IA) Political Developments: Pan-Regional and Global Issues
Gaza Conflict
Although the month saw plenty of heat about ceasefire negotiations in the Gaza conflict there was no light at the end and the deal eluded the concerned antagonists. The intelligence chiefs of the US, Qatar and Egypt met with Israeli and Hamas negotiators at least thrice during July without being able to foster a solution. The failed negotiations led to an acrimonious blame game between the two warring sides. There were four basic points of contestation between Israel and Hamas that defied solution: (i) Hostages Release (How many and at what stage and how many Palestinian prisoners to be released in return?) (ii) Israeli insistence on screening Palestinians returnees to northern Gaza; (iii) Israeli insistence of controlling Philadelphia Corridor on Gaza’s border with Egypt which Cairo also rejects; and (iv) Hamas insistence of the ceasefire leading to complete and final Israeli withdrawal from Gaza with Hamas still in power while Israel wants to continue the war till Hamas is eliminated and then retain control over territory till a non-Hamas dispensation takes over. Relevant to note that on July 5 Hamas “categorically rejected” any foreign forces being deployed in Gaza. (Comment: As can be seen, the antagonists’ positions are quite irreconcilable and no amount of diplomatic subterfuge can produce enough paper to cover the cracks. Moreover, having waged a no-holds-barred war, none of the two sides wanted to lose it on a negotiating table.)
As the Gaza war entered its tenth month, considerably weakened Hamas was increasingly forced to adopt tactics to survive a drawn-out war by resorting to an urban guerrilla insurgency relying more on speed, stealth and staging tactical ambushes on Israeli troops and armour. Hamas continue to confound Israel from declaring victory in the Gaza war. On the other hand, Israel claimed on July 25 that it had decimated 20 of the 24 battalions Hamas had at the beginning of the war. Israel further claimed that it has killed or apprehended at least 14,000 Hamas fighters out of the estimated 30,000 to 40,000 fighters that the group initially had. Crucially, the IDF has also said it had eliminated half of the leadership of Hamas’ military wing, the Al-Qassam brigades including its Chief Mohammed Dief who was killed with Rafa Salama, a Hamas Commander, in a massive air attack on July 13 on al-Mawasi camp in which nearly 100 persons died. Israel conceded that 326 of its soldiers have been killed in Gaza since the start of the ground offensive – just above the roughly 300 killed in a single day during Hamas’ Oct. 7 attack.
On the humanitarian side, the casualties continued to mount during July and by the end of the month, these were approaching the 39,400 mark. While the relatively lower intensity of the war reduced the war casualties, the frequency of Israeli relocation orders to Gazans added to their misery. By the end of the month, nearly a third of the Israeli hostages with Hamas were estimated to have perished. On July 22 Israel declared two more hostages to be dead and on July 24, it recovered the bodies of 5 more hostages. On July 15, UNRWA declared that it may take 15 years to clear the war-generated rubble, estimated at 40 mntons, in the Gaza Strip.
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:
In a far-reaching 83-page finding on the Israel-Palestinian conflict, the 15-judge bench of the International Court of Justice declared on June 19 that Israel’s occupation of Palestinian territories and settlements there are illegal and should be withdrawn as soon as possible. The court said Israel’s obligations include paying restitution for harm and “the evacuation of all settlers from existing settlements”. The ICJ opinion also found that the U.N. Security Council, the General Assembly and all states have an obligation not to recognise the occupation as legal nor “render aid or assistance” toward maintaining Israel’s presence in the occupied territories. The case stems from a 2022 reference to ICJ by the UN General Assembly for a legal opinion. More than 50 states were deposed before the court. Although Israel did not participate in the oral hearings, it filed a written statement telling the court that issuing an advisory opinion would be “harmful” to attempts to resolve the Israeli-Palestinian conflict. Israeli leadership reacted indignantly to the ICJ findings, with the Israeli PMO asserting “The Jewish nation cannot be an occupier in its land.” Israel’s Foreign Ministry rejected the opinion as “fundamentally wrong” and one-sided repeating its stance that a political settlement in the region can only be reached by negotiations. (Comment: While ICJ findings are not actionable, these add to the legal and moral pressure on Israel and increase its diplomatic isolation.)
A Reuters report on July 23 mentioned that the International Criminal Court has permitted 18 states and 40 organisations and individuals to file written depositions before August 6 on the case of issuance of arrest warrants against three each of Israeli and Hamas leaders for war crimes in the Gaza conflict.
Paris Olympics Games:
According to media reports Israel warned French authorities that Iran and its proxies of the kind may to Israeli pose a threat to Israeli athletes reminding them of the Munich Olympics in 1972.
In a sign of changing times, the Saudi contingent to the Paris Olympics included a 17-year-old female swimmer. She came sixth of seven in her 200-metre freestyle heat.
G7 Foreign Ministers meeting in Rome denounced the recently announced Israeli plan to expand the Jewish settlements in the occupied West Bank.
WANA and the UN and Its Agencies:
On July 12, the UN Secretary-General stated that there was no alternative to UNRWA. On July 17, he slammed Israel for denying the prospect of a two-state solution to the Israel-Palestine dispute. On July 29, The UN said 86% of the besieged Gaza Strip was currently under Israeli evacuation orders. On July 31, the UN High Commissioner for Human Rights stated that Israel may have tortured imprisoned Palestinians.
On July 9, a UN-mandated independent group of experts stated that the recent deaths of several children from malnutrition in the Gaza Strip indicate that famine has spread throughout the enclave. On July 30, the World Health Organisation evacuated 80 seriously ill patients from Gaza. WHO also supplied over one million polio vaccine doses to Gaza where the type 2 poliovirus has been found in sewer systems raising fears of an epidemic. An article in the Lancet journal on July 5 put the direct and indirect death toll in the Gaza war at nearly 186,000 dead.
WANA and the United States:
Israeli Prime Minister Benjamin Netanyahu addressed a joint session of the US Congress on July 23, becoming the first foreign leader to have this rare honour for the fourth time. His hour-long speech reiterated his strong views on the Gaza conflict and did not contain any fresh ideas on resolving the Middle East’s ongoing politico-military turbulence. He was widely expected to lay down a detailed “day after” Gaza withdrawal plans but his speech was limited to ensuring a “demilitarising and deradicalizing” Gaza Strip as the endgame. He also hinted at allying with friendly Arab states. Several Democrat Congressmen boycotted the speech and thousands of protestors picketed at the venue in protest of the Israeli war in Gaza.
PM Netanyahu met President Biden and VP Kamala Harris (then putative Democratic Presidential candidate) as well as ex-President Donald Trump, Republican candidate for the President. (Comment: PM Netanyahu’s visit was anchored around his Speech to Congress meant to shore up the US support for Israel, especially weapons supplies, in the face of the Biden administration’s growing criticism as well as the international censure after more than nine months of Gaza conflict threatening to escalate into a broader regional conflict.The visit went off the expected track with President Biden shying away from re-election in the previous week and VP Kamala Harris declaring, “I will not be silent.” This was Netanyahu’s first formal visit to Biden’s White House. The visit was given a relatively cooler reception by the US media and the American Jewery.)
“The War should end now”, President Biden said on July 11.
On July 15, the US Secretary of State received the visiting Israeli NSA and Minister of Strategic Affairs.
On July 10, the US resumed supplying Israel with 500-pound munitions but retained the ban on 2000-pound bombs.
On July 27, the White House granted a reprieve to 11,500 Lebanese from deportation citing disturbed conditions in Lebanon.
Bloomberg quoted the Iraqi Foreign Minister on July 13 as saying that his country had sent a delegation to Washington to discuss with the US Treasury Department several financial issues related to the US restrictions on Iraqi banks to prevent backhand transfer of dollars to Iran.
The US-built floating pier meant to deliver desperately needed humanitarian supplies directly by sea from Cyprus was dismantled on July 17 for good. Due to several engineering-related issues, it delivered only a small part of its potential relative to its estimated cost of $230 mn.
WANA and China:
The much-delayed talks between 14 factions of the Palestinian movement were finally held in Beijing on July 21-23 and concluded by issuing a “Beijing Declaration on Ending Division and Strengthening Palestinian National Unity” laying down the plans to form an interim National Unity Government for the post-war governance of Gaza and West Bank. It also called for the Israel-Palestine Peace Conference. Israeli Foreign Minister rejected any participation by Hamas in the governance of the Occupied Territories adding, “In reality, this won’t happen because Hamas’ rule will be crushed, and Abbas will be watching Gaza from afar. Israel’s security will remain solely in Israel’s hands,” (Comment: Although optically quite impressive in getting all 14 Palestinian factions on the same stage, Beijing Declaration was largely a cosmetic superficiality. It lacked any follow-up mechanism that would ensure that its fate would be different from similar piously worded pronouncements signed many times before. Most Palestine movements except Fatah, Hamas and PIJ, have outlived their expiry date. Further Fatah is at longstanding odds with Hamas and PIJ and their reconciliation is improbable particularly as Israel, the US and much of the West currently regard Hamas and PIJ as terrorist organisations. Some observers believe that in undertaking to host the Palestinian talks, China had two motives. Firstly, it wanted to show its outreach to the Middle East. Secondly, it has an eye for large contracts for the post-war reconstruction of Gaza which could help its beleaguered real estate developers at home.)
On July 25 Baosteel, China’s biggest listed steelmaker, announced that it will more than double its investment in a steel joint venture in Saudi Arabia with Saudi Aramco and PIF to $1 bn from around $437.5 mn previously. Baosteel shall hold 50% in the joint venture, while Saudi Aramco and PIF will take a 25% stake each in the JV with a designed annual capacity of 2.5 mn tons of direct reduced iron and 1.5 mn tons of steel plates. The doubling of Baosteel’s investment follows the PIF Governor’s visit to China earlier in July.
IB) Political Developments
Israel:
Israeli Prime Minister’s visit to the United States (Please see under “the United States and WANA”)
On July 27, an Iran-built Falaq-3 short-range missile hit a football field in Majdal Shams, the largest township in Israeli-occupied Golan Heights killing 12 teenage Druze teenagers, the largest single civilian causality since Oct 7. Israeli establishment reacted to this incident with considerable fury blaming it on Hezbollah which vehemently denied having launched the missile. The next day, the Israeli Cabinet held a special session on this incident and authorised the government to act as it deemed appropriate. Prime Minister Netanyahu cut short his US visit to visit the site and commiserated with the victims’ families. He promised a “harsh” response to this attack – which came in the form of targeted assassination of Hezbollah Commander Fuad Shukr. Other Israeli leaders including the Defence Minister also responded appropriately. even the Ministers from ultra-right parties also trooped down Majdal Shams. The local Druze leaders cold-shouldered them. (Comment: Israeli politicians’ response to the incident appeared contrived and self-serving. Although under Israeli occupation for over 50 years, the Golan-based Druze community of nearly 20,000 consider itself as Syrian Muslim Arabs and most of them have steadfastly refused Israeli nationality. Some other Druze communities in Israel itself are loyal local citizens and even serve in the IDF. Even in Lebanon and Syria, the local Druze communities, totalling around 2 mn, are largely allied with Shia Hezbollah and Alawi-led regime, respectively. So, the death of 12 boys allegedly by a Hezbollah projectile gave the Israeli establishment a rare opportunity to ingratiate itself with the Golan Druze community and put a spanner between Druze communities in Lebanon and Syria with their traditional anti-Israel allies viz. Hezbollah and Al-Assad regime respectively. While Hezbollah’s denial can be taken at face value, the militia has been paying special attention to Golan Heights in recent weeks. On July 7, it claimed to have made a drone attack on the IDF surveillance installations on Mount Herman, Golan Heights’ highest peak. Two days later it televised a 10-minute clip of the 17 IDF sites on Golan taken in June by one of its drones. Thus, there is a chance that the unguided Falaq-3 missile missed its target and hit the football field with a contrarian outcome.)
In a significant development, on July 18 Knesset passed a resolution asserting that the creation of a Palestinian state would pose “an existential danger to the State of Israel and its citizens, perpetuate the Israeli-Palestinian conflict and destabilize the region”. The resolution passed in the Knesset with 68 votes in favour and just 9 against as Opposition leader Yair Lapid’s centre-left party left the session to avoid supporting it. Further on July 21, Knesset gave preliminary approval on Monday to a bill declaring the United Nations Relief and Works Agency (UNRWA) a terrorist organisation and proposed to sever relations with the body. The bill was approved in a first reading and will be returned to the Knesset Foreign Affairs and Defence Committee for further deliberation. (Comment: Knesset resolution, which is not a legally binding document, virtually reneging on a two-state solution Israel had agreed to under the Oslo Accords signed in 1993. Domestically, it sought to channelise the Israeli public’s still raw anger at Hamas perpetrating the October 7 atrocity. In the international arena, it was a pushback against the increased pressure on Israel for a two-state solution with a large number of Western countries recognising Palestine as a state and adversarial rulings by the UN, ICC, ICJ, etc against occupation and the Jewish settlements. It also seemed aimed to provide diplomatic cover for PM Netanyahu’s very significant visit to the US during which he was to address Congress for the fourth time and line up the Jewish diaspora along the mother country’s hard sell. Last but not least, the resolution showed that Israel prefers a “winner takes all” military solution to greater regional amity and stability that the US has been clamouring for.)
On July 20, the Israeli military issued the first call-up notices to 1,000 members of the Haredim community (Ultra-Orthodox Jews) who were hitherto exempt from conscription and reservist duties. Last month an Israeli Supreme Court ruling ordered the defence ministry to end the longstanding exemption from military service for the Haredim following which Knesset adopted a bill which provided for a gradual entry into the military of some Haredim. (Comment: This move is likely to have a wide-ranging impact along multiple axes in Israel’s domestic society at large and its polity. It would remove a widely felt sense of grievance among a majority of “secular” Jews who were conscripted and had to undertake reservist duties, particularly when Gaza and northern fronts were active. However, at a political level, the ultra-orthodox parties, prominent members of the ruling coalition, were peeved at this move that was likely to erode their political base. The Israeli military, currently in serious need of additional manpower for wartime needs, was also dissatisfied at the gradual pace of conscripting some of the Haredim, which currently make up more than 13% of Israel’s population.)
In a major statement revealing growing military–government infighting, On July 11 while addressing a military officers’ graduation ceremony, Defence Minister Yoav Gallant called for a state inquiry into failings around the Oct. 7 Hamas attack, saying it should investigate Gallant himself and his boss, Prime Minister Netanyahu, who also was in attendance, but has resisted any blame pointing.
Ten Israeli reservist soldiers deployed at the Sde Teiman detention facility in southern Israel were detained by July 30 on allegations of severe abuse of a detainee captured in Gaza. The ultra-right Israel mob, including some cabinet ministers, staged violent demonstrations and break-ins at the facility calling for the detained soldiers, some with charges of sexually attacking a Hamas elite unit fighter, to be released.
Palestine Authority and West Bank:
In a strident statement following the killing of nearly 100 persons in the al-Mawasi camp on July 13, Palestine Authority President Mahmoud Abbas blamed Israel and the US for the carnage, but went on to add, “The presidency sees that by escaping national unity, and providing free pretexts to the occupation state, the Hamas movement is a partner in bearing legal, moral and political responsibility for the continuation of the Israeli war of genocide in Gaza Strip.” (Comment: While there is little love lost between Fatah led by Mahmoud Abbas and Hamas led by Yahya Sinwar, they have avoided criticising each other to maintain a façade of solidarity against Israel. Hence this statement was quite an extraordinary show of antipathy between the two factions. Tellingly, according to a credible opinion poll by a Palestinian agency, over 60% of Palestinians now support the PA’s dissolution as support for Hamas has been growing. Further Reading: “Squeezed by Israel, Palestinian Authority’s role fades in West Bank”, Reuters, July 17.)
Reuters also reported on July 23 that President Mahmoud Abbas approved the Palestine Authority’s emergency budget for 2024, which includes austerity measures such as reducing salaries, operational and capital expenditures, and maintaining minimal development expenditures. The budget deficit is projected to surge by 172% in 2024 compared to 2023 the revenues are also expected to drop by 21% due to the ongoing conflict in Gaza. The war has hindered the PA’s ability to pay public sector salaries in full for over two years because of reduced aid and Israel’s withholding tax money. Israel transferred 435 mn shekels ($116 mn) in early July, the first such transfer since April. The Israeli government has deducted about two-thirds of Palestinian tax revenues since October last year, amounting to a 3.4 bn shekel ($937.52 mn) decline from the previous year.
On July 19, the European Commission said that it would provide the Palestinian Authority with 400 mn euros ($435.5 mn) in emergency financial support in the coming two months to thwart its financial collapse.
On July 8, in a show of support for the Palestinian people, Brazil put into effect a free trade agreement with the Palestinian Authority that has been waiting for ratification for more than a decade.
There was no let-up in Israeli security forces’ iron-fisted attempts to nip in the bud the Hamas/PIJ-inspired insurgency in the occupied West Bank. Its main raids included: Nur Shams (4 killed on July 2), Jenin (7 killed on July 5) as well as Tulkarm and Hebron (7 killed, on July 23).
On July 18 Israel’s far-right National Security Minister visited the Al-Aqsa Mosque, a flashpoint holy site in Jerusalem’s Old City “ to pray for the return of Israeli captives” at the Temple Mount. This was condemned by the Palestinians as a provocation as under the status quo, non-Muslims may visit the site but cannot pray.
Israeli NGO Peace Now said that the planned seizure, approved by Israel’s government and publicised on July 3 targets 12.7 sq km of land in the Jordan Valley of the West Bank. The move raises the total amount of West Bank land that Israel has declared its own this year to 23.7sq km making 2024 by far the peak year for Israeli land seizures. Israel has built about 160 settlements housing some 700,000 Jews since it occupied the West Bank and East Jerusalem.
The UN said more than 530 Palestinians and 14 Israelis have been killed in the West Bank since the start of the war in Gaza on Oct 7.
Lebanon:
As far as the Hezbollah conflict was concerned, July was punctuated by four attacks: Israeli airstrikes assassinated three senior Hezbollah Commanders and an unclaimed rocket attack on Israeli-occupied Golan Heights (Please see details of the last attack under “Israel”).
An Israeli airstrike on July 3 killed Mohammed Nasser, a Hezbollah Commander heading a unit firing rockets at Israeli targets. Then on July 30, an Israel air strike killed Fuad Shukr, the senior Hezbollah Commander having a bounty of $5 mn by the US authorities for a truck bomb attack at US marine barracks in Beirut in 1982 killing nearly 280 persons. He was said to be a senior advisor to Hezbollah Chief Syed Hassan Nasrallah. Hezbollah threatened Israel with retribution for this assassination. Apart from these two assassinations, on July 18, an Israeli strike killed Habib Matouk, a Commander in Hezbollah’s elite Radwan Force. The fighting in Lebanon has killed more than 100 civilians and more than 300 Hezbollah fighters, including at least three top commanders.
In his speech in July, Hezbollah Chief Syed Hassan Nasrallah continued to threaten Israel. On July 10, he said that as Hamas was negotiating with Israel on behalf of the entire Axis of Resistance, Hezbollah did not have to engage in negotiations with Israel. On July 17, he warned that if Lebanon’s civilians were targeted by Israel, Hezbollah would hit new areas of the Jewish state. He sharply escalated his rhetoric after the July 27 killing of Fuad Shukr, one of his main aides and threatened unspecified retribution.
Israeli air attacks on Hezbollah targets continued during the month under review attacking arms depots in southern Lebanon (July 20) and in Beka’a Valley (July 28).
Four persons of Lebanese origin were detained on July 18 in Spain and Germany on suspicion of trafficking in parts used in drones made by Hezbollah.
Panicking under escalating tit-for-tat military actions and blood-curdling rhetoric, many airlines stopped flying to Beirut. The peak tourist season was cut short as many governments advised their nationals to leave Lebanon at the earliest.
Iran:
The second round of Presidential Elections was held on July 5 between the top two contenders of the first round, viz. Masoud Pezeshkian, the moderate, and Saeed Jalili, a hardliner. In the event, Pezeshkian was declared the winner with 16.3 mn votes in favour as opposed to Jalili’s 13.5 mn. The voting percentage was put at near 50%. (Comment: The managed election of a moderate President showed both astuteness and resilience of the Iranian political establishment in general and the Supreme Leader in particular. This balancing act against hardline-dominated clergy and parliament is what differentiates Iran’s organic polity from brittle and inflexible dictatorships elsewhere. Having said that, one has to add that the performance of the incipient Presidency would depend almost entirely on the continuation of support of the 84-year-old Supreme Leader. The record of moderate Presidents in Iran’s 45-year-old democracy from Rafsanjani to Rouhani has not been very reassuring as most of them were undermined by the old-fashioned clergy and/or hardliners and/or increasingly assertive IRGC. As it is, Pezeshkian Presidency had an inauspicious beginning with Hamas Political leader Ismael Haniyeh’s assassination in Tehran within hours of the inauguration on July 30 creating a full-blown Iran-Israel crisis that visibly snatched strings of power back to the Supreme Leader and IRGC.)
Ismael Haniyeh, Head of the Hamas Political Bureau based in Doha was killed on July 30 in an unclaimed mysterious explosion at a high-security IRGC-guarded guest house in Tehran where he had gone to attend the new Iranian President’s inauguration. Iranian authorities were quick to blame Israel for the assassination which stuck with its usual posture of neither confirming nor denying its involvement. Supreme Leader Ali Khamenei said as the killing occurred in the Iranian capital, avenging it by “harsh punishment” to Israel is Iran’s “duty”. There was some confusion about the exact mechanism that killed Haniyeh: while Iranian and Hamas sources portrayed it as a drone attack, the New York Times said on August 4 that it was by a bomb placed months ago in the room. (Comment: The attack was arguably Israel’s biggest blow yet to Iran and its allies since the beginning of the Gaza war. Although it was sensational in its effect, it was neither debilitating to its enemies nor decisive for the Gaza conflict where Israel has been struggling to decimate Hamas and free her hostages. By inviting Iranian grapes of wrath, it may even be counterproductive to Israel’s stated aim of not expanding the Gaza imbroglio into a regional war. It certainly helped Mossad and PM Netanyahu to turn the page of the grievous intelligence failure of Oct 7. In turn, it heaped the Iranian security apparatus and IRGC with almost equivalent embarrassment. Further Reading: How Hamas Leader Ismail Haniyeh Was Killed in Iran, NYT, Aug 4.)
Acting Foreign Minister Ali Bagheri Kani made a few statements during the month. He told Iran’s Etimad newspaper on July 11 “Indirect talks are being conducted through Oman but the negotiation process is confidential and its details cannot be recounted.” On July 16, Newsweek published his interview where he stated that Tehran remained open to resuming negotiations with Washington on restoring their participation in a nuclear agreement. His words came a week after the Biden administration said the US was not ready to resume nuclear talks with Iran under its new president.
The US intelligence sources revealed on July 7 that the satellite photographs had detected an expansion in Iran’s missile-building programme. These also stated on July 16 that the US had information a few weeks ago about an Iranian plot to kill former President Donald Trump even as this was not linked to July 13 assassination attempt on him. Iranian sources called the information “unsubstantiated and malicious”, adding that Trump was “a criminal who must be prosecuted and punished in a court of law”.
The European Union was represented at the Iranian Presidency’s inauguration ceremony on July 30 by its Chief Nuclear Negotiator Enrique Mora who took this opportunity to discuss the revival of JCPOA with the concerned Iranian officials.
Yemen:
On July 19 Ansar Allah (aka al-Houthis) militia long-range Samad-3 drone hit a Tel Aviv beachfront residential building killing one person and wounding 4. Since the beginning of the Gaza war on Oct 7, al-Houthis had launched over 200 missiles and drones against Israel nearly 1000 kms away, but this was the first time for their projectile to have caused death. Israel retaliated the next day with at least 8 F-15 jets bombing fuel depots and power stations located near Hodeidah, the main port for al-Houthis. The attack killed 9 persons and wounded 87. (Comment: The exchange raised the spectre of the ongoing Gaza war expanding into a regional conflict. However, despite al-Houthi expression of defiance, there were signs of some moderation in their attacks against Israel (although they launched a missile at Israel on July 21, it was shot down by the IDF) as well as the international shipping in the Red Sea and Gulf of Aden.)
During the first half of the month, al-Houthis continued their campaign to harass international maritime shipping on both sides of the Baab al-Mandeb choke point using missiles, drones and unmanned explosive-laden boats. It followed 16 such attacks during June, the largest so far. While they claimed to have targeted vessels in the Mediterranean Sea and Haifa port in Israel, these remained uncorroborated. Till month’s end, these attacks had sunk two vessels, seized one (and held its crew members) and killed 3 seafarers. On July 23, the UN Envoy to Yemen stated that al-Houthi threat to Rad Sea shipping was growing.
A Bloomberg report on July 26 spoke of heightened Saudi anxiety about al-Houthis may resume their attacks against the oil-rich kingdom. It quoted several unnamed sources as saying that Riyadh fears being drawn into a new direct conflict with the Houthis. Saudi Arabia previously fought the militant group for seven years from 2015 in an inconclusive conflict that devastated Yemen, leaving an estimated 370,000 people dead from fighting and famine. (Comment: There is some basis for Saudi apprehensions about al-Houthis turning on them. Al-Houthis have gained virtually nothing by attacking shipping and Israeli targets except notoriety as an irresponsible non-state actor. Their actions have also not helped Hamas. The day after the Gaza conflict, when they try to convert themselves into a functional state, their past is going to be baggage. Further, their enhanced missile and drone power can be very effective against the Kingdom with multiple vulnerabilities, esp. in the oil and gas sector. Saudis had a bitter experience of their cities and oil installations coming under al-Houthi attacks during the previous conflict. Alternatively, al-Houthis can blackmail Riyadh to obtain megabucks and switch the Saudi loyalties to al-Houthis in Sanaa instead of the National Unity Government in Aden. Interesting times these!)
The repairs of three internet subsea cables damaged in the Red Sea in February 2024 were undertaken this month and by July 17 first of them was functional again.
Under a deal between the two Yemeni governments, Yemenia Airlines resumed its flights from Sana’a to Cairo and New Delhi on July 28. (Comment: If the Sanaa-New Delhi direct flights resume in earnest, this could spur bilateral P2P and B2B ties, particularly concerning medical tourism and FMCG and RMG supplies from India.)
Turkey:
President Recep Tayyip Erdogan visited the Turkish part of Cyprus on July 19 to participate in 50th anniversary celebrations of an invasion by Turkish force of the Mediterranean island leading to a self-proclaimed Turkish Republic of Northern Cyprus (TRNC), but it is recognised only by Turkey. Speaking on this occasion, President Erdogan said “We believe that a federal solution is not possible in Cyprus. Yet he went on to add “Turkey is ready to negotiate, discuss, achieve lasting peace, solution in Cyprus,” and that both sides “should sit at the table as equals.”
On July 26, President Erdogan announced an incentive package of $30 bn to promote high-tech industries in the country. It included incentives of over $5 bn for electric vehicles manufacturing capacity of 1 mn units annually, $5 bn for semiconductors, $4.5 bn for advanced batteries, $2.5 bn for solar cells and $1.7 bn for wind energy components. He expected $20 bn in investments in these areas. Relevant to note that On July 8, China’s BYD announced the setting up of an EV factory in Western Turkey with an investment of $1 bn and the capacity to produce 150,000 units by the end of 2026.
Turkey’s long-strained relations with the US saw some positivity as the two sides started discussing about setting up of a nuclear power plant in Turkey, a domain where Russia has taken a lead. At the same time, Ankara has indicated that it would pare the $23 bn to modernise its US-built F-16 fighters while insisting on an offset programme.
Media reports on July 1 indicated that Turkey’s Foreign Minister has hosted a meeting of Ethiopian and Somali Foreign Ministers to resolve their sharp differences about Addis Ababa proposing to recognise breakaway Somaliland in exchange for a conclave to access the Indian Ocean port for the landlocked country. In the event, the tripartite meeting ended with an anodyne communique and a promise to meet again in Ankara. Separately, on July 18 Turkey announced that it shall deploy an exploration ship to search for hydrocarbons off the Somali coast
Keeping the focus on Africa, Turkey’s Foreign and Defence Ministers visited Niger on July 18. During the visit, the two sides agreed to cooperate in the energy and defence sectors. (Comment: Turkey seem to be taking advantage of the politico-economic ostracisation of Niger’s military junta by ECOWAS and France. The landlocked Muslim country has rich deposits of oil and Uranium)
Following violent demonstrations against Syrian migrants in several parts of Turkey, there were anti-Turk protests in the Sunni exclusion zone of Idlib. This led Turkey to close the bilateral border. (Comment: The anti-Al-Assad Sunni residents of Idlib enclave as well as Syrian refugees in Turkey were also deeply concerned by President Erdogan’s attempts to improve ties with Damascus, fearing that Ankara was planning to abandon them.)
On July 12, Turkey stated that she would not approve of any proposal for NATO–Israel cooperation.
On July 26, the mayor of Istanbul hoped that his city’s bid for hosting the 2036 Olympics would be approved by the IOC. Istanbul competes with India, Indonesia and Chile.
Sudan:
On July 10, Ethiopian Prime Minister Abiy Ahmed visited Port Sudan to meet Sudan’s armed forces chief General Abdel Fattah al-Burhan to seek ways to find an end to the 15-month-old civil war between the military and paramilitary Rapid Support Forces (RSF).
On July 31, President al-Burhan survived a drone attack allegedly mounted by RSF while he was taking a salute at a military graduation ceremony. He later announced rejection of the proposed ceasefire talks in Switzerland next month.
On July 18, the UAE President Mohammed bin Zayed called up SAF leader Gen. Abdul Fattah al-Burhan to affirm him of his country’s support for initiatives at ending the crisis in Sudan. (Comment: This gesture was a bit surprising as the UAE has been the largest weapon provider to the RSF which is pitted against Gen al-Burhan’s armed forces.)
There was no significant shift in the civil war frontlines in various parts of Sudan. However, the humanitarian situation continued to be dire in particular in Western provinces of Darfur where Human Rights Watch accused both sides of committing widespread sexual violence. (Further Reading: In Sudan’s catastrophe, food runs out as guns flow freely, Washington Post, July 30.)
Iran and Sudan exchanged ambassadors on July 21, ending a break in relations since 2011. (Comment: Iran has become a major weapons provider to SAF which has used Iranian drones to turn the tide of the civil war in its favour.)
The Sudanese President and Foreign Minister wrote edits for Al-Jazeera during the month to highlight the war crimes and atrocities committed by RSF in the conflict and urged the global community to respond to them.
Syria:
President Bashar Al-Assad met Russian President Vladimir Putin in Moscow on July 25. The talks were dominated by regional issues including the War in Gaza and Russian attempts to reconcile the ties between Syria and Turkey which have had no diplomatic relations since the beginning of the Syrian civil war in 2011. Earlier on July 14, the Syrian President had said that he would only meet Turkish President Tayyip Erdogan if the two countries could focus on the core issues of Ankara’s support for “terrorism” and the pullout of Turkish forces from Syrian territory.
The parliamentary elections were held on July 15 amidst a boycott by significant sections of Syrians living in Druze areas in the south and in Sunni rebel-controlled exclusion zones in the northwest. The results were a predictable endorsement of President Bashar Al-Assad’s Baath party-led ruling coalition.
Iraq:
Reuters reported on July 23 that during the US-Iraq security summit held in Washington, the Iraqi side had pressed for a drawdown of the US-led Western forces in that country to begin in September 2024 to be completed within one year. The US-led coalition deployed a decade earlier to fight ISIS currently has 2500 troops in Iraq.
Among the security-related incidents reported during the month under review, ISIS killed 4 Iraqi policemen in Diyala province in eastern Iraq on July 13. Drones and rocket attacks targeted al-Asad airbase, where some US troops were deployed on July 16 and 25. No casualties were reported. In an apparent retaliation, the US forces carried out an airstrike on July 30 on pro-Iran Popular Mobilisation Force (al-Hashed) units. On July 22, Iraq hanged 10 ISIS persons for terrorism. On July 1, Iraq arrested three people linked to the outlawed Kurdistan Workers Party (PKK) suspected of planning attacks across the country, including on a key oil export pipeline in the north.
Saudi Arabia:
A Bloomberg report on July 16 mentioned challenges faced by Saudi Authorities to finance the big-ticket projects under Vision 2030 which total well over $1.25 tr. According to the report the Kingdom and its state-backed institutions have raised $90 bn in 2024 so far, including $50 bn by raising foreign debt. The funding shortfall is due to oil market fundamentals as well as the Saudi decision to cut oil production voluntarily. The funding gap has caused a sweeping review of mega projects including the sprawling desert futuristic city development known as Neom. This is said to be the most precarious moment yet of the Kingdom’s ambitious plans for its economic reinvention away from oil.
On July 10, Bloomberg reported citing unnamed sources that Saudi Arabia privately hinted earlier this year it might sell some European debt holdings if the G7 decided to seize almost $300 bn of Russia’s frozen assets to help the Ukrainian economy. (Comment: The motives for the putative Saudi threat were unclear: these could range from helping Russia to avoiding the creation of a precedent for a similar action against the Kingdom’s assets on political grounds in future.)
On July 1 Saudi Arabia’s sovereign wealth fund PIF announced having made a profit of SR138.1 bn ($36.81 bn) in 2023, after posting a loss of $15.6 bn a year earlier. Total revenues at the Public Investment Fund more than doubled to $88.3 billion last year from $44 billion in 2022. The rise in revenues was driven by factors including an improvement in both investment and non-investment activities in sectors like banking, telecommunications and gaming, as well as increased dividends. PIF currently has around $925 bn in assets under management.
Under the terms of an agreement with the International Olympic Committee signed on July 12, Saudi Arabia will host the inaugural Olympic Esports Games in 2025. The games are part of a partnership that will run for 12 years and will add to the growing portfolio of such events put on by the Saudis.
The United Arab Emirates:
On July 14, the UAE Vice President and Prime Minister Sheikh Mohammed bin Rashed Al-Maktoum appointed his son Sheikh Hamdan bin Mohammed Al-Maktoum as the Defence Minister and Deputy Prime Minister of the UAE. He would continue to be the Crown Prince of Dubai. Foreign Minister Sheikh Abdullah bin Zayed Al-Nahyan was also elevated to the rank of Deputy Prime Minister. New appointments were also made for the Minister of State for Entrepreneurship, Education and Higher Education.
A UAE Court sentenced 43 persons to life sentences for belonging to the Justice and Dignity Committee, a local group of the Muslim Brotherhood, which has been regarded as a terrorist group in the country since 2014. In a different case, on July 22, a UAE court swiftly sentenced 57 Bangladeshis to long prison sentences for holding local protests against their own country’s government.
There was considerable commotion between the US and the UAE over Emirates’ state-run investment firms trying to game the artificial intelligence technology between the American and Chinese companies. It concerned, in the main, the $1.5 bn investment deal between Microsoft and Abu Dhabi company G42 with the latter also having AI tie-ups in China raising the US security concerns. In an obfuscatory move on July 8, Abu Dhabi investment firm Lunate announced that it was taking over the China-linked AI fund of G42. Yet, the US Congress announced that UAE authorities have scuttled a meeting between congressional staffers and G42 management. On the other hand, a Congress source told Reuters that the Saudi authorities “were very eager to meet with the delegation and expressed a strong desire to address any U.S. concerns about (Chinese government) activities in Saudi Arabia to receive permission to import U.S. advanced chips.” The Biden administration imposed sweeping new curbs on AI chip exports last year in a bid to cut off more avenues for China to obtain them, imposing a licensing requirement on their shipment to the UAE and other Middle Eastern countries. The UAE’s action is likely to lead to re-enforcement of these restrictions.
The UAE which last year completed its first nuclear power complex – the Arab world’s first – was now contemplating building the second such power plant. The first complex, a $20 bn 5600 MW capacity with four reactors was built by a South Korean consortium at al-Baraka in Abu Dhabi emirate.
The UAE suffered an unprecedented heat wave during the month. For instance, on July 20, the maximum temperature at the Dubai International Airport was recorded at 42C. However, intense humidity that day compounded the heat to make it feel like more than 62C.
Morocco-Algeria-Western Sahara:
Bloomberg reported on July 30 that in a letter from President Emmanuel Macron to Moroccan King Mohammed VI, France conveyed that “the present and future of Western Sahara fall within the framework of Moroccan sovereignty.” Algeria reacted sharply to this French shift of position on a long controversial issue and recalled its ambassador from Paris (Comment: Algeria and Morocco have sparred over the sovereignty of Western Sahara since 1975 when Spain, a former colonial master, withdrew from the territory. While Morocco occupied it immediately thereafter asserting it to be a part of its territory, Algeria has backed the Polisario Front, a liberation movement seeking its independence. During the last days of Trump’s Presidency, the US recognised Western Sahara to be a part of Morocco in return for Morocco establishing formal diplomatic relations with Israel. Now France has become the second P-5 country to do so.)
On July 10, Moroccan media as well as the state-owned Israeli Aerospace Industries (IAI) reported that Morocco is to acquire an Ofek 13 spy satellite from Israel in a $1 bn deal spread over 5 years.
Tunisia:
President Kais Saied issued an official decree on July 1 fixing the Presidential elections to be held on October 6. Later on July 20, he announced his intention to seek re-election for another five-year term.
Oman:
On July 16, gunmen fired at the Ashura procession in a Shia Mosque in Muscat causing 9 deaths, including 3 attackers, and injuring 28 persons. The victims were mostly Pakistanis, but one Indian died and another one was injured. Radical Sunni militant group Islamic State claimed responsibility for the attack. (Comment: Such attacks are a rarity in the GCC countries due to tight security. A surge in ISIS attacks from Moscow to Muscat raises the spectre of the revival of Daesh, which was thought to be decisively defeated in 2017 in Iraq and Syria. In these two countries ISIS has claimed 153 attacks during H1/24.)
II) Economic Developments
Oil & Gas Related Developments:
Global Issues:
The Brent for September delivery was at $80.72/barrel on July 31 having shed nearly 5.69 dollars during the month under review. Its losses were prompted by uncertainty about demand in China, the world’s largest consumer and enhanced supplies from non-OPEC+ producers. The earlier decision by OPEC+ to gradually wind down the voluntary cuts of 2.2 mbpd from October 2024 also contributed to the bearish trend. Further, as the OPEC Monthly Bulletin revealed on July 10, Russia, Iraq and Kazakhstan continued to produce significantly over their respective OPEC+ production quotas. The OPEC Bulletin continue to stick to its projection of the global crude demand rising by 2.25 mbpd during 2024 and further growth of 1.85 mbpd in 2025. On the other hand, Morgan Stanley prophesied on July 22 that the global oil market is likely to be in a surplus mode in 2025 with Brent range bound in the mid to high 70s per barrel. The crude prices were tactically affected during July by the geopolitical tensions in the WANA region.
Two likely candidates for the US Presidency seemed to have opposite views on the upstream oil industry in the country. While Republican Presidential hopeful Donald Trump called for “Drill Baby Drill” to indicate free reign to the oil industry, Democrat Kamala Harris was thought to be tougher on the oil industry than the Biden policy. The US is the world’s largest producer of crude so its future policies are bound to have a global impact.
China, the world’s largest consumer and importer of oil, was forecast to have a 5.6% year-on-year fall in diesel usage in the second half of 2024. It follows a 4.2% drop in the first half amid weaker logistics and infrastructure spending as well as an accelerated switch to EVs.
On July 3, Namibia in southwest Africa announced the discovery of 11 bn barrels of oil reserves deep offshore by Total and Shell.
Country Specific Developments:
On July 1, the Saudi Energy Minister said that Saudi Aramco had discovered “two unconventional oil fields, a reservoir of light Arabian oil” in the Eastern Province. In addition, “two natural gas fields, and two natural gas reservoirs” were discovered in the Kingdom’s Empty Quarter. No other details were provided.
On July 5, a Reuters report mentioned that the Abu Dhabi National Oil Company (ADNOC) has earmarked a 40% stake in its Ruwais liquefied natural gas (LNG) project 10% beach to four energy majors, viz. Shell, TotalEnergies, BP, and Mitsui. The project will more than double UAE’s output of sea-borne fuel and is expected to produce about 9.6 mn mtpa of LNG by late 2028. ADNOC currently produces around 6 mtpa of LNG and aims to lift its capacity to 15 mtpa.
A Reuters report on July 11 from Erbil revealed that following the stoppage of export of 450,000 bpd by pipeline via Turkey in March 2023, the daily crude production in IraqiKurdistan was running at 375,000 bpd. Of this, nearly 200,000 bpd was being trucked to Iran and Turkey and the rest refined locally. A local official was reported as saying that there was no trace of the oil revenue estimated at $200 mn a month.
On July 14, Kuwait Petroleum Corporation (KPC) announced a “giant” oil discovery in the Al-Nokhatha field east of the Kuwaiti island of Failaka, with oil reserves preliminary estimated at 3.2 billion barrels of oil equivalent.
On July 23, oil and gas major Energean announced its final investment decision of spending $1.2 bn
to develop the Katlan gas project off Israel, with output expected to commence in H1/2027. The field contains 1.10 tcf of proven and probable gas reserves.
In May 2024 Egypt’s natural gas production dropped to the lowest in more than six years making the country increasingly import-dependent.
A Bloomberg report on July 29 mentioned that Oman plans to build a new LNG train near its existing facility in Qalhat that will raise the nation’s export capacity by a third to 15.2 mn mtpa.
Following economy-related developments took place in WANA countries:
Regional Economic Developments
In its World Economic Outlook published on July 16, IMF projected the Middle East and North Africa region to grow 2.2% in 2024, a downward revision of half a percentage point from three months ago. The decline was largely due to the Saudi economic growth going down by 0.9%.
In a global Emerging Markets report published on July 4, Goldman Sachs saw the Risk Scores of Israel, and Saudi Arabia worsen most during H1/24 over H2/23, viz by -2.81 and -1.21 respectively. While it attributed the deteriorations to the Gaza War financial drainage for Israel, it noted that the kingdom’s extensive spending on Vision 2030 projects, including large-scale infrastructure endeavours, has constrained its ability to consolidate expenditures in the medium term.
Economic Developments in Individual WANA Countries:
Official Saudi statistics released on July 31 showed that GDP shrank an annual 0.4% in Q2/24. That’s an improvement from a drop of 1.7% in the previous quarter. In its World Economic Outlook published on July 16, the IMF projected the Saudi economy to grow by 1.7% in 2024 and 4.7% in 2025. The figures were lower by 0.9% and 1.3% over the previous IMF forecast made in April 2024. (Comment: The relative slowing of Saudi GDP decline provided some hope for an early end to the four quarters of a negative growth cycle, caused in the main by OPEC+ production cuts and relatively low crude prices.)
In its monthly meeting on July 23, the Turkish Central Bank chose to leave its Repo rate for one week unchanged at 50% to bring down the annual inflation that stood at 71.6% in the previous month. On July 24, Turkey returned $5 bn in deposits to Saudi Arabia that it had taken as a loan earlier to shore up its finances. This was possible as foreign funds resumed investing in Turkey in the hope of continued economic reforms. On July 19, Moody’s rating agency upgraded Turkey’s credit rating for the first time in a decade. Even after improvement from B3 to B1, it was still 4 notches below the investment grade.
On July 29, the UAE awarded a lottery license for the first time, potentially taking another step toward legalizing casinos and other kinds of gaming in a market which may boost tourism and other services, but may act as a lightning conductor for the Islamists and puritanically inclined. Abu Dhabi and Dubai face an office space shortage as global hedge funds and HNWI wealth managers rush in. In particular, Blackrock is expanding its research division to the Middle East and relocating a senior strategist to Dubai as it seeks closer ties with clients in the region. Bloomberg reported on July 18 that the Trump Organization was planning to launch a luxury tower in Dubai in partnership with a Saudi builder Dar Global.
On July 29, the IMF reviewed the status of Egypt’s reform programme and agreed to unlock $820 mn funding. It happened three days after the fuel prices were raised by 15%. On July 18, the Suez Canal Authority announced a drop by nearly a quarter in the transit revenues for the financial year that ended on March 31 2024: from $9.4 bn in FY23 to $7.2 bn in FY24. The number of ships using the canal also fell to 20,148 in FY24 from 25,911 the year before. The declines were almost entirely due to disruption in maritime passage in the lower Red Sea due to al-Houthi militia’s naval activities in support of Hamas fighting the Israeli invasion of Gaza.
On July 25, Iraq picked up French, Spanish and Turkish construction companies and Deutsche Bank to build and finance an $18 bn Baghdad metro project spanning 148 kms to be completed in 4 years.
On July 14, the Kuwaiti Ministry of Finance announced that the national budget is likely to show a deficit of KD 5.6 bn ($18.33 billion) for the 2024-2025 fiscal year, with expenses estimated at KD 24.5 bn and revenues at KD18.9 bn. The General Reserve Fund, from which the budget deficit is financed, decreased to KD2 bn last March from KD33.6 bn ten years ago due to perineal withdrawals.
On July 2, Qatar Airways announced a record profit of $1.67 bn in the financial year ending on March 31. It carried 40 mn passengers with an average plane load factor of 83%. Its revenue grew by 6% to QR81 bn in the year.
III) Bilateral Developments
- The first session of the Indo-Saudi High-Level Task Force on Investments (HLTFI)was held in virtual mould on July 28 with the Principal Secretary to PM and Saudi Minister for Energy as the two Co-Chairs. Among the decisions taken was to have a visit by the Secretary (Petroleum & Natural Gas) to Saudi Arabia to discuss the sectoral projects. The Indian side also suggested the opening of a Public Investment Fund (PIF) office in India to monitor investment opportunities. (Comment: The HLTFI was mooted to actualise Saudi Crown Prince & PM Mohammed bin Salman’s pledge to invest $100 bn in India made during his September 2023 visit to the country.)
- A meeting of the Indo-Qatari Joint Working Group (JWG) was held in Doha on 10th July. It was Co-chaired by the Economic Advisor, the Department of Commerce level and included officials from other ministries. The JWG identified several areas of focus for trade and economic cooperation including Gems and Jewellery, Customs Cooperation, trade in local currency, pharmaceuticals, food processing and food security, cooperation in MSME, etc. Bilateral trade between India and Qatar stood at $14.08 bn in 2023-24. India is Qatar’s second-largest trading partner. Both sides agreed to hold the next meeting of the JWG in 2025, in New Delhi.
- The 12th session of the India-UAE Joint Defence Cooperation Committee (JDCC) was held in Abu Dhabi on July 9 at the Joint Secretary Ministry of Defence level. Detailed discussions were held in areas such as training, joint military exercises, defence industrial cooperation, subject matter expert exchange, R&D etc. In tandem with the JDCC, Staff talks between the Navy and Army of the two countries were also conducted to discuss Service-specific cooperation.
- Comoro-flagged oil tanker Prestige Falcon capsized in the Gulf of Oman near Duqm port on July 16 with 13 Indian and 3 Sri Lankan seafarers on board. Indian naval vessel rescued 9 of them, including 8 Indians.
- India exported defence hardware worth a record $2.5 bn in 2023-24. Among the Top-10 markets for our exports were three WANA countries: Israel at #2, the UAE at #6 and Saudi Arabia at #10. No information on absolute figures and specific export items was available.
- During the month UPI payment facility was extended to the UAE and Qatar.
- During Q2/24, India’s consumption of natural gas increased by 3.8% while the domestic production went up by 5.7% and the imports were up by 0.6% y/y. LNG prices in the spot market have risen about 50% in four months.
- According to Kpler’s estimates, India imported on average 4.69 mbpd of crude during July 2024; 45% of the quantity came from Russia. Earlier in June 2024, the industrial data revealed that 1.98 mbpd of Russian oil was imported followed by 762,400 bpd from Iraq. The next three sources were Saudi Arabia, the UAE and the US.
- India’s Directorate General of Shipping said in a notice on its website that the recent spate of sea drone attacks has raised the question of how effective some private security providers are. After the Houthis sank a vessel with a waterborne explosive device last month, several other ships have faced similar threats. In two instances when armed guards fired at unmanned explosive-laden ships last week, the drone boats ultimately exploded. The sinking of a bulk commodity carrier last month “underscores the need for a comprehensive review of security protocols and on-board armed security personnel qualifications to ensure they are commensurate with the evolving nature of maritime threats in high-risk areas,” it said.
- Sovereign Wealth Funds of Abu Dhabi (ADIA) and Qatar (QIA) participated in Adani Energy Solutions’ $1 bn IPO.
- India’s annual budget reduced the duty on gold imports from 15% to 6% thereby removing the advantage of 8% concessional duty on such imports from the UAE under bilateral CEPA.
- On July 31, the Indian embassy in Beirut issued an advisory to Indians in Lebanon to limit their movements and exercise caution
