ansar Allah (al-Houthi) militia claimed that it had participated in such missile attacks which were jointly carried out with “Islamic Resistance of Iraq.” (Comment: Iraqi militias, esp. Kataib Hezbollah and Nujaba are believed to have been responsible for most of these attacks launched from vast swathes of desert in eastern Iraq or western Syria. Although these have not resulted in any significant damage to Israel, they nevertheless are disruptive and distractive ploys capable of expanding the scope of the regional hostilities and tensions. Opinions differ as to whether these attacks are choreographed by Iran.)
On June 13, a fire engulfed storage tanks containing oil and liquid asphalt at an oil refinery in Erbil, northern Iraq. The cause of the fire was not mentioned.
Saudi Arabia:
Over 1.5 mn Hajjis participated in the Hajj ceremony this year which began in Makkah on June 12. Extremely high temperatures which reached up to 51.8C caused the heat-related death of 1301 Hajjis which included 98 Indians. Saudi authorities blamed the deaths on unregistered Hajjis.
There were signs of scaling down some of the ambitious projects under Vision 2030 with the Saudi economy facing headwinds due to lower oil income caused by production cuts as well as depressed crude prices. Still, a report by real estate consultancy group Knight Frank expected Saudi Arabia to become the world’s largest construction market it continues to pour vast amounts of money into projects aimed at overhauling and diversifying the economy. The country’s total construction output value is forecast to reach $181.5 bn by the end of 2028, up almost 30% from 2023 levels.
A Public Investment Fund (PIF) backed Saudi-Brazil Investment Conference began in Rio de Janeiro on June 11 and focused on the mining and food sectors. It was addressed by President Lula and the Brazilian Finance Minister. While the Saudi side made no public commitments, the Brazilian Minister of Energy claimed that the Kingdom had promised to invest $15 bn in Brazil.
Egypt:
On June 3, President Abdel Fattah el-Sisi reappointed Prime Minister Mostafa Madbouly and asked him to form a new government. However, even by the end of the month, no new cabinet was announced.
An Egypt-EU investment conference was held in Cairo on June 29-30. It led to the European firms signing over 20 deals potentially worth over 40 bn euros ($42.85 bn) with Egyptian partners. Most of the proposed ventures were in the energy sector. This conference followed a 7.4 bn euro EU funding package and an upgraded bilateral relationship unveiled by the EU in March 2024. (Comment: After being in economic doldrums for the past few years, Egypt has finally got several economic bailouts totalling well over $70 bn from Gulf countries, Britton Woods institutions and the EU. However, Egypt has a long history of such financial support, but its economy remains hobbled by bureaucracy, opaque decision-making, inefficient public sector and wasteful projects and subsidies. Then again, Egypt is also known for loopy deals which appear improbable, but are announced for publicity: the deals announced included four worth $33 bn all signed by the Egyptian SWF meant to produce green ammonia with EU partners.)
Qatar:
Reuters reported on June 12 that following reconciliation between Saudi Arabia and Qatar in 2021, Qatari contractors have won nearly $10 bn worth of civil construction contracts in Saudi Arabia.
Kuwait:
On June 1, Emir Sheikh Meshal Al-Ahmed Al-Sabah appointed Sheikh Sabah Al-Khalid Al-Sabah as the Crown Prince. He had previously served as Prime Minister from 2019 until 2022 when he resigned after facing a combative legislature as the head of successive cabinets.
Mauritania:
Presidential elections held in Mauritania on June 29 resulted in the incumbent Mohammed Ould Ghazouani being declared the winner with 56.12% votes polled in his favour. The turnout was 55.39% and the election was deemed by observers as credible and transparent. (Further Reading: “Mauritania re-elects President Ghazouani for a second term” Al-Jazeera, July 1.)
II) Economic Developments
Oil & Gas Related Developments:
Global Issues:
The Brent for August delivery was at $86.41/barrel on June 28 having gained over 6 dollars during the month under review. Its gains were prompted by the need for correction of the previous two months’ decline as well as the semi-orderly manner in which OPEC+ decided to unwind its production cuts. It was also a reflection of a growing consensus among various monitoring mechanisms that global oil consumption was set to rise during 2024 and 2025, even as precise numbers continue to differ.
OPEC+ ministerial conference was hosted by Saudi Arabia in Riyadh on June 2 with both physical and virtual participation by the members. It decided to roll over 3.66 mbpd production cuts agreed on in 2022 and set to expire at the end of 2024 for another year till the end of 2025. In addition, OPEC+ also decided to gradually phase out the voluntary cuts of 2.2 mbpd for a year from October 2024 to September 2025. The decisions cause a sharp albeit temporary decline in oil prices with the market worrying over the decline in demand. Subsequent reassurances from OPEC+ that the plan to raise supplies from the fourth quarter of this year could be paused or reversed based on market conditions helped prices to rebound. On July 1, Bloomberg put the OPEC production at 26.98 mbpd during June which was 80,000 bpd less than the previous month’s as production declined in Iraq and Nigeria. (Comment: Some observers saw OPEC+ decisions as an acknowledgement that the cartel has reached its capacity to curb supplies to compensate for the growing contributions from new producers. Further Reading: “OPEC+ says goodbye to its $100-a-barrel oil quest” Bloomberg 3/6.)
There was some heartburn among the OPEC+ members about the member states’ spare oil production capacities after the UAE forcefully and successfully argued for a higher production quota because of its enhanced capacity and was allowed to gradually increase production by 300,000 bpd in 2025. On June 8, Rosneft Chief pointed out that the total spare capacity of Saudi Arabia, UAE, Kuwait and Iraq stood at 5.6 mbpd or 13% of OPEC+ current output. He said, “The presence of such ‘phantom barrels’, which can have a large-scale impact on the market, offsets the impact of the voluntary reduction in production quotas undertaken by the main OPEC participants.”
Country Specific Developments:
The sale of 0.64% of Saudi Aramco’s assets was offered in the Saudi stock market on June 2 and was sold out in a few hours. Subsequent offers for foreign investors were also well received, in the main for Saudi Aramco’s tendency to give consistently high dividends to help revenues of the Saudi state which retains 82% of its shares. In total, the sale netted $12.35 bn from investors.
On June 30 Saudi Aramco signed deals worth over $25 bn for a master gas network in the country and development of Jafurah gas field in the Empty Quarter.
On June 5, Saudi Aramco announced a reduction in its crude prices for the Asian market to offset the concerns about flagging demand.
Media reports emerged during the month alleging that the 1974 agreement between Saudi Arabia and the United States to price oil only in US Dollars (“Petrodollars”) came to an end at its 50th anniversary on June 8. While none of the two sides commented upon such reports, subsequent media reports discounted this possibility, claiming that the unpublicised bilateral agreement was only to funnel the surplus Saudi oil revenues into US securities. There was no perceptible change in oil being priced in some non-US currencies. (Further Reading: “The Petrodollar Is Dead, Long Live the Petrodollar”
Javier Blas, Bloomberg, 28/6.)
Bloomberg reported on June 1 that Saudi Aramco’s Prosperity7 Ventures, LLC became the first known foreign firm to back a major Chinese player in generative artificial intelligence, a startup called Zhipu AI, valued at $3 bn. The Saudi investment was reportedly put at $400 mn.
On June 28, the UAE’s ADNOC raised the offer for German Petrochem giant Covestro to 12.5 bn, the highest such takeover bid by a Gulf-based company.
Following economy-related developments took place in WANA countries:
Regional Economic Developments
According to GlobalSWF data revealed on July 1, the Middle East-based Sovereign Wealth Funds accounted for deals worth $52 bn in H1/24, or more than half of the total deals made by all of the world’s SWFs.
Mercer published a new global list of the world’s most expensive cities for expatriates on June 16, which included two cities from the WANA region: Dubai (15th) and Tel Aviv (16th).
The UAE and Saudi Arabia both appeared to be in a race for semiconductor chip fabrication plants with nuanced strategies. Riyadh, for its part, recently launched the National Semiconductor Hub to develop so-called 50 fabless chip companies that design new semiconductors. In the UAE, however, the authorities have put artificial intelligence at the centre of its economic future. The country is seeking to become a producer of advanced semiconductors — a crucial component of the supply chain for the technology. It recently set up a new technology investment fund that could surpass $100 bn in assets.
Economic Developments in Individual WANA Countries:
On June 14, the IMF published the Concluding Statement of the Article IV Mission to Saudi Arabia. It had the following economic data on WANA’s largest economy:
(a) The overall GDP contracted by 0.8% in 2023 (Oil GDP contracted by 9% due primarily to Saudi Arabia’s OPEC+ and voluntary oil production cuts. Real non-oil growth decelerated from 5.3% in 2022 to 3.8% in 2023)
(b) In 2023, the Saudi economy added over one million jobs, primarily in the private sector. The overall unemployment rate for Saudis dropped to 7.7% in Q4/23
(c) After peaking at 3.4% in January 2023, year-on-year inflation receded to 1.6% in April 2024. The inflation is expected to remain stable at 1.9% in 2024
(d) The current account surplus narrowed significantly from 13.7% of GDP in 2022 to 3.2% of GDP in 2023 mainly reflecting lower oil exports and strong growth in investment-related imports.
(e) The foreign assets reached $423.7 bn in April 2024, enough to sustain 15.6 months of imports and 208% of the IMF’s reserve adequacy metric by end-2023.
(f) Domestic demand is expected to remain the main driver of economic activity. Non-oil growth is projected at about 3.5% in 2024 as investment growth moderates before picking up in 2025.
(g) The oil output is projected to contract by 4.6% in 2024 but increase by 5.1% in 2025 as it makes a
gradual recovery to 10 mbpd in 2025.
(h) The current account is expected to shift to a deficit in 2024, averaging about 2.3% of GDP between 2026 and 2029 due to lower oil export proceeds and increased investment-linked imports.
(i) Following its first surplus in nine years in 2022, the fiscal balance swung back into deficit in 2023. To register 26.2% of GDP (as of end-2023); the public debt remains low and sustainable.
(j) The overall fiscal deficit is likely to be about 3% of GDP in 2024. Over the medium term, it would average 2.5-3.0% of GDP.
(k) There was a 9% tax gap with the G20 average and the Report suggested the Kingdom raise more taxes.
(l) At more than 5% of GDP in 2023, the fuel subsidies were a big drain on the state.
(m) Saudi Arabia climbed 15 notches in the IMD’s World Competitiveness ranking in two years, obtaining the 17th position globally in 2023.
The Saudi economic statistics released on June 9 revealed that the economy had continued to contract in Q1/24. The GDP declined by 1.7% in Q1/24 y/y (Oil GDP: -11.2% and Non-oil GDP: +3.4%).
Saudi Arabia’s Public Investment Fund (PIF) and a French private equity firm announced on June 14 that they have signed a $4.26 bn deal to own 37.6% of the London Heathrow airport. On June 28, Saudi Aramco acquired a 10% stake in a Renault-Geely joint venture with a market value of $7.93 bn, to produce improved IC engines for automobiles.
Following Goldman Sachs Group becoming the first Wall Street bank to comply with Saudi Arabia’s ultimatum for foreign firms to set up their Middle Eastern base there, other big banks were contemplating such moves to leverage the $925 bn asset base of the PIF, Bloomberg reported on June 1. In all, more than 400 companies have been granted licenses to move their regional headquarters to Riyadh.
Despite persistent high inflation, Turkey’s economy seemed to have turned the corner. The national budget switched to $6.7 bn in surplus in May 2024, the largest since 2006. A year of mostly conventional monetary policy – after years of voodoo economics of keeping interest rates low despite high inflation – has also assured foreign institutional investors. Turkish Central Bank’s monetary policy committee decided on June 27 to keep the one-week Repo rate at 50% to fight inflation which crossed 75% in May. On June 8, Turkey imposed a 40% additional tariff with a floor of $7000/- on EVs imported from China.
On June 8, the European Union decided to probe the UAE-based e&’s bid to acquire the Czech PPF group for $2.38 bn with telecom assets in 4 Balkan countries. DP World declared its plans to invest $3 bn in African ports. A Brookfield-led consortium was planning to invest $2 bn in the UAE-based GEMS education group founded by Sunny Varkey, an NRI, running schools in the UAE, Saudi Arabia and Qatar. On June 24, UAE’s Mubadala acquired Greece’s Terna Energy for $ 2.5 bn. Dubai’s real estate sector’s ongoing gravity-defying rise seems to suggest that it has finally broken the boom-bust cycle for the foreseeable future.
Reuters reported on June 12 that following reconciliation between Saudi Arabia and Qatarin 2021, Qatari contractors have won nearly $10 bn worth of civil construction contracts in Saudi Arabia. Separately, Qatari group Ooredoo announced on June 23 that it has signed a deal with Nvidia to deploy its artificial intelligence technology at data centres owned by Qatari telecoms group Ooredoo in five Middle Eastern countries, viz. Qatar, Algeria, Tunisia, Oman, Kuwait and the Maldives. The Qatari group would thus become the first partner in WANA for Nvidia, the world’s biggest market cap company.
III) Bilateral Developments
- Shri Narendra Modi received congratulatory messages from several of his WANA counterparts on his assumption of a third term as Prime Minister of India. Prominent among these were a call from the Sultan of Oman and a message from the Palestine Authority PM appealing for facilitation of the international efforts for a ceasefire in Gaza and aid to its citizens.
- 45 Indians perished and over 50 were injured in a fire in a congested 6-storied building in Kuwait housing expatriates on June 12. Prime Minister Modi held an emergency meeting on this development following which MOS(EA) Shri K.V. Singh was dispatched to Kuwait to arrange for quick relief and repatriation of those affected. PM announced a grant of Rs 10 lakhs to the next of kin of the deceased. EAM also spoke to his Kuwaiti counterpart who promised that the incident would be fully investigated. Seven persons (one Kuwaiti, 3 Indians and 4 Egyptians) were detained and charged with suspected manslaughter. Indians in Kuwait number nearly 9 lakhs constituting 21% of the population and 30% of the workforce.
- 76 cadets from the Royal Saudi Navy began their 4-week-long Afloat attachment with the Indian Navy on June 26.
- INS Tabar, a frigate reached Alexandria on June 27 for a 4-day port call during which a PassEx at sea was organised with the Egyptian navy. Coincidentally, several Rafale aircraft of the IAF were also in Egypt on that day on their way back from France. These planes also held joint exercises with their Egyptian counterparts
- Al-Jazeera reported on June 26 that India has been exporting rockets and explosives etc to Israel during the ongoing Gaza conflict. The report did not provide any numbers.
- India participated in the UN-hosted Conference on Afghanistan in Doha that began on June 30.
- The first session of the Indo-Qatar Joint Task Force on Investments was held in New Delhi on June 6 with DEA Secretary co-chairing it with his Qatari counterpart.
- 6th edition of Staff Talks between the Indian Navy and Royal Navy of Oman was held on June 4– 5 in New Delhi.
- Qatar defeated India 2-1 on June 11 ending Indian side’s hopes of qualifying for the FIFA World Cup 2026.
- A June 21 report by Henley & Partners, an international investment migration advisory firm, estimated that of approximately 6700 dollar millionaires migrating to the UAE in 2024, around 4300 would be from India. Dubai real estate market earned 16 bn dirhams, or Rs 35,500 crore, from sales to Indians in 2023. Indians form over 30% of the startup community in Dubai.
- According to the official data, India consumed 5,708 million metric standard cubic meters MMSCM of natural gas in May 2024, 0.3% higher than in the same month a year earlier. However, the domestic production of natural gas expanded 6.7% in May from a year earlier to 3,105 MMSCM, leading to a 7.2% decline in imports which stood at 2650 MMSCM. LNG prices have risen in recent months.
- According to the official data, the total consumption of refined petroleum products in FY24 rose by 4.6% y/y to 233.276 MT, an all-time high. The consumption of diesel and petrol, at 89.65 MT and 37.22 MT, respectively, was also an all-time high. However, the fuel consumption in May 2024 rose further due to election-related activities and unprecedented summer heat. The consumption of petrol and diesel fell by 5% each in June m/m.
- The IEA Oil Report 2024, released on June 12, predicted that India would lead the world in fuel demand growth during 2023-30 as its consumption would grow 3.2% annually from 5.4 mbpd to 6.7 mbpd. This is despite ethanol blending of fuel which reached 15.4% in May 2024.
- Business Standard revealed that India imported 2.1 mbpd of Russian oil in June 2024, constituting 45.4% of India’s overall 4.63 mbpd of crude purchases. This rise in imports from Russia led to the corresponding decline in the share of West Asian oil in India’s crude basket at just 36%. Iraqi and Saudi supplies dropped in June by more than a fifth m/m to around 800,000 barrels per day and 430,000 barrels per day, respectively, with Saudi shipments dropping to the lowest in a decade. A surge in Russian volumes was despite shrinking discounts of just over $4 per barrel now.
